Note 6: Restructuring and Impairment Charges

During fiscal 2013, the Company announced its intention to restructure its Europe segment. The Company’s restructuring actions and plans have included exiting certain non-core product lines based upon our global product strategy, reducing manufacturing costs, implementing headcount reductions, and disposing of and selling certain underperforming or non-strategic assets. The restructuring activities are designed to align the cost structure of the segment with the segment’s strategic focus on the commercial vehicle, off-highway, and engine product markets, while improving gross margin and return on average capital employed.

Since commencement of the Europe segment restructuring program, the Company has recorded $26.1 million of asset impairment charges, $28.6 million of employee severance costs, primarily related to headcount reductions at two manufacturing facilities and the segment headquarters, and $7.6 million of repositioning expenses, primarily related to accelerated depreciation of production equipment that is no longer used because of manufacturing process changes and equipment transfer costs.

Restructuring and repositioning expenses related to the Europe segment restructuring program were as follows:

	Years ended March 31,
	2014		2013
Employee severance and related benefits	$	13.7	$	14.9
Accelerated depreciation		4.3		-
Other repositioning costs		1.2		2.1
Total restructuring and repositioning expenses	$	19.2	$	17.0

During fiscal 2014, we recorded total restructuring and repositioning expenses in the consolidated statement of operations as follows: $14.9 million as restructuring expenses and $4.3 million within cost of sales. During fiscal 2013, we recorded all restructuring and repositioning costs in the consolidated statement of operations as restructuring expenses.

The Company accrues severance in accordance with its written plans, procedures, and relevant statutory requirements. Changes in accrued severance related to the Europe segment restructuring program were as follows:

	Years ended March 31,
	2014			2013
Beginning balance	$	11.6		$	-
Additions		13.7			14.9
Payments		(7.8	)		(3.3	)
Effect of exchange rate changes		0.8			-
Ending balance	$	18.3		$	11.6

During fiscal 2014, the Company recorded asset impairment charges of $2.0 million related to the Europe restructuring program, primarily due to a manufacturing facility in Germany that the Company plans to close. During fiscal 2013, the Company recorded asset impairment charges of $24.1 million to reduce the carrying values of certain facilities held for sale in the Europe segment to their estimated fair values, less costs to sell. During fiscal 2012, the Company recorded asset impairment charges of $2.5 million within the Europe segment.

During the fourth quarter of fiscal 2014, the Company approved a plan to close its McHenry, Illinois manufacturing facility. The Company plans to transfer its current production to other existing North America segment manufacturing facilities over an 18-month period. This measure reflects the Company’s focus on operating scale manufacturing facilities to improve overall competitiveness and profitability. As a result of the planned closure, the Company recorded $1.2 million of restructuring expenses, primarily related to severance costs, and $1.2 million of asset impairment charges. During fiscal 2013, the Company recorded asset impairment charges of $1.8 million to reduce the carrying values of certain facilities held for sale in the North America segment to their estimated fair values, less costs to sell.

At March 31, 2014 and 2013, assets held for sale of $11.6 million and $11.4 million, respectively, were included in other noncurrent assets. These consist of facilities that the Company is marketing for sale. Upon designation as held for sale, we measured the carrying value of the asset at the lower of its carrying value or its estimated fair value, less cost to sell.