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Note 10 - Restructuring and Impairment Activities | 12 Months Ended
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Jun. 30, 2020
Notes to Financial Statements |
Restructuring, Impairment, and Other Activities Disclosure [Text Block] |
( 10 ) | Restructuring and Impairment Activities
Summary of Restructuring, Impairments and Other related charges (gains) Restructuring, impairment and other related costs incurred during fiscal 2020 and 2019 were as follows (in thousands):
|  | Fiscal 2020 |  |  | Fiscal 2019 |
Optimization of manufacturing and logistics |  | $ | 829 |  |  | $ | 6,330 |
Gain on sale of Passaic property |  |  | (11,497 | ) |  |  | - |
Impairment of long-lived assets (retail) |  |  | 5,171 |  |  |  | 9,913 |
Lease exit costs (remaining lease obligations) |  |  | 2,372 |  |  |  | 2,662 |
Other charges (income) |  |  | 106 |  |  |  | (241 | )
Total Restructuring and other impairment charges, net of gains |  | $ | (3,019 | ) |  | $ | 18,664 |
Manufacturing overhead costs (1) |  |  | 1,319 |  |  |  | 866 |
Inventory write-downs (1) |  |  | 4,107 |  |  |  | 1,128 |
Total |  | $ | 2,407 |  |  | $ | 20,658 |
( 1 ) | Manufacturing overhead costs and inventory write-downs are reported within Cost of Sales in the consolidated statements of comprehensive income.
Restructuring and Other Related Charges Rollforward The Company's restructuring activity is summarized in the table below (in thousands):
|  |  |  |  | Fiscal 2020 Activity |  |  |  |
Optimization of Manufacturing and Logistics |  | Balance June 30, 2019 |  |  | New Charges (Income) |  |  | Non-Cash |  |  | (Payments) Receipts |  |  | Balance June 30, 2020 |
Employee severance, other payroll and benefit costs |  | $ | 1,714 |  |  | $ | 777 |  |  | $ | 23 |  |  | $ | (2,468 | ) |  | $ | - |
Manufacturing overhead costs |  |  | - |  |  |  | 1,319 |  |  |  | - |  |  |  | (1,319 | ) |  |  | - |
Sale of Passic property |  |  | - |  |  |  | (11,497 | ) |  |  | 245 |  |  |  | 11,742 |  |  |  | - |
Sale of other property, plant and equipment |  |  | - |  |  |  | (675 | ) |  |  | - |  |  |  | 675 |  |  |  | - |
Other exit costs |  |  | - |  |  |  | 727 |  |  |  | (522 | ) |  |  | (1,249 | ) |  |  | - |
Sub-total |  |  | 1,714 |  |  |  | (9,349 | ) |  |  | (254 | ) |  |  | 7,381 |  |  |  | - |
Retail Design Center Impairment |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Impairment of long-lived assets |  |  | - |  |  |  | 5,171 |  |  |  | 5,171 |  |  |  | - |  |  |  | - |
Other Restructuring and Impairment Charges |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Inventory write-downs |  |  | - |  |  |  | 4,107 |  |  |  | 4,107 |  |  |  | - |  |  |  | - |
Lease exit costs (remaining lease rentals) |  |  | 3,145 |  |  |  | 2,372 |  |  |  | 1,847 |  |  |  | (3,760 | ) |  |  | (90 | ) (1)
Other charges (income) |  |  | 224 |  |  |  | 106 |  |  |  | - |  |  |  | (271 | ) |  |  | 59 | (2)
Sub-total |  |  | 3,369 |  |  |  | 6,585 |  |  |  | 5,954 |  |  |  | (4,031 | ) |  |  | (31 | )
Total Restructuring and other impairment activities |  | $ | 5,083 |  |  | $ | 2,407 |  |  | $ | 10,871 |  |  | $ | 3,350 |  |  | $ | (31 | )
( 1 ) | The previously recorded vacant space liability as of June 30, 2019 was reclassified from Accounts payable and accrued expenses and Other long-term liabilities to Operating lease right-of-use assets upon the adoption of ASU 2016 - 02, which requires all right-of-use assets to be measured net of any Topic 420 lease liabilities. The remaining balance as of June 30, 2020 represents a refundable escrow deposit paid in connection with a lease exit and is recorded within Prepaid expenses and other current assets.
( 2 ) | The remaining balance from the other charges (income) as of June 30, 2020 is recorded within Accounts payable and accrued expenses and is expected to be paid out during the first half of fiscal 2021.
Optimization of Manufacturing and Logistics During the fourth quarter of fiscal 2019, we initiated restructuring plans to consolidate our manufacturing and logistics operations as part of an overall strategy to maximize production efficiencies and maintain our competitive advantage. As of June 30, 2019, we permanently ceased operations at our Passaic, New Jersey property and ceased using most of our Old Fort, North Carolina case goods manufacturing operations, which we transferred to our other existing case goods operations. We completed this optimization project in fiscal 2020 as we converted the Old Fort facility into a distribution center and expanded our existing Maiden, North Carolina manufacturing campus while finalizing severance and other exit costs. In connection with these initiatives, we recorded pre-tax restructuring and other exit charges totaling $2.1 million, consisting of $1.3 million in abnormal manufacturing variances associated with the Passaic and Old Fort facilities, $0.8 million in employee severance and other payroll and benefit costs and $0.7 million in other exit costs partially offset by $0.7 million in gains from the sale of property, plant and equipment held at our Old Fort facility. The abnormal manufacturing overhead variances of $1.3 million were recorded within Cost of Sales with the remaining recorded within the line item Restructuring and other impairment charges, net of gains in the consolidated statements of comprehensive income. As part of our optimization plans, we also completed the sale of our Passaic property in September 2019 to an independent third party and received $12.4 million in cash less certain adjustments, including $0.9 million in selling and other closing costs. As a result of the sale, the Company recognized a pre-tax gain of $11.5 million in the first quarter of fiscal 2020, which was recorded within the line item Restructuring and other impairment charges, net of gains in the consolidated statements of comprehensive income. As these optimization plans were initiated in the prior year, we recorded fiscal 2019 pre-tax restructuring, impairment, and other related charges totaling $8.3 million, consisting of $3.1 million in impairments of long-lived assets, $2.8 million in employee severance and other payroll and benefit costs, $2.0 million in inventory write-downs and manufacturing variances and $0.4 million of other associated costs, including freight and relocation expenses. The inventory write-downs and abnormal manufacturing overhead variances of $2.0 million were recorded within Cost of Sales with the remaining $6.3 million recorded within the line item Restructuring and other impairment charges, net of gains in the consolidated statement of comprehensive income. Retail Design Center Long-Lived Assets Impairment We recorded a non-cash impairment charge of $5.2 million during fiscal 2020 related to the impairment of long-lived assets held at certain retail design center locations. Of this total, we recorded $4.8 million during the fourth quarter of fiscal 2020 due to retail segment operating losses driven by the negative economic impacts from COVID- 19 and softened customer demand. The asset group used in the impairment analysis, which represented the lowest level for which identifiable cash flows were available and largely independent of the cash flows of other groups of assets, was the individual retail design center. We estimated future cash flows based on design center-level historical results, current trends, and operating and cash flow projections. The fiscal 2020 impairment charge of $5.2 million was recorded in the consolidated statement of comprehensive income within the line item Restructuring and other impairment charges, net of gains . In the year ago fourth quarter, we recorded a non-cash impairment charge of $9.9 million related to the impairment of long-lived assets held at certain retail design center locations. Due to the fiscal 2019 organizational realignment, we identified this as a triggering event requiring assessment of recoverability. The asset group used in the impairment analysis was the individual retail design center. The impairment charge of $9.9 million was recorded in the consolidated statement of comprehensive income within the line item Restructuring and other i mpairment c harge s, net of gain s. Inventory Write-downs During fiscal 2020 we recorded a non-cash charge of $4.1 million related to the write-down and disposal of certain slow moving and discontinued inventory items, which was due to actual demand and forecasted market conditions for these inventory items being less favorable than originally estimated. Of the total inventory write-down, $3.5 million related to slow moving finished goods with the remaining $0.6 million consisting of raw materials that were disposed. The non-cash inventory write-down was recorded in the consolidated statement of comprehensive income within the line item Cost of Sales. Lease Exit Costs During fiscal 2020 we recorded $2.4 million of restructuring charges within our retail segment related to the remaining contractual obligations under leased retail space that we exited during our fiscal fourth quarter. During April 2020, we entered into an amendment to an existing rental lease, whereby we would return the space back to the landlord effective May 31, 2020 in lieu of termination payments totaling $3.4 million. Partially offsetting these cash payments was a non-cash credit of $1.0 million due to the write-off of the related lease liability, net of the ROU asset. The net pre-tax charge of $2.4 million was recorded in the consolidated statement of comprehensive income within the line item Restructuring and other i mpairment c harge s, net of gain s. During fiscal 2019 we recorded $2.7 million of charges primarily related to remaining contractual obligations under leased retail design center space for which we ceased using as of June 30, 2019. The amount of the charge was equal to all costs that will continue to be incurred under our lease for its remaining term without economic benefit and measured at fair value when we ceased using the right conveyed by the contract. The pre-tax charge was recorded in the consolidated statement of comprehensive income within the line item Restructuring and other i mpairment c harges , net of gains .

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- Definition The entire disclosure of costs incurred for restructuring including, but not limited to, exit and disposal activities, remediation, implementation, integration, asset impairment, and charges against earnings from the write-down of assets. + References No definition available. + Details
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