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Note 9 - Restructuring and Impairment Activities | 6 Months Ended
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Dec. 31, 2019
Notes to Financial Statements |
Restructuring, Impairment, and Other Activities Disclosure [Text Block] |
( 9 ) | Restructuring and Impairment Activities
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 discontinued 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. During the first half of fiscal 2020, we continued with this optimization project 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 the foregoing fiscal 2020 initiatives, we recorded pre-tax restructuring and other exit charges totaling $1.8 million, consisting of $1.3 million in abnormal manufacturing variances associated with the Passaic and Old Fort facilities, $0.7 million in employee severance and other payroll and benefit costs and $0.4 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 Impairment Charges (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 Impairment Charges (Gains) in the consolidated statements of comprehensive income. Inventory Write-downs During the first half of fiscal 2020 we recorded a non-cash charge of $3.2 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, $2.6 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 Sale s. Summary of Restructuring , Impairments and Other r elated charges (gains) Restructuring, impairment and other related costs incurred during the three and six months ended December 31, 2019 were as follows (in thousands):
|  | Three months ended |  |  | Six months ended |
|  | December 31, 2019 |  |  | December 31, 2019 |
Optimization of manufacturing and logistics |  | $ | (178 | ) |  | $ | 462 |
Gain on sale of Passaic property |  |  | - |  |  |  | (11,497 | )
Total Restructuring and other exit costs (income) |  | $ | (178 | ) |  | $ | (11,035 | )
Manufacturing overhead costs |  |  | 271 |  |  |  | 1,323 | (1)
Inventory write-downs |  |  | 121 |  |  |  | 3,209 | (1)
Total |  | $ | 214 |  |  | $ | (6,503 | )
( 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 Dec 31, 2019 |
Employee severance, other payroll and benefit costs |  | $ | 1,714 |  |  | $ | 712 |  |  | $ | 23 |  |  | $ | (2,380 | ) |  | $ | 23 | (1)
Manufacturing overhead costs |  |  | - |  |  |  | 1,323 |  |  |  | - |  |  |  | (1,323 | ) |  |  | - |
Sale of Passaic property |  |  | - |  |  |  | (11,497 | ) |  |  | 245 |  |  |  | 11,742 |  |  |  | - |
Sale of other property, plant and equipment |  |  | - |  |  |  | (675 | ) |  |  | - |  |  |  | 675 |  |  |  | - |
Other exit costs |  |  | - |  |  |  | 425 |  |  |  | (522 | ) |  |  | (947 | ) |  |  | - |
Sub-total |  | $ | 1,714 |  |  | $ | (9,712 | ) |  | $ | (254 | ) |  | $ | 7,767 |  |  | $ | 23 |
Inventory write-downs |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Inventory write-downs |  | $ | - |  |  | $ | 3,209 |  |  | $ | 3,209 |  |  | $ | - |  |  | $ | - |
Other Restructuring and Impairment Charges |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Lease exit costs (remaining lease rentals) |  | $ | 3,145 |  |  | $ | - |  |  | $ | 2,878 |  |  | $ | (267 | ) |  | $ | - | (2)
Other charges (income) |  |  | 224 |  |  |  | - |  |  |  | - |  |  |  | (104 | ) |  |  | 120 | (3)
Sub-total |  |  | 3,369 |  |  |  | - |  |  |  | 2,878 |  |  |  | (371 | ) |  |  | 120 |
Total Restructuring, Impairments and other exit costs |  | $ | 5,083 |  |  | $ | (6,503 | ) |  | $ | 5,833 |  |  | $ | 7,396 |  |  | $ | 143 |
( 1 ) | Remaining severance expected to be paid during the third quarter of fiscal 2020. The balance is reported within Accrued compensation and benefits in our consolidated balance sheet as of December 31, 2019.
( 2 ) | The previously recorded vacant space liability 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.
( 3 ) | The remaining balance from the other charges (income) as of December 31, 2019 is recorded within Accounts payable and accrued expenses .

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