NOTE D – Restructuring and Other Expense (Income)

In fiscal 2008, we initiated a Transformation Plan (the “Transformation Plan”) with the overall goal to improve our sustainable earnings potential, asset utilization and operational performance. The Transformation Plan focuses on cost reduction, margin expansion and organizational capability improvements and, in the process, seeks to drive excellence in three core competencies: sales; operations; and supply chain management. The Transformation Plan is comprehensive in scope and includes aggressive diagnostic and implementation phases. When this process began, we retained a consulting firm to assist in the development and implementation of the Transformation Plan. As the Transformation Plan progressed, we formed internal teams dedicated to this effort, and they ultimately assumed full responsibility for executing the Transformation Plan. Although the consulting firm was again engaged as we rolled out the Transformation Plan in our Pressure Cylinders operating segment, most of the work is now being done by our internal teams. These internal teams are now an integral part of our business and constitute what we refer to as the Centers of Excellence (“COE”). The COE will continue to monitor the performance metrics and new processes instituted across our transformed operations and drive continuous improvements in all areas of our operations. The expenses related to the COE will be included in selling, general and administrative (“SG&A”) expense going forward.

To date, we have completed the transformation phases in each of the core facilities within our Steel Processing operating segment, including the facilities of our Mexican joint venture, Serviacero. We also substantially completed the transformation phases at our metal framing facilities prior to their contribution to ClarkDietrich. Transformation efforts within our Pressure Cylinders and Engineered Cabs operating segments, which began during the first quarter of fiscal 2012 and the first quarter of fiscal 2013, respectively, are ongoing.

A progression of the liabilities created as part of the Transformation Plan during the nine months ended February 28, 2014, combined with a reconciliation to the restructuring and other expense (income) financial statement caption in our consolidated statement of earnings is summarized as follows:


(in thousands)	Beginning Balance		Expense			Payments			Adjustments			Ending Balance
Early retirement and severance	$	5,029	$	5,672		$	(3,331	)	$	(81	)	$	7,289
Facility exit and other costs		1,200		2,182			(2,522	)		(126	)		734

	$	6,229		7,854		$	(5,853	)	$	(207	)	$	8,023

Net gain on sale of assets				(10,587	)
Less: joint venture transactions				(1,048	)

Restructuring and other expense			$	(3,781	)

During the nine months ended February 28, 2014, the following actions were taken in connection with the Transformation Plan:

•

In connection with the wind-down of our former Metal Framing operating segment, we recognized $934,000 of facility exit and other costs and a loss of $114,000 related to the sale of certain retained assets. These costs were recognized within the joint venture transactions financial statement caption in our consolidated statements of earnings to correspond with amounts previously recognized in connection with the formation of ClarkDietrich and the subsequent wind-down of our former Metal Framing operating segment.

•

In connection with the closure of our commercial stairs business, we incurred facility exit charges of $636,000.

•

In connection with the consolidation of the BernzOmatic hand torch manufacturing operation in Medina, New York into the existing Pressure Cylinders’ facility in Chilton, Wisconsin, we recognized an additional accrual of $578,000 for expected employee severance costs and $370,000 of facility exit costs. During the fourth quarter of fiscal 2013, we recognized a $2,488,000 accrual for expected severance costs related to this matter.

•

On June 30, 2013, the Company completed the sale of Integrated Terminals, its warehouse facility in Detroit, Michigan, for cash proceeds of $7,457,000, resulting in a gain of $4,762,000.

•

On November 12, 2013, the Company entered into an agreement to sell the operating assets related to its steel high pressure and acetylene cylinders business in North America, resulting in a gain of $5,939,000. In connection with this transaction, the Company recognized a $3,714,000 accrual for expected severance costs and incurred facility exit charges of $242,000.

•

On December 10, 2013, the Company announced the closure of its Baltimore steel facility by the end of fiscal 2014. In connection with this matter, the Company recognized a $1,380,000 accrual for expected severance costs.

Approximately $7,238,000 of the total liability shown in the table above is expected to be paid in the next twelve months. The remaining liability, which consists of certain severance benefits, will be paid through September 2016.