Restructuring and other strategic initiatives

3 Months Ended

Mar. 28, 2020

Restructuring and Related Activities [Abstract]

Restructuring and other strategic initiatives

Restructuring and other strategic initiatives

Gates continues to undertake various restructuring and other strategic initiatives to drive increased productivity in all aspects of our operations. These actions include efforts to consolidate our manufacturing and distribution footprint, scale operations to current demand levels, combine back-office workgroups and relocate certain operations to lower cost locations. Our recently completed manufacturing footprint investments and other productivity improvements in recent years have helped to position us to accelerate and expand upon our previously announced restructuring program, which is primarily intended to optimize our manufacturing and distribution footprint over the mid-term by removing structural fixed costs, and, to a lesser degree, to streamline our selling, general and administrative (“SG&A”) back-office functions.

Overall costs associated with our restructuring and other strategic initiatives have been recognized in the condensed consolidated statements as set forth below. Expenses incurred in relation to certain of these actions qualify as restructuring expenses under U.S. GAAP.

	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Restructuring expenses:
—Severance	$	0.2	$	2.6
—Professional fees	0.2		0.6
—Other restructuring expenses	1.5		0.1
Total restructuring expenses	$	1.9	$	3.3
Expenses related to other strategic initiatives:
—Severance costs included in cost of sales	$	0.1	$	—
—Severance costs (benefits) included in SG&A	0.5		(0.2)
Total expenses related to other strategic initiatives	$	0.6	$	(0.2)

Restructuring and other strategic initiatives undertaken during the three months ended March 28, 2020 related primarily to the closure of two North American manufacturing facilities and reductions in workforce, primarily in the U.S. and Asia. Expenses incurred during

the prior year in connection with our restructuring and other strategic initiatives related primarily to the closure of one of our facilities in France and a strategic restructuring of part of our Asian business.

Restructuring activities

As indicated above, restructuring expenses, as defined under U.S. GAAP, form a subset of our total expenses related to restructuring and other strategic initiatives. These expenses include the impairment of inventory, which is recognized in cost of sales. Analyzed by segment, our restructuring expenses were as follows:

	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Power Transmission	$	0.2	$	2.9
Fluid Power	1.7		0.4
Continuing operations	$	1.9	$	3.3

The following summarizes the reserve for restructuring expenses for the three months ended March 28, 2020 and March 30, 2019, respectively:

	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Balance as of the beginning of the period	$	2.9	$	2.6
Utilized during the period	(2.0)		(2.0)
Net charge for the period	2.4		3.3
Released during the period	(0.5)		—
Foreign currency translation	0.1		(0.1)
Balance as of the end of the period	$	2.9	$	3.8

Restructuring reserves, which are expected to be utilized in 2020 and 2021, are included in the condensed consolidated balance sheet within the accrued expenses and other current liabilities line.