RESTRUCTURING AND RELATED CHARGES AND ASSET IMPAIRMENT CHARGES

Restructuring and Related Charges

Phase 1

We are implementing restructuring actions in conjunction with our Phase 1 restructuring program to achieve synergies across Kennametal as a result of the TMB acquisition by consolidating operations among both organizations, reducing administrative overhead and leveraging the supply chain. These restructuring actions are expected to be completed by the end of fiscal 2016 and are anticipated to be mostly cash expenditures.

The total pre-tax charges for Phase 1 programs are expected to be in the range of $55 million to $60 million, which is expected to be approximately 50 percent Industrial and 50 percent Infrastructure. Total restructuring and related charges since inception of $51.9 million have been recorded for these Phase 1 programs through June 30, 2015: $29.7 million in Industrial, $20.0 million in Infrastructure, and $2.2 million in Corporate.

Phase 2

We are implementing restructuring actions in conjunction with Phase 2 to streamline the Company's cost structure. These initiatives are expected to enhance operational efficiencies through the rationalization of certain manufacturing facilities as well as other employment and cost reduction programs. These restructuring actions are expected to be completed by December 2016 and are anticipated to be mostly cash expenditures.

The total pre-tax charges for Phase 2 programs are expected to be in the range of $90 million to $100 million, which is expected to be approximately 85 percent Industrial and 15 percent Infrastructure. Total restructuring and related charges since inception of $23.6 million have been recorded for these Phase 2 programs through June 30, 2015: $14.2 million in Industrial, $8.2 million in Infrastructure, and $1.2 million in Corporate.

Phase 3

We are implementing restructuring actions in conjunction with Phase 3. These initiatives are expected to enhance operational efficiencies through an enterprise-wide cost reduction program as well as the consolidation of certain manufacturing facilities. These restructuring actions are expected to be completed by March 2017 and are anticipated to be mostly cash expenditures.

The total pre-tax charges for Phase 3 programs are expected to be in the range of $40 million to $45 million, which is expected to be approximately 50 percent Industrial and 50 percent Infrastructure. Total restructuring and related charges since inception of $1.6 million have been recorded in Infrastructure for these Phase 3 programs through June 30, 2015.

Combined

During 2015, we recognized total restructuring and related charges of $58.1 million, of this amount, restructuring charges totaled $42.1 million, of which $1.5 million were charges related to inventory disposals and were recorded in cost of goods sold. Total restructuring-related charges of $8.2 million were recorded in cost of goods sold and $7.8 million in operating expense during 2015.

During 2014, we recognized total restructuring and related charges of $19.1 million, of this amount, restructuring charges totaled $17.8 million, of which $0.2 million were charges related to inventory disposals and were recorded in cost of goods sold. Total restructuring-related charges of $1.2 million were recorded in cost of goods sold and $0.1 million in operating expense during 2014.

During 2013, we recorded no restructuring and related charges.

The restructuring accrual is recorded in other current liabilities in our consolidated balance sheet and the amount attributable to each segment is as follows:



(in thousands)	June 30, 2014		Expense		Asset Write-Down			Other ⁽²⁾			Translation			Cash Expenditures			June 30, 2015
Industrial
Severance	$	5,815	$	20,713	$	—		$	—		$	(328	)	$	(12,744	)	$	13,456
Facilities	444		2,277		(2,231		)	—			(15		)	(475		)	—
Other	67		77		—			—			(2		)	(114		)	28
Total Industrial	$	6,326	$	23,067	$	(2,231	)	$	—		$	(345	)	$	(13,333	)	$	13,484

Infrastructure
Severance	$	2,458	$	14,027	$	—		$	(459	)	$	(223	)	$	(8,630	)	$	7,173
Facilities	190		4,969		(3,638		)	—			(32		)	(1,358		)	131
Other	28		—		—			—			(3		)	(25		)	—
Total Infrastructure	2,676		18,996		(3,638		)	(459		)	(258		)	(10,013		)	7,304
Total	$	9,002	$	42,063	$	(5,869	)	$	(459	)	$	(603	)	$	(23,346	)	$	20,788

(2) Special termination benefit charge for one of our U.S.-based benefit pension plans resulting from a plant closure - see Note 12.



(in thousands)	June 30, 2013		Expense		Asset Write-Down			Other		Translation		Cash Expenditures			June 30, 2014
Industrial
Severance	$	—	$	9,536	$	—		$	—	$	11	$	(3,732	)	$	5,815
Facilities	—		2,829		(2,395		)	—		14		(4		)	444
Other	—		136		—			—		13		(82		)	67
Total Industrial	$	—	$	12,501	$	(2,395	)	$	—	$	38	$	(3,818	)	$	6,326

Infrastructure
Severance	$	—	$	4,034	$	—		$	—	$	4	$	(1,580	)	$	2,458
Facilities	—		1,197		(1,013		)	—		8		(2		)	190
Other	—		57		—			—		6		(35		)	28
Total Infrastructure	—		5,288		(1,013		)	—		18		(1,617		)	2,676
Total	$	—	$	17,789	$	(3,408	)	$	—	$	56	$	(5,435	)	$	9,002

Asset impairment Charges

See discussion on Infrastructure segment goodwill and other intangible asset impairment charges in Note 2.