Restructuring Charges

6 Months Ended

Dec. 31, 2021

Restructuring Charges

Restructuring Charges

Note 4. Restructuring Charges

2021 Restructuring Plan

On November 1, 2021, the Board of Directors authorized a restructuring and cost savings plan (the “2021 Restructuring Plan”) to further optimize its operations, improve efficiencies and reduce costs. Under the 2021 Restructuring Plan, the Company will consolidate its manufacturing footprint by transferring certain liquid drug production from its Silarx Pharmaceuticals, Inc. (“Silarx”) facility in Carmel, New York to the Company’s main plant in Seymour, Indiana. Following the transition, which is expected to take 12 to 18 months, the Company intends to shut down operations at Silarx. The Company is also currently pursuing the sale of the facility, which is anticipated within one year and may result in accelerated timing for the shutdown of operations at Silarx. Several products manufactured by Silarx and Kremers Urban Pharmaceuticals, Inc. will be scaled back or discontinued over time. Particularly, the Company will scale back or phase out some small low-margin over-the-counter medicines from Carmel and two low-margin prescription products as part of the restructuring program. During the transition of products from Carmel, New York to the Seymour, Indiana facility, the Company will continue to assess its portfolio and may introduce or discontinue additional products. As part of the 2021 Restructuring Plan, the Company will also scale back its research and development operations and eliminate certain administrative positions that primarily support the Silarx and research and development operations. The total reduction in headcount, and the basis of the estimated severance costs, for the 2021 Restructuring Plan is expected to be approximately 165 positions, which includes additional positions identified at the Seymour, Indiana facility in January 2022. The Company initiated the plan on November 3, 2021 and expects that the actions contemplated under the 2021 Restructuring Plan will be substantially complete by June 30, 2023. The plan is expected to generate cost savings of $20 million, annually.

The Company estimates that it will incur approximately $6.0 million to $7.0 million of total costs to implement the 2021 Restructuring Plan, comprised primarily of approximately $5.0 million of severance and employee-related costs and approximately $1.0 million to $2.0 million of tech transfer costs. The Company also expects to incur approximately $2.0 million to $3.0 million in capital expenditures to build out the liquid manufacturing business at the Kremers Urban Pharmaceuticals, Inc. facility.

The Company incurred $0.9 million in severance-related costs during the second quarter of Fiscal 2022 in connection with the 2021 Restructuring Plan. A reconciliation of the charges in restructuring liabilities associated with the 2021 Restructuring Plan from June 30, 2021 through December 31, 2021 is set forth in the following table:

	Employee		Tech Transfer
(In thousands)	Separation Costs		Costs		Total
Balance at June 30, 2021	$	—	$	—	$	—
Restructuring charges		864		27		891
Payments		(244)		(27)		(271)
Balance at December 31, 2021	$	620		—	$	620

The Company has incurred $48.9 million in non-cash impairment charges in connection with the 2021 Restructuring Plan related to certain long-lived intangible assets as well as certain facility, equipment and other plant-related assets currently utilized by the Company. Refer to Note 7 “Property, Plant and Equipment,” Note 9 “Intangible Assets” and Note 20 “Assets Held for Sale” for further details on the impairment charges incurred as of December 31, 2021 in connection with the 2021 Restructuring Plan.