G & K Services, Inc. Transaction and Integration Expenses

12 Months Ended

May 31, 2017

Business Combinations [Abstract]

G & K Services, Inc. Transaction and Integration Expenses

G&K Services, Inc. Transaction and Integration Expenses

As a result of the acquisition of G&K in fiscal 2017, the Company incurred $79.2 million in transaction and integration expenses. These expenses consisted of asset impairment charges of $23.3 million and other transaction and integration expenses of $55.9 million. These asset impairment charges and other transaction and integration expenses are included in a single line in the Consolidated Statements of Income and are reported by operating segment in Note 14 entitled Operating Segment Information. Our accounting policy for long-lived assets is described in Note 1 entitled Significant Accounting Policies. The asset impairment charges of $23.3 million relate to the write-down of machinery and equipment and other fixed assets to their fair value in G&K plants and branches that were identified by the Company on April 30, 2017 for future closure. The Company has determined that these assets cannot be used for other purposes, and the undiscounted projected future cash flows associated with these assets are less than their carrying value at April 30, 2017. The fair value utilized for purposes of the asset impairment analysis was determined by using Level 2 inputs based on both the cost and market approaches.

The other transaction and integration expenses consisted of the following: $17.4 million of legal and professional fees directly related to the acquisition, $31.0 million of employee termination expenses recognized under ASC Topic 712, "Compensation - Nonretirement Postemployment Benefits," $5.5 million write-off of excess inventory and $2.0 million of other miscellaneous integration expenses. The amount of employee termination benefits paid in fiscal 2017 was $6.7 million, resulting in a related liability balance as of May 31, 2017 of $24.3 million.