Strategic Transformation and Restructuring and Other Asset Charges

3 Months Ended

Mar. 31, 2023

Restructuring, Settlement and Impairment Provisions [Abstract]

Strategic Transformation and Restructuring and Other Asset Charges

The Company is undergoing a multi-year phased implementation of a standardized enterprise resource planning ("ERP") system across the global organization, which will replace much of the existing disparate core financial systems. The upgraded ERP will initially convert internal operations, manufacturing, finance, human capital resources management and customer relationship systems to cloud-based platforms. This new ERP system will provide for standardized processes and integrated technology solutions that enable the Company to better leverage automation and process efficiency. An implementation of this scale is a major financial undertaking and requires substantial time and attention of management and key employees.

In addition, beginning in the first quarter of 2022, a lean manufacturing initiative at one of the Company's largest sites was initiated and is expected to drive improvement in gross margin at that site. Gross margin improvements are expected to be realized in conjunction with the project completion in early to mid-2024. This improvement is intended to serve as the optimal blueprint for the Company's other manufacturing facilities.

Costs incurred of $7.2 million and $5.3 million related to these strategic transformational initiatives in the three months ended March 31, 2023 and 2022, respectively, are recorded in "Selling, general and administrative expenses" in the Consolidated Statements of Operations.

The Company periodically sells or disposes of its assets in the normal course of its business operations as they are no longer needed or used, and the Company may incur gains or losses on these disposals. Certain of the costs associated with these decisions are separately identified as restructuring. The Company reports asset impairment charges and gains or losses on the sales of property and equipment collectively, with restructuring charges in "Restructuring and other asset charges, net" in the Consolidated Statements of Operations to the extent they are experienced.

Restructuring charges and the net gain on sale of property and equipment are presented below:


	Three Months Ended March 31,
(in millions)	2023		2022
Restructuring charges:
Costs associated with leadership change and overhead restructuring	$	7.0	$	—
Costs associated with exited operations - Enid	0.1		0.2
Costs associated with closing Tacoma	—		0.8





Total restructuring related charges	7.1		1.0







Gain on sale of property and equipment, net:
Gain on sale of property and equipment, net	(3.4)		—
Total gain on sale of property and equipment, net	(3.4)		—

Restructuring and other asset charges, net	$	3.7	$	1.0

Restructuring charges by segment are as follows:


	Three Months Ended March 31,
(in millions)	2023		2022
Infrastructure Solutions	$	0.3	$	1.0

Corporate and Other	6.8		—
Total restructuring related charges	$	7.1	$	1.0

Net gains on sale of property and equipment by segment are as follows:


	Three Months Ended March 31,
(in millions)	2023		2022
Infrastructure Solutions	$	(3.4)	$	—


Total gain on sale of property and equipment, net	$	(3.4)	$	—

Restructuring charges accrued, but not paid, were $2.5 million and $4.7 million as of March 31, 2023 and December 31, 2022, respectively.

In January 2021, the Company announced plans to close the Tacoma facility in order to simplify and consolidate operations. The Tacoma facility ceased manufacturing operations at the end of 2021. The transfer of the manufacturing and marketing of Tacoma product lines to other facilities within the Infrastructure Solutions segment was completed during the first quarter of 2022. In conjunction with this action, the Company recorded $0.8 million of restructuring related charges during the three months ended March 31, 2022 in "Restructuring and other asset charges, net" in the Consolidated Statements of Operations. The Company recorded the Tacoma facility's land, building and certain equipment assets of $15.4 million as held for sale in its Consolidated Balance Sheets at December 31, 2022. The sale of these assets was completed in the first quarter of 2023 for $19.9 million. The Company recorded a gain on the sale of $3.4 million, which was recorded in "Restructuring and other asset charges, net" in the Consolidated Statements of Operations.

Additional restructuring costs of $0.1 million and $0.2 million were incurred during the three months ended March 31, 2023 and 2022, respectively, for the Company's exited oil and gas drilling product lines produced at its former Enid, Oklahoma ("Enid") location.

Effective as of January 6, 2023, Mr. Barry A. Ruffalo's employment as President and Chief Executive Officer was terminated. In connection with his separation, the Company entered into an agreement with Mr. Ruffalo (the "Separation Agreement") pursuant

to which, Mr. Ruffalo was entitled to certain severance payments and benefits. During the first quarter of 2023, $1.8 million of restructuring costs, related to the modification of Mr. Ruffalo's equity awards and other third-party transition support costs, were recorded in "Restructuring and other asset charges, net" in the Consolidated Statements of Operations. The related recovery of $1.6 million of incurred share-based compensation expense was recorded in "Selling, general and administrative expenses" in the Consolidated Statements of Operations. The Separation Agreement also included a release and waiver by Mr. Ruffalo and other customary provisions.

Management continually reviews the Company's organizational structure and operations to ensure they are optimized and aligned with achieving near-term and long-term operational and profitability targets. In connection with this review, in February 2023, the Company implemented a limited restructuring plan to right-size and reduce the fixed cost structure of certain overhead departments. Charges of $5.3 million for employee termination costs, including equity award modifications, were incurred in the first quarter of 2023 and recorded in "Restructuring and other asset charges, net" in the Consolidated Statements of Operations. The related recovery of $0.8 million of incurred share-based compensation expense was recorded in "Selling, general and administrative expenses" in the Consolidated Statements of Operations.