Note 9 – Restructuring Charges

In February 2013, the Company approved the initial phase of a restructuring plan designed to achieve cost savings. In January 2014, the Company announced the final phase of its restructuring plan designed to reduce the Company’s annual cost base and substantially improve the Company’s operating margins, increasing the aggregate targeted annualized cost savings to a total of $110 million to $120 million. This final phase includes additional reductions in the global workforce primarily across all general, administrative and shared services divisions of the Company, along with the early termination of certain operating leases and the closing or reduction in size of office facilities worldwide.

These cost reduction efforts, which are expected to be substantially completed by the end of fiscal 2015, are expected to result in cumulative charges of $50 million to $60 million. Substantially all of the estimated charges will result in future cash expenditures.

During the three and six months ended September 30, 2014, the Company recorded a charge of approximately $2.3 million and $5.2 million, respectively, for costs associated with these reductions, primarily related to severance costs for 30 terminated employees and facilities reductions. The timing of additional charges is dependent upon certain actions to be taken in the future. During the three and six months ended September 30, 2013, the Company recorded a charge of approximately $219,000 and $5.0 million, respectively, for costs associated with these reductions, primarily related to severance costs for 78 terminated employees.

The following table summarizes the restructuring accrual as of March 31, 2014 and changes to the accrual during the three and six months ended September 30, 2014 (in thousands):

	Employee Termination Benefits			Lease Abandonment Costs			Other			Total Restructuring Activity
Accrual at March 31, 2014	$	3,031		$	1,544		$	17		$	4,592

Restructuring charge		2,350			557			68			2,975

Payments		(2,487	)		(884	)		(17	)		(3,388	)

Accrual at June 30, 2014		2,894			1,217			68			4,179


Restructuring charge		731			1,511			13			2,255

Payments		(1,842	)		(1,351	)		(42	)		(3,235	)

Accrual at September 30, 2014	$	1,783		$	1,377		$	39		$	3,199

The Company evaluates its business segments prior to restructuring charges. Lease abandonment and other restructuring charges were not related to any specific segment. Restructuring charges across the business segments were as follows (in thousands):

	Three Months Ended September 30, 2014
	Dynatrace		MF		AS		Unallocated Expenses		Total

Employee termination benefits	$	136	$	83	$	-	$	512	$	731
Lease abandonment costs		-		-		-		1,511		1,511
Other		-		-		-		13		13
Total restructuring charges	$	136	$	83	$	-	$	2,036	$	2,255

	Six Months Ended
	September 30, 2014
	Dynatrace		MF		AS		Unallocated Expenses		Total

Employee termination benefits	$	895	$	313	$	-	$	1,873	$	3,081
Lease abandonment costs		-		-		-		2,068		2,068
Other		-		-		-		81		81
Total restructuring charges	$	895	$	313	$	-	$	4,022	$	5,230

As of September 30, 2014, substantially all of the restructuring accrual was recorded in current “accrued expenses” in the condensed consolidated balance sheets.

The accruals for employee termination benefits at September 30, 2014 primarily represent the amounts to be paid to employees that have been terminated as a result of initiatives described above.

The accruals for lease abandonment costs at September 30, 2014 represent the expected payments related to leases that have been terminated before the end of the contractual term. For terminated operating leases, the accrual includes the remaining fair value of lease obligations for exited and demised locations, as determined at the cease-use dates of those facilities, net of estimated sublease income that could be reasonably obtained in the future, and will be paid out over the remaining lease terms, the last of which ends in fiscal 2017. Projected sublease income is based on management’s estimates, which are subject to change.