RESTRUCTURING ACTIVITIES

12 Months Ended

Jul. 31, 2021

Restructuring and Related Activities [Abstract]

IWCO Restructuring Activities

On June 2, 2021, the Board approved a Competitive Improvement Plan (“CIP”) for IWCO Direct, which addresses the changing requirements of its customers and markets it serves, as well as the current competitive landscape. The CIP seeks to expand IWCO Direct’s marketing services capabilities, and upgrade its production platform to new digital and inserting technology, while reducing its overall production costs to enhance its competitive pricing capabilities. The CIP contemplates a total investment of approximately $54 million primarily over a 24-month period. The Company estimates the CIP cost will consist of approximately: (1) $38 million for digital press and insertion equipment, and technology build out cost (of which approximately $34 million in lease/purchase agreements were entered into subsequent to year-end), and (2) $16 million for severance, employee retention, facilities optimization, and other implementation costs. In addition, the Company expects to incur approximately $12 million for non-cash accelerated depreciation expense. The cost estimates do not include amounts for potential non-cash asset impairment charges relating to facilities and equipment optimization. The timing and amount of the costs will depend on a number of factors.

Accelerated depreciation costs primarily relate to operating facilities and equipment to be sold or closed as part of the programs. Accelerated depreciation costs represent the difference between the depreciation expense to be recognized over the revised useful life of the asset, based upon the anticipated date the site will be closed or divested or the equipment disposed of, and depreciation expense as determined utilizing the useful life prior to the restructuring actions.

As part of the CIP, the Company announced on August 23, 2021 that it will be optimizing its manufacturing footprint by closing IWCO Direct’s Little Falls, Minnesota facility. The facility is expected to close in January of 2022. For the fiscal year ended July 31, 2021, the Company did not incur any material costs associated with these restructuring activities.

ModusLink Restructuring Activities

During the fiscal year ended July 31, 2021, ModusLink implemented a strategic plan to reorganize its sales function and the e-Business operations. The restructuring charges associated with this plan were primarily composed of employee termination costs.

The tables below present restructuring charges by type of cost for the fiscal year ended July 31, 2021:


(in thousands)	Direct Marketing		Supply Chain		Total
Accelerated depreciation	$	3,228	$	—	$	3,228
Impairment of long-lived assets	498		—		498
Employee termination costs	—		1,720		1,720
Contractual obligations	—		35		35
Total restructuring charges	$	3,726	$	1,755	$	5,481


(in thousands)	Direct Marketing		Supply Chain		Total
Cost of revenue	$	3,724	$	—	$	3,724
Selling, general and administrative	2		1,755		1,757
	$	3,726	$	1,755	$	5,481

Changes to the restructuring liability during he fiscal year ended July 31, 2021 were as follows:


(in thousands)	Employee Termination Costs		Contractual Obligations		Restructuring Liability
Balance as of July 31, 2020	$	41	$	—	$	41
Costs incurred	2,124		37		2,161
Cash payments	(706)		(35)		(741)
Change in estimates	(404)		(2)		(406)
Balance as of July 31, 2021	$	1,055	$	—	$	1,055