Annual report pursuant to Section 13 and 15(d)

Restructuring and Severance Charges

v3.10.0.1
Restructuring and Severance Charges
12 Months Ended
Oct. 28, 2018
Restructuring and Related Activities [Abstract]  
Restructuring and Severance Charges
Impairment Charges

Impairment of Property, Equipment and Software

As a result of a system-wide upgrade to its operational and financial systems, the Company identified previously purchased software that will no longer be used and incurred impairment charges of $0.5 million and $0.3 million in fiscal 2018 and fiscal 2017, respectively.
Impairment of Goodwill
The Company performs its annual impairment test for goodwill during the second quarter of the fiscal year and when a triggering event occurs between annual impairment tests. For the fiscal 2018 test performed in the second quarter, we elected to bypass the qualitative assessment and prepared a Step 1 analysis. Our Step 1 analysis used significant assumptions including expected revenue and expense growth rates, forecasted capital expenditures, working capital levels and a discount rate of 12%. Under the market-based approach significant assumptions included relevant comparable company earnings multiples including the determination of whether a premium or discount should be applied to those comparables. During the second quarter of fiscal 2018, it was determined that no adjustment to the carrying value of goodwill of $5.7 million was required as our Step 1 analysis resulted in the fair value of the reporting unit exceeding its carrying value.
During fiscal 2018 and 2017, no adjustment to the carrying value of goodwill was required.
The following represents the change in the carrying amount of goodwill during each fiscal year (in thousands):
 
International Staffing
 
October 28, 2018
 
October 29, 2017
Aggregate goodwill acquired
$
10,483

 
$
10,483

Accumulated impairment losses
(3,733
)
 
(3,733
)
Foreign currency translation adjustment
(1,399
)
 
(1,274
)
Goodwill, net of impairment losses
$
5,351

 
$
5,476

Restructuring and Severance Charges

The Company incurred total restructuring and severance costs of $8.2 million and $1.4 million for fiscal 2018 and 2017, respectively.
2018 Restructuring Plan
On October 16, 2018, the Company approved a restructuring plan (the “2018 Plan”) based on an organizational and process redesign intended to optimize the Company’s strategic growth initiatives and overall business performance. In connection with the 2018 Plan, the Company incurred a restructuring charge of $4.3 million in the fourth quarter of fiscal 2018 comprised of $1.5 million related to severance and benefit costs and $2.8 million related to facility and lease termination costs. The lease termination costs primarily consist of the differential cost between the lease obligation for the former corporate office in New York, NY and the total sublease payments to be received pursuant to a sublease agreement entered into in the fourth quarter of fiscal 2018. The 2018 Plan is expected to be completed by the Company's fiscal year end on November 3, 2019. As of October 28, 2018, the Company anticipates payments of $2.2 million and $0.6 million will be made in fiscal 2019 and 2020, respectively. The remaining $1.3 million related to facility and lease termination costs will be paid through December 2025.
Change in Executive Management
Effective June 6, 2018, Mr. Dean departed from his role as President and Chief Executive Officer of the Company and is no longer a member of the Board of Directors of the Company (the “Board of Directors”). The Company and Mr. Dean subsequently executed a separation agreement, effective June 29, 2018. The Company incurred related severance costs of $2.6 million in the third quarter of fiscal 2018, which is payable over a period of 24 months.
Other Restructuring Costs
During fiscal 2018, there were other restructuring actions taken by the Company as part of its continued efforts to reduce costs and achieve operational efficiency. The Company recorded severance costs of $1.3 million, primarily resulting from the elimination of certain positions.
Additionally, the Company incurred restructuring and severance costs of $1.4 million during fiscal 2017 under a cost reduction plan implemented in fiscal 2016 resulting primarily from a reduction in workforce, facility consolidation and lease termination costs.
The following table presents the restructuring and severance costs for the twelve months ended October 28, 2018 and October 29, 2017 (in thousands):
 
Year Ended October 28, 2018
 
Total
 
North American Staffing
 
International Staffing
 
North American
MSP
 
Corporate & Other
Severance and benefit costs
$
1,526

 
$
401

 
$

 
$

 
$
1,125

Other
2,826

 
428

 

 

 
2,398

2018 Plan
4,352

 
829

 

 

 
3,523

 
 
 
 
 
 
 
 
 
 
Severance and benefit costs
1,009

 
103

 
210

 
37

 
659

Other
246

 

 
118

 
108

 
20

Other
1,255

 
103

 
328

 
145

 
679

 
 
 
 
 
 
 
 
 
 
Change in Executive Management
2,635

 

 

 

 
2,635

Total
$
8,242

 
$
932

 
$
328

 
$
145

 
$
6,837

 
Year Ended October 29, 2017
 
Total
 
North American Staffing
 
International Staffing
 
North American
MSP
 
Corporate & Other
Severance and benefit costs
$
1,301

 
$
294

 
$
24

 
$

 
$
983

Other
78

 
88

 
(10
)
 

 

2016 Plan
$
1,379

 
$
382

 
$
14

 
$

 
$
983


Accrued restructuring and severance costs are included in Accrued compensation and Accrued insurance and other in the Consolidated Balance Sheets. Activity for the fiscal years ended October 28, 2018 and October 29, 2017 are summarized as follows (in thousands):
 
 
October 28, 2018
 
October 29, 2017
Balance, beginning of year
 
$
297

 
$
1,653

Charged to expense
 
8,242

 
1,379

Cash payments
 
(2,837
)
 
(2,735
)
Ending Balance
 
$
5,702

 
$
297


The remaining balance at October 28, 2018 of $5.7 million, primarily related to Corporate and Other, includes $3.5 million related to the cost reduction plan implemented in fiscal 2018 and $2.2 million of other restructuring and severance charges.