Restructuring and Severance Charges
|12 Months Ended|
Oct. 31, 2021
|Restructuring and Related Activities [Abstract]|
|Restructuring and Severance Charges||Impairment Charges
Long-lived assets primarily consist of right-of-use assets, capitalized software costs, leasehold improvements and office equipment. The Company reviews these assets for impairment under ASC 360 Property, Plant and Equipment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When an impairment loss is recognized, the carrying amount of the asset is reduced to its estimated fair value based on discounted cash flow analysis or other valuation techniques.
In fiscal 2021, the Company recorded impairment charges of $0.4 million of capitalized software costs related to a change in the expected use of certain assets in the Corporate and Other category. There were no additional triggering events in fiscal 2021 that would indicate that the carrying amounts of any other of the Company’s long-lived assets may not be recoverable as of the end of the fiscal period.
In fiscal 2020, due to the economic impact of the COVID-19 pandemic, real estate rationalization decisions were made resulting in impairment charges of $16.1 million to reduce the carrying value of certain right-of-use assets to their estimated fair value. Significant assumptions used to estimate fair value were the current economic environment, real estate market conditions and general market participant assumptions. The Company also recorded impairment charges of $0.8 million primarily related to the leasehold improvements and office equipment associated with these closed facilities. Impairment charges of $1.9 million and $15.0 million were for the North American Staffing segment and the Corporate and Other category, 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.
Our fiscal 2021 annual test performed in the second quarter used significant assumptions, including expected revenue and expense growth rates, forecasted capital expenditures, working capital levels and a discount rate of 13.0%. 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. It was determined that the fair value of the reporting unit exceeded its carrying value, therefore no adjustment to the carrying value of goodwill of $5.8 million was required as of the end of the second quarter of fiscal 2021.
The following represents the change in the carrying amount of goodwill, which is included in non-current Other assets in the Consolidated Balance Sheets, during each fiscal year (in thousands):
Restructuring and Severance Charges
The Company incurred total restructuring and severance costs of $2.8 million and $2.6 million for fiscal 2021 and 2020, respectively.
2020 Restructuring Plan
In the first quarter of fiscal 2020, the Company approved a restructuring plan (the “2020 Plan”) as part of its strategic initiative to optimize the Company’s cost infrastructure. The 2020 Plan leveraged the global capabilities of the Company's staffing operations based in Bangalore, India and off-shored a significant number of strategically identified roles to this location. The total costs incurred in fiscal 2020 in connection with the 2020 Plan were $1.2 million, consisting of $0.1 million in North American Staffing, $0.1 million in International Staffing and $1.0 million in the Corporate and Other category.
Other Restructuring Costs
As part of its continued efforts to reduce costs, the Company recorded other restructuring costs. In fiscal 2021 and 2020, the Company recorded $1.8 million and $0.3 million, respectively, related to ongoing costs of facilities impaired in the second half of fiscal 2020. In fiscal 2021 and 2020, the Company recorded severance costs of $1.0 million and $1.1 million, respectively, primarily resulting from the elimination of certain positions.
The following tables present the restructuring and severance and benefit costs for the twelve months ended October 31, 2021 and November 1, 2020 (in thousands):
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 31, 2021 and November 1, 2020 are summarized as follows (in thousands):
Upon adoption of ASC 842 Leases, $2.0 million of accrued restructuring related to the exit of leased real estate was reclassified
as a reduction to the related ROU asset, per the accounting guidance. The remaining balance as of October 31, 2021 of $0.5 million, was related to $0.2 million of severance costs in the International Staffing segment and $0.1 million in the North American MSP segment, as well as $0.2 million in the Corporate and Other category.
The entire disclosure for restructuring and related activities. Description of restructuring activities such as exit and disposal activities, include facts and circumstances leading to the plan, the expected plan completion date, the major types of costs associated with the plan activities, total expected costs, the accrual balance at the end of the period, and the periods over which the remaining accrual will be settled.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef