Annual report pursuant to Section 13 and 15(d)

Restructuring and other charges (income)

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Restructuring and other charges (income)
 12 Months Ended
Mar. 31, 2023
Restructuring and Related Activities [Abstract]  
Restructuring and other charges (income) Restructuring and Other Charges/(Income)
As a result of the continued impact of the Russo-Ukrainian war, including the sanctions related thereto, in the third quarter of fiscal 2023, we identified a triggering event in our EMEA reportable segment. Given the continuing depressed economic conditions resulting from the Russo-Ukrainian war, including sanctions related thereto, the Company commenced a strategic assessment of its operations in its Russian subsidiary and we concluded that there was uncertainty in whether the Company could realize significant future economic benefits. Therefore, we recorded a total charge of $8,334 in the third fiscal quarter of 2023.
In the fourth quarter of fiscal 2023, on January 31, 2023, our board of directors authorized the Company to withdraw from its operations in the Russian Federation (the “Russia Exit”), through a planned disposition of its Russian subsidiary. We
expect to complete the Russia Exit by the second quarter of fiscal 2024, subject to the receipt of the requisite regulatory approvals. The carrying value of the remaining assets and liabilities is zero.
Additionally, in the fourth fiscal quarter, we moved the Russian subsidiary and its related assets and liabilities into an Assets Held-for-Sale asset group. Therefore, according to ASC 205, Presentation of Financial Statements, we marked down the asset group to its fair value less cost to sell. In fiscal 2023, we recorded the following charges:

Charge Financial statement impact Amount
Cash and cash equivalents Cash and cash equivalents; Selling, general and administrative expenses $ 3,939 
Increase in Current Expected Credit Loss, or "CECL," allowance for credit loss Accounts receivable, net; Selling, general and administrative expenses 681 
Increase in inventory valuation reserves Inventories, net; Cost of sales 4,325 
Contract assets Contract assets; Restructuring and other charges/(income) 347 
Prepaid expenses and other current assets Prepaid expenses and other current assets, Income tax receivable; Restructuring and other charges/(income) 1,102 
Property, plant and equipment, net Property, plant and equipment, net; Restructuring and other charges/(income) 298 
Operating lease right-of-use assets Operating lease right-of-use assets; Restructuring and other charges/(income) 567 
Other non-current assets Deferred income taxes, Other non-current assets; Restructuring and other charges/(income) 83 
Current and non-current liabilities, net, including accumulated foreign currency translation losses Current liabilities; Restructuring and other charges/(income) 1,296 
  $ 12,638 
All charges described above were recorded in our EMEA reportable segment, with the exception of $241 of cost of sales from an increase in inventory reserves in our Canada reportable segment. Additionally, we incurred $282 in certain legal and professional fees related to the Russia Exit, of which $209 were recognized in the fourth fiscal quarter of 2023.
During fiscal 2022, we recorded $(103) for severance-related activity in our Canadian segment which was recorded to "Restructuring and other charges/(income)" in our consolidated statements of operations and comprehensive income/(loss). Additionally, we recorded $(311) in cash receipts related to receivables existing prior to the sale of our South Africa business, which was completed in fiscal 2021.
During fiscal 2021, we enacted certain restructuring initiatives to align our cost structure with the decline in demand for our products and services primarily due to COVID-19 and supply/demand fluctuations in commodity prices. Moreover, during fiscal 2021, the Company terminated approximately 252 people (both hourly and salaried positions) and incurred $5,748 in one-time severance costs. These charges were recorded to restructuring and other charges/(income) in our consolidated statements of operations and comprehensive income/(loss).
In addition, we incurred $429 in lease impairment costs primarily related to one of our Canadian facilities that was substantially vacated by December 31, 2020, as the Company executed efforts to optimize its global manufacturing footprint. We also exercised the early termination option for one of our existing leases in Canada, which resulted in the remeasurement of the related right-of-use asset and lease liability and accelerated the lease amortization and expense to align with the cease use date of the facility. We substantially vacated the facility by December 31, 2020. Finally, we early terminated one of our leases in our US-LAM segment. As a result of these abandonments, we recorded a total of $381 in lease abandonment charges during fiscal 2021. We recorded these charges to restructuring and other charges/(income) in our consolidated statements of operations and comprehensive income/(loss).
Disposal of South Africa Business
On December 15, 2020, a Sale of Shares Agreement was entered into between one of our consolidated subsidiaries and an investor consortium (the "TSAPL Purchasers"). As a result of this agreement, 100% of the outstanding common shares of our consolidated subsidiary, Thermon South Africa Proprietary Limited (the "South Africa Business"), were sold to the TSAPL Purchasers, with aggregate proceeds of 2,500 South African Rand (ZAR), or $167, as partial satisfaction of an existing note receivable. In addition, Purchasers committed to settle operational receivables attributable to other Company subsidiaries existing at the time of sale.
After evaluating our presence in the region served by the South Africa Business, the Company decided to centralize and consolidate our business structure and streamline our organization. A member of the TSAPL Purchasers was the current general manager of the operations of the South Africa business at the time of sale. This sale is accompanied by a distribution agreement whereby the new owners of the business have agreed to distribute our products, continuing the Company's presence in the region. We believe this is an opportunity to optimize the business while pivoting to a new relationship that will better enable us to serve our customers.
As a result of the sale and in accordance with ASC Topic 360, Impairment and Disposal of Long-Lived Assets ("ASC 360"), we recognized a loss on the sale of a business of $2,065 in fiscal 2021, which included the impact of a currency translation adjustment of $828. This loss was recognized within restructuring and other charges/(income) on the consolidated statements of operations and comprehensive income/(loss). The reported loss on sale of stock is not deductible for tax. Prior to the disposal, the South Africa Business's results were reported within the "Europe, Middle East and Africa" segment.
Restructuring and other charges/(income) by reportable segment were as follows:
Year Ended March 31, 2023 Year Ended March 31, 2022 Year Ended March 31, 2021
United States and Latin America $ —  $ (46) $ 3,563 
Canada —  (186) 2,591 
Europe, Middle East and Africa 3,693  (182) 2,459 
Asia-Pacific —  —  10 
  $ 3,693  $ (414) $ 8,623 
Restructuring activity related to severance activity described above recorded in "Accrued liabilities" on the consolidated balance sheets is summarized as follows:
Beginning balance, April 1, 2021 $ 657 
Costs incurred (103)
Less cash payments (554)
Beginning balance, April 1, 2022 $ — 
Costs incurred — 
Less cash payments — 
Ending balance, March 31, 2023 $ —