Item 2.06 Material Impairments.
On June 18, 2020, the Board of Directors of Textron Inc. approved a restructuring plan to reduce the Company's operating expenses through headcount reductions, facility consolidations and other actions in response to the economic challenges and uncertainty resulting from the COVID-19 pandemic. The restructuring plan primarily impacts the TRU Simulation + Training business (TRU) within the Textron Systems segment, and the Textron Aviation and Industrial segments.
At TRU, there has been a substantial decline in demand and order cancellations for flight simulators in light of the expected long-term impact of the pandemic on the commercial air transportation business. Accordingly, TRU will cease manufacturing at its Montreal, Canada facility, resulting in the production suspension of its commercial air transport simulators. As a result, we will incur charges for severance, contract terminations, facility closures, asset impairments and an inventory valuation write-down, considering the current market conditions. TRU will continue to service and support its installed base of commercial air transport simulators and to manufacture flight simulators for other fixed wing aircraft and rotorcraft at its Tampa, Florida facility.
In the Textron Aviation segment, with lower volumes expected in the near term, we will initiate indirect and direct workforce reductions as we align our cost structure and production levels with demand. In the Industrial segment, the impact of the pandemic on global air travel has significantly reduced demand for the airport ground support equipment produced by the Textron Specialized Vehicles (TSV) business. Due to the overall negative impact of the pandemic on this business, we will take further actions to streamline operations across TSV, consisting primarily of headcount reductions and facility rationalizations, to reduce its overall cost structure.
In the second quarter of 2020, we expect to incur pre-tax special charges related to this restructuring plan in the range of $110 million to $130 million. Severance and related costs for this plan are estimated to be in the range of $60 million to $70 million. Asset impairment charges, which are largely related to facility closures, are estimated to be in the range of $30 million to $35 million, and contract termination and other facility closure charges are estimated to be in the range of $20 million to $25 million. The restructuring plan will result in the elimination of up to 1,950 positions, representing 6% of our workforce. Additionally, we will record a non-cash inventory valuation charge in the range of $50 million to $60 million.
Cash outflows will occur in 2020 and are estimated to be in the range of $80 million to $95 million. We anticipate that this plan will be substantially completed by the end of 2020.
Item 8.01 Other Events
During the second quarter of 2020, due to the temporary idling of manufacturing facilities as a result of the COVID-19 pandemic, we expect to incur idle facility costs in the range of $70 million to $80 million, principally in the Textron Aviation segment. In June, manufacturing operations have largely resumed across the company at these facilities as restrictions have been lifted.
Source:
https://www.marketscreener.com/TEXTRON-14698/news/TEXTRON-INC-Material-Impairments-Other-Events-form-8-K-30792347/