restructuring charge

Restructuring Charge

A cost that a company incurs when it reorganizes its operations. Restructuring charges include costs with opening or closing a factory, hiring new employees or paying the severances for lay-offs, and so forth. Restructuring charges are included in the calculation of a company's net income, but because they are unusual, a high restructuring charge is less likely to result in a steep decline in the company's share price.

restructuring charge

The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. It is not considered an extraordinary item and must be considered when calculating a firm's income from continuing operations.
Case Study In August 2001 Procter & Gamble Co. reported the first quarterly loss in nearly a decade. The $320 million quarterly loss resulted from a $1.16 billion restructuring charge to account for corporate streamlining and altering the firm's portfolio of brands. Procter & Gamble was in the process of divesting most of its food and drink business, mostly by entering into a joint venture with Coca-Cola, a plan that was later abandoned. The company reported it planned to continue taking restructuring charges through mid-2004. At the same time P&G reported the net loss, it announced that operating income increased 12% to 60¢ per share. Restructuring charges are often given little weight by investors and analysts who evaluate a company's financial performance, because these charges are considered one-time expenses. The market price of Procter & Gamble's common stock experienced no significant price change on the day the loss was announced.
References in periodicals archive ?
To obtain insights into the role accounting information plays in this compensation decision, we investigate the degree to which compensation committees assess the context of a specific income item--restructuring charges--when deciding whether to shield CEO compensation from the adverse effects of the restructuring charge on current period income.
Arecent study indicates that analysts may not be misled by restructuring charges and tend to revise their earnings estimate downward after a company announces a restructuring charge.
Analysts who get wind of a company announcing a restructuring charge tend to revise their one- and two-year forecasts downward -- but maybe not by enough, says a new study out of Vanderbilt University.
In 1985, CSX incurred a $954 million restructuring charge for book purposes.