Restructuring, Exit, Impairment and Integration Activities
|12 Months Ended|
Dec. 31, 2018
|Restructuring and Related Activities [Abstract]|
Restructuring, Exit, Integration and Impairment Activities
The Company has announced and implemented a number of initiatives designed to improve its cost structure, better utilize overall capacity, improve general operating efficiencies and integrate the operations of recently acquired businesses. These initiatives resulted in the recognition of restructuring, exit, integration and impairment charges in the Consolidated Statements of Operations during 2018, 2017 and 2016.
The costs incurred under these initiatives include:
•Restructuring and Exit Activities – These amounts relate to:
•Asset Disposition and Impairment Actions – These amounts relate to impairments of assets and gains on the sale of assets previously impaired as part of a restructuring or exit activity. The impairments recognized were equal to the difference between the carrying amount of the asset and the estimated fair value of the asset, which was determined using observable inputs, including appraisals from independent third parties when available. When observable inputs were not available, estimated fair value was determined using the Company’s assumptions, including the data that market participants would use in pricing the asset, based on the best information available in the circumstances. Specifically, the Company used discounted cash flows to determine the fair value of the asset when observable inputs were unavailable.
•Integration Activities – These amounts relate to professional fees for systems integration and deal costs, employee termination and benefits and other charges associated with integrating the operations of recently acquired businesses.
•Intangible Asset Impairments – These amounts relate to impairments of intangible assets recognized as a result of the Company's periodic impairment testing. In the fourth quarter of 2017, the Company recorded an impairment charge for the Cybex trade name as a result of declining sales and operating performance. In the third and fourth quarters of 2018, the Company recorded additional impairment charges for the Cybex trade name as a result of further declines in operating performance and projected declines in sales due to changes in operating strategy. The company used a relief-from-royalty analysis, using Level 3 inputs, to assess the fair value of the Cybex trade name. The impairment charges were recorded within the Fitness segment. Refer to Note 1 – Significant Accounting Policies for further details about the Company's impairment testing procedures.
The Company has reported restructuring, exit, integration and impairment activities based on the specific driver of the cost and reflected the expense in the accounting period when the Company has committed to or incurred the cost, as appropriate. The following table is a summary of the net expense associated with the restructuring, exit, integration and impairment activities.
(A) The charges in 2018 relate to warranty adjustments in connection with the wind-down of Sport Yacht and Yacht operations.
The following tables summarize the change in accrued restructuring, exit, integration and impairment charges within Accrued expenses in the Consolidated Balance Sheets for the years ended December 31, 2018, 2017 and 2016:
(A) Cash payments may include payments related to prior period charges.
(B) The accrued charges as of December 31, 2018 are expected to be paid during 2019.
Reductions in demand for the Company’s products, further refinement of its product portfolio, further opportunities to reduce costs or the cost of integrating future acquisitions may result in additional restructuring, exit, integration and impairment charges in future periods.
Actions Initiated in 2018
In the second quarter of 2018, the Company ended the sale process of its Sea Ray business and as a result, recorded an additional impairment of long-lived assets. During the second, third and fourth quarters of 2018, the Company recorded additional charges in connection with the wind down of Sport Yacht and Yacht production, mainly relating to inventory write-downs, increased warranty liabilities and employee severance and retention bonuses. These costs were partially offset by the reversal of the valuation allowance in the second quarter of 2018 for estimated transaction costs which was recorded when the assets and liabilities of Sea Ray were initially classified as held for sale.
In 2018, the Company executed headcount reductions in the Fitness and Boat segments aimed at improving general operating efficiencies.
In 2018, the Company also recorded charges within Corporate related to the transition of certain corporate officers.
The following table is a summary of the expenses associated with the restructuring, exit, integration and impairment activities for the year ended December 31, 2018, related to actions initiated in 2018:
Actions Initiated in 2017
In the fourth quarter of 2017, the Board of Directors authorized the Company to exit its Sea Ray business, including the Meridian brand. In conjunction with this decision, the Company evaluated the disposal group's fair value, less costs to sell, and compared that to its carrying value at the time. As a result, the Company recorded an impairment of long-lived assets as well as a valuation allowance for estimated transaction costs. Refer to Note 3 – Discontinued Operations for further information.
In the third quarter of 2017, the Company recorded restructuring charges within the Fitness segment for the write-down of inventory and tooling related to the exit of the InMovement product line. In 2018, a portion of these restructuring charges was reversed after certain inventory was subsequently sold above its recorded value.
In the second, third and fourth quarters of 2017, the Company implemented headcount reductions in the Fitness and Boat segments aimed at improving general operating efficiencies.
In the first quarter of 2017, the Company announced the closure of its boat manufacturing facility in Joinville, Santa Catarina, Brazil, as a result of continued market weakness due partially to unfavorable foreign currency impacts in the region. As a result, the Company recorded restructuring, exit and impairment charges including the write-down of inventory. The facility manufactured certain Bayliner and Sea Ray boat models for the Latin American market. The long-lived assets at this facility were previously fully impaired.
In the first quarter of 2017, the Company also recorded restructuring charges within Corporate related to the transition of certain corporate officers.
The following table is a summary of the expense associated with the restructuring, exit, integration and impairment activities for the years ended December 31, 2018 and 2017, related to actions initiated in 2017:
Actions Initiated in 2016
The Company acquired Cybex International, Inc. (Cybex) and Indoor Cycling Group GmbH (ICG) in the first and third quarters of 2016, respectively. During 2016, the Company executed certain restructuring and integration activities within the Fitness segment primarily related to these acquisitions.
In the fourth quarter of 2016, the Company recorded restructuring charges related to the realignment of certain executive positions within the Boat segment as well as an impairment charge recorded within the Corporate segment.
The following table is a summary of the expense associated with the restructuring, exit, integration and impairment activities for the years ended December 31, 2018, 2017 and 2016, related to actions initiated in 2016:
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://fasb.org/us-gaap/role/ref/legacyRef