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Restructuring and Related Impairment Charges | 9 Months Ended
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Sep. 30, 2020
Restructuring and Related Activities [Abstract] |
Restructuring and Related Impairment Charges | Restructuring and Related Impairment ChargesOn March 31, 2020, the Company's Board of Directors approved the previously announced restructuring plan ("2020 Restructuring") designed to rebalance the Company’s cost base to further improve profitability and cash flow generation. The Company identified further opportunities and on September 2, 2020, the Company’s Board of Directors approved a $75 million increase to the restructuring plan, resulting in an updated 2020 restructuring plan of approximately $550 million to $600 million of total estimated pre-tax restructuring and related charges. The restructuring and related charges primarily consist of up to approximately: •$224 million of cash restructuring charges, comprised of up to: $63 million in facility and lease termination costs, $30 million in employee severance and benefit costs, and $131 million in contract termination and other restructuring costs; and •$376 million of non-cash charges comprised of an impairment of $291 million related to the Company’s New York City flagship store and $85 million of intangibles and other asset related impairments. The Company recorded $70.2 million and $410.3 million of restructuring and related impairment charges for the three and nine months ended September 30, 2020, respectively. The summary of the costs recorded during the three and nine months ended September 30, 2020, as well as the Company's current estimates of the amount expected to be incurred in connection with the 2020 restructuring plan is as follows:
| Restructuring and Related Impairment Charges Recorded |  | Estimated Restructuring and Related Impairment Charges
(In thousands) | Three months ended September 30, 2020 |  | Nine months ended September 30, 2020 (A) |  | Remaining to be Incurred (B) |  | Total to be Incurred (1) (A+B)
Costs recorded in cost of goods sold: |  |  |  |  |  |  |
Contract-based royalties | $ | — |  | $ | — |  | $ | 11,000 |  | $ | 11,000
Inventory write-offs | — |  | — |  | 2,000 |  | 2,000
Total costs recorded in cost of goods sold | — |  | — |  | 13,000 |  | 13,000
Costs recorded in restructuring and related impairment charges: |  |  |  |  |  |  |
Property and equipment impairment | 3,307 |  |  | 26,211 |  |  | 17,789 |  |  | 44,000 |
Intangible asset impairment | — |  |  | — |  |  | 4,000 |  |  | 4,000 |
ROU asset impairment | — |  |  | 290,813 |  |  | 4,187 |  |  | 295,000 |
Employee related costs | 26,410 |  |  | 27,239 |  |  | 2,761 |  |  | 30,000 |
Contract exit costs (2) | 38,520 |  |  | 53,462 |  |  | 124,538 |  |  | 178,000 |
Other restructuring costs | 1,995 |  |  | 12,533 |  |  | 23,467 |  |  | 36,000 |
Total costs recorded in restructuring and related impairment charges | 70,232 |  |  | 410,258 |  |  | 176,742 |  |  | 587,000 |
Total restructuring and related impairment and restructuring related costs | $ | 70,232 |  |  | $ | 410,258 |  |  | $ | 189,742 |  |  | $ | 600,000 |
(1) Estimated restructuring and related impairment charges to be incurred reflect the high-end of the range of the estimated remaining charges expected to be taken by the Company in connection with the restructuring plan. The Company currently anticipates that most of the total restructuring and related charges will occur by the end of fiscal 2020. (2) Contract exit costs are primarily comprised of proposed lease exits of certain brand and factory house stores and office facilities, and proposed marketing and other contract exits. All restructuring and related impairment charges are included in the Company's Corporate Other non-operating segment, of which $39.1 million are North America related, $11.5 million are EMEA related, $6.1 million are Latin America related, $3.6 million are Asia-Pacific related and $0.1 million are Connected Fitness related for the three months ended September 30, 2020 and $367.4 million are North America related, $11.6 million are EMEA related, $6.4 million are Latin America related, $3.6 million are Asia-Pacific related and $0.1 million are Connected Fitness related for the nine months ended September 30, 2020. The lease term for the Company's New York City flagship store commenced on March 1, 2020 and an operating lease ROU asset and corresponding operating lease liability of $344.8 million was recorded on the Company's unaudited consolidated balance sheet. In March 2020, as a part of the 2020 Restructuring, the Company made the strategic decision to forgo the opening of its New York City flagship store and the property is actively being marketed for sublease. Accordingly, in the first quarter of 2020, the Company recognized a ROU asset impairment of $290.8 million, reducing the carrying value of the lease asset to its estimated fair value. Fair value was estimated using an income-approach based on management's forecast of future cash flows expected to be derived from the property based on current sublease market rent. Rent expense or sublease income related to this lease will be recorded within other income (expense) on the unaudited consolidated statements of operations. There were no related ROU asset impairment charges for the three months ended September 30, 2020. These charges require the Company to make certain judgements and estimates regarding the amount and timing of restructuring and related impairment charges or recoveries. The estimated liability could change subsequent to its recognition, requiring adjustments to the expense and the liability recorded. On a quarterly basis, the Company conducts an evaluation of the related liabilities and expenses and revises its assumptions and estimates as appropriate as new or updated information becomes available. A summary of the activity in the restructuring reserve related to the Company's 2020 restructuring plan, as well as prior restructuring plans in 2018 and 2017 are as follows:
(In thousands) | Employee Related Costs |  | Contract Exit Costs |  | Other Restructuring Related Costs
Balance at January 1, 2020 | $ | 462 |  |  | $ | 17,843 |  |  | $ | — |
Additions charged to expense | 26,930 |  |  | 42,391 |  |  | 11,843 |
Cash payments charged against reserve | (4,279) |  |  | (14,618) |  |  | (3,699) |
Changes in reserve estimate | (462) |  |  | 42 |  |  | — |
Balance at September 30, 2020 | $ | 22,651 |  |  | $ | 45,658 |  |  | $ | 8,144 |

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- Definition 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. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 420 -URI http://asc.fasb.org/topic&trid=2175745 + Details
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