Restructuring and Related Impairment Charges

9 Months Ended

Sep. 30, 2021

Restructuring and Related Activities [Abstract]

RESTRUCTURING AND RELATED IMPAIRMENT CHARGES

During Fiscal 2020, the Company's Board of Directors approved a restructuring plan ranging between $550 million to $600 million in costs (the "2020 restructuring plan") designed to rebalance the Company’s cost base to further improve profitability and cash flow generation.

Restructuring and related impairment charges and recoveries require the Company to make certain judgments and estimates regarding the amount and timing as to when these charges or recoveries occur. 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. As of September 30,

2021, the Company currently estimates total restructuring and related charges associated with the 2020 restructuring plan will range between $525 million to $575 million.

The restructuring and related charges primarily consist of approximately:

•$199 million of cash restructuring charges, of which approximately $28 million relates to employee severance and benefit costs, $14 million relates to facility and lease termination costs and $157 million relates to contract termination and other restructuring costs; and

•$376 million of non-cash charges, of which approximately $291 million relates to an impairment charge on the Company’s New York City flagship store and $85 million relates to intangibles and other asset related impairments.

The Company recorded $16.8 million and $26.9 million of restructuring and related impairment charges for the three and nine months ended September 30, 2021, respectively, and $70.2 million and $410.3 million for the three and nine months ended September 30, 2020, respectively, under the 2020 restructuring plan. As of September 30, 2021, $499.6 million of restructuring and related impairment charges under the 2020 restructuring plan have been recorded to date since the inception of the plan.

The following table illustrates the costs recorded during the three and nine months ended September 30, 2021, as well as the Company's current estimates of the amount expected to be incurred in connection with the 2020 restructuring plan:


	Restructuring and Impairment Charges Recorded								Estimated Restructuring and Impairment Charges (1)
(In thousands)	Three months ended September 30,				Nine months ended September 30,				Remaining to be Incurred		Total to be Incurred under plan
	2021		2020		2021		2020
Costs recorded in cost of goods sold:
Contract-based royalties	$	—	$	—	$	—	$	—	$	—	$	11,608
Inventory write-offs	107		—		515		—		1,000		2,283
Total costs recorded in cost of goods sold	107		—		515		—		1,000		13,891

Net costs (recoveries) recorded in restructuring and related impairment charges:
Property and equipment impairment	3,064		3,307		3,064		26,211		—		32,344
Intangible asset impairment	—		—		—		—		—		4,351
Right-of-use asset impairment	—		—		—		290,813		—		293,495
Employee related costs	(424)		26,410		(845)		27,239		—		27,734
Contract exit costs (2)	10,794		38,520		15,041		53,462		58,999		153,048
Other asset write off	1,055		—		2,400		—		7,349		22,823
Other restructuring costs	2,167		1,995		6,722		12,533		8,028		27,314
Total costs recorded in restructuring and impairment charges	16,656		70,232		26,382		410,258		74,376		561,109
Total restructuring and impairment charges	$	16,763	$	70,232	$	26,897	$	410,258	$	75,376	$	575,000

(1) Estimated restructuring and impairment charges reflect the high-end of the range of the estimated charges expected by the Company in connection with the 2020 restructuring plan.

(2) Contract exit costs primarily consist 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 segment.

For the three months ended September 30, 2021, approximately $10.5 million of the charges are North America related, $5.9 million are Latin America related and $1.4 million are Asia-Pacific related. These charges were offset by a recovery of $1.1 million related to EMEA.

For the three months ended September 30, 2020, approximately $39.1 million of the charges are North America related, $11.5 million are EMEA related, $6.1 million are Latin America related, and $3.6 million are Asia-Pacific related.

For the nine months ended September 30, 2021, approximately $16.7 million of the charges are North America related, $9.2 million are Latin America related and $2.1 million are Asia-Pacific related. These charges were offset by a recovery of $1.1 million related to EMEA.

For the nine months ended September 30, 2020, approximately $367.4 million of the charges are North America related, $11.6 million are EMEA related, $6.4 million are Latin America related and $3.6 million are Asia-Pacific related.

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, 2021	$	12,868	$	61,642	$	6,098
Net additions (recoveries) charged to expense	(845)		17,814		(872)
Cash payments charged against reserve	(5,471)		(45,378)		(6,078)
Foreign exchange and other	(1,086)		(1,443)		140
Balance at September 30, 2021	$	5,466	$	32,635	$	(712)

During the three and nine months ended September 30, 2021, the Company also incurred net costs of $6.4 million and $10.3 million, respectively, associated with abandoned facilities and the write off of fixed assets under the 2020 restructuring plan.