Note 16 – Restructuring and Impairment Charges

Restructuring and Impairment Related to Plant Closure

On July 22, 2019, the Company announced its intention to close its Roanoke, Virginia manufacturing facility as part of its “Back to Basics” strategy. The Company will retain the necessary workforce to complete the remaining contracted work at the facility through the end of November 2019. The cost of the restructuring plan is expected to range between $3,500 and $4,500, excluding the lease termination gain disclosed in Note 17 Subsequent Events, and will be incurred in 2019 and during the first half of 2020. Restructuring and impairment charges related to the plant closure primarily include non-cash impairment charges for property, plant and equipment at the Roanoke facility and employee severance and retention charges.

Goodwill Impairment

The Company assesses the carrying value of goodwill for impairment annually or more frequently whenever events occur and circumstances change indicating potential impairment. On August 1, 2019, the Company performed its annual assessment of its Manufacturing reporting unit, the only reporting unit carrying goodwill. Management determined the fair value of the Manufacturing reporting unit using the income approach, utilizing the discounted cash flow method. Fair value calculations using the income approach contain significant judgments and estimates with respect to a variety of factors that will significantly impact the future performance of the business, including: future railcar volume projections based on expected railcar demand; estimated margins on railcar sales; estimated growth rate for selling, general and administrative costs; future effective tax rate for the Company; and weighted-average cost of capital (“WACC”). Management estimated a WACC of 16% for the Company’s August 1, 2019 goodwill impairment valuation analysis. Based on this analysis, the Company determined that the carrying value of its Manufacturing reporting unit exceeded its fair value by an amount that exceeded the Manufacturing reporting unit goodwill. As a result, the Company recorded a goodwill impairment charge equal to the total goodwill balance of the Manufacturing reporting unit of $21,521 during the three months ended September 30, 2019. As previously disclosed, the new railcar market and the operating environment for our Manufacturing reporting unit continues to be challenging. Our outlook for new railcar demand and usage has accelerated its decline in the second half of the year. In addition, the sustained decline in our stock price as well as a change in our business model and market share decline has resulted in downward revisions of our forecasts of current and future projected earnings and cash flows for the Manufacturing reporting unit.

Restructuring and impairment charges are reported as a separate line item on the Company’s condensed consolidated statements of operations for the three and nine months ended September 30, 2019 and are detailed below:



		Nine Months Ended
		September 30, 2019

Impairment charge for leasehold improvements and equipment		$ 1,380
Employee severance and retention		1,318
Other charges related to facility closure		132
Goodwill impairment		21,521
Total restructuring and impairment charges		$ 24,351

Approximately $1.4 million of employee severance and facility closure costs remained to be paid at September 30, 2019.