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Restructuring and Impairment Charges | 9 Months Ended
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Sep. 30, 2020
Restructuring and Impairment Charges [Abstract] |
Restructuring and Impairment Charges | Note 16 – Restructuring and Impairment Charges On September 10, 2020, the Company announced its plan to permanently close its Shoals facility in light of the ongoing cyclical industry downturn, which has been magnified by the COVID-19 pandemic. The closure will reduce costs and align the Company’s manufacturing capacity with the current rail car market. The Company intends to cease production at the Shoals facility by the end of 2020 or during the first quarter of 2021, with full closure to be completed by the end of the first quarter of 2021. In connection with the closure, the Company estimated the fair value of the related asset group because it determined that an impairment trigger had occurred due to the shortened asset recoverability timeframe. Non-cash restructuring and impairment charges totaling $26,518 were allocated to the asset group and recognized during September 2020. These non-cash charges for the three months ended September 30, 2020 related to the ROU Asset ($17,540) and non-cash impairment charges for property, plant and equipment at the Shoals facility ($8,978). In connection with the impairment the Company reassessed the estimated useful lives of equipment that will continue to be used by the Company (primarily in Castaños, Mexico) and are depreciating it over their useful lives in accordance with the Companies policies. As a result of the plan, the Company expects to incur pre-tax cash charges of between $8 and $10 million, which consist of employee-related costs and other cash shutdown costs. Restructuring and impairment charges for the three months ended September 30, 2020 included cash charges of $3,532 which consisted primarily of employee severance and retention charges of which $3,359 remained unpaid as of September 30, 2020. The fair value of the ROU asset was estimated using an income valuation approach known as the “sublease” discounted cash flow (“DCF”) model in which the cash flows were based on current market-based lease pricing over the remaining term of the Shoals facility lease. The cash flows were discounted to present value using a market-derived rate of return. The Shoals facility personal property will be abandoned in place at the facility, sold, transferred to another FCA facility (primarily Castaños, Mexico), or scrapped. The assets abandoned in place represent property, plant and equipment to be transferred to the Shoals landlord as consideration for the landlord’s entry into the lease amendment described below. The premise of fair value differs for each type of asset disposition. The fair value of the personal property assets to be abandoned in place at the Shoals facility were analyzed under a fair value in continued use (“In-Use”) premise. This premise assumes that the assets will continue to be used in the ongoing operation of the facility and therefore includes installation, other assembly, freight, engineering, electrical set-up and process piping costs that would be required to make the assets fully operational. Assets to be sold or transferred were analyzed under the In-Exchange premise of fair value. Under this premise, we considered the value of the assets assuming an orderly sale on a stand-alone basis. It is assumed the assets will be sold on an as-is, where-is basis and alternative uses for the assets from the originally designed purpose are considered. Any remaining personal property assets that will neither be abandoned in place nor sold/transferred were considered unmarketable and were valued under a scrap value premise. For both the aforementioned In-Use and In Exchange premises, in instances where an asset was found to have no used market resale exposure, we utilized the Cost Approach. For assets in which there was an active secondary market where recent sales comparables exist, the Market Approach was utilized. In instances where market data was available but deemed too incomplete to apply a complete Market Approach, we used the market relationship data available to influence, confirm, or adjust the Cost Approach results. As further discussed in Note 17 –Subsequent Events, on October 8, 2020, the Company reached an agreement with the Shoals facility owner and landlord, the Retirement Systems of Alabama (“RSA”), to shorten the Shoals lease term by amending the expiration date to the end of February 2021, with a single one-month extension of the new February 28, 2021 expiration date at the option of the Company. The lease termination will result in a lease termination gain of approximately $15,000 to be recorded during the fourth quarter of 2020. The $10,383 estimated fair value of property, plant and equipment to be sold or transferred to the Shoals landlord as consideration for the landlord’s entry into the lease amendment is reported as Assets Held for Sale on the balance sheet as of September 30, 2020. See Note 17 –Subsequent Events. On August 1, 2019, the Company completed its annual goodwill impairment analysis and 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. 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 ceased operations at the facility as of November 29, 2019. The Company terminated its leases for the facility effective as of March 31, 2020. Restructuring and impairment charges related to the plant closure for the three and nine months ended September 30, 2019 primarily include non-cash impairment charges for property, plant and equipment at the Roanoke facility and employee severance and retention charges. 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, 2020 and 2019, and are detailed below:
|  | Three months ended |  | Nine months ended
|  | September 30, |  | September 30,
|  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019
Impairment and loss on right of use asset | $ | 17,540 |  | $ | - |  | $ | 17,540 |  | $ | -
Impairment and loss on disposal of machinery and equipment |  | 9,031 |  |  | 61 |  |  | 9,469 |  |  | 1,380
Employee severance and retention |  | 3,381 |  |  | 1,318 |  |  | 3,378 |  |  | 1,318
Goodwill impairment |  | - |  |  | 21,521 |  |  | - |  |  | 21,521
Other charges related to facility closure |  | 151 |  |  | 132 |  |  | 863 |  |  | 132
Total restructuring and impairment costs | $ | 30,103 |  | $ | 23,032 |  | $ | 31,250 |  | $ | 24,351
| Accrued as of ‎December 31, 2019 |  | Cash Charges |  | Non-cash charges |  | Cash payments |  | Accrued as of September 30, 2020
Impairment and loss on right of use asset | $ |  |  | $ |  |  | $ | 17,540 |  | $ |  |  | $ | -
Impairment and loss on disposal of machinery and equipment |  | - |  |  | - |  |  | 9,469 |  |  | - |  |  | -
Employee severance and retention |  | 647 |  |  | 3,371 |  |  | - |  |  | (659) |  |  | 3,359
Other charges related to facility closure |  | 359 |  |  | 798 |  |  | (86) |  |  | (1,157) |  |  | -
Total restructuring and impairment costs | $ | 1,006 |  | $ | 4,169 |  | $ | 26,923 |  | $ | (1,816) |  | $ | 3,359
‎
| Accrued as of December 31, 2018 |  | Cash Charges |  | Non-cash charges |  | Cash payments |  | Accrued as of September 30, 2019
Impairment charges for leasehold improvements and equipment | $ | - |  | $ | - |  | $ | 1,380 |  | $ | - |  | $ | -
Employee severance and retention |  | - |  |  | 1,318 |  |  | - |  |  | - |  |  | 1,318
Other charges related to facility closure |  | - |  |  | 132 |  |  | - |  |  | (84) |  |  | 48
Goodwill impairment |  | - |  |  | - |  |  | 21,521 |  |  | - |  |  | -
Total restructuring and impairment costs | $ | - |  | $ | 1,450 |  | $ | 22,901 |  | $ | (84) |  | $ | 1,366

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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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