Restructuring and Impairment

9 Months Ended

Sep. 30, 2020

Restructuring and Related Activities [Abstract]

Restructuring and Impairment

Restructuring and ImpairmentIn the second quarter of 2020, we announced a restructuring plan to exit our STEMCO Brake Products business involving the exit of manufacturing operations related to our Motor Wheel® brake drum and Crewson® brake adjuster brands and the sale of our Lunar® air disc brake product line and related manufacturing facility in Shanghai, China. Additionally, we had a number of smaller restructuring activities at several of our other divisions.

In the third quarter of 2020, we announced the sale of our Motor Wheel® brake drum and Crewson® brake adjuster brands, the Air Springs portion of our heavy duty trucking business, our bushing block business located in Dieuze, France, evaluated several indefinite-lived trademarks for impairment, and took several restructuring actions. For a further discussion of the businesses held for sale, see Note 3, "Acquisitions and Divestitures."

For the quarter and nine months ended September 30, 2020, respectively, we recorded $21.1 million and $40.0 million of restructuring and impairment charges. Of these charges, $21.1 million and $35.1 million are recorded in other operating expense on our consolidated income statements for the respective periods. For the nine months ended September 30, 2020, $4.9 million were recorded as cost of sales on our consolidated income statements as they pertain to impairments of inventory.

In the third quarter of 2020, sales declines by businesses utilizing two of the indefinite-lived trademarks within our Sealing Products segment were determined to be triggering events for an interim impairment analysis. Based on the results of this analysis, we recorded a $16.1 million impairment of indefinite-lived trademarks in the third quarter.

As a result of classifying the bushing block business operated at the Dieuze facility as held for sale at September 30, 2020, we evaluated the business and determined it was impaired. We recorded a $6.2 million impairment charge that consists of $1.8 million of non-cash impairments of long-lived assets and $4.4 million (3.7 million EUR) of cash payments to be due to the buyer at closing.

The exit from our Motor Wheel® brake drum and Crewson® brake adjuster brands resulted in restructuring and impairment charges of $11.1 million in the second quarter of 2020, of which $3.6 million was related to inventory impairment charges, $3.5 million was impairment of intangible assets, and $4.0 million related to severance, contract cancellation costs, and other expenses. Subsequent to announcing the exit of our Motor Wheel® brake drum and Crewson® brake adjuster brands, we identified a buyer and completed the sale of the business in the third quarter of 2020. As a result of our ability to sell the business, we reversed $3.7 million of expenses accrued in the second quarter related to severance, contract cancellation costs, and other expenses and recognized a loss on sale of the business of $3.6 million.

In the second quarter of 2020, we entered into an agreement to sell the Lunar® air disc brake business. As a result of this agreement, we recorded the business as held for sale and incurred $2.1 million in impairment charges, of which $1.6 million related to impairment of long-lived assets and $0.5 million related to impairment of inventory. The sale of U.S. assets closed in the third quarter and the sale of the assets located in Shanghai, China is expected to close in the fourth quarter of 2020. In the third quarter of 2020, a subsequent increase in the Lunar® air disc brake assets fair value resulted in a partial reversal of the second quarter impairment charge of $0.2 million.

For the quarter and nine months ended September 30, 2019, respectively, we recorded $1.4 million and $3.7 million of restructuring and impairment charges. These charges are recorded in other expense on our consolidated income statements.