Restructuring and Impairment

A description of significant restructuring and related impairment charges is included below:

2017 Restructuring Plan

On July 27, 2017, the Company’s Board of Directors approved a restructuring plan (the “2017 restructuring plan”) to more closely align its financial resources with the critical priorities of the business. After completion of the 2017 restructuring plan, the Company recognized approximately $100.4 million of pre-tax charges in connection with this restructuring plan. In addition to these charges, the Company also recognized restructuring related goodwill impairment charges of approximately $28.6 million for its Connected Fitness business.

Impairment

As a part of the 2017 restructuring plan, the Company abandoned the use of several assets included within Property and Equipment, resulting in an impairment charge of $30.7 million, reducing the carrying value of these assets to their estimated fair values. Fair value was estimated using an income-approach based on management’s forecast of future cash flows expected to be derived from the assets' use.

Additionally, in connection with the 2017 restructuring plan, strategic decisions were made during the third quarter of 2017 to abandon the use of certain intangible assets in the Company's Connected Fitness reporting unit. These intangible assets included technology and brand names, resulting in total intangible asset impairment charges of $12.1 million, reducing the carrying value of these assets to their estimated fair values. Fair value was estimated using an income-approach based on management’s forecast of future cash flows expected to be derived from the assets use. In addition, the Company also made the strategic decision to not pursue certain other planned future revenue streams in connection with the 2017 restructuring plan.

The Company determined sufficient indication existed to trigger the performance of an interim goodwill impairment for the Company’s Connected Fitness reporting unit. Using updated cash flow projections, the Company calculated the fair value of the Connected Fitness reporting unit based on the discounted cash flows model. The carrying value exceeded the fair value, resulting in an impairment of goodwill. As the excess of the carrying value for the Connected Fitness reporting unit was greater than the goodwill for this reporting unit, all of the goodwill was impaired.

The summary of the costs incurred during the year ended December 31, 2017 in connection with the 2017 restructuring plan are as follows:



	Year Ended December 31,
(In thousands)	2017
Costs recorded in cost of goods sold:
Inventory write-offs (1)	$	5,077
Total costs recorded in cost of goods sold	5,077

Costs recorded in restructuring and impairment charges:
Goodwill impairment	28,647
Property and equipment impairment	30,677
Employee related costs	14,572
Intangible asset impairment	12,054
Contract exit costs	12,029
Other restructuring costs	26,070
Total costs recorded in restructuring and impairment charges	124,049
Total restructuring, impairment and restructuring related costs	$	129,126

(1) This table includes an additional non-cash charge of $5.1 million for the year ended December 31, 2017 associated with the disposition of inventory outside of current liquidation channels in line with the 2017 restructuring plan.

A summary of the activity in the restructuring reserve related to the 2017 Restructuring Plan is as follows:



	Employee Related costs			Contract Exit Costs			Other Restructuring Related Costs
Balance at January 1, 2017	$	—		$	—		$	—
Additions charged to expense	14,572			12,029			13,070
Cash payments charged against reserve	(10,017		)	(9,181		)	(10,070		)
Balance at December 31, 2017	$	4,555		$	2,848		$	3,000

2018 Restructuring Plan

On February 9, 2018, the Company's Board of Directors approved an additional restructuring plan (the "2018 restructuring plan") identifying further opportunities to optimize operations. In conjunction with this plan, approximately $110 to $130 million of pre-tax restructuring and related charges are expected to be incurred during the Company's 2018 fiscal year, including:


•	Up to $105.0 million in cash charges, consisting of up to: $55.0 million in facility and lease terminations and $50.0 million in contract termination and other restructuring charges; and,


•	Up to $25.0 million in non-cash charges comprised of approximately $10.0 million of inventory related charges and approximately $15.0 million of intangibles and other asset related impairments.