Restructuring and Long-Lived Asset Impairment

3 Months Ended

Mar. 31, 2024

Restructuring and Long-Lived Asset Impairment

Restructuring and Long-Lived Asset Impairment

4. Restructuring and Long-Lived Asset Impairment

Restructuring – Active Sports

On March 1, 2023, management of the Company determined to implement plans (the “Active Sports Restructuring”) to exit and restructure operations of its indirect subsidiary, Active Sports, LLC, a specialty products retail business (“Active Sports”) as part of its review of underperforming assets and business lines. Upon liquidating a significant amount of inventory and exiting the related distribution centers, the Company reevaluated its exit plan and concluded instead that it would integrate the remaining operations into its existing distribution and fulfillment infrastructure while maintaining lower inventory levels and a smaller fixed cost structure. These plans have resulted in a much smaller operation and included the closure of the specialty retail

location. The incremental inventory reserve charges are based, in part, on the Company’s estimates of the discounting necessary to liquidate the Active Sports inventory.

The activities under the Active Sports Restructuring were substantially completed by December 31, 2023. Certain lease costs will continue to be incurred after December 31, 2023 on the remaining leases if the Company is unable to terminate the leases under acceptable terms or offset the lease costs through sublease arrangements. The Company expects that the ongoing lease-related costs relating to the Active Sports Restructuring, net of associated sublease income, will be less than $1.1 million per year.

As of March 31, 2024, the total restructuring costs associated with the Active Sports Restructuring were $6.2 million. The breakdown of these restructuring costs is as follows:

● one-time employee termination benefits relating to the specialty retail store and distribution center closures of $0.2 million;

● incremental inventory reserve charges of $4.3 million;

● lease termination charges of $0.4 million; and

● other associated costs of $1.3 million.

The following table details the costs incurred during the three months ended March 31, 2024 and 2023 associated with the Active Sports Restructuring (in thousands):

	Three Months Ended March 31,
	2024		2023
Active Sports Restructuring costs:
Other associated costs(1)	$	260	$	—
Total Active Sports Restructuring costs	$	260	$	—

(1) Other associated costs primarily represent lease and other operating expenses incurred during the post-close wind-down period for the Active Sports Restructuring for the periods presented and were included primarily in selling, general, and administrative expenses in the condensed consolidated statements of operations.

The following table details changes in the restructuring accrual associated with the Active Sports Restructuring (in thousands):

	One-time		Other
	Termination		Associated
	Benefits		Costs (1)		Total
Balance at March 31, 2023	$	—	$	—	$	—
Charged to expense		193		1,003		1,196
Paid or otherwise settled		(193)		(1,003)		(1,196)
Balance at December 31, 2023		—		—		—
Charged to expense		—		260		260
Paid or otherwise settled		—		(260)		(260)
Balance at March 31, 2024	$	—	$	—	$	—

(1) Other associated costs primarily represent labor, lease and other operating expenses incurred during the post-close wind-down period for the specialty retail location and distribution centers related to the Active Sports Restructuring.

Long-Lived Asset Impairment

During the three months ended March 31, 2023, the Company recorded an impairment charge totaling $6.6 million related to the Active Sports Restructuring, of which $4.5 million related to intangible assets, and $2.1 million related to other long-lived asset categories.

Additionally, during the three months ended March 31, 2024 and March 31, 2023, the Company had indicators of impairment of the long-lived assets for certain locations, which were unrelated to the Active Sports Restructuring. Such indicators primarily included decreases in market rental rates or market value of real

property for closed locations, or based on the Company’s review of location performance in the normal course of business. As a result of updating certain assumptions in the long-lived asset impairment analysis for these locations, the Company determined that the fair value of certain long-lived assets were below their carrying value and were impaired.

The long-lived asset impairment charges were calculated as the amount that the carrying value of these locations exceeded the estimated fair value, except that individual assets cannot be impaired below their individual fair values when that fair value can be determined without undue cost and effort. Estimated fair value is typically based on estimated discounted future cash flows, while property appraisals or market rent analyses are utilized for determining the fair value of certain assets related to properties and leases.

The following table details long-lived asset impairment charges by type of long-lived asset and by restructuring activity, all of which relate to the RV and Outdoor Retail segment (in thousands):

	Three Months Ended March 31,
	2024		2023
Long-lived asset impairment charges by type of long-lived asset:
Leasehold improvements	$	2,285	$	740
Operating lease right of use assets		1,290		—
Building and improvements		2,252		—
Furniture and equipment		—		329
Software		—		1,362
Construction in progress and software in development		—		113
Intangible assets		—		4,501
Total long-lived asset impairment charges	$	5,827	$	7,045
Long-lived asset impairment charges by restructuring activity:
Active Sports Restructuring	$	—	$	6,648
Unrelated to restructuring activities		5,827		397
Total long-lived asset impairment charges	$	5,827	$	7,045