6. Restructuring expenses

International Restructuring

On December 27, 2017, the Board of the Company approved an international restructuring plan to streamline and optimize the Company’s global operations. Beginning in December 2017, GSE has been in the process of consolidating its engineering services and R&D activities to Maryland and ceasing an unprofitable non-core business in the United Kingdom (UK). As a result, the Company closed its offices in Nyköping, Sweden; Chennai, India; and Stockton-on-Tees, UK. These actions are designed to improve Company productivity by eliminating duplicate employee functions, increasing GSE’s focus on its core business, improving efficiency and maintaining the full range of engineering capabilities while reducing costs and organizational complexity.

GSE eliminated approximately 40 positions due to these changes, primarily in Europe and India, and will undertake other cost-savings measures. As a result of these efforts, as shown in the table below, GSE expects to record a restructuring charge of approximately $2.2 million in total, primarily related to workforce reductions, contracts termination costs and asset write-offs due to the exit activities. We recorded a restructuring charge of $1.3 million for the year ended December 31, 2018. In addition to the restructuring costs in the table below, the Company has an estimated $1.3 million of cumulative translation adjustments that will be charged against net income (loss) and an estimated $1.0 million of tax benefits that will be realized upon liquidation of these foreign entities. GSE expects to recognize the remaining restructuring costs, currency translation adjustments and tax benefits in 2020.

For the year ended December 31, 2019, we made payments related to our international restructuring for employee termination benefits and other legal expenses in the amount of $54,000 that had been previously accrued.

DP Engineering Restructuring

During the third quarter of 2019, the Company implemented a restructuring plan as a result of the work suspension of DP Engineering’s largest customer and subsequent notification on August 6, 2019 that the Engineer of Choice contract was being terminated. Accordingly, the Company took the necessary measures to reduce DP’s workforce by approximately 12 FTE’s and in addition terminated one of its office leases early resulting in one-time costs of $0.3 million being paid in the third quarter. This reduction in force aligns the workforce to the current level of business going forward.

Lease abandonment

As of December 31, 2019, management decided abandon, a portion of several operating lease right of use lease assets in long idled space in our Sykesville office and in DP Engineering’s Fort Worth office. This was decided as part of on the on-going restructuring plans to right size the organization. Management determined the square footage which would remain in use and took steps to insure the abandoned space was separated from the remaining in use space, end access of all employees to the abandoned sections, and remove any remaining office furniture assets. We applied the abandonment guidance in ASC 360-10-35. We believe “abandonment” means ceasing to use the underlying asset and lacking either the intent or the ability to sublease the underlying asset. Accordingly, lease abandonment restructuring charges incurred relating to the right of use assets for the year ended December 31, 2019 totaled $1.5 million.

The following table shows the abandoned square footage and right of use asset details:

	Sykesville		DP Engineering		Total

Square Ft in use December 1, 2019		36,549		19,871		56,420
Square Ft in use December 31, 2019		14,636		9,936		24,572
Abandoned Square Ft		21,913		9,936		31,849
(in thousands)
Pre-Abandonment ROU Balance	$	1,474	$	1,291	$	2,765
Post-Abandonment Balance		590		646		1,236
Abandonment ROU		884		646		1,529

Collectively, for the year ended December 31, 2019, the Company recorded restructuring charges of approximately $2.5 million, of which $0.3 million related to DP Engineering severance and lease termination, and $1.5 million lease abandonment charges, and $0.5 million related to an executive departure related to the suspension of the Company’s acquisition strategy.

The following table shows the total restructuring costs:

	Total Expected Restructuring Costs		Total 2019 Restructuring Costs
Restructuring Costs
Lease Abandonment	$	1,529	$	1,529
Lease Abandonment costs		57		57
Lease termination costs		39		39
International Restructuring		106		106
Employee termination benefits		747		747
Total	$	2,478	$	2,478