Restructuring Expenses

12 Months Ended

Dec. 31, 2021

6. Restructuring expenses

International Restructuring

On December 27, 2017, the Board of Directors approved an international restructuring plan to streamline and optimize our global operations. Beginning in December 2017, we have 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, we have closed our offices in Nyköping, Sweden; Chennai, India; and Stockton-on-Tees, UK. These actions are designed to improve our productivity by eliminating duplicate employee functions, increasing our focus on our core business, improving efficiency and maintaining the full range of engineering capabilities while reducing costs and organizational complexity.

We eliminated approximately 40 positions due to these changes, primarily in Europe and India, and has undertaken other related cost-savings measures. As a result of these efforts, we have recorded total restructuring charges of approximately $3.9 million, primarily related to workforce reductions, contracts termination costs and asset write-offs due to the exit activities. We recorded a restructuring charge of $1.0 million and $0.8 million for the years ended December 31, 2020 and December 31, 2021, respectively. In addition to the restructuring costs incurred to date, we have charged $1.2 million of cumulative translation adjustments against net income (loss) and an approximately $0.8 million of tax benefit was realized upon liquidation of these foreign entities.

DP Engineering Restructuring

During the third quarter of 2019, we 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 EOC contract was being terminated. Accordingly, we took the necessary measures to reduce DP Engineering’s workforce by approximately 12 full-time employees and terminated one of its office leases early resulting in a one-time cost of $0.3 million being paid in the third quarter of 2019. As a result of this plan, we incurred $0.2 million of restructuring costs to align the workforce to the expected level of business for the years ended December 31, 2020.

Lease abandonment

As of December 31, 2019, management decided to cease-use and abandoned a portion of several operating lease right of use lease assets in a long idled space in our Sykesville office and in DP Engineering’s Fort Worth office. This was decided as part of the on-going international restructuring plans to right size the organization. Management determined the square footage which would remain in use and took steps to ensure 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, 2020 totaled $1.5 million. No additional charges were incurred for the year ended December 31, 2021.

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

	Sykesville		Fort Worth		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

The following table shows the total restructuring costs:

	Total 2021 Restructuring Costs			Total 2020 Restructuring Costs
Restructuring Costs
Lease termination costs	$	(10	)	$	-
International restructuring		808			1,119
Employee termination benefits		-			178
Total	$	798		$	1,297

Expected Restructuring Costs

We expect no additional restructuring costs under the international restructuring plan. As a part of the DP restructuring, the right sizing effort had led to the lease abandonment and related impairment as mentioned above. In a continuing effort to align our workforce and by extension the available workspace, we expect future restructuring as we continue to migrate out of the Sykesville office. At this time management is unable to estimate the ultimate restructuring costs or timeline over which these costs will be recognized.