| Restructuring | 11. Restructuring The Company incurred restructuring costs in both continuing and discontinued operations. The discussion in this note relates to the combination of both continuing and discontinued operations unless otherwise noted. Restructuring costs related to discontinued operations are recorded in discontinued operations within the Company’s Consolidated Condensed Statements of Earnings and are discussed in Note 12, Discontinued Operations In March 2014, the Company announced that it was initiating a restructuring plan (“2014 Restructuring Plan” or “Plan”) to eliminate underperforming operations, consolidate manufacturing facilities, and improve efficiencies within the Company. The Company determined that it had redundant manufacturing capabilities in both North America and Europe and that it could lower costs and operate more efficiently by consolidating into fewer facilities. Eight facilities were identified for consolidation in the Flavors & Fragrances segment, four in North America and four in Europe. Closures have been completed in Indianapolis, Indiana, United States; Cornwall, Mississauga, and Halton Hills, Canada; Bremen, Germany; and Milan, Italy. The Company sold its two European Natural Ingredients facilities as part of the Plan, as discussed below. In addition, the Company discontinued one of the businesses in the Color segment, located near Leipzig, Germany, because it did not fit with the Company’s long-term strategic plan and it had generated losses for several years. In 2015, the Company identified additional opportunities to consolidate manufacturing operations at one of the Color segment’s facilities in Europe and to eliminate additional positions in the European Flavors & Fragrances businesses. As of June 30, 2017, the Company has effectively completed all of the above-mentioned activities and closures. Based on this Plan, the Company determined that certain long-lived assets associated with the underperforming operations were impaired. The Company reduced the carrying amounts of these assets to their aggregate respective fair values, which were determined based on independent market valuations. The fair values of the remaining long-lived assets are estimated to be approximately $9 million, which includes certain of the land, buildings, and equipment in the assets held for sale, as noted below. Also, certain machinery and equipment has been identified to be disposed of at the time of the facility closures and the associated depreciation for these assets has been accelerated. The Company recorded a de minimis amount of long-lived asset impairments, including the impairment charges and accelerated depreciation, during the three months ended June 30, 2017, versus $0.3 million during the three months ended June 30, 2016, and $0.4 million and $0.7 million during the six months ended June 30, 2017 and 2016, respectively. Since initiating the Plan, the Company has recorded $87 million of long-lived asset impairments, including the impairment charges and accelerated depreciation. In addition, certain intangible assets, inventory, and other current assets were also determined to be impaired and were written down. The Company has also incurred employee separation and other restructuring costs as a result of this Plan. The Company originally anticipated that it would reduce headcount related to direct and indirect labor at manufacturing sites by approximately 400 positions at the affected facilities, primarily in the Flavors & Fragrances segment. Except for certain positions assisting with the facility decommissioning activities, the majority of these positions have been eliminated as of June 30, 2017. During the three months ended March 31, 2017, the Company sold its European Natural Ingredients business (also known as the European Dehydrated Vegetable business), a business in the Flavors & Fragrances segment. This business had two facilities, located in Marchais, France, and Elburg, the Netherlands. The European Natural Ingredients business had not generated significant profits for several years and did not fit with the Company’s long-term strategic plan. The Company completed the sale of this business on March 27, 2017, for a de minimis amount and has recognized a non-cash loss of approximately $21.6 million. As of June 30, 2017, the Company has recorded assets held for sale of land, buildings, and equipment of $7.3 million related to the 2014 Restructuring Plan. In accordance with GAAP, the Company recorded total restructuring costs of $7.4 million and restructuring income of $0.2 million for both the three months ended June 30, 2017 and 2016, respectively, and restructuring costs of $27.6 million and $3.1 million for the six months ended June 30, 2017 and 2016, respectively. Since initiating the 2014 Restructuring Plan, the Company has incurred $180 million of restructuring costs through June 30, 2017. The Company expects to incur approximately $1 million of additional restructuring costs by the end of 2017, primarily related to the wind down of restructuring activities. Since initiating the Plan, the Company has realized total savings of approximately $22 million as of June 30, 2017. During the three and six months ended June 30, 2017, the Company realized a de minimis amount of savings. The Company does not expect any additional savings for the remainder of 2017, but expects additional savings of approximately $4 to $5 million in 2018. Expected savings have shifted from 2017 to 2018 primarily due to the delay in closing the Indianapolis facility. The Company intends to continue to optimize production at the consolidating sites after the completion of the restructuring activities. In connection with the 2014 Restructuring Plan, the Company approved a plan to dispose of a certain business, located near Leipzig, Germany, within the Color segment. Production ceased in 2014 and the business met the criteria to be reported as a discontinued operation. In 2016, the facility and remaining assets were sold and the entity was liquidated. The Company evaluates performance based on operating income of each segment before restructuring and other costs. All restructuring and other costs related to continuing operations are recorded in Corporate & Other. The following table summarizes the restructuring expense by segment and discontinued operations for the three and six months ended June 30, 2017 and 2016, respectively: Three Months Ended June 30, Six Months Ended June 30, (In thousands) 2017 2016 2017 2016 Flavors & Fragrances $ 7,339 $ 2,925 $ 27,492 $ 5,867 Color - 93 - 132 Asia Pacific - - - - Corporate & Other 76 257 135 618 Total Continuing Operations 7,415 3,275 27,627 6,617 Discontinued Operations - (3,485 ) - (3,485 ) Total Restructuring $ 7,415 $ (210 ) $ 27,627 $ 3,132 The Company recorded restructuring costs in continuing operations for the three and six months ended June 30, 2017, as follows: Three Months Ended June 30, 2017 (In thousands) Selling & Administrative Cost of Products Sold Total Employee separation (1) $ 3,857 $ - $ 3,857 Long-lived asset impairment 12 - 12 Loss on sale of business 654 - 654 Write-down of inventory - - - Other restructuring costs (2) 2,892 - 2,892 Total $ 7,415 $ - $ 7,415 (1) Employee separation costs includes settlement expense related to the termination of one of the Company’s defined benefit plans. (2) Other costs include decommissioning costs, professional services, temporary labor, moving costs, and other related costs. Six Months Ended June 30, 2017 (In thousands) Selling & Cost of Total Employee separation (1) $ (628 ) $ - $ (628 ) Long-lived asset impairment 468 - 468 Loss on sale of business 21,563 - 21,563 Write-down of inventory - 342 342 Other restructuring costs (2) 5,882 - 5,882 Total $ 27,285 $ 342 $ 27,627 (1) Employee separation costs include a reversal, during the three months ended March 31, 2017, of the employee separation accrual for the European Natural Ingredients business, given the sale of this business, as well as, settlement expense related to the termination of one of the Company’s defined benefit plans. (2) Other costs include decommissioning costs, professional services, temporary labor, moving costs, and other related costs. The Company recorded restructuring costs in continuing operations for the three and six months ended June 30, 2016, as follows: Three Months Ended June 30, 2016 (In thousands) Selling & Administrative Cost of Products Sold Total Employee separation $ 319 $ - $ 319 Long-lived asset impairment 262 - 262 Write-down of inventory - 166 166 Other restructuring costs (1) 2,528 - 2,528 Total $ 3,109 $ 166 $ 3,275 (1) Other costs include decommissioning costs, professional services, temporary labor, moving costs, and other related costs. Six Months Ended June 30, 2016 (In thousands) Selling & Administrative Cost of Products Sold Total Employee separation $ 450 $ - $ 450 Long-lived asset impairment 733 - 733 Write-down of inventory - 810 810 Other restructuring costs (1) 4,624 - 4,624 Total $ 5,807 $ 810 $ 6,617 (1) Other costs include decommissioning costs, professional services, temporary labor, moving costs, and other related costs. The following table summarizes the accrual activities for the restructuring activities for the six months ended June 30, 2017: (In thousands) Employee Separations Other Total Balance as of December 31, 2016 $ 6,959 $ 570 $ 7,529 Expense activity (1) (4,425 ) 5,882 1,457 Cash spent (1,847 ) (6,238 ) (8,085 ) Translation adjustment 109 - 109 Balance as of June 30, 2017 $ 796 $ 214 $ 1,010 (1) Employee separation costs include a reversal, during the three months ended March 31, 2017, of the employee separation accrual for the European Natural Ingredients business, given the sale of this business. |
