Restructuring and Asset Impairment Charges

9 Months Ended

Sep. 30, 2012

Restructuring and Asset Impairment Charges

Restructuring and Asset Impairment Charges

3.Restructuring and Asset Impairment Charges

In the second quarter of 2012, the Company decided to restructure its business operations in Kenya and close its manufacturing plant in the country.  As part of that decision, the Company recorded a $10 million restructuring charge to its Statement of Income consisting of a $6 million fixed asset impairment charge, a $2 million charge to reduce certain working capital balances to net realizable value based on the announced closure, and $2 million of costs primarily consisting of severance pay related to the termination of the majority of its employees in Kenya.  In the third quarter of 2012, the Company recorded $1 million of additional charges related to this restructuring.  The Company estimates that it will incur approximately $9 million in additional charges in the fourth quarter of 2012 associated with this restructuring, primarily due to the realization of the cumulative translation adjustment associated with the Kenyan operations.  In the third quarter of 2012, the Company was approached by certain third parties interested in purchasing the Kenyan assets.  If the Company is unsuccessful in its efforts to sell these assets, it anticipates incurring additional charges of up to $3 million to dismantle the factory in the first half of 2013.

As part of the Company’s ongoing strategic optimization, in the third quarter of 2012, the Company decided to exit its investment in Shouguang Golden Far East Modified Starch Co., Ltd (“GFEMS”), a non wholly-owned consolidated subsidiary in China.  In conjunction with that decision, the Company recorded a $4 million impairment charge to reduce the carrying value of GFEMS to its estimated net realizable value.  The Company also recorded a $1 million charge for impaired assets in Colombia in the third quarter of 2012.

Additionally, as part of a manufacturing optimization program developed in conjunction with the acquisition of National Starch to improve profitability, in the second quarter of 2011 the Company committed to a plan that will optimize its production capabilities at certain of its North American facilities.  The plan was completed in October 2012.  As a result, the Company recorded restructuring charges to write-off certain equipment by the plan completion date.  For the third quarter and first nine months of 2012, the Company recorded charges of $4 million and $11 million, respectively, of which $3 million and $10 million represent accelerated depreciation on the equipment.  The equipment has been completely written off at September 30, 2012.