Facility Consolidation and Other Costs

6 Months Ended

Jun. 30, 2012

Facility Consolidation and Other Costs

Facility Consolidation and Other Costs

Note 3 — Facility Consolidation and Other Costs

2011 Program

During the fourth quarter of 2011, the Company initiated a facility consolidation and other costs program (“2011 Program”) to improve efficiencies and reduce fixed costs.  As a part of this program, the Company announced the planned closure of five facilities. As of June 30, 2012, manufacturing operations had ceased at four of these manufacturing facilities.  Most of the production from these five facilities is being transferred to other facilities.  In the second quarter of 2012, management revised the total estimated 2011 Program costs to approximately $86 million, related to an increase in employee-related costs in the Flexible Packaging segment.  The total estimated 2011 Program costs include $32 million in employee costs, $32 million in fixed asset accelerated depreciation and write-downs, and $22 million in other facility consolidation costs.  The estimated 2011 Program costs incurred by reportable segment follow:

							Total Facility
	Flexible		Pressure				Consolidation
(in millions)	Packaging		Sensitive		Corporate		and Other Costs
2011 net expense accrued	$	34.9	$	2.8	$	0.7	$	38.4
2012 first quarter net expense accrued	8.2		—		0.1		8.3
2012 second quarter net expense accrued	8.6		—		—		8.6
Expense incurred to date	51.7		2.8		0.8		55.3
Estimated future expense	30.7		—		—		30.7
Total estimated costs	$	82.4	$	2.8	$	0.8	$	86.0

An analysis of the 2011 Program accruals follows:

				Fixed						Total Facility
	Employee			Asset			Other			Consolidation
(in millions)	Costs			Related			Costs			and Other Costs
Reserve balance at December 31, 2011	$	23.1		$	—		$	0.2		$	23.3
Net expense accrued	1.2			5.9			1.2			8.3
Utilization (cash payments or otherwise settled)	(5.9		)	(5.9		)	(1.4		)	(13.2		)
Reserve balance at March 31, 2012	18.4			—			—			18.4
Expense accrued	4.0			2.9			2.1			9.0
Utilization (cash payments or otherwise settled)	(2.3		)	(2.8		)	(2.1		)	(7.2		)
Other	0.5			(0.1		)	—			0.4
Reserve balance at June 30, 2012	$	20.6		$	—		$	—		$	20.6

2012 Program

During the second quarter of 2012, the Company initiated another facility consolidation and other costs program (“2012 Program”) to further improve efficiencies and reduce costs within its Flexible Packaging segment.  As a part of this program, the Company announced the planned closure of an additional four production locations, including three facilities outside of the United States, and the relocation of the majority of the production to other facilities.  The total estimated 2012 Program costs of approximately $55 million include $23 million in employee-related costs, $16 million in fixed asset accelerated depreciation and write-downs, and $16 million in other facility consolidation costs.  Included in employee-related costs is a partial withdrawal liability provision which represents the Company’s best estimate for the cost to exit a multiemployer plan related to a facility that is scheduled to cease operations at year-end.  The estimated 2012 Program costs incurred by the Flexible Packaging reportable segment follow:

	Flexible
(in millions)	Packaging
2012 second quarter net expense accrued	$	11.1
Estimated future expense	44.3
Total estimated costs	$	55.4

An analysis of the 2012 Program accruals follows:

				Fixed						Total Facility
	Employee			Asset			Other			Consolidation
(in millions)	Costs			Related			Costs			and Other Costs
Net expense accrued	$	10.3		$	0.6		$	0.2		$	11.1
Utilization (cash payments or otherwise settled)	(0.2		)	(0.6		)	(0.2		)	(1.0		)
Reserve balance at June 30, 2012	$	10.1		$	—		$	—		$	10.1

Plant closings associated with the program are expected to be completed in 2012, and both programs are expected to be completed in 2013.  Cash payments for these programs in the three and six months ended June 30, 2012 totaled $4.5 million and $12.5 million respectively.  Cash payments for the balance of 2012 are expected to be approximately $51 million.  The costs related to facility consolidation activities have been recorded on the consolidated statement of income as facility consolidation and other costs.