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 more detail.

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 announced in Indianapolis, Indiana, United States; Cornwall, Mississauga and Halton Hills, Canada; Bremen, Germany; and Milan, Italy. The Company also identified its two European Natural Ingredients facilities to be sold 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 eliminate additional positions in the European Flavors & Fragrances businesses. The Company has operationally completed all of the above mentioned activities and closures with the exception of the closure of the Indianapolis facility, which is anticipated to be closed in the second quarter of 2017.

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 $14 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 long-lived asset impairments, including the impairment charges and accelerated depreciation of $0.5 million during each of the three months ended March 31, 2017 and 2016. Since initiating the Plan, the Company has recorded $87.2 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 anticipates that it will reduce headcount by approximately 400 positions at the affected facilities, primarily in the Flavors & Fragrances segment, related to direct and indirect labor at manufacturing sites. As of March 31, 2017, 355 positions had been eliminated as a result of this Plan.

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 recognized a non-cash loss of approximately $21 million.

As of March 31, 2017, the Company has recorded assets held for sale of land, buildings, and equipment of $6.8 million related to the 2014 Restructuring Plan.

The Company recorded total restructuring costs of $20.2 million for the three months ended March 31, 2017, and $3.3 million for the three months ended March 31, 2016, in accordance with GAAP. Since initiating the 2014 Restructuring Plan, the Company has incurred $172.7 million of restructuring costs through March 31, 2017. The Company expects to incur approximately $7 million of additional restructuring costs by the end of 2017. The increase in the 2017 expected costs are primarily due to the delay in closing the Indianapolis facility, which is now anticipated to be closed in the second quarter of 2017.

The closure and sale of these operations have significantly lowered the Company’s operating costs over the last few years and anticipates additional savings in 2018. Upon initiating the Plan, the Company estimated the annual cost reductions to be approximately $30 million, when fully implemented. The U.S. dollar has strengthened considerably since the initiation of the Plan, and as a result the dollar value of the cost savings has been reduced. In 2015, the Company identified additional cost savings opportunities, and as a result of these actions, the current estimate of annual cost savings is approximately $27 million. The Company has also implemented price increases to further mitigate the impact of foreign currency movements. Since initiating the Plan, the Company has realized total savings of approximately $22 million as of March 31, 2017. During the three months ended March 31, 2017, the Company realized a de minimis amount of savings and expects to realize approximately $1 million of additional savings by the end of 2017 and approximately $3 to $4 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 months ended March 31, 2017 and 2016, respectively:

	Three Months Ended March 31,
(In thousands)	2017		2016

Flavors & Fragrances	$	20,153	$	2,942
Color		-		39
Asia Pacific		-		-
Corporate & Other		59		361

Total Continuing Operations		20,212		3,342

Discontinued Operations		-		-

Total Restructuring	$	20,212	$	3,342

The Company recorded restructuring costs in continuing operations for the three months ended March 31, 2017, as follows:

Three Months Ended March 31, 2017

(In thousands)	Selling & Administrative			Cost of Products Sold		Total
Employee separation⁽¹⁾	$	(4,485	)	$	-	$	(4,485	)
Long-lived asset impairment		456			-		456
Loss on sale of business		20,909			-		20,909
Write-down of inventory		-			342		342
Other restructuring costs⁽²⁾		2,990			-		2,990

Total	$	19,870		$	342	$	20,212

⁽¹⁾

Employee separation costs include a reversal of the employee separation accrual for the European Natural Ingredients business, which is no longer expected to be paid due to the sale of this business.

⁽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 months ended March 31, 2016, as follows:

Three Months Ended March 31, 2016

(In thousands)	Selling & Administrative		Cost of Products Sold		Total
Employee separation	$	131	$	-	$	131
Long-lived asset impairment		471		-		471
Write-down of inventory		-		644		644
Other restructuring costs⁽¹⁾		2,096		-		2,096

Total	$	2,698	$	644	$	3,342

⁽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 three months ended March 31, 2017:

(In thousands)	Employee Separations			Other			Total
Balance as of December 31, 2016	$	6,959		$	570		$	7,529
Expense activity ⁽¹⁾		(4,485	)		2,990			(1,495	)
Cash spent		(1,252	)		(3,327	)		(4,579	)
Translation adjustment		77			-			77
Balance as of March 31, 2017	$	1,299		$	233		$	1,532

(1)

Employee separation costs include a reversal of the employee separation accrual for the European Natural Ingredients business, which is no longer expected to be paid due to the sale of this business.