Divestitures

9 Months Ended

Sep. 30, 2020

2.	Divestitures

In October 2019, the Company announced its intent to divest its inks, fragrances (excluding its essential oils product line), and yogurt fruit preparations product lines. In the fourth quarter of 2019, the Board of Directors approved the sale of the inks product line, which is within the Color segment, and the fragrances product line (excluding its essential oils product line), which is within the Flavors & Extracts segment (formerly known as the Flavors & Fragrances segment; see Note 7, Segment Information). In the second quarter of 2020, the Board of Directors approved the sale of the yogurt fruit preparations product line, which is within the Flavors & Extracts segment. The divesting and exit of these three product lines does not meet the criteria to be presented as a discontinued operation on the Consolidated Condensed Statements of Earnings.

On June 30, 2020, the Company completed the sale of its inks product line. At closing, the Company received $10.3 million of net cash, subject to post-closing working capital and net debt adjustments, and estimates it would realize additional value for the sale of certain assets post-closing and the collection of retained accounts receivables. During the three months ended September 30, 2020, the Company received $1.0 million of cash related to the sale of certain assets post-closing. The Company expects to receive additional cash when it finalizes its post-closing adjustments and completes the post-closing asset sales. For the nine months ended September 30, 2020, the Company recorded a non-cash impairment charge of $9.4 million as the estimated fair value less costs to sell the inks product line was lower than its carrying value and a non-cash net gain of $8.2 million related to the reclassification of foreign currency translation and related items from Accumulated Other Comprehensive Loss to Selling and Administrative Expenses.

On September 18, 2020, the Company completed the sale of its yogurt fruit preparations product line and recorded a net gain of approximately $0.9 million during the three months ended September 30, 2020. The sale included an earn-out based on future performance, which could result in additional consideration for the Company. During the second quarter of 2020, the Company reviewed the yogurt fruit preparations product line’s long-lived assets for impairment and determined that the carrying amounts of certain asset groups were not fully recoverable. As such, the Company recorded a non-cash impairment charge of $2.4 million in Selling and Administrative Expenses related to the long-lived assets in order to reduce their carrying value to their estimated fair value. In addition, in the second quarter of 2020, the Company recorded a non-cash charge of $1.7 million in Cost of Products Sold related to the yogurt fruit preparations divestiture to reduce the carrying value of certain inventories as they were determined to be excess based on changes in assumptions resulting from the signing of the definitive agreement.

The assets and liabilities related to the inks and fragrances product lines are recorded in Assets Held for Sale and Liabilities Held for Sale as of September 30, 2020, and December 31, 2019, as follows:

(in thousands)	September 30, 2020		December 31, 2019
Assets held for sale:
Trade accounts receivable, net	$	21,696	$	31,653
Inventories		24,521		34,612
Prepaid expenses and other current assets		4,463		5,528
Property, plant, and equipment, net		5,936		14,496
Intangible assets, net		1,918		5,004
Assets held for sale	$	58,534	$	91,293

Liabilities held for sale:
Trade accounts payable	$	12,481	$	12,318
Accrued salaries, wages and withholdings from employees		1,405		1,677
Other accrued expenses		3,605		5,190
Liabilities held for sale	$	17,491	$	19,185

In March 2020, the Company was notified by a potential buyer of the Company’s fragrances product line that environmental sampling conducted at the Company’s Granada, Spain location had identified the presence of contaminants in soil and groundwater in certain areas of the property. The Company records liabilities related to environmental remediation obligations when estimated future expenditures are probable and the amount of the liability is reasonably estimable. Based upon an environmental investigation and a quantitative risk assessment performed by a consultant hired by the Company during the second quarter of 2020, the Company has recorded $0.8 million related to these obligations in Selling and Administrative Expenses in the nine months ended September 30, 2020.

In addition, the Company currently estimates a non-cash charge of $10 million to $12 million upon closing the sale of the fragrances product line related to the reclassification of accumulated foreign currency translation and related items from Accumulated Other Comprehensive Loss to Selling and Administrative Expenses in the Consolidated Condensed Statement of Earnings. The estimated fair value of the fragrances product line (excluding its essential oils product line) was determined based on indicative bids, which are classified as Level 3 inputs in the fair value measurement hierarchy.

The Company also incurred $1.2 million and $5.2 million of other divestiture and other related costs, primarily severance and legal expenses, during the three and nine month periods ended September 30, 2020, respectively, which are recorded in Selling and Administrative Expenses.

The Company expects total cash costs in 2019, 2020, and 2021 associated with the divestitures of all three product lines to be between $6 million and $9 million, primarily related to severance and other exit activities.