Divestitures

12 Months Ended

Dec. 31, 2020

14. 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 12, Segment and Geographic 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 Statements of Earnings.

On June 30, 2020, the Company completed the sale of its inks product line. In 2020, the Company received $11.6 million of net cash and expects to receive additional cash when it completes certain post-closing asset sales. For the years ended December 31, 2020 and 2019, the non-cash loss on disposal of the inks product line was $0.1 million and $15.8 million, respectively.

On September 18, 2020, the Company completed the sale of its yogurt fruit preparations product line for $1.0 million. The sale included an earn-out based on future performance, which could result in additional cash consideration for the Company.

On November 23, 2020, the Company announced it had entered into a definitive agreement to sell its fragrances product line (excluding its essential oils product line). The Company expects the transaction to be finalized in the first half of 2021.

The assets and liabilities related to the inks and fragrances (excluding its essential oils product line) product lines are recorded in Assets held for sale and Liabilities held for sale as of December 31, 2020 and 2019, as follows:

(In thousands)	2020		2019
Assets held for sale:
Trade accounts receivable, less allowance for losses of $456 and $2,350, respectively	$	20,722	$	31,653
Inventories		25,045		34,612
Prepaid expenses and other current assets		1,843		5,528
Property, Plant, and Equipment, net		3,434		14,496
Intangible assets		1,716		5,004
Assets held for sale	$	52,760	$	91,293

Liabilities held for sale:
Trade accounts payable	$	13,967	$	12,318
Accrued salaries, wages, and withholdings from employees		1,739		1,677
Other accrued expenses		1,633		5,190
Liabilities held for sale	$	17,339	$	19,185

The Company reports all costs associated with the divestitures in Corporate & Other. The following table summarizes the divestiture & other related costs for the year ended December 31, 2020:

(In thousands)	Yogurt Fruit Preparations		Fragrances		Inks			Corporate/ Other			Consolidated
Non-cash impairment charges – Selling and administrative expenses	$	2,597	$	2,055	$	8,928		$	(861	)	$	12,719
Non-cash charges – Cost of products sold		1,679		77		(203	)		242			1,795
Reclassification of foreign currency translation and related items – Selling and administrative expenses		-		-		(8,625	)		-			(8,625	)
Other costs - Selling and administrative expenses⁽¹⁾		337		3,029		892			2,008			6,266
Total	$	4,613	$	5,161	$	992		$	1,389		$	12,155

(1)	Other costs – Selling and administrative expenses include employee separation costs, professional services, accelerated depreciation, and other related costs.

The Company reports all costs associated with the divestitures in Corporate & Other. The following table summarizes the divestiture & other related costs for the year ended December 31, 2019:

(In thousands)	Yogurt Fruit Preparations		Fragrances		Inks		Corporate/ Other		Consolidated
Non-cash impairment charges – Selling and administrative expenses	$	-	$	18,204	$	15,849	$	555	$	34,608
Non-cash charges – Cost of products sold		9,767		-		-		-		9,767
Other costs - Selling and administrative expenses⁽¹⁾		-		305		26		374		705
Other costs – Cost of products sold⁽²⁾		800		-		-		-		800
Total	$	10,567	$	18,509	$	15,875	$	929	$	45,880

(1)	Other costs – Selling and administrative expenses include employee separation costs, professional services, and other related costs.

(2)	Other costs – Cost of product sold include inventory disposal costs and other related costs.

The Company recorded non-cash impairment charges in Selling and Administrative Expenses, primarily related to property, plant, and equipment and allocated goodwill, during the years ended December 31, 2020 and 2019, when the estimated fair value less costs to sell the product line was lower than its carrying value. The Company recorded non-cash charges in Cost of Products Sold during the years ended December 31, 2020 and 2019, to reduce the carrying value of certain inventories, when they were determined to be excess. The Company recorded a non-cash gain during the year ended December 31, 2020, related to the reclassification of foreign currency translation and related items from Accumulated Other Comprehensive Loss to Selling and Administrative Expenses in the Consolidated 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.

In March 2020, the Company was notified by the 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, the Company has recorded $0.8 million related to these obligations in Selling and Administrative Expenses during the year ended December 31, 2020.

As of December 31, 2020, the Company estimates 2021 divestiture & other related costs will be $10 million to $14 million. The Company is expecting a non-cash charge of $8 million to $10 million upon closing the sale of the fragrances product line (excluding its essential oils 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 Statement of Earnings. In addition, the Company expects other costs, primarily accelerated depreciation and other exiting activities expenses, to be between $2 million and $4 million. The Company anticipates that it will complete the sale and exit activities of these product lines in 2021.