Portfolio Optimization Plan

12 Months Ended

Dec. 31, 2023

Portfolio Optimization Plan [Abstract]

16. Portfolio Optimization Plan

During the fourth quarter of 2023, the board of directors of the Company approved a portfolio optimization plan (Portfolio Optimization Plan) to undertake an effort to optimize certain production facilities and improve efficiencies within the Company. As part of the Portfolio Optimization Plan, in the Flavors & Extracts segment, the Company is evaluating the potential closure of its manufacturing facility in Felinfach, Wales, United Kingdom, the potential closure of its sales office in Granada, Spain, and the potential centralization and elimination of certain selling and administrative positions, with such proposals remaining subject to information and consultation processes in certain countries. In addition, in the Color segment, the Company’s proposals include closing a manufacturing facility in Delta, British Columbia, Canada, closing a sales office in Argentina, and centralizing and eliminating certain production positions as well as potentially eliminating some selling and administrative positions, with such proposals remaining subject to information and consultation processes in certain countries. The Company reports all costs associated with the Portfolio Optimization Plan in the Corporate & Other segment.

The Company recorded non-cash impairment charges in Selling and Administrative Expenses, primarily related to certain property, plant, and equipment and definite-lived intangible assets during the year ended December 31, 2023, when the estimated fair value of these assets was lower than the carrying value. The estimated fair value for property, plant, and equipment was based on an independent market valuation, which is classified as Level 3 inputs in the fair value measurement hierarchy. The definite-lived intangible assets relate to a product line to be shut down and were fully impaired as of December 31, 2023. The Company also recorded non-cash charges in Cost of Products Sold during the year ended December 31, 2023, to reduce the carrying value of certain inventories when they were determined to be excess.

As of December 31, 2023, the Company recorded $3.7 million of accrued liabilities in Other Accrued Expenses on the Company’s Consolidated Balance Sheet related to this plan. The Company expects this plan would, if executed in full, cost approximately $40 million, primarily related to non-cash impairment charges and proposed employee separation costs, and upon completion would reduce annual operating costs by approximately $8 million to $10 million, with the full benefit expected to be achieved after 2025. The Company proposes to reduce headcount by approximately 130 positions, primarily in the Flavors & Extracts and Color segments, related to certain production and selling and administrative positions.

The following table summarizes the Portfolio Optimization Plan expenses by segment for the year ended December 31, 2023:

(In thousands)	Flavors & Extracts		Color		Corporate & Other		Consolidated
Non-cash impairment charges – Selling and administrative expenses	$	11,599	$	9,355	$	-	$	20,954
Non-cash charges – Cost of products sold		2,040		1,095		-		3,135
Employee separation – Selling and administrative expenses		2,820		288		108		3,216
Other costs – Selling and administrative expenses⁽¹⁾		39		497		-		536
Total	$	16,498	$	11,235	$	108	$	27,841

⁽¹⁾

Other costs include legal settlements, professional services, and other related costs.