3. SPECIAL CHARGES

We continue to evaluate changes to our organization structure to reduce fixed costs, simplify or improve processes, and improve our competitiveness.

In our consolidated income statement, we include a separate line item captioned “special charges” in arriving at our consolidated operating income. Special charges consist of expenses, including related impairment charges, associated with certain actions undertaken by the company to reduce fixed costs, simplify or improve processes, and improve our competitiveness and are of such significance in terms of both up-front costs and organizational/structural impact to require advance approval by our Management Committee, comprised of our senior management, including our Chairman and Chief Executive Officer. Upon presentation of any such proposed action (generally including details with respect to estimated costs, which typically consist principally of employee severance and related benefits, together with ancillary costs associated with the action that may include a non-cash component, such as an asset impairment, or a component which relates to inventory adjustments that are included in cost of goods sold; impacted employees or operations; expected timing; and expected savings) to the Management Committee and the Committee’s advance approval, expenses associated with the approved action are classified as special charges upon recognition and monitored on an on-going basis through completion.

The following is a summary of special charges recognized in the years ended November 30, 2015, 2014 and 2013 (in millions):



	2015		2014		2013
Special charges included in cost of goods sold	$	4.0	—		—
Other special charges in the income statement (including non-cash brand impairment charges of $9.6 million in 2015 and $6.4 million in 2013 and a non-cash fixed asset impairment charge of $1.1 million in 2015)	61.5		$	5.2	$	25.0
Total special charges	$	65.5	$	5.2	$	25.0

The following is a breakdown of special charges by business segments in the years ended November 30, 2015, 2014 and 2013 (in millions):



	2015		2014		2013
Consumer segment	$	52.8	$	3.7	$	22.2
Industrial segment	12.7		1.5		2.8
Total special charges	$	65.5	$	5.2	$	25.0

Of the $65.5 million of special charges recognized in 2015, $29.2 million related to our North American effectiveness initiative, $24.4 million related to streamlining actions in our Europe, Middle East, and Africa (EMEA) region, and $14.2 million related to our Kohinoor business in India as more fully described below. Partially offsetting these charges was a reduction of $2.3 million associated with the 2015 reversal of reserves previously accrued as part of actions undertaken in 2013 and 2014

In 2015, we offered a voluntary retirement plan, which included enhanced separation benefits but did not include supplementary pension benefits, to certain U.S. employees aged 55 years or older with at least ten years of service to the company. Upon our receipt of notification from participants that they accepted this plan, which closed early in 2015, we accrued special charges of $23.9 million, consisting of employee severance and related benefits that have been largely paid in 2015 as substantially all of the affected employees have left the company in 2015. The voluntary retirement plan is part of our North American effectiveness initiative. In addition to the cost of the voluntary retirement plan, we recognized an additional $5.3 million of special charges in 2015 as part of our North American effectiveness initiative, of which $3.0 million represented additional employee severance and related benefits and $2.3 million represented other related expenses.

Our North American effectiveness initiative generated cost savings of approximately $15 million in 2015 and is expected to generate annual cost savings with a full year impact of approximately $27 million beginning in 2016. We do not expect that additional special charges under our North American effectiveness initiative will be material in 2016. The following table outlines the major components of accrual balances and activity relating to the special charges associated with our North American effectiveness initiative for the year ended November 30, 2015 (in millions):



	Employee severance and related benefits			Other related costs			Total
Special charges	$	26.9		$	2.3		$	29.2
Cash paid	(24.6		)	(2.3		)	(26.9		)
Balance as of November 30, 2015	$	2.3		—			$	2.3

In 2015, we recorded special charges of $24.4 million, principally consisting of severance and related costs, to enhance organization efficiency and streamline processes in EMEA in order to support our competitiveness and long-term growth. These initiatives center on actions intended to reduce fixed costs and improve business processes, as well as continue to drive simplification across the business and supply chain. These actions include the transfer of certain additional activities to our shared services center in Poland. In addition to the $24.4 million of special charges recorded in 2015, we expect to record additional special charges in 2016, ranging from approximately $3.2 million to $5.5 million, for future actions approved under these EMEA reorganization and streamlining initiatives began in 2015, which will be settled in cash and reflected in special charges upon recognition in 2016. Related annual cost savings are projected to be approximately $3 million in 2016 and $19 million by the end of 2017.

The following table outlines the major components of accrual balances and activity relating to the special charges associated with the EMEA reorganization plans undertaken in 2015 (in millions):



	Employee severance and related benefits			Other related costs			Total
Special charges	$	21.5		$	2.9		$	24.4
Cash paid	(4.5		)	(1.3		)	(5.8		)
Impairment of fixed assets recorded	—			(1.1		)	(1.1		)
Impact of foreign exchange	(0.8		)	0.1			(0.7		)
Balance as of November 30, 2015	$	16.2		$	0.6		$	16.8

Also in 2015, we recorded a total of $14.2 million of special charges related to initiatives to improve the profitability our Kohinoor consumer business in India. This action principally relates to the discontinuance of Kohinoor's non-profitable bulk-packaged and broken basmati rice product lines and other ancillary activities to enable the business to focus on both its existing consumer-packaged basmati rice product lines and the launch of consumer-packaged herbs and spices under the Kohinoor brand name.

In light of the anticipated sales reduction associated with Kohinoor's discontinuance of its bulk-packaged and broken basmati rice product lines, only partially offset by the launch of consumer-packaged herbs and spices, we determined that an impairment of the Kohinoor brand name had occurred. Using a relief from royalty method (and a discount rate associated with the risk of the launch of consumer-packaged herbs and spices), a level 3 fair value measurement, we estimated a current fair value of the Kohinoor brand name that represented a reduction in its previous carrying value by 53%, resulting in a non-cash impairment charge of $9.6 million in 2015. The remaining carrying value of our Kohinoor brand name at November 30, 2015, was $8.3 million. In addition as a result of the Kohinoor product line discontinuance in 2015, we recognized a $4.0 million charge in cost of goods sold, which represents a provision for the excess of the carrying value of inventories of bulk and broken basmati rice, determined on a lower of cost or market basis, over the estimated net realizable value of such discontinued inventories. We also recorded $0.6 million of other exit costs associated with this plan of which $0.4 million were paid in 2015. In addition to the $14.2 million of special charges outlined above and recorded in 2015, the future actions approved with respect to Kohinoor's plan to improve its profitability consist of costs associated with exiting certain contractual arrangements and other costs directly related to the plan. The estimated cost of such future actions, which will be reflected in special charges upon recognition in 2016, range from approximately $1.4 million to $3.4 million.

In late 2013, we announced a reorganization of parts of our EMEA region to further improve EMEA’s profitability and process standardization while supporting its competitiveness and long-term growth. These actions include the closure of our sales and distribution operations in The Netherlands, with the transition to a third-party distributor model to continue to sell the Silvo^® brand, as well as actions intended to streamline selling, general and administrative activities throughout EMEA, including the centralization of certain shared service activity across parts of the region into a newly created shared services center in Poland. In 2013, we recorded $25.0 million of charges related to this reorganization. Of the $25.0 million of special charges recognized in 2013, $15.9 million related to employee severance, $6.4 million to asset write-downs, and $2.7 million to other exit costs. In 2014, we recorded an additional $2.1 million of special charges associated with this EMEA reorganization, with $1.1 million related to employee severance and $1.0 million for other exit costs.

The $6.4 million asset write-down included in the $25.0 million special charge for 2013 related to an impairment charge for the reduction in the value of our Silvo brand name in The Netherlands. Our decision to transition to a third-party distributor model to continue to sell the Silvo brand led us to conclude an impairment indicator to the Silvo brand was present. We calculated the fair value of the Silvo brand using the relief-from-royalty method and determined that it was lower than its carrying value. Consequently, we recorded a non-cash impairment charge of $6.4 million as part of the special charges of $25.0 million in 2013. The carrying value of the Silvo brand name as of November 30, 2015 is not significant.

The following table outlines the major components of accrual balances relating to the special charges associated with this EMEA reorganization as of November 30, 2013, 2014 and 2015 (in millions):



	Employee severance			Other exit costs			Total
Balance as of November 30, 2013	$	15.9		$	2.7		$	18.6
Special charges	1.1			1.0			2.1
Cash paid	(6.9		)	(2.9		)	(9.8		)
Impact of foreign exchange	(0.8		)	(0.1		)	(0.9		)
Balance as of November 30, 2014	9.3			0.7			10.0
Cash paid	(3.5		)	(0.6		)	(4.1		)
Impact of foreign exchange	(1.6		)	(0.1		)	(1.7		)
Reversal into income (special charges)	(1.9		)	—			(1.9		)
Balance as of November 30, 2015	$	2.3		—			$	2.3

In 2014, we continued to evaluate changes to our organizational structure to enable us to reduce fixed costs, simplify or improve processes, and improve our competitiveness. In addition to the $2.1 million of special charges recognized in 2014 related to the previously described EMEA reorganization, we also undertook reorganization actions in our U.S. and Australian businesses in 2014 and recognized $3.1 million of special charges in 2014, consisting of the following:

•

$1.3 million of special charges, principally related to employee severance, to realign certain manufacturing operations in the U.S. industrial business. In 2015, we reversed $0.4 million of unused reserves as a credit into income. Cash expenditures in 2015 and 2014 associated with this action totaled $0.4 million for each year. We expect that this action will be completed by the first quarter 2016 and, upon completion, generate annual savings of approximately $2.3 million.

•

$0.7 million of special charges in the Australian business consisting of employee severance and related expenses, to streamline costs through the elimination of certain manufacturing and administrative positions. Cash expenditures in 2015 and 2014 associated with this reorganization totaled $0.5 million and $0.2 million, respectively. This reorganization was completed in 2015 and will generate annual savings of approximately $0.8 million in 2016.


•	$1.1 million of special charges, consisting of employee severance and related expenses, to eliminate certain administrative positions in the U.S. business. Cash expenditures in 2015 and 2014 associated with this action totaled $0.9 million and $0.2 million, respectively. This action was completed in 2015 and will generate annual savings of approximately $1.2 million in 2016.


•	Savings realized in 2015 associated with these actions were not significant.

With the exception of inventory reserves established with respect to the Kohinoor actions in 2015, reserves associated with special charges are included in other accrued liabilities in our consolidated balance sheet.