Asset Impairment Charges and Facility Closing and Reorganization Costs

Asset Impairment Charges

We evaluate our long-lived assets for impairment when circumstances indicate that the carrying value may not be recoverable. Indicators of impairment could include, among other factors, significant changes in the business environment or the planned closure of a facility. Considerable management judgment is necessary to evaluate the impact of operating changes and to estimate future cash flows.

Testing the assets for recoverability involves developing estimates of future cash flows directly associated with, and that are expected to arise as a direct result of, the use and eventual disposition of the assets. Other inputs are based on assessment of an individual asset’s alternative use within other production facilities, evaluation of recent market data and historical liquidation sales values for similar assets. As the inputs for testing for recoverability are largely based on management’s judgments and are not generally observable in active markets, we consider such measurements to be Level 3 measurements in the fair value hierarchy. See Note 6.

The results of our analysis indicated no impairment of our property, plant and equipment, outside of facility closing and reorganization costs, for the three and nine months ended September 30, 2016 and 2015. We can provide no assurance that we will not have impairment charges in future periods as a result of changes in our business environment, operating results or the assumptions and estimates utilized in our impairment tests.

Facility Closing and Reorganization Costs

Costs associated with approved plans within our ongoing network optimization strategies are summarized as follows:



	Three Months Ended September 30				Nine Months Ended September 30
	2016		2015		2016		2015
	(In thousands)
Closure of facilities, net(1)	$	9,297	$	2,709	$	9,063	$	9,362
Facility closing and reorganization costs, net	$	9,297	$	2,709	$	9,063	$	9,362

(1)

Reflects charges, net of gains on the sales of assets, associated with closed facilities that were incurred in 2016 and 2015. These charges are primarily related to facility closures in Orem, Utah; New Orleans, Louisiana; Rochester, Indiana; Sheboygan, Wisconsin; Riverside, California; Delta, Colorado; Denver, Colorado; Dallas, Texas; Waco, Texas; Springfield, Virginia; Buena Park, California; Evart, Michigan; Bangor, Maine; Shreveport, Louisiana and Mendon, Massachusetts, as well as other approved closures. We have incurred net charges to date of $74.2 million related to these facility closures through September 30, 2016. We expect to incur additional charges related to these facility closures of approximately $4.2 million related to contract termination, shutdown and other costs. As we continue the evaluation of our supply chain and distribution network, it is likely that we will close additional facilities in the future.

Activity with respect to facility closing and reorganization costs during the nine months ended September 30, 2016 is summarized below and includes items expensed as incurred:



	Accrued Charges at December 31, 2015		Charges and Adjustments			Payments			Accrued Charges at September 30, 2016
	(In thousands)
Cash charges:
Workforce reduction costs	$	5,476	$	2,482		$	(1,855	)	$	6,103
Shutdown costs	—		1,614			(1,614		)	—
Lease obligations after shutdown	5,286		318			(1,334		)	4,270
Other	—		740			(740		)	—
Subtotal	$	10,762	5,154			$	(5,543	)	$	10,373
Other charges (gains):
Write-down of assets(1)			7,872
Gain on sale of related assets			(3,963		)
Subtotal			3,909
Total			$	9,063

(1)

The write-down of assets relates primarily to owned buildings, land and equipment of those facilities identified for closure. The assets were tested for recoverability at the time the decision to close the facilities was more likely than not to occur. Over time, refinements to our estimates used in testing for recoverability may result in additional asset write-downs. The write-down of assets can include accelerated depreciation recorded for those facilities identified for closure. Our methodology for testing the recoverability of the assets is consistent with the methodology described in the “Asset Impairment Charges” section above.