Asset Impairment Charges and Facility Closing and Reorganization Costs

Asset Impairment Charges

We evaluate our finite-lived intangible and 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, the planned closure of a facility, or deteriorations in operating cash flows. 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 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 8.

The results of our analysis indicated no impairment of our property, plant and equipment, outside of facility closing and reorganization costs for three months ended March 31, 2019 and 2018.

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 and reorganization strategies are summarized as follows:



	Three Months Ended March 31
	2019		2018
	(In thousands)
Closure of facilities, net(1)	$	3,023	$	2,363
Organizational effectiveness(2)	1,309		(331		)
Enterprise-wide cost productivity plan(3)	—		6,430
Facility closing and reorganization costs, net	$	4,332	$	8,462

(1)

Reflects charges, net of gains on the sales of assets, associated with closed facilities that were incurred in 2019 and 2018. These charges are primarily related to facility closures in Braselton, GA; Louisville, KY; Erie, PA; Huntley, IL; Thief River Falls, MN; Lynn, MA; Livonia, MI; Richmond, Virginia; Orem, Utah; New Orleans, Louisiana; Rochester, Indiana; Riverside, California; Denver, Colorado; and Buena Park, California. The net gain during the three months ended March 31, 2019 was primarily due to gains from the sale of properties for which we recognized restructuring charges in previous periods. We have incurred net charges to date of $115.0 million related to these facility closures through March 31, 2019. We expect to incur additional charges related to these facility closures of approximately $4.6 million related to shutdown, contract termination and other costs.

(2)

During 2017, we initiated a company-wide, multi-phase organizational effectiveness assessment to better align each key function of the Company with our strategic plan. This initiative has resulted in headcount reductions due to changes to our organizational structure, and the charges shown in the table above are primarily comprised of severance benefits and other employee-related costs associated with these organizational changes. We do not expect to incur any material additional costs associated with this initiative.

(3)

In the fourth quarter of 2017, we announced an enterprise-wide cost productivity plan, which includes rescaling our supply chain, optimizing spend management and integrating our operating model. This plan has resulted in headcount reductions due to changes to our organizational structure, and the charges shown in the table above are primarily comprised of severance benefits and other employee-related costs associated with these changes. Efforts with respect to the enterprise-wide cost productivity plan are ongoing, and we expect that we will incur additional costs in the coming months associated with the approval and implementation of additional phases of the plan; however, as specific details of these phases have not been finalized and approved, future costs are not yet estimable.

Activity with respect to facility closing and reorganization costs during the three months ended March 31, 2019 is summarized below and includes items expensed as incurred:



	Accrued Charges at December 31, 2018		Charges and Adjustments			Payments			Accrued Charges at March 31, 2019
	(In thousands)
Cash charges:
Workforce reduction costs	$	13,213	$	121		$	(4,238	)	$	9,096
Shutdown costs			3,210			(3,210		)	—
Lease obligations after shutdown	1,368		52			(353		)	1,067
Other			693			(693		)	—
Subtotal	$	14,581	4,076			$	(8,494	)	$	10,163
Non-cash charges:
Write-down of assets			—
Gain on sale/disposal of related assets			(1,026		)
Other, net			1,282
Subtotal			256
Total			$	4,332