16.

FACILITY CLOSING AND REORGANIZATION COSTS

Approved plans within our multi-year initiatives and related charges are summarized as follows:


	Year Ended December 31
	2011		2010		2009
	(In thousands)
Fresh Dairy Direct:
Closure of facilities(1)	$	18,751	$	21,350	$	29,021
Broad-based reduction of facility and distribution personnel(2)		(282)		3,404		—
Organization Optimization Initiative(3)		4,269		—		—
Management Realignment(5)		(194)		3,100		—
Other		—		—		65

Total Fresh Dairy Direct		22,544		27,854		29,086

Morningstar Closure of facility (6)		—		—		1,076

Corporate:
Department Realignment(4)		2,535		2,907		—
Organization Optimization Initiative(3)		20,609		—		—

Total Corporate		23,144		2,907		—

Total	$	45,688	$	30,761	$	30,162

(1)

These charges in 2011, 2010 and 2009 primarily relate to facility closures in Newport, Kentucky; Baxley, Georgia; Florence, South Carolina; and Flint, Michigan, as well as previously announced closures. We have incurred $55.1 million of charges related to these initiatives to date. We expect to incur additional charges related to these facility closures of $0.7 million, related to shutdown and other costs. As we continue the evaluation of our supply chain described more fully below it is likely that we will close additional facilities in the future.

(2)

These charges relate to a plan to reduce the workforce within our Fresh Dairy Direct segment impacting approximately 230 positions. Implementation began during the second quarter of 2010 and was carried out over the balance of the year. The reduction in workforce affected employees across the country and was a result of operational changes from supply chain initiatives. The workforce reduction costs related to this plan were part of an existing benefit arrangement; therefore, the full amount of expected severance benefits was accrued during the second quarter of 2010. We incurred total charges of $3.1 million related to this initiative and do not expect to incur any additional charges going forward.

(3)

In the first quarter of 2011 we initiated a significant cost reduction program that is incremental to our other ongoing cost-savings initiatives. This initiative is focused on permanently removing costs out of our business through organizational and corporate departmental redesigns, driven by process simplification and standardization, centralization of activities and reorganization to drive growth in our core customers and categories. As part of this program, we eliminated approximately 300 corporate and field positions by the end of 2011. The charges recorded during 2011 relate to workforce reduction costs associated with the first four tranches of this program and include costs associated with eliminating the position filled by our then President and Chief Operating Officer. The charges incurred under this plan also include workforce reduction and shutdown costs associated with the closure of several distribution facilities within Fresh Dairy Direct that were a direct result of the organizational redesigns noted above. We have incurred $24.9 million of charges related to this initiative to date, and we expect to incur additional charges of approximately $0.4 million related to shutdown and other costs.

(4)

In 2010, as a result of peer comparisons and our ongoing cost control initiatives, our management team approved a multi-year cost reduction plan aimed at centralization and process improvement, as well as business unit and functional organization redesigns. Charges in 2011 relate to workforce reduction costs associated with this plan. The plan was implemented during the fourth quarter of 2010 beginning with the redesign of certain functions within human resources, legal and finance. The plan has resulted in the elimination of approximately 75 positions throughout 2011 as each function has reorganized its processes in line with the peer comparisons and internally developed functional blueprints as approved by an executive operating team. We have incurred $5.4 million of charges related to this initiative to date and do not expect to incur any additional charges going forward.

(5)

In 2010, we realigned management positions within our Fresh Dairy Direct segment to facilitate supply-chain and commercial focused functions across the segment. This resulted in the elimination of the position filled by the then President of Fresh Dairy Direct and we incurred $2.9 million of workforce reduction costs. We do not expect additional costs related to this initiative; however, as described more fully below, we continue to evaluate opportunities to further align and integrate our Fresh Dairy Direct operations, which could result in additional charges in the future.

(6)	These charges in 2009 relate to shut down and other costs associated with the previously announced closure of a facility in Belleville, Pennsylvania. We incurred total charges of $4.7 million under this plan and do not expect to incur any additional charges going forward.

Activity for 2011 and 2010 with respect to facility closing and reorganization costs is summarized below and includes items expensed as incurred:


	Accrued Charges at December 31, 2009		Charges		Payments		Accrued Charges at December 31, 2010		Charges		Payments		Accrued Charges at December 31, 2011
	(In thousands)
Cash charges:
Workforce reduction costs	$	2,319	$	13,011	$	(11,470)	$	3,860	$	25,171	$	(23,846)	$	5,185
Shutdown costs		23		2,419		(2,426)		16		2,648		(2,705)		(41)
Lease obligations after shutdown		—		254		(254)		—		240		(240)		—
Other		19		552		(566)		5		852		(854)		3

Subtotal	$	2,361		16,236	$	(14,716)	$	3,881		28,911	$	(27,645)	$	5,147

Non-cash charges:
Write-down of assets(1)				13,173						16,535
(Gain)/Loss on sale of related assets				562						(54)
Pension curtailment				790						—
Other				—						296

Total charges			$	30,761					$	45,688

(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. Estimates of future cash flows used to test the recoverability of the assets included the net cash flows directly associated with and that are expected to arise as a direct result of the use and eventual disposition of the assets. The inputs for the fair value calculation were 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.

During the first quarter of 2012, our management team reassessed our company-wide strategy, resulting in a shift in focus to deploying our capital and strategically investing in the value-added segments of our business. With this new strategy, our goal is to invest our strategic capital primarily in those initiatives that yield higher returns over shorter time frames. In connection with this change, our management team approved a cost reduction plan that is incremental to any other prior cost savings initiative. This initiative is focused on aligning key functions within the Fresh Dairy Direct organization under a single leadership team and permanently removing costs from the Fresh Dairy Direct organization as well as certain functions that support this segment of our business.

We expect to incur approximately $25 million under this initiative, primarily related to workforce reduction costs, the write-down of certain information technology assets and costs associated with exiting other commitments deemed not necessary to execute our new strategy.