10. Facility Closing and Reorganization Costs

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


	Three Months Ended March 31
	2012			2011
	(In thousands)
Fresh Dairy Direct:
Closure of facilities(1)	$	817		$	1,081
Functional Realignment(5)		25,336			—
Organization Optimization Initiative (4)		(17	)		1,491

Total Fresh Dairy Direct		26,136			2,572
Morningstar:
Closure of facilities(2)		3,387			—
Corporate:
Department Realignment(3)		(44	)		2,971
Organization Optimization Initiative(4)		(657	)		5,100

Total Corporate		(701	)		8,071

Total	$	28,822		$	10,643

(1)

These charges in 2012 and 2011 primarily relate to facility closures in Newport, Kentucky; Baxley, Georgia; and Florence, South Carolina, as well as previously announced closures. We have incurred $55.8 million of charges related to these initiatives to date. We expect to incur additional charges related to Fresh Dairy Direct facility closures of $1.2 million, related to shutdown and other costs. As we continue the evaluation of our supply chain, it is likely that we will close additional facilities in the future.

(2)

These charges in 2012 relate to workforce reduction costs and asset write-downs associated with the announced closure of our Sulphur Springs, Texas cultured production facility. We expect to incur additional charges related to this facility closure of $0.5 million, related to shutdown and other costs.

(3)

Charges relate to workforce reduction costs associated with a multi-year cost reduction plan aimed at centralization and process improvement, as well as business unit and functional organization redesigns. The plan was implemented during the fourth quarter of 2010 and resulted in the elimination of approximately 75 positions as each function reorganized its processes in line with peer comparisons and internally developed functional blueprints as approved by an executive operating team. We incurred total charges of $5.4 million related to this initiative and do not expect to incur any additional charges going forward.

(4)

In the first quarter of 2011 we initiated a significant cost reduction program that was incremental to our other ongoing cost-savings initiatives. This initiative was 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 during 2011. The charges recorded during the three months ended March 31, 2011 relate to workforce reduction costs associated with the first tranche of this program and include costs associated with eliminating the position filled by our then President and Chief Operating Officer. We have incurred $24.2 million of charges related to this initiative to date, and we do not expect to incur any material additional charges related to this plan going forward.

(5)

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 eliminated approximately 120 corporate positions throughout the first quarter of 2012 under this initiative. Charges recorded during the three months ended March 31, 2012 are 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. We expect to incur additional charges under this initiative ranging from approximately $3 million to approximately $7 million, primarily related to lease termination costs and the disposal of certain leasehold improvements.

Activity with respect to facility closing and reorganization costs during the three months ended March 31, 2012 is summarized below and includes items expensed as incurred:


	Accrued Charges at December 31, 2011			Charges		Payments			Accrued Charges at March 31, 2012
	(In thousands)
Cash charges:
Workforce reduction costs	$	5,185		$	15,017	$	(13,681	)	$	6,521
Shutdown costs		(41	)		566		(566	)		(41	)
Lease obligations after shutdown		—			51		(51	)		—
Other		3			1,884		(1,784	)		103

Subtotal	$	5,147			17,518	$	(16,082	)	$	6,583

Noncash charges:
Write-down of assets					11,081
Loss on sale of related assets					193
Other					30

Total charges				$	28,822