Divestitures

3 Months Ended

Mar. 31, 2020

2.	Divestitures

In October 2019, the Company announced its intent to divest its inks, fragrances (excluding its essential oils product line), and yogurt fruit preparations product lines. In October 2019, the Board of Directors approved the sale of the inks product line, which is within the Color segment. The Company has signed a memorandum of understanding with a potential buyer. In November 2019, the Board of Directors approved the sale of the fragrances product line (excluding its essential oils product line), which is within the Flavors & Fragrances segment. The Company has signed a memorandum of understanding with a potential buyer. As a result, the Company met all of the assets held for sale criteria for the inks and fragrances disposal groups. The divesting and exit of these products lines does not meet the criteria to be presented as a discontinued operation on the Consolidated Condensed Statements of Earnings.

As of March 31, 2020, the yogurt fruit preparations product line, which is included in the Flavors & Fragrances segment, did not meet all of the assets held for sale criteria. Subsequent to March 31, 2020, the Board of Directors approved the sale of the yogurt fruit preparations product line. See Note 12, Subsequent Events, for further information.

The assets and liabilities related to the inks and fragrances product lines are recorded in Assets held for sale and Liabilities held for sale as of March 31, 2020 and December 31, 2019, as follows:

(in thousands)	March 31, 2020		December 31, 2019
Assets held for sale:
Trade accounts receivable, net	$	34,610	$	31,653
Inventories		30,104		34,612
Prepaid expenses and other current assets		6,628		5,528
Property, Plant, and Equipment, net		4,643		14,496
Intangible assets, net		2,627		5,004
Assets held for sale	$	78,612	$	91,293

Liabilities held for sale:
Trade accounts payable	$	13,532	$	12,318
Accrued salaries, wages and withholdings from employees		1,222		1,677
Other accrued expenses		5,067		5,190
Liabilities held for sale	$	19,821	$	19,185

During the year ended December 31, 2019, the Company estimated that the fair value of the inks product line less costs to sell was lower than its carrying value resulting in a non-cash impairment charge of $15.8 million. As of March 31, 2020, the Company revised its estimate of the fair value of the inks product line based on indicative bids resulting in an additional non-cash impairment charge of $9.4 million recorded in Selling and Administrative Expenses during the three months ended March 31, 2020. The charge adjusted the carrying value of certain long-lived assets, primarily property, plant, and equipment, intangible assets and allocated goodwill, to their estimated fair value. This estimate will be finalized and adjusted as necessary upon the closing of the sale or as estimates change. In addition, the Company currently estimates a non-cash gain of $6 million to $8 million upon closing the transaction related to the reclassification of accumulated foreign currency translation and related items from Accumulated Other Comprehensive Loss to Selling and Administrative Expenses in the Consolidated Condensed Statements of Earnings.

During the year ended December 31, 2019, the Company estimated that the fair value of the fragrances product line less costs to sell was lower than its carrying value resulting in a non-cash impairment charge of $18.2 million. As of March 31, 2020, the Company revised its estimate of the fair value of the fragrances product line based on indicative bids resulting in an additional non-cash impairment charge of $0.3 million recorded in Selling and Administrative Expenses during the three months ended March 31, 2020. The charge adjusted the carrying value of certain long-lived assets, primarily property, plant and equipment and allocated goodwill, to their estimated fair value. This estimate will be finalized and adjusted as necessary upon the closing of the sale or as estimates change. In addition, the Company currently estimates an additional non-cash charge of $10 million to $12 million upon closing related to the reclassification of accumulated foreign currency translation and related items from Accumulated Other Comprehensive Loss (OCI) to Selling and Administrative Expenses in the Consolidated Condensed Statement of Earnings.

In March 2020, the Company was notified by a potential buyer of the Company’s fragrances product line that environmental sampling conducted at the Company’s Granada, Spain, location had identified the presence of contaminants in soil and groundwater in certain areas of the property. The Company is in the process of conducting its own environmental investigation to confirm the presence and extent of these contaminants and plans to perform a quantitative risk assessment to determine whether or what remedial action is required under Spanish law. At the conclusion of this work, if necessary, the Company intends to report any confirmed contamination, along with a remediation plan to address the contamination, if necessary, to the relevant Spanish authorities. Due to the impacts of COVID-19 in Spain, the Company has not been able to conduct a quantitative assessment of the issues identified in the environmental sampling. Consequently, the Company is unable to quantify any potential remediation costs at this time.

The Company also incurred $1.3 million of other divestiture and exit related costs, primarily severance and legal expenses, and $0.6 million of non-cash expenses charge related to other exit activities in the period ended March 31, 2020, which is recorded in Selling and Administrative Expenses. Also during the period, the Company recorded a non-cash charge of $0.2 million in Costs of Products Sold related to the value of certain inventories.

Excluding any potential remediation costs associated with the Granada, Spain, location of the fragrances product line, which the Company is unable to quantify at this time as discussed above, the Company expects total cash costs in 2019 and 2020 associated with the anticipated divestitures of all three product lines to be between $7 million and $10 million, primarily related to severance and other exit activities.