Portfolio Optimization Plan

3 Months Ended

Mar. 31, 2024

Portfolio Optimization Plan [Abstract]

2.	Portfolio Optimization Plan

During the fourth quarter of 2023, the board of directors of the Company approved a plan to undertake an effort to optimize certain production facilities and improve efficiencies within the Company (Portfolio Optimization Plan). As part of the Portfolio Optimization Plan, in the Flavors & Extracts segment, the Company began evaluating the potential closure of its manufacturing facility in Felinfach, Wales, United Kingdom, the potential closure of its sales office in Granada, Spain, and the potential centralization and elimination of certain selling and administrative positions, with such proposals remaining subject to information and consultation processes in certain countries. In addition, in the Color segment, the Company’s proposals include closing a manufacturing facility in Delta, British Columbia, Canada, closing a sales office in Argentina, and centralizing and eliminating certain production positions as well as potentially eliminating some selling and administrative positions, with such proposals remaining subject to information and consultation processes in certain countries. The Company reports all costs associated with the Portfolio Optimization Plan in the Corporate & Other segment.

The Company recorded non-cash impairment charges in Selling and Administrative Expenses, primarily related to certain property, plant, and equipment during the three months ended March 31, 2024, when the estimated fair value of these assets was lower than the carrying value. The property, plant, and equipment related to a product line that was shut down and determined to not be usable at other plant locations.

The Company recorded $3.4 million and $3.7 million of accrued liabilities in Other Accrued Expenses on the Company’s Consolidated Balance Sheet related to this plan as of March 31, 2024 and December 31, 2023, respectively. The Company expects this plan will cost approximately $40 million, primarily related to non-cash impairment charges and proposed employee separation costs, and upon completion would reduce annual operating costs by approximately $8 million to $10 million, with the full benefit expected to be achieved after 2025. The Company proposes to reduce headcount by approximately 120 positions, primarily in the Flavors & Extracts and Color segments, related to certain production and selling and administrative positions.

The following table summarizes the Portfolio Optimization Plan expenses by segment for the three months ended March 31, 2024:

(In thousands)	Flavors & Extracts		Color			Corporate & Other		Consolidated
Non-cash impairment charges – Selling and administrative expenses	$	-	$	975		$	-	$	975
Non-cash charges – Cost of products sold		125		(18	)		-		107
Employee separation – Selling and administrative expenses		611		491			28		1,130
Other costs – Selling and administrative expenses⁽¹⁾		316		284			-		600
Total	$	1,052	$	1,732		$	28	$	2,812

⁽¹⁾

Other costs include professional services, accelerated depreciation, accelerated lease costs, and other related costs.