Portfolio Optimization Plan

9 Months Ended

Sep. 30, 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 evaluated the closure of its manufacturing facility in Felinfach, Wales, United Kingdom, the closure of its sales office in Granada, Spain, and the centralization and elimination of certain selling and administrative positions. In addition, in the Color segment, the Company evaluated the closure of a manufacturing facility in Delta, British Columbia, Canada, the closure of a sales office in Argentina, and centralizing and eliminating certain production positions and selling and administrative positions. The Company reports all costs associated with the Portfolio Optimization Plan in the Corporate & Other segment.

The Company’s Felinfach site will continue to operate until all production activities have successfully transferred to other locations, and then will be closed. The Company has substantially completed all other actions contemplated under the Portfolio Optimization Plan in accordance with local laws.

The Company recorded non-cash impairment charges in Selling and Administrative Expenses, primarily related to certain property, plant, and equipment during the nine months ended September 30, 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 $2.7 million and $3.7 million of accrued liabilities in Other Accrued Expenses on the Company’s Consolidated Balance Sheet related to the Portfolio Optimization Plan as of September 30, 2024 and December 31, 2023, respectively. The Company expects the Portfolio Optimization Plan will cost approximately $40 million, of which $33.6 million has been incurred through September 30, 2024, 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 anticipates it would reduce headcount by approximately 100 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 September 30, 2024:

(In thousands)	Flavors & Extracts		Color		Corporate & Other			Consolidated
Employee separation – Selling and administrative expenses	$	490	$	68	$	-		$	558
Other production costs – Cost of products sold		209		-		-			209
Other costs – Selling and administrative expenses⁽¹⁾		447		9		(12	)		444
Total	$	1,146	$	77	$	(12	)	$	1,211

⁽¹⁾

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

The following table summarizes the Portfolio Optimization Plan expenses by segment for the nine months ended September 30, 2024:

(In thousands)	Flavors & Extracts		Color			Corporate & Other			Consolidated
Non-cash impairment charges – Selling and administrative expenses	$	-	$	1,129		$	-		$	1,129
Non-cash charges – Cost of products sold		408		(194	)		-			214
Employee separation – Selling and administrative expenses		1,341		594			28			1,963
Other production costs – Cost of products sold		309		-			-			309
Other costs – Selling and administrative expenses⁽¹⁾		1,506		693			(39	)		2,160
Total	$	3,564	$	2,222		$	(11	)	$	5,775

⁽¹⁾

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