Restructuring and Asset Impairments

6 Months Ended

Jul. 02, 2023

Restructuring and Related Activities [Abstract]

Restructuring and Asset ImpairmentsDue to its geographic footprint and the cost-competitive nature of its businesses, the Company is continually seeking more cost-effective means and structures to serve its customers and to respond to fundamental changes in its markets. As such, restructuring costs have been, and are expected to be, a recurring component of the Company’s operating costs. The amount of these costs can vary significantly from quarter to quarter and from year to year depending upon the scope, nature, and location of the restructuring activities.

Following are the total restructuring and asset impairment charges, net of adjustments, recognized during the periods presented:



	Three Months Ended				Six Months Ended
	July 2, 2023		July 3, 2022		July 2, 2023		July 3, 2022
Restructuring and restructuring-related asset impairment charges	$	6,057	$	6,857	$	34,871	$	12,610
Other asset impairments	—		3,706		—		10,095
Restructuring and asset impairment charges	$	6,057	$	10,563	$	34,871	$	22,705

The table below sets forth restructuring and restructuring-related asset impairment charges by type incurred:



	Three Months Ended				Six Months Ended
	July 2, 2023		July 3, 2022		July 2, 2023		July 3, 2022
Severance and termination benefits	$	4,118	$	2,214	$	9,634	$	4,313
Asset impairments	806		787		19,999		1,232
Other costs	1,133		3,856		5,238		7,065
Restructuring and restructuring-related asset impairment charges	$	6,057	$	6,857	$	34,871	$	12,610

The table below sets forth restructuring and restructuring-related asset impairment charges by reportable segment:



	Three Months Ended				Six Months Ended
	July 2, 2023		July 3, 2022		July 2, 2023		July 3, 2022
Consumer Packaging	$	1,928	$	2,544	$	3,504	$	4,179
Industrial Paper Packaging	1,987		1,007		26,531		2,355
All Other	2,952		(495)		4,109		(417)
Corporate	(810)		3,801		727		6,493
Restructuring and restructuring-related asset impairment charges	$	6,057	$	6,857	$	34,871	$	12,610

Restructuring and restructuring-related asset impairment charges are included in “Restructuring/Asset impairment charges” in the Company’s Condensed Consolidated Statements of Income.

The following table sets forth the activity in the restructuring accrual included in “Accrued expenses and other” on the Company’s Condensed Consolidated Balance Sheets:


	Severance and Termination Benefits		Asset Impairments/ Disposal of Assets		Other Costs		Total
Accrual Activity
Liability at December 31, 2022	$	14,677	$	—	$	1,392	$	16,069
2023 charges	9,634		19,999		5,238		34,871

Cash payments	(13,603)		(166)		(4,133)		(17,902)
Asset writedowns/disposals	—		(19,833)		—		(19,833)
Foreign currency translation	13		—		9		22
Liability at July 2, 2023	$	10,721	$	—	$	2,506	$	13,227

“Severance and Termination Benefits” during the first six months of 2023 includes the cost of severance for approximately 240 employees whose positions were eliminated in conjunction with the Company’s ongoing organizational effectiveness efforts, severance related to the closure of the Company’s paper mill in Hutchinson, Kansas, part of the Industrial Paper Packaging segment, and severance related to the closures of several smaller operations.

“Asset Impairments/Disposal of Assets” during the first six months of 2023 consists primarily of asset impairment charges related to the closure of the Company’s paper mill in Hutchinson, Kansas.

“Other Costs” during the first six months of 2023 consists primarily of consulting services, costs related to the closure of the Hutchinson, Kansas paper mill, and the cost of earlier plant closures, including equipment removal, utilities, plant security, property taxes and insurance.

The Company expects to pay the majority of the remaining restructuring reserves by the end of 2023 using cash generated from operations. The Company also expects to recognize future additional charges totaling approximately $3,900 in connection with previously announced restructuring actions and believes that the majority of these charges will be incurred and paid by the end of 2023. The Company continually evaluates its cost structure, including its manufacturing capacity, and additional restructuring actions are likely to be undertaken.

Other Asset Impairments

Other asset impairment charges recognized during the three- and six-month periods ended July 3, 2022 include net asset impairment charges totaling $3,452 and $9,165, respectively, resulting from the Company’s exit from its operations in Russia as a result of the ongoing Russia-Ukraine conflict. These operations consisted of two small tube and core plants in the Company’s Industrial Paper Packaging segment. The charges include $3,747 of cumulative translation adjustment losses that were reclassified from accumulated other comprehensive income upon completion of the Company’s exit from Russia on July 1, 2022. Fixed asset impairments totaling $254 and $930, respectively, were recognized in the three- and six-month periods ended July 3, 2022, in the Company’s plastics foods operations, part of the Consumer Packaging segment.

The assets were impaired as the value of their projected undiscounted cash flows was determined to no longer be sufficient to recover their carrying value. These impairment charges are included in “Restructuring/Asset impairment charges” in the Company’s Condensed Consolidated Statements of Income.