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Plants Shutdowns, Asset Impairments, Restructurings And Other | 9 Months Ended
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Sep. 30, 2018
Restructuring Charges [Abstract] |
Plant Shutdowns, Asset Impairments, Restructurings And Other | Plant shutdowns, asset impairments, restructurings and other items are shown in the net sales and operating profit by segment table in Note 11 and are also included in “Asset impairments and costs associated with exit and disposal activities, net of adjustments” in the consolidated statements of income, unless otherwise noted below. Plant shutdowns, asset impairments, restructurings and other items in the third quarter of 2018 include:
• | Pretax charges of $1.7 million associated with the shutdown of PE Films’ manufacturing facility in Shanghai, China, which consists of severance and other employee-related costs of $1.3 million ($0.2 million included in “Cost of goods sold” in the consolidated statements of income), and accelerated depreciation of $0.4 million (included in “Cost of goods sold” in the consolidated statements of income);
• | Pretax charges of $0.4 million for professional fees associated with the Terphane Limitada worthless stock deduction and a market study for PE Films (included in “Selling, general and administrative expenses” in the consolidated statements of income);
• | Pretax charges of $0.2 million for severance and other employee-related costs associated with restructurings in PE Films;
• | Pretax charges of $0.2 million related to estimated excess costs associated with the ramp-up of new product offerings and additional expenses related to strategic capacity expansion projects by PE Films (included in “Cost of goods sold” in the consolidated statements of income);
• | Pretax charges of $0.2 million related to expected future environmental costs at the aluminum extrusions manufacturing facility in Carthage, Tennessee (included in “Cost of goods sold” in the consolidated statements of income); and
• | Pretax charges of $0.1 million related to wind damage that occurred in the third quarter of 2018 at the aluminum extrusions manufacturing facility in Elkhart, Indiana (included in “Selling, general and administrative expenses” in the consolidated statements of income).
Plant shutdowns, asset impairments, restructurings and other items in the first nine months of 2018 include:
• | Pretax charges of $2.4 million associated with the shutdown of PE Films’ manufacturing facility in Shanghai, China, which consists of severance and other employee-related costs of $1.7 million, accelerated depreciation of $0.5 million (included in “Cost of goods sold” in the consolidated statements of income) and other facility consolidation-related expenses of $0.2 million;
• | Pretax charges of $1.7 million related to estimated excess costs associated with the ramp-up of new product offerings and additional expenses related to strategic capacity expansion projects by PE Films (included in “Cost of goods sold” in the consolidated statements of income);
• | Pretax charges of $0.7 million for professional fees associated with the Terphane Limitada worthless stock deduction, the impairment of assets of Flexible Packaging Films, determining the effect of the new U.S. federal income tax law, and a market study for PE Films (included in “Selling, general and administrative expenses” in the consolidated statements of income);
• | Pretax charges of $0.3 million for severance and other employee-related costs associated with restructurings in PE Films;
• | Pretax charges of $0.2 million related to expected future environmental costs at the aluminum extrusions manufacturing facility in Carthage, Tennessee (included in “Cost of goods sold” in the consolidated statements of income); and
• | Pretax charges of $0.1 million related to wind damage that occurred in the third quarter of 2018 at the aluminum extrusions manufacturing facility in Elkhart, Indiana (included in “Selling, general and administrative expenses” in the consolidated statements of income).
Plant shutdowns, asset impairments, restructurings and other items in the third quarter of 2017 include:
• | Pretax charges of $0.7 million related to estimated excess costs associated with the ramp-up of new product offerings and additional expenses related to strategic capacity expansion projects by PE Films of $0.6 million and by Bonnell of $0.1 million (included in “Cost of goods sold” in the consolidated statements of income);
• | Pretax charges of $0.2 million associated with a business development project (included in “Selling, general and administrative expense” in the consolidated statements of income);
• | Pretax charges of $0.2 million associated with the consolidation of domestic PE Films’ manufacturing facilities (included in “Cost of goods sold” in the consolidated statements of income);
• | Pretax charges of $0.2 million associated with the settlement of customer claims and other costs related to the previously shutdown aluminum extrusions manufacturing facility in Kentland, Indiana; and
• | Pretax charges of $0.1 million for severance and other employee-related costs associated with restructurings in PE Films.
Plant shutdowns, asset impairments, restructurings and other items in the first nine months of 2017 include:
• | Pretax income of $11.9 million related to the settlement of an escrow arrangement established upon the acquisition of Terphane in 2011 (included in “Other income (expense), net” in the consolidated statements of income). In settling the escrow arrangement, the Company assumed the risk of the claims (and associated legal fees) against which the escrow previously secured the Company. While the ultimate amount of such claims is unknown, the Company believes that it is reasonably possible that it could be liable for some portion of these claims, and currently estimates the amount of such future claims at approximately $1.0 million;
• | Pretax charges of $3.3 million related to the acquisition of Futura, i) associated with accounting adjustments of $1.7 million made to the value of inventory sold by Aluminum Extrusions after its acquisition of Futura (included in “Cost of goods sold” in the consolidated statements of income), ii) acquisition costs of $1.5 million and, iii) integration costs of $0.1 million (included in “Selling, general and administrative expenses” in the consolidated statements of income), offset by pretax income of $0.7 million related to the fair valuation of an earnout provision (included in “Other income (expense), net” in the consolidated statements of income);
• | Pretax charges of $3.5 million related to estimated excess costs associated with the ramp-up of new product offerings and additional expenses related to strategic capacity expansion projects by PE Films of $3.0 million and by Aluminum Extrusions of $0.5 million (included in “Cost of goods sold” in the consolidated statements of income);
• | Pretax income of $0.5 million related to the explosion that occurred in the second quarter of 2016 at the aluminum extrusions manufacturing facility in Newnan, Georgia, which includes the expected recovery of excess production costs of $0.6 million incurred in 2016 for which recovery from insurance carriers was not previously considered to be reasonably assured (included in “Cost of goods sold” in the consolidated statements of income), partially offset by legal and consulting fees of $0.1 million (included in “Selling, general and administrative expenses” in the consolidated statements of income);
• | Pretax charges of $0.8 million associated with the consolidation of domestic PE Films’ manufacturing facilities, which consists of asset impairments of $0.1 million, accelerated depreciation of $0.2 million (included in “Cost of goods sold” in the consolidated statements of income) and other facility consolidation-related expenses of $0.5 million (included in “Cost of goods sold” in the consolidated statements of income), offset by pretax income of $0.1 million related to a reduction of severance and other employee-related accrued costs;
• | Pretax charges of $0.4 million related to expected future environmental costs at the aluminum extrusions manufacturing facility in Carthage, Tennessee (included in “Cost of goods sold” in the consolidated statements of income);
• | Pretax charges of $1.1 million associated with a business development project (included in “Selling, general and administrative expense” in the consolidated statements of income);
• | Pretax charges of $0.4 million for severance and other employee-related costs associated with restructurings in PE Films ($0.1 million) and Corporate ($0.3 million) (included in “Corporate expenses, net” in the net sales and operating profit by segment table); and
• | Pretax charges of $0.2 million associated with the settlement of customer claims and other costs related to the previously shutdown aluminum extrusions manufacturing facility in Kentland, Indiana.
Results on the Company’s investment in kaleo, Inc. (“kaléo”), which is accounted for under the fair value method, in the third quarter of 2018 include an unrealized loss of $2.1 million ($1.6 million after taxes) and in the first nine months an unrealized gain of $11.9 million ($9.3 million after taxes), compared to an unrealized gain of $24.8 million ($18.2 million after taxes) in the first nine months of 2017 (included in “Other income (expense), net” in the consolidated statements of income). There was no change in the estimated fair value from June 30, 2017 to September 30, 2017, as appreciation in value from the discount rate for one quarter was offset by a change in the present value of projected cash flows versus prior projections. An unrealized loss on the Company’s investment in the Harbinger Capital Partners Special Situations Fund, L.P. (“Harbinger Fund”) of $0.2 million and $0.3 million was recognized in the third quarter and first nine months of 2018, respectively (included in “Other income (expense), net” in the consolidated statements of income) (none in 2017). See Note 7 for additional information on investments. During the third quarter of 2018, the Company performed a goodwill impairment analysis related to the Personal Care component of PE Films. This review was undertaken as a result of the expected loss of business from a key customer and revised projections for PE Films. Based on an evaluation of projections under various business planning scenarios, the Company concluded that the value of the Personal Care component of PE Films was less than the carrying value of the underlying working capital and long-lived net assets. The assessment resulted in a full write-off of the goodwill of $46.8 million associated with the acquisition of certain components of PE Films. See Note 15 for additional details. The Company recorded an unrealized loss on its investment property in Alleghany and Bath Counties, Virginia (included in “Other income (expense), net” in the consolidated statements of income) of $0.2 million in the third quarter of 2018. In June 2018, the Company announced plans to close its facility in Shanghai, China, which primarily produces plastic films used as components for personal care products (“Shanghai transition”). Production is expected to cease at this plant during the fourth quarter of 2018. The Company expects to recognize costs associated with exit and disposal activities of $7.1 million comprised of: (i) retention, severance and related costs ($3.6 million), (ii) customer-related costs ($1.1 million), and (iii) legal, asset disposal and other cash costs ($2.4 million). In addition, the Company expects non-cash asset write-offs and accelerated depreciation of $0.9 million. Net annual cash savings from consolidating operations of $1.7 million is expected. Proceeds from expected property disposals are uncertain. The Company anticipates that these activities, including property disposals, will require 12-18 months to execute, and the costs are expected to be incurred during this period. Total expenses associated with the Shanghai transition were $1.7 million and $2.4 million in the three months and nine months ended September 30, 2018, respectively, ($1.0 million and $1.5 million, respectively, included in “Asset impairments and costs associated with exit and disposal activities, net of adjustments” and $0.7 million and $0.9 million, respectively, included in “Cost of goods sold” in the consolidated statements of income). Cash expenditures were $0.1 million and $0.4 million in the three months and nine months ended September 30, 2018, respectively. A reconciliation of the beginning and ending balances of accrued expenses associated with exit and disposal activities and charges associated with asset impairments and reported as “Asset impairments and costs associated with exit and disposal activities, net of adjustments” in the consolidated statements of income for the nine months ended September 30, 2018 is as follows:
(In thousands) | Severance (a) |  | Asset Impairments |  | Other (b) |  | Total
Balance at January 1, 2018 | $ | 627 |  |  | $ | — |  |  | $ | 476 |  |  | $ | 1,103 |
Changes in 2018: |  |  |  |  |  |  |
Charges | 1,871 |  |  | — |  |  | 20 |  |  | 1,891 |
Cash spent | (933 | ) |  | — |  |  | (310 | ) |  | (1,243 | )
Charges against assets | — |  |  | 92 |  |  | — |  |  | 92 |
Reversed to income |  |  | (92 | ) |  |  |  | (92 | )
Balance at September 30, 2018 | $ | 1,565 |  |  | $ | — |  |  | $ | 186 |  |  | $ | 1,751 |
(a) Severance cash spent includes severance payments associated with the consolidation of North American PE Films manufacturing facilities. (b) Other primarily includes other restructuring costs associated with Aluminum Extrusions.

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