HPC » Topics » 9. Severance and Other Exit Costs

This excerpt taken from the HPC 10-Q filed May 6, 2005.

9.             Severance and Other Exit Costs

 

During 2005, the Company announced, as part of its continuous improvement strategy, personnel reductions of approximately 54 employees under its Severance Pay Plan and Dismissal Wage Plan (“Dismissal Plans”).  As a result, $7.4 million was recognized in Other operating expense, net for the three months ended March 31, 2005 of which $4.7 million, $2.0 million and $0.7 million related to the Performance Products segment, the Engineered Materials and Additives segment, and Corporate, respectively.

 

In 2004, the Company announced its intent to close its European research facility located in Barneveld, The Netherlands, which has approximately 60 employees.  The severance and termination agreements, which constitute one-time termination benefits, were approved by the local works council during the quarter ended March 31, 2005.  The Company intends to terminate approximately two-thirds of the employees and offer relocation to the remainder.  The termination and exit costs are subject to the accounting requirements of Statement of Financial Accounting Standards No. 146 “Accounting for Costs Associated with Exit or Disposal Activities” (“SFAS 146”).  Accordingly, the estimated liability of approximately $3.7 million associated with the exit and closure of the research facility is being recognized ratably to Other operating expense, net over a ten-month period from the communication date through the anticipated closure in September 2005.  Charges of approximately $1.2 million were recognized in the first quarter of 2005 in the Performance Products segment.

 

Cash payments during the three months ended March 31, 2005 were $2.0 million, including $0.2 million for severance under the Company’s 2001 restructuring plan and $1.8 million for severance liabilities recognized under the Company’s Dismissal Plans.

 

A consolidated reconciliation of activity with respect to the liabilities for these plans is as follows:

 

Balance at December 31, 2004

 

$

5.8

 

Additional termination costs recognized

 

7.4

 

Charges for SFAS 146 terminations and relocations

 

1.2

 

Cash payments

 

(2.0

)

 

 

 

 

Balance at March 31, 2005

 

$

12.4

 

 

The balance at March 31, 2005 represents severance benefits and other exit costs of which $1.7 million pertains to the continuing benefit payment streams under the 2001 restructuring plan, $9.2 million pertains to other severance benefits accounted for under the Company’s Dismissal Plans and $1.5 million is associated with SFAS 146 termination liabilities.

 

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