Note 3. Restructuring, Discontinued Operations, and Other

In February 2013, we announced the planned closure of the Paper segment’s technical specialty paper mill in Brainerd, Minnesota. The Brainerd mill permanently closed late in the first quarter of 2013. The cost of sales for the three months ended March 31, 2013, includes $42.2 million in pre-tax charges, primarily resulting from accelerated depreciation on mill assets and adjustments of mill inventory and spare parts to net realizable value. In addition, pre-tax restructuring expense related to severance and benefit continuation costs and other associated closure costs was approximately $2.1 million during the three months ended March 31, 2013.

The following table sets forth information with respect to charges related to the closure of the Brainerd, Minnesota mill:

	March 31,
(all dollar amounts in thousands)	2013

Accelerated depreciation on equipment	$	35,716
Inventory, spare parts, and other writedowns	6,712
Severance and benefit continuation costs	1,369
Other associated costs	532

Total	$	44,329

We expect to incur additional pre-tax closure charges related to the closure of the Brainerd mill of approximately $1.3 million during the remainder of 2013.

Following is a summary of the liabilities for restructuring expenses through March 31, 2013, related to the closure of the Brainerd mill, all of which are included in accrued and other liabilities in the Condensed Consolidated Balance Sheets:

	December 31,		Reserve		Payments/		March 31,
(all dollar amounts in thousands)	2012		Provisions		Usage		2013

Severance and benefit continuation	$	—	$	1,369	$	—	$	1,369
Contract termination and other	—		510		—		510

Total	$	—	$	1,879	$	—	$	1,879

In December 2011, we announced that our Board of Directors had approved the sale of our premium Print & Color brands, and the closure of our Brokaw, Wisconsin paper mill. The sale of the premium Print & Color brands, select paper inventory, and certain manufacturing equipment to Neenah Paper, Inc. closed on January 31, 2012. We permanently ceased papermaking operations at the mill on February 10, 2012. The sale of the premium Print & Color brands, select paper inventory, and certain manufacturing equipment generated a pre-tax gain of $12.2 million, which is recorded in earnings from discontinued operations in the Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2012.

We had determined that the assets of the Brokaw mill, which were part of our Paper segment, met the criteria for, and are reported as, discontinued operations in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Subtopic 205-20, “Discontinued Operations.” During the third quarter of 2012, we completed the sale and disposal of the remaining long-lived assets of the Brokaw mill. At March 31, 2012, we evaluated the recoverability of the carrying amount of the long-lived assets of the discontinued operation. As part of the evaluation, we estimated the future cash flows related to the long-lived assets using a probability weighted estimate and determined those cash flows were not sufficient to recover the carrying value of the assets. As there were no quoted market prices available for these or similar assets, we used our best estimates in determining the fair value of the long-lived assets of the discontinued operation based upon a range of anticipated sales prices for these assets. The use of these unobservable inputs, or level 3 inputs, resulted in pre-tax impairment charges of $2.1 million for the three months ended March 31, 2012. These impairment charges are included in earnings from discontinued operations in the Condensed Consolidated Statements of Comprehensive Income (Loss).

At March 31, 2013, there were no assets classified within discontinued operations, while there were liabilities from discontinued operations of $0.2 million, consisting of accrued and other liabilities.

The following table summarizes certain Condensed Consolidated Statements of Comprehensive Income (Loss) information for discontinued operations:

	Three Months
	Ended March 31,
(all amounts in thousands, except per share data)	2013		2012

Net sales	$	—	$	41,540

Earnings from discontinued operations before income taxes	$	106	$	13,043
Provision for income taxes	39		4,825
Earnings from discontinued operations, net of taxes	$	67	$	8,218

Net earnings per share — basic and diluted	$	0.00	$	0.17

During the first quarter of 2012, we executed restructuring activities related to the closure of the Brokaw mill, and recognized, exclusive of the gain recorded for the sale transaction, net pre-tax charges of approximately $3.4 million during the three months ended March 31, 2012. These net charges, which are detailed in the following table, are recorded in earnings from discontinued operations in the Condensed Consolidated Statements of Comprehensive Income (Loss).

	March 31,
(all dollar amounts in thousands)	2012

Impairment of long-lived assets	$	2,075
Severance and benefit continuation costs	1,108
Other associated costs, net	245

Total	$	3,428

No additional pre-tax closure charges related to the Brokaw mill were incurred in the first quarter of 2013.

Following is a summary of the liabilities for restructuring expenses through March 31, 2013, related to the closure of the Brokaw mill, all of which were included in liabilities of discontinued operations - current:

	December 31,		Payments/			March 31,
(all dollar amounts in thousands)	2012		Usage			2013

Severance and benefit continuation	$	26	$	(26	)	$	—
Contract termination and other	22		(22		)	—

Total	$	48	$	(48	)	$	—

In the first quarter of 2012, we incurred pre-tax charges of $3.3 million related to a natural gas contract for a closed facility. The charge is included in selling and administrative expenses in the Condensed Consolidated Statements of Comprehensive Income (Loss). During the three months ended March 31, 2013, we recorded expense of approximately $0.2 million and made payments of $0.5 million related to this natural gas contract. At March 31, 2013, $2.4 million and $9.4 million are included in current liabilities and noncurrent liabilities, respectively, consisting of contract termination costs associated with the Groveton, New Hampshire mill. At December 31, 2012, $2.3 million and $9.8 million are included in current liabilities and noncurrent liabilities, respectively, related to these contract termination costs.