(1) Impairment of long-lived assets

During the third quarter of 2016, the Company assessed the carrying value of owned equipment and leasehold improvements associated with its leased San Bernardino, California juice facility as it evaluated recent commercial and operational developments that impacted the facility. In particular, the Company identified a need for significant investment in new packaging and processing capabilities in order to satisfy packaging format changes demanded by the facility’s largest customer. In addition, the Company was unsuccessful in contracting sufficient supply of raw citrus fruit for the upcoming season to allow for effective and efficient use of the facility’s extraction capabilities. This supply chain challenge is expected to continue for the foreseeable future, and while the Company has secured sufficient supply of extracted juice to meet its production requirements, the Company determined that it would be more beneficial to transfer its juice production from the facility to contract manufacturers with whom the Company has ongoing relationships. Accordingly, the Company has decided to not make further capital investments in support of the bottling or extraction areas of the facility. As a result, the Company determined that the carrying value of the long-lived assets of $10.9 million was not recoverable and that the assets were impaired. The Company recorded an impairment loss of $10.3 million to write down the carrying value of these assets to their estimated fair value. This facility is included in the Consumer Products operating segment.

On November 8, 2016, the Board of Directors of the Company approved the closure of the San Bernardino juice facility. During the fourth quarter of 2016, the Company expects to incur additional facility closure costs of approximately $4.0 million to $5.0 million including lease termination and employee severance costs. In addition, it is reasonably possible that the Company may need to further adjust the estimated fair value of the long-lived assets based on the final disposition of the facility.

For the three quarters ended October 1, 2016, the Company also recorded an impairment charge of $1.7 million related to the write-off of leasehold improvements at its Buena Park, California frozen fruit processing facility. In the first quarter of 2016, the Company transferred all production volume from this facility into Sunrise’s facilities located in Kansas and California.

(2) Legal settlement

In the second quarter of 2016, the Company recorded a charge of $9.0 million in connection with the settlement of a complaint filed by Plum, PBC (“Plum”) that arose out of a voluntary recall by Plum of certain resealable pouch products manufactured at the Company’s Allentown, Pennsylvania facility in 2013 (see note 13). Previously, in the fourth quarter of 2013, the Company recorded a $5.2 million provision for the expected loss associated with this recall, which reflected at that time the amount due to the Company for product sold to Plum that was subject to the recall, as well as the carrying value of recalled product still in inventory at the Company. The previously recorded provision did not include any potential amounts payable in connection with the settlement of litigation relating to the voluntary recall.

(3) Product withdrawal and recall costs

For the three quarters ended October 1, 2016, the Company recognized costs of $1.1 million associated with the voluntary withdrawal by a customer, in coordination with the Company, of private label orange juice product produced at the San Bernardino juice facility, due to instances of early spoilage within the prescribed shelf life of the product. In addition, for the three quarters ended October 1, 2016, the Company recognized an estimated loss of $0.6 million, net of estimated insurance recoveries in connection with a voluntary recall of certain sunflower kernel products that was announced in the second quarter of 2016 (see note 4).

(4) Severance and rationalization costs

For the three quarters ended October 1, 2016, severance and rationalization costs primarily related to the consolidation of the Company’s frozen fruit processing facilities following the Sunrise Acquisition, which included lease termination costs associated with the vacated Buena Park facility and related corporate office located in Cerritos, California.

For the quarter and three quarters ended October 3, 2015, employee severance costs included contractual severance benefits of $1.2 million and previously unrecognized stock-based compensation expense of $0.9 million recognized in connection with the departure of Steven Bromley as the Company’s Chief Executive Officer effective October 1, 2015.