Note 19. Asset Impairment Charges and Exit Costs

As part of the Company’s ongoing portfolio management, the Company decided to divest its interests in Gruma S.A.B. de C.V. and related joint ventures (“Gruma”). As a result, the Company’s equity method investments in Gruma were evaluated for impairment. In the quarter ended September 30, 2012, the Company recorded a $146 million pre-tax asset impairment charge ($0.16 per share after tax) on its investments in Gruma by comparing the carrying value, including $123 million of cumulative unrealized foreign currency translation losses, to estimated fair value. Fair value was estimated based on negotiations which resulted in the Company entering into a non-binding letter of intent to sell its interests in Gruma to a third party on October 16, 2012. The agreement was subject to the approvals of the Company and Gruma’s boards of directors and to rights of first refusal on the part of Gruma’s controlling shareholder. In December 2012, Gruma’s controlling shareholder exercised its rights of first refusal and entered into an equity purchase agreement with the Company to purchase the Company’s interests in Gruma. Under the terms of the sale, the Company received $450 million in December 2012, the estimated fair value at September 30, 2012. The Company may also receive up to $60 million of contingent consideration over the next 42 months.

During the second quarter of fiscal 2012, the Company determined that the carrying values of its Clinton, IA, bioplastics facility’s long-lived assets were greater than their future net undiscounted cash flows. Accordingly, the Company recorded charges of $339 million in the Corn Processing segment related to the impairment of its Clinton, IA, bioplastics facility’s property, plant, and equipment and inventories. In addition, the Company recognized an other-than-temporary impairment charge of $13 million in Corporate related to its investment in Metabolix, Inc. The Company estimated the fair value of these assets based on limited market data available and on its ability to redeploy the assets within its own operations.

During the third quarter of fiscal 2012, the Company recorded in its Corn Processing segment $14 million in facility exit and other related costs related to the closure of its ethanol facility in Walhalla, ND, which was partially offset by a $4 million recovery of prior quarter bioplastic-related charges. In addition, the Company incurred $4 million of facility exit and other related costs in Corporate.

In January 2012, the Company announced a plan to streamline its organizational structure, reducing its global workforce to enhance the cost structure of the Company. Over 1,200 positions, primarily salaried, were eliminated. To help achieve this reduction, the Company offered a voluntary early retirement incentive in the U.S. These actions, in concert with other targeted cost reductions, have reduced the Company’s annual pre-tax expenses by approximately $150 million. The Company achieved a significant portion of the position reductions through the voluntary early retirement incentive in the U.S. and offered severance and outplacement assistance to other affected employees.

The following table summarizes the Company’s significant asset impairment, exit, and restructuring costs for the six months ended December 31, 2012 and 2011 and the fiscal year ended June 30, 2012:



	Six Months Ended December 31				Year Ended
(In millions)	2012			2011	June 30, 2012
	(Unaudited)

Employee-related costs ⁽¹⁾	$	-	$	-	$	71
Facility exit and other related costs ⁽²⁾		146		352		366
Total asset impairment, exit, and restructuring costs	$	146	$	352	$	437

⁽¹⁾	These costs primarily consist of one-time termination benefits provided to employees who have been involuntarily terminated and $34 million for pension and postretirement remeasurement charges triggered by an amendment of its U.S. plans due to the voluntary early retirement program.

⁽²⁾

Facility exit and other related costs for the six months ended December 31, 2012 consist of an asset impairment charge of $146 million related to the Gruma investment writedown in the Agricultural Services segment. Facility and other related costs for the six months ended December 31, 2011 consist of asset impairment charges and other costs of $339 million related to the exit of the Clinton, IA, bioplastics facility in the Corn Processing segment and $13 million investment writedown in Corporate. Facility exit and other related costs for the fiscal year ended June 30, 2012 consist of asset impairment charges and other costs of $349 million related to the exit of the Clinton, IA, bioplastics and Walhalla, ND, ethanol facilities in the Corn Processing segment and investment writedown and other facility exit-related costs of $17 million in Corporate.

There were no significant asset impairment charges and exit costs recognized in fiscal years 2011 and 2010.