EXIT ACTIVITY COSTS AND ASSET IMPAIRMENTS

The Company’s business strategy has been formulated to effect a transformation of its operations and improve financial results over a five year period.

In 2015, the first year of this planned transformation, an 80/20 simplification initiative commenced across many of our business units. This on-going initiative, in part, focuses the Company’s internal resources on further increasing the value provided to our customers. A result of this initiative was the identification of low-volume, low-margin, internally-produced products which have been or will be outsourced or discontinued.

In 2016, the 80/20 simplification initiative was initiated at additional business units as well as continued at those business units which commenced activity in 2015. Correspondingly, the Company executed another key strategy in 2016 known as portfolio management. Portfolio management, a natural adjunct to this 80/20 initiative, is another initiative to drive transformational change in the Company’s financial results in which management continually evaluates all aspects of our current portfolio for future profitable growth and greater shareholder returns. As a result of this initiative, the Company executed three transactions in 2016 related to this strategy: the sale of its European industrial manufacturing business to a third party in April 2016, the exiting of its small European residential solar racking business and the exiting of its U.S. bar grating product line. Both the exit of the Company's small European residential solar racking business and the exit of the Company's U.S. bar grating product line commenced in the fourth quarter of 2016 and are expected to be completed in early 2017.

During 2016, the Company incurred asset impairments resulting from the above initiatives. Asset impairments relate to the write-down of inventory and impairment of machinery, equipment and facilities associated with either businesses sold or exited, discontinued product lines or the reduction of manufactured goods offered within a product line. These assets were written down to their sale or scrap value, and were subsequently sold or disposed of.

The Company also incurred exit activity costs in 2016 which related to contract termination costs, severance costs, and other moving and closing costs. The above initiatives led to the closing and consolidation of seven facilities in 2016, which resulted in costs for relocation of inventory and equipment at those facilities, termination of leases and the reduction of workforce associated with the discontinued products and closed facilities. In conjunction with the exiting of its small European residential solar racking business and its U.S. bar grating product line, as of December 31, 2016, the Company expects to close five more facilities in early 2017 and expect to incur additional exit activity charges related to these closures in 2017. The Company also incurred intangible asset impairment charges related to the exiting of its small European residential solar racking business and its U.S. bar grating product line which are not included in the aforementioned charges, but rather have been disclosed in Note 6.

In 2015, the Company closed and consolidated four facilities which resulted in asset impairment charges and exit activity costs. In addition, the Company sold and leased back a facility.

The following table sets forth the asset impairment charges, exit activity costs and gain on facilities sold in conjunction with these efforts, incurred by segment during the years ended December 31 related to the restructuring activities described above (in thousands):



	2016						2015									2014
	Inventory write-downs &/or asset impairment charges		Exit activity costs		Total		Inventory write-downs &/or asset impairment charges		Exit activity costs		Gain on sale leaseback			Total		Inventory write-downs &/or asset impairment charges		Exit activity costs		Gain on sale			Total
Residential Products	$	1,459	$	1,074	$	2,533	$	6,495	$	1,256	$	(6,799	)	$	952	$	83	$	1,332	$	(663	)	$	752
Industrial & Infrastructure Products	4,221		4,546		8,767		2,009		162		—			2,171		125		794		—			919
Renewable Energy & Conservation	1,850		539		2,389		—		—		—			—		—		—		—			—
Corporate	—		58		58		—		—		—			—		—		—		—			—
Total exit activity costs & asset impairments	$	7,530	$	6,217	$	13,747	$	8,504	$	1,418	$	(6,799	)	$	3,123	$	208	$	2,126	$	(663	)	$	1,671

The following table provides a summary of where the above exit activity costs and asset impairments are recorded in the consolidated statements of operations for the years ended December 31 (in thousands):



	2016		2015			2014
Cost of sales	$	9,922	$	9,381		$	843
Selling, general, and administrative expense	3,825		(6,258		)	828
Total exit activity costs and asset impairments	$	13,747	$	3,123		$	1,671

The following table reconciles the beginning and ending liability for exit activity costs relating to the Company’s facility consolidation efforts (in thousands):



	2016			2015
Balance as of January 1	$	603		$	575
Exit activity costs recognized	6,217			1,418
Cash payments	(3,076		)	(1,390		)
Balance as of December 31	$	3,744		$	603

As noted above, the Company sold its European industrial manufacturing business to a third party on April 15, 2016, from its Industrial and Infrastructure Products segment. The pretax loss on the disposal was $8.8 million. The sale resulted in a net loss of $2.0 million on net proceeds of $8.3 million. This divestiture did not meet the criteria to be reported as a discontinued operation as it does not represent a strategic shift that has or will have a major effect on the Company’s operations. Therefore, prior period results of continuing operations have not been restated to exclude the impact of the divested business’s financial results. The pretax loss on disposal is presented within other expense (income) in the consolidated statement of operations. Neither the exiting of the Company’s small European residential solar racking business nor its U.S. bar grating product line either currently meet, nor will meet, the criteria to be reported as a discontinued operation.