EXIT ACTIVITY COSTS AND ASSET IMPAIRMENTS

The Company is in its third year of a five year planned transformation strategy formulated to transform its operations and improve its financial results over this five year period. This strategy includes an 80/20 simplification initiative which, 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. Portfolio management, another key part of the strategy and a natural adjunct to the 80/20 initiative, is another initiative in which management conducts strategic reviews of our current portfolio for future profitable growth and greater shareholder returns. This initiative has resulted in the sale and exiting of less profitable businesses or products lines in order to enable the Company to re-allocate leadership, time, capital and resources to the highest potential platforms and businesses. Exit activity costs and asset impairment charges were incurred as a result of these initiatives.

Exit activity costs were incurred during the six months ended June 30, 2017 which related to contract termination costs, severance costs, and other moving and closing costs. These costs were the result of the closing and consolidation of facilities, relocation of inventory and equipment at those facilities and the reduction of workforce associated with the discontinued products and closed facilities. During the six months ended June 30, 2017, asset impairment charges incurred were more than offset by a gain on sale of assets previously impaired in 2016 as a result of businesses and product lines discontinued. Specifically, the exit of both the Company's small European residential solar racking business and the exit of the Company's U.S. bar grating product line, which commenced during the fourth quarter of 2016, transacted sales of assets during the six months ended June 30, 2017 which resulted in a net gain. These exits were completed in the first half of 2017. During the six months ended June 30, 2017, asset impairment charges were incurred related to the write-down of inventory and impairment of machinery and equipment associated with either 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. During the six months ended June 30, 2017, the company closed three facilities as a result of these initiatives.

During the six months ended June 30, 2016, the Company incurred asset impairment charges and exit activity costs resulting from the above initiatives as well. As a result of these initiatives, the Company sold its European industrial manufacturing business to a third party in April 2016, as well as closed one other facility during the first half of 2016.

The following tables set forth the asset impairment charges and exit activity costs incurred by segment during the three and six months ended June 30, related to the restructuring activities described above (in thousands):



	Three Months Ended June 30,
	2017								2016
	Inventory write-downs &/or asset impairment recoveries, net			Exit activity costs		Total			Inventory write-downs &/or asset impairment charges		Exit activity costs		Total
Residential Products	$	(126	)	$	207	$	81		$	118	$	140	$	258
Industrial & Infrastructure Products	(1,694		)	315		(1,379		)	46		805		851
Renewable Energy & Conservation	—			1,369		1,369			—		—		—
Corporate	—			135		135			—		—		—
Total exit activity costs & asset impairments	$	(1,820	)	$	2,026	$	206		$	164	$	945	$	1,109



	Six Months Ended June 30,
	2017							2016
	Inventory write-downs &/or asset impairment recoveries, net			Exit activity costs		Total		Inventory write-downs &/or asset impairment charges		Exit activity costs		Total
Residential Products	$	(147	)	$	392	$	245	$	806	$	470	$	1,276
Industrial & Infrastructure Products	(2,590		)	2,971		381		268		1,263		1,531
Renewable Energy & Conservation	—			2,419		2,419		—		—		—
Corporate	—			163		163		—		—		—
Total exit activity costs & asset impairments	$	(2,737	)	$	5,945	$	3,208	$	1,074	$	1,733	$	2,807

The following table provides a summary of where the asset impairments and exit activity costs were recorded in the statement of operations for the three and six months ended June 30, (in thousands):



	Three Months Ended June 30,					Six Months Ended June 30,
	2017			2016		2017			2016
Cost of sales	$	(1,472	)	$	560	$	(478	)	$	1,678
Selling, general, and administrative expense	1,678			549		3,686			1,129
Net asset impairment and exit activity charges	$	206		$	1,109	$	3,208		$	2,807

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



	2017			2016
Balance at January 1	$	3,744		$	603
Exit activity costs recognized	5,945			1,733
Cash payments	(8,288		)	(1,527		)
Balance at June 30	$	1,401		$	809

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. 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 met the criteria to be reported as a discontinued operation as well.