EXIT ACTIVITY COSTS AND ASSET IMPAIRMENTS

The Company completed the third year of its 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.

In 2017, the 80/20 simplification initiative was initiated at additional business units as well as continued at those business units which commenced activity in 2016 and 2015. Correspondingly, the Company executed the portfolio management strategy in 2016, which had carryover effect in 2017. The portfolio management resulted in the execution of three transactions directly 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 were essentially completed in 2017.

During 2017, asset impairment charges incurred by the Company 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, asset sales related to the exit of both the Company's small European residential solar racking business and U.S. bar grating product line during 2017 resulted in a net gain. 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 2017 which related to contract termination costs, severance costs, and other moving and closing costs. The above initiatives led to the closing and consolidation of three facilities in 2017. The Company closed and consolidated seven facilities during 2016 and four facilities in 2015, which resulted in asset impairment charges and exit activity costs in both years. In addition, the Company sold and leased back a facility in 2015.

The following table sets forth the inventory write-downs, 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):



	2017							2016						2015
	Inventory write-downs &/or asset impairment charges			Exit activity costs		Total		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
Residential Products	$	345		$	1,058	$	1,403	$	1,459	$	1,074	$	2,533	$	6,495	$	1,256	$	(6,799	)	$	952
Industrial & Infrastructure Products	(2,484		)	2,820		336		4,221		4,546		8,767		2,009		162		—			2,171
Renewable Energy & Conservation	509			2,986		3,495		1,850		539		2,389		—		—		—			—
Corporate	—			261		261		—		58		58		—		—		—			—
Total exit activity costs & asset impairments	$	(1,630	)	$	7,125	$	5,495	$	7,530	$	6,217	$	13,747	$	8,504	$	1,418	$	(6,799	)	$	3,123

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):



	2017		2016		2015
Cost of sales	$	911	$	9,922	$	9,381
Selling, general, and administrative expense	4,584		3,825		(6,258		)
Total exit activity costs and asset impairments	$	5,495	$	13,747	$	3,123

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 as of January 1	$	3,744		$	603
Exit activity costs recognized	7,125			6,217
Cash payments	(9,908		)	(3,076		)
Balance as of December 31	$	961		$	3,744

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 exit 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. The costs related to exiting this business and product line are reflected in the above tables.