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Restructuring And Impairment
12 Months Ended
Dec. 31, 2011
Restructuring And Impairment [Abstract]  
Restructuring And Impairment

Note 3. Restructuring and Impairment

The Company recorded restructuring and impairment charges of $667.8 million, $157.9 million and $382.7 million for the years ended December 31, 2011, 2010 and 2009, respectively. The charges in 2011 included $392.3 million for the impairment of goodwill and $90.7 million of impairment primarily related to acquired customer relationship intangible assets. Additionally in 2011, the Company recorded restructuring charges of $76.7 million for employee termination costs, $59.6 million for other restructuring charges, of which $15.1 million related to multi-employer pension plan partial withdrawal charges primarily attributable to the closing of three manufacturing facilities within the U.S. Print and Related Services segment and the remaining amount related to lease termination and other facility closure costs, and $48.5 million of impairment charges for other long-lived assets. The charges in 2010 included $87.9 million for the impairment of goodwill and acquired customer relationship intangible assets. Additionally in 2010, the Company recorded restructuring charges of $35.9 million for employee termination costs, $29.5 million for other restructuring charges, of which $13.6 million related to multi-employer pension plan partial withdrawal charges primarily attributable to two closed manufacturing facilities within the U.S. Print and Related Services segment and the remaining amount related to lease termination and other facility closure costs, and $4.6 million of impairment charges for other long-lived assets. The charges in 2009 included $128.5 million for the impairment of goodwill, as well as charges, discounted for future cash payments, of $118.6 million for the termination of a significant long-term customer contract in the business process outsourcing reporting unit within the International segment, of which $117.2 million, $0.8 million and $0.6 million are reflected in other charges, impairment and employee terminations, respectively. Additionally in 2009, the Company recorded restructuring charges of $78.8 million for employee termination costs, other restructuring charges, including lease termination and other facility closure costs, of $32.1 million and $24.7 million of impairment charges for other long-lived assets.

The restructuring charges recorded are based on restructuring plans that have been committed to by management and are, in part, based upon management's best estimates of future events. Changes to the estimates may require future adjustments to the restructuring liabilities.

Restructuring and Impairment Costs Charged to Results of Operations

 

2011

   Employee
Terminations
     Other
Charges
     Total
Restructuring
     Impairment      Total  

U.S. Print and Related Services

   $ 49.2       $ 52.5       $ 101.7       $ 403.4       $ 505.1   

International

     24.2         7.0         31.2         125.8         157.0   

Corporate

     3.3         0.1         3.4         2.3         5.7   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 76.7       $ 59.6       $ 136.3       $       $ 667.8   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

In the fourth quarter of 2011, as a result of the Company's annual goodwill impairment test, the Company recorded non-cash charges of $170.4 million and $99.9 million to recognize the impairment of goodwill in the commercial and forms and labels reporting units, respectively, within the U.S. Print and Related Services segment, as well as non-cash charges of $62.2 million and $59.8 million to recognize the impairment of goodwill in the Canada and Latin America reporting units, respectively, within the International segment. These goodwill impairment charges resulted from reductions in the estimated fair value of the commercial, forms and labels, Canada and Latin America reporting units, based on lower expectations for future revenue, profitability and cash flows due to the continued impact of electronic substitution on demand for business forms and other products and continued price pressure. Because the fair values of these reporting units were below their carrying amounts, including goodwill, the Company performed an additional fair value measurement calculation to determine the amount of impairment loss. As part of this impairment calculation, the Company also estimated the fair value of the significant tangible and intangible long-lived assets of these reporting units. The goodwill impairments were determined using Level 3 inputs, including discounted cash flow analyses, comparable marketplace fair value data and management's assumptions in valuing the significant tangible and intangible assets.

Additionally, during the fourth quarter of 2011, the Company recorded non-cash charges of $90.7 million primarily related to the impairment of acquired customer relationship intangible assets in the forms and labels reporting unit within the U.S. Print and Related Services segment. The impairment of the acquired customer relationship intangible assets resulted from lower expectations for future revenue, profitability and cash flows due to the continued impact of electronic substitution on demand for business forms and continued price pressure. The impairment of the acquired customer relationship intangible assets was determined using Level 3 inputs and estimated based on cash flow analysis, which included estimates of customer attrition rates and management's assumptions related to future revenues and profitability. After recording the impairment charge, the remaining customer relationship intangible asset in the forms and labels reporting unit was $12.2 million, related to the acquisition of Stratus on November 21, 2011.

For the year ended December 31, 2011, the Company also recorded net restructuring charges of $76.7 million for employee termination costs for 2,899 employees, of whom 2,790 were terminated as of December 31, 2011. These charges primarily related to the closings of certain facilities and headcount reductions due to the Bowne acquisition. These charges also related to the completed or announced closing of four books and directories manufacturing facilities and one commercial manufacturing facility within the U.S. Print and Related Services segment. These actions included the reorganization of certain operations within the books and directories and the magazines, catalogs and retail inserts reporting units within the U.S. Print and Related Services segment. The restructuring activities also included the reorganization of certain operations within the Latin America and Europe reporting units within the International segment. Additionally, the Company incurred multi-employer pension plan partial withdrawal charges, lease termination and other restructuring charges of $59.6 million for the year ended December 31, 2011. The multi-employer pension plan partial withdrawal charges of $15.1 million are primarily attributable to the closing of three manufacturing facilities within the U.S. Print and Related Services segment. For the year ended December 31, 2011, the Company also recorded $48.5 million of impairment charges primarily related to land, buildings, machinery and equipment and leasehold improvements associated with the facility closings. The fair values of the land, buildings, machinery and equipment and leasehold improvements were determined to be Level 3 under the fair value hierarchy and were estimated based on discussions with real estate brokers, review of comparable properties, if available, discussions with machinery and equipment brokers, dealer quotes and internal expertise related to the current marketplace conditions.

2010

   Employee
Terminations
     Other
Charges
     Total
Restructuring
     Impairment      Total  

U.S. Print and Related Services

   $ 5.9       $ 24.0       $ 29.9       $ 64.1       $ 94.0   

International

     17.9         4.5         22.4         28.2         50.6   

Corporate

     12.1         1.0         13.1         0.2         13.3   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 35.9       $ 29.5       $ 65.4       $ 92.5       $ 157.9   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

In the fourth quarter of 2010, as a result of the Company's annual impairment test, the Company recorded a non-cash charge of $61.0 million to reflect the impairment of goodwill in the forms and labels reporting unit within the U.S. Print and Related Services segment. The goodwill impairment charge of $61.0 million resulted from reductions in the estimated fair value of the forms and labels reporting unit, based on lower expectations for future revenue and cash flows due to the continued impacts of electronic substitution on forms demand and increasing price pressure. In addition, the lower fair value reflects higher estimated spending on information technology and capital equipment, in part to better position this reporting unit for increased growth in labels volume as forms' demand continues to decline. Because the fair value of this reporting unit was below its carrying amount including goodwill, the Company performed an additional fair value measurement calculation to determine the amount of impairment loss. As part of this impairment calculation, the Company also estimated the fair value of the significant tangible and intangible long-lived assets of this reporting unit. The goodwill impairment was determined using Level 3 inputs, including discounted cash flow analyses, comparable marketplace fair value data, as well as management's assumptions in valuing the significant tangible and intangible assets.

 

Additionally, during the third quarter of 2010, the Company recorded a non-cash charge of $26.9 million for the impairment of acquired customer relationship intangible assets in the Global Turnkey Solutions reporting unit within the International segment. The impairment of the acquired customer relationship intangible assets primarily resulted from the termination of a customer contract and was determined using Level 3 inputs and estimated based on cash flow analysis and management's assumptions related to future revenues and profitability of certain customers. After recording the impairment charge, remaining customer relationship intangible assets in the Global Turnkey Solutions reporting unit were $32.6 million and $43.0 million as of December 31, 2011 and 2010, respectively. For the year ended December 31, 2010, the Company recorded net restructuring charges of $35.9 million for employee termination costs for 1,458 employees, substantially all of whom were terminated as of December 31, 2011, associated with actions resulting from the reorganization of certain operations. These actions included the reorganization of certain operations within the Financial Print reporting unit within the U.S. Print and Related Services segment due to the acquisition of Bowne. In addition, these actions included the closing of one Latin America manufacturing facility, one business process outsourcing manufacturing facility and one Global Turnkey Solutions manufacturing facility within the International segment. Further, continuing charges resulting from the closing of two Global Turnkey Solutions manufacturing facilities in 2009 within the International segment were recorded in 2010. These actions also included the reorganization of certain operations within the magazine, catalog and retail insert and variable print reporting units and the closing of one Forms and Labels manufacturing facility within the U.S. Print and Related Services segment. Additionally, the Company incurred other restructuring charges of $29.5 million for the year ended December 31, 2010, of which $13.6 million related to multi-employer pension plan partial withdrawal charges primarily attributable to two closed manufacturing facilities within the U.S. Print and Related Services segment. The remaining charges included lease termination and other facility closure costs partially offset by gains on the sales of two previously closed facilities within both the International and U.S. Print and Related Services segment. Finally, for the year ended December 31, 2010, the Company recorded $4.6 million of impairment charges primarily for machinery and equipment and leasehold improvements associated with the facility closings. The fair values of the machinery and equipment and leasehold improvements were determined to be Level 3 under the fair value hierarchy and were estimated based on discussions with machinery and equipment brokers, dealer quotes and internal expertise related to the equipment and current marketplace conditions.

 

2009

   Employee
Terminations
     Other
Charges
     Total
Restructuring
     Impairment      Total  

U.S. Print and Related Services

   $ 36.5       $ 19.2       $ 55.7       $ 108.1       $ 163.8   

International

     40.5         124.3         164.8         45.9         210.7   

Corporate

     2.4         5.8         8.2         —           8.2   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $       $ 149.3       $ 228.7       $ 154.0       $ 382.7   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

In the fourth quarter of 2009, the Company recorded a non-cash charge of $128.5 million to reflect the impairment of goodwill, of which $93.8 million and $34.7 million are reflected in the U.S. Print and Related Services and International segments, respectively. The goodwill impairment charges of $93.8 million and $34.7 million resulted from reductions in the estimated fair value of the forms and labels and Canada reporting units, respectively, based on lower expectations for revenue due to declines in business and consumer spending and continued price pressure. Because the fair value of these reporting units was below their carrying amounts including goodwill, the Company performed an additional fair value measurement calculation to determine the amount of impairment loss. As part of this impairment calculation, the Company estimated the fair value of the significant tangible and intangible long-lived assets of each reporting unit.

For the year ended December 31, 2009, the Company also recorded net restructuring and impairment charges, discounted for future cash payments, of $118.6 million for the termination of a significant long-term customer contract in the business process outsourcing reporting unit within the International segment, of which $117.2 million, $0.8 million and $0.6 million are reflected in other charges, impairment and employee terminations, respectively. In addition, for the year ended December 31, 2009, the Company recorded net restructuring charges of $78.8 million for employee termination costs for 4,043 employees, all of whom were terminated as of December 31, 2011, associated with actions resulting from the reorganization of certain operations. These actions included the closings of two magazine, catalog and retail insert manufacturing facilities, two book manufacturing facilities and one premedia facility within the U.S. Print and Related Services segment and the closing of two Global Turnkey Solutions manufacturing facilities, one business process outsourcing facility, one Latin America manufacturing facility and one European manufacturing facility within the International segment. Additionally, the Company incurred other restructuring charges, including lease termination and other facility closure costs, of $32.1 million for the year ended December 31, 2009. Finally, for the year ended December 31, 2009, the Company recorded $24.7 million of impairment charges primarily for machinery and equipment associated with the facility closings. The fair values of the machinery and equipment were determined to be Level 3 under the fair value hierarchy and were estimated based on discussions with machinery and equipment brokers, dealer quotes, internal expertise related to the equipment and current marketplace conditions.

 

Restructuring Reserve

Activity impacting the Company's restructuring reserve for the year ended December 31, 2011 was as follows:

 

     December 31,
2010
     Restructuring
Charges
     Foreign
Exchange and
Other
    Cash
Paid
    December 31,
2011
 

Employee terminations

   $ 11.2       $ 76.7       $ (0.5   $ (60.2   $ 27.2   

Multi-employer pension withdrawal obligations

     13.6         15.1         —          (0.8     27.9   

Lease terminations and other

     29.2         44.5         2.1        (43.2     32.6   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total

   $ 54.0       $ 136.3       $ 1.6      $ (104.2   $ 87.7   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

The current portion of restructuring reserves of $43.9 million was included in accrued liabilities at December 31, 2011, while the long-term portion of $43.8 million, primarily related to multi-employer pension plan partial withdrawal obligations and lease termination costs, was included in other noncurrent liabilities at December 31, 2011.

The Company anticipates that payments associated with the employee terminations reflected in the above table will be substantially completed by December 2012 and payments on certain of the multi-employer pension plan partial withdrawal obligations are scheduled to continue until 2031.

As of December 31, 2011, the restructuring liabilities classified as "lease terminations and other" consisted of lease terminations, other facility closing costs and contract termination costs. Payments on certain of the lease obligations are scheduled to continue until 2026. Market conditions and the Company's ability to sublease these properties could affect the ultimate charge related to the lease obligations. Any potential recoveries or additional charges could affect amounts reported in the Consolidated Financial Statements of future periods.

Activity impacting the Company's restructuring reserve for the year ended December 31, 2010 was as follows:

 

     December 31,
2009
     Restructuring
Charges
     Foreign
Exchange and
Other
     Cash
Paid
    December 31,
2010
 

Employee terminations

   $ 20.4       $ 35.9       $ —         $ (45.1   $ 11.2   

Multi-employer pension withdrawal obligations

     —           13.6         —           —          13.6   

Lease terminations and other

     120.5         15.9         5.8         (113.0     29.2   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total

   $ 140.9       $ 65.4       $ 5.8       $ (158.1   $ 54.0   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

The current portion of restructuring reserves of $28.4 million was included in accrued liabilities at December 31, 2010, while the long-term portion of $25.6 million, primarily related to multi-employer pension plan partial withdrawal obligations and lease termination costs, was included in other noncurrent liabilities at December 31, 2010.

As of December 31, 2010, the restructuring liabilities classified as "lease terminations and other" consisted of lease terminations, other facility closing costs and contract termination costs. In 2010, the Company paid $57.5 million and $38.3 million in January and December, respectively, related to the termination of a significant long-term customer contract.