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Cost savings initiatives and restructuring
12 Months Ended
Dec. 31, 2011
Cost savings initiatives and restructuring [Abstract]  
Cost savings initiatives and restructuring

8. Cost savings initiatives and restructuring

Manufacturing operations optimization

As part of our continuing efforts to optimize our network of manufacturing facilities and improve cost efficiencies, on January 18, 2011, we entered into an agreement whereby Boehringer Ingelheim (BI) agreed to acquire our rights in and substantially all assets at our manufacturing facility located in Fremont, California. The transaction was approved by Amgen’s Board of Directors in December 2010 and closed in March 2011. In connection with the closing of this transaction, BI has assumed our obligations under certain of the facility’s operating lease contracts and has entered into an agreement to manufacture certain quantities of our marketed product Vectibix® for us at this facility through December 31, 2012 (the supply period).

We considered the transaction with BI to be a potential indicator of impairment, and accordingly, we performed an impairment analysis of the carrying values of the related fixed assets as of December 31, 2010. Based on this analysis, we determined that no future economic benefit would be received from a manufacturing line at the facility that had not yet been completed. As a result, we wrote off its entire carrying value, which aggregated $118 million during the year ended December 31, 2010. This amount is included in Other operating expenses in the Consolidated Statement of Income. The carrying values of the remaining fixed assets, aggregating approximately $133 million at December 31, 2010, were determined to be fully recoverable.

Due to the lack of sufficient initial investment by BI in the acquisition of this facility and our ongoing involvement with these operations, the transaction did not meet the accounting requirements to be treated as a sale involving real estate. As a result, the related assets continue to be carried on our Consolidated Balance Sheets.

 

As a result of this transaction, we reduced the estimated useful lives of the remaining fixed assets to coincide with the supply period. During the year ended December 31, 2011, we recorded incremental depreciation of approximately $42 million in excess of what otherwise would have been recorded. In addition, due to the assignment to BI of the obligations under certain of the facility’s operating leases, we recorded charges of approximately $23 million during the year ended December 31, 2011, with respect to the lease period beyond the end of the supply period. These amounts are recorded in Cost of sales (excludes amortization of certain acquired intangible assets presented separately) in the Consolidated Statement of Income.

Other cost savings initiatives

As part of our continuing efforts to improve cost efficiencies in our operations, we recorded certain charges, primarily severance-related, aggregating approximately $109 million during the year ended December 31, 2011, which are included in Other operating expenses in the Consolidated Statement of Income.

Restructuring

On August 15, 2007, we announced a plan to restructure our worldwide operations in order to improve our cost structure. This restructuring plan was primarily the result of regulatory and reimbursement developments that began in 2007 involving erythropoiesis-stimulating agents (ESAs), including our marketed ESAs, Aranesp ® and EPOGEN®, and the resulting impact on our operations. As of December 31, 2009, we completed all of the actions included in our restructuring plan and subsequently identified initiatives. During the year ended December 31, 2009, we recorded charges associated with these actions aggregating $70 million, comprised primarily of staff separation costs of $25 million, included principally in Other operating expenses in the Consolidated Statement of Income, and integration-related costs of $32 million, which were included principally in Selling, general and administrative expenses in the Consolidated Statement of Income.