Cost Reduction Actions

3 Months Ended

Mar. 31, 2016

b. Cost Reduction Actions. In 2015, in connection with organizational initiatives to create a more competitive cost structure and rebalance the company’s global skill set, the company initiated a plan to incur pretax restructuring charges currently estimated at approximately $300 million through 2017.

During the twelve months ended December 31, 2015, the company recognized charges of $118.5 million in connection with this plan, principally related to a reduction in employees. The charges related to work-force reductions were $78.8 million and were comprised of: (a) a charge of $27.9 million for 700 employees in the U.S. and (b) a charge of $50.9 million for 782 employees outside the U.S. In addition, the company recorded charges of $39.7 million, related to asset impairments ($20.2 million) and other expenses related to the cost reduction effort ($19.5 million). The charges were recorded in the following statement of income classifications: cost of revenue – services, $52.3 million; cost of revenue – technology, $.3 million; selling, general and administrative expenses, $53.5 million; and research and development expenses, $12.4 million.

During the three months ended March 31, 2016, the company recognized charges of $26.9 million in connection with this plan, principally related to a reduction in employees. The charges related to work-force reductions were $22.1 million, principally related to severance costs, and were comprised of: (a) a charge of $4.2 million for 175 employees in the U.S. and (b) a charge of $17.9 million for 337 employees outside the U.S. In addition, the company recorded charges of $4.8 million, for other expenses related to the cost reduction effort. The charges were recorded in the following statement of income classifications: cost of revenue – services, $11.5 million; selling, general and administrative expenses, $13.3 million; and research and development expenses, $2.1 million. There were no charges recognized in connection with this plan during the three months ended March 31, 2015.

A breakdown of the individual components of the work-force reduction costs follows (in millions of dollars):


	Total			U.S.			Int’l.
Charges for work-force reductions	$	78.8		$	27.9		$	50.9
Utilized		(45.3	)		(23.7	)		(21.6	)
Translation adjustments		(.5	)		—			(.5	)

Balance at Dec. 31, 2015		33.0			4.2			28.8
Additional provisions		23.0			4.5			18.5
Utilized		(12.0	)		(3.1	)		(8.9	)
Changes in estimates and revisions		(.9	)		(.3	)		(.6	)
Translation adjustments		1.8			—			1.8

Balance at March 31, 2016	$	44.9		$	5.3		$	39.6

Expected future utilization:
2016 remaining nine months	$	43.2		$	5.3		$	37.9
Beyond 2016		1.7			—			1.7