
Note 15.	Restructuring and Other Costs, Net

Restructuring and other costs in 2018 included continuing charges for headcount reductions and facility consolidations in an effort to streamline operations, including the closure and consolidation of operations within several facilities in the U.S. and Europe; third-party transaction/integration costs primarily related to recent acquisitions; sales of inventories revalued at the date of acquisition; and environmental remediation charges. These charges were partially offset by gains on sales of real estate and favorable results of litigation. In 2018, severance actions associated with facility consolidations and cost reduction measures affected approximately 1% of the company’s workforce.

Restructuring and other costs in 2017 included continuing charges for headcount reductions and facility consolidations in an effort to streamline operations, including the closure and consolidation of operations within several facilities in the U.S., Europe and Asia; costs to achieve synergies related to acquisitions, including severance and abandoned facility costs; third-party acquisition transaction and integration costs primarily associated with the acquisitions of FEI and Patheon; sales of inventories revalued at the date of acquisition; charges to conform the accounting policies of Patheon to the company's accounting policies; charges for changes in estimates of acquisition contingent consideration; hurricane response/impairment costs; net charges for the settlement/curtailment of retirement plans; and net credits for litigation matters. In 2017, severance actions associated with facility consolidations and cost reduction measures affected less than 2% of the company’s workforce.

Restructuring and other costs in 2016 included continuing charges for headcount reductions and facility consolidations in an effort to streamline operations, including the closure and consolidation of operations within several facilities in the U.S., Europe and Asia; third-party acquisition transaction and integration costs primarily associated with the acquisitions of FEI and Affymetrix; sales of inventories revalued at the date of acquisition; costs to conform the accounting policies of FEI and Affymetrix to the company's accounting policies; costs to achieve synergies related to acquisitions, including severance and abandoned facility costs; and net charges for environmental and litigation-related matters. These charges were partially offset by gains on sales of assets. In 2016, severance actions associated with facility consolidations and cost reduction measures affected less than 3% of the company’s workforce.

As of February 27, 2019, the company has identified restructuring actions that will result in additional charges of approximately $65 million, primarily in 2019, which will be recorded when specified criteria are met, such as communication of benefit arrangements and abandonment of leased facilities.

2018

During 2018, the company recorded net restructuring and other costs by segment as follows:



(In millions)	Cost of Revenues		Selling, General and Administrative Expenses			Restructuring and Other Costs, Net			Total

Life Sciences Solutions	$	4	$	12		$	(17	)	$	(1	)
Analytical Instruments	3		8			28			39
Specialty Diagnostics	—		3			(1		)	2
Laboratory Products and Services	5		16			31			52
Corporate	—		(10		)	9			(1		)

	$	12	$	29		$	50		$	91

The principal components of net restructuring and other costs by segment are as follows:

Life Sciences Solutions

In 2018, the Life Sciences Solutions segment recorded $1 million of net restructuring and other income. The segment recorded charges to cost of revenues of $4 million for the sales of inventory revalued at the date of acquisition, as well as $12 million of charges to selling, general, and administrative expenses, primarily third-party transaction/integration costs related to recent acquisitions. The segment also recorded $17 million of net restructuring and other income, principally for a $46 million net gain on the resolution of litigation, partially offset by charges for severance other costs associated with facility consolidations in the U.S.

Analytical Instruments

In 2018, the Analytical Instruments segment recorded $39 million of net restructuring and other charges. The segment recorded net charges to cost of revenues of $3 million for the sales of inventory revalued at the date of acquisition; $8 million of net charges to selling, general, and administrative expense, principally third-party transaction costs related to the acquisition of Gatan; and $28 million of restructuring and other costs, primarily for employee severance and other costs associated with facility consolidations in the U.S. and Europe, as well as abandoned facilities costs associated with the remediation and closure of a manufacturing facility in the U.S.

Specialty Diagnostics

In 2018, the Specialty Diagnostics segment recorded $2 million of net restructuring and other charges, including $3 million of net charges to selling, general, and administrative expense, principally third-party transaction costs in connection with the planned sale of the Anatomical Pathology business. The segment also recorded $1 million of net restructuring and other income, including a $6 million gain on the sale of real estate, mostly offset by cash charges for severance and other costs associated with facility consolidations in the U.S. and Europe.

Laboratory Products and Services

In 2018, the Laboratory Products and Services segment recorded $52 million of net restructuring and other charges. The segment recorded charges to cost of revenues of $5 million, principally for the sales of inventory revalued at the date of acquisition, and $16 million of charges to selling, general, and administrative expenses for third-party transaction/integration costs related to the acquisition of Patheon. The segment also recorded $31 million of restructuring and other costs, primarily charges for environmental remediation associated with a Superfund site in the U.S., employee severance, and, to a lesser extent, hurricane response costs.

Corporate

In 2018, the company recorded $1 million of net restructuring and other income, principally income from favorable results of product liability litigation, mostly offset by charges for environmental remediation at an abandoned facility and, to a lesser extent, severance at its corporate operations.

2017

During 2017, the company recorded net restructuring and other costs by segment as follows:



(In millions)	Cost of Revenues		Selling, General and Administrative Expenses			Restructuring and Other Costs, Net			Total

Life Sciences Solutions	$	1	$	29		$	(16	)	$	14
Analytical Instruments	31		(2		)	30			59
Specialty Diagnostics	1		(2		)	39			38
Laboratory Products and Services	90		61			41			192
Corporate	—		(8		)	3			(5		)

	$	123	$	78		$	97		$	298

The principal components of net restructuring and other costs by segment are as follows:

Life Sciences Solutions

In 2017, the Life Sciences Solutions segment recorded $14 million of net restructuring and other charges. The segment recorded $29 million of charges to selling, general and administrative expenses, principally for changes in estimates of acquisition contingent consideration. The segment also recorded $16 million of restructuring and other income, net, including $64 million of net credits principally for pre-acquisition litigation-related matters, and, to a lesser extent, net gains on the settlement of retirement plans. These credits were largely offset by $48 million of cash restructuring costs, including $23 million of severance and related costs primarily to achieve acquisition synergies, and $25 million of abandoned facilities costs primarily for the consolidation of facilities in the U.S.

Analytical Instruments

In 2017, the Analytical Instruments segment recorded $59 million of net restructuring and other charges. The segment recorded charges to cost of revenues of $31 million for the sales of inventory revalued at the date of acquisition, as well as $30 million of restructuring and other costs, primarily for severance and other costs to achieve acquisition synergies, as well as charges for the settlement of retirement plans.

Specialty Diagnostics

In 2017, the Specialty Diagnostics segment recorded $38 million of net restructuring and other charges, principally charges for litigation-related matters, and, to a lesser extent, cash costs for employee severance and other costs associated with headcount reductions in the U.S. and Europe.

Laboratory Products and Services

In 2017, the Laboratory Products and Services segment recorded $192 million of net restructuring and other charges. The segment recorded charges to cost of revenues of $90 million, including $33 million to conform the accounting policies of Patheon to the company's accounting policies and $55 million for sales of inventory revalued at the date of acquisition. The segment also recorded $61 million of charges to selling, general, and administrative expenses, including $55 million for third-party acquisition transaction costs, as well as $6 million to conform the accounting policies of Patheon to the company's accounting policies. The segment also recorded $41 million of restructuring and other costs, primarily for employee severance and compensation due at Patheon on the date of acquisition, and, to a lesser extent, hurricane response/impairment charges.

Corporate

In 2017, the company recorded $5 million of net restructuring and other income, principally $8 million of income from favorable results of product liability litigation, partially offset by charges for the settlement of a retirement plan and severance at its corporate operations.

2016

During 2016, the company recorded net restructuring and other costs by segment as follows:



(In millions)	Cost of Revenues		Selling, General and Administrative Expenses		Restructuring and Other Costs, Net		Total

Life Sciences Solutions	$	31	$	36	$	88	$	155
Analytical Instruments	63		46		68		177
Specialty Diagnostics	—		—		15		15
Laboratory Products and Services	8		1		17		26
Corporate	—		21		1		22

	$	102	$	104	$	189	$	395

Life Sciences Solutions

In 2016, the Life Sciences Solutions segment recorded $155 million of net restructuring and other charges. The segment recorded charges to cost of revenues of $31 million, including $27 million for sales of inventories revalued at the date of acquisition and $4 million to conform the accounting policies of Affymetrix to the company's accounting policies. The segment recorded $36 million of charges to selling, general and administrative expenses, including $34 million of third-party transaction and integration costs primarily related to the acquisition of Affymetrix, $4 million for accelerated depreciation at facilities closing due to real estate consolidation, offset in part by credits of $2 million from changes in estimates of contingent acquisition consideration. In addition, the segment recorded $78 million of cash restructuring costs, including $60 million of severance and related costs primarily to achieve acquisition synergies, and $18 million of abandoned facilities costs principally for the consolidation of facilities in the U.S. The segment also recorded $10 million of other costs, net, primarily for charges associated with litigation-related matters at acquired businesses.

Analytical Instruments

In 2016, the Analytical Instruments segment recorded $177 million of net restructuring and other charges. The segment recorded charges to cost of revenues of $63 million, including $21 million to conform the accounting policies of FEI to the company's accounting policies and $42 million for the sales of inventory revalued at the date of acquisition. The segment recorded $46 million of charges to selling, general, and administrative expense, including $38 million of third-party transaction costs related to the acquisition of FEI, as well as $9 million of charges to conform the accounting policies of FEI to the company's accounting policies. The segment also recorded $68 million of cash restructuring costs primarily for severance obligations payable to former FEI executives and charges associated with abandoned facilities, including remediation and other closure costs of a manufacturing facility in the U.S.

Specialty Diagnostics

In 2016, the Specialty Diagnostics segment recorded $15 million of net restructuring and other charges. These costs were principally comprised of $10 million for charges associated with litigation-related matters and $6 million of cash restructuring costs for severance and other costs associated with headcount reductions and facility consolidations. The segment also recorded $1 million of other income, net, primarily gains on the sale of real estate, offset in part by charges for the settlement of retirement plans.

Laboratory Products and Services

In 2016, the Laboratory Products and Services segment recorded $26 million of net restructuring and other charges. The segment recorded charges to cost of revenues of $8 million, including $6 million for sales of inventories revalued at the date of acquisition, and $2 million for accelerated depreciation at facilities closing due to real estate consolidation. The segment recorded $11 million of cash restructuring costs, primarily for employee severance and other costs associated with headcount reductions and facility consolidations. In addition, the segment recorded $8 million of charges for an increase in environmental remediation cost estimates associated with a Superfund site in the U.S., offset in part by $1 million of gains on the settlement of litigation.

Corporate

In 2016, the company recorded $22 million of restructuring and other costs, principally within selling, general, and administrative expenses, including $17 million of charges for product liability litigation and $4 million of accelerated depreciation on information systems to be abandoned due to integration synergies. The segment also recorded $1 million of restructuring charges for severance and other costs associated with facility consolidation at its corporate operations.

The following table summarizes the cash components of the company’s restructuring plans. The non-cash components and other amounts reported as restructuring and other costs, net, in the accompanying statement of income have been summarized in the notes to the tables. Accrued restructuring costs are included in other accrued expenses in the accompanying balance sheet.



(In millions)	Severance			Abandonment of Excess Facilities			Other (a)			Total

Balance at December 31, 2015	$	15		$	13		$	3		$	31
Costs incurred in 2016 (c)	109			46			12			167
Reserves reversed (b)	(2		)	—			(1		)	(3		)
Payments	(83		)	(27		)	(12		)	(122		)
Currency translation	(1		)	—			—			(1		)

Balance at December 31, 2016	38			32			2			72
Costs incurred in 2017 (d)	62			27			17			106
Reserves reversed (b)	(9		)	—			—			(9		)
Payments	(62		)	(19		)	(12		)	(93		)
Currency translation	1			—			(1		)	—

Balance at December 31, 2017	30			40			6			76
Costs incurred in 2018 (e)	51			33			18			102
Reserves reversed (b)	(7		)	(4		)	(3		)	(14		)
Payments	(39		)	(27		)	(17		)	(83		)
Currency translation	(1		)	—			—			(1		)

Balance at December 31, 2018	$	34		$	42		$	4		$	80


(a)	Other includes relocation and moving expenses associated with facility consolidations, as well as employee retention costs which are accrued ratably over the period through which employees must work to qualify for a payment.


(b)	Represents reductions in cost of plans.


(c)	Excludes $24 million of provision for losses on litigation-related matters; $8 million of provision for environmental remediation; $5 million of net gains on the sale of real estate; and an aggregate of $3 million of non-cash income, net.


(d)	Excludes $27 million of net credits associated with litigation-related matters, and $27 million of other restructuring charges, net, primarily for hurricane response/impairment, charges associated with the settlement/curtailment of retirement plans, and non-cash compensation due at an acquired business.


(e)	Excludes $38 million of income, net, primarily associated with litigation-related matters, gains on sales of real estate, charges for environmental remediation, and hurricane response costs.

The company expects to pay accrued restructuring costs as follows: severance, employee-retention obligations and other costs, primarily through 2019; and abandoned-facility payments, over lease terms expiring through 2027.