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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________
FORM 10-Q
___________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to _______
Commission File Number 001-01136
___________________________
BRISTOL-MYERS SQUIBB COMPANY
(Exact name of registrant as specified in its charter)
___________________________
Delaware
 
22-0790350
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S Employer
Identification No.)

430 E. 29th Street, 14FL, New York, NY 10016
(Address of principal executive offices) (zip code)
(212546-4000
(Registrant’s telephone number, including area code)

___________________________
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.10 Par Value
BMY
New York Stock Exchange
1.000% Notes due 2025
BMY25
New York Stock Exchange
1.750% Notes due 2035
BMY35
New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer  
 
Accelerated filer  
 
Non-accelerated filer  
 
Smaller reporting company  
 
Emerging growth company  
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes    No  
APPLICABLE ONLY TO CORPORATE ISSUERS:
At September 30, 2019, there were 1,629,284,798 shares outstanding of the Registrant’s $0.10 par value common stock.
 





BRISTOL-MYERS SQUIBB COMPANY
INDEX TO FORM 10-Q
September 30, 2019
 
 
PART I—FINANCIAL INFORMATION
 
 
 
Item 1.
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
PART II—OTHER INFORMATION
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 6.
 
 
 
*
Indicates brand names of products which are trademarks not owned by BMS. Specific trademark ownership information is included in the Exhibit Index at the end of this Quarterly Report on Form 10-Q.





PART I—FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS
BRISTOL-MYERS SQUIBB COMPANY
CONSOLIDATED STATEMENTS OF EARNINGS
Dollars in Millions, Except Per Share Data
(UNAUDITED)

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
EARNINGS
2019
 
2018
 
2019
 
2018
Net product sales
$
5,768

 
$
5,433

 
$
17,512

 
$
15,866

Alliance and other revenues
239

 
258

 
688

 
722

Total Revenues
6,007

 
5,691

 
18,200

 
16,588

 
 
 
 
 


 


Cost of products sold
1,810

 
1,648

 
5,646

 
4,857

Marketing, selling and administrative
1,055

 
1,104

 
3,137

 
3,215

Research and development
1,382

 
1,280

 
4,061

 
4,965

Other income (net)
411

 
(508
)
 
252

 
(912
)
Total Expenses
4,658

 
3,524

 
13,096

 
12,125

 
 
 
 
 
 
 
 
Earnings Before Income Taxes
1,349

 
2,167

 
5,104

 
4,463

Provision for Income Taxes
(17
)
 
255

 
584

 
674

Net Earnings
1,366

 
1,912

 
4,520

 
3,789

Noncontrolling Interest
13

 
11

 
25

 
29

Net Earnings Attributable to BMS
$
1,353

 
$
1,901

 
$
4,495

 
$
3,760

 
 
 
 
 
 
 
 
Earnings per Common Share
 
 
 
 
 
 
 
Basic
$
0.83

 
$
1.16

 
$
2.75

 
$
2.30

Diluted
0.83

 
1.16

 
2.75

 
2.30



CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Dollars in Millions
(UNAUDITED)

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
COMPREHENSIVE INCOME
2019
 
2018
 
2019
 
2018
Net Earnings
$
1,366

 
$
1,912

 
$
4,520

 
$
3,789

Other Comprehensive Income/(Loss), net of taxes and reclassifications to earnings:
 
 
 
 
 
 
 
Derivatives qualifying as cash flow hedges
38

 
5

 
24

 
71

Pension and postretirement benefits
1,116

 
22

 
1,204

 
194

Available-for-sale securities
4

 
2

 
43

 
(31
)
Foreign currency translation

 
(21
)
 
28

 
(237
)
Other Comprehensive Income/(Loss)
1,158

 
8

 
1,299

 
(3
)
 
 
 
 
 
 
 
 
Comprehensive Income
2,524

 
1,920

 
5,819

 
3,786

Comprehensive Income Attributable to Noncontrolling Interest
13

 
11

 
25

 
29

Comprehensive Income Attributable to BMS
$
2,511

 
$
1,909

 
$
5,794

 
$
3,757

The accompanying notes are an integral part of these consolidated financial statements.


3




BRISTOL-MYERS SQUIBB COMPANY
CONSOLIDATED BALANCE SHEETS
Dollars in Millions
(UNAUDITED)
 
ASSETS
September 30,
2019
 
December 31,
2018
Current Assets:
 
 
 
Cash and cash equivalents
$
30,489

 
$
6,911

Marketable securities
2,053

 
1,973

Receivables
5,510

 
5,965

Inventories
1,192

 
1,195

Prepaid expenses and other
947

 
1,116

Total Current Assets
40,191

 
17,160

Property, plant and equipment
4,830

 
5,027

Goodwill
6,513

 
6,538

Other intangible assets
1,002

 
1,091

Deferred income taxes
1,624

 
1,371

Marketable securities
925


1,775

Other assets
2,348

 
2,024

Total Assets
$
57,433

 
$
34,986

 
 
 
 
LIABILITIES
 
 
 
Current Liabilities:
 
 
 
Short-term debt obligations
$
569

 
$
1,703

Accounts payable
1,888

 
1,892

Accrued and other current liabilities
8,032

 
7,059

Total Current Liabilities
10,489

 
10,654

Income taxes payable
2,919

 
3,043

Other non-current liabilities
1,881

 
1,516

Long-term debt
24,390

 
5,646

Total Liabilities
39,679

 
20,859

 
 
 
 
Commitments and contingencies
 
 
 
 
 
 
 
EQUITY
 
 
 
Bristol-Myers Squibb Company Shareholders’ Equity:
 
 
 
Preferred stock

 

Common stock
221

 
221

Capital in excess of par value of stock
2,206

 
2,081

Accumulated other comprehensive loss
(1,463
)
 
(2,762
)
Retained earnings
36,555

 
34,065

Less cost of treasury stock
(19,871
)
 
(19,574
)
Total Bristol-Myers Squibb Company Shareholders’ Equity
17,648

 
14,031

Noncontrolling interest
106

 
96

Total Equity
17,754

 
14,127

Total Liabilities and Equity
$
57,433

 
$
34,986

The accompanying notes are an integral part of these consolidated financial statements.

4




BRISTOL-MYERS SQUIBB COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Dollars in Millions
(UNAUDITED)

 
Nine Months Ended September 30,
 
2019
 
2018
Cash Flows From Operating Activities:
 
 
 
Net earnings
$
4,520

 
$
3,789

Adjustments to reconcile net earnings to net cash provided by operating activities:
 
 
 
Depreciation and amortization, net
510

 
465

Deferred income taxes
(587
)
 
(161
)
Stock-based compensation
157

 
168

Impairment charges
183

 
110

Pension settlements and amortization
1,683

 
145

Divestiture gains and royalties
(1,676
)
 
(822
)
Asset acquisition charges
25

 
85

Equity investment losses
15

 
244

Other adjustments
(21
)
 
(43
)
Changes in operating assets and liabilities:
 
 
 
Receivables
434

 
(222
)
Inventories
(7
)
 
(152
)
Accounts payable
48

 
(186
)
Deferred income
13

 
84

Income taxes payable
47

 
199

Other
685

 
(192
)
Net Cash Provided by Operating Activities
6,029

 
3,511

Cash Flows From Investing Activities:
 
 
 
Sale and maturities of marketable securities
2,464

 
1,453

Purchase of marketable securities
(1,642
)
 
(1,062
)
Capital expenditures
(585
)
 
(661
)
Divestiture and other proceeds
2,087

 
947

Acquisition and other payments
(58
)
 
(1,215
)
Net Cash Provided by/(Used in) Investing Activities
2,266

 
(538
)
Cash Flows From Financing Activities:
 
 
 
Short-term debt obligations, net
115

 
(617
)
Issuance of long-term debt
18,790

 

Repayment of long-term debt
(1,256
)
 
(5
)
Repurchase of common stock
(300
)
 
(320
)
Dividends
(2,011
)
 
(1,960
)
Other
(40
)
 
(55
)
Net Cash Provided by/(Used in) Financing Activities
15,298

 
(2,957
)
Effect of Exchange Rates on Cash and Cash Equivalents
(15
)
 
(29
)
Net Increase/(Decrease) in Cash and Cash Equivalents
23,578

 
(13
)
Cash and Cash Equivalents at Beginning of Period
6,911

 
5,421

Cash and Cash Equivalents at End of Period
$
30,489

 
$
5,408

The accompanying notes are an integral part of these consolidated financial statements.

5




Note 1. BASIS OF PRESENTATION AND RECENTLY ISSUED ACCOUNTING STANDARDS

Basis of Consolidation

Bristol-Myers Squibb Company prepared these unaudited consolidated financial statements following the requirements of the SEC and U.S. GAAP for interim reporting. Under those rules, certain footnotes and other financial information that are normally required for annual financial statements can be condensed or omitted. The Company is responsible for the consolidated financial statements included in this Quarterly Report on Form 10-Q, which include all adjustments necessary for a fair presentation of the financial position at September 30, 2019 and December 31, 2018, the results of operations for the three and nine months ended September 30, 2019 and 2018, and cash flows for the nine months ended September 30, 2019 and 2018. All intercompany balances and transactions have been eliminated. These financial statements and the related notes should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2018 included in the 2018 Form 10-K. Refer to the Summary of Abbreviated Terms at the end of this Quarterly Report on Form 10-Q for terms used throughout the document.

Business Segment Information

The Company operates in a single segment engaged in the discovery, development, licensing, manufacturing, marketing, distribution and sale of innovative medicines that help patients prevail over serious diseases. A global research and development organization and supply chain organization are responsible for the discovery, development, manufacturing and supply of products. Regional commercial organizations market, distribute and sell the products. The business is also supported by global corporate staff functions. The determination of a single segment is consistent with the financial information regularly reviewed by the chief executive officer for purposes of evaluating performance, allocating resources, setting incentive compensation targets, and planning and forecasting future periods. For further information on product and regional revenue, see “—Note 2. Revenue.”

Use of Estimates and Judgments

Revenues, expenses, assets and liabilities can vary during each quarter of the year. Accordingly, the results and trends in these unaudited consolidated financial statements may not be indicative of full year operating results. The preparation of financial statements requires the use of management estimates, judgments and assumptions. The most significant assumptions are estimates used in determining sales rebate and return accruals; legal contingencies; income taxes; and pension and postretirement benefits. Actual results may differ from estimates.

Reclassification

Certain prior period amounts were reclassified to conform to the current period presentation. Accrued liabilities, Deferred income and Income taxes payable previously presented separately in Total Current Liabilities in the consolidated balance sheets are now presented as Accrued and other current liabilities. Deferred income and Pension and other liabilities previously presented separately in Total Liabilities in the consolidated balance sheets are now presented as Other non-current liabilities.

Recently Adopted Accounting Standards

Leases

Amended guidance for lease accounting was adopted on January 1, 2019 using the modified retrospective method with the cumulative effect of the change recognized in retained earnings in the period of adoption. The new guidance requires an entity to recognize a right-of-use asset and a lease liability initially measured at the present value of future lease payments. The cumulative effect of the accounting change was not material. The Company elected the package of practical expedients upon adoption and will apply the practical expedient not to separate lease and non-lease components for new and modified leases commencing after adoption. In addition, the Company applied the short-term lease recognition exemption for leases with terms at inception not greater than 12 months. The amended guidance does not materially impact the Company’s results of operations other than recognition of the operating lease right-of-use asset and lease liability.

Goodwill Impairment Testing

Amended guidance that simplifies the recognition and measurement of a goodwill impairment loss by eliminating Step 2 of the quantitative goodwill impairment test was adopted prospectively in the first quarter of 2019. Under the amended guidance, a goodwill impairment loss is recognized for the amount by which the reporting unit's carrying amount, including goodwill, exceeds its fair value up to the amount of its allocated goodwill. The adoption of the amended guidance did not have an impact on the Company’s results of operations.


6




Recently Issued Accounting Standards Not Yet Adopted

Financial Instruments - Measurement of Credit Losses

In June 2016, the FASB issued amended guidance for the measurement of credit losses on financial instruments. Entities will be required to use a forward-looking estimated loss model. Available-for-sale debt security credit losses will be recognized as allowances rather than a reduction in amortized cost. The guidance is effective January 1, 2020 with early adoption permitted in 2019 on a modified retrospective approach. The amended guidance will not have a material impact to the Company’s results of operations.

Note 2. REVENUE

The following table summarizes the disaggregation of revenue by nature:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
Dollars in Millions
2019
 
2018
 
2019
 
2018
Net product sales
$
5,768

 
$
5,433

 
$
17,512

 
$
15,866

Alliance revenues
143

 
177

 
418

 
483

Other revenues
96

 
81

 
270

 
239

Total Revenues
$
6,007

 
$
5,691

 
$
18,200

 
$
16,588



The following table summarizes GTN adjustments:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
Dollars in Millions
2019
 
2018
 
2019
 
2018
Gross product sales
$
8,884

 
$
7,681

 
$
25,697

 
$
21,891

GTN adjustments(a)
 
 
 
 
 
 
 
Charge-backs and cash discounts
(927
)
 
(711
)
 
(2,591
)
 
(1,957
)
Medicaid and Medicare rebates
(1,362
)
 
(847
)
 
(3,252
)
 
(2,169
)
Other rebates, returns, discounts and adjustments
(827
)
 
(690
)
 
(2,342
)
 
(1,899
)
Total GTN adjustments
(3,116
)
 
(2,248
)
 
(8,185
)
 
(6,025
)
Net product sales
$
5,768

 
$
5,433

 
$
17,512

 
$
15,866


(a)
Includes adjustments to provisions for product sales made in prior periods resulting from changes in estimates of $12 million and $139 million for the three and nine months ended September 30, 2019 and $(7) million and $103 million for the three and nine months ended September 30, 2018, respectively.

The following table summarizes the disaggregation of revenue by product and region:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
Dollars in Millions
2019
 
2018
 
2019
 
2018
Prioritized Brands
 
 
 
 
 
 
 
Opdivo
$
1,817

 
$
1,793

 
$
5,441

 
$
4,931

Eliquis
1,928

 
1,577

 
5,895

 
4,733

Orencia
767

 
675

 
2,185

 
1,979

Sprycel
558

 
491

 
1,561

 
1,464

Yervoy
353

 
382

 
1,104

 
946

Empliciti
89

 
59

 
263

 
178

 
 
 
 
 
 
 
 
Established Brands

 

 
 
 
 
Baraclude
145

 
175

 
433

 
579

Other Brands
350

 
539

 
1,318

 
1,778

Total Revenues
$
6,007

 
$
5,691

 
$
18,200

 
$
16,588

 
 
 
 
 
 
 
 
United States
$
3,472

 
$
3,235

 
$
10,588

 
$
9,243

Europe
1,445

 
1,365

 
4,416

 
4,179

Rest of the World
976

 
932

 
2,838

 
2,728

Other(a)
114

 
159

 
358

 
438

Total Revenues
$
6,007

 
$
5,691

 
$
18,200

 
$
16,588


(a)
Other revenues include royalties and alliance-related revenues for products not sold by the Company's regional commercial organizations.

7




Revenue recognized from performance obligations satisfied in prior periods was $78 million and $341 million for the three and nine months ended September 30, 2019 and $97 million and $398 million for the three and nine months ended September 30, 2018, respectively, consisting primarily of royalties for out-licensing arrangements and revised estimates for gross-to-net adjustments related to prior period sales. Contract assets were not material at September 30, 2019 and December 31, 2018.

Note 3. ALLIANCES

The Company enters into collaboration arrangements with third parties for the research, development, manufacturing and/or commercialization of certain products. Although each of these arrangements is unique in nature, both parties are active participants in the operating activities of the collaboration and exposed to significant risks and rewards depending on the commercial success of the activities. The Company may either in-license intellectual property owned by the other party or out-license its intellectual property to the other party. These arrangements can cover a single investigational compound or commercial product or multiple compounds and/or products in various life cycle stages. The rights and obligations of the parties can be global or limited to geographic regions. The Company refers to these collaborations as alliances and its partners as alliance partners.

Selected financial information pertaining to the Company's alliances was as follows, including net product sales when the Company is the principal in the third-party customer sale for products subject to the alliance. Expenses summarized below do not include all amounts attributed to the activities for the products in the alliance, but only the payments between the alliance partners or the related amortization if the payments were deferred or capitalized.
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
Dollars in Millions
2019
 
2018
 
2019
 
2018
Revenues from alliances:
 
 
 
 
 
 
 
Net product sales
$
2,464

 
$
2,037

 
$
7,412

 
$
6,135

Alliance revenues
143

 
177

 
418

 
483

Total Revenues
$
2,607

 
$
2,214

 
$
7,830

 
$
6,618

 
 
 
 
 
 
 
 
Payments to/(from) alliance partners:
 
 
 
 
 
 
 
Cost of products sold
$
1,017

 
$
838

 
$
3,116

 
$
2,528

Marketing, selling and administrative
(33
)
 
(26
)
 
(93
)
 
(76
)
Research and development
11

 
(2
)
 
32

 
1,060

Other income (net)
(15
)
 
(14
)
 
(45
)
 
(44
)
Selected Alliance Balance Sheet information:
 
 
 
Dollars in Millions
September 30,
2019
 
December 31,
2018
Receivables - from alliance partners
$
342

 
$
395

Accounts payable - to alliance partners
994

 
904

Deferred income from alliances(a)
452

 
491

(a)
Includes unamortized upfront and milestone payments.

The nature and purpose, significant rights and obligations of the parties and specific accounting policy elections for each of the Company's significant alliances are discussed in the Company's 2018 Form 10-K. There were no significant developments and updates related to alliances during 2019.


8




Note 4. DIVESTITURES AND OTHER ARRANGEMENTS

Divestitures

The following table summarizes proceeds, gains or losses and royalty income resulting from divestitures. Revenue and pretax earnings related to all divestitures and assets held-for-sale were not material in all periods presented (excluding divestiture gains or losses).
 
Three Months Ended September 30,
 
Net Proceeds(a)
 
Divestiture Losses/(Gains)
 
Royalty Income
Dollars in Millions
2019
 
2018
 
2019
 
2018
 
2019
 
2018
UPSA Business
$
1,510

 
$

 
$
(1,176
)
 
$

 
$

 
$

Diabetes Business
163

 
165

 

 

 
(171
)
 
(170
)
Erbitux* Business
3

 
59

 

 

 

 
(48
)
Manufacturing Operations

 

 
1

 

 

 

Mature Brands and Other
7

 
140

 
(4
)
 
(108
)
 
(6
)
 
1

Total
$
1,683

 
$
364

 
$
(1,179
)
 
$
(108
)
 
$
(177
)
 
$
(217
)
 
Nine Months Ended September 30,
 
Net Proceeds(a)
 
Divestiture Losses/(Gains)
 
Royalty Income
Dollars in Millions
2019
 
2018
 
2019
 
2018
 
2019
 
2018
UPSA Business
$
1,510

 
$

 
$
(1,160
)
 
$

 
$

 
$

Diabetes Business
491

 
408

 

 

 
(497
)
 
(497
)
Erbitux* Business
11

 
168

 

 

 

 
(145
)
Manufacturing Operations
3

 
159

 
1

 

 

 

Mature Brands and Other
9

 
212

 
(12
)
 
(178
)
 
(8
)
 
(2
)
Total
$
2,024

 
$
947

 
$
(1,171
)
 
$
(178
)
 
$
(505
)
 
$
(644
)
(a)
Includes royalties received subsequent to the related sale of the asset or business.

UPSA Business

In the third quarter of 2019, the Company sold its UPSA consumer health business, including the shares of UPSA SAS and BMS's assets and liabilities relating to the UPSA product portfolio. The transaction was accounted for as the sale of a business. The UPSA business was treated as a single disposal group held-for-sale as of December 31, 2018.

Assets Held-For-Sale

Manufacturing Operations

In the second quarter of 2019, the Company agreed to sell its manufacturing and packaging facility in Anagni, Italy to Catalent for approximately $50 million. The transaction is expected to close by the end of 2019 subject to regulatory approvals and the satisfaction of certain other customary closing conditions and will be accounted for as a sale of a business. Catalent will provide certain manufacturing and packaging services for the Company for a period of time subsequent to closing. The business was accounted for as held-for-sale and its assets were reduced to the estimated relative fair value resulting in a $113 million impairment charge for the nine months ended September 30, 2019 that was included in Cost of products sold. Assets were reclassified to assets held-for-sale as of September 30, 2019 and included within Prepaid expenses and other. Liabilities were reclassified to liabilities related to assets held-for-sale and included within Accrued and other current liabilities.


9




The following table summarizes the net assets held-for-sale as of September 30, 2019 and December 31, 2018.
Dollars in Millions
September 30,
2019
 
December 31,
2018
Receivables
$

 
$
79

Inventories
7

 
81

Property, plant and equipment
36

 
187

Goodwill
4

 
127

Other
12

 
5

Assets held-for-sale
$
59

 
$
479

 
 
 
 
Accounts payable
$

 
$
35

Accrued and other current liabilities
8

 
78

Deferred income taxes

 
25

Other liabilities
3

 
14

Liabilities related to assets held-for-sale
$
11

 
$
152

 
 
 
 
Net assets held-for-sale
$
48

 
$
327



Note 5. OTHER INCOME (NET)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
Dollars in Millions
2019
 
2018
 
2019
 
2018
Interest expense
$
209


$
44

 
$
377


$
135

Investment income
(173
)

(44
)
 
(348
)

(118
)
Equity investment losses/(gains)
261


(97
)
 
15


244

Provision for restructuring
10


45

 
32


102

Acquisition expenses
7



 
475



Integration expenses
96

 

 
224

 

Litigation and other settlements
(1
)

11

 


10

Equity in net income of affiliates


(22
)
 


(73
)
Divestiture gains
(1,179
)

(108
)
 
(1,171
)

(178
)
Royalties and licensing income
(356
)

(338
)
 
(967
)

(1,058
)
Transition and other service fees
(7
)


 
(11
)

(5
)
Pension and postretirement
1,537


(10
)
 
1,607


(40
)
Intangible asset impairment



 
15


64

Other
7


11

 
4


5

Other income (net)
$
411


$
(508
)
 
$
252


$
(912
)


Note 6. RESTRUCTURING

In October 2016, the Company announced a restructuring plan to evolve and streamline its operating model. The majority of the charges are expected to be incurred through 2020, range between $1.5 billion to $2.0 billion and consist of employee termination benefit costs, contract termination costs, plant and equipment accelerated depreciation, impairment charges and other shutdown costs associated with early manufacturing and R&D site exits. Cash outlays in connection with these actions are expected to be approximately 40% to 50% of the total charges. Charges of approximately $1.3 billion have been recognized for these actions since the announcement. Restructuring charges are recognized upon meeting certain criteria, including finalization of committed plans, reliable estimates and discussions with local works councils in certain markets.

Employee workforce reductions were approximately 100 and 600 for the nine months ended September 30, 2019 and 2018, respectively.


10




The following tables summarize the charges and activity related to the restructuring actions:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
Dollars in Millions
2019
 
2018
 
2019
 
2018
Employee termination costs
$
4

 
$
37

 
$
11

 
$
72

Other termination costs
6

 
8

 
21

 
30

Provision for restructuring
10

 
45

 
32

 
102

Accelerated depreciation
33

 
30

 
96

 
82

Impairment charges
9

 

 
119

 
10

Other shutdown costs

 
1

 

 
6

Total charges
$
52

 
$
76

 
$
247

 
$
200

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
Dollars in Millions
2019
 
2018
 
2019
 
2018
Cost of products sold
$
22

 
$
12

 
$
156

 
$
39

Marketing, selling and administrative

 
1

 
1

 
2

Research and development
20

 
18

 
58

 
57

Other income (net)
10

 
45

 
32

 
102

Total charges
$
52

 
$
76

 
$
247

 
$
200


 
Nine Months Ended September 30,
Dollars in Millions
2019
 
2018
Liability at December 31
$
99

 
$
186

Cease-use lease liability reclassification
(3
)
 

Liability at January 1
96

 
186

 
 
 
 
Charges
36

 
108

Change in estimates
(4
)
 
(6
)
Provision for restructuring
32

 
102

Foreign currency translation and other
(1
)
 
2

Payments
(98
)
 
(171
)
Liability at September 30
$
29

 
$
119



Note 7.