NOTE 4. RESTRUCTURING

2016 U.S. Generic Pharmaceuticals Restructuring

As part of the ongoing U.S. Generic Pharmaceuticals integration efforts initiated in connection with the acquisition of Par Pharmaceutical Holdings Inc. in September 2015, the Company announced a restructuring initiative in May 2016 to optimize its product portfolio and rationalize its manufacturing sites to expand product margins (the 2016 U.S. Generic Pharmaceuticals restructuring initiative). These measures included certain cost savings initiatives, including a reduction in headcount and the disposal of our Charlotte, North Carolina manufacturing facility (the Charlotte facility). On October 31, 2016, we entered into a definitive agreement to sell the Charlotte facility for proceeds of $14 million. The transaction closed in January 2017. The assets of the Charlotte facility were classified as held for sale in the accompanying Condensed Consolidated Balance Sheet as of December 31, 2016.

As a result of the 2016 U.S. Generic Pharmaceuticals restructuring initiative, the Company incurred charges of $1.6 million and $127.2 million during the three months ended March 31, 2017 and 2016, respectively. The charges incurred during the three months ended March 31, 2017 related primarily to employee separation and other benefit-related costs. The charges incurred during the three months ended March 31, 2016 consisted of certain intangible asset impairment charges of $100.3 million and charges to increase excess inventory reserves of $26.9 million. These charges are included in the U.S. Generic Pharmaceuticals segment and are included in Asset impairment charges, Cost of revenues and Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations. The Company expects to incur additional restructuring-related expenses of approximately $0.3 million related to employee separation and other benefit-related costs. The Company anticipates these actions will be completed by September 2017, with substantially all cash payments made by the end of 2017. Under this restructuring initiative, separation costs are expensed ratably over the requisite service period, as applicable.

The liability related to the 2016 U.S. Generic Pharmaceuticals restructuring initiative is included in Accounts payable and accrued expenses in the Condensed Consolidated Balance Sheets and is entirely related to employee separation and other benefit-related costs. Changes to this liability during the three months ended March 31, 2017 were as follows (in thousands):



	Total
Liability balance as of January 1, 2017	$	9,939
Expenses	1,598
Cash distributions	(7,202		)
Liability balance as of March 31, 2017	$	4,335

2016 U.S. Branded Pharmaceutical Restructuring

In December 2016, the Company announced that it was terminating its worldwide license and development agreement with BioDelivery Sciences International, Inc. (BDSI) for BELBUCA™ and returning the product to BDSI. This termination was completed on January 6, 2017. As a result of this announcement and a comprehensive assessment of its product portfolio, the Company restructured its U.S. Branded Pharmaceuticals segment sales organization during the fourth quarter of 2016 (the 2016 U.S. Branded restructuring initiative), which included the elimination of an approximate 375-member U.S. Branded Pharmaceuticals pain field sales force and the termination of certain contracts.

The Company did not incur any pre-tax charges during the three months ended March 31, 2017 or 2016 as a result of the 2016 U.S. Branded restructuring initiative. Actions related to this initiative were completed by December 31, 2016 and substantially all of the cash payments are anticipated to be made by the end of 2017. The Company does not expect to incur any additional material pre-tax restructuring expenses related to this initiative.

The liability related to the 2016 U.S. Branded Pharmaceutical restructuring initiative is included in Accounts payable and accrued expenses in the Condensed Consolidated Balance Sheets. Changes to this liability during the three months ended March 31, 2017 were as follows (in thousands):



	Employee Separation and Other Benefit-Related Costs			Contract Termination Charges			Total
Liability balance as of December 31, 2016	$	16,544		$	5,224		$	21,768
Cash distributions	(10,326		)	(4,470		)	(14,796		)
Liability balance as of March 31, 2017	$	6,218		$	754		$	6,972

January 2017 Restructuring

On January 26, 2017, the Company announced a restructuring initiative implemented as part of its ongoing organizational review (the January 2017 restructuring initiative). This restructuring is intended to further integrate, streamline and optimize the Company’s operations by aligning certain corporate and R&D functions with its recently restructured U.S. Generics Pharmaceutical and U.S. Branded Pharmaceutical business units in order to create efficiencies and cost savings. As part of this restructuring, the Company undertook certain cost reduction initiatives, including a reduction of approximately 90 positions of its workforce, primarily related to corporate and U.S. Branded Pharmaceutical R&D functions in Malvern, PA and Chestnut Ridge, NY, a streamlining of general and administrative expenses, an optimization of commercial spend and a refocusing of research and development efforts.

As a result of the January 2017 restructuring initiative, the Company incurred total pre-tax charges of approximately $15.5 million during the three months ended March 31, 2017 related to employee separation and other benefit-related costs. Of the total charges incurred, $6.9 million is included in the U.S. Branded Pharmaceuticals segment, $5.2 million is included in Corporate unallocated costs and $3.4 million is included in the U.S. Generic Pharmaceuticals segment. These charges are included in Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations. The Company does not expect to incur additional material pre-tax restructuring-related expenses. Substantially all cash payments are anticipated to be made by the end of 2017 and substantially all of the actions associated with this restructuring were completed by the end of April 2017.

The liability related to the January 2017 restructuring initiative is included in Accounts payable and accrued expenses in the Condensed Consolidated Balance Sheets and is entirely related to employee separation and other benefit-related costs. Changes to this liability during the three months ended March 31, 2017 were as follows (in thousands):



	Total
Liability balance as of January 1, 2017	$	—
Expenses	15,456
Cash distributions	(585		)
Liability balance as of March 31, 2017	$	14,871