RESTRUCTURING

9 Months Ended

Sep. 30, 2021

Restructuring and Related Activities [Abstract]

NOTE 4. RESTRUCTURING

Set forth below are disclosures relating to restructuring initiatives for which amounts recognized or cash expenditures during the three- or nine-month periods ended September 30, 2021 or 2020 were material or that had material restructuring liabilities at either September 30, 2021 or December 31, 2020.

2020 Restructuring Initiative

On November 5, 2020, the Company announced the initiation of several strategic actions to further optimize the Company’s operations and increase overall efficiency (the 2020 Restructuring Initiative). These actions are expected to generate significant cost savings that will be reinvested, among other things, to support the Company’s key strategic priority to expand and enhance its product portfolio. These actions include the following:

•Optimizing the Company’s retail generics business cost structure by exiting manufacturing sites in Irvine, California and Chestnut Ridge, New York, as well as active pharmaceutical ingredient manufacturing and bioequivalence study sites in India. The sites will be exited in a phased approach that is expected to be completed between the fourth quarter of 2021 and the second half of 2022, beginning with the sale transactions that are further discussed in Note 3. Discontinued Operations and Held for Sale. Certain products currently manufactured at the Irvine and Chestnut Ridge sites are expected to be transferred to other internal and external sites within the Company’s manufacturing network.

•Improving operating flexibility and reducing general and administrative costs by transferring certain transaction processing activities to third-party global business process service providers.

•Increasing organizational effectiveness by further integrating the Company’s commercial, operations and research and development functions, respectively, to support the Company’s key strategic priorities.

The amounts in this footnote related to the 2020 Restructuring Initiative include the sale transactions that are further discussed in Note 3. Discontinued Operations and Held for Sale.

As a result of the 2020 Restructuring Initiative, the Company’s global workforce is expected to be reduced by approximately 500 net full-time positions. The Company expects to realize annualized pre-tax cash savings (without giving effect to the costs described below) of approximately $85 million to $95 million by the first half of 2023, primarily related to reductions in Cost of revenues of approximately $65 million to $70 million and other expenses, including Selling, general and administrative and Research and development expenses, of approximately $20 million to $25 million.

As a result of the 2020 Restructuring Initiative, the Company expects to incur total pre-tax restructuring-related expenses of approximately $170 million to $190 million, of which approximately $145 million to $160 million relates to the Generic Pharmaceuticals segment, with the remaining amounts relating to our other segments and certain corporate unallocated costs. These estimates, which have been updated to reflect the effects the sale transactions that are further discussed in Note 3. Discontinued Operations and Held for Sale, consist of accelerated depreciation charges of approximately $45 million to $55 million, asset impairment charges of approximately $50 million, employee separation, continuity and other benefit-related costs of approximately $60 million to $65 million and certain other restructuring costs of approximately $15 million to $20 million. Cash outlays associated with the 2020 Restructuring Initiative are expected to be approximately $80 million and consist primarily of employee separation, continuity and other benefit-related costs and certain other restructuring costs. The Company anticipates these actions will be substantially completed by the end of 2022, with substantially all cash payments made by then.

The following pre-tax net amounts related to the 2020 Restructuring Initiative are included in the Company’s Condensed Consolidated Statements of Operations during the three and nine months ended September 30, 2021 and 2020 (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net restructuring charges (charge reversals) related to:
Accelerated depreciation	$	6,350	$	6,291	$	22,329	$	14,676
Asset impairments	42,155		7,391		42,155		7,391
Excess inventory reserves	719		—		6,513		—
Employee separation, continuity and other benefit-related costs	(14,481)		53,647		(6,150)		53,647
Certain other restructuring costs	1,209		—		3,003		—
Total	$	35,952	$	67,329	$	67,850	$	75,714

These pre-tax net amounts were primarily attributable to our Generic Pharmaceuticals segment, which incurred $31.0 million and $53.5 million of pre-tax net charges during the three and nine months ended September 30, 2021, respectively, and $57.8 million and $66.2 million of pre-tax net charges during the three and nine months ended September 30, 2020, respectively. The remaining amounts related to our other segments and certain corporate unallocated costs.

As of September 30, 2021, cumulative amounts incurred to date include charges related to accelerated depreciation of approximately $44.8 million, asset impairments related to identifiable intangible assets, certain operating lease assets and the disposal group that is further discussed in Note 3. Discontinued Operations and Held for Sale of approximately $49.5 million, excess inventory reserves of approximately $9.6 million, employee separation, continuity and other benefit-related costs of approximately $53.9 million and certain other restructuring costs of approximately $3.7 million. Of these amounts, approximately $132.4 million were attributable to the Generic Pharmaceuticals segment, with the remaining amounts relating to our other segments and certain corporate unallocated costs.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net restructuring charges (charge reversals) included in:
Cost of revenues	$	(11,050)	$	36,172	$	9,294	$	42,198
Selling, general and administrative	4,946		20,185		15,174		22,130
Research and development	(99)		3,581		1,227		3,995
Asset impairment charges	42,155		7,391		42,155		7,391

Total	$	35,952	$	67,329	$	67,850	$	75,714

Changes to the liability for the 2020 Restructuring Initiative during the nine months ended September 30, 2021 were as follows (in thousands):


	Employee Separation, Continuity and Other Benefit-Related Costs		Certain Other Restructuring Costs		Total
Liability balance as of December 31, 2020	$	58,338	$	664	$	59,002
Net (charge reversals) charges	(6,150)		2,731		(3,419)
Cash payments	(28,957)		(3,168)		(32,125)
Liability balance as of September 30, 2021	$	23,231	$	227	$	23,458

Of the liability at September 30, 2021, $23.1 million is classified as current and is included in Accounts payable and accrued expenses in the Condensed Consolidated Balance Sheets, with the remaining amount classified as noncurrent and included in Other liabilities.