Asset Impairment, Restructuring and Other Special Charges

9 Months Ended

Sep. 30, 2019

Restructuring and Related Activities [Abstract]

Asset Impairment, Restructuring and Other Special Charges

Note 7. Asset Impairment, Restructuring and Other Special Charges

Our total charges related to asset impairment, restructuring and other special charges, including integration of acquired businesses, in the unaudited condensed consolidated and combined statements of operations consisted of the following:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Cash expense (income):
Severance and other costs	$	10.4	$	(0.2)	$	9.6	$	(2.8)
Integration and acquisition costs	46.1		4.9		99.6		10.5
Facility exit costs	—		1.5		—		11.2
Total cash expense	56.5		6.2		109.2		18.9
Non-cash expense:
Asset impairment	10.2		6.2		14.2		63.9
Asset write-down	10.5		—		10.5		—
Total non-cash expense	20.7		6.2		24.7		63.9
Total expense	$	77.2	$	12.4	$	133.9	$	82.8

Restructuring

We historically participated in Lilly's cost-reduction initiatives, which resulted in restructuring charges in the period prior to our IPO. The restructuring costs include severance and other costs incurred as a result of actions taken to reduce our cost structure.

During September 2019, we initiated a restructuring program to reduce costs and support margin expansion. As a part of the restructuring program, the Company will eliminate certain positions across multiple locations and functions, including exiting research and development operations in Prince Edward Island, Canada, ceasing certain manufacturing operations in Wusi, China, and streamlining operations in Speke, England. The restructuring charge consisted of severance costs and non-cash asset write-down expenses. We expect to substantially complete the restructuring activities by September 2020.

Integration and acquisition costs

Integration and acquisition costs primarily represent charges and costs related to our integration efforts as a result of our acquired businesses, external costs directly related to acquiring businesses, including expenses for banking, legal, accounting, and other similar services, and costs to stand our organization up to be an independent company.

Facility exit costs

Facility exit costs primarily represent contract termination costs and reserves for costs related to facilities which we have exited.

Asset impairment

Asset impairment recognized during the three and nine months ended September 30, 2019 resulted from the adjustment to fair value of property and equipment and intangible assets that were subject to product rationalization.

Asset write-down

Asset write-down expenses recognized during the three and nine months ended September 30, 2019 resulted from the adjustments recorded to write assets classified as held for sale down to their current fair value.

The following table summarizes the activity in our reserves established in connection with restructuring activities:

	Facility exit costs		Severance		Total
Balance at December 31, 2017	$	34.9	$	43.1	$	78.0
Charges	11.2		(2.8)		8.4
Separation adjustment	(5.9)		—		(5.9)
Cash paid	(10.9)		(22.6)		(33.5)
Balance at September 30, 2018	$	29.3	$	17.7	$	47.0
Balance at December 31, 2018	$	9.3	$	35.1	$	44.4
Charges	20.7		20.0		40.7
Reserve adjustments	—		(10.2)		(10.2)
Cash paid	(2.0)		(18.8)		(20.8)
Balance at September 30, 2019	$	28.0	$	26.1	$	54.1

Substantially all of the reserves are expected to be utilized in the next twelve months. We believe that the reserves are adequate.