RESTRUCTURING CHARGES

12 Months Ended

Dec. 31, 2020

Restructuring and Related Activities [Abstract]

The Company continually evaluates its operations to identify opportunities to streamline operations and optimize operating efficiencies as an anticipation to changes in the business environment.

On December 15, 2020, the Company announced the December 2020 Plan which is designed to substantially reduce the Company’s operating footprint through the reduction of its workforce. The Company believes the December 2020 Plan will allow it to adapt to the current market environment by reducing cost and better positioning the Company to continue to provide our differentiated products to patients and maximize shareholder value. The reorganization plan included a reduction of staff at our headquarters office and remote sales force. As a result, $9.6 million of severance and benefits costs and $1.6 million of other exit costs, including the write off of fixed assets no longer in use and the early termination of fleet leases, were recognized as restructuring charges, related to the December 2020 Plan, during the year ended December 31, 2020. The Company expects to substantially complete the workforce reduction by the end of the first quarter of 2021.

Subsequent to the Zyla Merger in May 2020, the Company began implementing reorganization plans of its workforce and other restructuring activities to realize the synergies of the Zyla Merger and to re-align resources to strategic areas and drive growth. The reorganization plan primarily focused on reduction of staff at the Company’s headquarters offices (Zyla Merger Reorganization). As a result, $5.6 million of severance and benefits costs, which includes $1.0 million of stock-based compensation expense associated with equity modifications for certain executives, and $0.2 million of other exit costs were

recognized as restructuring charges, related to the Zyla Merger, during the year ended December 31, 2020. The Company does not expect to incur significant costs related to the Zyla Merger Reorganization beyond 2020.

In April 2020, the Company executed a limited reduction to its sales force due to the impact of COVID-19 on its ability to see in-person providers who prescribe our products. As a result, $0.3 million of severance and benefits costs and $0.3 million of other costs were recognized as restructuring charges during the year ended December 31, 2020. This initiative was completed during 2020.

In November 2019, the Company announced an acceleration of cost-saving initiatives that included a decision to discontinue its relationship with its contract sales organization, a reduction in the use of certain outside vendors and consultants, and the reorganization of certain functions resulting in a reduction of staff at its headquarters office and remote positions during the fourth quarter of 2019 (the 2019 Plan). As a result, $0.2 million and $3.9 million of severance and benefits costs for the reduction of staff were recognized as restructuring charges, related to the 2019 Plan, during the years ended December 31, 2020 and 2019, respectively. The 2019 cost-saving initiative was substantially complete as of December 31, 2020.

The following table reflects total expenses related to restructuring activities recognized within the Consolidated Statement of Comprehensive Income as restructuring charges for the years ended December 31, 2020 and 2019 (in thousands):


	Year ended December 31,
	2020		2019
Employee compensation costs	$	15,705	$	3,891

Other exit costs	2,101		—
Total restructuring charges	$	17,806	$	3,891

The following table reflects cash activity related to the Company’s accrued restructuring as of December 31, 2020 and 2019 (in thousands):


	Employee separation costs		Other exit costs		Total
Balance as of December 31, 2018	$	1,578	$	—	$	1,578
Accruals	3,891		$	—	3,891

Cash paid	(1,706)		—		(1,706)
Balance as of December 31, 2019	$	3,763	$	—	$	3,763
Accruals	15,705		2,101		17,806
Adjustment to previous accrual estimate	(594)		—		(594)
Write off of fixed assets and leases and other adjustments	—		(1,888)		(1,888)
Cash paid	(10,130)		(213)		(10,343)
Balance as of December 31, 2020	$	8,744	$	—	$	8,744

As of December 31, 2020, the accrued restructuring balance of $8.7 million was comprised of $7.2 million related to the December 2020 Plan, $0.8 million related to the 2019 Plan, and $0.7 million related to Zyla Merger restructuring activities and was classified as accrued liabilities in the Consolidated Balance Sheet. Non-cash charges during the year ended December 31, 2020 primarily related to the write off of fixed assets no longer in use and the early termination of fleet leases in connection with the December 2020 plan. As of December 31, 2019, the accrued restructuring balance of $3.8 million related to the 2019 Plan.