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SPECIAL (GAINS) AND CHARGES

12 Months Ended

Dec. 31, 2023

3. SPECIAL (GAINS) AND CHARGES

Special (gains) and charges reported on the Consolidated Statements of Income included the following:



(millions)	2023		2022		2021
Cost of sales
Restructuring activities		$22.5		$21.4		$24.7
Acquisition and integration activities		-		25.0		4.2
Russia/Ukraine		-		7.2		-
Other		-		16.3		65.0
Cost of sales subtotal		22.5		69.9		93.9

Special (gains) and charges
Restructuring activities		63.2		85.8		11.9
Acquisition and integration activities		16.1		14.5		29.9
Russia/Ukraine		1.4		5.9		-
Other		30.7		34.3		60.8
Special (gains) and charges subtotal		111.4		140.5		102.6

Operating income subtotal		133.9		210.4		196.5

Other (income) expense		-		50.6		37.2
Interest expense, net		-		-		33.1

Total special (gains) and charges		$133.9		$261.0		$266.8

For segment reporting purposes, special (gains) and charges are not allocated to reportable segments, which is consistent with the Company’s internal management reporting.

Restructuring Activities

Restructuring activities are primarily related to the Combined Program which is described below. These activities have been included as a component of cost of sales, special (gains) and charges, other (income) expense and interest expense, net on the Consolidated Statements of Income. Restructuring liabilities have been classified as a component of other current and other noncurrent liabilities on the Consolidated Balance Sheets.

Combined Program

In November 2022 the Company approved a Europe cost savings program. In connection with these actions, the Company expected to incur pre-tax charges of $130 million ($110 million after tax). In February 2023, the Company expanded its previously announced Europe cost savings program to focus on its Institutional and Healthcare businesses in other regions. In connection with the expanded program (“Combined Program”), the Company expects to incur total pre-tax charges of $195 million ($150 million after tax). The Company expects that these restructuring charges will be completed by the end of 2024. Program actions include headcount reductions from terminations, not filling certain open positions, and facility closures. The Combined Program charges are expected to be primarily cash expenditures related to severance and asset disposals.

In anticipation of this Combined Program, a limited number of actions were taken in the fourth quarter of 2022. As a result, the Company reclassified $19.3 million ($14.5 million after tax) from other restructuring to the Combined Program in the first quarter of 2023.

In 2023 and 2022, the Company recorded total Combined Program restructuring charges of $77.7 million ($66.4 million after tax) and $67.2 million ($56.0 million after tax), respectively, primarily related to severance. The Company has recorded $164.2 million ($136.9 million after tax) of cumulative charges under the Combined Plan. The net liability related to the Combined Program was $43.1 million and $62.0 million as of December 31, 2023 and 2022, respectively. The remaining liability is expected to be paid over a period of a few months to several quarters and will continue to be funded from operating activities.

Restructuring activity related to the Combined Program since inception of the underlying actions includes the following:

Employee

Asset

(millions)

Costs

Disposals

Other

Total

2022 Activity

Recorded expense and accrual

$67.2

Net cash payments

(5.2)

Net restructuring liability, December 31, 2022

62.0

2023 Activity

Recorded expense and accrual

47.0

14.0

16.7

77.7

Net cash payments

(85.2)

(16.7)

(101.9)

Non-cash charges

(14.0)

Reclassification

19.3

Net restructuring liability, December 31, 2023

$43.1

Institutional Advancement Program

The Company approved a restructuring plan in 2020 focused on the Institutional business (“the Institutional Plan”) which is intended to enhance the Company’s Institutional sales and service structure and allow the sales team to capture share and penetration while maximizing service effectiveness by leveraging the Company’s ongoing investments in digital technology.

Certain activities contemplated in this Institutional Plan were previously approved in 2020 and included as part of Accelerate 2020. These activities were reclassified to the Institutional Plan. During 2023, 2022 and 2021, the Company recorded restructuring charges of $8.0 million ($6.0 million after tax), $6.3 million ($4.8 million after tax) and $12.6 million ($10.2 million after tax), respectively, primarily related to severance, disposals of equipment and office closures. The restructuring activities were completed at the end of 2023, with total costs of $62.1 million ($47.4 million after tax). Net cash payments were $2.6 million and non-cash net charges were $6.8 million during 2023. There was no liability related to the Institutional Plan as of December 31, 2023 and $1.9 million as of December 31, 2022.

Accelerate 2020

During 2018, the Company formally commenced a restructuring plan, Accelerate 2020 (“the A2020 Plan”), to leverage technology and systems investments and organizational changes. The goals of the A2020 Plan were to further simplify and automate processes and tasks, reduce complexity and management layers, consolidate facilities and focus on key long-term growth areas by further leveraging technology and structural improvements. The Company recorded restructuring charges of $9.9 million ($8.4 million after tax) and $5.3 million ($6.2 million after tax) in 2022 and 2021, respectively, primarily related to severance. The restructuring activities were completed at the end of 2022, with total costs of $254.4 million ($198.4 million after tax).

Net cash payments were $13.2 million during 2023. The liability related to the A2020 Plan were $4.9 million and $18.1 million as of December 31, 2023 and 2022, respectively. The remaining liability is expected to be paid over a period of a few months to several quarters and will continue to be funded from operating activities.

Other Restructuring Activities

During 2022, and 2021, the Company recorded other restructuring charges of $23.8 million ($17.9 million after tax), and $18.7 million ($17.0 million after tax), respectively, related to other immaterial restructuring activity. The charges are comprised primarily of severance and asset write-offs.

The restructuring liability balance for all other restructuring plans excluding Combined Program, the A2020 Plan and the Institutional Plan was $3.3 million and $23.2 million as of December 31, 2023 and 2022, respectively. The decrease in liability was driven primarily by the reclass of $19.3 million from other restructuring to the Combined Program in the first quarter of 2023. The remaining liability is expected to be paid over a period of a few months to several quarters and will continue to be funded from operating activities. Cash payments during 2023 related to all other restructuring plans excluding the Combined Program, the A2020 Plan and Institutional Plan were $0.6 million.

Acquisition and integration related costs

Acquisition and integration related costs reported in special (gains) and charges on the Consolidated Statements of Income in 2023 include $16.1 million ($12.0 million after tax) related primarily to the Purolite Corporation (“Purolite”) acquisition and consist of integration related costs and advisory and legal fees.

Acquisition and integration related costs reported in special (gains) and charges on the Consolidated Statements of Income in 2022 include $14.5 million ($11.4 million after tax) related primarily to the Purolite acquisition and consist of integration related costs and advisory and legal fees. Acquisition and integration related costs reported in product and equipment cost of sales on the Consolidated Statements of Income in 2022 included $25.0 million ($19.6 million after tax) related primarily to the recognition of fair value step-up in Purolite inventory and other integration related costs.

Acquisition and integration related costs reported in special (gains) and charges on the Consolidated Statements of Income include $29.9 million ($23.5 million after tax) in 2021. Charges are related primarily to the Purolite acquisition and consisted of deal costs, integration costs and advisory and legal fees. Acquisition and integration costs reported in product and equipment cost of sales on the Consolidated Statements of Income in 2021 include $4.2 million ($3.3 million after tax) and are related to the recognition of fair value step-up in the Purolite inventory. In conjunction with its acquisitions, the Company incurred $0.8 million ($0.6 million after tax) of special (gains) and charges reported in interest expense in 2021.

Russia/Ukraine

In light of Russia’s invasion of Ukraine and the sanctions against Russia by the United States and other countries, the Company has made the determination that it will limit the Company’s Russian business to operations that are essential to life, providing minimal support for the Company’s healthcare, life sciences, food and beverage and certain water businesses. The Company incurred charges of $1.4 million ($1.1 million after tax) and $13.1 million ($12.6 million after tax) during 2023 and 2022, respectively, primarily related to recoverability risk of certain assets in both Russia and Ukraine.

Other operating activities

Other operating activities recorded to cost of sales on the Consolidated Statements of Income of $16.3 million ($12.7 million after tax) in 2022 and $65.0 million ($49.2 million after tax) in 2021 relate primarily to COVID-19 activities.

Other operating activities recorded in special (gains) and charges on the Consolidated Statements of Income of $30.7 million ($23.3 million after tax) in 2023 relate primarily to certain legal charges. Other operating activities recorded in special (gains) and charges on the Consolidated Statements of Income of $34.3 million ($25.7 million after tax) in 2022 and $60.8 million ($46.4 million after tax) in 2021 relate primarily to COVID-19 activities and certain legal charges.

Other (income) expense

During 2022 and 2021, the Company incurred pension settlement expense recorded in other (income) expense on the Consolidated Statements of Income of $50.6 million ($38.2 million after tax) and $37.2 million ($28.7 million after tax), respectively, related to U.S. pension plan lump-sum payments to retirees.

Interest expense, net

During 2021, the Company recorded special charges of $32.3 million ($28.4 million after tax) in interest expense on the Consolidated Statements of Income related to debt issuance and refinancing charges.