Reorganization of Businesses

The Company maintains a formal Involuntary Severance Plan (the “Severance Plan”), which permits the Company to offer eligible employees severance benefits based on years of service and employment grade level in the event that employment is involuntarily terminated as a result of a reduction-in-force or restructuring. The Severance Plan includes defined formulas to calculate employees’ termination benefits. In addition to the Involuntary Severance Plan, during the year ended December 31, 2016, the Company accepted voluntary applications to its Severance Plan from a defined subset of employees within the United States. Voluntary applicants received termination benefits based on the formulas defined in the Severance Plan. However, termination benefits, which are normally different based on employment level grade and capped at six months of salary, were equialized for all employment level grades and capped at a full year’s salary.

The Company recognizes termination benefits based on formulas per the Severance Plan at the point in time that future settlement is probable and can be reasonably estimated based on estimates prepared at the time a restructuring plan is approved by management. Exit costs consist of future minimum lease payments on vacated facilities and other contractual terminations. At each reporting date, the Company evaluates its accruals for employee separation and exit costs to ensure the accruals are still appropriate. In certain circumstances, accruals are no longer needed because of efficiencies in carrying out the plans or because employees previously identified for separation resigned from the Company and did not receive severance, or were redeployed due to circumstances not foreseen when the original plans were approved. In these cases, the Company reverses accruals through the consolidated statements of operations where the original charges were recorded when it is determined they are no longer needed.

During 2016, 2015, and 2014 the Company continued to implement various productivity improvement plans aimed at achieving long-term, sustainable profitability by driving efficiencies and reducing operating costs. Both of the Company’s segments were impacted by these plans. The employees affected were located in all geographic regions.

2016 Charges

During 2016, the Company recorded net reorganization of business charges of $140 million, including $43 million of charges in Costs of sales and $97 million of charges in Other charges in the Company’s consolidated statements of operations. Included in the $140 million were charges of: (i) $120 million for employee separation costs, (ii) a $17 million building impairment charge, (iii) $5 million for exit costs, and (iv) $3 million for the impairment of the corporate aircraft, partially offset by $5 million of reversals of accruals no longer needed.

The following table displays the net charges incurred by segment:



Year ended December 31	2016
Products	$	106
Services	34
	$	140

The following table displays a rollforward of the reorganization of businesses accruals established for exit costs and employee separation costs from January 1, 2016 to December 31, 2016:



	Accruals at January 1		Additional Charges		Adjustments			Amount Used			Accruals at December 31
Exit costs	$	9	$	5	$	(1	)	$	(6	)	$	7
Employee separation costs	51		120		(4		)	(73		)	94
	$	60	$	125	$	(5	)	$	(79	)	$	101

Exit Costs

At January 1, 2016, the Company had $9 million accrual for exit costs. There were $5 million of additional charges in 2016. The $6 million used in 2016 reflects cash payments. The remaining accrual of $7 million, which was included in Accrued liabilities in the Company’s consolidated balance sheets at December 31, 2016, primarily represents future cash payments for lease obligations that are expected to be paid over a number of years.

Employee Separation Costs

At January 1, 2016, the Company had an accrual of $51 million for employee separation costs. The 2016 additional charges of $120 million represent severance costs for approximately an additional 1,300 employees, of which 400 were direct employees and 900 were indirect employees. The adjustments of $4 million reflect reversals of accruals no longer needed. The $73 million used in 2016 reflects cash payments to severed employees. The remaining accrual of $94 million, which is included in Accrued liabilities in the Company’s consolidated balance sheet at December 31, 2016, is expected to be paid, primarily within one year to: (i) severed employees who have already begun to receive payments and (ii) approximately 300 employees to be separated in 2017.

2015 Charges

During 2015, the Company recorded net reorganization of business charges of $117 million, including $9 million of charges in Costs of sales and $108 million of charges under Other charges in the Company’s consolidated statements of operations. Included in the aggregate $117 million are charges of: (i) $74 million for employee separation costs, (ii) $31 million for the impairment of the corporate aircraft, (iii) $10 million for exit costs, and (iv) a $6 million building impairment charge, partially offset by $4 million of reversals of accruals no longer needed.

The following table displays the net charges incurred by segment:



Year ended December 31	2015
Products	$	84
Services	33
	$	117

The following table displays a rollforward of the reorganization of businesses accruals established for exit costs and employee separation costs, including those related to discontinued operations which were maintained by the Company after the sale of the Enterprise business, from January 1, 2015 to December 31, 2015:



	Accruals at January 1		Additional Charges		Adjustments			Amount Used			Accruals at December 31
Exit costs	$	—	$	10	$	—		$	(1	)	$	9
Employee separation costs	57		74		(10		)	(70		)	51
	$	57	$	84	$	(10	)	$	(71	)	$	60

Exit Costs

At January 1, 2015, the Company had no accrual for exit costs. There were $10 million of additional charges in 2015. The $1 million used in 2015 reflects cash payments. The remaining accrual of $9 million, which was included in Accrued liabilities in the Company’s consolidated balance sheets at December 31, 2015, primarily represented future cash payments for lease obligations.

Employee Separation Costs

At January 1, 2015, the Company had an accrual of $57 million for employee separation costs. The additional 2015 charges of $74 million represent severance costs for approximately an additional 1,100 employees, of which 200 were direct employees and 900 were indirect employees. The adjustments of $10 million reflect $4 million of reversals of accruals no longer needed and $6 million of reversals of accruals held for employees separated from discontinued operations. The $70 million used in 2015 reflects cash payments to severed employees. The remaining accrual of $51 million, which was included in Accrued liabilities in the Company’s consolidated balance sheet at December 31, 2015.

2014 Charges

During 2014, the Company recorded net reorganization of business charges of $73 million, including $9 million of charges in Costs of sales and $64 million of charges in Other charges in the Company’s consolidated statements of operations. Included in the aggregate $73 million are charges of: (i) $67 million for employee separation costs and (ii) $7 million of charges for exit costs, partially offset by $1 million of reversals for accruals no longer needed.

The following table displays the net charges incurred by segment:



Year ended December 31	2014
Products	$	48
Services	25
	$	73



	Accruals at January 1		Additional Charges		Adjustments			Amount Used			Accruals at December 31
Exit costs	$	6	$	7	$	—		$	(13	)	$	—
Employee separation costs	103		93		(4		)	(135		)	57
	$	109	$	100	$	(4	)	$	(148	)	$	57

Exit Costs

At January 1, 2014, the Company had an accrual of $6 million for exit costs attributable to lease terminations. There were $7 million of additional charges in 2014. The $13 million used in 2014 reflects cash payments. There was no remaining accrual as of December 31, 2014.

Employee Separation Costs

At January 1, 2014, the Company had an accrual of $103 million for employee separation costs. The additional 2014 charges of $93 million represent severance costs, of which $26 million related to employees of the Enterprise business and were recorded within discontinued operations. The charges represent severance for approximately an additional 1,200 employees, of which 300 were direct employees and 900 were indirect employees. The adjustments of $4 million reflect reversals of accruals no longer needed. The $135 million used in 2014 reflects cash payments to these separated employees, including $50 million related to employees of the Enterprise business and included in cash flow from discontinued operations. The remaining accrual of $57 million was included in Accrued liabilities in the Company’s consolidated balance sheet at December 31, 2014.