Restructuring Charges and Asset Impairments

From time to time, Applied initiates restructuring activities to appropriately align its cost structure relative to prevailing economic and industry conditions and associated customer demand as well as in connection with certain acquisitions. Costs associated with restructuring actions can include termination benefits and related charges in addition to facility closure, contract termination and other related activities.

The following table summarizes major components of the restructuring and asset impairment charges during fiscal 2013, 2012 and 2011:



	2013			2012		2011

	(In millions)
2012 Global Restructuring Plan
Severance and other employee-related costs¹	$	39		$	106	$	—
2012 EES Restructuring Plan
Severance and other employee-related costs²	8			27		—
Contract cancellation and other costs	6			1		—
Asset impairments	12			20		—
2010 EES Restructuring Plan
Severance and other employee-related costs	—			—		(36		)
Asset impairments	—			—		—
2010 Global Restructuring Plan
Severance and other employee-related costs	—			—		(19		)
Others
Severance and other employee-related costs	2			14		(5		)
Contract cancellation and other costs	(4		)	—		—
Non-Restructuring Related
Asset impairments	—			—		30
	$	63		$	168	$	(30	)

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¹Includes share-based compensation expense, with the offset recorded in additional paid-in capital.

²Includes post-retirement benefit expense, with the offset recorded in accumulated other comprehensive loss.

Restructuring and asset impairment charges were recorded as follows:



	2013		2012		2011

	(In millions)
Silicon Systems Group	$	1	$	4	$	—
Applied Global Services	2		15		24
Energy and Environmental Solutions	25		38		(33		)
Corporate Unallocated	35		111		(21		)
Total	$	63	$	168	$	(30	)

Global Restructuring Plan

On October 3, 2012, Applied announced a restructuring plan (the 2012 Global Restructuring Plan) to realign its global workforce and enhance its ability to invest for growth. Under this plan, Applied implemented a voluntary retirement program and other workforce reduction actions that were expected to affect approximately 900 to 1,300 positions, or 6 percent to 9 percent of its global workforce. The voluntary retirement program was available to certain U.S. employees who met minimum age and length of service requirements, as well as other business-specific criteria. In addition, Applied implemented other workforce reduction actions globally across multiple business segments and functions, the extent of which depended on the number of employees who participated in the voluntary retirement program and other considerations.

In connection with the 2012 Global Restructuring Plan, Applied expects to incur aggregate pre-tax restructuring charges comprised of severance and other termination benefits of up to $160 million (including costs incurred to date of $145 million discussed below). Applied expects to substantially complete this plan by the end of the first quarter of fiscal 2014.

During fiscal 2013 and 2012, Applied recognized $39 million and $106 million, respectively, of employee-related costs in connection with the 2012 Global Restructuring Plan. These costs were not allocated to the segments. Applied has incurred aggregate pre-tax restructuring charges comprised of severance and other termination benefits of $145 million under this plan.

2012 EES Restructuring Plan

On May 10, 2012, Applied announced a plan (the 2012 EES Restructuring Plan) to restructure its Energy and Environmental Solutions segment in light of challenging industry conditions affecting the solar photovoltaic and light-emitting diode (LED) equipment markets. As part of this plan, Applied relocated certain manufacturing, business operations and customer support functions of its precision wafering systems business and ceased LED development activities. The 2012 EES Restructuring Plan also impacted certain LED support activities in the Applied Global Services segment. The 2012 EES Restructuring Plan impacted approximately 300 positions globally. As of October 27, 2013, principal activities related to this plan were complete. Total costs incurred in implementing this plan were $87 million, of which $13 million were inventory-related charges.

During fiscal 2013 and 2012, Applied recognized $26 million and $48 million, respectively, of restructuring and asset impairment charges in connection with the 2012 EES Restructuring Plan. These costs were reported in the Energy and Environmental Solutions and Applied Global Services segments. As of October 27, 2013, remaining severance accrual associated with restructuring reserves under this program was $5 million.

Integration of Varian and Prior Year Restructuring Plans

During fiscal 2013 and 2012, Applied also recognized $2 million and $14 million, respectively of severance and other employee-related costs in connection with the integration of Varian. These costs were reported in the Silicon Systems Group and Applied Global Services segments. As of October 27, 2013, remaining severance accrual associated with restructuring reserves under this program was $2 million.

In fiscal 2011, Applied had favorable adjustments of $60 million related to a restructuring programs announced prior to fiscal 2012, partially offset by asset impairment charges of $30 million primarily related to certain fixed and intangible assets.

Changes in restructuring reserves for fiscal 2013, 2012, and 2011 were as follows:



	2012 Global Restructuring Plan			2012 EES Restructuring Plan						2010 EES Restructuring Plan			2010 Global Restructuring Plan			Others
	Severance and Other Employee-Related Costs			Severance and Other Employee-Related Costs			Contract Cancellation and Other Costs			Severance and Other Employee-Related Costs			Severance and Other Employee-Related Costs			Severance and Other Employee-Related Costs			Contract Cancellation and Other Costs			Total

	(In millions)
Balance, October 31, 2010	$	—		$	—		$	—		$	42		$	51		$	6		$	5		$	104
Consumption of reserves	—			—			—			(5		)	(27		)	(1		)	—			(33		)
Adjustment of restructuring reserves	—			—			—			(36		)	(19		)	(5		)	—			(60		)
Balance, October 30, 2011	$	—		$	—		$	—		$	1		$	5		$	—		$	5		$	11
Provision for restructuring reserves	106			27			1			—			—			14			—			148
Consumption of reserves	—			(11		)	—			(1		)	(5		)	(9		)	—			(26		)
Balance, October 28, 2012	$	106		$	16		$	1		$	—		$	—		$	5		$	5		$	133
Provision for restructuring reserves	35			7			8			—			—			2			—			52
Consumption of reserves	(111		)	(18		)	(2		)	—			—			(5		)	—			(136		)
Adjustment of restructuring reserves¹	(4		)	—			(2		)	—			—			—			(4		)	(10		)
Balance, October 27, 2013	$	26		5			5			—			—			$	2		$	1		$	39

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¹ Adjustment of restructuring reserves for 2012 Global Restructuring plan represents reclassification of post-retirement benefit liability to other liabilities.