Restructuring Charges and Asset Impairments

From time to time, Applied initiates restructuring activities to appropriately align its cost structure and product investments relative to prevailing market conditions, competitive environment and customer demand. Costs associated with restructuring actions can include termination benefits and related charges, in addition to facility closure, contract termination and other related activities. Restructuring charges and asset impairments are included in general and administrative expenses in the Consolidated Statements of Operations.

The following table summarizes major components of the restructuring and asset impairment charges during each fiscal year:



	2015			2014		2013

	(In millions)
2012 Global Restructuring Plan
Severance and other employee-related costs	$	(1	)	$	5	$	39
2012 EES Restructuring Plan
Severance and other employee-related costs	—			—		8
Contract cancellation and other costs	(2		)	—		6
Asset impairments	—			—		12
Others
Severance and other employee-related costs	9			—		2
Contract cancellation and other costs	1			—		(4		)
Asset impairments	7			—		—
	$	14		$	5	$	63

Restructuring and asset impairment charges for each fiscal year were recorded as follows:



	2015			2014		2013

	(In millions)
Silicon Systems	$	—		$	—	$	1
Applied Global Services	—			—		2
Energy and Environmental Solutions	15			—		25
Corporate Unallocated	(1		)	5		35
Total	$	14		$	5	$	63

2012 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. 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. 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. A total of approximately 1,300 positions were affected under this plan. As of January 26, 2014, principal activities related to this plan were complete.

During fiscal 2014 and 2013, Applied recognized $5 million and $39 million, respectively, of employee-related costs in connection with the 2012 Global Restructuring Plan. Total costs incurred in implementing this plan were $150 million, none of which were allocated to the operating segments.

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 2015, Applied recorded a favorable adjustment of $2 million associated with restructuring reserves under this program. During fiscal 2013, Applied recognized $26 million, 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.

Other

During fiscal 2015, Applied implemented cost reduction measures in its solar business to achieve a lower break-even level and improve business performance and incurred $17 million in restructuring charges and asset impairments and $35 million of inventory-related charges recorded in cost of products sold. These costs are reported in Applied Global Services and Energy and Environmental Solutions segments. Total costs expected to be incurred in implementing these actions are in the range of $45 million to $55 million. Applied expects to complete the principal activities related to these actions by the second quarter of fiscal 2016. As of October 25, 2015, the restructuring accruals related to these actions were $4 million, of which $3 million is related to severance and other employee cost accruals.

During fiscal 2013, Applied also recognized $2 million of severance and other employee-related costs in connection with the integration of Varian. These costs were reported in the Silicon Systems and Applied Global Services segments. As of October 26, 2015, there were no remaining severance accrual associated with restructuring reserves under this program.

Changes in restructuring reserves were as follows:



	2012 Global Restructuring Plan			2012 EES 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			Contract Cancellation and Other Costs			Total

	(In millions)
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 reserves	(4		)	—			(2		)	—			(4		)	(10		)
Balance, October 27, 2013	$	26		$	5		$	5		$	2		$	1		$	39
Provision for restructuring reserves	7			—			—			—			—			7
Consumption of reserves	(27		)	(5		)	(1		)	(2		)	—			(35		)
Adjustment of restructuring reserves	(2		)	—			—			—			—			(2		)
Balance, October 26, 2014	$	4		$	—		$	4		$	—		$	1		$	9
Provision for restructuring reserves	—			—			—			8			1			9
Consumption of reserves	(2		)	—			(1		)	(5		)	(1		)	(9		)
Adjustment of restructuring reserves	(1		)	—			(2		)	—			—			(3		)
Balance, October 25, 2015	$	1		$	—		$	1		$	3		$	1		$	6