Restructuring and Divestiture Charges

The Company evaluates its operations for opportunities to improve operational effectiveness and efficiency, including facility and operations consolidation, and to better align expenses with revenues. As a result of these assessments, the Company has undertaken various restructuring actions which are described below. The following table displays charges taken related to restructuring actions in fiscal 2015, 2014 and 2013 and a rollforward of the charges to the accrued balances as of September 26, 2015:



	Consolidation of Diagnostics Operations		Closure of Indianapolis Facility		Fiscal 2015 Actions		Fiscal 2014 Actions		Fiscal 2013 Actions		Other Operating Cost Reductions		Total
Restructuring and Divestiture Charges
Fiscal 2013 charges:
Workforce reductions	$	14.0	$	4.8	$	—	$	—	$	11.3	$	1.1	$	31.2
Facility closure costs	—		0.2		—		—		—		0.4		0.6
Other	—		0.7		—		—		—		0.2		0.9
Fiscal 2013 restructuring charges	$	14.0	$	5.7	$	—	$	—	$	11.3	$	1.7	$	32.7
Divestiture net charges													0.1
Fiscal 2013 restructuring and divestiture charges													$	32.8
Fiscal 2014 charges:
Workforce reductions	$	2.9	$	0.2	$	—	$	29.5	$	0.9	$	8.7	$	42.2
Non-cash impairment charge	—		—		—		—		—		3.1		3.1
Facility closure costs	—		0.5		—		—		—		0.1		0.6
Other	0.1		—		—		—		—		0.2		0.3
Fiscal 2014 restructuring charges	$	3.0	$	0.7	$	—	$	29.5	$	0.9	$	12.1	$	46.2
Divestiture net charges													5.5
Fiscal 2014 restructuring and divestiture charges													$	51.7
Fiscal 2015 charges:
Workforce reductions	0.1		—		10.0		6.0		—		0.2		$	16.3
Facility closure costs	0.5		—		—		2.0		—		0.1		2.6
Fiscal 2015 restructuring charges	$	0.6	$	—	$	10.0	$	8.0	$	—	$	0.3	$	18.9
Divestiture net charges													9.6
Fiscal 2015 restructuring and divestiture charges													$	28.5



	Consolidation of Diagnostics Operations			Closure of Indianapolis Facility			Fiscal 2015 Actions			Fiscal 2014 Actions			Fiscal 2013 Actions			Other Operating Cost Reductions			Total
Rollforward of Accrued Restructuring
Balance as of September 29, 2012	$	8.4		$	1.8		$	—		$	—		$	—		$	0.6		$	10.8

Fiscal 2013 restructuring charges	$	14.0		$	5.7		$	—		$	—		$	11.3		$	1.7		$	32.7
Stock-based compensation	(6.3		)	—			—			—			(1.6		)	—			(7.9		)
Non-cash impairment charges	—			—			—			—			—			(0.1		)	(0.1		)
Severance payments	(13.1		)	(3.1		)	—			—			(4.4		)	(0.9		)	(21.5		)
Other payments	—			(0.6		)	—			—			—			(1.1		)	(1.7		)
Balance as of September 28, 2013	$	3.0		$	3.8		$	—		$	—		$	5.3		$	0.2		$	12.3

Fiscal 2014 restructuring charges	$	3.0		$	0.7		$	—		$	29.5		$	0.9		$	12.1		$	46.2
Stock-based compensation	—			—			—			(6.6		)	—			—			(6.6		)
Non-cash impairment charges	—			—			—			—			—			(3.1		)	(3.1		)
Severance payments	(3.0		)	(4.0		)	—			(10.9		)	(6.1		)	(7.0		)	(31.0		)
Other payments	—			(0.5		)	—			—			—			(0.4		)	(0.9		)
Balance as of September 27, 2014	$	3.0		$	—		$	—		$	12.0		$	0.1		$	1.8		$	16.9

Fiscal 2015 restructuring charges	$	0.6		$	—		$	10.0		$	8.0		$	—		$	0.3		$	18.9
Stock-based compensation	—			—			(4.1		)	—			—			—			(4.1		)
Severance payments	(3.0		)	—			(2.8		)	(16.2		)	(0.1		)	(1.8		)	(23.9		)
Other payments	(0.5		)	—			—			(1.3		)	—			(0.3		)	(2.1		)
Balance as of September 26, 2015	$	0.1		$	—		$	3.1		$	2.5		$	—		$	—		$	5.7

Consolidation of Diagnostics Operations

In connection with its acquisition of Gen-Probe in fiscal 2012, the Company implemented restructuring actions to consolidate its Diagnostics operations, including streamlining product development initiatives, reducing overlapping functional areas in sales, marketing and general and administrative functions, and consolidating manufacturing resources, field services and support. As a result, the Company terminated certain employees from Gen-Probe and its legacy diagnostics business in research and development, sales, marketing, and general and administrative functions. The Company recorded severance and benefit charges in fiscal 2012 of $13.3 million related to this action pursuant to ASC 420, Exit or Disposal Cost Obligations (ASC 420). The majority of these employees ceased working in the fourth quarter of fiscal 2012, and their full severance charge was recorded in the fourth quarter of fiscal 2012. In addition, certain of the terminated Gen-Probe employees had unvested stock options, which were accelerated at termination pursuant to the stock options’ original terms. As such, the severance charges in fiscal 2012 include $3.5 million of stock-based compensation expense. In fiscal 2013, the Company recorded $10.8 million of severance charges, including $6.3 million for stock-based compensation. Included in these charges was $9.7 million recorded in the second quarter of fiscal 2013 related to the termination of certain Gen-Probe executives, including Carl Hull, Gen-Probe’s former Chairman, President and Chief Executive Officer. The charge was for the acceleration of certain retention payments and equity awards pursuant to the original terms of the related agreements. No additional charges were recorded in fiscal 2014 or 2015 under this portion of the action.

In addition, under this plan, the Company completed moving its legacy molecular diagnostics operations from Madison, Wisconsin to Gen-Probe’s facilities in San Diego, California. This transfer was completed at the end of fiscal 2014, and as a result, many of the employees in Madison were terminated. The Company recorded severance and benefit charges pursuant to ASC 420 beginning in fiscal 2012 through the third quarter of fiscal 2015 as charges were recorded over requisite service periods. The Company recorded $0.1 million, $3.0 million, $3.2 million and $0.9 million for severance and benefits in fiscal 2015, 2014, 2013 and 2012, respectively, and $0.5 million for facility closure costs in fiscal 2015. The Company also recorded non-cash charges of $0.6 million in the fourth quarter of fiscal 2012 as a result of exiting certain research projects. This action is complete and no additional charges will be recorded.

Closure of Indianapolis Facility

In the fourth quarter of fiscal 2012, the Company finalized its decision to transfer production of the majority of its interventional breast products, which are included within the Breast Health segment, from its Indianapolis, Indiana facility to its facility in Costa Rica. The transfer was completed in the first quarter of fiscal 2014, and all employees at the Indianapolis location were terminated. The Company recorded total severance and benefit charges under this action of $5.9 million pursuant to ASC 420. These charges were recorded ratably over the required service period of the affected employees. The Company recorded severance and benefits charges of $0.2 million, $4.8 million and $0.9 million in fiscal 2014, 2013 and 2012, respectively, related to this action. In addition, the Company recorded a charge of $0.4 million in the first quarter of fiscal 2014 related to the termination of its Indianapolis lease. The Company also recorded miscellaneous charges of $0.8 million in fiscal 2013 and $0.9 million in fiscal 2012 for amounts owed to the state of Indiana for employment credits. This action was completed in fiscal 2014 and no additional charges were recorded in fiscal 2015.

Fiscal 2015 Actions

During each quarter of fiscal 2015, the Company continued to make executive management changes resulting in the termination of certain executives and employees on a worldwide basis. In addition, the Company continued to consolidate and close certain international offices to improve operational efficiency and reduce costs. Severance and benefit charges under these actions have been recorded pursuant to ASC 712, Compensation-Nonretirement Postemployment Benefits (ASC 712), and ASC 420 depending on the employees terminated, and the Company recorded severance and benefit charges of $10.0 million in fiscal 2015. Included in the charge is $4.1 million of stock-based compensation in the twelve month period.

In connection with its review of operations, the Company decided to shut-down its manufacturing operation in China, which manufactured mammography systems for the Chinese market. As a result, the Company will terminate manufacturing and research and development personnel located in China, and the severance charge was insignificant.

Fiscal 2014 Actions

During the first quarter of fiscal 2014, the Company implemented a cost reduction initiative comprised of reducing headcount and evaluating research projects and operating costs. In connection with this plan, the Company terminated certain employees on a worldwide basis. The Company recorded the severance and benefit charges pursuant to ASC 420 and ASC 712, depending on the employee terminated. The Company recorded $6.3 million of severance and benefit charges in the first quarter of fiscal 2014, which included $0.4 million of stock-based compensation.

On December 6, 2013, Stephen P. MacMillan was appointed as President, Chief Executive Officer and a director of the Company. The employment of John W. Cumming, the Company’s prior President and Chief Executive Officer, terminated upon Mr. MacMillan’s appointment. The Company provided separation benefits to Mr. Cumming pursuant to his employment letter dated July 18, 2013 resulting in a charge of $6.6 million in the first quarter of fiscal 2014, which included $4.4 million of stock-based compensation related to the acceleration of all of Mr. Cumming’s outstanding equity awards in accordance with the existing terms of Mr. Cumming’s share based payment arrangements.

In the second, third, and fourth quarters of fiscal 2014, the Company continued to make executive management changes and implement additional cost reduction initiatives resulting in the termination of certain executives and employees on a worldwide basis. In addition, in the fourth quarter of fiscal 2014 the Company decided to consolidate and close certain international offices. Severance and benefit charges under these actions were recorded pursuant to ASC 420 and ASC 712 depending on the employees terminated, and the Company recorded severance and benefit charges of $16.6 million in fiscal 2014. Included in the charge was $1.8 million of stock-based compensation for the modification of the terms of equity awards to certain employees. For those employees who continued to be employed beyond the minimum retention period, charges were recorded ratably over the estimated service period of the affected employees.

During fiscal 2015, the Company recorded $6.0 million for severance and benefits costs and $2.0 million for facility closure costs related to this action. The facility closure costs primarily relate to lease obligation charges for three office locations that were vacated and the Company had met the cease-use date criteria. This action was completed in fiscal 2015.

Fiscal 2013 Actions

During the third quarter of fiscal 2013, the Company implemented a cost reduction initiative comprised of reducing headcount and evaluating research projects and operating costs. In connection with this plan, the Company terminated certain employees on a worldwide basis. The Company primarily recorded severance and benefit charges pursuant to ASC 420, and the total severance and benefits charge related to this plan was $5.4 million. For those employees who continued to be employed beyond the minimum retention period, charges were recorded ratably over the estimated service period of the affected employees. The Company recorded severance and benefit charges of $0.9 million and $4.6 million in fiscal 2014 and 2013, respectively, related to this action.

During the fourth quarter of fiscal 2013, Robert A. Cascella resigned as the Company’s President and Chief Executive Officer and as a member of the Board of Directors of the Company, and effective at the same time, Mr. Cumming was appointed as the Company’s President and Chief Executive Officer. In connection with this management change, additional headcount reductions were implemented. As a result of this action, the Company recorded $6.8 million in the fourth quarter of fiscal 2013 for severance and benefits charges. All employees were notified prior to September 28, 2013 and primarily ceased employment in the fourth quarter of fiscal 2013. The severance and benefit charges were recorded pursuant to ASC 712 for those employees with contractual arrangements and under ASC 420 for the remainder of the affected employees. In addition to the acceleration of stock options pursuant to the stock options’ original terms for certain employees, the Company also modified the terms of equity awards to certain employees resulting in aggregate stock-based compensation charges of $1.4 million recorded in the fourth quarter of fiscal 2013.

Other Operating Cost Reductions:

Hitec-Imaging Organic Photoconductor Manufacturing Line Shut-down

In the fourth quarter of fiscal 2013, in connection with the Company’s cost reduction initiatives, the Company decided to shut-down its Hitec-Imaging organic photoconductor manufacturing line located in Germany. This production line was included within the Breast Health segment. As a result, the Company terminated certain employees, primarily in manufacturing, in fiscal 2014. During the first quarter of fiscal 2014, the Company completed its negotiations with the local Works Council to determine severance benefits for the approximately 95 affected employees. The Company recorded severance and benefit charges pursuant to ASC 420 and began notifying the affected employees in the second quarter of fiscal 2014. The Company recorded charges of $0.3 million and $8.7 million in fiscal 2015 and 2014, respectively in connection with terminating these employees.

In the first quarter of fiscal 2014, the Company recorded an impairment charge of $3.1 million to record certain buildings at this location to their estimated fair value.

Divestitures

In the fourth quarter of fiscal 2014, the Company completed the sale of its MRI breast coils product line and recorded a loss on disposal of $5.3 million. The Company also provided certain transition services through April 2015, including the manufacturing and sale of inventory to the buyer. Since all operations had ceased during the third quarter of fiscal 2015, the Company concluded that this subsidiary had been substantially liquidated and recorded a $9.6 million charge in the third quarter of fiscal 2015 related to writing off the cumulative translation adjustment related to the subsidiary.

Subsequent Events - Fiscal 2016 Actions

During the third quarter of fiscal 2015, the Company decided to close its Bedford, Massachusetts facility where it manufactures its Skeletal Health products as well as certain support manufacturing services for its Breast Health segment. The manufacturing of the Skeletal Health products will be outsourced to a third-party and the Breast Health manufacturing services will be moved to the Company's Danbury, Connecticut and Marlborough, Massachusetts facilities. In addition, research and development, sales and services support and administrative functions will be moved to both Marlborough and Danbury. The transition is expected to be completed by the end of fiscal 2016. In connection with this plan, certain employees, primarily in manufacturing, will be terminated. The employees were notified of termination and related benefits in the first quarter of fiscal 2016, and the Company will account for these charges pursuant to ASC 420. Employees will be required to remain employed during this transition period and charges will be recorded ratably over the required service period. The Company estimates the severance benefits will be approximately $3.0 million.

During the first quarter of fiscal 2016, the Company began implementing a second plan to consolidate and improve operational efficiency of its international sales and marketing and field services operations and certain support functions. As a result, the Company will terminate certain employees. Severance benefits will be recorded pursuant to ASC 420 and ASC 712, depending on the employees terminated. The Company is in process of finalizing the plan and estimating severance benefits that will commence in the first quarter of fiscal 2016.