Annual report pursuant to Section 13 and 15(d)

RESTRUCTURING, IMPAIRMENT AND PLANT CLOSING COSTS

v2.4.0.6
RESTRUCTURING, IMPAIRMENT AND PLANT CLOSING COSTS
12 Months Ended
Dec. 31, 2012
RESTRUCTURING, IMPAIRMENT AND PLANT CLOSING COSTS  
RESTRUCTURING, IMPAIRMENT AND PLANT CLOSING COSTS

11. RESTRUCTURING, IMPAIRMENT AND PLANT CLOSING COSTS

        As of December 31, 2012, 2011 and 2010, accrued restructuring, impairment and plant closing costs by type of cost and initiative consisted of the following (dollars in millions):

 
  Workforce
reductions(1)
  Demolition and
decommissioning
  Non-cancelable
lease costs
  Other
restructuring
costs
  Total(2)  

Accrued liabilities as of January 1, 2010

  $ 60   $ 2   $ 2   $ 11   $ 75  

2010 charges for 2005 and prior initiatives

    1                 1  

2010 charges for 2008 initiatives

    1                 1  

2010 charges for 2009 initiatives

    4             5     9  

2010 charges for 2010 initiatives

    22             1     23  

Reversal of reserves no longer required

    (6 )       (1 )       (7 )

2010 payments for 2005 and prior initiatives

    (1 )   (1 )           (2 )

2010 payments for 2006 initiatives

    (3 )               (3 )

2010 payments for 2008 initiatives

    (7 )               (7 )

2010 payments for 2009 initiatives

    (11 )           (5 )   (16 )

2010 payments for 2010 initiatives

    (1 )           (2 )   (3 )

Net activity of discontinued operations

    (26 )               (26 )

Foreign currency effect on liability balance

    3             1     4  
                       

Accrued liabilities as of December 31, 2010

    36     1     1     11     49  

2011 charges for 2006 and prior initiatives

    1                 1  

2011 charges for 2009 initiatives

    1             6     7  

2011 charges for 2010 initiatives

    2     2     10     1     15  

2011 charges for 2011 initiatives

    87         1     1     89  

Reversal of reserves no longer required

    (5 )               (5 )

2011 payments for 2006 and prior initiatives

    (1 )       (1 )   (1 )   (3 )

2011 payments for 2008 initiatives

    (2 )               (2 )

2011 payments for 2009 initiatives

    (6 )           (6 )   (12 )

2011 payments for 2010 initiatives

    (17 )   (3 )       (1 )   (21 )

2011 payments for 2011 initiatives

    (13 )           (1 )   (14 )

Net activity of discontinued operations

                (2 )   (2 )

Foreign currency effect on liability balance

    (10 )               (10 )
                       

Accrued liabilities as of December 31, 2011

    73         11     8     92  

2012 charges for 2007 and prior initiatives

    2                 2  

2012 charges for 2009 initiatives

    1             4     5  

2012 charges for 2010 initiatives

    2                 2  

2012 charges for 2011 initiatives

    4     5         6     15  

2012 charges for 2012 initiatives

    64             5     69  

Reversal of reserves no longer required

    (15 )           (1 )   (16 )

2012 payments for 2007 and prior initiatives

    (2 )           (1 )   (3 )

2012 payments for 2009 initiatives

    (1 )           (5 )   (6 )

2012 payments for 2010 initiatives

    (3 )       (1 )       (4 )

2012 payments for 2011 initiatives

    (25 )   (6 )   (1 )   (5 )   (37 )

2012 payments for 2012 initiatives

    (12 )           (6 )   (18 )

Foreign currency effect on liability balance

    2     1         1     4  
                       

Accrued liabilities as of December 31, 2012

  $ 90   $   $ 9   $ 6   $ 105  
                       

(1)
The total workforce reduction reserves of $90 million relate to the termination of 831 positions, of which 786 positions had not been terminated as of December 31, 2012.

(2)
Accrued liabilities remaining at December 31, 2012 and 2011 by year of initiatives were as follows (dollars in millions):

 
  December 31,  
 
  2012   2011  

2007 initiatives and prior

  $ 2   $ 2  

2009 initiatives

    7     11  

2010 initiatives

    9     16  

2011 initiatives

    34     63  

2012 initiatives

    53      
           

Total

  $ 105   $ 92  
           

        Details with respect to our reserves for restructuring, impairment and plant closing costs are provided below by segment and initiative (dollars in millions):

 
  Polyurethanes   Performance
Products
  Advanced
Materials
  Textile
Effects
  Pigments   Discontinued
Operations
  Corporate
& Other
  Total  

Accrued liabilities as of January 1, 2010

  $ 2   $   $ 7   $ 17   $ 11   $ 34   $ 4   $ 75  

2010 charges for 2005 initiatives

                    1             1  

2010 charges for 2008 initiatives

                1                 1  

2010 charges for 2009 initiatives

            1         8             9  

2010 charges for 2010 initiatives

        2         15             6     23  

Reversal of reserves no longer required

            (3 )   (1 )   (2 )       (1 )   (7 )

2010 payments for 2005 initiatives

    (1 )               (1 )           (2 )

2010 payments for 2006 initiatives

                (3 )               (3 )

2010 payments for 2008 initiatives

    (1 )           (5 )   (1 )           (7 )

2010 payments for 2009 initiatives

            (3 )   (2 )   (8 )       (3 )   (16 )

2010 payments for 2010 initiatives

        (1 )                   (2 )   (3 )

Net activity of discontinued operations

                        (26 )       (26 )

Foreign currency effect on liability balance

                3             1     4  
                                   

Accrued liabilities as of December 31, 2010

        1     2     25     8     8     5     49  

2011 charges for 2006 and prior initiatives

                1                 1  

2011 charges for 2009 Initiatives

                    7             7  

2011 charges for 2010 Initiatives

                13             2     15  

2011 charges for 2011 Initiatives

            21     65     3             89  

Reversal of reserves no longer required

            (1 )   (4 )               (5 )

2011 payments for 2006 and prior initiatives

                (2 )   (1 )           (3 )

2011 payments for 2008 Initiatives

                (1 )   (1 )           (2 )

2011 payments for 2009 Initiatives

            (1 )       (11 )           (12 )

2011 payments for 2010 Initiatives

                (15 )           (6 )   (21 )

2011 payments for 2011 Initiatives

            (7 )   (5 )   (2 )           (14 )

Net activity of discontinued operations

                        (2 )       (2 )

Foreign currency effect on liability balance

            (2 )   (8 )               (10 )
                                   

Accrued liabilities as of December 31, 2011

        1     12     69     3     6     1     92  

2012 charges for 2007 and prior initiatives

                2                 2  

2012 charges for 2009 Initiatives

            1         4             5  

2012 charges for 2010 Initiatives

        1                     1     2  

2012 charges for 2011 Initiatives

            3     12                 15  

2012 charges for 2012 Initiatives

    38         30                 1     69  

Reversal of reserves no longer required

                (16 )               (16 )

2012 payments for 2007 and prior initiatives

                (3 )               (3 )

2012 payments for 2009 Initiatives

            (1 )       (5 )           (6 )

2012 payments for 2010 Initiatives

        (2 )       (1 )           (1 )   (4 )

2012 payments for 2011 Initiatives

            (14 )   (23 )               (37 )

2012 payments for 2012 Initiatives

    (12 )       (6 )                   (18 )

Foreign currency effect on liability balance

    1         2     2     (1 )           4  
                                   

Accrued liabilities as of December 31, 2012

  $ 27   $   $ 27   $ 42   $ 1   $ 6   $ 2   $ 105  
                                   

Current portion of restructuring reserves

  $ 27   $   $ 26   $ 31   $ 1   $ 6   $ 2   $ 93  

Long-term portion of restructuring reserve

            1     11                 12  

Estimated additional future charges for current restructuring projects

                                                 

Estimated additional charges within one year

  $ 3   $   $ 17   $ 80   $   $   $   $ 100  

Estimated additional charges beyond one year

            2                     2  

        Details with respect to cash and noncash restructuring charges for the years ended December 31, 2012, 2011 and 2010 by initiative are provided below (dollars in millions):

Cash charges:

       

2012 charges for 2007 and prior initiatives

  $ 2  

2012 charges for 2009 initiatives

    5  

2012 charges for 2010 initiatives

    2  

2012 charges for 2011 initiatives

    15  

2012 charges for 2012 initiatives

    69  

Reversal of reserves no longer required

    (16 )

Non-cash charges

    15  
       

Total 2012 Restructuring, Impairment and Plant Closing Costs

  $ 92  
       

Cash charges:

       

2011 charges for 2006 and prior initiatives

  $ 1  

2011 charges for 2009 initiatives

    7  

2011 charges for 2010 initiatives

    15  

2011 charges for 2011 initiatives

    89  

Reversal of reserves no longer required

    (5 )

Non-cash charges

    60  
       

Total 2011 Restructuring, Impairment and Plant Closing Costs

  $ 167  
       

Cash charges:

       

2010 charges for 2005 and prior initiatives

  $ 1  

2010 charges for 2008 initiatives

    1  

2010 charges for 2009 initiatives

    9  

2010 charges for 2010 initiatives

    23  

Reversal of reserves no longer required

    (7 )

Non-cash charges

    2  
       

Total 2010 Restructuring, Impairment and Plant Closing Costs

  $ 29  
       

2012 RESTRUCTURING ACTIVITIES

        During 2012, our Polyurethanes segment implemented a restructuring program to reduce annualized fixed costs by approximately $75 million by the third quarter of 2013. In connection with this program, we recorded restructuring expenses of $38 million during 2012 primarily for workforce reductions. As of December 31, 2012, our Polyurethanes segment restructuring reserve consisted of $27 million related to this program. We expect to incur additional charges of $3 million through 2013 related to our initiative.

        During the fourth quarter of 2012, our Advanced Materials segment began implementing a global transformational change program, subject to consultation with relevant employee representatives, designed to improve the segment's manufacturing efficiencies, enhance commercial excellence and ensure its long-term global competitiveness. As of December 31, 2012, our Advanced Materials segment restructuring reserve consisted of $27 million primarily related to this program. During 2012, we recorded charges of $38, million of which $28 million related to our global transformational change program, $3 million related to the reorganization of our global structure and relocation of our divisional headquarters from Basel, Switzerland to The Woodlands, Texas and $3 million related primarily to a redesign of our planning process focused on inventory reduction. Our Advanced Materials segment also recorded noncash charges of $4 million related to pension settlements. We expect to incur additional charges of $19 million through the first half of 2014 related to our initiatives.

        During 2011, our Textile Effects segment began implementing a significant restructuring program, including the closure of our production facilities and business support offices in Basel, Switzerland, as part of an ongoing strategic program aimed at improving the segment's long-term global competitiveness. In connection with this plan, during 2012, we recorded cash charges of $1 million for workforce reductions, $9 million for decommissioning and other restructuring expenses, and noncash charges of $11 million primarily for pension settlements. We expect to incur additional restructuring and plant closing charges of up to approximately $80 million through 2014 related to the closure of our production facilities and business support offices in Basel, Switzerland. In addition, during 2012, our Textile Effects segment recorded charges of $4 million of which $2 million related to the closure of our St. Fons, France facility and $2 million related to a global transfer pricing initiative. We reversed charges of $16 million which were no longer required for workforce reductions at our production facility in Langweid, Germany, the simplification of the commercial organization and optimization of our distribution network, the consolidation of manufacturing activities and processes at our site in Basel, Switzerland and the closure of our production facilities in Basel, Switzerland.

        As of December 31, 2012, our Textile Effects segment restructuring reserve consisted of $42 million, of which $2 million related to opening balance sheet liabilities from the Textile Effects Acquisition, $9 million related to the consolidation of our Switzerland manufacturing facilities and $31 million related to the closure of our production facilities and business support offices in Basel, Switzerland.

        As of December 31, 2012, our Pigments segment restructuring reserve consisted of $1 million primarily related to workforce reductions at our Scarlino, Italy plant. During 2012, our Pigments segment recorded charges of $4 million related to the closure of our Grimsby, U.K. plant.

        The restructuring reserve related to discontinued operations as of December 31, 2012 of $6 million was associated with the closure of our Australian styrenics business. For more information, see "Note 25. Discontinued Operations—Australian Styrenics Business Shutdown."

        As of December 31, 2012, our Corporate and other segment restructuring reserve consisted of $2 million primarily related to a reorganization and regional consolidation of our purchasing activities. During 2012, we recorded charges of $2 million in Corporate and other primarily related to workforce reductions in connection with this project.

2011 RESTRUCTURING ACTIVITIES

        As of December 31, 2011, our Advanced Materials segment restructuring reserve consisted of $12 million related to workforce reductions in connection with a reorganization of its global structure and relocation of its divisional headquarters from Basel, Switzerland to The Woodlands, Texas. During 2011, our Advanced Materials segment recorded net charges of $20 million primarily related this activity.

        On September 27, 2011, we announced plans to implement a significant restructuring of our Textile Effects segment, including the closure of our production facilities and business support offices in Basel, Switzerland, as part of an ongoing strategic program aimed at improving the Textile Effects segment's long-term global competitiveness. In connection with this plan during 2011, we recorded a charge of $62 million for workforce reduction, a pension curtailment gain of $38 million and a charge of $53 million for the impairment of long-lived assets at our Basel, Switzerland manufacturing facility. For purposes of calculating the impairment charge, the fair value of the Basel, Switzerland manufacturing facility was based on the discounted cash flows of that facility. As of December 31, 2011, our Textile Effects segment restructuring reserve consisted of $69 million, of which $2 million related to opening balance sheet liabilities from the Textile Effects Acquisition, $2 million related to workforce reductions at our production facility in Langweid, Germany, $2 million related to the simplification of the commercial organization and optimization of our distribution network, $15 million related to the consolidation of manufacturing activities and processes at our site in Basel, Switzerland, $47 million related to the closure of our production facilities and business support offices in Basel, Switzerland and $1 million related to the consolidation of our North Carolina sites.

        In addition, during 2011, our Textile Effects segment recorded charges of $22 million, of which $5 million related to simplification of our commercial organization and optimization of our distribution network, $12 million related to non-workforce reductions incurred for the consolidation of our Switzerland manufacturing facilities, and $4 million related to the consolidation of our North Carolina sites. We reversed charges of $4 million which were no longer required for workforce reductions at our production facility in Langweid, Germany and the consolidation of manufacturing activities and processes at our site in Basel, Switzerland.

        As of December 31, 2011, our Pigments segment restructuring reserve consisted of $3 million primarily related to workforce reductions at our Huelva, Spain and Scarlino, Italy plants. During 2011, our Pigments segment recorded charges of $10 million, of which $7 million related to the closure of our Grimsby, U.K. plant and $3 million related to workforce reductions at our Umbogintwini, South Africa plant.

        The restructuring reserve related to discontinued operations as of December 31, 2011 of $6 million was associated with the closure of our Australian styrenics business. For more information, see "Note 25. Discontinued Operations—Australian Styrenics Business Shutdown."

        As of December 31, 2011, our Corporate and other segment restructuring reserve consisted of $1 million primarily related to a reorganization and regional consolidation of our transactional accounting activities. During 2011, we recorded charges of $2 million in Corporate and other primarily related to workforce reductions in connection with this project.

2010 RESTRUCTURING ACTIVITIES

        As of December 31, 2010, our Performance Products segment restructuring reserve consisted of $1 million related to workforce reductions in connection with a new Performance Products organizational structure. During 2010, we recorded charges of $2 million related to workforce reductions in connection with this project.

        As of December 31, 2010, our Advanced Materials segment restructuring reserve consisted of $2 million related to workforce reductions in connection with a reorganization designed to implement a regional management structure. During 2010, we recorded net reversals of $2 million primarily related to workforce reductions in connection to this project.

        As of December 31, 2010, our Textile Effects segment restructuring reserve consisted of $25 million, of which $2 million related to opening balance sheet liabilities from the Textile Effects Acquisition, $1 million related to the streamlining of the textile effects business into two global strategic business units as announced during the fourth quarter of 2008, $3 million related to workforce reductions at our production facility in Langweid, Germany and $19 million related to the consolidation of manufacturing activities and processes at our site in Basel, Switzerland. During 2010, our Textile Effects segment recorded net charges of $15 million primarily related to the consolidation of manufacturing activities and processes at our site in Basel, Switzerland.

        As of December 31, 2010, our Pigments segment restructuring reserve consisted of $8 million primarily related to workforce reductions at our Scarlino, Italy plant. During 2010, our Pigments segment recorded net charges of $7 million primarily related to the closure of our Grimsby, U.K. plant.

        The restructuring reserve related to discontinued operations as of December 31, 2010 of $8 million was associated with the closure of our Australian styrenics business. For more information, see "Note 25. Discontinued Operations—Australian Styrenics Business Shutdown."

        As of December 31, 2010, our Corporate and other segment restructuring reserve consisted of $5 million primarily related to a reorganization and regional consolidation of our transactional accounting and purchasing activities. During 2010, we recorded net charges of $5 million in Corporate and other primarily related to workforce reductions in connection with these projects.