4.	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 as described below. The following table displays charges taken related to restructuring actions in fiscal 2013 and 2012 and a rollforward of the charges to the accrued balances as of September 28, 2013. Such initiatives were not significant in fiscal 2011.


Restructuring Charges	Abandonment of Adiana Product Line			Consolidation of Diagnostics Operations			Closure of Indianapolis Facility			Fiscal 2013 Actions			Other Operating Cost Reductions			Total

Fiscal 2012 charges:
Non-cash impairment charge	$	16,316		$	585		$	—		$	—		$	—		$	16,901
Purchase orders and other contractual obligations		3,099			—			—			—			—			3,099
Workforce reductions		128			14,202			879			—			40			15,249
Facility closure costs		—			—			—			—			430			430
Other		—			—			900			—			—			900


Total fiscal 2012 charges	$	19,543		$	14,787		$	1,779		$	—		$	470		$	36,579

Recorded to cost of product sales	$	19,064		$	—		$	—		$	—		$	—		$	19,064

Recorded to restructuring	$	479		$	14,787		$	1,779		$	—		$	470		$	17,515

Fiscal 2013 charges:
Workforce reductions	$	—		$	13,950		$	4,805		$	11,332		$	1,127		$	31,214
Facility closure costs		—			—			173			—			377			550
Other		—			—			651			42			236			929

Fiscal 2013 restructuring charges	$	—		$	13,950		$	5,629		$	11,374		$	1,740		$	32,693

Divestiture net charges		—			—			—			—			—			112

Fiscal 2013 restructuring and divestiture charges	$	—		$	13,950		$	5,629		$	11,374		$	1,740		$	32,805


Rollforward of Accrued Restructuring

Total fiscal 2012 charges	$	19,543		$	14,787		$	1,779		$	—		$	470		$	36,579
Non-cash impairment charges		(16,316	)		(585	)		—			—			—			(16,901	)
Stock compensation		—			(3,500	)		—			—			—			(3,500	)
Severance payments		(128	)		(2,423	)		—			—			(78	)		(2,629	)
Other payments		(2,572	)		—			—			—			(430	)		(3,002	)
Acquired		—			83			—			—			—			83
Foreign exchange and other adjustments		—			22			—			—			91			113

Balance at September 29, 2012	$	527		$	8,384		$	1,779		$	—		$	53		$	10,743

Fiscal 2013 restructuring charges	$	—		$	13,950		$	5,629		$	11,374		$	1,740		$	32,693
Stock compensation		—			(6,322	)		—			(1,595	)		—			(7,917	)
Non-cash impairment charges		—			—			—			—			(54	)		(54	)
Severance payments		—			(13,068	)		(3,048	)		(4,425	)		(897	)		(21,438	)
Other payments		(527	)		—			(566	)		(25	)		(560	)		(1,678	)
Foreign exchange and other adjustments		—			(2	)		—			(14	)		6			(10	)

Balance at September 28, 2013	$	—		$	2,942		$	3,794		$	5,315		$	288		$	12,339

Abandonment of Adiana Product Line

At the end of the second quarter of fiscal 2012, the Company decided to cease manufacturing, marketing and selling its Adiana system, which was a product line within the Company’s GYN Surgical reporting segment. Management determined that the product was not financially viable and would not become so in the foreseeable future. In addition, the Company settled its intellectual property litigation regarding the Adiana system with Conceptus as discussed in Note 13. As a result, in the second quarter of fiscal 2012, the Company recorded a charge of $18.3 million and recorded additional adjustments in fiscal 2012 resulting in an aggregate charge of $19.5 million. Of the total charge, $19.1 million was recorded within cost of product sales and $0.4 million was recorded in restructuring. The amount recorded in cost of product sales comprised impairment charges of $9.9 million to record inventory at its net realizable value, $6.5 million to write down certain manufacturing equipment and equipment placed at customer sites to its fair value that had no further utility, and $2.7 million for outstanding contractual purchase orders of raw materials and components that will not be utilized and other contractual obligations. In connection with this action, the Company terminated certain manufacturing and other personnel primarily at its Costa Rica location, resulting in severance charges of $0.1 million, and incurred other contractual charges of $0.3 million. All identified employees were terminated and paid as of September 29, 2012.

Consolidation of Diagnostics Operations

In connection with its acquisition of Gen-Probe, the Company implemented restructuring actions to consolidate its Diagnostics operations, such as streamlining product development initiatives, reducing overlapping functional areas such as sales, marketing and general and administrative functions, and consolidation of 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. For the year ended September 28, 2013, the Company recorded $10.8 million of severance charges, including $6.3 million for stock-based compensation. Included in these charges is $9.7 million recorded in the second quarter of fiscal 2013 related to certain Gen-Probe executives including Carl Hull, Gen-Probe’s former Chairman, President and Chief Executive Officer, who ceased employment. The charge was for the acceleration of certain retention payments and equity awards pursuant to the original terms of the related agreements.

In addition, the Company is in process of moving its legacy molecular diagnostics operations from Madison, Wisconsin to Gen-Probe’s facilities in San Diego, California. This transfer is expected to be finalized by the end of fiscal 2014 and, as a result, the majority of employees in Madison will be terminated. The Company is recording severance and benefit charges pursuant to ASC 420 and estimates the total severance and benefits charge to be approximately $6.4 million, which is being recorded ratably over the estimated service period of the affected employees. The Company recorded $3.2 million in the year ended September 28, 2013 and $0.9 million in the fourth quarter of fiscal 2012. 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. Additional charges, which are not expected to be significant, will be recorded as the manufacturing operation is transferred and the facility is closed down. These charges will be recorded as they are incurred.

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 reporting segment, from its Indianapolis facility to its facility in Costa Rica. The transfer is expected to be completed in the first half of fiscal 2014, and the majority of employees at the Indianapolis, Indiana location will be terminated. The Company is recording severance and benefit charges pursuant to ASC 420 and estimates the total severance and benefits charge to be approximately $6.0 million, which is being recorded ratably over the estimated service period of the affected employees. The Company recorded $4.8 million of severance benefits in the year ended September 28, 2013 and $0.9 million in the fourth quarter of fiscal 2012. In addition, the Company recorded charges of $0.8 million in fiscal 2013 for additional miscellaneous items and $0.9 million in the fourth quarter of fiscal 2012 for amounts owed to the state of Indiana for employment credits. Additional charges, which are not expected to be significant, will be recorded as the manufacturing operation is transferred and the facility is closed down. These charges will be recorded as they are incurred.

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 is primarily recording severance and benefit charges pursuant to ASC 420 and estimates the total severance and benefits charge to be approximately $5.2 million. For those employees who will continue to be employed beyond the minimum retention period, charges are being recorded ratably over the estimated service period of the affected employees. The Company recorded $4.6 million of severance and benefit charges in fiscal 2013.

During the fourth quarter of fiscal 2013, effective July 18, 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, John W. 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. The severance and benefit charges were accounted for pursuant to ASC 712, Compensation-Nonretirement Postemployment Benefits, for those employess with contractual arrangements and under ASC 420 for the remainder of 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 compensation charges of $1.4 million.

In the fourth quarter of fiscal 2013, in connection with the Company’s cost reduction initiatives, it decided to shut-down its Hitec-Imaging organic photoconductor manufacturing line located in Germany. As a result, the Company will terminate certain employees, primarily in manufacturing, in fiscal 2014 and incur severance and benefit charges, which will be recorded pursuant to ASC 420. The Company is currently working with the local Works Council to negotiate severance benefits for the affected employees, which number approximately 100. In connection with this action, the Company recorded a $0.3 million impairment charge in the fourth quarter of fiscal 2013 to record certain equipment at fair value.

Other Operating Cost Reductions:

Consolidation of Selenium Panel Coating Production

During the third quarter of fiscal 2012, the Company finalized its decision to consolidate its Selenium panel coating process and transfer the production line to its Newark, Delaware facility from its Hitec-Imaging German subsidiary. This production line is included within the Breast Health segment. The transfer was completed in the fourth quarter of fiscal 2013. In connection with this consolidation plan, the Company terminated certain employees, primarily manufacturing personnel. Severance charges were recorded pursuant to ASC 420 because the severance benefits qualify as one-time employee termination benefits. The termination communications began in January 2013, and the Company recorded severance charges of $1.1 million in the year ended September 28, 2013. No additional charges will be incurred under this plan.

Other

The Company recorded a charge of $0.4 million in fiscal 2013 for a lease obligation charge and the write-off of related leaseholds.

During the second quarter of fiscal 2012, the Company abandoned certain lease space and recorded charges of $0.4 million to terminate the leases and write-off related leasehold improvements that have no further utility. The obligation to the landlord was paid in the third quarter of fiscal 2012. During the fourth quarter of fiscal 2012, the Company terminated the employment of certain individuals and recorded a severance and benefits charge of $0.1 million, which was partially offset by the reversal of severance charges recorded in fiscal 2011.

Divestitures

In the fourth quarter of fiscal 2013, the Company designated the assets of its Elucigene product line, acquired in the Gen-Probe acquisition, as assets held-for-sale, and recorded a charge of $0.7 million to record the assets at fair value. In the first quarter of fiscal 2014, the Company finalized the sale of the assets for $3.0 million. At September 28, 2013, assets held-for-sale consisted of inventory and certain equipment valued at $2.4 million and goodwill of $0.6 million.

The Company completed the sale of its LIFECODES business and recorded a net gain of $0.9 million in the second quarter of fiscal 2013. For the year ended September 28, 2013, the Company recorded a charge of $0.3 million related to the disposition of certain other assets held-for-sale.

Fiscal 2011 Charges

In the fourth quarter of fiscal 2011, the Company terminated the employment of certain individuals and recorded a severance and benefits charge of $0.3 million, all of which was unpaid as of September 24, 2011. In addition, in the fourth quarter of fiscal 2011, the Company sold a minor non-core product line for $1.1 million resulting in a net gain of $0.4 million.

Subsequent Events—Fiscal 2014 Action

In the first quarter of fiscal 2014, the Company implemented an additional cost reduction initiative which included headcount reductions. All affected employees were notified and ceased employment in the first quarter of fiscal 2014. The Company expects to record a severance and benefits charge of approximately $4.6 million in the first quarter of fiscal 2014.