Reorganization and Business Transformation

12 Months Ended

Dec. 31, 2020

Restructuring and Related Activities [Abstract]

Reorganization and Business Transformation

2018 Plan

In June 2018, the Company approved a plan to consolidate certain of its operations, including transitioning its corporate headquarters to San Diego, California from its location in Dayton, Ohio. This plan, which was being executed in connection with Teradata’s comprehensive business transformation, better aligned the Company’s skills and resources to effectively pursue opportunities in the marketplace. The Company recognized costs of $23 million in 2018, $14 million in 2019 and $1 million in 2020 for employee separation benefits, transition support, facilities lease related costs, outside service, legal and other exit-related costs. The employee separation benefit costs were expensed over the time period that the employees had to work to earn them. All actions were completed as of December 31, 2020 and the Company incurred costs and charges of approximately $38 million related to the plan. The majority of the costs were attributable to the Americas reporting unit and recorded as selling, general and administrative expenses with no impact on our segment gross profit. Cash paid related to this plan was $11 million in 2018, $19 million in 2019 and $2 million in 2020. Included in the total costs of $38 million for the plan are non cash expenses of $6 million for accelerated amortization recorded in 2019 for right-of-use assets associated with the lease on its prior corporate headquarters. The remaining lease liability is included in our operating lease obligations as of December 31, 2019 and 2020.

2020 Plan

In September 2020, the Company offered a voluntary separation program ("VSP") to certain tenured employees. This global program was generally made available to active employees in good standing who (1) were at least 55 years old as of October 1, 2020 and (2) had at least ten years of service with Teradata. This program was implemented as part of the Company's efforts to improve its cost structure. On November 2, 2020, the Company approved a plan to realign and reduce its workforce and rationalize its real estate footprint. The workforce measures involve involuntary headcount reduction actions. These actions are separate from the VSP. The rationalization of the Company’s real estate footprint involves terminating leases relating to certain of the Company’s offices globally and transitioning impacted employees to a permanent virtual working environment, co-working space or a smaller facility, depending on business need. The Company is continuing to evaluate and implement additional measures that would be expected to result in further cost savings.

The Company expects that the costs relating to these workforce reduction and real estate rationalization measures will include one-time employee separation benefits, transition support, outside services and other exit-related costs. The Company expects that it will incur total costs and charges related to these actions in the range of approximately $55 to $65 million, consisting primarily of the following:

•$12 to $14 million for employee severance and other employee-related costs, which is separate from the $30 to $33 million for costs related to the Voluntary Separation Program,

•$5 to $6 million charge for facilities lease related costs, and

•$8 to $12 million for outside service, legal and other associated costs.

The Company incurred $42 million of these costs and charges in 2020 with the remaining costs and charges expected to be incurred in 2021 upon completion of these actions. Cash expenditures related to these actions are estimated at approximately $65 to $75 million. Approximately $14 to $18 million of the cash expenditures relate to cash payments to international employees and will not have a material impact on the Consolidated Statements of Income (Loss) due to the Company accounting for its International postemployment benefits under Accounting

Standards Codification 712, Compensation - Nonretirement Postemployment Benefits ("ASC 712"), which uses actuarial estimates and defers the immediate recognition of gains or losses.

The Company recognized costs of $42 million ($38 million cash and $4 million non-cash) in 2020 for the VSP, employee separation benefits, facilities lease related costs, outside service, legal and other associated costs. Certain benefits are being expensed over the time period that the employees have to work to earn them to the extent the required service period extends beyond the nominal period. $10 million of these costs were recorded to Costs of revenue, $25 million were recorded to Selling, general and administrative expenses and $7 million were recorded to Research and development expenses. There was no impact to the segment gross profit.

Cash paid related to the plan listed above was $23 million in 2020. Not included in the table below are approximately $2 million of cash payments for international employees which will not have a material impact on the Consolidated Statements of Income (Loss) as noted above, as well as another $1 million payments made for outside services to be completed in early 2021. These advance payments have not yet been recognized as expense for the year ended December 31, 2020.

The 2020 activity and the reserves related to the 2020 plan are as follows:


In millions	Expense accruals		Cash payments		Balance at December 31, 2020
VSP	$	23	$	(7)	$	16
Employee severance and other employee-related costs	9		(7)		2
Facilities lease related costs, outside service, legal and other associated costs	6		(6)		—
Total	$	38	$	(20)	$	18

In addition, the Company incurred non-cash costs not reflected in the table above of $2 million in stock-based compensation for accelerated vesting tied to the VSP and $2 million for accelerated amortization of right-of-use assets and fixed assets in 2020 associated with the termination of leases relating to certain of the Company’s offices globally. The remaining lease liability is included in our operating lease obligations as of December 31, 2020 and is not included in the table above.