Reorganization and Business Transformation

3 Months Ended

Mar. 31, 2021

Restructuring and Related Activities [Abstract]

Reorganization and Business Transformation

2020 Workforce Reduction and Real Estate Rationalization Measures

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 $52 to $60 million, consisting primarily of the following:

•$13 to $15 million for employee severance and other employee-related costs, which is separate from the $28 to $30 million for costs related to the VSP,

•$4 to $7 million charge for facilities lease related costs, and

•$7 to $8 million for outside service, legal and other associated costs.

The Company incurred $8 million of these costs and charges in the first quarter of 2021 and $42 million 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 $60 to $70 million. Approximately $12 million to $14 million of the cash expenditures relate to cash payments to international employees and which are not expected to have a material impact on the Company's Condensed Consolidated Statements of Income 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 $8 million ($7 million cash and $1 million non-cash) in the first quarter of 2021 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 are required to work to earn them to the extent the required service period extends beyond the nominal period. $3 million of these costs were recorded to Costs of revenue, $2 million were recorded to Selling, general and administrative expenses and $3 million were recorded to Research and development expenses. There was no impact to the segment gross profit.

Cash paid related to the actions described above was $17 million in 2021 and $23 million in 2020. Not included in the table below are approximately $1 million in 2021 and $2 million in 2020 of cash payments for international employees which, are not expected to have a material impact on the Condensed Consolidated Statements of Income as noted above.

The 2021 activity and the reserves related to these workforce reduction and real estate rationalization measures are as follows:


In millions	Balance at December 31, 2020		Expense accruals		Cash payments		Balance at March 31, 2021
VSP	$	16	$	2	$	(11)	$	7
Employee severance and other employee-related costs	2		3		(4)		1
Facilities lease related costs, outside service, legal and other associated costs	—		2		(2)		—
Total	$	18	$	7	$	(17)	$	8

In addition, the Company incurred non-cash costs not reflected in the table above of $1 million in 2021 and $2 million in 2020 for 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 March 31, 2021 and is not included in the table above.