This excerpt taken from the SYT 6-K filed Jul 28, 2005.
Note 4: Restructuring and Impairment
SYNGENTA HALF YEAR RESULTS 2005 / PAGE 16 OF 24
Restructuring represents the effect on reported performance of initiating business changes which are considered major and which, in the opinion of management, will have a material effect on the nature and focus of Syngenta's operations, and therefore require separate disclosure to provide a more thorough understanding of business performance. Restructuring includes the effects of completing and integrating significant business combinations and divestments. The incidence of these business changes may be periodic and the effect on reported performance of initiating them will vary from period to period. Because each such business change is different in nature and scope, there will be little continuity in the detailed composition and size of the reported amounts which affect performance in successive periods. Separate disclosure of these amounts facilitates the understanding of performance including and excluding items affecting comparability. Reported performance before restructuring and impairment is one of the measures used in Syngentas short term employee incentive compensation schemes. Syngentas definition of restructuring and impairment may not be comparable to similarly titled line items in financial statements of other companies.
Restructuring and impairment includes the impairment costs associated with major restructuring and also impairment losses and reversals of impairment losses resulting from major changes in the markets in which a reported segment operates.
As part of the operational efficiency program, the closure of one Crop Protection production site was announced in 2005, together with the rationalization of one further production site. The Seeds NAFTA corn and soybean business continued its restructuring program to integrate the Garst and Golden Harvest acquisitions. Cash costs of $62 million and non-current asset impairments totaling $5 million have been recorded in the first half 2005.
The $24 million inventory step-up charge relates to seed inventories acquired in the Garst and Golden Harvest business combinations. Purchase accounting rules require the book value of acquired finished goods inventories to be stepped up to fair value less costs to sell, with a corresponding reduction in goodwill. The stepped-up amount is expensed as the acquired inventories are sold. This adjustment does not affect cash flows, and inventories produced after the acquisition date are valued at their production cost.
The $54 million non-cash pension restructuring charges in 2004 mainly represents the non-recurring transition expense associated with the amendment of Syngentas Swiss pension plan.
This excerpt taken from the SYT 20-F filed Mar 16, 2005.
Restructuring and impairment consists of the following:
Restructuring represents the effect on reported performance of initiating business changes which are considered major and which, in the opinion of management, will have a material effect on the nature and focus of Syngentas operations, and therefore require separate disclosure to provide a more thorough understanding of business performance. Restructuring includes the effects of completing and integrating significant business combinations and divestments. Restructuring and impairment includes the impairment costs associated with major restructuring and also impairment losses and reversals of impairment losses resulting from major changes in the markets in which a reported segment operates.
Charges to provisions reflect liabilities associated with restructuring recognized in the year as provisions. Costs expensed as incurred are mainly related to the establishment of common IT systems across the merged group and the relocation of staff and operations as part of the restructuring, which may not be recognized until they are incurred under IAS 37. No such costs were incurred in 2004.
Approximately 5,200 jobs that existed at the formation of Syngenta will be eliminated in respect of plans announced by December 31, 2004, and 4,700 employees had already left the group by that date. Provisions for employee termination costs include severance, pension and other costs directly related to these employees.
Provisions for other third party costs principally include payments for early termination of contracts with third parties related to redundant activities.
As part of the operational efficiency program, the closure of three production sites has been announced together with the rationalization of two further production sites. A further focusing of R&T activities, including the closure of one site, has also been announced. The Seeds NAFTA corn and soybean business announced a restructuring program to integrate the Advanta and Golden Harvest® acquisitions. The final costs related to the merger restructuring program, associated with the closure of two production sites, were also charged in 2004. Cash costs of US$171 million and asset impairments totalling US$134 million have been recorded in 2004 for these restructuring initiatives. In addition, the rules of Syngentas Swiss pension plan were amended in April 2004 so that, whilst it continues to be accounted as a defined benefit plan, there is increased sharing of risks with the employee members against a one-time non-cash transition charge of US$60 million. The change will reduce the expense related to early retirement in 2005 and future years, and reduces Syngentas exposure to pension fund investment returns. This charge has been partially offset by a US$10 million favourable non-cash impact of pension fund curtailments associated with restructuring.
The charge to income in 2003 mainly represents:
Divestment gains in 2003 represent a net pre-tax gain of US$39 million on a sale of technology and intellectual property to Diversa Corporation and gains of US$17 million on the divestment of other product rights.
The charge to income in 2002 largely represents costs related to further progress in the synergy plans, including plans to close a further four manufacturing sites, and the announced plan to refocus the activities of each of Syngentas main research and development sites on specific activities and out license certain activities linked to the alliance with Diversa Corporation announced in the fourth quarter. Of the total charge to income in 2002, US$49 million of employee termination costs and US$21 million of other third party costs relate to the manufacturing integration plans, and US$53 million of employee termination costs and US$35 million of other third party costs relate to the research and development integration plans. The charge also included employee termination costs of US$4 million relating to restructuring the Seeds business in South Korea.