Other charges
Manufacturing operations optimization
In order to optimize our network of manufacturing facilities and improve cost effectiveness, we determined that certain manufacturing facilities located in Boulder, Colorado, were no longer needed and accordingly, they were abandoned during the fourth quarter of 2012. This resulted in the write-off of the carrying value of the facility, which aggregated $118 million, during the year ended December 31, 2012. The amount is included in Cost of sales in the Consolidated Statements of Income.
On January 18, 2011, we entered into an agreement whereby Boehringer Ingelheim (BI) agreed to acquire our rights in and substantially all assets at our manufacturing facility located in Fremont, California. The transaction closed in March 2011. In connection with the closing of the transaction, BI assumed our obligations under certain of the facility’s operating lease contracts and entered into an agreement to manufacture certain quantities of our marketed product Vectibix® for us at this facility through December 31, 2012 (the supply period).
These assets continued to be carried on our Consolidated Balance Sheets until the accounting requirements to recognize the sale were met, and estimated useful lives of the remaining fixed assets were reduced to coincide with the supply period. During each of the years ended December 31, 2012 and 2011, we recorded incremental depreciation of approximately $42 million in excess of what otherwise would have been recorded. In addition, due to the assignment to BI of the obligations under certain of the facility’s operating leases, we recorded charges of approximately $23 million during the year ended December 31, 2011, with respect to the lease period beyond the end of the supply period. These amounts were recorded in Cost of sales in the Consolidated Statements of Income.
Other cost savings initiatives
As part of our efforts to improve cost efficiencies in our operations, we recorded certain charges aggregating approximately $71 million, $175 million and $109 million during the years ended December 31, 2013, 2012 and 2011, respectively, which are included in Other operating expenses in the Consolidated Statements of Income. The expenses are primarily severance-related. The 2012 charges also included expenses associated with abandoning leased facilities.
Legal settlement
During the year ended December 31, 2011, we recorded a loss accrual of $780 million in connection with an agreement in principle to settle allegations relating to our sales and marketing practices arising out of previously disclosed federal civil and criminal investigations in the U.S. Attorney’s Offices for the Eastern District of New York and the Western District of Washington. This amount was recorded in Other operating expense in the Consolidated Statement of Income.
