Annual report pursuant to Section 13 and 15(d)

RESTRUCTURING AND OTHER CHARGES

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RESTRUCTURING AND OTHER CHARGES
 12 Months Ended
Dec. 31, 2013
Restructuring and Related Activities [Abstract]  
RESTRUCTURING AND OTHER CHARGES
NOTE 19. RESTRUCTURING AND OTHER CHARGES
We executed restructuring actions primarily in the form of involuntary separation programs in the fourth quarter of 2012.  These actions were in response to reduced demand in our U.S. businesses and most key markets around the world in the second half of 2012, as well as a reduction in orders in most U.S. and global markets for 2013.  We reduced our worldwide professional workforce by approximately 650 employees, or 3 percent.  We also reduced our hourly workforce by approximately 650 employees.  During 2012, we incurred a pre-tax charge related to the professional and hourly workforce reductions of approximately $49 million.
Employee termination and severance costs were recorded based on approved plans developed by the businesses and corporate management which specified positions to be eliminated, benefits to be paid under existing severance plans or statutory requirements and the expected timetable for completion of the plan.  Estimates of restructuring were made based on information available at the time charges were recorded. 
We incurred a $1 million charge for lease terminations and a $2 million charge for asset impairments and other non-cash charges. During 2012, we recorded restructuring and other charges of $52 million ($35 million after-tax). These restructuring actions included:
In millions
Year ended
December 31, 2012
Workforce reductions
$
49

Exit activities
1

Other
2

Restructuring and other charges
$
52


Restructuring and other charges were included in each segment in our operating results as follows:
In millions
Year ended
December 31, 2012
Engine
$
20

Distribution
14

Power Generation
12

Components
6

Restructuring and other charges
$
52


The table below summarizes where the restructuring and other charges are located in our Consolidated Statements of Income for the year ended December 31, 2012.
In millions
Year ended
December 31, 2012
Cost of sales
$
29

Selling, general and administrative expenses
20

Research, development and engineering expenses
3

Restructuring and other charges
$
52


At December 31, 2013, of the approximately 1,300 employees affected by this plan, substantially all terminations have been completed.
The table below summarizes the activity and balance of accrued restructuring charges, which is included in "Other accrued expenses" in our Consolidated Balance Sheets for the years ended December 31, 2012 and 2013.
In millions
 
 
2012 Restructuring charges(1)
 
$
50

Cash payments for 2012 actions
 
(25
)
Balance at December 31, 2012
 
25

Cash payments for 2012 actions
 
(22
)
Change in estimate(2)
 
(3
)
Balance at December 31, 2013
 
$
—

__________________________________________________
(1) 
Restructuring charges include severance pay and benefits and related charges and lease termination costs.
(2) 
Due to the inherent uncertainty involved in calculating the initial estimates, the actual amounts paid for such activities differed slightly from the amounts initially recorded. We have adjusted the previous estimates accordingly.