Adaptec 2003 Annual Report Download - page 28

Restructuring Costs and other Special Charges
In response to the severe economic downturn in the semiconductor industry in 2001, we implemented two restructuring plans aimed at
focusing development efforts on key projects and reducing operating costs. By the first quarter of 2003, we were still operating in a
challenging economic climate, making it necessary to again streamline operations and announce a further restructuring. Our
assessment of market demand for our products, and the development efforts necessary to meet this demand, were key factors in our
decisions to implement these restructuring plans. Because end markets for our products had contracted to such a great degree, certain
development projects were curtailed. Cost reductions in all other functional areas were also implemented, as fewer resources were
required to support the reduced level of development and sales activities during this period.
We have completed substantially all of the activities contemplated in the original restructuring plans, but have not yet disposed of all
surplus leased facilities as of December 31 2003.
Restructuring – March 26, 2001
We had completed the restructuring activities contemplated in the March 2001 restructuring plan by June 2002. However, we still
have ongoing rental commitments for office space abandoned under this plan. Due to the continued downturn in real estate markets,
we expect these costs to be higher than anticipated in the original plan. As a result, we recorded an additional provision for abandoned
office facilities of $3.1 million in the third quarter of 2003. Payments made in connection with these leases in 2003 were $1.9
million, including amounts drawn down from accrued liabilities. Efforts to exit these sites are ongoing, however, the payments related
to these facilities could extend to 2010.
Restructuring – October 18, 2001
We implemented a restructuring plan in the fourth quarter of 2001 to reduce our operating cost structure. This restructuring plan
included the termination of 341 employees, the consolidation of excess facilities, and the abandonment of certain research and
development projects. As a result, we recorded a restructuring charge of $175.3 million in the fourth quarter of 2001.
On July 7, 2003, we terminated our remaining rental commitment for Mission Towers Two, located in Santa Clara, CA, by purchasing
the facility for $133 million and then immediately reselling it for $33 million. We incurred fees of approximately $1 million on these
transactions. Upon completion of the sale of Mission Towers Two, we reversed $4.5 million of excess restructure provision. The
remainder of cash payments made in 2003 and the remaining accrual at December 28, 2003 related to other facilities abandoned in the
October 2001 restructuring. While we continue our efforts to exit the remaining sites, payments relating to these facilities could
extend to 2009.
Restructuring – January 16, 2003
In the first quarter of 2003, as a result of the prolonged economic downturn in the semiconductor industry, we implemented another
corporate restructuring aimed at further reducing operating expenses. The restructuring included the termination of approximately 175
employees and the closure of design centers in Maryland, Ireland and India. To date, we have recorded a restructuring charge of $18.3
million in accordance with SFAS 146, “Accounting for Costs Associated with Exit or Disposal Activities”. These charges related to
workforce
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