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ADOBE SYSTEMS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
(Continued)
NOTE 7. RESTRUCTURING AND OTHER CHARGES (CONTINUED)
divesting two business units, vacating leased facilities, and canceling certain contracts. These actions and
other non-restructuring related items resulted in charges of $38.2 million, of which approximately
$9.1 million were non-cash charges. Of the $28.6 million in total cash charges, $6.2 million remains accrued
at November 27, 1998.
The following table depicts the restructuring and other activity through November 27, 1998:
Accrued Accrued
Balance at Total Balance at
November 28 Charges Cash Write- November 27
1997 (Credits) Payments downs 1998
Severance and related charges .... $ — $14,264 $(13,370) $ — $ 894
Lease termination costs ......... — 4,526 (464) — 4,062
Impairment of leasehold
improvements at vacated facilities . — 6,382 — (6,382) —
Divestiture of business units ...... — 5,958 — (5,958) —
Canceled contracts ............. — 6,178 (5,235) — 943
Other charges ................ — 4,367 (127) (3,964) 276
— 41,675 (19,196) (16,304) 6,175
Accrual related to previous
restructuring ............... 8,383 (3,430) (2,261) — 2,692
$ 8,383 $38,245 $(21,457) $(16,304) $ 8,867
Severance and related charges primarily include involuntary termination and COBRA benefits,
outplacement costs, and payroll taxes. The terminations were comprised principally of engineering,
marketing, and technical support staff and came primarily from overhead areas, divested business units,
and redundant marketing activities. As of August 31, 1998, the majority of these terminations were
completed. Also included in severance and related charges are expenses associated with a reduction in
force in the Company’s Printing and Systems business that was implemented in the first half of fiscal 1998.
This reduction in force was part of the Company’s initiative to refocus resources on high-growth
opportunities in the printing and digital copier markets. As of November 27, 1998, the remaining accrual
balance of $0.9 million in severance and related charges consists primarily of COBRA benefits and
outplacement costs and is expected to be paid by the third quarter of fiscal 1999.
Lease termination costs of $4.5 million include remaining lease liabilities, brokerage fees, and legal
fees offset by estimated sublease income related primarily to facilities in San Jose, California that were
vacated as part of the restructuring program. The estimated cost of vacating these two facilities, including
estimated costs to sublease, was provided by a commercial real estate brokerage firm retained by the
Company. As of November 27, 1998, $4.0 million of lease termination costs, net of anticipated sublease
income, remains accrued and is expected to be utilized by the third quarter of fiscal 1999.
Charges related to the impairment of leasehold improvements at vacated facilities of $6.4 million
included the write-down of the net book value of leasehold improvements, telecommunications equip-
ments, and a minimal amount of furniture and equipment used in the vacated facilities. Based on an
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