3Ware 2004 Annual Report Download - page 38

total of $11.6 million of restructuring costs, which were recognized as operating expenses in the last three
quarters of fiscal 2002. The July 2001 restructuring plan was comprised of the following components:
•Workforce reduction—Approximately 50 employees, or 5% of the workforce was eliminated, which
resulted in severance payments of approximately $900,000 in the fiscal year ended March 31, 2002.
•Consolidation of excess facilities—As a result of our acquisitions and significant internal growth in
fiscal 2001, we expanded our number of locations throughout the world. In an effort to improve the
efficiency of our workforce and reduce our cost structure, we implemented a plan to consolidate our
workforce into certain designated facilities. As a result, we recorded a charge of approximately $2.0
million, which was recognized in the second quarter of fiscal 2002, primarily relating to non-cancelable
lease commitments for smaller facilities in the United States.
•Property and equipment impairments—During fiscal 2000 and 2001, we aggressively expanded our
manufacturing capacity in order to meet demand. As a result of the sharp decrease in demand at the end
of fiscal 2001, we recorded a charge of approximately $5.6 million in the second quarter of fiscal 2002
for the elimination of excess manufacturing equipment related to older process technologies. These
assets were removed from the production floor and disposed of. In addition, we recorded a charge of
approximately $3.1 million relating to the abandonment of certain leasehold improvements and software
licenses in connection with the closure of certain U.S. facilities.
We have completed the restructuring activities contemplated by the July 2001 plan, but have not yet
disposed of the surplus leased facilities. As a result of the July 2001 restructuring activities, we realized
approximately $4 million of annual savings relating to fixed cost of sales overhead and approximately
$2 million of annual savings relating to operating expenses.
In July 2002, we announced our second workforce reduction and restructuring program. This came about as
aresult of the prolonged downturn in the telecommunications industry and the uncertainty as to when the
telecommunications equipment market would recover. The July 2002 workforce reduction and restructuring
program was comprised of the following:
•Closure of the wafer manufacturing facility—In June 2002, we completed our plan to discontinue
manufacturing non-communication ICs and close our internal wafer manufacturing facility in San
Diego. As a result, we recorded a total charge of $4.0 million in fiscal 2003. The charge was comprised
of severance packages for approximately 70 employees in the manufacturing workforce and estimated
facility restoration costs. This was the only wafer fabrication facility owned by us.
Our wafer manufacturing facility was closed at the end of March 2003 and the facility was exited at the
end of June 2003. During the third quarter of fiscal 2004, we completed the activities contemplated by
the plan. As a result, we recorded an adjustment to the restructuring liability for the excess accrued
severance and facilities restoration costs, and recognized a restructuring benefit of approximately
$537,000. We do not expect any future charges or benefits related to the closure of the wafer
manufacturing facility. As a result of the closure of our internal wafer manufacturing facility, we
realized annual savings totaling approximately $14 million relating to fixed cost of sales overhead in
fiscal 2004.
•Global workforce reduction—In an effort to reduce our expenses in July 2002, we implemented a
workforce reduction plan, which eliminated approximately 165 employees or 25% of our workforce.
The global workforce reduction included the closing of a United States design center and disposal of its
related assets and resulted in a charge of $3.0 million. Payments for the employee severance were made
in fiscal 2003; amounts for the facility closure were paid through the end of the related lease term in
fiscal 2004.
We have completed the activities contemplated by the global workforce reduction portion of the July
2002 plan, and no further payments or expenses are anticipated under this program. As a result of the
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