Adaptec 2001 Annual Report Download - page 72

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72
charge for operating and lease termination costs was recorded net of expected future sublease
revenues.
Certain leasehold improvements located at the closed facilities and computer equipment,
software licenses, and related software maintenance prepayments were written down to
estimated fair market value, net of disposal costs.
PM C expects to complete the restructuring activities contemplated in the October 2001 plan by
the fourth quarter of 2002.
Impairment of Goodw ill and Intangible Assets
During the second quarter of 2001, PM C made a decision to discontinue further development of
the technology acquired in the purchase of Malleable. The Company does not expect to have
any future cash flows related to these assets and has no alternative use for the technology.
Accordingly, the Company has recorded an impairment charge of $189 million, equal to the
remaining net book value of goodwill and intangible assets related to Malleable.
In the fourth quarter of 2001, due to a continued decline in market conditions and a delay in
introduction of certain products to the market, the Company completed an assessment of the
future revenue potential and estimated costs associated with all acquired technologies. As a
result of this review, the Company recorded a further impairment charge of $80.8 million
related to the acquired goodw ill and other intangibles recognized in the purchase of Datum
and Octera. The Company recorded a charge of $79.3 million, measured as the amount by
which the carrying value of the goodwill and intangibles exceeded the present value of
estimated future cash flows related to these assets, to impair the goodw ill and intangibles
acquired in the purchase of Datum. The remaining $1.5 million impairment of goodwill
resulted from the cancellation of Octera’s research and development activities during 2001.
Write-down of Inventory
The Company recorded a write-down of excess inventory totaling $20.7 million during the year
ended December 31, 2001. The continued industry wide reduction in capital spending and
resulting decrease in demand for the Company’s products prompted the Company to assess its
current inventory levels compared to sales forecasts for the next twelve months. This excess
inventory charge, which was included in cost of revenues, was calculated in accordance with
the Company's policy, which is based on inventory levels in excess of estimated 12-month
demand.