Adaptec 2002 Annual Report Download - page 23

Facility Lease Write−down of
and Property
Workforce Contract Settlement and
(in thousands) Reduction Costs Equipment, Net Total
−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−
Total charge − March 26, 2001 $ 9,367 $ 6,545 $ 3,988 $ 19,900
Noncash charges − − (3,988) (3,988)
Cash payments (7,791) (3,917) − (11,708)
−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−
Balance at December 31, 2001 1,576 2,628 − 4,204
======================================================================
We completed the restructuring activities contemplated in the March 2001 plan by
June 30, 2002 and achieved annualized savings of approximately $28.2 million in
cost of revenues and operating expenses based on the expenditure levels at the
time of this restructuring.
During the first six months of fiscal 2002, we made cash payments of $2.8
million in connection with the March restructuring. The remaining restructuring
liability of $1.4 million at June 30, 2002 related primarily to facility lease
payments, net of estimated sublease revenues, and was classified as accrued
liabilities on the balance sheet. We do not expect this restructuring to have
any impact on our Statement of Operations in the future.
Amortization of Goodwill and Impairment of Goodwill and Purchased
Intangibles
We adopted the Statement of Financial Accounting Standard No. 142 (SFAS 142),
"Goodwill and Other Intangible Assets" on a prospective basis at the beginning
of 2002 and stopped amortizing goodwill in accordance with the provisions of
SFAS 142. The impact of not amortizing goodwill on the net income and net income
per share for 2001 and 2000 is provided in Note 1 to the Consolidated Financial
Statements.
In conjunction with the implementation of SFAS 142, we completed the
transitional impairment test as of the beginning of 2002 and determined that a
transitional impairment charge would not be required. We also completed our
annual impairment test in December 2002 and determined that there was no
impairment of goodwill.
Amortization of goodwill increased to $44.0 million in 2001 from $36.4 million
in 2000 primarily as a result of the goodwill recorded in connection with the
Malleable and Datum acquisitions, which were completed in mid 2000.
During the second quarter of 2001, we discontinued further development of the
technology acquired in the purchase of Malleable. We did not expect to have any
future cash flows related to the Malleable assets and had no alternative use for
the technology. Accordingly, we recorded an impairment charge of $189.0 million,
equal to the remaining net book value of goodwill and intangible assets related
to Malleable. As a result, there was no remaining Malleable goodwill or
intangibles to amortize in the second half of 2001.
In the fourth quarter of 2001, due to a continued decline in current market
conditions and a delay in the introduction of certain products to the market, we
completed an assessment of the future revenue potential and estimated costs
associated with all acquired technologies. As a result of this review, we
recorded an impairment charge of $79.3 million related to the acquired goodwill
and intangibles recognized in the purchase of Datum. The impairment charge was
calculated by the excess of the carrying value of assets over the present value
of estimated future cash flow related to these assets. The impairment charge
reduced the amounts subject to amortization for the remainder of 2001.
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