Adaptec 2006 Annual Report Download - page 49

Table of Contents
2005
During 2005, we completed various restructuring activities aimed at streamlining production and reducing our operating expenses. In the first quarter of 2005, we
recorded restructuring charges of $0.9 million in severance costs related to the termination of 24 employees across all business functions. In the second quarter of
2005, we expanded the workforce reduction activities initiated during the first quarter and terminated 63 employees from research and development located in the
Santa Clara facility. In addition, we consolidated our two manufacturing facilities (Santa Clara, California and Burnaby, British Columbia) into one facility
(Burnaby), which involved the termination of 26 employees from production control, quality assurance, and product engineering. As a result, we recorded total
second quarter restructuring charges of $7.6 million, including $6.7 million for termination benefits and a $0.9 million write-down of equipment and software
assets whose value was impaired as a result of these plans. In the third quarter of 2005, we consolidated our facilities and vacated excess office space in the Santa
Clara location, and recorded a restructuring charge of $5.3 million for excess facilities and an additional $0.1 million in severance costs.
In the first quarter of 2006, we continued the workforce reduction plans initiated in 2005 and recorded $1.6 million restructuring charges related to the
termination of 19 employees, primarily from research and development, in the Santa Clara facility. During the third quarter of 2006 we reduced our estimated
severance accrual related to the 2005 workforce reduction activities by $0.4 million, and increased the accrual for excess facilities related to the 2005
restructuring by $0.8 million. To date, we have made payments relating to these activities of $10.6 million. As of December 31, 2006, the software assets have
been disposed of and $0.1 million severance costs remain to be paid in 2007. Payments related to the excess facilities will extend to 2011.
2003 and 2001
In 2003 and 2001, we implemented three restructuring plans aimed at focusing development efforts on key projects and reducing operating costs in response to
the severe and prolonged economic downturn in the semiconductor industry. Our assessment of the 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. As end markets for our products had contracted, certain
projects were curtailed in an effort to cut costs. 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 these periods.
The January 2003 restructuring included the termination of 175 employees and the closure of design centers in Maryland, Ireland and India, and vacating office
space in the Santa Clara facility. To date, we have recorded restructuring charges of $18.3 million in accordance with SFAS 146, “Accounting for Costs
Associated with Exit or Disposal Activities”, including $1.5 million for asset write-downs. These charges related to workforce reduction, lease and contract
settlement costs, and the write-down of certain property, equipment and software assets whose value was impaired as a result of this restructuring plan. We have
disposed of the property improvements and computer equipment, and software licenses have been cancelled or are no longer being used. In 2006, we reversed
$2.3 million of our restructuring accrual because certain floors in the Santa Clara facility that had been vacated in 2003 were re-occupied in 2006 due to the
addition of personnel that occurred with the acquisition of the Storage Semiconductor Business.
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Source: PMC SIERRA INC, 10-K, March 01, 2007 Powered by Morningstar® Document Research℠