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Table of Contents
consolidated its 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, the Company continued the workforce reduction plans initiated in 2005 and recorded $1.6 million in 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 the Company reduced its
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. The Company further increased its accrual for excess facilities by $0.5 million in the fourth quarter of 2007. To date, the Company
has made payments relating to these activities of $12.0 million. As of December 30, 2007, all severance costs have been paid. Payments related to the excess
facilities will extend to 2011.
2003 and 2001
In 2003 and 2001, the Company 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. PMC’s assessment of the market demand for its products, and the
development efforts necessary to meet this demand, were key factors in the decisions to implement these restructuring plans. As end markets for the Company’s
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, PMC has 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. PMC has
disposed of the property improvements and computer equipment, and software licenses have been cancelled or are no longer being used. In 2006, the Company
reversed $2.3 million of this 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. The Company reversed a further $0.5 million in 2007 as it
completed a portion of the lease obligation at this site.
The October 2001 restructuring plan included the termination of 341 employees, the consolidation of excess facilities, and the curtailment of certain research and
development projects, resulting in a restructuring charge of $175.3 million, including $12.2 million of asset write-downs. Due to the continued downturn in real
estate markets, the Company recorded additional provisions for abandoned office facilities of $1.3 million in the fourth quarter of 2004.
In the first quarter of 2001, PMC recorded a charge of $19.9 million for a restructuring plan that included the termination of 223 employees across all business
functions, the consolidation of a number of facilities and the curtailment of certain research and development projects. Due to the continued downturn in real
estate markets, the Company recorded additional provisions for abandoned office facilities of $2.2 million in the fourth quarter of 2004, $0.8 million in the third
quarter of 2006, and $0.9 million in the fourth quarter of 2007.
82
Source: PMC SIERRA INC, 10-K, February 22, 2008