Adobe 1999 Annual Report Download - page 24

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23
distribution warehouse as a result of the decision to outsource our North American distribution and
warehousing operations and the majority of our customer support. The reduction in force primarily
affected employees in Seattle, Washington and Santa Clara, California. Total charges incurred as a result of
the restructuring were $2.1 million, which include severance and related charges associated with the
reduction in force and charges for vacating leased facilities.
The other 1999 restructuring program, implemented in the second and third quarters, was directly
related to the centralization of our worldwide sales and administrative organizations and the realignment
of our Printing Solutions business. The program included a reduction in force of 198 positions, two of
which were executive positions. The reduction in force primarily affected our European headquarters in
Edinburgh, Scotland and our North American headquarters in San Jose, California. Total charges incurred
as a result of the restructuring were $17.6 million, of which approximately $0.1 million were noncash
charges. This restructuring was completed in the third quarter of fiscal 1999.
In the third and fourth quarters of fiscal 1999, we revised our estimate of the total costs associated
with the restructuring program implemented during the second and third quarters described above,
resulting in an adjustment to the restructuring accrual of approximately $3.2 million. Approximately
$3.0 million of the adjustment reflects lower than estimated severance and related charges primarily
attributable to employees impacted by the restructuring who were able to find alternative employment
within Adobe. The remaining adjustment was due to lower than expected charges related to vacating
leased facilities.
We also recorded adjustments during the third and fourth quarters of fiscal 1999 related to prior year
restructuring programs in the amount of $1.9 million. For detailed information regarding the adjustments
and our restructuring programs, see Note 7 of the Notes to Consolidated Financial Statements.
Fiscal 1998 restructuring program
The 1998 restructuring program was implemented to refocus our product development efforts and to
eliminate management redundancies in the organization. As part of the restructuring program, we
implemented a reduction in force of 364 positions, four of which were executive positions, primarily in our
North American and corporate operations. The reductions came predominantly from overhead areas,
divested business units, and redundant marketing activities, and as of August 31, 1998, the majority of
these terminations were completed. In addition to severance and related charges associated with the
reduction in force of 364 positions, the restructuring program included charges for divesting two business
units, vacating leased facilities, and canceling certain contracts. These actions and other nonrestructuring-
related items resulted in charges of $38.2 million, of which approximately $9.1 million were noncash
charges.
During fiscal 1999, we experienced savings of approximately $60.0 million from the fiscal 1998
restructuring program as a result of the reductions in force, as well as reductions in marketing, facilities,
and other discretionary expenses, such as travel and outside services. We also experienced savings of
approximately $15.0 million as a result of the restructuring programs implemented during fiscal 1999,
which, on an annualized basis, equate to approximately $25.0 million. We believe that the savings realized
under the restructuring programs will be invested in programs and people to enhance revenue growth by
significantly increasing our investment in eBusiness and enhanced marketing activities. We also believe
that these savings will assist us in achieving our operating model targets of 20%, 32%, and 9% of revenue
for research and development, sales and marketing, and general and administrative expenses, respectively,
in fiscal 2000.
Other charges
During the third and fourth quarters of fiscal 1999, we recorded other charges of $8.4 million that
were unusual in nature. These charges included $2.0 million associated with the cancellation of a contract,