Memorex 2007 Annual Report Download - page 53

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Restructuring and Other
The components of our restructuring and other expense included in the Consolidated Statements of Operations were
as follows:
2007 2006 2005
Years Ended December 31,
(In millions)
Restructuring
Severance and severance related expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $23.6 $ 8.6 $ —
Lease termination costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.6 1.4 1.6
Reversal of severance and severance related expense from prior restructuring programs . . . . — (0.9) (0.4)
Total restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.2 9.1 1.2
Asset impairments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.4 2.8 —
Pension curtailment (Note 11). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.4 — —
Terminated employment agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.7) — —
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $33.3 $11.9 $ 1.2
In 2007, we announced a strategy focused on transforming Imation to a brand and product management company
with a balanced portfolio of strong commercial and consumer brands. Consequently, we started a cost reduction
restructuring program in our manufacturing, R&D, administrative and sales organizations to align our resources with our
strategic direction. In 2007, we recorded net restructuring charges of $21.5 million related to our 2007 cost reduction
restructuring program. This program included a reorganization of our magnetic data storage tape manufacturing operations
and changes to our R&D organization to support an increasing focus on engineering and qualification of new products. We
are focusing manufacturing on magnetic tape coating operations at our existing plants in Camarillo, California and
Weatherford, Oklahoma, and are consolidating and outsourcing all converting operations for magnetic tape cartridges that
are currently spread among three plants. We plan to discontinue our manufacturing operations at our Wahpeton, North
Dakota plant, which we plan to exit by mid-2009. The R&D organization will be aligned to focus on key programs in
support of future advanced magnetic tape formats and our increased growth and focus on consumer digital storage
products and accessories.
As of December 31, 2007, we estimate that a cumulative total of 835 positions will be eliminated under our cost
reduction restructuring program by mid-2009, primarily in our manufacturing organization. The program is expected to
result in $25 million to $30 million in annualized cost savings once the program is fully implemented, which is intended to
counteract the impact of declining gross margins on tape products described above. We expect to incur a total of
$35 million to $40 million in restructuring charges over two years related to this cost reduction program.
In connection with the TDK Recording Media business acquisition we reorganized our business and recorded
$2.3 million of restructuring costs related to Imation operations that were reflected in our Consolidated Statements of
Operations as restructuring and other expense. An additional $9.4 million of restructuring charges was recorded as an
adjustment to goodwill in accordance with Emerging Issues Task Force (EITF) 95-3, Recognition of Liabilities in Connection
with a Purchase Business Combination.
Asset impairment charges of $8.4 million were related to abandonment of certain manufacturing and R&D assets.
In the second quarter of 2007, the Board of Directors and Mr. Henderson mutually determined that Mr. Henderson
would resign as Chairman of the Board and CEO of the Company due to his continuing health issues. Costs recorded in
the second quarter of 2007 associated with the terminated employment agreement totaled $3.1 million. Mr. Henderson’s
passing resulted in the accounting recognition of a change in estimate resulting in the reversal of $3.8 million of expense
for unvested stock awards previously awarded and other costs recorded during the second quarter which will not be
incurred.
In 2006, we recorded net restructuring charges of $9.1 million mainly related to the restructuring program which
began in the second quarter of 2006, as well as first quarter charges related to employee reductions in our Wahpeton,
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