Memorex 2007 Annual Report Download - page 91

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Note 9 — Restructuring and Other Expense
The components of our restructuring and other expense included in the Consolidated Statements of Operations for
the years ended December 31, 2007, 2006 and 2005 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
2007 Activity
2007 Cost Reduction Restructuring Program
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, research and development (R&D), administrative and sales organizations to
align our resources with our strategic direction. This program includes 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 will focus manufacturing on magnetic tape coating operations at our existing plants in
Camarillo, California and Weatherford, Oklahoma, and we will consolidate and outsource all converting operations for
magnetic tape cartridges that are currently spread among three plants. We plan to discontinue all 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.
Severance, severance related costs and lease termination costs. During the second quarter of 2007, we recorded
estimated severance and related benefits of $15.1 million related to our cost reduction program for our manufacturing and
R&D organizations. During the third quarter of 2007, we recorded additional restructuring charges of $3.1 million related to
reorganization of certain administrative and sales organizations. The charges in the third quarter of 2007 consisted of
estimated severance and related benefits of $2.9 million and lease termination costs of $0.2 million. During the fourth
quarter of 2007, we recorded additional restructuring charges of $3.3 million for severance and related costs related to
reorganization of certain administrative and sales organizations.
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. We expect to incur a total of $35 million to $40 million
in restructuring charges over two years related to this cost reduction program.
62
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)