Restructuring and Other Costs, Net

6 Months Ended

Jul. 01, 2023

Restructuring and Related Activities [Abstract]

13.	Restructuring and Other Costs, Net

During the first quarter of fiscal 2022, Intevac substantially completed implementation of the 2022 cost reduction plan (the “2022 Cost Reduction Plan”), which was intended to reduce our overall cost structure and optimize our operational design, inclusive of the stranded overhead associated with the divestiture of the Photonics business. The restructuring program includes management reorganization and the right sizing of certain technology development, marketing and administrative functions. We incurred restructuring costs of $1.2 million in estimated severance and the related modification of certain stock-based awards. Other costs incurred as part of the 2022 Cost Reduction Plan include: (i) a benefit of $1.3 million related to the stock-based compensation forfeitures related to the employees affected by the reduction in workforce, (ii) $1.5 million for fixed asset disposals and (iii) $755,000 for write-offs of excess inventory. The 2022 Cost Reduction Plan reduced Intevac’s workforce by 6 percent. The cost of implementing the 2022 Cost Reduction Plan was reported under cost of net revenues and operating expenses in the condensed consolidated statements of operations. Implementation of the 2022 Cost Reduction Plan is expected to reduce salary, wages and other employee-related expenses by approximately $2.1 million on an annual basis.

The changes in restructuring reserves, which resulted from cash-based severance payments and other employee-related costs, associated with the 2022 Cost Reduction Plan for the three and six months ended July 2, 2022 were as follows.


	Employee Termination Costs
	(In thousands)
Balance at January 1, 2022	$	—
Provision for restructuring charges under the 2022 Cost Reduction Plan		1,232
Cash payments made		(757	)
Non-cash utilization (a)		37

Balance at April 2, 2022		512
Cash payments made		(179	)

Balance at July 2, 2022 (b)	$	333

(a)	Acceleration of equity awards.

(b)	Liability for employee termination costs is included in accrued payroll and related liabilities.

During the fourth quarter of fiscal 2021, the Company recorded asset impairment and restructuring charges associated with the sale of the Photonics division including (i) $693,000 in severance and other employee-related costs related to the termination of the Photonics general manager; (ii) $1.2 million in asset impairment charges on the Company’s ROU asset and (iii) $665,000 in accruals for common area charges associated with an unused space commitment to EOTECH. In consideration of EOTECH’s assumption of certain lease obligations related to the Company’s Santa Clara, California campus, which assumed lease obligations pertain in part to excess space beyond that required by EOTECH’s currently anticipated operation of the Photonics division, the Company agreed to pay EOTECH the amount of $2.1 million, which is payable in (i) one initial installment of $308,000 on January 10, 2022 and (ii) seven equal quarterly installments of $259,000. The Company recorded an asset impairment charge against its ROU asset in the amount of $1.2 million associated with the excess space noted above. The Company recorded a liability to EOTECH in the amount of $665,000, the amount related to common area charges which are not included in the base rental payments or the lease liability on the Company’s condensed consolidated balance sheet. During the first quarter of fiscal 2022, the Company recorded restructuring charges associated with the sale of the Photonics division including $37,000 in severance and other employee-related costs related to the termination of employment of four Photonics employees and $75,000 in stock-based compensation associated with the modification of certain stock-based awards for eighty Photonics employees.

The changes in restructuring reserves, which resulted from cash-based severance payments and other employee-related costs and other exit costs associated with the Photonics divestiture for the three and six months ended July 1, 2023 and July 2, 2022 were as follows.


	Other Exit Costs
	(In thousands)

Balance at December 31, 2022	$	318
Provision for restructuring charges associated with Photonics divestiture (a)		3
Cash payments made		(81	)

Balance at April 1, 2023	$	240
Provision for restructuring charges associated with Photonics divestiture (a)		2
Cash payments made		(80	)

Balance at July 1, 2023	$	162


	Employee Termination Costs			Other Exit Costs			Total

	(In thousands)
Balance at January 1, 2022	$	358		$	665		$	1,023
Provision for restructuring charges associated with Photonics divestiture (a)		112			2			114
Cash payments made		(137	)		(128	)		(265	)
Non-cash utilization (b)		(75	)		—			(75	)

Balance at April 2, 2022	$	258		$	539		$	797

Provision for restructuring charges associated with Photonics divestiture (a)		—			4			4
Cash payments made		(90	)		(77	)		(167	)

Balance at July 2, 2022	$	168	(c)	$	466		$	634

(a)	Included in loss from discontinued operations (See Note 2).

(b)	Acceleration of equity awards.

(c)	Liability for employee termination costs is included in accrued payroll and related liabilities.