Asset Impairment, Restructuring and Other Charges (Recoveries)

Asset impairment, restructuring and other charges reflect the impact of certain cost reduction programs and initiatives implemented by the Company. These programs and initiatives include the closing of facilities, the termination of employees and other related activities. Asset impairment, restructuring and other charges include program-specific exit costs, severance benefits pursuant to an ongoing benefit arrangement, and special termination benefits. Severance costs unrelated to the Company's restructuring initiatives are recorded as an element of cost of sales, research and development (“R&D”) or selling, general and administrative expense (“SG&A”), depending upon the classification and function of the employment position terminated. Restructuring costs are expensed during the period in which all requirements of recognition are met.

Asset write-downs are principally related to facilities and equipment that will not be used subsequent to the completion of exit or downsizing activities being implemented, and cannot be sold for amounts in excess of carrying value. In determining the asset groups for the purpose of calculating write-downs, the Company groups assets at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. In determining whether an asset is impaired, the Company evaluates estimated undiscounted future cash flows and other factors such as changes in strategy and technology. An impairment loss exists if the estimated undiscounted future cash flows are less than the carrying amount of the asset group. The Company then determines the fair value of the asset group by discounting the estimated future cash flows, consistent with the cash flows of a market participant, at a discount rate that is used when analyzing potential acquisitions. The Company then compares the fair value of the asset group with the carrying amount of the asset group and writes down the carrying amount of the asset group to its fair value.

During the first quarter of fiscal year 2013, the Company announced a restructuring plan to modify its manufacturing strategy and lower its operating expenses in order to align its cost structure with business conditions. As part of the plan, the Company has incurred and expects to further incur costs recorded in asset impairment, restructuring and other charges related primarily to the following:


•	Fiscal Year 2013 El Segundo Fabrication Facility Closure Initiative


•	Fiscal Year 2013 Newport Fabrication Facility Resizing Initiative


•	Fiscal Year 2013 Other Cost Reduction Activities Initiative (completed in fiscal year 2013)

The following tables summarize the total asset impairment, restructuring and other charges (recoveries) by initiative for the three and six months ended December 29, 2013 and December 23, 2012 (in thousands):



	Three Months Ended
Fiscal Year 2013 Initiatives	December 29, 2013
	El Segundo Fabrication Facility Closure Initiative			Newport Fabrication Facility Resizing Initiative		Other Cost Reduction Activities Initiative		Total
Reported in asset impairment, restructuring and other charges:
Asset impairment	$	—		$	—	$	—	$	—
Severance and workforce reduction costs (recoveries)	(9		)	—		—		(9		)
Decommissioning costs	—			93		—		93
Relocation and re-qualification costs	—			931		—		931
Total asset impairment, restructuring and other charges (recoveries)	$	(9	)	$	1,024	$	—	$	1,015



	Three Months Ended
Fiscal Year 2013 Initiatives	December 23, 2012
	El Segundo Fabrication Facility Closure Initiative		Newport Fabrication Facility Resizing Initiative		Other Cost Reduction Activities Initiative		Total
Reported in asset impairment, restructuring and other charges:
Asset impairment	$	178	$	666	$	1,062	$	1,906
Severance and workforce reduction costs	170		597		1,509		2,276
Decommissioning costs	—		55		—		55
Relocation and re-qualification costs	210		494		—		704
Total asset impairment, restructuring and other charges	$	558	$	1,812	$	2,571	$	4,941



	Six Months Ended
Fiscal Year 2013 Initiatives	December 29, 2013
	El Segundo Fabrication Facility Closure Initiative			Newport Fabrication Facility Resizing Initiative		Other Cost Reduction Activities Initiative		Total
Reported in asset impairment, restructuring and other charges:
Asset impairment	$	—		$	—	$	—	$	—
Severance and workforce reduction costs (recoveries)	(22		)	141		—		119
Decommissioning costs	—			177		—		177
Relocation and re-qualification costs	4			2,117		—		2,121
Total asset impairment, restructuring and other charges (recoveries)	$	(18	)	$	2,435	$	—	$	2,417



	Six Months Ended
Fiscal Year 2013 Initiatives	December 23, 2012
	El Segundo Fabrication Facility Closure Initiative		Newport Fabrication Facility Resizing Initiative		Other Cost Reduction Activities Initiative		Total
Reported in asset impairment, restructuring and other charges:
Asset impairment	$	178	$	666	$	1,062	$	1,906
Severance and workforce reduction costs	5,857		597		4,788		11,242
Decommissioning costs	—		55		—		55
Relocation and re-qualification costs	210		494		—		704
Total asset impairment, restructuring and other charges	$	6,245	$	1,812	$	5,850	$	13,907

In addition to the amounts in the tables above, other charges related to the restructuring initiatives recorded in cost of sales were $0.7 million and $1.1 million for the three and six months ended December 29, 2013, respectively, and $0.4 million and $1.3 million for the three and six months ended December 23, 2012, respectively. These charges, which were primarily for accelerated depreciation, are not classifiable as restructuring costs, and were recorded in cost of sales.

The following table summarizes changes in the Company's restructuring related accruals related to its fiscal year 2013 initiatives for the six months ended December 29, 2013, which are included in accrued salaries, wages, and commissions on the balance sheet (in thousands):



Fiscal Year 2013 Initiatives	El Segundo Fabrication Facility Closure Initiative			Newport Fabrication Facility Resizing Initiative			Other Cost Reduction Activities Initiative		Total
Accrued severance and workforce reduction costs at June 30, 2013	$	197		$	—		$	—	$	197
Accrued (recovered) during the period and charged to asset impairment, restructuring and other charges	(22		)	141			—		119
Costs paid during the period	(31		)	(141		)	—		(172		)
Accrued severance and workforce reduction costs at December 29, 2013	$	144		$	—		$	—	$	144

Fiscal Year 2013 El Segundo Fabrication Facility Closure Initiative

During fiscal year 2013, the Company adopted a restructuring plan to close its El Segundo wafer fabrication facility. The closure took place in March 2013. During each of the three and six months ended December 29, 2013, the Company incurred de minimis asset impairment, restructuring and other charges (recoveries). The Company incurred asset impairment, restructuring and other charges of $0.6 million and $6.2 million during the three and six months ended December 23, 2012, respectively. In connection with the plan, the Company estimates total pre-tax costs of $6.5 million. The estimated total costs consist of $5.9 million of severance and workforce reduction costs, $0.4 million of relocation and re-qualification costs, and $0.2 million of asset impairment costs.

In addition to the restructuring charges above, the Company recorded $0.4 million and $1.3 million of other charges related to the restructuring initiative in cost of sales for the three and six months ended December 23, 2012, respectively. These other charges, which were for accelerated depreciation and inventory write-downs, are not classifiable as restructuring costs, and affected the Energy Saving Products reporting segment. The Company recorded no such charges during each of the three and six months ended December 29, 2013.

During each of the three and six months ended December 29, 2013, the Company made de minimis cash payments for this initiative. During the three and six months ended December 23, 2012, cash payments for this initiative were $1.6 million and $2.4 million, respectively. Remaining cash payments are estimated to be approximately $0.2 million through June 2015.

In addition, the Company estimates it will make total cash expenditures of $2.5 million for the decommissioning and restoration of the El Segundo wafer fabrication facility. These costs were previously considered as part of the asset impairment of the facility recorded in the fourth quarter of fiscal year 2012, and are not anticipated to result in additional restructuring charges.

Fiscal Year 2013 Newport Fabrication Facility Resizing Initiative

During fiscal year 2013, the Company adopted a restructuring plan to resize its wafer fabrication facility in Newport, Wales. The resizing of the facility is planned to take place in several phases, and is expected to be completed by the middle of calendar year 2015. The Company incurred $1.0 million and $2.4 million of asset impairment, restructuring and other charges for the three and six months ended December 29, 2013, respectively. The Company incurred $1.8 million of asset impairment, restructuring and other charges for each of the three and six months ended December 23, 2012. In connection with the plan, the Company estimates total pre-tax costs of approximately $16.5 million. These consist of approximately $0.7 million of asset impairment costs, $3.2 million of severance and workforce reduction costs, $5.7 million of decommissioning costs, and $6.9 million of relocation and re-qualification costs.

In addition to the restructuring charges above, the Company recorded $0.6 million and $1.1 million of other charges related to the restructuring initiative in cost of sales for the three and six months ended December 29, 2013, respectively. These other charges, which were for accelerated depreciation, are not classifiable as restructuring costs. The Company recorded no such charges during each of the three and six months ended December 23, 2012.

Cash payments for this initiative were $1.2 million and $2.4 million for the three and six months ended December 29, 2013, respectively, and $1.1 million for each of the three and six months ended December 23, 2012. Remaining cash payments are estimated to be approximately $10.0 million for the remainder of the initiative.

Fiscal Year 2013 Other Cost Reduction Activities Initiative

During fiscal year 2013, the Company completed all actions for this initiative. These actions included reducing (i) capacity at manufacturing facilities in Mexico, California, and Arizona, and (ii) administrative and research and development costs around the world. As part of the plan, the Company incurred approximately $1.5 million and $4.8 million of severance and workforce reduction costs during the three and six months ended December 23, 2012, respectively. The severance and workforce reduction costs recorded during the three months ended December 23, 2012 included $0.6 million for research and development functions, $0.5 million for manufacturing functions, and $0.4 million for general and administrative functions. During the six months ended December 23, 2012, severance and workforce reduction costs included $2.6 million related to manufacturing functions, and $1.1 million for general and administrative functions, and $1.1 million for research and development functions.

During each of the three and six months ended December 23, 2012, the Company incurred $1.1 million of asset impairment costs for the planned disposition of certain manufacturing equipment related to its manufacturing facility in Mexico. During the three and six months ended December 23, 2012, cash payments for this initiative were $1.9 million and $3.8 million, respectively.