RESTRUCTURING AND RELATED CHARGES

The Company implemented several restructuring plans in the past few years. The goal of these plans was to bring operational expenses to appropriate levels relative to its net revenues, while simultaneously implementing extensive company-wide expense control programs.

The Company accounts for its restructuring plans under the authoritative guidance for exit or disposal activities. The restructuring and asset impairment charges are included in “Product cost of revenue” and “Operating expenses-restructuring and asset impairment charges” in the Condensed Consolidated Statements of Operations. The following table summarizes the restructuring and asset impairment charges (in thousands):



	Three months ended
	April 1, 2016			April 3, 2015
Restructuring and asset impairment charges in:
Product cost of revenue	$	(29	)	$	—
Operating expenses-Restructuring and asset impairment charges	2,612			44
Total restructuring and asset impairment charges	$	2,583		$	44

Harmonic 2016 Restructuring

In the first quarter of 2016, the Company implemented a new restructuring plan (the “Harmonic 2016 Restructuring Plan”) to streamline the corporate organization, thereby reducing operating costs by consolidating duplicative resources in connection with the acquisition of TVN. The planned activities have primarily resulted, and will primarily result, in cash expenditures related to severance and related benefits and exiting certain operating facilities and disposing of excess assets. The Company anticipates spending approximately $20 million in 2016, in aggregate, on the Harmonic 2016 Restructuring Plan and TVN acquisition and integration-related expenses. The activities under the Harmonic 2016 Restructuring Plan are expected to take at least 12 months to complete and the estimated synergies from this plan and the TVN integration effort is approximately $20 million, which the Company anticipates within two years.

In the three months ended April 1, 2016, the Company recorded $2.6 million of restructuring and related charges under the Harmonic 2016 Restructuring Plan, consisting of $1.4 million of costs related to the Company exiting an excess facility at its U.S. headquarters, $1.0 million of severance and benefits for the termination of 13 employees worldwide and $0.2 million of other charges. In the three months ended April 1, 2016, the Company incurred $3.1 million of TVN acquisition-related expenses. (See Note 3, “Business Acquisition” for additional information on TVN acquisition-and integration-related expenses).

In January 2016, the Company exited an excess facility at its U.S. headquarters in San Jose, California and recorded $1.4 million in facility exit costs. The Company accounts for facility exit costs in accordance with ASC 420, “Exit or Disposal Cost Obligations”, which requires that a liability for such costs be recognized and measured initially at fair value on the cease-use date based on remaining lease rentals, adjusted for the effects of any prepaid or deferred items recognized, reduced by the estimated sublease rentals that could be reasonably obtained even if it is not the intent to sublease. The fair value of these liabilities is based on a net present value model using a credit-adjusted risk-free rate. The liability will be paid out over the remainder of the leased properties’ terms, which continue through August 2020. Actual sublease terms may differ from the estimates originally made by the Company. Any future changes in the estimates or in the actual sublease income could require future adjustments to the liabilities, which would impact net income in the period the adjustment is recorded. As of the cease-use date, the fair value of this restructuring liability totaled $2.5 million. Offsetting these charges was an adjustment for deferred rent liability relating to this space of $1.1 million.

The following table summarizes the activity in the Company’s restructuring accrual related to the Harmonic 2016 Restructuring Plan during the three months ended April 1, 2016 (in thousands):



	Excess facilities			Severance and benefits (1)			Other charges			Total
Charges for 2016 Harmonic Restructuring Plan	$	1,390		$	1,012		$	246		$	2,648
Non-cash adjustments	1,087			—			—			1,087
Cash payments	(234		)	(311		)	—			(545		)
Non-cash write-offs	—			—			(246		)	(246		)
Balance at April 1, 2016	$	2,243		$	701		$	—		$	2,944

(1) The Company anticipates that the remaining severance and benefits accrual at April 1, 2016 will be substantially paid out by the end of 2016.

Harmonic 2015 Restructuring

In the fourth quarter of 2014, the Company implemented a restructuring plan (the “Harmonic 2015 Restructuring Plan”) to reduce 2015 operating costs and the planned restructuring activities involve headcount reduction, exiting certain operating facilities and disposing of excess assets. The Company recorded $2.2 million and $1.5 million of restructuring and impairment charges under the Harmonic 2015 Restructuring Plan in fiscal 2014 and 2015, respectively, consisting primarily of severance and benefits for the termination of 56 employees worldwide as well as a fixed asset impairment charge related to software development costs incurred for a discontinued information technology (“IT”) project. No new activities are anticipated in 2016 for the Harmonic 2015 Restructuring Plan and the remaining restructuring accrual for this plan is expected to be fully settled by the end of the second quarter of 2016.

The following table summarizes the activity in the Company’s restructuring accrual related to the Harmonic 2015 Restructuring Plan during the three months ended April 1, 2016 (in thousands):



	Severance and benefits (2)
Balance at December 31, 2015	$	264
Adjustments to restructuring provisions	(65		)
Cash payments	(139		)
Balance at April 1, 2016	$	60

(2) The Company anticipates that the remaining restructuring accrual as of April 1, 2016 will be fully settled by the end of the second quarter of 2016.