Restructuring Costs

12 Months Ended

Jan. 31, 2016

Restructuring and Related Activities [Abstract]

Restructuring Costs

Restructuring

During fiscal year 2016, Semtech Corporation announced a worldwide reduction in force as part of an overall plan to align operating expenses with business conditions and leverage recent infrastructure investments. As a result of the reduction in force, the Company recorded restructuring charges of $4.5 million in fiscal year 2016.

During fiscal year 2014, the Company made a strategic decision to reduce its investment in the long-haul optical market, realign its product groupings, and align spending to current demand levels. As a result of these actions, the Company recorded restructuring charges of $1.3 million in fiscal year 2015. The Company completed the restructuring activities in the first quarter of fiscal 2015.

Restructuring related liabilities are included in “Accrued liabilities” within the condensed consolidated balance sheets as of January 31, 2016 and January 25, 2015, respectively. Restructuring charges are presented in “Restructuring charge” within the condensed consolidated statements of income.

Activity under the restructuring plans is summarized in the following table:

(in thousands)	One-time employee termination benefits			Contract commitments			Total
Balance at January 26, 2014	$	1,387		$	1,245		$	2,632
Charges	662			623			1,285
Cash payments	(1,767		)	(1,753		)	(3,520		)
Reclassifications	—			(115		)	(115		)
Balance at January 25, 2015	282			—			282
Charges	4,526			—			4,526
Cash payments	(4,466		)	—			(4,466		)
Balance at January 31, 2016	$	342		$	—		$	342

As a result of these actions detailed above, the Company also recorded additional contract commitment cancellation charges as detailed below:

	Fiscal year ended
(in thousands)	January 31, 2016		January 25, 2015		January 26, 2014
Cost of sales	$	—	$	2,983	$	1,729
Product development and engineering	—		—		3,197
Total	$	—	$	2,983	$	4,926

During the fiscal year ended January 25, 2015, the Company implemented a strategic decision to reduce its investment in the defense and microwave communications infrastructure market and to further reduce investment in the optical long-haul market. As a result of this strategy, the Company also recorded charges associated with contract commitment cancellations totaling $3.0 million that are included in "Cost of sales" on the consolidated statements of operations.

The restructuring actions in fiscal year 2014 also resulted in $4.9 million of additional contract commitment cancellation charges. Of this amount $1.7 million is included in “Cost of sales” and $3.2 million is included in “Product development and engineering” on the consolidated statements of operations. In connection with the restructuring activities, $15.0 million of inventory was determined not to be recoverable and was written off as a charge to “Cost of sales - lower of cost or market write-down” in fiscal year 2014. Additionally, certain property, plant and equipment, intangible assets, and goodwill were determined to be impaired. See Notes 7 and 8.