Note 11. Restructuring and Related Charges

The Company continues to reduce costs through targeted restructuring events intended to consolidate its operations, rationalize the manufacturing of its products and align its businesses in response to market conditions. As of March 29, 2014 and June 29, 2013, the Company’s total restructuring accrual was $9.0 million and $16.5 million, respectively. During the three and nine months ended March 29, 2014, the Company incurred restructuring expenses of $3.6 million and $3.8 million, respectively. During the three and nine months ended March 30, 2013, the Company incurred restructuring expenses of $0.4 million and $6.1 million, respectively. The Company’s restructuring charges can include severance and benefit costs to eliminate a specified number of positions, facilities and equipment costs to vacate facilities and consolidate operations, and lease termination costs. The timing of associated cash payments depend upon the type of restructuring charge and can extend over multiple periods.

Summary of Restructuring Plans

The adjustments to the accrued restructuring expenses related to all of the Company’s restructuring plans described below for the three and nine months ended March 29, 2014 were as follows (in millions):

			Nine Months Ended						Non-cash					Three Months Ended
	Balance		March 29,						Settlements			Balance		March 29,
	June 29,		2014			Cash			and Other			March 29,		2014
	2013		Charges			Settlements			Adjustments			2014		Charges
Fiscal 2014 Plans
NSE Product Strategy Restructuring Plan (Workforce Reduction)	$	—	$	3.3		$	(1.9	)	$	—		$	1.4	$	3.3
Central Finance and IT Restructuring Plan (Workforce Reduction)	—		1.5			(1.1		)	—			0.4		(0.1		)
Fiscal 2013 Plans
OSP Operational Realignment Plan (Workforce Reduction)	3.7		(0.7		)	(1.8		)	—			1.2		0.1
NSE Lease Restructuring Plan	5.0		(0.8		)	(1.8		)	0.2			2.6		0.7
CCOP Outsourcing Plan (Workforce Reduction)	0.7		—			(0.2		)	—			0.5		—
NSE Wireless Business Restructuring Plan (Workforce Reduction)	1.0		0.1			(0.9		)	—			0.2		—
Other plans	0.5		0.6			(1.1		)	—			—		0.1
Fiscal 2012 Plans
NSE Operation and Repair Outsourcing Restructuring Plan:
Workforce Reduction	2.0		(0.3		)	(1.2		)	—			0.5		(0.4		)
Lease Costs	0.1		(0.1		)	—			—			—		(0.1		)
Total NSE Operation and Repair Outsourcing Restructuring Plan	2.1		(0.4		)	(1.2		)	—			0.5		(0.5		)
Other plans	0.6		—			(0.2		)	—			0.4		—
Plans Prior to Fiscal 2012	2.9		0.2			(1.4		)	0.1			1.8		—
Total	$	16.5	$	3.8		$	(11.6	)	$	0.3		$	9.0	$	3.6

Ottawa Lease Exit Costs	$	3.7	$	0.1		$	(1.0	)	$	(0.1	)	$	2.7	$	0.1

As of March 29, 2014 and June 29, 2013, the Company included the long-term portion of the restructuring liability of $2.6 million and $6.2 million, respectively, as the restructuring accrual component under Other non-current liabilities, and the short-term portion as the restructuring accrual component under Other current liabilities in the Consolidated Balance Sheets.

The Company had also previously recorded lease exit charges, net of assumed sub-lease income in prior fiscal years related to its Ottawa facility, that were included in SG&A expenses. As of March 29, 2014 and June 29, 2013 the fair value of the remaining contractual obligations, net of sublease income, was $2.7 million and $3.7 million, respectively. The Company included the long-term portion of the contract obligations of $1.9 million and $2.7 million in Other non-current liabilities as of each period end, and the short-term portion in Other current liabilities in the Consolidated Balance Sheets. The payments related to these lease costs are expected to be paid by the end of the third quarter of fiscal 2018.

Fiscal 2014 Plans

NSE Product Strategy Restructuring Plan

During the third quarter of fiscal 2014, Management approved a plan in the NSE segment to realign its services, support and product resources in response to market conditions in the mobile assurance market and to increase focus on software products and next generation solutions through acquisitions and Research and Development (“R&D”). As a result, a restructuring charge of $3.3 million was recorded for severance and employee benefits for 63 employees primarily in SG&A and manufacturing functions located in North America, Latin America, Asia and Europe. As of March 29, 2014, 34 employees have been terminated. Payments related to the remaining severance and benefits accrual are expected to be paid by the end of the second quarter of fiscal 2015.

Central Finance and Information Technology (“IT”) Restructuring Plan

During the second quarter of fiscal 2014, Management approved a plan to eliminate positions and re-define roles and responsibilities in the Finance and IT organizations to align with the future state of the organizations under new executive management and move positions to lower-cost locations where appropriate. As a result, 25 employees primarily in SG&A functions located in North America, Asia and Europe will be impacted. As of March 29, 2014, 18 employees have been terminated. Payments related to the remaining severance and benefits accrual are expected to be paid by the end of the second quarter of fiscal 2015.

Fiscal 2013 Plans

Optical Security and Performance Products (“OSP”) Operational Realignment Plan

During the fourth quarter of fiscal 2013, Management approved a plan in the OSP segment to realign its operations to focus on priority markets such as Anti-counterfeiting, Consumer and Industrial and Other offerings in government, aerospace and defense. As a result, the OSP segment is ceasing production of certain legacy products such as anti-reflection coatings and front-surface mirrors for display and office automation applications, solar cell covers, and select infrared products that use the Multi-layer Anti-reflection Coater, custom display, and certain box coater production platforms which were at the end of their product lifecycle. The business segment phased out production of these product offerings by the end of the third quarter of fiscal 2014 and de-commissioned and disposed of certain related production equipment. This will result in consolidation of manufacturing operations and office space at the Santa Rosa, California site and reduction of workforce by 79 employees primarily in manufacturing, R&D and SG&A functions located in the United States. Management reduced the number of employees impacted by this plan from 126 to 79, which reduced the total liability for this plan by approximately $0.7 million during the nine months ended March 29, 2014. As of March 29, 2014, 42 employees have been terminated. Payments related to the remaining severance and benefits accrual are expected to be paid by the end of the first quarter of fiscal 2015.

NSE Lease Restructuring Plan

During the fourth quarter of fiscal 2013, Management approved a plan to consolidate workspace in Germantown, Maryland and Beijing, China, primarily used by the NSE segment. As of June 29, 2013, the Company exited the workspace in Germantown and Beijing under the plan. The fair value of the remaining contractual obligations, net of sublease income as of March 29, 2014 was $2.6 million. A $0.8 million benefit was recorded during the nine months ended March 29, 2014, to adjust the estimated lease liability accrual for the Germantown location. Payments related to the Germantown lease costs are expected to be paid by the end of the second quarter of fiscal 2019. Final payments related to the Beijing lease costs were paid during the first quarter of fiscal 2014.

CCOP Outsourcing Plan

During the third quarter of fiscal 2013, Management approved a plan to transition certain functions related to the CCOP segment to an offshore contract manufacturer as part of its continuous efforts to optimize its supply chain. As a result, 44 employees primarily in manufacturing, R&D and SG&A functions located in the United States were impacted. As of March 29, 2014, 15 employees have been terminated. Payments related to the remaining severance and benefits accrual are expected to be paid by the end of the first quarter of fiscal 2015.

NSE Wireless Business Restructuring Plan

During the second quarter of fiscal 2013, Management approved a plan to align the Company’s investment strategy in the NSE segment with customer spending priorities in high-growth product lines such as wireless network assurance. As a result, the segment eliminated positions in R&D, sales and operations functions that supported low-growth product lines and 63 employees primarily in manufacturing, R&D and SG&A functions located in North America, Europe and Asia were impacted. As of March 29, 2014, 61 employees have been terminated. Payments related to the remaining severance and benefits accrual are expected to be paid by the end of the fourth quarter of fiscal 2014.

Other Plans

Other plans account for an immaterial portion of the total restructuring accrual, with minimal or no revisions recorded.

Fiscal 2012 Plans

NSE Operation and Repair Outsourcing Restructuring Plan

During the fourth quarter of fiscal 2012, Management approved a plan which focuses on three areas in the NSE segment: (1) moving the repair organization to a repair outsourcing partner; (2) reorganizing the R&D global team because of portfolio prioritization primarily in the Customer Experience Management business to consolidate key platforms from several sites to a single site, and (3) reorganizing Global Sales to focus on strategic software growth, wireless growth, and to ensure sales account resources on the most critical global growth accounts. This action will occur over the next several quarters and will impact 161 employees in manufacturing, R&D and SG&A functions and resulted in the exit of workspaces in Techpoint Singapore and Atlanta, Georgia. As of September 29, 2012, the Company exited both workspaces. The employees being affected are located in North America, Europe, Latin America and Asia. As of March 29, 2014, 157 of these employees have been terminated. Payments related to the severance and benefits accrual are expected to be paid by the end of the second quarter of fiscal 2015.

Other Plans

Other plans account for an immaterial portion of the total restructuring accrual, with minimal or no revisions recorded.

Plans Prior to Fiscal 2012

The restructuring accrual for plans that commenced prior to fiscal year 2012 was $1.8 million. Of this amount, $1.0 million is related to severance and benefits accrual for the NSE Germany Restructuring Plan which commenced in the fourth quarter of fiscal 2009. Payments related to the severance and benefits accrual are expected to be paid by the end of the fourth quarter of fiscal 2016. The remaining balance consists of immaterial lease obligation accruals from various restructuring plans that commenced prior to fiscal 2012.