Special Charges

9 Months Ended

Jul. 01, 2011

10. Special Charges

Special charges consist of the following (in thousands):


	Successor		Predecessor				Successor		Predecessor
	Period from		Period from				Period from		Period from
	April 20, 2011		April 2, 2011		Fiscal Quarter		April 20, 2011		October 2,		Nine Fiscal
	through		through		Ended		through		2010 through		Months Ended
	July 1, 2011		April 19, 2011		July 2, 2010		July 1, 2011		April 19, 2011		July 2, 2010
Severance charges	$	8,368	$	90	$	—	$	8,368	$	2,873	$	—
Merger transaction charges		355		5,290		—		355		16,860		—
Lease impairment charges		2,106		7		99		2,106		87		99
Restructuring charges		1,712		273		624		1,712		925		760
Other special charges		39		—		—		39		145		—

	$	12,580	$	5,660	$	723	$	12,580	$	20,890	$	859

For the period from April 20, 2011 through July 1, 2011, special charges consisted primarily of $8.4 million of severance charges resulting from reduction in headcount after the Merger, $2.1 million of lease impairment charges resulting from under-utilized space after the Merger under which we have continuing lease obligations, $1.7 million for restructuring charges resulting primarily from changes in projected sub-lease income on restructured leases and $0.4 million transaction charges. For the period from April 2, 2011 through April 19, 2011, special charges consisted primarily of $5.3 million of transaction charges and $0.3 million restructuring charges from accretion of lease liability related to restructured facilities. For the period from October 2, 2010 through April 19, 2011, special charges consisted primarily of $16.9 million for transaction charges, including payment of a $7.7 million fee for termination of the SMSC Agreement and $9.2 million of financial advisory, legal and other fees related to the terminated merger with SMSC and the Merger, $2.9 million for one-time severance benefits associated with reductions in headcount primarily in the first fiscal quarter of 2011, and $0.9 million of restructuring charges from accretion of lease liability related to restructured facilities.

For the fiscal quarter and nine fiscal months ended July 2, 2010, special charges consisted primarily of restructuring and lease impairment charges primarily related to accretion of lease liability related to restructured facilities and impaired leases.

Restructuring Charges

The Company has implemented a number of cost reduction initiatives to improve its operating cost structure. The cost reduction initiatives included workforce reductions and the closure or consolidation of certain facilities, among other actions.

Restructuring Accruals — As of July 1, 2011, the Company has remaining restructuring accruals of $31.9 million, which primarily relate to facilities. Of the $31.9 million of restructuring accruals at July 1, 2011, $4.3 million is included in other current liabilities and $27.6 million is included in other non-current liabilities in the accompanying consolidated balance sheet. The Company expects to pay the obligations for the non-cancelable lease and other commitments over their respective terms, which expire at various dates through fiscal 2021. The Company’s accrued liabilities include the net present value of the future lease obligations of $49.7 million, net of contracted sublease income of $12.7 million, and projected sublease income of $5.1 million. The facility charges were determined in accordance with the accounting guidance for costs associated with exit or disposal activities. As a result, the Company recorded the net present value of the future lease obligations and will accrete the remaining amounts into expense over the remaining terms of the non-cancellable leases.

Fiscal 2009 Restructuring Actions — As part of a workforce reduction implemented during the fiscal year ended October 2, 2009, the Company completed actions that resulted in the elimination of 183 positions worldwide.

Activity and liability balances recorded as part of the fiscal 2009 restructuring actions through April 19, 2011 were as follows (in thousands):


	Workforce Reductions
	Fiscal Period Ended

	Successor		Predecessor
	July 1,		April 19,			October 1,
	2011		2011			2010
Reserve at beginning of period	$	—	$	53		$	1,582
Charged to costs and expenses		—		(8	)		26
Cash payments		—		(45	)		(1,555	)

Reserve at end of period	$	—	$	—		$	53

There was no activity in the period April 20, 2011 through July 1, 2011 related to the fiscal 2009 restructuring action.

Fiscal 2008 Restructuring Actions — During fiscal 2008, the Company announced its decision to discontinue investments in standalone wireless networking solutions and other product areas. Charges to expense in the period from April 20, 2011 through July 1, 2011 and October 2, 2010 to April 19, 2011 relate to accretion of lease liability on restructured facilities under non-cancelable leases.

Activity and liability balances recorded as part of the Fiscal 2008 restructuring actions through July 1, 2011 were as follows (in thousands):


	Facility and Other
	Fiscal Period Ended

	Successor			Predecessor
	July 1,			April 19,			October 1,
	2011			2011			2010
Reserve at beginning of period	$	44		$	74		$	64
Charged to costs and expenses		15			4			115
Cash payments		(9	)		(34	)		(105	)

Reserve at end of period	$	50		$	44		$	74

Fiscal 2007 Restructuring Actions — During fiscal 2007, the Company announced several facility closures and workforce reductions. In total, the Company notified approximately 670 employees of their involuntary termination. Charges to expense in the period from April 20, 2011 through July 1, 2011 consist of $1.3 million expense due to lower projected sub-tenant rent income and $0.4 million accretion of lease liability on restructured facilities under non-cancelable leases, of which $1.7 million was included in discontinued operations related to the Company’s discontinued BMP business. Charges to expense in the period October 2, 2010 to April 19, 2011 consists of $0.2 million of expense due to lower projected sub-tenant rent income and $1.1 million accretion of lease liability on restructured facilities under non-cancelable leases, of which $0.8 million was included in discontinued operations related to the Company’s discontinued BMP business.

Activity and liability balances recorded as part of the Fiscal 2007 restructuring actions through July 1, 2011 were as follows (in thousands):


	Facility and Other
	Fiscal Period Ended

	Successor			Predecessor
	July 1,			April 19,			October 1,
	2011			2011			2010
Reserve at beginning of period	$	19,617		$	22,845		$	27,233
Charged to costs and expenses		1,718			1,282			2,211
Cash payments		(683	)		(4,510	)		(6,599	)

Reserve at end of period	$	20,652		$	19,617		$	22,845

Fiscal 2006 and 2005 Restructuring Actions — During fiscal years 2006 and 2005, the Company announced operating site closures and workforce reductions. In total, the Company notified approximately 385 employees of their involuntary termination. Charges to expense in the period from April 20, 2011 through July 1, 2011 consist of $1.4 million expense due to lower projected sub-tenant rent income and $0.2 million accretion of lease liability on restructured facilities under non-cancelable leases. Charges to expense in the period October 2, 2010 to April 19, 2011 relate to accretion of lease liability on restructured facilities under non-cancelable leases.

Activity and liability balances recorded as part of the Fiscal 2006 and 2005 restructuring actions through July 1, 2011 were as follows (in thousands):


	Facility and Other
	Fiscal Period Ended

	Successor			Predecessor
	July 1,			April 19,			October 1,
	2011			2011			2010
Reserve at beginning of period	$	10,070		$	10,849		$	13,851
Charged to costs and expenses		1,600			515			(936	)
Cash payments		(457	)		(1,294	)		(2,066	)

Reserve at end of period	$	11,213		$	10,070		$	10,849