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Restructuring and Excess Facilities | 12 Months Ended
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Dec. 31, 2016
Restructuring and Related Activities [Abstract] |
Restructuring and Excess Facilities | RESTRUCTURING AND RELATED CHARGES The Company implemented several restructuring plans in the past few years and recorded restructuring and related charges of $18.0 million, $1.5 million and $3.1 million for the years ended December 31, 2016, 2015 and 2014, respectively. 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 restructuring charges of $18.0 million in 2016 were primarily related to 2016 restructuring plan implemented in the first quarter of 2016. The restructuring charges of $1.5 million in 2015 were primarily related to the 2015 restructuring plan implemented during fourth quarter of 2014. Of the $3.1 million restructuring charges recorded in 2014, $2.2 million was recorded in the fourth quarter of 2014 related to the 2015 restructuring plan and the remaining $0.9 million were related to restructuring plan implemented in 2013. 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 related charges” in the Consolidated Statements of Operations. The following table summarizes the restructuring and related charges (in thousands):
| Year ended December 31,
| 2016 (1) |  | 2015 |  | 2014
Product cost of revenue | $ | 3,400 |  |  | $ | 113 |  |  | $ | 315 |
Operating expenses-Restructuring and related charges | 14,602 |  |  | 1,372 |  |  | 2,761 |
Total | $ | 18,002 |  |  | $ | 1,485 |  |  | $ | 3,076 |
(1) The restructuring and related charges for the year ended December 31, 2016 is net of $0.6 million and $1.4 million, in product cost of revenue and operating expenses-restructuring and related charges, respectively, of gain from TVN pension curtailment. See Note 13, “Employee Benefit Plans and Stock-based Compensation-TVN Retirement Benefit Plan,” for additional information on gain from TVN pension curtailment. 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. In the second quarter of 2016, as part of the Company’s 2016 restructuring initiative, the Company also initiated a voluntary departure plan in France to streamline the organization of the TVN French Subsidiary (the “TVN VDP”). In 2016, the Company recorded an aggregate of $20.0 million of restructuring and related charges under the Harmonic 2016 Restructuring Plan, of which $2.2 million is primarily related to the Company exiting from the excess facility at its U.S. headquarters and the remaining $17.8 million is related to severance and benefits for the termination of 118 employees worldwide, including 83 employees in France who participated in the TVN VDP. (See details of TVN VDP described below). Additionally, the restructuring and related charges under the Harmonic 2016 Restructuring Plan is offset by approximately $2.0 million of gain from TVN pension curtailment. For the employees who participated in the TVN VDP, their pension benefit will be funded by the TVN VDP and as a result, the TVN defined benefit pension plan was remeasured at December 31, 2016, which resulted in a non-cash curtailment gain. This gain was recorded as an offset to restructuring costs in the Company’s Statement of Operations, of which $0.6 million is included in product cost of revenue and the remaining $1.4 million is included in operating expenses-restructuring and related charges. (See Note 13, “Employee Benefit Plans and Stock-based Compensation-TVN Retirement Benefit Plan,” for additional information on gain from TVN pension curtailment). The Company also incurred $16.9 million of TVN acquisition- and integration-related expenses in 2016 (See Note 3, “Business Acquisition,” for additional information on TVN acquisition-and integration-related expenses). A majority of the 2016 restructuring and integration activities were completed in 2016 but some of the TVN VDP activities will continue into 2017 based on the contractual terms with each employee. The Company anticipates incurring approximately $5 million of additional restructuring and TVN acquisition- and integration-related expenses, under this plan in 2017. The estimated synergies from these restructuring activities and the TVN integration effort is anticipated to exceed $20 million on an annualized basis. TVN VDP In the second quarter of 2016, the Company initiated a consultative process with the works council for the French Subsidiary and applicable union representatives to establish a voluntary departure plan to enable French employees of TVN to voluntarily terminate with certain benefits. The Company finalized the consultation process and the terms of the voluntary departure plan in the third quarter of 2016. Following approval of the TVN VDP by the applicable French authorities in September 2016, employees were invited to apply for the voluntary termination benefits detailed in the TVN VDP. A total of 83 employees applied for the TVN VDP and were duly approved by the Company in the fourth quarter of 2016. The total TVN VDP costs, including severance, certain benefits and taxes, as well as administration costs, is estimated at approximately $15.3 million, in aggregate, and will be paid over a period of four years, based on the TVN VDP terms agreed with each employee. The fair value of the total TVN VDP liability at inception is estimated to be approximately $14.8 million. The Company accounts for these special termination benefits in accordance with ASC 712, “Compensation - Non-retirement Post-employment Benefits,” which requires that the special termination benefits be recognized as a liability and a loss beginning when an employee accepts the offer of voluntary termination and the amount can be reasonably estimated. Where an employee is required to work beyond a minimum statutory notice period, the cost of the special termination benefit is recognized as an expense over the employee’s remaining service period. Where the employee is not required to work beyond a minimum statutory notice period, the cost of the special termination benefit is recognized upon the date the employee accepts the offer of voluntary termination, provided that the amount of the benefit can be estimated. Out of the 83 employees who applied for TVN VDP, 11 of them are required to work beyond the minimum statutory notice period into 2017. Based on the application of the accounting guidance, the Company recorded a charge of $13.1 million for TVN VDP costs in the fourth quarter of 2016, of which $3.5 million was already paid in 2016, resulting in a TVN VDP liability balance of $9.6 million at December 31, 2016. The table below shows the estimated future payments for TVN VDP as of December 31, 2016 (in thousands):
Years ending December 31, |
2017 | $ | 6,757 |
2018 | 3,021 |
2019 | 1,492 |
2020 | 696 |
Total | $ | 11,966 |
Excess Facilities in San Jose, California 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. In December 2016, as a result of a change in the estimate in sublease income, the restructuring liability was increased by $0.6 million. The following table summarizes the activity in the Company’s restructuring accrual related to the Harmonic 2016 Restructuring Plan as of December 31, 2016 (in thousands):
| Excess facilities (1) |  | VDP (2) |  | Non-VDP Severance and benefits (3) |  | Other charges |  | Total
Charges for 2016 Restructuring Plan | $ | 1,655 |  |  | $ | 13,175 |  |  | $ | 4,702 |  |  | $ | 247 |  |  | $ | 19,779 |
Adjustments to restructuring provisions | 582 |  |  | — |  |  | (88 | ) |  | (247 | ) |  | 247 |
Reclassification of deferred rent | 1,087 |  |  | — |  |  | — |  |  | — |  |  | 1,087 |
Cash payments | (948 | ) |  | (3,484 | ) |  | (3,075 | ) |  | — |  |  | (7,507 | )
Foreign exchange loss | (1 | ) |  | (41 | ) |  | (20 | ) |  | — |  |  | (62 | )
Balance at December 31, 2016 | 2,375 |  |  | 9,650 |  |  | 1,519 |  |  | — |  |  | 13,544 |
Less: current portion (4) | (1,085 | ) |  | (6,597 | ) |  | (1,519 | ) |  | — |  |  | (9,201 | )
Long-term portion (4) | $ | 1,290 |  |  | $ | 3,053 |  |  | $ | — |  |  | $ | — |  |  | $ | 4,343 |
(1) In December 2016, the Company also exited from an excess facility at its office in Paris, France and recorded $0.2 million of facility exit costs. This liability will be fully paid in the first quarter of 2017. (2) See discussion on TVN VDP above for future estimated payments under the TVN VDP through 2020. (3) The Company anticipates that the remaining severance and benefits (non-TVN VDP related) accrual at December 31, 2016 will be fully paid by the first quarter of 2017. (4) The current portion and long-term portion of the restructuring liability are reported under “Accrued and other current liabilities” and “Other non-current liabilities”, respectively, on the Company’s Consolidated Balance Sheets. 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 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. The following table summarizes the activities in the Harmonic 2015 restructuring accrual during the years ended December 31, 2016, 2015 and 2014 (in thousands):
| Termination of an information technology ("IT") project |  | Severance and benefits |  | Termination of a research and development project |  | Other charges |  | Total
Charges for 2015 Restructuring Plan | $ | 1,138 |  |  | $ | 599 |  |  | $ | 307 |  |  | $ | 125 |  |  | $ | 2,169 |
Cash payments | — |  |  | (294 | ) |  | (307 | ) |  | — |  |  | (601 | )
Non-cash write-offs | (1,138 | ) |  | — |  |  | — |  |  | (108 | ) |  | (1,246 | )
Balance at December 31, 2014 | — |  |  | 305 |  |  | — |  |  | 17 |  |  | 322 |
Charges for 2015 Restructuring Plan | — |  |  | 1,413 |  |  | — |  |  | 204 |  |  | 1,617 |
Adjustments to restructuring provisions | — |  |  | (126 | ) |  | — |  |  | (6 | ) |  | (132 | )
Cash payments | — |  |  | (1,328 | ) |  | — |  |  | (13 | ) |  | (1,341 | )
Non-cash write-offs | — |  |  | — |  |  | — |  |  | (202 | ) |  | (202 | )
Balance at December 31, 2015 | — |  |  | 264 |  |  | — |  |  | — |  |  | 264 |
Adjustments to restructuring provisions | — |  |  | (70 | ) |  | — |  |  |  |  | (70 | )
Cash payments | — |  |  | (194 | ) |  | — |  |  |  |  | (194 | )
Balance at December 31, 2016 | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Harmonic 2013 Restructuring The Company implemented a series of restructuring plans in 2013 to reduce costs and improve efficiencies and the actions extended through the third quarter of 2014. The Company recorded restructuring charges of $2.2 million in 2013 under this plan consisting primarily of severance and benefits related to the termination of 85 employees worldwide and, to a lesser extent, the costs associated with writing down some of its inventory to net realizable value due to restructuring activities in its Israel facilities. The Company recorded an additional $0.9 million restructuring charges in 2014 under this plan primarily for severance and benefits related to the termination of 25 employees worldwide. The following table summarizes the activities in the Harmonic 2013 restructuring accrual during the years ended December 31, 2014 and 2013 (in thousands):
| Severance |  | Impairment of Leasehold Improvement |  | Obsolete Inventories |  | Termination of a Research and Development Project |  | Excess Facilities |  | Total
Charges for 2013 Restructuring Plan | $ | 1,663 |  |  | $ | 101 |  |  | $ | 404 |  |  | $ | — |  |  | $ | — |  |  | $ | 2,168 |
Adjustments to restructuring provisions | 29 |  |  | 48 |  |  | — |  |  | — |  |  | — |  |  | 77 |
Cash payments | (1,513 | ) |  | — |  |  | — |  |  | — |  |  | — |  |  | (1,513 | )
Non-cash write-offs | — |  |  | (149 | ) |  | (404 | ) |  | — |  |  | — |  |  | (553 | )
Balance at December 31, 2013 | 179 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 179 |
Charges for 2013 Restructuring Plan | 829 |  |  | — |  |  | — |  |  | 63 |  |  | 32 |  |  | 924 |
Adjustments to restructuring provisions | (17 | ) |  | — |  |  | — |  |  | — |  |  | — |  |  | (17 | )
Cash payments | (991 | ) |  | — |  |  | — |  |  | (63 | ) |  | (32 | ) |  | (1,086 | )
Balance at December 31, 2014 | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |

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- Definition The entire disclosure for restructuring and related activities. Description of restructuring activities such as exit and disposal activities, include facts and circumstances leading to the plan, the expected plan completion date, the major types of costs associated with the plan activities, total expected costs, the accrual balance at the end of the period, and the periods over which the remaining accrual will be settled. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 420 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 5.P.4) -URI http://asc.fasb.org/extlink&oid=27011515&loc=d3e140904-122747 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 420 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB Topic 5.P.3) -URI http://asc.fasb.org/extlink&oid=27011515&loc=d3e140864-122747 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 420 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6394359&loc=d3e17939-110869 + Details
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