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 Company’s 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 related charges” in the Consolidated Statements of Operations. The following table summarizes the Company’s restructuring and related charges (in thousands):



	Year ended December 31,
	2017		2016 ⁽¹⁾		2015
Product cost of revenue	$	1,279	$	3,400	$	113
Operating expenses-Restructuring and related charges	5,307		14,602		1,372
Total	$	6,586	$	18,002	$	1,485

(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 discussion below “Harmonic 2016 Restructuring Plan-TVN VDP” for additional information on the gain from TVN pension curtailment.

Harmonic 2017 Restructuring

In the third quarter of 2017, the Company implemented a restructuring plan (the “Harmonic 2017 Restructuring Plan”) to better align its operating costs with the continued decline in its net revenues. In 2017, the Company recorded $2.5 million of restructuring and related charges under this plan consisting of $2.1 million of employee severance and $0.4 million related to the closure of one of the Company’s offices in New York. The activities under this plan were completed in 2017. In 2017, the Company made $2.0 million payments for this plan and the remaining $0.5 million liability outstanding at December 31, 2017 which relates to the accrual for thew New York excess facility will be paid out over the remainder of the New York leased properties’ terms, which continue through August 2020.

Harmonic 2016 Restructuring

In the first quarter of 2016, the Company implemented a restructuring plan (the “Harmonic 2016 Restructuring Plan”) to reduce operating costs by consolidating duplicative resources in connection with the acquisition of TVN. The planned activities included global workforce reductions, exiting certain operating facilities and disposing of excess assets and an employee voluntary departure plan in France (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 exit from the excess facility at the 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. Additionally, the restructuring and related charges under this plan were offset by $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. In 2017, the Company recorded an additional $1.1 million in severance and benefits and this plan was completed in June 2017.

TVN VDP

Based on the applicable accounting guidance, the Company recorded $1.8 million and $13.1 million of TVN VDP costs in the years ended December 31, 2017 and 2016, respectively. In aggregate, in 2016 and 2017, the Company had paid $10.7 million of TVN VDP costs. The TVN VDP liability balance as of December 31, 2017 was $5.1 million, payable from 2018 through 2020.

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 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. 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. As a result of a change in the estimate of the sublease income, the restructuring liability was increased by $1.2 million and $0.6 million, as of December 31, 2017 and 2016, respectively.

The following table summarizes the activity in the Company’s restructuring accrual related to the Harmonic 2016 Restructuring Plan (in thousands):



	Excess facilities			VDP			Non-VDP Severance and benefits			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
Adjustments to restructuring provisions	1,223			1,766			1,134			—			4,123
Cash payments	(1,172		)	(7,203		)	(2,690		)	—			(11,065		)
Foreign exchange gain	—			915			37			—			952
Balance at December 31, 2017	2,426			5,128			—			—			7,554
Less: current portion ⁽¹⁾	(645		)	(3,186		)	—			—			(3,831		)
Long-term portion ⁽¹⁾	$	1,781		$	1,942		$	—		$	—		$	3,723

(1) 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 the Harmonic 2015 Restructuring Plan to reduce operating costs. The plan was completed in 2015 and the Company recorded $3.7 million restructuring charges, in aggregate, under this plan, of which $2.2 million and $1.5 million were recorded in 2014 and 2015, respectively. All liabilities under this plan were fully paid in 2016.