RESTRUCTURING AND FACILITIES CONSOLIDATION INITIATIVES

9 Months Ended

Sep. 30, 2020

Restructuring and Related Activities [Abstract]

RESTRUCTURING AND FACILITIES CONSOLIDATION INITIATIVES

The Company recorded restructuring and related expense aggregating $3.3 million and $2.4 million in the three months ended September 30, 2020 and 2019, respectively, and $10.7 million and $16.4 million in the nine months ended September 30, 2020 and 2019, respectively. Restructuring and related expense includes both restructuring expense (primarily severance and related costs), estimated future variable lease costs for vacated properties with no intent or ability of sublease, and accelerated rent amortization expense.

For restructuring events that involve lease assets and liabilities, the Company applies lease reassessment and modification guidance and evaluates the right-of-use assets for potential impairment. If the Company plans to exit all or distinct portions of a facility and does not have the ability or intent to sublease, the Company will accelerate the amortization of each of those lease components through the vacate date. The accelerated amortization is recorded as a component of Restructuring and related expense in the Company's condensed consolidated statements of operations. Related variable lease expenses will continue to be expensed as incurred through the vacate date, at which time the Company will reassess the liability balance to ensure it appropriately reflects the remaining liability associated with the premises and record a liability for the estimated future variable lease costs.

The components of Restructuring and related expense for the three and nine months ended September 30, 2020 and 2019 were as follows (in thousands):



	Three months ended				Nine months ended
	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Severance and related costs	$	1,789	$	719	$	8,276	$	11,619
Variable and other facilities-related costs	1,501		$	1,052	2,380		1,370
Accelerated amortization of lease assets due to cease-use	—		$	601	70		3,459
	$	3,290	$	2,372	$	10,726	$	16,448

2020 Restructuring Initiative

In 2020, the Company implemented a restructuring plan to eliminate certain positions and redundant facilities primarily in connection with the ECI Merger to further streamline the Company's global footprint and improve its operations (the "2020 Restructuring Initiative"). The 2020 Restructuring Initiative includes facility consolidations and a reduction in workforce, including three former executives of ECI for whom severance aggregating $1.1 million was recorded in the three months ended March 31, 2020. In connection with this initiative, the Company expects to eliminate duplicate functions arising from the ECI Merger and support its efforts to integrate the two companies.

The Company recorded restructuring and related expense of $2.9 million and $8.7 million in connection with the 2020 Restructuring Initiative in the three and nine months ended September 30, 2020, respectively, for severance and related costs. The amount recorded in the nine months ended September 30, 2020 was for severance and related costs for approximately 125 employees, including three former executives of ECI. The Company expects these amounts will be fully paid in 2021. The Company expects that it will record additional restructuring and related expense approximating $6 million under the 2020 Restructuring Initiative in the aggregate for severance and planned facility consolidations. A summary of the 2020 Restructuring Initiative accrual activity for severance and related costs for the nine months ended September 30, 2020 is as follows (in thousands):


	Balance at January 1, 2020		Initiatives charged to expense		Cash payments		Balance at September 30, 2020
Severance	$	—	$	7,691	$	(3,375)	$	4,316
Facilities	—		999		(79)		920
	$	—	$	8,690	$	(3,454)	$	5,236

2019 Restructuring and Facilities Consolidation Initiative

In June 2019, the Company implemented a restructuring plan to further streamline the Company's global footprint, improve its operations and enhance its customer delivery (the "2019 Restructuring Initiative"). The 2019 Restructuring Initiative includes facility consolidations, refinement of the Company's research and development activities, and a reduction in workforce. In connection with this initiative, the Company expects to reduce its focus on hardware and appliance-based development over time and to increase its development focus on software virtualization, functional simplicity and important customer requirements. The facility consolidations under the 2019 Restructuring Initiative (the "2019 Facilities Initiative") include a consolidation of the Company's North Texas sites into a single campus, housing engineering, customer training and support, and administrative functions, as well as a reduction or elimination of certain excess and duplicative facilities worldwide. In addition, the Company intends to substantially consolidate its global software laboratories and server farms into two lower cost North American sites. The Company continues to evaluate its properties included in the Facilities Initiative for accelerated amortization and/or right-of-use asset impairment. The Company expects that the actions under the 2019 Facilities Initiative will be completed by the end of 2020.

In connection with the 2019 Restructuring Initiative, the Company recorded restructuring and related expense of $0.4 million and $2.1 million in the three and nine months ended September 30, 2020, respectively, and $1.8 million and $7.8 million in the three and nine months ended September 30, 2019, respectively. The amount recorded in the three months ended September 30, 2020 was primarily related to facility consolidations. The amount recorded in the nine months ended September 30, 2020 was comprised of $0.6 million for severance and related costs for approximately 5 employees and $1.5 million related to facility consolidations. These amounts include nominal credits to restructuring and related expense in the three and nine months ended September 30, 2020, representing changes in estimate for both severance and related expenses and variable facilities-related expenses. The amount recorded in the three months ended September 30, 2019 was comprised of $0.7 million for severance and related costs for approximately 20 employees and $1.7 million for variable and other facilities-related costs, including accelerated rent amortization. The amount recorded in the nine months ended September 30, 2019 was comprised of $6.5 million for severance and related costs for approximately 130 employees and $4.7 million for variable and

other facilities-related costs, including accelerated rent amortization. The Company expects to record nominal additional restructuring and related expense, if any, related to severance and related costs under the 2019 Restructuring Initiative.

A summary of the 2019 Restructuring Initiative accrual activity for severance and related costs for the nine months ended September 30, 2020 is as follows (in thousands):


	Balance at January 1, 2020		Initiatives charged to expense		Adjustments for changes in estimate		Reclassify accelerated amortization to operating lease liabilities		Cash payments		Balance at September 30, 2020
Severance	$	2,110	$	723	$	(80)	$	—	$	(2,234)	$	519
Facilities	991		1,473		(22)		(70)		(1,573)		799
	$	3,101	$	2,196	$	(102)	$	(70)	$	(3,807)	$	1,318

Accelerated Rent Amortization

Accelerated rent amortization is recognized from the date that the Company commences the plan to fully or partially vacate a facility, for which there is no intent or ability to enter into a sublease, through the final vacate date. The accelerated rent amortization recorded in connection with the Facilities Initiative reduced the value of the Company's Operating lease right-of-use assets recorded in the Company's condensed consolidated balance sheets at September 30, 2020 and December 31, 2019, respectively. The liability for the total lease payments for each respective facility is included as a component of Operating lease liabilities in the Company's condensed consolidated balance sheets, both current and noncurrent (see Note 18). The Company may incur additional future expense if it is unable to sublease other locations included in its restructuring initiatives.

GENBAND Merger Restructuring Initiative

In connection with the merger in 2017 between Sonus Networks, Inc. and GENBAND (the "GENBAND Merger"), the Company implemented a restructuring plan in the fourth quarter of 2017 to eliminate certain redundant positions and facilities within the combined companies (the "GENBAND Merger Restructuring Initiative"). The Company recorded a credit to restructuring and related expense of $0.1 million in the nine months ended September 30, 2020, representing a change in estimate to the total severance and related costs required to complete the activities under this initiative. In connection with this initiative, the Company recorded restructuring expense of $5.2 million in the nine months ended September 30, 2019, virtually all of which was for severance and related costs for approximately 40 employees. As of September 30, 2020, the GENBAND Merger Restructuring Initiative was complete.

A summary of the GENBAND Merger Restructuring Initiative accrual activity for the nine months ended September 30, 2020 is as follows (in thousands):


	Balance at January 1, 2020		Adjustments for changes in estimate		Cash payments		Balance at September 30, 2020
Severance	$	409	$	(58)	$	(351)	$	—

Balance Sheet Classification

The current portions of accrued restructuring are included as a component of Accrued expenses and the long-term portions of accrued restructuring are included as a component of Other long-term liabilities in the condensed consolidated balance sheets. The long-term portions of accrued restructuring totaled $0.8 million at September 30, 2020 and $0.9 million at December 31, 2019.