6. Restructuring Charge
2008 Plan
In December 2008, our management approved, committed to, and initiated a restructuring plan, or the 2008 Plan, to improve efficiencies in our operations, which was largely driven by our plan to consolidate our facility in Carlsbad, California into the Longmont, Colorado facility. As a result of this relocation, we terminated approximately 70 California employees whose positions have been relocated to Colorado and incurred approximately $1.5 million in severance-related costs since the inception of the 2008 Plan, all of which was recognized as of December 31, 2010. The remainder of the restructuring costs, all of which represent future minimum lease payments relating to the Carlsbad, California facility, will be paid out over the remainder of the lease term ending in April 2013.
As part of the 2008 Plan, we also incurred contract termination costs of $3.8 million since the inception of the 2008 Plan through December 31, 2011. We record charges for contract termination and other associated costs as restructuring expense, which is presented as a separate component within operating expenses. We expect to pay these contract lease termination costs over the remainder of the lease term ending in April 2013. Based on our estimates, we do not expect to receive any material amounts of sublease income beginning in the fourth quarter of 2011 through the remainder of the lease term, and accordingly recognized an additional $0.6 million of contract lease termination costs as of the year ended December 31, 2011.
All of the 2008 Plan activity relates to our storage systems operating segment.
The following table summarizes our 2008 Plan activities (in thousands):
2008 Plan
| Severance and Related Costs |
Contract Termination and Other Associated Costs |
Total | ||||||||||
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Accrued restructuring balance as of December 31, 2009 |
$ | 439 | $ | 1,258 | $ | 1,697 | ||||||
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Restructuring plan charges |
233 | 1,289 | 1,522 | |||||||||
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Cash payments |
(672 | ) | (1,047 | ) | (1,719 | ) | ||||||
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Accrued restructuring balance as of December 31, 2010 |
— | 1,500 | 1,500 | |||||||||
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Restructuring plan charges |
— | 621 | 621 | |||||||||
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Cash payments |
— | (909 | ) | (909 | ) | |||||||
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Accrued restructuring balance as of December 31, 2011 |
$ | — | $ | 1,212 | $ | 1,212 | ||||||
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2010 Plan
In the second quarter of 2010, our management approved, committed to, and initiated a restructuring and cost reduction plan, or the 2010 Plan, to better align our resources in order to lower our breakeven point. The 2010 Plan includes severance and related costs for the reduction of approximately 10% of our workforce, and fees associated with the acceleration of the closure of our Carlsbad, California facility. As a result of these actions, we intend to terminate approximately 26 employees located in the United States, of which 25 have been terminated as of December 31, 2011. We expect to incur approximately $0.4 million in severance-related costs, all of which was recognized as of December 31, 2010. The remainder of the severance and related restructuring costs attributable to our 2010 Plan were paid out in the third quarter of 2011.
As part of the 2010 Plan, we also incurred contract termination costs of $0.3 million since the plan inception through December 31, 2011 for facility lease and other associated costs that we continue to incur without economic benefit, as we exited the remaining portion of our Carlsbad, California facility. We record charges for contract termination costs and other associated costs as restructuring expense, which is presented as a separate component within operating expenses. We expect to pay these contract lease termination costs over the remainder of the lease term ending in April 2013. Based on our estimates, we do not expect to receive any material amounts of sublease income beginning in the fourth quarter of 2011 through the remainder of the lease term, and accordingly, recognized an additional $0.6 million of contract lease termination costs in the third quarter of 2011.
The majority of the 2010 Plan activity relates to our storage systems operating segment.
The following table summarizes our 2010 Plan activities (in thousands):
2010 Plan
| Severance and Related Costs |
Contract Termination and Other Associated Costs |
Total | ||||||||||
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Accrued restructuring balance as of December 31, 2009 |
$ | — | $ | — | $ | — | ||||||
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Restructuring plan charges |
377 | 188 | 565 | |||||||||
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Cash payments |
(357 | ) | (44 | ) | (401 | ) | ||||||
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Accrued restructuring balance as of December 31, 2010 |
20 | 144 | 164 | |||||||||
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Restructuring plan charges |
— | 62 | 62 | |||||||||
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Cash payments |
(20 | ) | (90 | ) | (110 | ) | ||||||
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Accrued restructuring balance as of December 31, 2011 |
$ | — | $ | 116 | $ | 116 | ||||||
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We also incurred additional severance-related restructuring charges of approximately $0.1 million in the first quarter of 2010 related to the termination of a former employee of Cloverleaf. All of the severance-related costs were paid to this employee in the first quarter of 2010.
All costs related to the 2008 and 2010 Plans are recorded in the restructuring accrual line on our consolidated balance sheets and restructuring charge line on our consolidated statement of operations.