LIGHTING SCIENCE GROUP CORP | 2011 | FY | 3


NOTE 13: RESTRUCTURING EXPENSES

In September 2011, the Company began implementing a restructuring plan designed to further increase efficiencies across the organization and lower the overall cost structure. This restructuring plan included a reduction in full time headcount in the United States, which was completed in October 2011. For the year ended December 31, 2011, the Company incurred $522,000 of costs as a result of severance and termination benefits and a write-down of tooling, production and test equipment of $76,000. In addition, the restructuring plan included recording an inventory valuation allowance of $19.2 million and a provision for losses on purchase commitments of $8.5 million for the year ended December 31, 2011, which are included in cost of goods sold.

In August 2010, the Company announced restructuring plans to increase efficiencies across the organization and lower the overall cost structure. These plans included the consolidation of the Company's research and development and product development operations, including its California operations to the Company's headquarters in Satellite Beach, Florida and the restructuring of the European operations from a development and manufacturing business to a sales and marketing business. These restructuring plans included a reduction in full time headcount in the United States and Europe, which was partially completed by December 2010 and was completed in the first quarter of 2011. For the year ended December 31, 2010, the Company incurred $1.7 million of severance and termination benefits and rent costs as a result of the closing of the California offices and a reduction in workforce and relocation to smaller offices in The Netherlands. These expenses were partially offset by the $601,000 gain on the exit of LEDS Japan, the Company's Japanese operation.

In the second quarter of 2009, the Company determined it would consolidate U.S. operations from four locations to two and moved both the Dallas, Texas based headquarters and the New Jersey based light engine business to Satellite Beach, Florida. In addition, headcount was reduced for the California business. For the year ended December 31, 2009, the Company incurred $950,000 of costs related to severance and termination benefits related to these headcount reductions.

A summary of the restructuring and other costs recognized for the years ended December 31, 2011, 2010 and 2009 are as follows:

 

     Workforce
Reduction
     Excess
Facilities
     Other Exit
Costs
     Total  

Amounts expected to be incurred

   $ 2,185,694       $ 764,718       $ 461,648       $ 3,412,060   

Amounts incurred in:

           

2009

     702,625         408,564         —           1,111,189   

2010

     961,437         356,154         385,243         1,702,834   

2011

     521,632         —           76,405         598,037   
  

 

 

    

 

 

    

 

 

    

 

 

 

Cumulative amount incurred as of December 31, 2011

   $ 2,185,694       $ 764,718       $ 461,648       $ 3,412,060   
  

 

 

    

 

 

    

 

 

    

 

 

 

The expenses for the year ended December 31, 2010 were partially offset by the $601,000 gain on the exit of LEDS Japan, the Company's Japanese operation.

 

As of December 31, 2011 and 2010, the accrued liability associated with the restructuring and other related charges consisted of the following:

 

     Workforce
Reduction
    Excess
Facilities
    Total  

Accrued liability as of December 31, 2009

   $ 602,598      $ 408,565      $ 1,011,163   

Charges

     961,438        356,154        1,317,592   

Payments

     (1,400,259     (297,412     (1,697,671
  

 

 

   

 

 

   

 

 

 

Accrued liability as of December 31, 2010

   $ 163,777      $ 467,307      $ 631,084   

Charges

     521,632        —          521,632   

Payments

     (317,241     (292,468     (609,709
  

 

 

   

 

 

   

 

 

 

Accrued liability as of December 31, 2011

   $ 368,168      $ 174,839      $ 543,007   
  

 

 

   

 

 

   

 

 

 

The remaining accrual as of December 31, 2011, of $543,000 is expected to be paid during the year ending December 31, 2012.

The restructuring and other related charges are included in the line item restructuring expenses in the consolidated statement of operations.


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