Quarterly report pursuant to Section 13 or 15(d)

Streamlining and Restructuring Charges

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Streamlining and Restructuring Charges
 3 Months Ended
Mar. 31, 2012
Streamlining and Restructuring Charges [Abstract]  
Streamlining and Restructuring Charges
 
6. 
Streamlining and Restructuring Charges
  
In January 2012, the Company implemented a streamlining of operations, which resulted in a restructuring plan designed to sharpen its focus on value-creating opportunities led by gevokizumab and its unique antibody discovery and development capabilities. The restructuring plan included a reduction of XOMA's personnel by 84 positions, or 34%, of which 52 were eliminated immediately and the remainder eliminated as of April 6, 2012. These staff reductions resulted primarily from the Company's decisions to utilize a contract manufacturing organization for Phase 3 and commercial antibody production and to eliminate internal research functions that are non-differentiating or that can be obtained cost-effectively by contract service providers.

During the three months ended March 31, 2012, in connection with this streamlining of operations, the Company recorded charges of $2.1 million related to severance, other termination benefits and outplacement services. The Company expects to incur an additional $0.1 million restructuring charge in the second quarter of 2012 related to severance, other termination benefits and outplacement services.

The Company plans to vacate two of its leased buildings in 2012 related to manufacturing operations and internal research functions. The Company did not incur any restructuring charges during the first quarter of 2012 in connection with the exit of these leased buildings as they are still in use; however, it expects to incur restructuring charges of approximately $1.2 million in the remainder of 2012, primarily related to the net present value of future minimum lease payments at the cease-use date, less potential estimated future sublease income.

As of March 31, 2012, the Company performed an impairment analysis of property and equipment and leasehold improvements related to its manufacturing operations. Since the estimated undiscounted future cash inflows from a certain group of these assets were less than the carrying value, the Company determined that these assets were impaired and recorded a restructuring charge of $0.8 million. Further, the Company changed the useful life of certain property and equipment and leasehold improvements impacted by XOMA's plans to vacate two leased buildings. As a result, the Company recorded accelerated depreciation of $0.9 million as a restructuring charge. The Company expects to incur additional restructuring charges of approximately $0.7 million in the remainder of  2012 related to the accelerated depreciation of leasehold improvements.

The current and long-term portions of the outstanding restructuring liabilities are included in accrued and other liabilities and other liabilities - long-term on the condensed consolidated balance sheets and are based upon restructuring charges recognized as of March 31, 2012 and December 31, 2011 in connection with the 2009 and 2012 restructuring plans. As of March 31, 2012, the components of these liabilities are shown below (in thousands):

   
Employee Severance
and Other Benefits
    
Facility Charges
    
Asset
Impairment (1)
   
Total
  
Balance at December 31, 2011
   $ -     $ 162     $ -     $ 162  
Restructuring charges
     2,070       -       1,707       3,777  
Cash payments
     (1,258 )     (23 )     -       (1,281 )
Adjustments
     -       8       (1,707 )     (1,699 )
Balance at March 31, 2012
   $ 812     $ 147     $ -     $ 959  

(1)  Restructuring charges include non-cash impairments of property and equipment and leasehold improvements. However, these amounts are not included in the restructuring accrual.
 
The restructuring charges the Company expects to incur in connection with the 2012 streamlining of operations are subject to various assumptions, and actual results may differ.