Quarterly report pursuant to Section 13 or 15(d)

Streamlining and Restructuring Charges

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Streamlining and Restructuring Charges
 6 Months Ended
Jun. 30, 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 six months ended June 30, 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 does not expect to incur additional restructuring charges during the remainder of 2012 related to severance, other termination benefits and outplacement services.

In 2012, the Company plans to vacate and sublease leased facilities, which housed its large scale manufacturing operations and associated quality functions. During the three and six months ended June 30, 2012, the Company recorded charges of $0.3 million related to moving and other facility costs in connection with the exit of these buildings. The Company does not expect to incur any significant restructuring charges during the remainder of 2012 in connection with lease payments for these buildings as it expects that these payments will be offset by future sublease income.

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 assets were less than the carrying value, the Company determined that these assets were impaired and recorded a restructuring charge of $0.8 million during the first quarter of 2012. Further, the Company changed the useful life of certain property and equipment and leasehold improvements impacted by its plans to vacate two leased buildings. As a result, the Company recorded accelerated depreciation of $0.4 million and $1.3 million during the three and six months ended June 30, 2012, respectively, as restructuring charges. Subsequent to June 30, 2012, the Company entered into a sublease for these buildings and does not expect to incur additional restructuring charges during the remainder of 2012 related to the accelerated depreciation of property and equipment and 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 June 30, 2012 and December 31, 2011 in connection with the Company's restructuring plans. As of June 30, 2012, the components of these liabilities are shown below (in thousands):
 
Employee Severance
 and Other Benefits
 
 
Facility Charges (1) 
 
 
Asset Impairment
 and Accelerated
Depreciation (2)
 
 
Total
 
Balance at December 31, 2011
 
$
-
 
 
$
162
 
 
$
-
 
 
$
162
 
Restructuring charges
 
 
2,051
 
 
 
321
 
 
 
2,081
 
 
 
4,453
 
Cash payments
 
 
(2,051
 )
 
 
(369
 )
 
 
-
 
 
 
(2,420
 )
Adjustments
 
 
-
 
 
 
(8
 )
 
 
(2,081
 )
 
 
(2,089
 )
Balance at June 30, 2012
 
$
-
 
 
$
106
 
 
$
-
 
 
$
106
 
 
(1)
Includes moving and relocation costs, and lease payments offset by sublease payments.
(2) 
Restructuring charges include non-cash impairments and accelerated depreciation 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.