Pacific Biosciences (NASDAQ: PACB): Company is laying off 28% of its workforce to conserve capital on hand. Burn through rate of cash was too rapid while product adoption has been slower than expected. Analysts are lowering expectations and downgrading to underweight.
On September 20, 2011, Pacific Biosciences of California, Inc. (the "Company") implemented a reduction in its workforce of approximately 130 employees, or approximately 28% of its total workforce. The actions taken were in consideration of uncertainties associated with the economic environment and to position the Company for long-term success. The Company's current infrastructure was staffed to support a faster adoption rate for its products. The reduction implemented will allow the Company to continue support of its growing customer base with improved service and continued product enhancements, while at the same time conserving cash.
The reduction in workforce was authorized by the Company's Board of Directors on September 16, 2011 and the employees being terminated received notification on September 20, 2011. Although the cuts were across the organization, the Company's operations and research and development functions were most effected. In lieu of notice required under the California Worker Adjustment and Retraining Notification Act (the "WARN Act") and other federal and state law equivalents, as applicable, departing employees will receive salary and benefits for a period of 60 days. In addition, the Company has implemented a severance benefit program that will provide for benefits which are greater than the minimum requirements of the WARN Act, such as additional cash payments determined on the basis of the affected employee's base salary and tenure with the Company, as well as outplacement services and Company-paid continuation of medical, dental and vision benefits under the Consolidated Omnibus Budget Reconciliation Act ("COBRA"). Payment of the termination benefits in excess of those provided for under the WARN Act is contingent on the departing employee entering into a separation agreement with the Company containing a general release of claims against the Company. As a result of the reductions, the Company expects to record a restructuring charge, comprised mainly of compensation and benefits afforded to terminated employees, of approximately $5.2 million during the third quarter of fiscal 2011. The Company anticipates that the actions associated with the reductions will be substantially completed during September 2011. All cash expenditures for restructuring related charges are expected to be substantially completed during 2011.