Cisco 2002 Annual Report Download - page 37

Download and view the complete annual report

Please find page 37 of the 2002 Cisco annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 54

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54

Cisco Systems, Inc. 2002 Annual Report 35
Worldwide Workforce Reduction, Consolidation of Excess Facilities, and Other Special Charges
The following table summarizes the activity related to the restructuring liabilities (in millions):
Consolidation of Impairment of
Excess Facilities Goodwill
Workforce and and Purchased
Reduction Other Charges(2) Intangible Assets Total
Initial charge in third quarter of fiscal 2001 $ 397 $ 484 $ 289 $1,170
Noncash charges (71) (141) (289) (501)
Cash payments (265) (18) – (283)
Balance at July 28, 2001 61 325 – 386
Adjustments(1) (35) 128 – 93
Cash payments (26) (131) – (157)
Balance at July 27, 2002 $ – $ 322 $ – $ 322
Note 1: Due to changes in previous estimates, the Company reclassified $35 million of restructuring liabilities related to the workforce
reduction charges to consolidation of excess facilities and other charges. The initial estimated workforce reduction was approximately
6,000 regular employees. Approximately 5,400 regular employees have been terminated and the liability has been paid. In addition,
during the third quarter of fiscal 2002, the Company increased the restructuring liabilities related to the consolidation of excess
facilities and other charges by $93 million due to changes in real estate market conditions. The increase in the restructuring liabilities
related to the consolidation of excess facilities and other charges was recorded as research and development ($39 million), sales
and marketing ($42 million), general and administrative ($8 million) expenses and cost of sales ($4 million) in the Consolidated
Statements of Operations.
Note 2: Amounts related to the net lease expense due to the consolidation of excess facilities will be paid over the respective lease
terms through fiscal 2010.
Provision for Inventory
The following is a summary of the change in the additional excess inventory reserve (in millions):
Excess Excess
Inventory Inventory
Reserve Benefit
Initial charge in the third quarter of fiscal 2001 $ 2,249
Usage:
Inventory scrapped (105) $ –
Sale of inventory (89) 9
Inventory utilized (49) 49
Settlement of purchase commitments (329) 129
(572) $ 187
Reserve balance as of July 28, 2001 1,677
Usage:
Inventory scrapped (975) $ –
Sale of inventory (64) 14
Inventory utilized (408) 408
Settlement of purchase commitments (173) 103
(1,620) $ 525
Reserve balance as of July 27, 2002 $57