Cisco 2003 Annual Report Download - page 48

Balance at Balance at
July 28, 2001 Acquired Adjustments July 27, 2002
Americas $2,177 $ 120 $ 38 $ 2,335
EMEA 531 50 12 593
Asia Pacific 110 2 6 4 140
Japan 371 125 1 497
Total $3,189 $ 321 $ 55 $ 3,565
In fiscal 2003, the Company purchased a portion of the minority interest of Cisco Systems, K.K. (Japan). As a result, the Company
increased its ownership from 92.4% to 94.8% of the voting rights of Cisco Systems, K.K. (Japan) and recorded goodwill of $54 million.
4. RESTRUCTURING COSTS AND OTHER SPECIAL CHARGES
On April 16, 2001, the Company announced a restructuring program, which included a worldwide workforce reduction, consolidation
of excess facilities, and restructuring of certain business functions. The following table summarizes the activity related to the liability
for restructuring costs and other special charges as of July 26, 2003 (in millions):
Consolidation of Impairment of
Excess Facilities Goodwill
Workforce and and Purchased
Reduction Other Charges Intangible Assets Total
Initial charge in the third quarter of fiscal 2001 $ 397 $ 484 $ 289 $ 1,170
Non-cash 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
Adjustments(2) —45 — 45
Cash payments — (72) — (72)
Balance at July 26, 2003(3) $— $295 $ — $ 295
Note 1: Due to changes in previous estimates, in fiscal 2002, 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 fiscal 2002, the Company increased the restructuring liabilities related to the consolidation of excess facilities
and other charges by $93 million, which was recorded during the third quarter of fiscal 2002, due to changes in real estate market
conditions. The increase in restructuring liabilities was recorded as expenses related to research and development ($39 million),
sales and marketing ($42 million), general and administrative ($8 million), and cost of sales ($4 million) in the Consolidated Statements
of Operations.
Note 2: During fiscal 2003, the Company increased the restructuring liabilities related to the consolidation of excess facilities and
other charges by $45 million, which was recorded during the first quarter and fourth quarter of fiscal 2003, due to changes in real
estate market conditions. The increase in restructuring liabilities was recorded as expenses related to research and development
($18 million), sales and marketing ($18 million), general and administrative ($4 million), and cost of sales ($5 million) in the Consolidated
Statements of Operations.
Note 3: Includes approximately $140 million of lease obligations that were terminated during the fourth quarter of fiscal 2003 and will
be paid during the first quarter of fiscal 2004. The remaining 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.
46 CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS