EMC 2003 Annual Report Download - page 22

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We maintain an allowance for doubtful accounts to provide for the estimated amount of accounts and notes receivable that will not be collected. The
allowance is based upon the credit-worthiness of our customers, our historical experience, the age of our receivables and current market and economic
conditions. The provision for bad debts was $35.2 in 2002 and $32.7 in 2001. The increase in the provision in 2002 compared to 2001 was due to the general
economic decline experienced worldwide.
• Restructuring and Other Special Charges
During 2002 and 2001, we implemented restructuring programs to reduce our cost structure and focus our resources on the highest potential growth areas
of our business. In 2002 and 2001, we recognized restructuring and other special charges of $100.0 and $825.1, respectively. The 2002 charges consisted of
$140.9 associated with the 2002 restructuring program, an $8.9 loss on assets associated with the 2002 restructuring program and $11.8 of additional
restructuring costs associated with the 2001 restructuring program. Offsetting these costs in 2002 was a $61.6 benefit resulting primarily from the sale of
previously identified obsolete inventory for which a reserve was established in 2001.
The restructuring and other special charges have been classified within our statement of operations according to their related category. These categories
are as follows:
2002 2001
Cost of sales $ (61.6) $320.0
Restructuring and other special charges 150.4 398.5
SG&A expenses 2.3 –
Other expense, net 8.9 106.6
Total $100.0 $825.1
The activity for 2002 and 2001 is explained in the following sections.
29
2002 Restructuring Program
A summary of the costs for the 2002 restructuring program is outlined as follows:
2002
Category
Initial
Provision
Utilization
During 2002
Ending
Balance
Non-Cash
Portion of the
Provision
Workforce reduction $ 44.5 $ (22.4) $ 22.1 $ –
Consolidation of excess facilities 58.0 (5.4) 52.6 5.1
Asset impairment 21.5 (21.5) – 21.5
Contractual and other obligations 16.9 (1.6) 15.3 –
Total $ 140.9 $ (50.9) $ 90.0 $ 26.6
2001 Restructuring Program
The amounts charged and adjusted against the provisions established in 2001 are as follows:
2002
Category
Beginning
Balance
Adjustment
to the
Provision
During 2002
Utilization
During 2002
Ending
Balance
Workforce reduction $ 48.2 $ 19.3 $ (67.5) $ –
Other contractual obligations 23.7 (7.3) (13.3) 3.1
Consolidation of excess facilities 127.4 (0.2) (29.9) 97.3
Total $ 199.3 $ 11.8 $ (110.7) $100.4
2001
Category
Initial
Provision
Adjustment
to the
Provision
During 2001
Utilization
During 2001
Ending
Balance
Workforce reduction $ 111.5 $ (18.3) $ (45.0) $ 48.2
Impairment of goodwill, purchased intangibles and other long-lived assets 104.5 – (104.5) –
Other contractual obligations 34.5 (8.0) (2.8) 23.7
Consolidation of excess facilities 158.1 26.3 (57.0) 127.4
Total $ 408.6 $ – $ (209.3) $199.3
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