EMC 2003 Annual Report Download - page 51

In the third quarter of 2001, we implemented a restructuring program to reduce our cost structure. As a result of the program, we incurred restructuring
and other special charges of $825.1 million. The restructuring charges consisted of $111.5 million for employee termination benefits, $104.5 million related to
the impairment of goodwill, purchased intangibles and other long-lived assets, $158.1 million to consolidate excess facilities and $34.5 million for other
contractual obligations for which we will no longer derive an economic benefit. The other special charges included a provision for excess and obsolete
inventory of $310.0 million and an other than temporary decline in certain equity investments of $106.6 million.
The amounts charged and adjusted against the provisions established in 2001 are as follows (tables in thousands):
2003
Category
Beginning
Balance
Adjustment
to the
Provision
During 2003
Utilization
During 2003
Ending
Balance
Other contractual obligations $ 3,063 $ – $ (2,237) $ 826
Consolidation of excess facilities 97,397 (10,196) (26,822) 60,379
Total $100,460 $ (10,196) $ (29,059) $61,205
2002
Category
Beginning
Balance
Adjustment
to the
Provision
During 2002
Utilization
During 2002
Ending
Balance
Workforce reduction $ 48,149 $ 19,277 $ (67,426) $ –
Other contractual obligations 23,645 (7,268) (13,314) 3,063
Consolidation of excess facilities 127,487 (183) (29,907) 97,397
Total $199,281 $ 11,826 $ (110,647) $100,460
2001
Category
Initial
Provision
Adjustment to
the
Provision
During 2001
Utilization
During 2001
Ending
Balance
Workforce reduction $111,459 $ (18,280) $ (45,030) $ 48,149
Impairment of goodwill, purchased intangibles and other long-lived assets 104,511 – (104,511) –
Other contractual obligations 34,468 (8,032) (2,791) 23,645
Consolidation of excess facilities 158,137 26,312 (56,962) 127,487
Total $408,575 $ – $ (209,294) $199,281
The adjustment to the consolidation of excess facilities in 2003 related to the reactivation of a previously vacated facility. The adjustment to the
provision for workforce reduction in 2002 was primarily attributable to the finalization of severance payments associated with reductions in force in foreign
jurisdictions. The adjustment to the provision for other contractual obligations in 2002 resulted from favorable settlements.
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EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATMENTS
The adjustment to the provision for the workforce reduction in 2001 primarily related to voluntary employee resignations. The adjustment to the
provision for other contractual obligations in 2001 related primarily to a favorable settlement of an estimated liability for the closure of an information storage
services business. The adjustment to the provision for the consolidation of excess facilities in 2001 primarily related to additional leased facilities being
vacated.
2001 Inventory Provision
The amounts charged and adjusted against the 2001 established provisions for excess and obsolete inventory is set forth below (tables in thousands). The
activity is reflected within cost of sales in our statement of operations.
Reduction in
Cost of Sales
Inventory
Scrapped and
Charged Against
the Reserve
2003
Category
Beginning
Balance
Inventory
Sold
Favorable
Vendor
Settlements
Ending
Balance
Excess and obsolete EMC owned inventory $ 6,289 $ (5,401) $ – $ – $ 888
Reduction in
Cost of Sales
Inventory
Scrapped and
Charged Against
the Reserve
2002
Category
Beginning
Balance
Inventory
Sold
Favorable
Vendor
Settlements
Ending
Balance
Excess and obsolete EMC owned inventory $226,175 $ (182,852) $(37,034) $ – $6,289
Excess and obsolete purchase obligations 29,292 (4,768) (20,927) (3,597) –