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Table of Contents
EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The 2006 restructuring programs included a workforce reduction that was finalized on December 29, 2006 and covers approximately 1,350 employees
worldwide. The workforce reduction's objective is to further integrate EMC and the majority of the businesses we have acquired over the past three years.
These actions impacted our major business functions and major geographic regions. Approximately 70% of the affected employees are or were based in North
America, excluding Mexico, and 30% are or were based in Europe, Latin America, Mexico and the Asia Pacific region. As of December 31, 2006,
approximately 100 employees have been terminated.
The asset impairment charge of $29.7 million consists primarily of internal infrastructure projects that management decided to no longer pursue. The
impairment charge was equal to the amount by which the assets' carrying amount exceeded its fair value, measured as the present value of their estimated
discounted cash flows.
The restructuring programs impacted the Information storage and Content management and archiving segments. The workforce reductions include
$10.7 million of non-cash stock-based compensation expense.
The 2006 restructuring programs are expected to be completed by the end of 2007 with the remaining cash expenditures relating to workforce reduction
expected to be substantially paid by the end of 2008. The expected cash impact of the 2006 restructuring charges is $135.3 million, of which $7.8 million was
paid in 2006.
2005 Restructuring Programs
The activity for the 2005 restructuring programs for the years ended December 31, 2006 and 2005 is presented below (table in thousands):
2006
Category
Beginning
Balance
Adjustments
to the Provision
During 2006
Utilization
During 2006
Ending
Balance
Workforce reductions $ 79,783 $ (2,338) $ (59,402) $ 18,043
Consolidation of excess facilities — 148 — 148
Total $ 79,783 $ (2,190) $ (59,402) $ 18,191
2005
Category
Initial
Provision
Adjustments
to the Provision
During 2005
Utilization
During 2005
Ending
Balance
Workforce reductions $ 84,144 $ — $ (4,361) $ 79,783
Consolidation of excess facilities 423 — (423) —
Total $ 84,567 $ — $ (4,784) $ 79,783
The 2005 restructuring programs included two separate reductions in force, one that commenced in the first quarter of 2005 and a second that
commenced in the fourth quarter of 2005, aggregating approximately 1,060 employees. These actions impacted our major business functions and major
geographic regions. Approximately 67% of the affected employees were based in North America, excluding Mexico, and 33% were based in Europe, Latin
America, Mexico and the Asia Pacific region. As of December 31, 2006, the restructuring programs had been substantially completed. The restructuring
programs impacted the Information storage and Content management and archiving segments.
The adjustment to the provision in 2006 is primarily attributable to a decrease in the original number of individuals identified for termination and lower
than expected severance benefits. The remaining cash expenditures relating to workforce reduction are expected to be substantially paid by the end of 2007.
The expected cash impact of the 2005 restructuring charges is $78.3 million, of which $4.8 million was paid in 2005 and $55.3 million was paid in 2006.
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