HP 2012 Annual Report Download - page 118

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 8: Restructuring Charges (Continued)
the 2012 Plan through fiscal year 2014, with a portion of those employees exiting the company as part
of voluntary enhanced early retirement (‘‘EER’’) programs in the United States and in certain other
countries. As discussed in Note 16, a majority of the U.S. EER program will be funded through HP’s
U.S. pension plan. In connection with the 2012 Plan, HP expects to record aggregate charges of
approximately $3.7 billion through the end of HP’s 2014 fiscal year as accounting recognition criteria
are met. Of that amount, HP expects approximately $3.1 billion to relate to the workforce reductions
and the EER programs and approximately $0.6 billion to relate to other items, including data center
and real estate consolidation. Due to uncertainties associated with attrition and the acceptance rates of
future international EER programs, the total expected headcount reductions could vary as much as
15% from our estimates. We could also experience similar variations in the total expense of the 2012
Plan.
HP recorded a charge of approximately $2.1 billion in the fiscal year of 2012 relating to the 2012
Plan. This amount included costs for EER plans in the United States and Canada of $41 million of
stock-based compensation expense for accelerated vesting of stock-based awards held by participating
EER employees and a special termination benefit (‘‘STB’’) expense of $126 million for certain EER
participants whose retirement incentive benefit will be paid in cash outside of HP’s pension plans. As
of October 31, 2012, HP had eliminated approximately 11,700 positions as part of the 2012 Plan. The
$2.1 billion charge also includes $105 million for data center and real estate consolidation, of which
$56 million related to asset impairments. The cash payments associated with the 2012 Plan are expected
to be paid out through fiscal 2015.
Fiscal 2010 Acquisitions
In connection with the acquisitions of Palm, Inc. (‘‘Palm’’) and 3Com Corporation (‘‘3Com’’) in
fiscal 2010, HP’s management approved and initiated plans to restructure the operations of the
acquired companies, including severance for employees, contract cancellation costs, costs to vacate
duplicative facilities and other items. The total expected combined cost of the plans is $101 million,
which includes $33 million of additional restructuring costs recorded in the fourth quarter of fiscal 2011
in connection with HP’s decision to wind down the webOS device business. As of October 31, 2011, HP
had recorded the majority of the costs of the plans based upon the anticipated timing of planned
terminations and facility closure costs. The Palm and 3Com plans are now closed with no further
restructuring charges anticipated. The unused accrual in the amount of $13 million was credited to
restructuring expense in fiscal year 2012. The remaining severance costs associated with the webOS
plan are expected to be paid out in fiscal year 2013.
Fiscal 2010 Enterprise Services Business Restructuring Plan
On June 1, 2010, HP’s management announced a plan to restructure its ES business, which
includes the ITO and ABS business units. The multi-year restructuring program includes plans to
consolidate commercial data centers, tools and applications. The total expected cost of the plan that
will be recorded as restructuring charges is approximately $1.0 billion, and includes severance costs to
eliminate approximately 8,200 positions and infrastructure charges. As the execution of the
restructuring activities has evolved, certain components and their related cost estimates have been
revised. While the total cost of the plan remains consistent, during the first quarter of fiscal 2012, HP
reduced the severance accrual by $100 million and recognized additional infrastructure related charges
of $104 million. The majority of the infrastructure charges were paid out during fiscal 2012 with the
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