Intel 2006 Annual Report Download - page 83

Table of Contents
INTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 11: Restructuring and Asset Impairment Charges
Intel is undertaking a restructuring plan designed to improve operational efficiency and financial results. In the third quarter of
2006, management approved several actions related to this plan that were recommended by the company’s structure and
efficiency task force. A portion of these activities involves cost savings or other actions that do not result in restructuring
charges, such as better utilization of assets, reduced spending, and organizational efficiencies. The efficiency program includes
headcount targets for various groups within the company, and we expect these targets to be met through ongoing employee
attrition, divestitures, and employee terminations as detailed below.
During 2006, Intel incurred restructuring charges related to employee severance and benefit arrangements for approximately
4,800 employees. A substantial majority of these employee terminations occurred within marketing, manufacturing,
information technology, and human resources. Additionally, Intel completed the divestiture of the assets of three businesses in
2006 concurrently with the ongoing execution of the efficiency program. See “Note 14: Acquisitions and Divestitures” for
further details. In connection with the divestiture of certain assets of the communications and application processor business,
the company recorded impairment charges of $103 million related to the write-down of manufacturing tools to their fair value,
less the cost to dispose of the assets. The fair value was determined using a market-
based valuation technique. In addition, as a
result of both this divestiture and a subsequent assessment of Intel’s worldwide manufacturing capacity operations,
management placed for sale its fabrication facility in Colorado Springs, Colorado. This plan resulted in an impairment charge
of $214 million to write down to fair value the land, building, and equipment asset grouping that has been principally used to
support the communications and application processor business. The fair value of the asset grouping was determined using
various valuation techniques.
The following table summarizes the restructuring and asset impairment activity for 2006:
The restructuring and asset impairment charges above have been reflected separately as restructuring and asset impairment
charges on the consolidated statements of income. All amounts have been recorded within the “all other”
category for segment
reporting purposes, as segment managers are not held accountable for restructuring charges, and the segment-level evaluation
within the company’s budget and planning process does not include restructuring charges. The remaining accrual as of
December 30, 2006 is related to severance benefits that are expected to be paid within the next 12 months. As such, the
restructuring accrual is recorded as a current liability within accrued compensation and benefits on the consolidated balance
sheets. In addition, Intel may incur charges in the future under this restructuring for employee severance and benefit
arrangements, and facility-related or other exit activities.
72
Employee Severance
(In Millions)
and Benefits
Asset Impairment
Total
Accrued restructuring balance as of December 31, 2005
$
—
$
—
$
—
Additional accruals
238
317
555
Adjustments
—
—
—
Cash payments
(190
)
—
(
190
)
Non
-
cash settlements
—
(
317
)
(317
)
Accrued restructuring balance as of December 30, 2006
$
48
$
—
$
48