Xerox 2002 Annual Report Download - page 55

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to receive lump-sum cash payments in 2003. In accor-
dance with pension accounting rules, we are not per-
mitted to recognize such gains or losses until such
settlement occurs. We expect 2003 restructuring
charges of approximately $115, $90 of which are
expected to relate to pension settlements in the
Production and Office segments. Such amounts could
change based on the actual level of participants who
elect to receive the lump-sum distributions and the
pension asset values as of such date. The balance of
the planned 2003 restructuring charges relate to addi-
tional severance and cost reduction actions associat-
ed with our XES business in the Other segment.
The following table summarizes the restructuring
activity for the Fourth Quarter 2002 Restructuring
Program for the year ended December 31, 2002:
Lease
Cancell-
ation and
Severance and Other
Related Costs Costs Total
Provision, net of accretion $312 $45 $357
Charges against reserve(1) (71) – (71)
Balance December 31, 2002 $241 $45 $286
1 Includes the impact of currency translation adjustments of $3.
Restructuring and asset impairment charges of
$402 for the Fourth Quarter 2002 Restructuring
Program were comprised of $145 in our Production
segment, $102 in our Office segment, $55 in our DMO
segment and $100 in our Other segment.
Turnaround Program: The Turnaround Program began
in October to reduce costs, improve operations, tran-
sition customer equipment financing to third-party
vendors and sell certain assets.
In the fourth quarter of 2000, we provided $105, con-
sisting of $71 for severance and related costs and $34
for asset impairments associated with the disposition
of Delphax, which supplied high-speed election beam
digital printing systems. Over half of these charges
related to our Production operating segment, with the
remainder relating to our Office, DMO and Other oper-
ating segments. During 2001, we provided an addition-
al $403 of restructuring and asset impairment charges,
net of reversals of $26. The reversals related to actual
employee separation costs being lower than we origi-
nally anticipated. This was largely due to employee
attrition, prior to fulfilling the services required before
severance became payable as well as certain employ-
ees that were subsequently redeployed within our
other businesses as a result of unrelated attrition in
these other businesses. Of the amounts provided, $339
was for severance and other employee separation
costs (including $21 for pension curtailment charges),
$36 was for lease cancellation and other exit costs and
$28 was for asset impairments. The majority of these
charges related to our Production and Office operating
segments. The lease termination and other exit costs
and asset impairments related primarily to manufactur-
ing operations. Included in 2001 restructuring charges
are $24, primarily for severance and other employee
separation costs, related to the outsourcing of certain
Office operating segment manufacturing to Flextronics,
as discussed in Note 4.
As of December 31, 2001, we had $223 of Turn-
around Program restructuring reserves remaining,
primarily related to employee severance as a result
of our downsizing efforts. During the year ended
December 31, 2002, we provided an additional $253
(including special termination benefits and pension
curtailments of $27), net of $33 reversals. The reversals
are related to employee attrition prior to severance
payments, lower costs of outplacement programs and
other costs. These provisions were primarily for sever-
ance and other employee separation costs affecting
our Production and Office operating segments, as well
as a minor amount of lease termination and other
costs. The 2002 charge related to the elimination of
redundant resources and the consolidation of activities
into other existing operations, bringing the total elimi-
nated positions, since the inception of the Turnaround
Program, to approximately 11,200. As of December 31,
2002, substantially all the 11,200 affected employees
had separated under the program. The Turnaround
Program reserve balance at December 31, 2002 was
$131, which is expected to be substantially utilized in
the first half of 2003. The total net costs included in
Restructuring and asset impairment charges in the
Consolidated Statements of Income for the Turnaround
Program were $253, $403 and $105 in 2002, 2001 and
2000, respectively.
The following table summarizes the restructuring
activity for the Turnaround Program for the two years
ended December 31, 2002:
Lease
Cancell-
Severance ation and
and Related Other
Costs Costs Total
Turnaround Program
Restructuring Costs:
Balance December 31, 2000(1) $ 71 $ – $ 71
Provision 364 37 401
Reversal (25) (1) (26)
Charges(2) (219) (4) (223)
Balance December 31, 2001 191 32 223
Provision 261 25 286
Reversal (28) (5) (33)
Charges(2) (320) (25) (345)
Balance December 31, 2002 $ 104 $ 27 $ 131
1 There were no charges against reserves for the Turnaround Program in 2000.
2 Includes the impact of currency translation adjustments of $12 and ($8) for
the years ended December 31, 2002 and 2001, respectively.