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55
restructuring program activity during the three years
ended December 31, 2004 is outlined below.
Ongoing Legacy
Restructuring Activity Programs Programs (1) Total
Ending Balance
December 31, 2001 $ — $ 282 $ 282
Provision 357 291 648
Reversals of prior accruals — (33) (33)
Charges against reserve
and currency (71) (403) (474)
Ending Balance
December 31, 2002 $ 286 $ 137 $ 423
Provision 193 11 204
Reversals of prior accruals (16) (13) (29)
Charges against reserve
and currency (284) (93) (377)
Ending Balance
December 31, 2003 $ 179 $ 42 $ 221
Provision 103 2 105
Reversals of prior accruals (11) (9) (20)
Charges against reserve
and currency (178) (11) (189)
Ending Balance
December 31, 2004 $ 93 $ 24 $ 117
(1) Legacy Programs, as explained further below, include the Turnaround,
SOHO and 1998/2000 Programs.
Reconciliation to Statements of Income
For the year ended December 31, 2004 2003 2002
Restructuring provision $105 $204 $648
Restructuring reversal (20) (29) (33)
Asset impairment charges 1155
(1)
Restructuring and asset
impairment charges $86 $ 176 $ 670
(1) Asset impairment charges consisted of $45 and $10 for the Ongoing and
Legacy Programs, respectively.
Reconciliation to Statements of Cash Flows
For the year ended December 31, 2004 2003 2002
Charges to reserve $(189) $(377) $ (474)
Pension curtailment,
special termination
benefits and settlements 833 59
Effects of foreign currency
and other noncash (6) (1) 23
Cash payments for
restructurings $(187) $(345) $(392)
Restructuring — Ongoing Programs: Beginning
in the fourth quarter of 2002, we initiated a series of
ongoing restructuring initiatives designed to continue
to achieve the cost savings resulting from realized
productivity improvements. These ongoing initiatives
included downsizing our employee base and the
outsourcing of certain internal functions. These
initiatives are not individually significant and primarily
include severance actions and impact all geographies
and segments. We recorded an initial provision of
$402 associated with these ongoing programs in the
fourth quarter 2002. The provision consisted of $312 for
severance and related costs, $45 of net costs associated
with lease terminations and future rental obligations
and $45 for asset impairments. The severance and
related costs related to the elimination of approximately
4,700 positions worldwide. During 2003, we provided
an additional $177 for restructuring programs, net of
reversals of $16, related to changes in estimates for
severance costs from previously recorded actions. The
additional provision consisted of net charges of $138
primarily related to the elimination of over 2,000
positions worldwide, $33 for pension settlements and
post-retirement medical benefit curtailments and $6 for
lease terminations. During 2004, weprovided an
additional $93for ongoing restructuring programs, net
of reversals of $11 related to changes in estimates for
severance costs from previously recorded actions. The
additional provision consisted of a net charge of $76
related to the elimination of over 1,900 positions
primarily in North America and Latin America, $8 for
pension settlements, $8 for lease terminations and
$1 for asset impairments. The reservebalance for these
Restructuring Programs at December 31, 2004 was $93.
The majority of this balance will be spent during 2005
and is summarized as follows:
Lease
Severance Cancella-
and Related tion and
Costs Other Costs Total
Initial Provision (1) $ 312 $ 45 $ 357
Charges against reserve (71) — (71)
Balance at December 31, 2002 $ 241 $ 45 $ 286
Provisions (1) 186 7 193
Reversals (15) (1) (16)
Charges (269) (15) (284)
Balance at December 31, 2003 $ 143 $ 36 $ 179
Provisions (1) 95 8 103
Reversals (11) — (11)
Charges (157) (21) (178)
Balance at December 31, 2004 $ 70 $ 23 $ 93
(1) These amounts exclude cumulative asset impairment charges of $46
through December 31, 2004.