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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per-share data and unless otherwise indicated)
Additional details about our restructuring programs
are as follows:
Reconciliation to Consolidated Statements of Cash
Flows
Years ended
December 31,
2006 2005 2004
Charges to reserve ........... $(284) $(247) $(190)
Pension curtailment, special
termination benefits and
settlements ............... — — 8
Asset impairments ........... 30 15 1
Effects of foreign currency and
other non-cash ............ (11) 18 (6)
Cash payments for
restructurings ............ $(265) $(214) $(187)
Restructuring: In recent years we have initiated a
series of ongoing restructuring initiatives designed to
leverage cost savings resulting from realized productivity
improvements, realign and lower our overall cost
structure and outsource certain internal functions. These
initiatives primarily include severance actions and impact
all major geographies and segments. Recent initiatives
include:
• During 2006, we provided $420 for ongoing
restructuring programs which consisted of $351 for
severance and related costs, $39 for lease and
contract terminations and $30 for asset
impairments. The charges primarily relate to the
elimination of approximately 3,400 positions
primarily in North America and Europe. The 2006
actions associated with these charges primarily
include the following: technical and professional
services infrastructure and global back-office
optimization; continued R&D efficiencies and
productivity improvements; supply chain
optimization to ensure, for example, alignment to
our global two-tier model implementation; and
selected off-shoring opportunities. The lease
termination and asset impairment charges primarily
related to the relocation of certain manufacturing
operations as well as an exit from certain leased and
owned facilities. These charges were offset by
reversals of $35 primarily related to changes in
estimates in severance costs from previously
recorded actions.
• During 2005, we provided $398 for ongoing
restructuring programs, which consisted of a charge
of $371 for severance costs, primarily related to the
elimination of approximately 3,900 positions
worldwide, a charge of $12 for lease terminations
and $15 for asset impairments. The initiatives in
2005 were focused on cost reductions in service,
manufacturing and back office support operations
primarily within the Office and Production
segments. These charges were offset by reversals of
$27 primarily related to changes in estimates in
severance costs from previously recorded actions.
• During 2004, we provided $104 for ongoing
restructuring programs, which consisted of a charge
of $87 related to the elimination of approximately
1,900 positions primarily in North America and
Latin America, $8 for pension settlements, $8 for
lease terminations and $1 for asset impairments.
These charges were offset by reversals of $11
related to changes in estimates for severance costs
from previously recorded actions.
We expect to utilize the majority of the
December 31, 2006 restructuring balance in 2007.
The following table summarizes the total amount of
costs incurred in connection with these restructuring
programs by segment for the three years ended
December 31, 2006 (in millions):
Years Ended December 31, 2006 2005 2004
Production .................... $142 $150 $ 27
Office ....................... 127 175 29
DMO........................ 21 22 30
Other ........................ 95 19 —
Total Provisions .............. $385 $366 $ 86
We expect to incur additional restructuring charges
in 2007 of approximately $11 related to initiatives
identified to date that have not yet been recognized in the
Consolidated Financial Statements as well as expected
interest accretion on the reserve.
74