EMC 2002 Annual Report Download - page 22

Download and view the complete annual report

Please find page 22 of the 2002 EMC annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 118

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118

Table of Contents
Worldwide Reduction in Force
The 2002 restructuring program includes a reduction in force of approximately 1,500 employees across all business functions and geographic regions.
Approximately 64% of such employees are or were based in North America and the remainder are or were based in Europe, Latin America and the Asia
Pacific region. The workforce reduction resulted in a pre-tax charge of $44.5 for termination benefits. As a result of labor laws in certain foreign countries in
which we operate, the amount of termination benefits for employees in such countries was not determinable as of December 31, 2002. As these amounts are
finalized, which is expected to be in the first quarter of 2003, we will recognize additional charges. As of December 31, 2002, approximately 1,000 employees
had been terminated.
Consolidation of Excess Facilities
The 2002 restructuring program includes a pre-tax charge of $58.0 for the consolidation of space within our corporate facilities and the elimination of
excess field office space worldwide. Included in the charge are $52.9 for estimated losses on subleases and a $5.1 impairment charge for non-recoverable
leasehold improvements. Certain facilities were vacated in the fourth quarter of 2002, with the remainder to be vacated in the first half of 2003. As a result of
our decision to vacate the premises earlier than the lease termination dates, we will accelerate the amortization of the related leasehold improvements over the
remaining periods of occupancy. This will result in incremental amortization expense of $6.7 in the first half of 2003.
Impairment of Long-Lived Assets
In the fourth quarter of 2002, we implemented a program to consolidate the locations of and made other modifications to our Internet hosting business.
As a result, we recognized a pre-tax charge of $17.9 relating to the impairment of long-lived assets. The impairment charge is equal to the amount by which
the assets' carrying amount exceeded the present value of their estimated discounted cash flows. Additionally, in the fourth quarter of 2002, we placed for sale
certain assets associated with a portion of our Data General services business. The expected proceeds from this sale were estimated to be less than the related
assets' carrying value, resulting in a pre-tax charge of $3.6. The impaired assets are classified within our information storage services segment.
Contractual and Other Obligations
As a result of the 2002 restructuring program, various contractual obligations will no longer provide any economic benefit to us. These contractual
obligations include marketing agreements, equipment leases, maintenance agreements and component part purchase obligations. Additionally, as a result of
our restructuring activities, we have certain pending employment-related claims. In light of the above factors, we recognized a pre-tax charge of $16.9.
A summary of the costs for the 2002 restructuring program is outlined as follows:
Category Provision Current Utilization Ending Balance
Non-Cash
Portion of the Provision
Workforce reduction $ 44.5 $ (22.4) $ 22.1 $ —
Consolidation of excess facilities 58.0 (5.4) 52.6 5.1
Asset impairment 21.5 (21.5) — 21.5
Contractual and other obligations 16.9 (1.6) 15.3 —
Total $ 140.9 $ (50.9) $ 90.0 $ 26.6
Loss on the Disposal of Assets
As a result of the 2002 restructuring program, we disposed of certain fixed assets that were no longer essential to the operation of our business. As a
result, we recognized a pre-tax charge of $8.9 which is classified within other expense, net, in our statement of operations.
19