EMC 2002 Annual Report Download - page 23

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Table of Contents
Impacts of the 2002 Restructuring Program
The 2002 restructuring program is expected to be substantially completed by June 30, 2003, although the ability to sublet facilities is subject to
appropriate market conditions. The expected cash impact of the 2002 restructuring program is $114.3, of which $24.2 was paid in 2002. Remaining cash
expenditures, relating to workforce reductions and contractual obligations, are expected to be substantially paid by the end of 2003. Amounts relating to the
consolidation of facilities will be paid over the respective lease terms through 2015.
As a result of the 2002 restructuring program, we expect to reduce costs in all areas of our operations, favorably impacting cost of sales, SG&A
expenses and R&D expenses. The 2002 restructuring program, once fully implemented, is expected to reduce costs by approximately $130.0 per year. We
began to realize a portion of the benefits in the fourth quarter of 2002.
2001 Restructuring Program
In the third quarter of 2001, we implemented a restructuring program to reduce our cost structure. As a result of the program, we incurred restructuring
and other special charges of $825.2. The restructuring charges consisted of $111.5 for employee termination benefits, $104.5 related to the impairment of
goodwill, purchased intangibles and other long-lived assets, $158.1 to consolidate excess facilities and $34.5 for other contractual obligations for which we
will no longer derive an economic benefit. The other special charges included a provision for excess and obsolete inventory of $310.0 and an other than
temporary decline in certain equity investments of $106.6.
The amounts charged and adjusted against the provisions established in 2001 are as follows:
2002
Category Beginning Balance
Adjustment to the
Provision
Current
Utilization Ending Balance
Workforce reduction $ 48.2 $ 19.3 $ (67.5) $ —
Other contractual obligations 23.7 (7.3) (13.3) 3.1
Consolidation of excess facilities 127.4 (0.2) (29.9) 97.3
Total $ 199.3 $ 11.8 $ (110.7) $ 100.4
2001
Category Beginning Balance Provision
Adjustment
to the
Provision
Current
Utilization Ending Balance
Workforce reduction $ — $ 111.5 $ (18.3) $ (45.0) $ 48.2
Impairment of goodwill, purchased intangibles and other long-lived assets — 104.5 — (104.5) —
Other contractual obligations — 34.5 (8.0) (2.8) 23.7
Consolidation of excess facilities — 158.1 26.3 (57.0) 127.4
Total $ — $ 408.6 $ — $ (209.3) $ 199.3
The 2001 restructuring program included a reduction in force of approximately 4,000 employees across all business functions and geographic regions.
As of June 30, 2002, all identified personnel had been terminated.
The adjustment to the provision for workforce reduction in 2002 was primarily attributable to the finalization of severance payments associated with
reductions in force in certain foreign jurisdictions. The adjustment to the provision for other contractual obligations in 2002 resulted from favorable
settlements.
The adjustment to the provision for the workforce reduction in 2001 primarily related to voluntary employee resignations. The adjustment to the
provision for other contractual obligations in 2001 related primarily to a favorable settlement of an estimated liability for the closure of an information storage
services business. The adjustment to the provision for the consolidation of excess facilities in 2001 primarily related to additional leased facilities being
vacated.
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