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Table of Contents
EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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 million.
The impaired assets are classified within EMC's 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 EMC. These contractual
obligations include marketing agreements, equipment leases, maintenance agreements and component part purchase obligations. Additionally, as a result of
our restructuring activities, EMC has certain pending employment-related claims. As a result of the above factors, EMC recognized a pre-tax charge of $16.9
million.
A summary of the costs for the 2002 restructuring program is outlined as follows (table in thousands):
Category Provision Current Utilization Ending Balance Non-Cash Portion of the Provision
Workforce reduction $ 44,478 $ (22,357) $ 22,121 $ —
Consolidation of excess facilities 57,988 (5,341) 52,647 5,124
Asset impairment 21,487 (21,487) — 21,487
Contractual and other obligations 16,921 (1,661) 15,260 —
Total $ 140,874 $ (50,846) $ 90,028 $ 26,611
Loss on the Disposal of Assets
As a result of the 2002 restructuring program, management disposed of certain fixed assets that were no longer essential to the operation of the
business. As a result, EMC recognized a non-cash pre-tax charge of $8.9 million which is classified within other expense, net, in the statement of operations.
Cash Impact 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 million, of which $24.2 million 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.
2001 Restructuring Program
In the third quarter of 2001, EMC implemented a restructuring program to reduce its cost structure. As a result of the program, EMC incurred
restructuring and other special charges of $825.2 million. The restructuring charges consisted of $111.5 million for employee termination benefits, $104.5
million related to the impairment of goodwill, purchased intangibles and other long-lived assets, $158.1 million to consolidate excess facilities and $34.5
million for other contractual obligations for which EMC will no longer derive an economic benefit. The other special charges included a provision for excess
and obsolete inventory of $310.0 million and an other than temporary decline in certain equity investments of $106.6 million.
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