EMC 2003 Annual Report Download - page 49

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Changes in the carrying amount of goodwill, net, on a consolidated basis and by segment for the years ended December 31, 2003 and 2002 consist of the
following (tables in thousands):
Year ended December 31, 2003
Information
Storage
Products
Information
Storage
Services
LEGATO
Products and
Services
Documentum
Products and
Services
Other
Businesses Total
Balance, beginning of the year $ 203,415 $ 1,615 $ – $ – $ – $ 205,030
Goodwill acquired 501,303 – 929,934 1,072,131 – 2,503,368
Tax deduction from exercise of stock options – – (1,600) – – (1,600)
Finalization of purchase price allocations 4,879 – – – – 4,879
Balance, end of the year $ 709,597 $ 1,615 $ 928,334 $ 1,072,131 $ – $2,711,677
Year ended December 31, 2002
Information
Storage
Products
Information
Storage
Services
Other
Businesses Total
Balance, beginning of the year $ 186,741 $ 1,615 $ – $188,356
Goodwill acquired 5,091 – – 5,091
Finalization of purchase price allocations 11,583 – – 11,583
Balance, end of the year $ 203,415 $ 1,615 $ – $205,030
C. Restructuring and Other Special Charges
During 2003, we recorded restructuring and other special charges primarily related to the acquisitions of LEGATO and Documentum. In 2002 and 2001,
we implemented restructuring programs to reduce our cost structure and focus our resources on the highest potential growth areas of our business. The
restructuring and other special charges were $66.3 million, $100.0 million and $825.1 million in 2003, 2002 and 2001, respectively. The 2003 charge
consisted of $61.1 million associated primarily with the acquisitions consummated in the year and $35.0 million of additional restructuring costs associated
with the 2002 restructuring program. Partially offsetting these costs in 2003 was a $29.8 million reduction in accruals from prior restructuring programs. The
reductions resulted from management's decision to utilize a facility for Documentum, LEGATO and certain of our other operations that we had previously
vacated. Additionally, we favorably resolved a previously recognized contractual obligation.
72
EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATMENTS
The 2002 charges consisted of $149.8 million associated with the 2002 restructuring program and $11.8 million of additional restructuring costs
associated with the 2001 restructuring program. Offsetting these costs in 2002 was a $61.6 million benefit resulting primarily from the sale of previously
identified obsolete inventory for which a reserve was established in 2001. The 2001 charge consisted of a $310.0 million provision for excess and obsolete
inventory, $408.6 million for restructuring activities and $106.6 million for other than temporary declines in equity investments.
The restructuring and other special charges have been classified within our statement of operations according to their related category. These categories
are as follows (table in thousands):
2003 2002 2001
Cost of sales $ – $ (61,558) $320,066
Restructuring and other special charges 66,267 150,402 398,508
SG&A expenses – 2,300 –
Other expense, net – 8,920 106,560
Total $66,267 $100,064 $825,134
The detail on each of the charges and activity for each year is explained in the following sections.
2003 Restructuring Program
In 2003, we recognized restructuring and other special charges of $61.1 million, primarily relating to the acquisitions of LEGATO and Documentum.
Included in the charges are employee termination benefits, write-off of a duplicative software project and consolidation of excess facilities, which aggregated
$31.9 million. The 2003 restructuring program impacted our information storage products and information storage services segments. The expected cash
impact of the charge is $20.8 million, of which $3.9 million was paid in 2003. The restructuring and other special charges also included IPR&D charges of
$19.6 million and $9.5 million associated with the acquisitions of LEGATO and Documentum, respectively. See Note B.
The amounts charged against the provision established in 2003 are as follows (table in thousands):