EMC 2003 Annual Report Download - page 50

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2003
Category
Initial
Provision
Utilization
During 2003
Ending
Balance
Non-Cash
Portion of the
Provision
Workforce reduction $18,557 $ (3,861) $14,696 $ –
Asset impairment 10,515 (10,515) – 10,515
Elimination of excess facilities 2,844 (582) 2,262 582
Total $31,916 $ (14,958) $16,958 $ 11,097
Worldwide Reduction in Force
The 2003 restructuring program included a reduction in force of approximately 200 employees across our major business functions and all major
geographic regions. Approximately 48% of such employees were based in North America and the remainder are or were based in Europe, Latin America and
the Asia Pacific region. As of December 31, 2003, approximately 125 employees had been terminated.
73
EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATMENTS
Asset impairment
As a result of the LEGATO acquisition, we recognized an impairment charge of $10.5 million for a duplicative EMC software project. The impairment
charge was equal to the amount by which the assets' carrying amount exceeded the present value of its estimated discounted cash flows. The impaired asset is
classified within our information storage products segment.
Elimination of excess facilities
The 2003 restructuring program includes a charge of $2.8 million for the elimination of excess office space in the United Kingdom.
2002 Restructuring Program
In the fourth quarter of 2002, we implemented a restructuring program to reduce our cost structure. As a result of the program, we incurred restructuring
and other special charges of $140.9 million. The restructuring charge included employee termination benefits, consolidation of excess facilities, impairment of
long-lived assets and contractual and other obligations for which we no longer derive an economic benefit. In addition, we recognized a charge of $8.9 million
related to disposal of certain fixed assets which is classified within other expense, net, in our statement of operations.
The amounts charged and adjusted against the provisions established in 2002 are as follows (tables in thousands):
2003
Category
Beginning
Balance
Additions to
the Provision
During 2003
Utilization
During 2003
Ending
Balance
Workforce reduction $ 22,121 $ 24,081 $ (39,585) $ 6,617
Consolidation of excess facilities 52,647 6,134 (21,594) 37,187
Contractual and other obligations 15,260 1,300 (11,685) 4,875
Total $ 90,028 $ 31,515 $ (72,864) $48,679
2002
Category
Initial
Provision
Utilization
During 2002
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
The $24.1 million addition to the provision in 2003 for workforce reduction was primarily attributable to finalizing severance packages for employees in
foreign jurisdictions. The $6.1 million addition to the provision for the consolidation of excess facilities represents the charges for facilities being vacated,
offset by the reversal of reserves related to the reactivation of facilities that had previously been vacated. The $1.3 million addition to the provision for
contractual and other obligations represents incremental costs associated with previously established obligations.
74
EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATMENTS
2001 Restructuring Program