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Table of Contents
rate of our outstanding accounts and notes receivable balance. Our quarterly average day's sales outstanding were 45 days in 2004, 47 days in 2003 and
63 days in 2002.
Restructuring and Other Special Charges
In 2004, 2003 and 2002, we incurred restructuring and other special charges of $56.1, $66.3 and $150.4.
The 2004 charge consisted of $17.4 of in-process R&D ("IPR&D") charges associated with acquisitions ($15.2 related to VMware) and $38.7 of
restructuring charges. The 2004 restructuring programs consisted of $24.5 of employee termination benefits associated with reductions in force and $2.1 of
costs associated with vacating excess facilities. The remaining $12.1 of charges was associated with prior restructuring programs, primarily relating to
additional rent expense for vacated facilities. The additional rent expense was attributable to a revised estimate of the time needed to sublet the facilities.
The 2003 charge consisted of $29.1 of IPR&D charges associated with the LEGATO and Documentum acquisitions, $18.6 of employee termination
benefits associated with reductions in force, $2.8 associated with vacating excess facilities, $10.5 pertaining to an asset impairment and $5.3 associated with
prior restructuring programs.
The 2002 charge consisted of $44.5 of employee termination benefits associated with reductions in force, $58.0 associated with vacating excess facilities,
$21.5 pertaining to asset impairments, $16.9 associated with contractual and other obligations for which we no longer derive an economic benefit and $11.8
associated with a prior restructuring program. For purposes of presentation, $2.3 of the charge was classified within selling, general and administrative
expenses within the statement of operations.
The activity for each charge is explained in the following sections.
2004 Restructuring Programs
The activity for the 2004 restructuring programs for the year ended December 31, 2004 is presented below:
Adjustments
2004 to the
Initial Provision Utilization
Category Provision During 2004 During 2004 Ending Balance
Workforce reduction $ 26.8 $ (2.4) $ (8.1) $ 16.3
Elimination of excess facilities 2.2 – (0.5) 1.7
Total $ 29.0 $ (2.4) $ (8.6) $ 18.0
The 2004 restructuring programs included two separate reductions in force, one which commenced in the first quarter of 2004 and the second which
commenced in the fourth quarter of 2004, aggregating approximately 400 employees across our major business functions and all major geographic regions.
Approximately 72% of the affected employees are or were based in North America, excluding Mexico, and 28% are or were based in Europe, Latin America,
Mexico and the Asia Pacific region. As of December 31, 2004, approximately 180 employees have been terminated.
The 2004 restructuring programs are expected to be completed by the end of 2005, with the remaining cash expenditures relating to workforce reduction
expected to be substantially paid by the end of 2006. Amounts relating to the elimination of excess facilities will be paid over the respective lease terms
through 2005. The expected cash impact of the 2004 restructuring charge is $26.6, of which $8.6 was paid in 2004.
The $2.4 reversal to the provision for workforce reduction was attributable to a decrease in the number of individuals included in the reduction in force
which commenced in the first quarter of 2004. 21