EMC 2004 Annual Report Download - page 26

Table of Contents
Adjustments
2003 to the
Beginning Provision Utilization Ending
Category Balance During 2003 During 2003 Balance
Workforce reduction $ 22.1 $ 24.1 $ (39.6) $ 6.6
Consolidation of excess facilities 52.6 6.1 (21.5) 37.2
Contractual and other obligations 15.3 1.3 (11.7) 4.9
Total $ 90.0 $ 31.5 $ (72.8) $ 48.7
2002 Non-Cash
Initial Utilization Ending Portion of the
Category Provision During 2002 Balance Provision
Workforce reduction $ 44.5 $ (22.4) $ 22.1 $ –
Consolidation of excess facilities 58.0 (5.4) 52.6 5.1
Asset impairments 21.5 (21.5) – 21.5
Contractual and other obligations 16.9 (1.6) 15.3 –
Total $ 140.9 $ (50.9) $ 90.0 $ 26.6
The $24.1 addition to the provision for workforce reduction in 2003 was primarily attributable to finalizing severance packages for employees in foreign
jurisdictions. The $6.1 addition to the provision for the consolidation of excess facilities in 2003 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 asset impairment charges in 2002 resulted from consolidating the locations of and modifications made to our Internet hosting business and the write-
down of assets within one of our Data General's services business which we put up for sale. The impairment charge relating to the Internet hosting business
was equal to the amount by which the assets' carrying amount exceeded their fair value, measured as the present value of their estimated discounted cash
flows. The impairment charge relating to the assets used within our Data General's services business were determined by comparing the expected sales
proceeds to the assets' carrying value. The impaired assets were classified within the information storage and management services and other businesses
segments.
The 2002 restructuring program impacted our information storage products, information storage and management services, EMC Software Group products
and services and other businesses segments.
In addition to these restructuring programs, we have remaining liabilities aggregating $62.8 associated with prior years' restructuring programs. All
restructuring programs, with the exception of the 2004 restructuring programs, are complete although our ability to sublet facilities is subject to appropriate
market conditions. The total liability for all of our restructuring programs was $115.3 as of December 31, 2004. The remaining balance relates primarily to
consolidation of facilities and employee termination benefits. These amounts are expected to be paid out through 2015.
The 2004, 2003 and 2002 restructuring programs have reduced costs in all areas of our operations, favorably impacting cost of sales, SG&A expenses and
R&D expenses. As of December 31, 2004, the annualized cost savings expected from these programs was approximately $180.0.
As of December 31, 2004, we had a goodwill balance of $3,284.4. At least annually, we evaluate goodwill for impairment at the reporting unit level. As of
December 31, 2004, none of the reporting units had any indications that goodwill was likely to be impaired.
As we continue to refine our business model, we will reassess our cost structure and asset deployment to assess whether additional reductions are
necessary. Should we determine that additional reductions will benefit our business, we may incur additional restructuring and other special charges. If
customer demand for products change or we acquire complimentary products, we may be required to write down the value of assets. Additionally, changes in
our business model could cause goodwill or other assets to be impaired. 23