Apple 1996 Annual Report Download - page 41

Restructuring of Operations
In the second quarter of 1996, the Company announced and began to implement a restructuring plan aimed at reducing costs and restoring
profitability to the Company's operations. The restructuring plan was necessitated by decreased demand for Company products and the
Company's adoption of a new strategic direction. The Company's restructuring actions consist primarily of terminating approximately 1,500
full-time employees (down from an initial planned termination of approximately 2,800), approximately 900 of whom have been terminated
through September 27, 1996, excluding employees who were hired by SCI Systems, Inc. and MCI Systemhouse, the purchasers of the
Company's Fountain, Colorado, manufacturing facility and the Napa, California, data center facility, respectively);canceling or vacating certain
facility leases as a result of these employee terminations; writing down certain land, buildings and equipment to be sold as a result of
downsizing operations and outsourcing various operational functions; and canceling contracts as a result of terminating eWorld, Apple's on-
line
service. These actions resulted in an initial charge of $207 million. The charge was adjusted downward by $28 million in the fourth quarter of
1996, primarily as a result of greater than expected voluntary terminations, which led to fewer than planned involuntary terminations, as well as
lower than expected costs to cancel or vacate certain facility leases, partially offset by greater than expected costs to cancel certain contracts
and to write down certain operating assets sold or to be sold. The restructuring actions have resulted in cash expenditures of $55 million and
noncash asset write-downs of $7 million through September 27, 1996. The Company expects that the remaining $117 million accrued balance
at September 27, 1996, will result in cash expenditures of approximately $60 million over the next twelve months and approximately $10
million thereafter. The Company expects that most of the contemplated restructuring actions will be completed within the next six months and
will be financed through current working capital and continued short-term borrowings.
The following table depicts the restructuring activity through September 27, 1996:
(In millions)
(C): Cash; (N): Noncash.
In the third quarter of 1993, the Company initiated a plan to restructure its operations worldwide in order to address the competitive conditions
in the personal computer industry. In connection with this plan, the Company recorded a $321 million charge to operating expenses. In 1995
and 1994, the Company lowered its estimate of the total costs associated with this restructuring and recorded an adjustment that increased
income by $23 million and $127 million, respectively. These adjustments primarily reflected the modification or cancelation of certain
elements of the Company's original restructuring plan because of changing business and economic conditions that made certain elements of the
restructuring plan financially less attractive than originally anticipated. In addition, some actions were completed at a lower cost than originally
estimated.
39
Total Adjustments: Balance at
Restructuring Increase/ September 27,
Category Charge Spending (Decrease) 1996
Payments to employees
involuntarily
terminated (C) $115 $(48) $(34) $ 33
Payments on canceled
or vacated facility
leases (C) 26 (4) (7) 15
Write-down of operating
assets to be sold (N) 48 (7) 6 47
Payments on canceled
contracts (C) 18 (3) 7 22
$207 $(62) $(28) $117