Apple 1997 Annual Report Download - page 48

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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 the Company's products and the
Company's adoption of a new strategic direction. These actions resulted in a net charge of $179 million after subsequent adjustments recorded
in the fourth quarter of 1996. During 1997, the Company announced and began to implement supplemental restructuring actions to meet the
foregoing objectives of the plan. The Company recognized a $217 million charge during 1997 for the estimated incremental costs of those
actions, including approximately $8 million of costs related to the termination of the Company's former Chief Executive Officer. The combined
restructuring actions consist of terminating approximately 3,600 full-
time employees, approximately 2,600 of whom have been terminated from
the second quarter of 1996 through September 26, 1997, excluding employees who were not paid severance bonuses and who were hired by
SCI Systems, Inc. or 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 those 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 for projects and technologies that are not central to the Company's core business strategy. The restructuring actions under the plan
have resulted in cash expenditures of $163 million and noncash asset write-downs of $53 million from the second quarter of 1996 through
September 26, 1997. The Company expects that the remaining $180 million accrued balance as of September 26, 1997 will result in cash
expenditures of approximately $130 million over the next twelve months and $11 million thereafter. The Company expects that most of the
contemplated restructuring actions related to the plan will be completed during the first half of fiscal 1998 and will be financed through current
working capital and, if necessary, continued short-term borrowings.
The following table depicts the restructuring activity through September 26, 1997:
RESTRUCTURING ACTIVITY
(C): Cash; (N): Noncash.
45
NET BALANCE AS OF NET BALANCE AS OF
ADDITIONS SPENDING SEPTEMBER 27, ADDITIONS SPENDING SEPTEMBER 26,
CATEGORY DURING 1996 DURING 1996 1996 DURING 1997 DURING 1997 1997
--------------------------------------- ----------- ------------- --------------- ----------- ----------- ---------------
(IN MILLIONS)
Payments to employees involuntarily
terminated (C)....................... $ 81 $ 48 $ 33 $ 131 $ 88 $ 76
Payments on canceled or vacated
facility leases (C).................. 19 4 15 19 9 25
Write-down of operating assets to be
sold (N)............................. 54 7 47 38 46 39
Payments on canceled contracts (C)..... 25 3 22 29 11 40
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$ 179 $ 62 $ 117 $ 217 $ 154 $ 180
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