Apple 1998 Annual Report Download - page 51

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4--SPECIAL CHARGES
RESTRUCTURING OF OPERATIONS
In the second quarter of 1996, the Company announced and began to implement a restructuring plan aimed at reducing costs and returning the
Company to profitability. 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 during 1996 of $179 million. 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. The combined restructuring actions consist of terminating
approximately 4,200 full-time employees, approximately 4,000 of whom have been terminated from the second quarter of 1996 through
September 25, 1998; 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 critical to the Company's core business strategy. The restructuring actions under the plan have
resulted in cash expenditures of $270 million and noncash asset write-downs of $95 million from the second quarter of 1996 through
September 25, 1998.
All material restructuring actions contemplated under the plan are essentially complete as of September 25, 1998. The remaining balance of
$31 million in accrued restructuring costs as of September 25, 1998, is comprised of $10 million for severance payments to employees who
have already been terminated as of September 25, 1998, or who will be terminated in the first quarter of fiscal 1999, and $21 million for
payments over the next three years on leases and contracts which have already been terminated. The Company expects that the remaining
accrual will result in cash expenditures of $31 million over the next three years that will be financed through current working capital.
The following table depicts the restructuring activity through September 25, 1998 (in millions):
(a): Cash; (b): Noncash.
48
PAYMENTS TO
EMPLOYEES PAYMENTS ON WRITE-DOWN OF PAYMENTS ON
INVOLUNTARILY CANCELED FACILITY OPERATING ASSETS TO CANCELED
TERMINATED(A) LEASES(A) BE SOLD(B) CONTRACTS(A) TOTAL
----------------- ------------------- --------------------- --------------- ---------
Net Additions during 1996............ $ 81 $ 19 $ 54 $ 25 $ 179
Spending during 1996................. (48) (4) (7) (3) (62)
----- --- --- ----- ---------
Balances as of September 27, 1996.... 33 15 47 22 117
Net Additions during 1997............ 131 19 38 29 217
Spending during 1997................. (88) (9) (46) (11) (154)
----- --- --- ----- ---------
Balances as of September 26, 1997.... 76 25 39 40 180
Adjustments during 1998.............. 6 4 3 (13) --
Spending during 1998................. (72) (15) (42) (20) (149)
----- --- --- ----- ---------
Balances as of September 25, 1998.... $ 10 $ 14 $ -- $ 7 $ 31
----- --- --- ----- ---------
----- --- --- ----- ---------