EMC 2002 Annual Report Download - page 24

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Table of Contents
2001 Inventory Provision
The amounts charged and adjusted against the 2001 established provisions for excess and obsolete inventory are set forth below. The activity is
reflected within cost of sales in our statement of operations.
Beginning Balance
Inventory Scrapped and Charged Against the Reserve
Reduction in
Cost of Sales
Ending Balance
2002
Category
Inventory
Sold Favorable Vendor Settlements
Excess and obsolete EMC owned
inventory $ 226.2 $ (182.9) $ (37.0) $ — $ 6.3
Excess and obsolete purchase
obligations 29.3 (4.8) (20.9) (3.6) —
Total $ 255.5 $ (187.7) $ (57.9) $ (3.6) $ 6.3
Beginning Balance
Current
Year
Provision
Inventory Scrapped and Charged Against the
Reserve
Reduction in
Cost of Sales
Ending Balance
2001
Category
Inventory
Sold Favorable Vendor Settlements
Excess and obsolete EMC
owned
inventory $ — $ 280.5 $ (54.3) $ — $ — $ 226.2
Excess and obsolete purchase
obligations — 29.5 (0.2) — — 29.3
Total $ — $ 310.0 $ (54.5) $ — $ — $ 255.5
Other Charges
In 2001, we recorded a pre-tax charge of $106.6 for other than temporary declines in equity investments. These investments are in privately-held
companies, primarily in the storage industry, many of which are in the start-up or development stage. These investments are carried at cost, subject to
adjustment for impairment. Due to the continued global economic slowdown in 2001, as well as the downturn in the storage industry, we determined that the
decline in these investments was other than temporary and recognized an impairment loss.
Impacts of the 2001 Restructuring Program
The 2001 restructuring program has been substantially completed, although our ability to sell and sublet facilities is subject to appropriate market
conditions. The expected cash impact of the charge is $266.5, of which $55.4 was paid in 2001 and $110.7 was paid in 2002. The remaining accrual balance
primarily relates to the consolidation of facilities that will be paid over the respective lease terms through 2015.
Cost Savings from the Restructuring Programs
Both the 2002 and 2001 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, 2002, the annualized costs savings, compared to the cost structure in place as of the end of the second quarter of
2001, is in excess of $1,250.0.
Investment Income and Interest Expense
Investment income was $256.2, $265.3 and $206.2 in 2002, 2001 and 2000, respectively. Investment income was earned primarily from investments in
cash equivalents, short and long-term investments and sales-
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