Restructuring and Other Charges
Fiscal 2011 Plans
In fiscal 2011, the Company initiated a number of key targeted actions to address several areas in its business model. These actions were intended to simplify and focus the Company’s organization and operating model, align the Company’s cost structure given transitions in the marketplace, divest or exit underperforming operations, and deliver value to the Company’s shareholders. The Company initiated these actions to align its business based on its five foundational priorities: leadership in its core business (routing, switching, and associated services), which includes comprehensive security and mobility solutions; collaboration; data center virtualization and cloud; video; and architectures for business transformation.
Pursuant to the restructuring that the Company announced in July 2011, the Company has incurred cumulative charges of approximately $1.1 billion (included as part of the charges discussed below). The Company has completed the July 2011 restructuring and does not expect any remaining charges related to these actions. The following table summarizes the activities related to the restructuring and other charges pursuant to the Company’s July 2011 announcement related to the realignment and restructuring of the Company’s business as well as certain of its then consumer product lines as announced during April 2011 (in millions):
|
| | | | | | | | | | | | | | | | | | | | |
| | Voluntary Early Retirement Program | | Employee Severance | | Goodwill and Intangible Assets | | Other | | Total |
Gross charges in fiscal 2011 | | $ | 453 |
| | $ | 247 |
| | $ | 71 |
| | $ | 28 |
| | $ | 799 |
|
Cash payments | | (436 | ) | | (13 | ) | | — |
| | — |
| | (449 | ) |
Non-cash items | | — |
| | — |
| | (71 | ) | | (17 | ) | | (88 | ) |
Balance as of July 30, 2011 | | 17 |
| | 234 |
| | — |
| | 11 |
| | 262 |
|
Gross charges in fiscal 2012 | | — |
| | 299 |
| | — |
| | 54 |
| | 353 |
|
Change in estimate related to fiscal 2011 charges | | — |
| | (49 | ) | | — |
| | — |
| | (49 | ) |
Cash payments | | (17 | ) | | (401 | ) | | — |
| | (18 | ) | | (436 | ) |
Non-cash items | | — |
| | — |
| | — |
| | (20 | ) | | (20 | ) |
Balance as of July 28, 2012 | | — |
| | 83 |
| | — |
| | 27 |
| | 110 |
|
Gross charges in fiscal 2013 | | — |
| | 111 |
| | — |
| | (6 | ) | | 105 |
|
Cash payments | | — |
| | (173 | ) | | — |
| | (11 | ) | | (184 | ) |
Non-cash items | | — |
| | — |
| | — |
| | (3 | ) | | (3 | ) |
Balance as of July 27, 2013 | | $ | — |
| | $ | 21 |
| | $ | — |
| | $ | 7 |
| | $ | 28 |
|
Other charges incurred during fiscal 2012 were primarily for the consolidation of excess facilities, as well as an incremental charge related to the sale of the Company’s Juarez, Mexico manufacturing operations, which sale was completed in the first quarter of fiscal 2012.
During fiscal 2011, the Company incurred a charge of approximately $63 million related to a reduction to goodwill as a result of the sale of its Juarez manufacturing operations and also recorded an intangible asset impairment of $8 million in connection with the restructuring of the Company’s then consumer product lines. Other charges incurred during fiscal 2011 were primarily related to the consolidation of excess facilities and other charges associated with the realignment and restructuring of the Company’s then consumer product lines. During fiscal 2011, the Company also recorded charges of approximately $124 million, primarily related to inventory and supply chain charges in connection with restructuring related to its then consumer product lines, most notably exiting the Flip Video camera product line, which were recorded in cost of sales and not included in the preceding table.
August Fiscal 2014 Plan
In August 2013 the Company announced a workforce reduction plan. The Company is rebalancing its resources with a workforce reduction plan that will impact approximately 4,000 employees, or 5% of the Company’s global workforce. The Company expects to take action under this plan beginning in the first quarter of fiscal 2014. The Company currently estimates that it will recognize pre-tax charges to its financial results in an amount not expected to exceed $550 million consisting of severance and other one-time termination benefits, and other associated costs. These charges will be primarily cash-based. The Company expects that approximately $250 million to $300 million of these charges will be recognized during the first quarter of fiscal 2014 with the remaining amount to be recognized during the rest of fiscal 2014.
