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In addition to these charges were revisions to prior accruals of $19 resulting primarily from changes in estimates for sublease income and costs
to vacate certain properties, across all segments. During 2003, the provision balance for contract settlement and lease costs was drawn down by
cash payments of $275. The remaining provision, net of approximately $317 in estimated sublease income, is expected to be substantially
drawn down by the end of 2013. Also, we recorded charges of $74 related to current period write downs to fair value less costs to sell for
various leasehold improvements and excess Optical Networks equipment held for sale. Net revisions of $28 to reduce prior accruals related to
adjustments in our original plans or estimates for the closure of certain facilities. In 2003, we concluded that an impairment of our goodwill did
notexistandnowritedownwasrecorded.
In 2002, we recorded special charges of $2,095, net of revisions of $179, related to our restructuring work plan and contract settlement and
lease costs. Workforce reduction charges of $952 were related to the cost of severance and benefits associated with the approximately 12,700
employees notified of termination which was primarily in the U.S., Canada and EMEA and extended across all segments. Net revisions of $132
to reduce prior accruals primarily related to termination benefits where actual costs were lower than our original estimates across all segments.
Workforce reduction charges included $124 for pension and post-retirement benefits other than pension, settlement and curtailment costs.
During 2002, the workforce reduction provision balance was drawn down by cash payments of $788 and by $100 of non-cash pension and
post-retirement benefits other than pension, settlement and curtailment costs attributable to the notified employee group charged against the
provision. Contract settlement and lease costs of $225 consisted of negotiated settlements to cancel or renegotiate contracts and net lease
charges related to leased facilities (comprised of office, warehouse and manufacturing space) and leased manufacturing equipment that were no
longer required, across all segments. In addition to these charges were net revisions of $8 primarily from changes in estimates for sublease
income and costs to vacate certain properties, across all segments. During the year ended December 31, 2002, the provision balance for
contract settlement and lease costs was drawn down by cash payments of $286. The remaining provision balance was net of approximately
$402 in estimated sublease revenue. Plant and equipment charges of $475 were related to current period write downs to fair value less costs to
sell for various owned facilities and plant and manufacturing related equipment. These charges included $358 related to specialized plant
infrastructure and equipment within Optical Networks and the remaining charges for facilities and equipment arising across all segments.
Offsetting these charges were revisions of $55 to prior write downs of assets held for sale related primarily to additional proceeds from
disposals of equipment from Optical Networks and other segments in excess of amounts previously expected and adjustments to original plans
or estimated amounts for certain facility closures across all segments. Also in 2002, we recorded $27 related to the write downs of certain
acquired technology in Optical Networks due to our reassessment of market conditions.
In 2002, we also completed the SFAS 142 transitional impairment test and concluded at that time that there was no impairment of recorded
goodwill, as the fair values of our reporting units exceeded their carrying amounts as of January 1, 2002. Therefore, the second step of the
transitional impairment test under SFAS 142 was not required to be performed in 2002. However, as a result of the continued decline in 2002
in both our overall market value generally and within Optical Networks specifically, we evaluated the goodwill associated with the businesses
within Optical Networks for potential impairment. The conclusion of those evaluations was that the fair value associated with these businesses
could no longer support the carrying value of the remaining goodwill associated with them. As a result, we recorded a goodwill write down of
$595 in 2002.
In 2001, we recorded special charges of $14,816, net of revisions, related to our restructuring work plan and write downs of goodwill and other
assets. These special charges related to workforce reduction costs of $1,174, contract settlement and lease costs of $897, plant and equipment
write downs of $1,000, other charges of $39, intangible asset impairments of $407 and a goodwill write down of $11,426.
On December 31, 2003, our workforce was 35,160. In 2004 and into 2005, our focus is on managing each of our businesses based on financial
performance, the market and customer priorities. In the third quarter of 2004, we announced a strategic plan that includes a work plan
involving focused workforce reductions and a voluntary retirement program relating in the aggregate to approximately 3,250 employees, real
estate optimization and other cost containment actions such as reductions in information services costs, outsourced services and other
discretionary spending. Expected cash costs in connection with this work plan are approximately $430. See “Business overview — Our
strategic plan and outlook”.
For additional information on expected future cash outflows related to special charges, see “Liquidity and capital resources — Uses of
liquidity”. For additional information related to our restructuring activities, see “Special charges” in note 7 of the accompanying consolidated
financial statements.
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