Notes to Consolidated F<strong>in</strong>ancial Statements - as of December 30, 2001In millions, except share and per share amountsAdecco’s assessment of the realisability of deferred tax assets ismade on a country-by-country basis. A valuation allowance is usedto reduce deferred tax assets to a level which, more likely than not,will be realised. Other current assets <strong>in</strong>clude current deferred taxassets of CHF 205 and CHF 232 as of December 30, 2001 andDecember 31, 2000 respectively. Other long-term assets <strong>in</strong>cludeCHF 394 and CHF 280 of net deferred tax assets as of December 30,2001 and December 31, 2000 respectively.As of December 30, 2001 and December 31, 2000, Adecco hadapproximately CHF 355 and CHF 169 <strong>in</strong> net operat<strong>in</strong>g loss and taxcredit carryforwards. Some of these losses and credits expire overtime and have other restrictions on usage. The largest tax loss is <strong>in</strong>the United States and equals CHF 276 and CHF 54. Those lossesbeg<strong>in</strong> to expire <strong>in</strong> 2004. Additionally, a portion of the net operat<strong>in</strong>gloss and tax credit carryforward available is not <strong>in</strong>cluded <strong>in</strong> thedeferred tax assets disclosed above because management believesthe probability of utilisation is remote.The difference between the provision for <strong>in</strong>come taxes and theexpected tax provision at the weighted average tax rate is reconciledas follows for the fiscal years:2001 2000 1999Expected tax provision (benefit) CHF (119) CHF (64) CHF 11Goodwill amortisation 231 297 199Adjustment to valuation allowance 50 - -Losses not tax benefited 28 24 9Adjustment to deferred tax assets due to rate changes 49 - 11Other 15 8 (26)Total provision for <strong>in</strong>come taxes CHF 254 CHF 265 CHF 204The expected tax provision was calculated by aggregat<strong>in</strong>g theproducts of pre-tax <strong>in</strong>come (loss) <strong>in</strong> each country multiplied by thecountry’s statutory <strong>in</strong>come tax rate. A provision has been made forwithhold<strong>in</strong>g tax and other taxes on cross-border, <strong>in</strong>tercompanytransactions <strong>in</strong>clud<strong>in</strong>g management fees, royalties, <strong>in</strong>terest anddividends.Note 11 – Commitments and Cont<strong>in</strong>genciesCommitmentsAdecco leases facilities under operat<strong>in</strong>g leases, certa<strong>in</strong> of whichrequire payment of property taxes, <strong>in</strong>surance and ma<strong>in</strong>tenancecosts. Operat<strong>in</strong>g leases for facilities are usually renewable at Adecco’soption and usually <strong>in</strong>clude escalation clauses l<strong>in</strong>ked to <strong>in</strong>flation.Future m<strong>in</strong>imum annual lease payments (net of proceeds to bereceived under subleas<strong>in</strong>g agreements) are as follows :Fiscal year2002 CHF 2102003 1782004 1312005 942006 64Thereafter 145CHF 822Total rent expense under operat<strong>in</strong>g leases amounted to CHF 214,CHF 149 and CHF 131 dur<strong>in</strong>g 2001, 2000 and 1999 respectively.Cont<strong>in</strong>genciesAdecco is <strong>in</strong>volved <strong>in</strong> various legal actions and claims. In the op<strong>in</strong>ionof management, after tak<strong>in</strong>g appropriate legal advice, the futuresettlements of such actions and claims will not have a materialadverse effect on Adecco’s f<strong>in</strong>ancial position or results of operations.Note 12 – Restructur<strong>in</strong>gOlsten acquisitionIn connection with acquisitions <strong>in</strong> 2000, primarily Olsten, Adeccocommitted to restructur<strong>in</strong>g plans which resulted <strong>in</strong> a pre-tax chargeto net <strong>in</strong>come <strong>in</strong> 2000 of CHF 65. Only CHF 36 of this amount wascharged to the restructur<strong>in</strong>g reserve. Additional restructur<strong>in</strong>greserves of CHF 93 were accrued as part of the purchase price andwere allocated to goodwill. The total restructur<strong>in</strong>g reserves ofCHF 129 <strong>in</strong>cluded CHF 57 for employee reductions, CHF 20 forrema<strong>in</strong><strong>in</strong>g lease commitments on abandoned facilities and CHF 52for branch closure and other costs. As part of the restructur<strong>in</strong>g plans,Adecco reduced its workforce by approximately 1,100 positions,<strong>in</strong>clud<strong>in</strong>g approximately 700 positions <strong>in</strong> North America and400 positions <strong>in</strong> the rest of the <strong>world</strong>, consist<strong>in</strong>g primarily ofadm<strong>in</strong>istrative and sales and market<strong>in</strong>g personnel. Approximately160 positions and 860 positions were elim<strong>in</strong>ated dur<strong>in</strong>g 2001 and2000 respectively. Dur<strong>in</strong>g 2001, additional restructur<strong>in</strong>g reservesof CHF 28 <strong>in</strong>clud<strong>in</strong>g CHF 15 for employee term<strong>in</strong>ation, CHF 5 forrema<strong>in</strong><strong>in</strong>g lease commitments and CHF 8 for branch closure andother costs, were accrued as a purchase price adjustment andrecorded aga<strong>in</strong>st goodwill.OtherIn connection with acquisitions <strong>in</strong> 1999, primarily Delphi andCareer Staff, Adecco committed to restructur<strong>in</strong>g plans whichresulted <strong>in</strong> a pre-tax charge to net <strong>in</strong>come <strong>in</strong> 1999 of CHF 3.Additional restructur<strong>in</strong>g reserves of CHF 24 were accrued as part ofthe purchase price and allocated to goodwill. The total20
Notes to Consolidated F<strong>in</strong>ancial Statements - as of December 30, 2001In millions, except share and per share amountsrestructur<strong>in</strong>g reserves of CHF 27 <strong>in</strong>cluded CHF 8 for employeereductions, CHF 9 for rema<strong>in</strong><strong>in</strong>g lease commitments on abandonedfacilities and CHF 10 for branch closure costs. Restructur<strong>in</strong>g costs ofCHF 8 recorded <strong>in</strong> 1999 <strong>in</strong> connection with the Delphi acquisitionwere reversed dur<strong>in</strong>g the year 2000 and allocated to goodwill.EmployeereductionsRema<strong>in</strong><strong>in</strong>g leasecommitments onabandoned facilitiesBranch closureand other costsTotal restructur<strong>in</strong>greserveRestructur<strong>in</strong>g reserve January 2, 2000 CHF 6 CHF 5 CHF 6 CHF 17Net additions to restructur<strong>in</strong>g reservecharged to net <strong>in</strong>come 1 19 10 7 36Net additions to restructur<strong>in</strong>g reservecharged to goodwill 2 32 9 44 85Cash payments (40) (13) (12) (65)Restructur<strong>in</strong>g reserve December 31, 2000 CHF 17 11 45 73Net additions to restructur<strong>in</strong>g reservecharged to goodwill 15 5 8 28Cash payments (28) (10) (35) (73)Restructur<strong>in</strong>g reserve December 30, 2001 CHF 4 CHF 6 CHF 18 CHF 28The components of the rema<strong>in</strong><strong>in</strong>g restructur<strong>in</strong>g reserve as of December 30, 2001 are as follows:EmployeereductionsRema<strong>in</strong><strong>in</strong>g leasecommitments onabandoned facilitiesBranch closureand other costsTotal restructur<strong>in</strong>greserveClos<strong>in</strong>g balance Delphi acquisition CHF - CHF 1 CHF 4 CHF 5Clos<strong>in</strong>g balance Olsten acquisition 4 5 14 23Total clos<strong>in</strong>g balance CHF 4 CHF 6 CHF 18 CHF 281In connection with acquisitions <strong>in</strong> 2000, Adecco committed to restructur<strong>in</strong>gplans which resulted <strong>in</strong> a pre-tax charge to net <strong>in</strong>come of CHF 65. Of thisbalance, only CHF 36 was charged to the restructur<strong>in</strong>g reserve. The rema<strong>in</strong><strong>in</strong>gCHF 29 related to the write-down of software and other fixed assets.2In connection with acquisitions <strong>in</strong> 2000, restructur<strong>in</strong>g costs of CHF 93 wereaccrued and recorded aga<strong>in</strong>st goodwill. In addition, restructur<strong>in</strong>g costs ofCHF 8 recorded <strong>in</strong> connection with the 1999 acquisition of Delphi, werereversed dur<strong>in</strong>g the year, result<strong>in</strong>g <strong>in</strong> total net additions to goodwill <strong>in</strong> 2000of CHF 85.21