Dell takes $59 million charge to close local plant that cost $110 million to build

By: Richard Craver | Winston-Salem Journal
Published: November 20, 2009

Dell Inc. will spend about half the cost of building its $110 million local plant to close it.

The company said it took a $59 million non-cash charge in the third quarter of its fiscal year 2010, which ended Oct. 30.

Brian Gladden, the chief financial officer, said during a conference call with analysts yesterday that the charge "represents the majority of the Winston-Salem exposure expense."

David Frink, a Dell spokesman, said today that the company won't provide further financial detail regarding the plant closing, such as saying how much it is paying in severance and other benefits to employees.

Dell said on Oct. 7 that it was closing the plant and eliminating 905 jobs by mid-January. It cut more than 400 jobs Wednesday, 200 below its initial projection for the first work-force reduction.

The $59 million charge was included in what Dell called $123 million in "organizational effectiveness expenses." The same amount also is listed as severance and facilities actions in other financial data. The $123 million expense represented a 5-cent, after-tax charge to earnings.

Gladden said that the majority of the $123 million expense was related to cost of goods sold in the quarter. "The biggest item driving this expense was the closure of the Winston-Salem manufacturing facility," Frink said.

As employees' jobs are cut, they will receive two months of pay, an additional week of pay for every year they worked at the plant, two months of COBRA health-insurance coverage, a bonus for fiscal year 2010 goals that were met at the plant, and two months of outplacement services help.

Frink said that the repayment of $26.5 million in local incentives was not included in the $59 million charge.

On Nov. 3, Dell repaid about $15.5 million in incentives to the city, about $7.9 million to Forsyth County, about $2.8 million to the Millennium Fund and about $308,000 to Forsyth County Development Corp.

"The repayment of incentive funds was not material to the quarter's results," Frink said. "We repaid the incentive funds because we wanted to as quickly as possible honor the commitments we made under the agreements."