Earthlink 2003 Annual Report Download - page 29

Sacramento, California; Pasadena, California; and Seattle, Washington during the months of February and March 2003. The closure of the four
contact center facilities resulted in the termination of 1,220 employees and a net reduction of 920 employees, primarily customer support
personnel. In connection with the Contact Center Plan, we recorded facility exit costs of approximately $36.6 million. These costs included
approximately $10.7 million for employee, personnel and related costs; $18.2 million for real estate and telecommunications service
termination costs and $7.7 million in asset write-downs. As of December 31, 2003, we have paid all telecommunications service termination
costs and employee and personnel related costs and expect to incur future cash outflows for real estate obligations through 2010. We have
realized reduced costs in 2003 as a result of completing the Contact Center Plan.
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The following table summarizes the status of the accrued costs associated with the Phoenix contact center facility exit costs as well as the
facility exit costs associated with the Contact Center Plan as of and for the years ended December 31, 2002 and 2003:
2004 facility exit cost plan
In January 2004, we announced plans to restructure our contact center operations and further rely on outsourced contact center service
providers to further reduce costs and increase efficiencies. Upon execution of the plan, we will utilize outsourced contact center service
providers for substantially all of our customer support operations. Under the plan, we will close contact center operations in Harrisburg,
Pennsylvania; Roseville, California; San Jose, California; and Pasadena, California and reduce our contact center operations in Atlanta,
Georgia by the end of the first quarter of 2004. The plan will impact approximately 1,300 employees. While we expect to realize future expense
reductions as a result of executing our plan, we may not experience the level of benefits and related cost savings we have historically realized
or expect to realize in connection with further restructuring our contact center operations.
In connection with the 2004 facility exit cost plan, we expect to record facility exit costs of approximately $36.0 million in the first quarter
of 2004, including $13.0 million for employee, personnel and related costs, $14.0 million for lease termination costs and $9.0 million for non-
cash asset write-offs. We expect cash outflows for employee and personnel related costs to occur primarily in the first and second quarters of
2004 and cash outflows for real estate obligations through 2008. Please see "Liquidity and Capital Resources" below for a discussion of our
plans for funding expected future cash payments.
Liquidity and Capital Resources
Cash flows for the year ended December 31, 2003
Our operating activities provided cash of $101.7 million. Our net loss of $62.2 million was more than offset by depreciation and
amortization expenses relating to our network, facilities and intangible assets of $164.2 million and non-cash disposals and impairments of
fixed assets primarily associated with the Contact Center Plan of $7.8 million. Additional cash was provided as a result of a $17.6 million
decrease in receivables and an $8.5 million decrease in prepaid expenses and other assets. In addition, we recognized $14.0 million of non-
cash
revenues associated with the acquired Membership Customers, which is included in the change in deferred revenue. Approximately
Facility
Exit
Costs
Non-Cash
Items
Payments
Balance
December 31,
2002 Payments
Balance
December 31,
2003
(in thousands)
Phoenix contact center facility exit costs:
Severance and personnel related costs $
1,724
$ — $ (
1,428
) $
296
$
(296
) $ —
Real estate and telecommunications contract
termination costs
486
— (
486
) — — —
Write-off abandoned and disposed
assets
1,282
(1,282
)
— — — —
$
3,492
$
(1,282
) $
(1,914
) $
296
$
(296
) $ —
Facility
Exit
Costs
Non-Cash
Items Payments Adjustments
Balance
December 31,
2003
(in thousands)
Facility exit costs associated with the Contact Center Plan:
Severance and personnel related costs
$
10,737
$
—
$
(
11,220
)
$
483
$
—
Real estate and telecommunications contract termination costs,
including non-cancelable leases
18,207
— (
7,832
)
(483
)
9,892
Write-off abandoned and disposed assets
7,652
(7,652
) — — —
$
36,596
$
(7,652
)
$
(19,052
)
$
—
$
9,892