Rosetta Stone 2015 Annual Report Download - page 42

Table of Contents
continue to decline as we take steps to reduce costs. Additionally, as a result of shareholder engagement and execution of our accelerated strategy, our
general and administrative expenses may increase in the near term.
Impairment
Impairment expense for the year ended December 31, 2015 was $6.8 million, a decrease of $13.6 million, from the year ended December 31, 2014. The
decrease was primarily attributable to a $20.2 million goodwill impairment charge related to our Consumer business during 2014, partially offset by a $5.6
million goodwill impairment charge related to our Consumer Fit Brains reporting unit and 2015 impairment charges of $1.1 million, primarily related to the
abandonment of certain previously capitalized internal-use software projects.
Lease Abandonment and Termination
Lease abandonment and termination expenses for the year ended December 31, 2015 were $0.1 million, compared to $3.8 million for the year ended
December 31, 2014. The decrease was attributable to the 2014 lease abandonment of the sixth floor space in the Arlington, VA office of $3.2 million, as well
as the closure of the Japan office resulting in lease abandonment costs of $0.4 million.
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Interest income
$ 23
$ 17
$ 6
35.3%
Interest expense
(378)
(233)
(145)
62.2%
Other expense
(1,469)
(1,129)
(340)
30.1%
Total other income and (expense)
$ (1,824)
$ (1,345)
$ (479)
35.6%
Interest income for the year ended December 31, 2015 was $23 thousand, a slight increase from the year ended December 31, 2014. Interest income
represents interest earned on our cash and cash equivalents.
Interest expense for the year ended December 31, 2015 was $0.4 million, an increase of $0.1 million, from the year ended December 31, 2014. This
increase was primarily attributable to interest on our capital leases and the recognition of our financing fees associated with our undrawn credit facility.
Other expense for the year ended December 31, 2015 was $1.5 million, an increase of $0.3 million, as compared to $1.1 million for the year ended
December 31, 2014. The fluctuation was primarily attributable to foreign exchange losses, partially offset by the divestiture of our Korea entity of $0.7
million.
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Income tax expense (benefit)
$ 1,159
$ (6,489)
$ 7,648
(117.9)%
Our income tax expense for the year ended December 31, 2015 was $1.2 million, compared to income tax benefit of $6.5 million for the year ended
December 31, 2014. The tax expense was due to current year taxable income from our operations in Germany and the UK, the tax impact of the amortization
of indefinite lived intangibles, and the inability to recognize tax benefits associated with current year losses of operations in all other foreign jurisdictions
and in the U.S. due to the valuation allowance recorded against the deferred tax asset balances of these entities. These tax expenses were partially offset by
tax benefits related to current year losses (excluding the Consumer Fit Brains goodwill impairment) in Canada. The goodwill that was impaired in 2015 was
not deductible for tax. Additionally, tax benefits were recorded related to the reversal of accrued withholding taxes as a result of an intercompany transaction.
For the year ended December 31, 2015, we incurred an income tax expense of $1.2 million based on losses before taxes of $45.6 million resulting in a
worldwide effective tax rate of approximately (2.5)%.
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