Rosetta Stone 2015 Annual Report Download - page 93
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Table of Contents
During 2014, the Company initiated other actions across its business to reduce headcount in order to align resources to support business needs. The
Company recorded $3.2 million in severance costs associated with these actions. As a result, $2.3 million was paid during 2014, $0.8 million was paid during
2015, and the remaining $0.1 million liability will be paid in 2016.
As part of the Company’s effort to reduce general and administrative expenses through a planned space consolidation at its Arlington, Virginia
headquarters location, the Company incurred a lease abandonment charge of $3.2 million for the year ended December 31, 2014. Prior to January 31, 2014,
the Company occupied the 6th and 7th floors at its Arlington, Virginia headquarters. The Company estimated the liability under the operating lease
agreements and accrued lease abandonment costs in accordance with ASC 420, ("ASC 420"), as the Company has no future
economic benefit from the abandoned space and the lease does not terminate until December 31, 2018. All leased space related to the 6th floor was
abandoned and ceased to be used by the Company on January 31, 2014.
In March 2013 Rosetta Stone Japan Inc. partially abandoned its Japan office as a result of excess office space due to reduction in staff along with overall
local operations business performance. The Company estimated the liability under the operating lease agreement reduced for anticipated sublease income in
accordance with ASC 420 as the Company had no future economic benefit from the abandoned space and the lease did not terminate until February 28,
2015. As of March 31, 2014, the Company ceased to use the remaining office space in this facility and simultaneously negotiated and paid a lease
termination fee of $0.4 million. The Company has been released from all obligations under the lease arrangement as of December 31, 2014.
A summary of the Company’s lease abandonment activity for the years ended December 31, 2015 and 2014 is as follows (in thousands):
Accrued lease abandonment costs, beginning of period
$ 1,679
$ 413
Costs incurred and charged to expense
55
3,812
Principal reductions
(452)
(2,546)
Accrued lease abandonment costs, end of period
$ 1,282
$ 1,679
Accrued lease abandonment costs liability:
Short-term
$ 455
$ 496
Long-term
827
1,183
Total
$ 1,282
$ 1,679
F-37