8x8 1998 Annual Report Download - page 28

Operating Expenses -- Selling, General and Administrative
Selling, general and administrative expenses consist primarily of personnel and related overhead costs for sales, marketing, finance, human
resources and general management. Such costs also include advertising, sales commissions, trade show and other marketing and promotional
expenses. Selling, general and administrative expenses were $17.4 million, $10.1 million and $7.9 million in fiscal 1998, 1997 and 1996,
respectively. Expenses increased due to additional headcount, higher compensation costs and costs associated with the marketing, advertising
and promotion of the Company's VideoCommunicator product line. The Company expects that its sales and marketing expenses may increase
as the Company launches new VideoCommunicator products and promotes its current VideoCommunicator products.* Therefore, future
selling, general and administrative costs may vary both in absolute dollars and as a percentage of total revenues.* See "Factors That May
Affect Future Results -- Potential Fluctuations in Operating Results."
While total expenses increased from fiscal 1997 to fiscal 1998 as a result of the factors listed above, the non-cash compensation expense
recognized on certain stock option grants and charged to selling, general and administrative decreased to $741,000 in fiscal 1998 from $3.1
million in fiscal 1997.
Restructuring Costs
During fiscal 1997, the Company recorded a $59,000 charge for restructuring its operations by reducing its workforce. As of March 31, 1997,
the Company's restructuring actions were fully completed and there were no remaining restructuring cost accruals.
During fiscal 1996, the Company recorded a $603,000 restructuring charge related to discontinuing certain research and development activities
not related to video communication products. These restructuring costs related primarily to the write-off of equipment associated with the
discontinued research and development efforts.
Other Income, Net
In fiscal 1998, 1997 and 1996, other income, net, was $1.5 million, $120,000 and $952,000, respectively. In fiscal 1998, other income, net,
consisted primarily of interest income from the Company's short-term cash investments. Interest income in fiscal 1998 included interest earned
on the proceeds from the Company's initial public offering in July 1997. During fiscal 1996, the Company acquired equity positions in four
privately held companies. In fiscal 1996, the Company realized $727,000 of income by selling the stock of one of these entities. The
Company's investment in each of these entities represents less than 15% of the outstanding voting stock of these entities and accordingly, the
Company has accounted for these investments on a cost basis. As of March 31, 1998, these investments were fully reserved.
* This statement is a forward looking statement reflecting current expectations. There can be no assurance that the Company's actual future
performance will meet the Company's current expectations. See "Manufacturing" commencing on page 10, "Competition" on page 13 and
"Factors That May Affect Future Results" commencing on page 14 for a discussion of certain factors that could affect future performance.
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YEAR ENDED MARCH 31,
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1998 1997 1996
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(IN MILLIONS)
Selling, general and administrative.................. $17.4 $10.1 $7.9
As a percentage of total revenues.................... 35% 53% 27%
YEAR ENDED MARCH 31,
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1998 1997 1996
---- ---- ----
(IN MILLIONS)
Restructuring costs.................................... $-- $0.1 $0.6
As a percentage of total revenues...................... 0% 1% 2%