8x8 2002 Annual Report Download - page 28

Employee separation............................... $ 765
Fixed asset losses and impairments................ 2,084
Intangible asset impairments...................... 30,247
Lease obligation and termination.................. 220
---------
$ 33,316
=========
Employee separation costs represent severance payments related to the 96 employees in the Montreal and Hull offices
who were laid-off.
The impairment charges for fixed assets of approximately $2.1 million included write-
offs of abandoned and unusable
assets of approximately $1.4 million, a loss on sale of assets of $567,000, and a charge for assets to be disposed of
$172,000. The loss on sale of assets of $567,000 was attributable to the sale of office, computer, and other equipment
of the Montreal office. We received common stock of the purchaser valued at approximately $412,000 as of the date of
sale. Fair value of assets to be disposed of was measured based on expected salvage value, less costs to sell. Assets to
be disposed of consist of computer equipment with a fair value of $57,000 at March 31, 2001. Substantially all of these
assets were liquidated during fiscal 2002.
The impairment charges for intangible assets represented the write-
off of the unamortized intangible assets recorded in
connection with the acquisition of U|Force. The charges of approximately $30.2 million included: $28.7 million for the
goodwill related to the acquisition, $739,000 for the assembled workforce, and $789,000 related to a distribution
agreement. The impairments were directly attributable to the cessation of operations in Canada. We performed an
evaluation of the recoverability of the intangible assets related to these operations in accordance with SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed Of." The lack of
estimated future net cash flows related to the acquired products necessitated an impairment charge to write-
off the
remaining unamortized goodwill. The distribution agreement asset was written off because we will no longer provide
products and services to customers under that agreement.
We terminated the lease for our primary facility in Montreal in March 2001, but we were required to pay rent on the
facility through May 31, 2001. We terminated the lease for our facility in Hull, Quebec in fiscal 2002. Accrued
obligations related to remaining lease commitments on the Montreal and Hull facilities totaled $212,000 at March 31,
2001. There are no remaining restructuring related accruals at March 31, 2002.
Cash payments related to the restructuring during the quarter ended March 31, 2001, which included all employee
separation costs and certain lease termination costs, approximated $920,000. The payments made in fiscal 2002 related
to the terminations of the Montreal and Hull facility leases totaled $225,000.
OTHER INCOME, NET
In fiscal 2002, 2001, and 2000, other income, net, was approximately $1.0 million, $2.6 million, and $2.8 million,
respectively. The decrease in other income, net, in fiscal 2002 compared to fiscal 2001 was due primarily to a
significant decrease in interest income resulting from lower average cash and cash equivalent balances and lower
interest rates. Gains realized on the sale of investments also decreased by approximately $94,000 in fiscal 2002 as
compared to fiscal 2001. The decrease in other income, net, in fiscal 2001 compared to fiscal 2000 was due primarily to
a $1.7 million decrease in gains realized from the sale of equity investments, offset by an increase in interest income
resulting from higher average cash equivalent and short-term investment balances as compared to fiscal 2000.
INTEREST EXPENSE
Interest expense in each of the three years ended March 31, 2002 consisted mainly of charges associated with the 4%
convertible subordinated debentures, or the Debentures, that we issued in December 1999, including the amortization