8x8 2004 Annual Report Download - page 24

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RESTRUCTURING AND OTHER CHARGES
2003 Restructuring Actions
During the third and fourth quarters of fiscal 2003, we continued our cost reduction activities to better align expense
levels with current revenue levels and ensure conservative spending during the current economic downturn. As a
result of these activities, we recorded restructuring and other asset impairment charges of approximately $3.4
million. These charges included severance and benefits of approximately $1.2 million, as we reduced our
workforce, under voluntary and involuntary separation plans, by thirty-two employees or thirty percent. The
majority of the affected employees were Netergy employees based in Santa Clara, California and Marlow, United
Kingdom and included employees from sales and marketing and research and development, as well as four
executives of Netergy. Severance of approximately $325,000 attributable to involuntary terminations was paid
during the year ended March 31, 2003.
We closed our facility in Marlow, United Kingdom, and recorded $434,000 of charges related to the termination of
the operating leases for the facility and related services. In addition, we recorded asset impairment charges of
$212,000 related to assets in the United Kingdom that were abandoned or disposed of.
We also recorded a charge of approximately $74,000 for our remaining lease liability for office space in Tempe,
Arizona that was vacated as a result of the restructuring actions during the fourth quarter.
In the fourth quarter of fiscal 2003, we also implemented a plan to reduce the workforce at our Sophia Antipolis,
France office by ten employees or seventy percent. This downsizing and its potential impact on our iPBX business
prompted an assessment of the key assumptions underlying our goodwill valuation judgments. As a result of the
analysis, we determined that an impairment charge of $1.5 million was required because the estimated fair value of
the goodwill was less than the book value of the goodwill that arose from the acquisition of Odisei S.A. in fiscal
2000.
The following table illustrates the charges, credits and balances of the restructuring reserves for the years ended
March 31, 2004 and 2003, and summarizes asset impairment charges (in thousands):
OTHER INCOME, NET
In fiscal 2004, 2003, and 2002, other income, net, was approximately $822,000, $600,000, and $1.0 million,
respectively. The $222,000 increase in other income, net, in fiscal 2004 was primarily attributable to a $790,000
gain recorded in the second quarter of fiscal 2004 in connection with the sale of Centile Europe SA, which was
offset by a decrease of $560,000 related to the Canadian tax credits that we collected in fiscal 2003 and recorded as
other income.
The decrease in other income, net, in fiscal 2003 compared to fiscal 2002 was due primarily to an approximately
$440,000 decrease in interest income resulting from lower average cash and cash equivalent balances and lower
interest rates, a $131,000 non-recurring gain realized on the sale of an investment in fiscal 2002, and a $100,000
increase in foreign exchange losses. These decreases were offset by an increase in other income from our former
Total Cash Non-Cash Liability at Cash Liability at
Charges Payments Charges March 31, 2003 Payments March 31, 2004
Restructuring Charges:
Severance............................. $ 1,177 $ (1,002) $ -- $ 175 $ (175) $ --
Facility related..................... 508 (161) (273) 74 (33) 41
Total restructuring charges. 1,685 (1,163) (273) 249 (208) 41
Asset Impairment s:
Fixed Assets......................... 212 -- (212) -- -- --
Goodwill............................... 1,539 -- (1,539) -- -- --
Total impairment charges.. 1,751 -- (1,751) -- -- --
T ot al rest ruct uring and
impairment charges.......... $ 3,436 $ (1,163) $ (2,024) $ 249 $ (208) $ 41