8x8 2004 Annual Report Download - page 53

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50
The following table illustrates the charges, credits and balances of the restructuring reserves as of March 31, 2004
and 2003, and summarizes impairment charges (in thousands) recorded in fiscal 2003:
5. ADOPTION OF SFAS NO. 142, GOODWILL AND OTHER INTANGIBLE ASSETS
In July 2001, the FASB issued SFAS No. 142, “Goodwill and Other Intangible Assets” (SFAS No. 142). Under
SFAS No. 142, goodwill and intangible assets with indefinite lives are no longer amortized but are reviewed
annually (or more frequently if impairment indicators arise) for impairment. Furthermore, SFAS No. 142 requires
purchased intangible assets other than goodwill to be amortized over their useful lives unless these lives are
determined to be indefinite. In accordance with SFAS No. 142, the effect of this accounting change was reflected
prospectively. Supplemental comparative disclosure as if the change had been retroactively applied to the prior year
period is as follows (in thousands, except per share amounts):
Year Ende d Mar c h 3 1 ,
2004 2003 2002
Reported net loss ............................................................
.
$ (3,039) $ (11,403) $ (9,105)
Add back: Goodwill and intangibles amortization....... -- -- 763
Adjusted net loss.............................................................
.
$ (3,039) $ (11,403) $ (8,342)
Basic and diluted earnings per share:
Reported net loss per share..........................................
.
$ (0.09) $ (0.40) $ (0.33)
Goodwill and intangibles amortization........................
.
-- -- 0.03
Adjusted net loss per share............................................ $ (0.09) $ (0.40) $ (0.30)
In accordance with SFAS No. 142, 8x8 is required to perform an annual impairment test for goodwill. As described
in Note 4 above, the Company recorded a $1.5 million goodwill impairment charge in the fourth quarter of fiscal
2003.
6. DEBT
Convertible Subordinated Debentures
Issuance of the Debentures
In December 1999, the Company issued $7.5 million of 4% Series A and Series B convertible subordinated
debentures (the Debentures) due in December 2002. In conjunction with the issuance of the Debentures, the lenders
received warrants to purchase 531,915 8x8 common shares at $7.05 per share and 105,634 shares at $35.50 per
share (the Lender Warrants). The Company also issued warrants to the placement agent to purchase 53,191 8x8
common shares at $7.05 per share and 10,563 shares at $35.50 per share. All of the warrants expired in December
2002 without being exercised.
Using the Black-Scholes pricing model, the Company determined that the debt discount associated with the fair
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