8x8 2006 Annual Report Download - page 62

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59
Product Warranties
The Company accrues for the estimated costs that may be incurred under its product warranties upon revenue
recognition. Changes in the Company’s product warranty liability, which is included in cost of product revenues in
the consolidated statements of operations, during the years ended March 31, 2006 and 2005 were as follows (in
thousands):
Standby letters of credit
At March 31, 2006 and 2005, the Company had standby letters of credit totaling $250,000 and $500,000,
respectively, which were recorded as either restricted cash and other assets line items on the consolidated balance
sheets. During fiscal 2006, the Company canceled one standby letter of credit and the amount previously recorded in
the restricted cash line at March 31, 2005 was moved to the short-term investments line in the consolidated balance
sheet. These standby letters of credits were issued to guarantee certain contractual obligations, and are secured by
cash deposits at the Company’s bank.
Leases
The Company leases its primary facility in Santa Clara, California under a non-cancelable operating lease agreement
that expires in August 2009. The Company also has leased facilities in France and Canada. The facility leases
include rent escalation clauses, and require the Company to pay taxes, insurance, and normal maintenance costs. At
March 31, 2006, future minimum annual lease payments under non-cancelable operating leases, net of sublease
income, were as follows (in thousands):
Rent expense for the years ended March 31, 2006, 2005 and 2004 was $478,000, $394,000 and $489,000,
respectively.
The Company subleases office space under an operating lease agreement expiring in 2007. The total future
minimum rentals to be received under this noncancelable sublease agreement approximates $18,000 in fiscal 2007
and $12,000 in fiscal 2008.
Year s Ende d Mar ch 3 1 ,
2006 2005
Balance at beginning of year..........................................
.
$ 187 $ 194
Accruals for warranties...................................................
.
576 217
Settlements........................................................................
.
(375) (121)
Changes in estimates.......................................................
.
(87) (103)
Balance at end of year.....................................................
.
$ 301 $ 187
Year Ending March 31,
2007..................................................................................................................
.
$482
2008..................................................................................................................
.
490
2009..................................................................................................................
.
493
2010..................................................................................................................
.
206
Total minimum payments.................................................................... $ 1,671