8x8 2009 Annual Report Download - page 64

The Company's policy for recording interest and penalties associated with audits is to record such items as a component of
operating expense income before taxes. During the fiscal year ended March 31, 2009 and 2008, the Company did not recognize
any interest or penalties related to unrecognized tax benefits.
Undistributed earnings of the Company’ s foreign subsidiaries are indefinitely reinvested in foreign operations. No provision
has been made for taxes that might be payable upon remittance of such earnings, nor is it practicable to determine the amount
of this liability.
3. COMMITMENTS AND CONTINGENCIES
Guarantees
Indemnifications
In the normal course of business, the Company may agree to indemnify other parties, including customers, lessors and parties
to other transactions with the Company, with respect to certain matters such as breaches of representations or covenants or
intellectual property infringement or other claims made by third parties. These agreements may limit the time within which an
indemnification claim can be made and the amount of the claim. In addition, the Company has entered into indemnification
agreements with its officers and directors.
It is not possible to determine the maximum potential amount of the Company’ s exposure under these indemnification
agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each
particular agreement. Historically, payments made by the Company under these agreements have not had a material impact on
the Company’ s operating results, financial position or cash flows. Under some of these agreements, however, the Company’ s
potential indemnification liability might not have a contractual limit.
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, 2009, 2008 and 2007 were as follows (in thousands):
2009 2008 2007
Balance at beginning of year $ 314 $ 323 $ 301
Accruals for warranties 366 297 331
Payments (352) (306) (270)
Changes in estimates - - (39)
Balance at end of year $ 328 $ 314 $ 323
Years Ended March 31,
Standby letter of credit
At March 31, 2009 and 2008, the Company had certain restricted deposits totaling $100,000 which were recorded in the other
assets line item on the consolidated balance sheets. This deposit was made in order to obtain a standby letter of credit in
accordance with certain contractual obligations, and is collateralized by a cash deposit 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. The facility leases include rent escalation clauses,
and require the Company to pay taxes, insurance and normal maintenance costs. At March 31, 2009, future minimum annual
lease payments under non-cancelable operating leases, net of sublease income, were as follows (in thousands):
Year Ending March 31,
2010 $ 206
Total minimum payments $ 206
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