Earthlink 2004 Annual Report Download - page 78

EARTHLINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
4. Restructuring Charges and Facility Exit Costs
PeoplePC
EarthLink’s acquisition of PeoplePC included costs related to a formal plan (the “PeoplePC Plan”) to integrate PeoplePC’
s operations into
EarthLink’s operations and to exit PeoplePC’s international operations. The PeoplePC Plan called for the net reduction of 13 positions in
operations and customer support, sales and marketing, and in general and administrative departments. The original estimates for costs
associated with the PeoplePC Plan included $2.1 million related to the write-off of duplicative and abandoned assets, $0.8 million related to
employee termination benefits and $1.8 million related to exiting PeoplePC’s international operations, including $0.6 million for the write-off
of abandoned assets and $1.2 million related to costs associated with a non-cancelable lease. The costs associated with the PeoplePC Plan were
less than original estimates and, as a result, the Company decreased its liability related to severance costs and the non-cancelable lease during
the year ended December 31, 2003 by $0.5 million resulting in a decrease in goodwill. The Company has paid all exit costs associated with the
PeoplePC Plan. The costs of the PeoplePC Plan are included in the purchase price of PeoplePC and are included in the fair values of tangible
assets acquired and liabilities assumed in the acquisition.
Facility exit costs
On November 15, 2002, EarthLink closed its Phoenix, Arizona contact center facility. The plan for the closure of the Phoenix facility
resulted in the elimination of 259 positions, primarily customer support personnel. In connection with the closing, EarthLink recorded facility
exit costs of $3.5 million in the fourth quarter of 2002. These costs included approximately $1.7 million for employee, personnel and related
costs; $0.5 million for real estate and telecommunications costs; and approximately $1.3 million in asset disposals. The Company has paid all
exit costs associated with the Phoenix facility.
On January 28, 2003, EarthLink announced a plan to streamline its contact center facilities, which was executed during the three months
ended March 31, 2003 (the “2003 Plan”). In connection with the 2003 Plan, EarthLink closed contact center facilities in Dallas, Texas;
Sacramento, California; Pasadena, California; and Seattle, Washington. The closure of the four contact center facilities resulted in the
termination of 1,220 employees and the net reduction of 920 employees, primarily customer support personnel. In connection with the 2003
Plan, EarthLink recorded facility exit costs of approximately $36.6 million, including approximately $10.7 million for employee, personnel and
related costs; $18.2 million for real estate and telecommunications costs; and $7.7 million in asset disposals.
On January 6, 2004, EarthLink announced a plan to restructure and further streamline its contact center operations, which was executed
during the three months ended March 31, 2004 (the “2004 Plan”). Under the 2004 Plan, EarthLink closed contact center operations in
Harrisburg, Pennsylvania; Roseville, California; San Jose, California; and Pasadena, California; and reduced its contact center operations in
Atlanta, Georgia. Approximately 1,140 employees were directly impacted, primarily customer support personnel. As a result of the 2004 Plan,
EarthLink recorded facility exit costs of $30.2 million, including approximately $10.5 million for employee, personnel and related costs; $11.3
million for real estate and telecommunications costs; and $8.4 million in asset disposals.
During the year ended December 31, 2004, EarthLink reduced its estimates for real estate commitments associated with the 2003 Plan and
2004 Plan by $2.0 million based on events occurring during the period and realized additional expense of $0.2 million associated with the
disposal and write-down of
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