Earthlink 2007 Annual Report Download - page 45

Facility exit, restructuring and other costs
Facility exit, restructuring and other costs consisted of the following during the years ended December 31, 2005, 2006 and 2007:
2007 Restructuring Plan. In August 2007, we adopted a restructuring plan intended to reduce costs and improve the efficiency of our
operations. The 2007 Plan was the result of a comprehensive review of operations within and across our functions and businesses. Under the
2007 Plan, we reduced our workforce by approximately 900 employees, consolidated our office facilities in Atlanta, Georgia and Pasadena,
California and closed office facilities in Orlando, Florida; Knoxville, Tennessee; Harrisburg, Pennsylvania and San Francisco, California. The
Plan was primarily implemented during the latter half of 2007 and is expected to be completed during the first half of 2008. As a result of the
2007 Plan, we recorded facility exit and restructuring costs of $64.3 million during the year ended December 31, 2007, including $30.3 million
for severance and personnel-related costs; $12.2 million for lease termination and facilities-related costs; $20.6 million for non-cash asset
impairments; and $1.1 million for other associated costs. The asset impairment charges primarily relate to fixed asset write-offs due to facility
closings and consolidations and the termination of certain projects for which costs had been capitalized. These assets were impaired as the
carrying values of the assets exceeded the expected future undiscounted cash flows to us.
Management continues to evaluate our businesses and, therefore, there may be supplemental provisions for new plan initiatives as well as
changes in estimates to amounts previously recorded, as payments are made or actions are completed.
Legacy Restructuring Plans. During the years ended December 31, 2003, 2004 and 2005, we executed a series of plans to restructure and
streamline our contact center operations and outsource certain internal functions (collectively referred to as "Legacy Plans"). The Legacy Plans
included facility exit costs, personnel-related costs and asset disposals. We periodically evaluate and adjust our estimates for facility exit and
restructuring costs based on currently-
available information and record such adjustments as facility exit, restructuring and other costs. During the
years ended December 31, 2005 and 2007, we recorded $2.0 million and $1.1 million of facility exit, restructuring and other costs as a result of
new accruals and changes to estimates for Legacy Plans. During the year ended December 31, 2006, we recorded a $0.1 million reduction to
facility exit, restructuring and other costs as a result of changes in estimates for Legacy Plans.
Other Costs.
Under SFAS No. 142, goodwill and indefinite lived intangible assets must be tested for impairment annually or when events
or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. We tested goodwill and indefinite lived
intangible assets during the fourth quarter of 2007 and recorded an impairment loss of $4.3 million on certain indefinite lived intangible assets,
consisting of trade names. We did not recognize any impairment losses during the years ended December 31, 2005 or 2006.
Net losses of equity affiliate
We account for our investment in HELIO under the equity method of accounting because we can exert significant influence over HELIO's
operating and financial policies. Accordingly, we record our
40
Year Ended December 31,
2005
2006
2007
(in thousands)
2007 Restructuring Plan
$
—
$
—
$
64,271
Legacy Restructuring Plans
2,080
(117
)
1,110
Other costs
—
—
4,250
$
2,080
$
(117
)
$
69,631