Earthlink 2007 Annual Report Download - page 81

EARTHLINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED—(Continued)
3. 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, EarthLink adopted a restructuring plan (the "2007 Plan") intended to reduce costs and improve the efficiency of the
Company's operations. The 2007 Plan was the result of a comprehensive review of operations within and across the Company's functions and
businesses. Under the 2007 Plan, the Company reduced its workforce by approximately 900 employees, consolidated its office facilities in
Atlanta, Georgia and Pasadena, California and closed office facilities in Orlando, Florida; Knoxville, Tennessee; Harrisburg, Pennsylvania and
San Francisco, California. The 2007 Plan was primarily implemented during the latter half of 2007 and is expected to be completed during the
first half of 2008. In connection with the 2007 Plan, the Company expects to record total costs of approximately $75.0 to $85.0 million,
including $30.0 to $32.0 million for severance and personnel-related costs, $14.0 to $16.0 million for lease termination and facilities-related
costs, $26.0 to $30.0 million for non-cash asset impairments and $5.0 to $7.0 million for other associated costs.
As a result of the 2007 Plan, EarthLink 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. Such costs have been classified as facility exit,
restructuring and other costs in the Consolidated Statements of Operations. 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 the Company. The impairment charges
recorded during the year ended December 31, 2007 have been classified as facility exit, restructuring and other costs in the Consolidated
Statements of Operations.
Management continues to evaluate EarthLink's 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.
75
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