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PFSWEB, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The note receivable amount represents the remaining balance of a $1.7
million contract termination fee. As amended, the principal balance, bearing
interest at prime rate plus two percent is due in periodic payments through June
29, 2001. Value Added Tax ("VAT") receivables represent amounts due from
European governments for refundable VAT payments made in the ordinary course of
business. The governmental grant relates to investments made by the Company in
fixed assets in its Belgium operation. The Company received approximately $1.3
million associated with this grant in April 2001 and expects the remaining
balance to be paid within the next twelve months.
At establishment, the total grant of approximately $1.6 million was
deferred and is being recognized as a reduction to depreciation expense over the
same period over which the costs of the related fixed assets are being
depreciated. A deferred credit included in other liabilities in the accompanying
consolidated financial statements represents the long-term unrecognized portion
of the grant. For fiscal 2001, approximately $0.2 million was recognized as a
reduction of depreciation expense. The current unrecognized portion of the grant
is included in accrued expenses. The grant was earned by the Company upon the
achievement of certain minimum capital expenditure requirements. Realization of
the entire gain requires the Company to maintain a certain minimum workforce
through December 2004. The Company's management believes that the likelihood of
a refund of this grant is remote.
Inventories
During the quarter ended September 30, 1999, the Company transferred to
Daisytek all of its inventory (see Notes 1 and 5) and as of March 31, 2000 and
2001, the Company did not own any inventory.
Property and Equipment
The components of property and equipment as of March 31, 2000 and 2001 are
as follows (in thousands):
FISCAL YEAR ENDED
MARCH 31,
----------------- DEPRECIABLE
2000 2001 LIFE
------- ------- -----------
Furniture and fixtures................................. $11,933 $13,882 5-9 years
Computer equipment..................................... 3,725 4,714 3-7 years
Leasehold improvements................................. 3,472 3,554 2-9 years
Capitalized software costs............................. 4,772 6,201 2-3 years
Other.................................................. 356 251 3-7 years
------- -------
24,258 28,602
Less-accumulated depreciation and amortization....... (2,703) (8,349)
------- -------
Property and equipment, net.................. $21,555 $20,253
======= =======
Property and equipment are stated at cost and are depreciated using the
straight-line method over the estimated useful lives of the respective assets
which range from three to nine years. Leasehold improvements are amortized over
the shorter of the useful life of the related asset or the remaining lease term.
The Company reviews long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Fair value would be
determined using appraisals, discounted cash flow analysis or similar valuation
techniques. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell.
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