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EARTHLINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
$10.4 million as a result of the acquisition of Aluria. During the year ended December 31, 2004, goodwill decreased $5.3 million as a result of
reducing or eliminating contingent liabilities related to taxes established at the acquisition of PeoplePC that were not considered probable of
being paid.
Purchased Intangible Assets
The following table presents the components of the Company’s acquired identifiable intangible assets included in the accompanying
Consolidated Balance Sheets as of December 31, 2004 and 2005.
Acquisition-related amortization in the Consolidated Statements of Operations for the years ended December 31, 2003, 2004 and 2005
represents the amortization of definite life intangible assets. The Company’
s definite life intangible assets primarily consist of subscriber bases,
acquired software and technology and other assets acquired in conjunction with the purchases of businesses and subscriber bases from other
ISPs that are not deemed to have indefinite lives. Definite life intangible assets are amortized on a straight-
line basis over their estimated useful
lives, which are generally three years for subscriber bases and one to six years for acquired software and technology. The weighted average
amortization periods are 3.0 years for subscriber base assets and 4.3 years for software and technology. Based on the current amount of definite
life intangible assets, the Company expects to record amortization expense of approximately $6.4 million, $4.0 million, $2.1 million, $0.3
million, $0.3 million and $0.2 million during the years ending December 31, 2006, 2007, 2008, 2009, 2010 and thereafter, respectively. Actual
amortization expense to be reported in future periods could differ materially from these estimates as a result of asset acquisitions, changes in
useful lives and other relevant factors.
In connection with the formation of HELIO and the transfer of 27,000 wireless subscribers to HELIO, EarthLink reclassified a subscriber
base asset with a net book value of $0.4 million associated with certain wireless subscribers to its investment in HELIO during the year ended
December 31, 2005. The subscriber base asset had a cost basis of $1.9 million and accumulated amortization of $1.5 million.
6. Investments
Investments in Marketable Securities
The following table summarizes proceeds received from sales of available-for-sale securities and realized gains and losses from sales of
available-for-sale securities, excluding sales of asset-baked auction rate securities on the interest rate reset date which have historically not
resulted in any gain or loss, for the years ended December 31, 2003, 2004 and 2005:
82
As of December 31, 2004
As of December 31, 2005
Gross
Net
Gross
Net
Carrying
Accumulated
Carrying
Carrying
Accumulated
Carrying
Value
Amortization
Value
Value
Amortization
Value
(in thousands)
Definite life intangible assets
$
330,278
$
(316,608
)
$
13,670
$
340,636
$
(327,358
)
$
13,278
Indefinite life intangible asset
3,000
3,000
Total
$
16,670
$
16,278
Year Ended December 31,
2003
2004
2005
(in thousands)
Proceeds from sales of investments
$
52,851
$
58,439
$
—
Realized gains from sales of investments
336
77
—
Realized losses from sales of investments
(10
)
(105
)
—