Earthlink 2015 Annual Report Download - page 43

Table of Contents
Impairment of goodwill and long-lived assets
Impairment of goodwill. During the first quarter of 2013, we recognized a $256.7 million non-cash impairment charge to goodwill related to our legacy Business
Services reporting unit, of which $255.6 million is included in continuing operations and $1.1 million is reflected in discontinued operations. We test our goodwill
annually during the fourth quarter of each fiscal year or when events or changes in circumstances indicate that goodwill might be impaired. Our stock price and
market capitalization declined during the three months ended March 31, 2013 following the announcement in mid-February 2013 of our fourth quarter 2012
earnings and 2013 financial guidance. As a result of the sustained decrease in stock price and market capitalization, we performed an interim goodwill test in
conjunction with the preparation of our financial statements for the three months ended March 31, 2013. The primary factor contributing to the impairment was a
change in the discount rate and market multiples as a result of the change in these market conditions, both key assumptions used in the determination of fair value.
We did not record any impairment of goodwill during the years ended 2014 or 2015. During the year ended December 31, 2015, we performed an interim goodwill
impairment test as a result of a change in our reporting units. For more information regarding this or any of our other interim and annual goodwill impairment tests,
refer to Note 5 to our Consolidated Financial Statements. Approximately $137.8 million of goodwill remains as of December 31, 2015. Deterioration in market
conditions or estimated future cash flows in our reporting units could result in future goodwill impairment. We continue to monitor events and circumstances which
may affect the fair value of our reporting units.
Impairment of long-lived assets. During the year ended December 31, 2014, we recorded $14.3 million for impairment of long-lived assets, consisting of
impairment of work in progress for information technology projects not expected to be used, impairment of software licenses not expected to be used and
impairment of certain assets held for sale. The impairments were classified within impairment of goodwill and long-lived assets in the Consolidated Statement of
Comprehensive Loss for the year ended December 31, 2014. We did not record any impairment of long-lived during the years ended 2013 or 2015.
Restructuring, acquisition and integration-related costs
Restructuring, acquisition and integration-related costs consist of costs related to our restructuring, acquisition and integration-related activities. Such costs include:
1) integration-related costs, such as system conversion, rebranding costs and integration-related consulting and employee costs; 2) severance, retention and other
employee termination costs associated with restructuring, acquisition and integration activities and with certain voluntary employee separations; 3) facility-related
costs, such as lease termination and asset impairments; and 3) transaction-related costs, which are direct costs incurred to effect a business combination, such as
advisory, legal, accounting, valuation and other professional fees. Restructuring, acquisition and integration-related costs are expensed in the period in which the
costs are incurred and the services are received and are included in restructuring, acquisition and integration-related costs in the Consolidated Statements of
Comprehensive Loss. We plan to continue to evaluate our business, which may result in additional restructuring activities. For more information regarding our
restructuring, acquisition and integration-related costs, refer to Note 11 to our Consolidated Financial Statements.
The following table presents our restructuring, acquisition and integration-related costs for the years ended December 31, 2013, 2014 and 2015 :
Year Ended December 31,
2014 vs 2013
2015 vs 2014
2013
2014
2015
$ Change
% Change
$ Change
% Change
(dollars in thousands)
Integration-related costs $ 21,622
$ 9,043
$ 5,924
$ (12,579)
(58)%
$ (3,119)
(34)%
Severance, retention and other employee costs 14,844
9,297
9,798
(5,547)
(37)%
501
5 %
Facility-related costs 2,328
1,744
3,598
(584)
(25)%
1,854
106 %
Transaction-related costs 1,021
4
—
(1,017)
(100)%
(4)
(100)%
Legacy plan restructuring costs 215
—
—
(215)
100%
—
— %
Restructuring, acquisition and integration-
related costs $ 40,030
$ 20,088
$ 19,320
$ (19,942)
(50)%
$ (768)
(4)%
The decrease in restructuring, acquisition and integration-related costs during the year ended December 31, 2014 compared to the prior year was primarily due to
the following:
•the completion of several acquisition and integration projects during the year;
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