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EARTHLINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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, 2005 and 2006:
Amortization of intangible assets in the Consolidated Statements of Operations for the years ended December 31, 2004, 2005 and 2006
represents the amortization of definite lived intangible assets. The Company’s definite lived intangible assets primarily consist of subscriber
bases and customer relationships, 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 lived intangible assets are amortized on a straight-
line basis over their estimated useful lives, which are generally three to six years for subscriber bases and customer relationships and one to six
years for acquired software and technology. As of December 31, 2006, the weighted average amortization periods were 3.3 years for subscriber
bases and customer relationships and 4.1 years for software and technology. Based on the current amount of definite lived intangible assets, the
Company expects to record amortization expense of approximately $13.8 million, $11.8 million, $9.0 million, $6.4 million, $6.0 million and
$1.9 million during the years ending December 31, 2007, 2008, 2009, 2010, 2011 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. The Company’s indefinite lived intangible assets consist of trade names.
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.
7. Facility Exit and Restructuring Costs
During the year ended December 31, 2003, EarthLink executed a plan to streamline its contact center facilities (the “2003 Plan”). In
connection with the 2003 Plan, EarthLink closed contact center facilities in Dallas, Texas; Sacramento, California; Pasadena, California; and
Seattle, Washington. The closure of the four contact center facilities resulted in the termination of 1,220 employees and the net reduction of
920 employees, primarily customer support personnel. In connection with the 2003 Plan, EarthLink recorded facility exit costs of $36.6
million, including $10.7 million for employee, personnel and related costs; $18.2 million for real estate and telecommunications costs; and $7.7
million in asset disposals. As of December 31, 2006, the Company had a $1.2 million liability remaining for real estate commitments. All other
costs have been paid.
87
As of December 31, 2005
As of December 31, 2006
Gross
Net
Gross
Net
Carrying
Accumulated
Carrying
Carrying
Accumulated
Carrying
Value
Amortization
Value
Value
Amortization
Value
(in thousands)
Subscriber bases and customer
relationships
$
337,511
$
(327,020
)
$
10,491
$
384,336
$
(337,708
)
$
46,628
Software, technology and other
3,125
(338
)
2,787
3,864
(1,551
)
2,313
Trade names
3,000
—
3,000
10,857
—
10,857
Total
$
343,636
$
(327,358
)
$
16,278
$
399,057
$
(339,259
)
$
59,798