Earthlink 2007 Annual Report Download - page 90

EARTHLINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED—(Continued)
Depreciation expense charged to continuing operations, which includes depreciation expense associated with property under capital leases,
was $34.9 million, $33.2 million and $32.6 million for the years ended December 31, 2005, 2006 and 2007, respectively.
8. Goodwill and Purchased Intangible Assets
Goodwill
Pursuant to SFAS No. 142, the Company performs an impairment test annually during the fourth quarter of its fiscal year or when events
and circumstances indicate goodwill might be permanently impaired. During the years ended December 31, 2005, 2006 and 2007, the Company's
tests indicated its goodwill was not impaired.
During the year ended December 31, 2006, the carrying amount of goodwill increased $101.2 million, which consisted of a $100.0 million
increase in goodwill resulting from the acquisition of New Edge and $1.2 million of purchase accounting adjustments.
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, 2006 and 2007:
Amortization of intangible assets in the Consolidated Statements of Operations for the years ended December 31, 2005, 2006 and 2007
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 companies that are not deemed to have indefinite lives. The Company's identifiable indefinite lived intangible
assets consist of trade names. 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, 2007, the weighted average amortization periods were 3.9 years for subscriber base assets 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 $14.0 million, $10.7 million, $7.2 million, $6.0 million, $1.7 million and $0.1 million during the years ending December 31,
2008, 2009, 2010, 2011, 2012 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.
83
As of December 31, 2006 As of December 31, 2007
Gross
Carrying
Value
Accumulated
Amortization
Net
Carrying
Value
Gross
Carrying
Value
Accumulated
Amortization
Net
Carrying
Value
(in thousands)
Subscriber bases
$
384,336
$
(337,708
)
$
46,628
$
118,702
$
(79,763
)
$
38,939
Software, technology and other
3,864
(1,551
)
2,313
3,892
(3,161
)
731
Trade names
10,857
—
10,857
6,606
—
6,606
Total
$
399,057
$
(339,259
)
$
59,798
$
129,200
$
(82,924
)
$
46,276