GOODWILL AND OTHER INTANGIBLE ASSETS

12 Months Ended

Dec. 31, 2016

Goodwill and Intangible Assets Disclosure

3. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

Goodwill and intangible assets with indefinite lives are subject to an annual impairment test and tested more frequently if events or circumstances occur that would indicate a potential decline in fair value. For goodwill, a two-step quantitative test is performed at a reporting unit level which requires, under the first step, that the fair value of a reporting unit is determined and compared to the reporting unit’s carrying value, including goodwill. To assess the fair value of a reporting unit, both income and market valuation approaches are used. If the fair value is determined to be less than the carrying value, the second step is performed to measure the amount, if any, of the impairment.

Our annual impairment test of an indefinite-lived domain name and goodwill is set as of the first day of the year. Goodwill is held by our Large Account and SMB reporting units. The fair value of the domain name and the Large Account and SMB reporting units each substantially exceeded the respective carrying value, and accordingly, an impairment was not identified in the annual test. We also did not identify any events or circumstances that would indicate that it is more likely than not that the carrying values of the reporting unit or the domain name were in excess of the respective fair values during the year ended December 31, 2016.

To determine the fair value of our reporting units, we considered operating results and future projections, as well as changes in the Company’s overall market capitalization. The significant assumptions used in our discounted cash flow analysis include: projected cash flows and profitability, the discount rate used to present value future cash flows, working capital requirements, and terminal growth rates. Cash flows and profitability assumptions include sales growth, gross margin, and SG&A growth assumptions which are generally based on historical trends. The discount rate used is a "market participant" weighted average cost of capital ("WACC"). For our computation of fair value as of January 1, 2016, we used a WACC rate of 10.9%, and estimated terminal growth rate at 5.0% and working capital requirements at 7.5% of revenues. The carrying amount of goodwill for the periods presented is detailed below:


Balance at December 31, 2015	SMB		Large Account		Public Sector		Total
Goodwill, gross	$	1,173	$	51,276	$	7,634	$	60,083
Accumulated impairment losses		(1,173)		─		(7,634)		(8,807)
Net balance	$	—	$	51,276	$	—	$	51,276

Balance at December 31, 2016	SMB		Large Account		Public Sector		Total
Goodwill, gross	$	8,539	$	66,236	$	7,634	$	82,409
Accumulated impairment losses		(1,173)		─		(7,634)		(8,807)
Net balance	$	7,366	$	66,236	$	—	$	73,602

Intangible Assets

At December 31, 2016, our intangible assets included a domain name for $450, which has an indefinite life and is not subject to amortization. In addition, we acquired in 2016 customer relationships from our Softmart and GlobalServe acquisitions, which will be amortized on a straight-line basis over their estimated useful lives of 10 years. Our remaining intangible assets are amortized in proportion to the estimates of the future cash flows underlying the valuation of the assets. Intangible assets and related accumulated amortization are detailed below:


		December 31, 2016						December 31, 2015
	Estimated	Gross		Accumulated		Net		Gross		Accumulated		Net
	Useful Lives	Amount		Amortization		Amount		Amount		Amortization		Amount
Customer List	8	$	3,400	$	2,861	$	539	$	3,400	$	2,499	$	901
Tradename	5		1,190		1,111		79		1,190		873		317
Customer Relationships	10		12,200		682		11,518		—		—		—
Total Intangible Assets		$	16,790	$	4,654	$	12,136	$	4,590	$	3,372	$	1,218

In 2016, 2015, and 2014, we recorded amortization expense of $1,281, $735, and $901, respectively. The estimated amortization expense relating to intangible assets in each of the five succeeding years and thereafter is as follows:


For the Years Ended December 31,
2017	$	1,582
2018		1,441
2019		1,256
2020		1,220
2021		1,220
2022 and thereafter		5,417
	$	12,136

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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