GOODWILL AND OTHER INTANGIBLE ASSETS

12 Months Ended

Dec. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

As of January 1, 2017, we changed our operating segments, as discussed in Note 11, and, subsequently, our reporting units. We now have six reporting units: IP services, IP products, data center services (“DCS”), cloud, hosting services and hosting products. We allocated goodwill to our new reporting unit using a relative fair value approach. In addition, we completed an assessment of any potential goodwill impairment for all reporting units immediately prior to and after the reallocation and determined that no impairment existed.

We performed our annual impairment review as of August 1, 2017. To determine the estimated fair value of our reporting units, we utilized the discounted cash flow and market methods. We have consistently utilized both methods in our goodwill impairment assessments and weighted both as appropriate based on relevant factors for each reporting unit. The discounted cash flow method is specific to our anticipated future results of the reporting unit, while the market method is based on our market sector including our competitors.

We determined the assumptions supporting the discounted cash flow method, including the discount rate, using our estimates as of the date of the impairment review. To determine the reasonableness of these assumptions, we considered our past performance and empirical trending of results, looked to market and industry expectations used in the discounted cash flow method, such as forecasted revenues and discount rate. We used reasonable judgment in developing our estimates and assumptions. The market method estimates fair value based on market multiples of revenue and earnings derived from comparable companies with similar operating and investment characteristics as the reporting unit.

The assumptions, inputs and judgments used in performing the valuation analysis are inherently subjective and reflect estimates based on known facts and circumstances at the time we perform the valuation. These estimates and assumptions primarily include, but are not limited to, discount rates; terminal growth rates; projected revenues and costs; earnings before interest, taxes, depreciation and amortization for expected cash flows; market comparables and capital expenditure forecasts. The use of different assumptions, inputs and judgments, or changes in circumstances, could materially affect the results of the valuation. Due to inherent uncertainty involved in making these estimates, actual results could differ from our estimates and could result in additional non-cash impairment charges in the future.

The Company determined, after performing the fair value analysis above, that all reporting units’ fair values were in excess of its carrying value. No impairment of goodwill has been identified during the year ended December 31, 2017.

During the years ended December 31, 2017 and 2016, our goodwill activity is as follows (in thousands):



	January 1, 2016		Re-allocations			Impairment			December 31, 2016		Re-allocations			December 31, 2017
Reportable segments:
Data center services	$	90,849	$	(90,849	)	$	—		$	—	$	—		$	—
IP services	39,464		(39,464		)	—			—		—			—
Data center and network services	—		80,105			(80,105		)			—			—
Cloud and hosting services	—		50,209			—			50,209		(50,209		)	—
INAP COLO									—		6,003			6,003
INAP CLOUD									—		44,206			44,206
Total	$	130,313	$	—		$	(80,105	)	$	50,209	$	—		$	50,209

Other Intangible Assets

During the year ended December 31, 2017, we concluded that no impairment indicators existed to cause us to reassess our other intangible assets. The estimated useful lives range from 5 years to 15 years.

The components of our amortizing intangible assets, including capitalized software, are as follows (in thousands):



	December 31, 2017				December 31, 2016
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Acquired and developed technology	$	52,825	(48,063	)	$	52,195	$	(45,995	)
Customer relationships and trade names	71,116		(50,212	)	69,698		(47,920		)
	$	123,941	(98,275	)	$	121,893	$	(93,915	)

Amortization expense for intangible assets during the years ended December 31, 2017, 2016 and 2015 was $5.1 million, $5.3 million and $20.3 million, respectively. As of December 31, 2017, remaining amortization expense is as follows (in thousands):



2018	$	4,649
2019	4,146
2020	3,236
2021	2,753
2022	1,794
Thereafter	9,088
	$	25,666

- 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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