Long-Lived Assets

The total depreciation, amortization and accretion expenses related to property and equipment, amortizable intangible assets, and asset retirement obligations for the years ended December 31, 2013, 2012, and 2011 were $9.6 million, $11.2 million and $14.0 million, respectively, for wireless operations; and $5.6 million, $7.0 million and $5.3 million for software operations for the years ended December 31, 2013, 2012 and 2011, respectively. The consolidated balances consisted of the following for the periods stated:



	For the Year Ended December 31,
	2013		2012		2011
	(Dollars in thousands)
Depreciation	$	9,664	$	11,054	$	13,253
Amortization	4,965		6,411		5,274
Accretion⁽¹⁾	538		767		807
Total depreciation, amortization and accretion	$	15,167	$	18,232	$	19,334


⁽¹⁾	Accretion expense included $(29,000) in 2013 and $29,000 in 2012 in software operations related to the IMCO acquisition.

Property and Equipment — A component of depreciation expense for wireless operations relates to the depreciation of certain of our paging equipment assets. The primary component of these assets are transmitters. For the years ended December 31, 2013, 2012 and 2011, $1.1 million, $1.9 million, and $3.3 million, respectively, of total wireless operations’ depreciation expense related to these assets. The components of depreciation expense for software operations relate primarily to computer equipment and leasehold improvements which were $0.8 million, $0.8 million and $0.3 million, respectively, for the years ended December 31, 2013, 2012 and 2011.

Transmitter assets are grouped into tranches based on our transmitter decommissioning forecast and are depreciated using the group life method on a straight-line basis. Depreciation expense is determined by the expected useful life of each tranche of the underlying transmitter assets. The expected useful life is based on our forecasted usage of those assets and their retirement over time and aligns the useful lives of these transmitter assets with their planned removal from service. This rational and systematic method matches the underlying usage of these assets to the underlying revenue that is generated from these assets.

Depreciation expense for these assets is subject to change based upon revisions in the timing of transmitter deconstruction resulting from our long-range planning and network rationalization process. During the fourth quarter of 2013, we completed a review of the estimated useful life of our transmitter assets (that are part of paging and computer equipment.) This review was based on the results of our long-range planning and network rationalization process and indicated that the expected useful life of the last tranche of the transmitter assets was no longer appropriate. As a result of that review, the expected useful life of the final tranche of transmitter assets was extended from 2017 to 2018. This change has resulted in a revision of the expected future depreciation expense for the transmitter assets beginning in the fourth quarter of 2013. We believe these estimates are reasonable at the present time, but we can give no assurance that changes in technology, customer usage patterns, our financial condition, the economy or other factors would not result in changes to our transmitter decommissioning plans. Any further variations from our estimates could result in a change in the expected useful lives of the underlying transmitter assets and operating results could differ in the future by any difference in depreciation expense.

The extension of the depreciable life qualifies as a change in accounting estimate. In the fourth quarter of 2013, depreciation expense was approximately $0.1 million less than it would have been had the depreciable lives not been extended.

Asset Retirement Obligations — Asset retirement costs are reflected in paging equipment assets with depreciation expense recognized over the estimated lives, which range between one and five years. The asset retirement costs were $3.8 million and $1.7 million at December 31, 2013 and 2012, respectively. The net increase in asset retirement cost in 2013 increased paging equipment assets which are being depreciated over the related estimated lives of 12 to 60 months.

Depreciation, amortization and accretion for the years ended December 31, 2013 and 2012 included benefits of $1.0 million and $1.1 million, respectively, related to depreciation of these asset retirement costs. The benefits in depreciation expense for these years are due to net reductions to the asset retirement costs as a result of changes in the timing and costs of the transmitter deconstructions.

The asset retirement costs and the corresponding liabilities that have been recorded to date generally relate to either current plans to consolidate networks or to the removal of assets at a future terminal date.

The components of the changes in the asset retirement obligation liabilities for the periods stated were as follows:



	Short-Term Portion			Long-Term Portion			Total
	(Dollars in thousands)
Balance at January 1, 2012	$	794		$	7,557		$	8,351
Accretion	62			676			738
Amounts paid	(767		)	—			(767		)
Reductions recorded	(35		)	(351		)	(386		)
Reclassifications	325			(325		)	—
Balance at December 31, 2012	$	379		$	7,557		$	7,936
Accretion	(112		)	679			567
Amounts paid	(415		)	—			(415		)
Reductions recorded	(445		)	314			(131		)
Reclassifications	951			(951		)	—
Balance at December 31, 2013	$	358		$	7,599		$	7,957

At both December 31, 2013 and 2012, accrued other liabilities included $0.4 million of asset retirement liabilities related to our efforts to reduce the number of transmitters in operation; other long-term liabilities included $7.6 million, related primarily to an estimate of the costs of deconstructing assets through the terminal date. The primary variables associated with these estimates are the number of transmitters and related equipment to be removed, the timing of removal, and a fair value estimate of the outside contractor fees to remove each asset. The fair value estimate of contractor fees to remove each asset is assumed to escalate by 4% each year through the terminal date.

The long-term cost associated with the estimated removal costs and timing refinements due to ongoing network rationalization activities will accrete to a total liability of $9.6 million. The accretion was recorded on the interest method utilizing the following discount rates for the specified periods:




Period	Discount Rate
2013 – December 31 Additions⁽¹⁾ and Incremental Estimates	10.48	%
2013 – January 1 through September 30 – Additions⁽¹⁾	10.60	%
2012 – December 31 Additions⁽¹⁾ and Incremental Estimates	10.60	%
2012 – September 30 – Incremental Estimates⁽²⁾	12.14	%
2012 – January 1 through September 30 – Additions⁽¹⁾	10.77	%
2011 – December 31 Additions⁽¹⁾ and Incremental Estimates	10.77	%
2011 – September 30 – Incremental Estimates⁽²⁾	12.17	%
2011 – April 1 through September 30 – Additions⁽¹⁾	11.50	%
2011 – January 1 through March 31 – Additions⁽¹⁾	12.46	%


⁽¹⁾	Transmitters moved to new sites resulting in additional liability.


⁽²⁾	Weighted average credit adjusted risk-free rate used to discount downward revision to estimated future cash flows.

The total estimated liability is based on the transmitter locations remaining after we have consolidated the number of networks we operate and assume the underlying leases continue to be renewed to that future date. Depreciation, amortization and accretion expense for the years ended December 31, 2013, 2012 and 2011 included $0.6 million, $0.7 million and $0.8 million, respectively, for accretion expense on the asset retirement obligation liabilities.

We believe these estimates are reasonable at the present time, but we can give no assurance that changes in technology, our financial condition, the economy or other factors would not result in higher or lower asset retirement obligations. Any variations from our estimates would generally result in a change in the assets and liabilities in equal amounts, and operating results would differ in the future by any difference in depreciation expense and accretion expense.

Amortizable Intangible Assets and Goodwill — Other intangible assets for wireless operations consisted of a covenant to non-compete with a former executive which was amortized over a three year period. Other intangible assets for software operations were recorded at fair value on the date of acquisition and are being amortized over two to fifteen years. We recorded an impairment charge of $3.4 million to the contract-based intangible assets (non compete agreements) for our software operations for the year ended December 31, 2012 and no impairment of amortizable intangible assets was recorded for the same period in 2013 and 2011.

The gross carrying amount of other intangible assets for the wireless operations was zero and $0.4 million, respectively, and $41.5 million for software operations at both December 31, 2013 and 2012. The gross carrying amount of the intangible assets for the wireless operations (covenant to non-compete) was fully amortized and written off in 2013. The accumulated amortization for wireless operations was $0.3 million at December 31, 2012 and $16.2 million and $11.3 million, respectively, for software operations at December 31, 2013 and 2012.

The net consolidated balance of amortizable intangible assets consisted of the following at December 31, 2013 and 2012:



		As of December 31,
		2013							2012
	Useful Life (In Years)	Gross Carrying Amount		Accumulated Amortization			Net Balance		Gross Carrying Amount		Accumulated Amortization			Net Balance
		(Dollars in thousands)
Customer relationships	10	$	25,002	$	(7,084	)	$	17,918	$	25,002	$	(4,584	)	$	20,418
Acquired technology	2 - 4	8,452		(5,865		)	2,587		8,452		(3,911		)	4,541
Non-compete agreements	3 - 5	2,370		(2,132		)	238		2,800		(2,431		)	369
Trademarks	15	5,702		(1,077		)	4,625		5,702		(697		)	5,005
Total amortizable intangible assets		$	41,526	$	(16,158	)	$	25,368	$	41,956	$	(11,623	)	$	30,333

Aggregate amortization expense for other intangible assets for the years ended December 31, 2013, 2012 and 2011 was $5.0 million, $6.4 million and $5.3 million, respectively.

Estimated amortization of intangible assets for future periods was as follows:




	(Dollars in thousands)
For the year ending December 31,
2014	$	4,866
2015	3,588
2016	3,013
2017	2,880
2018	2,880
Thereafter	8,141
Total	$	25,368

Goodwill at both December 31, 2013 and 2012 was $133.0 million, which is all attributed to our software operations. Goodwill is not amortized but is evaluated for impairment at least annually, or when events or circumstances suggested a potential impairment had occurred. (See Note 1.)

We did not record any impairment of goodwill for the years ended December 31, 2013, 2012 or 2011.