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, 2014, 2013, and 2012 were $16.7 million, $15.2 million and $18.2 million, respectively. The consolidated balances consisted of the following for the periods stated:



	For the Year Ended December 31,
	2014		2013		2012
	(Dollars in thousands)
Depreciation	$	10,200	$	9,664	$	11,054
Amortization	5,722		4,965		6,411
Accretion⁽¹⁾	755		538		767
Total depreciation, amortization and accretion	$	16,677	$	15,167	$	18,232


⁽¹⁾	Accretion expense included $(29,000) in 2013 and $29,000 in 2012 related to a prior acquisition.

Property and Equipment — A component of depreciation expense relates to the depreciation of certain of our paging equipment assets. The primary component of these assets are transmitters. Total depreciation expense was $0.9 million, $1.1 million, and $1.9 million, for the years ended December 31, 2014, 2013 and 2012, respectively. 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 2014, 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 2018 to 2019. This change has resulted in a revision of the expected future depreciation expense for the transmitter assets beginning in the fourth quarter of 2014. 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 2014, depreciation expense was approximately $49,000 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 $2.8 million and $3.8 million at December 31, 2014 and 2013, respectively. The net decrease in asset retirement costs in 2014 is related to the decrease in paging equipment assets during the period.

Depreciation, amortization and accretion for the years ended December 31, 2014, 2013 and 2012 included benefits of $0.3 million, $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, 2013	$	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
Accretion	28			727			755
Amounts paid	(399		)	—			(399		)
Reductions recorded	(141		)	(1,025		)	(1,166		)
Reclassifications	496			(496		)	—
Balance at December 31, 2014	$	342		$	6,805		$	7,147

At December 31, 2014 and 2013, accrued other liabilities included $0.3 million and $0.4 million, respectively, of asset retirement liabilities related to our efforts to reduce the number of transmitters in operation; other long-term liabilities included $6.8 million and $7.6 million, respectively, 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 cost associated with the estimated removal costs and timing refinements due to ongoing network rationalization activities will accrete to a total liability of $8.4 million. The accretion was recorded on the interest method utilizing the following discount rates for the specified periods:




Period	Discount Rate
2014 – January 1 through December 31 – Additions⁽¹⁾	10.48	%
2014 – December 31 - Incremental Estimates⁽²⁾	12.10	%
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	%


⁽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, 2014, 2013 and 2012 included $0.8 million, $0.6 million and $0.7 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 not to 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. These intangibles primarily related to the Amcom trademarks and trade name that were impacted by our rebranding to SPŌK. In 2014, we reviewed the remaining useful life of the software intangibles that had initially been set to amortize over fifteens years. At the time the intangible assets were reassessed, they had been amortized for approximately three years. Upon reassessment, we determined the remaining useful life to be three years and are amortizing the remaining balance over this period. We recorded an impairment charge of $3.4 million to the contract-based intangible assets (non-compete agreements) for the year ended December 31, 2012 and no impairment of amortizable intangible assets was recorded for the same period in 2014 and 2013.

The net consolidated balance of amortizable intangible assets consisted of the following at December 31, 2014 and 2013:



		As of December 31,
		2014							2013
	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	$	(9,584	)	$	15,418	$	25,002	$	(7,084	)	$	17,918
Acquired technology	2 - 4	8,452		(7,741		)	711		8,452		(5,865		)	2,587
Non-compete agreements	3 - 5	2,370		(2,242		)	128		2,370		(2,132		)	238
Trademarks	15	5,754		(2,313		)	3,441		5,702		(1,077		)	4,625
Total amortizable intangible assets		$	41,578	$	(21,880	)	$	19,698	$	41,526	$	(16,158	)	$	25,368

Aggregate amortization expense for other intangible assets for the years ended December 31, 2014, 2013 and 2012 was $5.7 million, $5.0 million and $6.4 million, respectively. During 2014, we increased trademarks by approximately $52,000 due to the purchase of the website domain name associated with the Company re-branding to the name SPŌK in 2014.

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




	(Dollars in thousands)
For the year ending December 31,
2015	$	4,735
2016	4,160
2017	2,886
2018	2,500
2019	2,500
Thereafter	2,917
Total	$	19,698

Goodwill at both December 31, 2014 and 2013 was $133.0 million. 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, 2014, 2013 or 2012.