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GOODWILL AND INTANGIBLE ASSETS
6 Months Ended
Jun. 30, 2012
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Intangible Assets Disclosure [Text Block]

NOTE 4 — GOODWILL AND INTANGIBLE ASSETS

 

During the second quarter of 2012, the Company recorded goodwill in the amount of $7.1 million in connection with the nLayer acquisition and in accordance with ASC Topic 350, Intangibles—Goodwill and Other.  Additionally, $8.4 million of the purchase price was allocated to intangible assets related to customer relationships and non-compete agreements which are subject to straight-line amortization.

 

The Company entered into a sales novation agreement during the second quarter of 2012 which assigned and transferred to the Company certain service level agreements and all rights under those agreements, as well as certain supply agreements and obligations thereunder. The Company valued the customer relationships from the novation and recorded $1.1 million in intangible assets.

 

Also during the second quarter of 2012, the Company completed a final measurement review of the PacketExchange goodwill that was initially recorded during the acquisition in the second quarter of 2011. In accordance with ASC Topic 805, Business Combinations, the Company recorded a $0.7 million measurement period adjustment. New information was obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of those assets and liabilities as of that date.

 

The Company adjusted certain prepaid expenses and other assets relating to the August 2010 sales novation agreements, resulting in a $2.9 million increase to intangible assets. This was the result of a settlement agreement which triggered the re-characterization of the asset.

 

The changes in the carrying amount of goodwill for the six months ended June 30, 2012 are as follows (in thousands):

 

Balance at December 31, 2011   $ 40,950  
Goodwill associated with the nLayer acquisition     7,138  
Measurement period adjustment related to the PacketExchange acquisition     744  
Balance at June 30, 2012   $ 48,832  

 

The following table summarizes the Company’s intangible assets as of June 30, 2012 and December 31, 2011 (amounts in thousands):

 

            June 30, 2012  
      Amortization     Gross Asset     Accumulated     Net Book  
      Period     Cost     Amortization     Value  
Customer contracts     4-7 years     $ 25,019     $ 4,190     $ 20,829  
Carrier contracts     1 year       151       151       -  
Noncompete agreements     4-5 years       4,331       3,481       850  
Software     7 years       4,935       4,125       810  
            $ 34,436     $ 11,947     $ 22,489  

 

            December 31, 2011  
      Amortization     Gross Asset     Accumulated     Net Book  
      Period     Cost     Amortization     Value  
Customer contracts     4-5 years     $ 13,384     $ 2,827     $ 10,557  
Carrier contracts     1 year       151       151       -  
Noncompete agreements     4-5 years       3,531       3,384       147  
Software     7 years       4,935       3,811       1,124  
            $ 22,001     $ 10,173     $ 11,828  

 

Amortization expense was $1.1 million and $0.6 million for the three months ended June 30, 2012 and 2011, respectively. Amortization expense was $1.8 million and $1.0 million for the six months ended June 30, 2012 and 2011, respectively.

  

Estimated amortization expense related to intangible assets subject to amortization is as follows (amounts in thousands):

 

2012 remaining   $ 2,916  
2013     5,697  
2014     5,093  
2015     3,749  
2016     2,960  
2017 and beyond     2,074  
Total   $ 22,489