DSL Service Assurance Software Exit

9 Months Ended

Sep. 30, 2013

Digital Subscriber Line Service Assurance Software Exit [Abstract]

DSL Service Assurance Software Exit. In August 2013, our Board of Directors approved the shutdown of our DSL service assurance software product line, which is the remaining component of our DSL Service Assurance Segment. We intend to provide limited support to customers until December 31, 2013 at which point we expect to complete the shutdown. The results of operations for the DSL service assurance software product line have been reported in continuing operations for the three and nine month periods ended September 30, 2013 and 2012. We anticipate the results of operations for this product line will be reported in discontinued operations commencing next quarter.

We estimate our total shutdown costs to date to be approximately $3.0 million. Such costs comprise: i) $3.7 million of payments to customers to terminate contracts, which were offset by $1.2 million of deferred revenue obligations that were relieved as a result of such contract terminations; ii) $397,000 of severance and employee-related costs; and iii) $47,000 of asset write-offs. We recorded $2.8 million of those costs in “Exit costs” in the consolidated statements of comprehensive income for the three months ended September 30, 2013. The remaining $165,000 of costs represents employee severance and retention bonuses for employees who have been retained to support customers through December 31, 2013. We intend to charge those costs to expense in the three months ended December 31, 2013, if earned by employees.

We may incur additional costs or receive additional income related to the termination of customer contracts, however we are unable to estimate those amounts at this time.

At September 30, 2013, we recorded a liability for exit costs of $3.8 million. This liability comprises: i) $3.7 million of payments due to customers for contract terminations; and ii) $232,000 of severance and employee related costs earned by employees through September 30, 2013, less $176,000 of payments made to such employees before the end of the quarter.

The following table is a rollforward of our exit costs liability accounts. Customer contract termination costs were included in “Due to customers” and severance and employee-related costs were included in “Accrued compensation” in the consolidated balance sheets. (in thousands):

	Customer Contract Termination Costs		Severance and Employee-Related Costs			Other Costs			Total
Balance at June 30, 2013	$	-	$	-		$	-		$	-
Amount charged to expense		2,553		232			47			2,832
Deferred revenue offset		1,179		-			-			1,179
Payments/write-offs		-		(176	)		(47	)		(223	)
Balance at September 30, 2013	$	3,732	$	56		$	-		$	3,788