Devcon International (DEVC)

DEVC » Topics » NOTE 2 CUSTOMER CONTRACTS PURCHASED AND ACCUMULATED AMORTIZATION

This excerpt taken from the DEVC 8-K filed Jan 26, 2006.

NOTE 2 CUSTOMER CONTRACTS PURCHASED AND ACCUMULATED AMORTIZATION

 

Customer contracts purchased - The Company has entered into agreements with other security companies (dealers), under which it agrees to purchase their customer contracts. The contract agreements also provide for a holdback, usually 10% of the purchase price, in the event customers cancel their contracts. The seller usually has two options, either to replace the customer contract with a new customer, or the residual value of the contract will be offset against the holdback amount. The holdback is paid out over a pre-determined term prescribed in each respective contract. As of December 31, 2004 and 2003, holdbacks amounted to $586,430 and $289,440, respectively.

 

Accumulated amortizationCustomer contracts are amortized using the straight-line method over their estimated lives of seven years. The seven-year amortization period is management’s best estimate of the average life of a typical customer based on historical experience within the industry. The Company evaluates acquired customer contracts periodically to assess whether an impairment may exist.

 

As management has estimated this amortization, it is at least reasonably possible that actual lives of these contracts could be greater than or less than this estimate. If so, the amortization period would be changed thus increasing or decreasing amortization expense in the future. At December 31, 2004 and 2003 customer contracts purchased consisted of the following:

 

     2004

    2003

 

Customer contracts purchased

   $ 40,466,362     $ 30,307,462  

Less accumulated amortization

     (20,272,682 )     (16,479,447 )
    


 


     $ 20,193,680     $ 13,828,015  
    


 


 

Amortization expense was $3,787,239 and $4,186,701 for the years ended December 31, 2004 and 2003, respectively. The estimated amortization expense for the five succeeding years ending December 31, 2005 to December 31, 2009 and thereafter are as follows: 2005 - $3,876,000; 2006 - $3,627,000; 2007 - $3,533,000; 2008 - $3,485,000 and 2009 - $3,143,000 and thereafter - $2,530,000.

 

7


COASTAL SECURITY COMPANY AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2004 AND 2003 – Continued

 

Wikinvest © 2006, 2007, 2008, 2009, 2010, 2011, 2012. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.
Powered by MediaWiki