5. | Long-Lived Assets |
Property and Equipment. Property and equipment at December 31 consisted of the following (in thousands, except years):
|
Useful |
|
|
2013 |
|
|
2012 |
|
|||
Computer equipment |
|
3-5 |
|
|
$ |
89,605 |
|
|
$ |
76,924 |
|
Leasehold improvements |
|
5-10 |
|
|
|
15,793 |
|
|
|
14,415 |
|
Operating equipment |
|
3-5 |
|
|
|
48,759 |
|
|
|
58,684 |
|
Furniture and equipment |
|
3-8 |
|
|
|
10,426 |
|
|
|
9,990 |
|
Capital projects in process |
|
— |
|
|
|
— |
|
|
|
59 |
|
|
|
|
|
|
|
164,583 |
|
|
|
160,072 |
|
Less—accumulated depreciation |
|
|
|
|
|
(129,522 |
) |
|
|
(120,643 |
) |
Property and equipment, net |
|
|
|
|
$ |
35,061 |
|
|
$ |
39,429 |
|
Goodwill. We do not have any intangible assets with indefinite lives other than goodwill. A rollforward of goodwill in 2013 and 2012 is as follows (in thousands):
January 1, 2012 balance |
|
$ |
220,013 |
|
Goodwill acquired during period |
|
|
8,955 |
|
Revisions related to prior acquisitions |
|
|
(59 |
) |
Effects of changes in foreign currency exchange rates |
|
|
4,456 |
|
December 31, 2012 balance |
|
|
233,365 |
|
Adjustments for the dispositions of business operations |
|
|
(1,967 |
) |
Revisions related to prior acquisitions |
|
|
(164 |
) |
Effects of changes in foreign currency exchange rates |
|
|
2,365 |
|
December 31, 2013 balance |
|
$ |
233,599 |
|
The goodwill acquired in 2012 is related to the Ascade Acquisition discussed in Note 3. On July 1, 2013, we sold a small print operation, which resulted in an adjustment to our goodwill balance of $1.4 million. The net proceeds from this disposition were $1.7 million and the gain from the sale was not material. Additionally, on December 31, 2013, we sold our marketing analytics business, which resulted in an adjustment to our goodwill balance of $0.6 million. The net proceeds from this disposition were $2.8 million and the loss from the sale was approximately $3 million.
Other Intangible Assets. Our intangible assets subject to ongoing amortization consist of client contracts and software.
Client Contracts
Client contracts consist of the following: (i) investments in client contracts; (ii) direct and incremental costs that we have capitalized related to contractual arrangements where we have deferred revenues to convert or set-up client customers onto our outsourced solutions; and (iii) client contracts acquired in business combinations.
As of December 31, 2013 and 2012, the carrying values of these assets were as follows (in thousands):
|
2013 |
|
|
2012 |
|
||||||||||||||||||
|
Gross |
|
|
Accumulated |
|
|
Net |
|
|
Gross |
|
|
Accumulated |
|
|
Net |
|
||||||
Investments in client contracts (1) |
$ |
27,370 |
|
|
$ |
(20,345 |
) |
|
$ |
7,025 |
|
|
$ |
118,473 |
|
|
$ |
(112,225 |
) |
|
$ |
6,248 |
|
Capitalized costs (2) |
|
5,003 |
|
|
|
(3,340 |
) |
|
|
1,663 |
|
|
|
16,288 |
|
|
|
(11,054 |
) |
|
|
5,234 |
|
Acquired client contracts (3) |
|
98,200 |
|
|
|
(51,697 |
) |
|
|
46,503 |
|
|
|
122,724 |
|
|
|
(58,903 |
) |
|
|
63,821 |
|
Total client contracts |
$ |
130,573 |
|
|
$ |
(75,382 |
) |
|
$ |
55,191 |
|
|
$ |
257,485 |
|
|
$ |
(182,182 |
) |
|
$ |
75,303 |
|
The decrease in the gross carrying amount and accumulated amortization of our client contracts between 2012 and 2013 is due primarily to the removal of fully-amortized assets related to client incentives for the Comcast and Time Warner contracts that came to end of term during the first quarter of 2013.
The aggregate amortization related to client contracts included in our operations for 2013, 2012, and 2011, was as follows (in thousands):
|
2013 |
|
|
2012 |
|
|
2011 |
|
|||
Investments in client contracts (1) |
$ |
6,181 |
|
|
$ |
7,591 |
|
|
$ |
7,521 |
|
Capitalized costs (2) |
|
2,365 |
|
|
|
4,172 |
|
|
|
3,296 |
|
Acquired client contracts (3) |
|
14,999 |
|
|
|
17,017 |
|
|
|
17,126 |
|
Total client contracts |
$ |
23,545 |
|
|
$ |
28,780 |
|
|
$ |
27,943 |
|
(1) | Investments in client contracts consist principally of incentives provided to new or existing clients to convert their customer accounts to, or retain their customer’s accounts on, our customer care and billing systems. Investments in client contracts related to client incentives are amortized ratably over the lives of the respective client contracts, which as of December 31, 2013, have termination dates that range from 2014 through 2020. Amortization of the investments in client contracts related to client incentives is reflected as a reduction in processing and related services revenues in our Income Statements. |
(2) | Capitalized costs related to client conversion/set-up services related to long-term processing or managed services arrangements are generally amortized proportionately over the contract period that the processing or managed services are expected to be provided, and are primarily reflected in cost of processing and related services in our Income Statements. |
(3) | Acquired client contracts represent assets acquired in our prior business acquisitions. Acquired client contracts are being amortized over their estimated useful lives ranging from five to ten years based on the approximate pattern in which the economic benefits of the intangible assets are expected to be realized. Classification of the amortization of acquired client contracts generally follows where the acquired business’ cost of revenues are categorized in our Income Statements. |
The weighted-average remaining amortization period of client contracts as of December 31, 2013 was approximately 74 months. Based on the December 31, 2013 net carrying value of these intangible assets, the estimated amortization for each of the five succeeding fiscal years ending December 31 will be: 2014 – $18.6 million; 2015 – $10.8 million; 2016 – $8.1 million; 2017 – $6.4 million; and 2018 – $4.4 million.
Software
Software consists of: (i) software and similar intellectual property rights from various business combinations; and (ii) internal use software.
As of December 31, 2013 and 2012, the carrying values of these assets were as follows (in thousands):
|
2013 |
|
|
2012 |
|
||||||||||||||||||
|
Gross |
|
|
Accumulated |
|
|
Net |
|
|
Gross |
|
|
Accumulated |
|
|
Net |
|
||||||
Acquired software (4) |
$ |
67,975 |
|
|
$ |
(53,820 |
) |
|
$ |
14,155 |
|
|
$ |
67,088 |
|
|
$ |
(51,724 |
) |
|
$ |
15,364 |
|
Internal use software (5) |
|
53,094 |
|
|
|
(23,684 |
) |
|
|
29,410 |
|
|
|
39,780 |
|
|
|
(16,772 |
) |
|
|
23,008 |
|
Total software |
$ |
121,069 |
|
|
$ |
(77,504 |
) |
|
$ |
43,565 |
|
|
$ |
106,868 |
|
|
$ |
(68,496 |
) |
|
$ |
38,372 |
|
The aggregate amortization related to software included in our operations for 2013, 2012, and 2011, was as follows (in thousands):
|
2013 |
|
|
2012 |
|
|
2011 |
|
|||
Acquired software (4) |
$ |
4,221 |
|
|
$ |
5,700 |
|
|
$ |
5,595 |
|
Internal use software (5) |
|
7,633 |
|
|
|
6,985 |
|
|
|
5,637 |
|
Total software |
$ |
11,854 |
|
|
$ |
12,685 |
|
|
$ |
11,232 |
|
(4) | Acquired software represents the software intangible assets acquired in our prior business acquisitions, which are being amortized over their estimated useful lives ranging from five to ten years. |
(5) | Internal use software represents: (i) third-party software licenses; and (ii) the internal and external costs related to the implementation of the third-party software licenses. Internal use software is amortized over its estimated useful life ranging from twelve months to ten years. |
The weighted-average remaining amortization period of the software intangible assets as of December 31, 2013 was approximately 84 months. Based on the December 31, 2013 net carrying value of these intangible assets, the estimated amortization for each of the five succeeding fiscal years ending December 31 will be: 2014 – $10.7 million; 2015 – $7.9 million; 2016 – $6.0 million; 2017 – $5.0 million; and 2018 – $4.0 million.