Long-Lived Assets

12 Months Ended

Dec. 31, 2011

5. Long-Lived Assets

Property and Equipment. Property and equipment at December 31 consisted of the following (in thousands, except years):


	Useful Lives (years)		2011			2010
Computer equipment		3-5	$	63,102		$	55,597
Leasehold improvements		5-10		17,315			16,240
Operating equipment		3-10		60,233			60,138
Furniture and equipment		3-8		14,241			13,930
Capital projects in process		—		2,388			588

				157,279			146,493
Less—accumulated depreciation				(116,125	)		(94,236	)

Property and equipment, net			$	41,154		$	52,257

Goodwill. We do not have any intangible assets with indefinite lives other than goodwill. A rollforward of goodwill in 2011 and 2010 is as follows (in thousands):


January 1, 2010 balance	$	107,052
Goodwill acquired during period		101,095
Revisions related to prior acquisitions		1,940
Effects of changes in foreign currency exchange rates		(923	)

December 31, 2010 balance		209,164
Revisions related to prior acquisitions		11,929
Effects of changes in foreign currency exchange rates		(1,080	)

December 31, 2011 balance	$	220,013

The goodwill acquired in 2010 is related to the Intec Acquisition discussed in Note 3. The revisions related to prior acquisitions made in 2011 relate to the finalization of our purchase accounting for the Intec Acquisition. The revisions related to prior acquisitions made in 2010 are mainly due to the recording of contingent purchase price payments of $2.0 million related to the Quaero acquisition.

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, 2011 and 2010, the carrying values of these assets were as follows (in thousands):


	2011							2010
	Gross Carrying Amount		Accumulated Amortization			Net Amount		Gross Carrying Amount		Accumulated Amortization			Net Amount
Investments in client contracts(1)	$	135,855	$	(122,896	)	$	12,959	$	134,178	$	(115,747	)	$	18,431
Capitalized costs(2)		22,388		(10,527	)		11,861		16,580		(8,546	)		8,034
Acquired client contracts(3)		99,385		(25,802	)		73,583		98,788		(8,925	)		89,863

Total client contracts	$	257,628	$	(159,225	)	$	98,403	$	249,546	$	(133,218	)	$	116,328

The aggregate amortization related to client contracts included in our operations for 2011, 2010, and 2009, was as follows (in thousands):


	2011		2010		2009
Investments in client contracts(1)	$	7,521	$	6,715	$	4,525
Capitalized costs(2)		3,296		2,660		1,077
Acquired client contracts(3)		17,126		3,920		4,087

Total client contracts	$	27,943	$	13,295	$	9,689

(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, 2011, have termination dates that range from 2012 through 2016. 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 the deferral of conversion/set-up services costs are amortized proportionately over the same period that the deferred conversion/set-up services revenues are recognized, and are primarily reflected in cost of processing and related services in our Income Statements.

(3)

Acquired client contracts represent assets acquired in the Intec, Quaero, DataProse, Prairie, and ComTec business acquisitions. Acquired client contracts are being amortized over their estimated useful lives ranging from two to fifteen 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, 2011 was approximately 84 months. Based on the December 31, 2011 net carrying value of these intangible assets, the estimated amortization for each of the five succeeding fiscal years ending December 31 will be: 2012—$26.5 million; 2013—$19.6 million; 2014—$15.0 million; 2015—$9.6 million; and 2016—$7.7 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, 2011 and 2010, the carrying values of these assets were as follows (in thousands):


	2011							2010
	Gross Carrying Amount		Accumulated Amortization			Net Amount		Gross Carrying Amount		Accumulated Amortization			Net Amount
Acquired software(4)	$	63,125	$	(45,986	)	$	17,139	$	63,102	$	(40,533	)	$	22,569
Internal use software(5)		23,362		(10,535	)		12,827		13,595		(5,046	)		8,549

Total software	$	86,487	$	(56,521	)	$	29,966	$	76,697	$	(45,579	)	$	31,118

The aggregate amortization related to software included in our operations for 2011, 2010, and 2009, was as follows (in thousands):


	2011		2010		2009
Acquired software(4)	$	5,595	$	2,286	$	2,017
Internal use software(5)		5,637		3,101		1,894

Total software	$	11,232	$	5,387	$	3,911

(4)	Acquired software represents the software intangible assets acquired in the Intec, Quaero, DataProse, Prairie, ComTec, and Telution 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, 2011 was approximately 71 months. Based on the December 31, 2011 net carrying value of these intangible assets, the estimated amortization for each of the five succeeding fiscal years ending December 31 will be: 2012—$10.8 million; 2013—$7.3 million; 2014—$4.7 million; 2015—$2.6 million; and 2016—$1.9 million.

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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