Acquisitions, Divestiture, Intangible Assets and Goodwill

12 Months Ended

Dec. 31, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Acquisitions, Divestiture, Intangible Assets and Goodwill

Acquisitions

In July 2016, we acquired Maponics for $24 million, net of cash acquired. Maponics provides comprehensive boundary information and geospatial data that support location-based services and analytics and will be reported within our Software Solutions segment.

In January 2016, we acquired Enroute for $14 million in cash. Additional cash payments may also be required during 2017-2019 based on the achievement of certain annual revenue targets for 2016-2018. Enroute is a software-as-a-service enterprise retail and fulfillment solutions company and is reported within our Global Ecommerce segment.

In June 2015, we acquired Borderfree, Inc. ("Borderfree") for $381 million, net of $92 million of cash acquired. During the second quarter of 2016, we obtained new information about facts and circumstances that existed as of the acquisition date and increased accounts payable and accrued expenses and goodwill acquired in the Borderfree acquisition by $2 million. On a supplemental pro forma basis, had we acquired Borderfree on January 1, 2015, our revenues would have been $47 million higher for 2015. The impact on our earnings would not have been material.

Divestiture

In May 2015, we sold Imagitas for net proceeds of $292 million. We recognized a pre-tax gain of $111 million, which was reported within other expense (income), net in the Consolidated Statements of Income.

Intangible assets

Intangible assets at December 31, 2016 and 2015 consisted of the following:



	December 31, 2016							December 31, 2015
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Customer relationships	$	445,039	$	(300,906	)	$	144,133	$	437,459	$	(272,353	)	$	165,106
Software & technology	150,037		(136,508		)	13,529		149,591		(135,198		)	14,393
Trademarks & other	36,212		(28,702		)	7,510		35,314		(27,435		)	7,879
Total intangible assets, net	$	631,288	$	(466,116	)	$	165,172	$	622,364	$	(434,986	)	$	187,378

During the year, we acquired intangible assets with a fair value of $19 million in connection with the acquisitions of Enroute and Maponics. Amortization expense for intangible assets was $40 million, $37 million and $34 million for the years ended December 31, 2016, 2015 and 2014, respectively. The future amortization expense for intangible assets at December 31, 2016 is as follows:



Year ended December 31,
2017	$	29,391
2018	27,200
2019	23,848
2020	18,740
2021	18,946
Thereafter	47,047
Total	$	165,172

Actual amortization expense may differ from the amounts above due to, among other things, fluctuations in foreign currency exchange rates, acquisitions, divestitures and impairment charges.

Goodwill

During the third quarter, based on the operating results of our Software Solutions reporting unit, we performed Step 1 of the goodwill impairment test to assess the adequacy of the carrying value of goodwill. At that time, we determined that the estimated fair value of the reporting unit exceeded its carrying value by 15% and the measurement of a goodwill impairment charge was not necessary. The assumptions used to estimate fair value were based on projections of revenue and earnings growth, including a strong sales pipeline, operating cash flows, discount rate and market multiples. Additionally, we launched several initiatives during 2016 that we expected would drive revenue and earnings growth in the future, including the development of a new partner channel, the reorganization of the sales organization to improve sales efficiency and the pipeline of deals, the improvement of processes for acquiring new clients and the implementation of a more disciplined marketing strategy for new products.

During the fourth quarter, however; our Software Solutions reporting unit experienced weaker than expected performance. Based on this and including the soft operating results in 2016, we performed a goodwill impairment test that indicated the fair value of the Software Solutions reporting unit was less than its carrying value. We engaged a third party to perform Steps 1 and 2 of the goodwill impairment test and determined that the implied fair value of goodwill was less than the recorded goodwill and as a result recorded a non-cash, pre-tax goodwill impairment charge of $171 million to write down the carrying value of goodwill to its estimated fair value.

The changes in the carrying amount of goodwill, by reporting segment, for the years ended December 31, 2016 and 2015 are shown in the tables below.



	Gross value before accumulated impairment		Accumulated impairment		December 31, 2015		Acquisition		Impairment			Other ⁽¹⁾			December 31, 2016
North America Mailing	$	296,053	$	—	$	296,053	$	—	$	—		$	(3,215	)	$	292,838
International Mailing	148,351		—		148,351		—		—			(2,785		)	145,566
Small & Medium Business Solutions	444,404		—		444,404		—		—			(6,000		)	438,404
Production Mail	105,757		—		105,757		—		—			(4,658		)	101,099
Presort Services	196,890		—		196,890		—		—			—			196,890
Enterprise Business Solutions	302,647		—		302,647		—		—			(4,658		)	297,989
Software Solutions	674,976		—		674,976		11,908		(171,092		)	(14,201		)	501,591
Global Ecommerce	323,930		—		323,930		9,421		—			—			333,351
Digital Commerce Solutions	998,906		—		998,906		21,329		(171,092		)	(14,201		)	834,942
Total goodwill	$	1,745,957	$	—	$	1,745,957	$	21,329	$	(171,092	)	$	(24,859	)	$	1,571,335



	Gross value before accumulated impairment		Accumulated impairment		December 31, 2014		Acquisition		Other ⁽¹⁾			December 31, 2015
North America Mailing	$	309,448	$	—	$	309,448	$	—	$	(13,395	)	$	296,053
International Mailing	162,146		—		162,146		—		(13,795		)	148,351
Small & Medium Business Solutions	471,594		—		471,594		—		(27,190		)	444,404
Production Mail	110,837		—		110,837		—		(5,080		)	105,757
Presort Services	195,140		—		195,140		1,750		—			196,890
Enterprise Business Solutions	305,977		—		305,977		1,750		(5,080		)	302,647
Software Solutions	677,008		—		677,008		5,792		(7,824		)	674,976
Global Ecommerce	23,910		—		23,910		300,020		—			323,930
Digital Commerce Solutions	700,918		—		700,918		305,812		(7,824		)	998,906
Other	194,232		—		194,232		—		(194,232		)	—
Total goodwill	$	1,672,721	$	—	$	1,672,721	$	307,562	$	(234,326	)	$	1,745,957


(1)	Primarily represents foreign currency translation adjustments. For 2015, Other represents the write-off of remaining goodwill upon the sale of Imagitas.

- 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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