Goodwill and Acquired Intangible Assets, Net

Goodwill represents the excess of the purchase price of the acquired business over the estimated fair value of the underlying net tangible and intangible assets acquired. The following table summarizes intangible assets as of December 31, 2013 and 2012:



	As of December 31, 2013					As of December 31, 2012
(in thousands)	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
Customer relationships	$	162,585	$	(109,964	)	$	172,280	$	(120,117	)
Trademarks and trade names	46,129		(15,806		)	44,226		(13,742		)
Software	15,514		(6,276		)	5,914		(5,645		)
Non-compete agreements	1,725		(881		)	1,798		(1,325		)
Total	$	225,953	$	(132,927	)	$	224,218	$	(140,829	)

The following table summarizes the goodwill and amortizable intangible assets activity for the years ended December 31, 2012 and 2013:



(in thousands)	Acquired Intangible Assets			Goodwill			Total Intangible Assets
Balance as of January 1, 2012	$	99,878		$	488,628		$	588,506
Increases (decreases):
2012 acquisitions	10,856			12,812			23,668
Impairment	(5,235		)	(23,505		)	(28,740		)
Amortization	(22,129		)	—			(22,129		)
Other (primarily changes in foreign currency exchange rates)	19			3,825			3,844
Balance as of December 31, 2012	83,389			481,760			565,149
Increases (decreases):
2013 acquisitions	33,279			27,917			61,196
Impairment	—			(18,425		)	(18,425		)
Amortization	(21,116		)	—			(21,116		)
Other (primarily changes in foreign currency exchange rates)	(2,526		)	7,183			4,657
Balance as of December 31, 2013	$	93,026		$	498,435		$	591,461

The Company performs its annual goodwill impairment test during the fourth quarter of each year. As a result of the 2013 and 2012 annual goodwill impairment tests, the Company recorded non-cash goodwill impairment charges of $18.4 million and $23.5 million, respectively. The annual goodwill impairment test completed during the fourth quarter of 2011 resulted in no impairment charge.

In performing the annual goodwill impairment test, management must apply judgment in determining the estimated fair value of a business and uses all available information to make these fair value determinations, including discounted projected future cash flow analysis using discount rates commensurate with the risks involved in the assets, together with comparable sales prices that the Company or another purchaser would likely pay for the respective assets.

Of the total goodwill balance of $498.4 million as of December 31, 2013, $246.3 million relates to the Money Transfer Segment, $187.7 million relates to the epay Segment and the remaining $64.5 million relates to the EFT Processing Segment. Amortization expense for intangible assets with finite lives was $21.1 million, $22.1 million and $22.2 million for the years ended December 31, 2013, 2012 and 2011, respectively. Estimated annual amortization expense, before income taxes, on intangible assets with finite lives as of December 31, 2013, is expected to total $18.2 million for 2014, $12.9 million for 2015, $11.3 million for 2016, $9.5 million for 2017 and $7.1 million for 2018.

2013 Impairment Charges

As a result of the 2013 annual goodwill impairment test, the Company recorded non-cash goodwill impairment charges related to its epay reporting units in Australia and Spain of $12.3 million and $6.1 million, respectively. The goodwill impairment charge in Australia was the result of continuing declines in the demand for mobile top-up services, caused by certain large retailers (which have a significant share of the retail market) negotiating direct agreements with two mobile operators and certain mobile operators modifying their distribution strategies to drive consumer demand for top-up services to on-line or mobile device channels. In Spain, the goodwill impairment charge was the result of the longer term effect of poor economic conditions, including continued high levels of unemployment and increased competitive pressures. In response to the business challenges in Australia and Spain, the Company has continued to sell additional products and services to mobile operators and develop strategies to increase the distribution of other prepaid products. However, in the fourth quarter of 2013, the Company concluded that while future cash flows from existing agreements with mobile operators and from the launch of new products would likely grow steadily over time, the growth would not add the level of cash flows previously forecasted. Based upon these revised future cash flow forecasts, the Company concluded that the resulting valuations were not sufficient to support the goodwill carrying values of epay Australia and epay Spain. Therefore, the impairment charges were recorded in the period. There are no remaining goodwill or acquired intangible assets in the epay Australia and Spain reporting units as of December 31, 2013.

2012 Impairment Charges

In the fourth quarter of 2012, epay Brazil recorded a goodwill impairment charge of $23.5 million and an additional $5.2 million impairment charge of other acquired intangibles assets, specifically customer relationships. The impairment charges were the cumulative result of a culmination of several factors in Brazil including, but not necessarily limited to, changes in mobile operator distribution strategies, delays in non-mobile product distribution and operating costs.

The initial factor contributing to the impairment charges was changes in certain mobile operators' distribution strategies throughout 2012. These changes limited our ability to distribute certain mobile operators' products in certain markets and had a negative impact on epay Brazil's 2012 results. While the changes affected the 2012 results, we continued to negotiate alternative arrangements with the mobile operators in order to regain profitability in Brazil. In the fourth quarter of 2012, we determined that these negotiations were not likely to result in arrangements that would restore our profitability from those products in the future.

While these distribution changes were occurring, the Company was also establishing plans to introduce other electronic payment products in the Brazilian market which was expected to increase profitability. As the plans became more concrete in the fourth quarter of 2012, the Company's assessment was that the added profitability from these new products would likely grow steadily over time, but would not add significant earnings as quickly as originally projected.

Simultaneously with the changes in the mobile operators' distribution strategies, epay Brazil undertook efforts to align costs with revenues. While significant progress was made in reducing costs during 2012, the extent of that progress was constrained by the investments needed to launch the new electronic payment products. In the fourth quarter of 2012, the revised cost structure, which aligns costs with the decreased mobile revenues and supports the new products, was solidified and resulted in cost savings which were less than initially expected.

Further, the changes in the mobile operators' distribution strategies accelerated efforts to pursue other distribution channels. In the fourth quarter of 2012, epay Brazil acquired new partners in these other channels which provided insight to the profit potential of these channels. The Company's assessment of the opportunity in these channels was that while these channels are expected to be profitable, they are not likely to have profit margins as great as the ones lost with the changes in mobile operators' distribution strategies previously discussed.

As described above, the Company had several initiatives to improve profitability which were evolving during the year. The collective impact of those initiatives was the key consideration to determining if the epay Brazil business could return to or exceed its previous profitability. While each initiative had the potential to significantly contribute to that goal, during the fourth quarter of 2012, the Company determined that each initiative was likely to contribute less than what was previously expected. The culmination of these various factors in the fourth quarter of 2012 led the Company to conclude that the resulting valuation was not sufficient to support the recorded value of its investment in epay Brazil and, therefore, it recorded the goodwill and other acquired intangible assets impairment charges in the period.