Acquisitions, Divestiture, Intangible Assets and Goodwill

12 Months Ended

Dec. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Acquisitions, Divestiture, Intangible Assets and Goodwill

Acquisitions

In October 2017, we acquired Newgistics for $471 million, net of cash acquired. Newgistics provides parcel delivery, returns, fulfillment and digital commerce solutions for retailers and ecommerce brands. Newgistics is reported within our Global Ecommerce segment.

The allocation of the purchase price to the fair values of assets acquired and liabilities assumed was as follows:



Accounts receivable	$	36,195
Other current assets	16,051
Fixed assets	26,933
Goodwill	330,272
Intangible assets	135,640
Accounts payable and other current liabilities	(21,500		)
Deferred taxes, net	(52,363		)
Other assets and liabilities, net	(688		)
	$	470,540

Goodwill represents the excess of the purchase price over the fair values of assets acquired and liabilities assumed. Goodwill is primarily attributable to expected growth opportunities, synergies and other benefits that we believe will result from combining the operations of Newgistics with our operations. Goodwill from the Newgistics acquisition is not deductible for tax purposes.

Intangible assets acquired consisted of the following:



	Value			Amortization period
Customer relationships	$	111,600	—	10 years
Developed technology	19,000		—	5 years
Tradenames	4,300		—	3 years
Other	740			1-3 years
Total intangible assets, net	$	135,640

The operating results of Newgistics are included in our consolidated results from the date of acquisition. Consolidated revenue for the year ended December 31, 2017 includes $140 million from Newgistics. Earnings from Newgistics included in our consolidated earnings were not significant. On a pro forma basis, had we acquired Newgistics on January 1, 2016, revenue would have been $341 million and $481 million higher for the years ended December 31, 2017 and 2016, respectively. The impact on 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, 2017 and 2016 consisted of the following:



	December 31, 2017							December 31, 2016
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Customer relationships	$	526,149	$	(292,500	)	$	233,649	$	445,039	$	(300,906	)	$	144,133
Software & technology	173,141		(144,742		)	28,399		150,037		(136,508		)	13,529
Trademarks & other	42,505		(32,367		)	10,138		36,212		(28,702		)	7,510
Total intangible assets, net	$	741,795	$	(469,609	)	$	272,186	$	631,288	$	(466,116	)	$	165,172

Amortization expense for intangible assets was $34 million, $38 million and $37 million for the years ended December 31, 2017, 2016 and 2015, respectively. The future amortization expense for intangible assets at December 31, 2017 is as follows:



Year ended December 31,
2018	$	42,564
2019	38,838
2020	34,251
2021	30,631
2022	29,223
Thereafter	96,679
Total	$	272,186

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

The changes in the carrying amount of goodwill, by reporting segment, for the years ended December 31, 2017 and 2016 are shown in the tables below.



	Gross value before accumulated impairment		Accumulated impairment			December 31, 2016		Acquisition		Impairment		Other ⁽¹⁾		December 31, 2017
North America Mailing	$	354,000	$	—		$	354,000	$	—	$	—	$	14,905	$	368,905
International Mailing	145,566		—			145,566		—		—		12,637		158,203
Small & Medium Business Solutions	499,566		—			499,566		—		—		27,542		527,108
Production Mail	101,099		—			101,099		—		—		6,390		107,489
Presort Services	196,890		—			196,890		7,891		—		—		204,781
Enterprise Business Solutions	297,989		—			297,989		7,891		—		6,390		312,270
Software Solutions	672,683		(171,092		)	501,591		—		—		9,014		510,605
Global Ecommerce	272,189		—			272,189		330,272		—		—		602,461
Digital Commerce Solutions	944,872		(171,092		)	773,780		330,272		—		9,014		1,113,066
Total goodwill	$	1,742,427	$	(171,092	)	$	1,571,335	$	338,163	$	—	$	42,946	$	1,952,444



	Gross value before accumulated impairment		Accumulated impairment		December 31, 2015		Acquisition		Impairment			Other ⁽¹⁾			December 31, 2016
North America Mailing	$	357,215	$	—	$	357,215	$	—	$	—		$	(3,215	)	$	354,000
International Mailing	148,351		—		148,351		—		—			(2,785		)	145,566
Small & Medium Business Solutions	505,566		—		505,566		—		—			(6,000		)	499,566
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	262,768		—		262,768		9,421		—			—			272,189
Digital Commerce Solutions	937,744		—		937,744		21,329		(171,092		)	(14,201		)	773,780
Total goodwill	$	1,745,957	$	—	$	1,745,957	$	21,329	$	(171,092	)	$	(24,859	)	$	1,571,335


(1)	Primarily represents foreign currency translation adjustments.

During the fourth quarter of 2016, 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.

- 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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