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Table of Contents
NetSpend Holdings, Inc.
Notes to Consolidated Financial Statements (Continued)
December 31, 2008, 2009 and 2010
NOTE 5: GOODWILL
In 2004, the Company recorded its initial $52.1 million goodwill balance through a recapitalization transaction pursuant to which
NetSpend Holdings, as a newly formed holding company incorporated in Delaware, acquired all of the capital stock of NetSpend Corporation.
In 2008, the Company recorded additional goodwill of $99.5 million as a result of acquisitions of Skylight Financial, Inc. ("Skylight"), a
company in the prepaid card industry that is focused on the market for direct deposit payroll accounts, and Procesa International, LLC
("Procesa"), a service provider for direct, cross-border, and cell phone top-up payment services for Latin America.
Goodwill is tested for impairment annually or if an event occurs or conditions change that would more likely than not reduce the fair value
of the reporting unit below its carrying value. The determination of fair value used in the impairment evaluation is based on a combination of
comparative market multiples and discounted cash flow analyses.
In 2008, the Company determined that the carrying value of the Paycard reporting unit exceeded its fair value based on a combination of
comparative market multiples and discounted cash flow analyses, indicating that goodwill was potentially impaired. As a result, the Company
initiated the second step of the goodwill impairment test, which involved calculating the implied fair value of goodwill by allocating the fair
value of the reporting unit to all assets and liabilities of the reporting unit other than goodwill, and comparing it to the carrying amount of
goodwill. The Company determined that the implied fair value of goodwill related to the Paycard reporting unit was less than its carrying value
by approximately $23.0 million, which was recorded as a goodwill impairment charge in 2008. The impairment was caused by declining
market conditions and the adverse business environment in which the Paycard reporting unit was operating.
In 2009 and 2010, the Company performed its goodwill impairment evaluations and determined that the fair value of its goodwill
exceeded the carrying value. No impairment charges were recorded in the years ended December 31, 2009 or 2010.
NOTE 6: INTANGIBLE ASSETS
Intangible assets consisted of the following at December 31, 2009:
79
December 31, 2009
Gross
Carrying
Amount Accumulated
Amortization
Net
Carrying
Amount
(in thousands of dollars)
Distributor and partner
relationships
$
26,426
$
(9,551
)
$
16,875
Developed technology
7,261
(5,916
)
1,345
Other
168
(22
)
146
Amortized intangible
assets
$
33,855
$
(15,489
)
$
18,366
Unamortized intangible
assets:
Tradenames
10,615
—
10,615
Total intangible assets
$
44,470
$
(15,489
)
$
28,981