NetSpend 2015 Annual Report Download - page 88

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Under the terms of the Merger Agreement, the Company replaced unvested share-based awards for certain
current employees of NetSpend. The following table provides a list of all replacement awards and the estimated
fair value of those awards issued in conjunction with the acquisition of NetSpend:
Number of Shares
and Options Issued Fair Value
(in millions)
Time-based restricted stock ........................................... 870,361 $21.5
Non-qualified stock options ........................................... 530,696 8.4
Incentive stock options ............................................... 529,452 5.3
Performance-based restricted stock ..................................... 87,356 2.2
Total ............................................................ 2,017,865 $37.4
The portion of the fair value of the replacement awards related to services provided prior to the business
combination was included in the total purchase price. The portion of the fair value associated with future service
is recognized as expense over the future service period, which varies by award. The Company determined that
$15.6 million ($11.1 million net of tax) of the replacement awards was related to services rendered prior to the
business combination.
The goodwill amount of $1.0 billion arising from the acquisition consists largely of expansion of customer base,
differentiation in market opportunity and economies of scale expected from combining the operations of TSYS
and NetSpend. All of the goodwill was assigned to TSYS’ new NetSpend segment. The goodwill recognized is
not expected to be deductible for income tax purposes.
The following table summarizes the consideration paid for NetSpend and the initially recognized amounts of the
identifiable assets acquired and liabilities assumed on July 1, 2013 (the acquisition date).
(in thousands)
Consideration
Cash ................................................................................ $1,355,270
Equity instruments .................................................................... 15,557
Dissenting shareholder liability* ......................................................... 25,723
Fair value of total consideration transferred ................................................ $1,396,550
Recognized amounts of identifiable assets acquired and liabilities assumed:
Cash ................................................................................ $ 40,610
Accounts receivable ................................................................... 11,335
Property equipment and software ........................................................ 11,657
Identifiable intangible assets ............................................................ 480,086
Deferred tax asset ..................................................................... 10,165
Other assets ......................................................................... 36,660
Deferred tax liability ................................................................... (155,945)
Financial liabilities ..................................................................... (62,452)
Total identifiable net assets ............................................................. 372,116
Goodwill ............................................................................ 1,024,434
$1,396,550
* Represents 1.6 million NetSpend shares held by dissenting shareholders
In 2015, the Company adjusted goodwill for NetSpend to include an additional $627,000 for a change in a sales
and use tax reserve associated with the acquisition. As of December 31, 2014, goodwill related to NetSpend
increased $8.5 million due to changes during the measurement period. For more information, refer to Note 7.
Identifiable intangible assets acquired in the NetSpend acquisition include channel relationships, current
technology, a prospect database, the NetSpend trade name and non-compete agreements.
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