2. Acquisitions

Fiscal 2013 Acquisitions

Online Resources Corporation

On March 11, 2013, the Company completed the exchange offer for Online Resources Corporation (“ORCC”) and all its subsidiaries. The Company paid cash of $3.85 per share of common stock for approximately $134.3 million and $127.2 million for the Series A-1 Convertible Preferred Stock for a total purchase price of $261.5 million (the “Merger”). The Company has included the financial results of ORCC in our condensed consolidated financial statements from the date of acquisition. As a leading provider of online banking and full service bill pay solutions, the acquisition of ORCC adds Electronic Bill Presentment and Payment (“EBPP”) solutions as a strategic part of ACI’s Universal Payments portfolio. It also strengthens the Company’s online banking capabilities with complementary technology, and expands the Company’s leadership in serving community banking and credit union customers.

Each outstanding option to acquire ORCC common stock was canceled and terminated at the effective time of the Merger and converted into the right to receive an equivalent number of options to purchase ACI common stock. Each ORCC restricted stock unit was vested immediately prior to the effective time of the Merger and received $3.85 per share.

The Company used funds from the $300.0 million of senior bank financing arranged through Wells Fargo Securities, LLC to fund the acquisition. See Note 3, Debt, for terms of the financing arrangement.

The Company incurred approximately $5.4 million in transaction related expenses during the six months ended June 30, 2013, including fees to the investment bank, legal and other professional fees, which are included in general and administrative expenses in the accompanying condensed consolidated statement of operations.

ORCC contributed approximately $38.4 million in revenue and $1.6 million in operating income for the three months ended June 30, 2013, which includes severance expense related to the integration activities. ORCC contributed approximately $47.2 million in revenue and $0.5 million in operating income for the six months ended June 30, 2013, which includes severance expense related to the integration activities.

The consideration paid by the Company to complete the Merger has been allocated preliminarily to the assets acquired and liabilities assumed based upon their estimated fair values as of the date of the acquisition. The allocation of purchase price is based upon certain external valuations and other analyses that have not been completed as of the date of this filing, including, but not limited to, certain tax matters, property and equipment, intangible assets, and deferred revenue. Accordingly, the purchase price allocations are preliminary and are subject to future adjustments during the maximum one-year allocation period.

In connection with the acquisition, the Company recorded the following amounts based upon its preliminary purchase price allocation during the six months ended June 30, 2013, which are subject to completion of the valuation and other analyses (in thousands, except weighted-average useful lives):


	Amount		Weighted-Average Useful Lives
Current assets:
Cash and cash equivalents	$	9,930
Billed and accrued receivables, net		19,394
Deferred income taxes, net		18,224
Other current assets		11,592

Total current assets acquired		59,140

Noncurrent assets:
Property and equipment		8,175
Goodwill		124,104
Software		62,774	10 years
Customer relationships		68,750	15 years
Trademarks		3,050	5 years
Other noncurrent assets		626

Total assets acquired		326,619

Current liabilities:
Accounts payable		15,216
Accrued employee compensation		10,549
Note payable		7,500
Other current liabilities		4,232

Total current liabilities acquired		37,497

Noncurrent liabilities:
Deferred income taxes, net		24,125
Other noncurrent liabilities acquired		3,508

Total liabilities acquired		65,130

Net assets acquired	$	261,489

During the three months ended June 30, 2013, the Company made adjustments to the preliminary purchase price allocation as additional information became available to deferred income taxes, other current assets, property and equipment, software, customer relationships, other noncurrent assets, accounts payable, accrued employee compensation, other current and noncurrent liabilities. These adjustments and any resulting adjustments to the statements of operations were not material to the Company’s previously reported operating results or financial position.

Factors contributing to the purchase price that resulted in the goodwill (which is not tax deductible) include the acquisition of management, sales, and technology personnel with the skills to market new and existing products of the Company, enhanced product capabilities, complementary products and customers.

Profesionales en Transacciones Electronicas S.A.

During the first quarter of 2013, the Company acquired 100% of Profesionales en Transacciones Electronicas S.A. – Venezuela (“PTESA-V”), 100% of Profesionales en Transacciones Electronicas S.A. – Ecuador (“PTESA-E”), and the ACI related assets of Profesionales en Transacciones Electronicas S.A. – Colombia (“PTESA-C”), collectively “PTESA”. The common stock of PTESA-E and PTESA-V were acquired for $2.8 million and the assets of PTESA-C were acquired for $11.4 million, for a total aggregate purchase price of $14.2 million. The Company has included the financial results of PTESA in our condensed consolidated financial statements from the date of acquisition. PTESA has been a long-term partner of the Company, serving customers in South America in sales, service and support functions. The addition of the PTESA team to the Company reinforces its commitment to serve the Latin American market.

The aggregate purchase price of PTESA of $14.2 million was paid in cash. The consideration paid by the Company to complete the acquisition has been preliminarily allocated to the assets acquired and liabilities assumed based upon their estimated fair values as of the date of the acquisition, including $7.2 million of goodwill and $7.7 million of customer relationships with a weighted-average useful life of 14 years. The allocation of purchase price is based upon certain external valuations and other analyses that have not been completed as of the date of this filing, including, but not limited to, certain tax matters, property and equipment, and intangible assets. Accordingly, the purchase price allocations are preliminary and are subject to future adjustments during the maximum one-year allocation period.

During the three months ended June 30, 2013, the Company made adjustments to the preliminary purchase price allocation as additional information became available to intangible assets and goodwill. These adjustments and any resulting adjustments to the statements of operations were not material to the Company’s previously reported operating results or financial position.

Factors contributing to the purchase price that resulted in the goodwill (approximately $1.5 million of which is not tax deductible) include the acquisition of management, sales, and services personnel with the skills to market and support products of the Company in the Latin America region. Pro forma results are not presented because they are not material.

Fiscal 2012 Acquisitions

Distra Pty Ltd

On September 18, 2012, the Company closed the acquisition of 100% of Distra Pty Ltd (“Distra”). The Company has included the financial results of Distra in our condensed consolidated financial statements from the date of acquisition. The Distra Universal Payments Platform delivers a fault-tolerant, Service-Oriented Architecture (SOA)-based payments platform that helps to significantly reduce the risk and cost of payments transformation without compromising security, performance, scalability and reliability. The integration of the Company’s and Distra’s technologies will enable financial institutions, processors and retailers to enhance the flexibility and performance of their existing payments infrastructure to address market needs, such as mobile, social channels and payment service hubs. In addition, this acquisition will enable the Company’s payment products to integrate more tightly with customers’ enterprise architectures, reducing their total cost of ownership.

The aggregate purchase price of Distra was $49.8 million and was paid with existing cash balances. The consideration paid by the Company to complete the acquisition has been allocated preliminarily to the assets acquired and liabilities assumed based upon their estimated fair values as of the date of the acquisition. The allocation of purchase price is based upon certain external valuations and other analyses that have not been completed as of the date of this filing primarily related to certain tax matters. Accordingly, the purchase price allocations are preliminary and are subject to future adjustments during the maximum one-year allocation period.

In connection with the acquisition, the Company recorded the following amounts based upon its preliminary purchase price allocation as of the date of the acquisition, which are subject to completion of the valuation and other analyses (in thousands, except weighted-average useful lives):


	Amount		Weighted-Average Useful Lives
Total current assets acquired	$	1,857
Noncurrent assets:
Goodwill		22,139
Software		18,802	7 years
Customer relationships		6,200	10 years
Deferred income taxes		4,075
Other noncurrent assets		96

Total assets acquired		53,169

Current liabilities acquired		3,419

Net assets acquired	$	49,750

Factors contributing to the purchase price that resulted in the goodwill (which is not tax deductible) include the acquisition of management, technical, and services personnel with the skills to support products of the Company in addition to the enhanced focus on product innovation and enabling cross-selling opportunities when coupled with the Company’s suite of payments products. Pro forma results are not presented because they are not material.

North Data Uruguay S.A.

On May 24, 2012, the Company closed the acquisition of North Data Uruguay S.A (“North Data”). The Company has included the financial results of North Data in our condensed consolidated financial statements from the date of acquisition. North Data had been a long-term partner of the Company, serving customers in South America in sales, service and support functions. The addition of the North Data team to the Company reinforces its commitment to serve the Latin American market.

The aggregate purchase price of North Data was $4.6 million, which included cash acquired of $0.1 million. The consideration paid by the Company to complete the acquisition has been allocated to the assets acquired and liabilities assumed based upon their estimated fair values as of the date of the acquisition, including $3.5 million of goodwill and $2.2 million of customer relationships with a weighted-average useful life of 12.6 years.

Factors contributing to the purchase price that resulted in the goodwill (which is not tax deductible) include the acquisition of management, sales, and services personnel with the skills to market and support products of the Company in the Latin America region. Pro forma results are not presented because they are not material.

S1 Corporation

On February 10, 2012, the Company completed the exchange offer for S1 Corporation and all its subsidiaries (“S1”). The acquisition was effectively closed on February 13, 2012 for approximately $368.7 million in cash and 5.9 million shares of the Company’s stock, including 95,500 shares reissued from Treasury stock, resulting in a total purchase price of $587.3 million (the “Merger”). The Company has included the financial results of S1 in our condensed consolidated financial statements from the date of acquisition. The combination of the Company and S1 has created a leader in the global enterprise payments industry. The combined company has enhanced scale, breadth, and additional capabilities, as well as a complementary suite of products that will better serve the entire spectrum of financial institutions, processors and retailers.

The Company used $73.7 million of its cash balance for the acquisition in addition to $295.0 million of senior bank financing arranged through Wells Fargo Securities, LLC. See Note 3, Debt, for terms of the financing arrangement.

The consideration paid by the Company to complete the acquisition has been allocated to the assets acquired and liabilities assumed based upon their estimated fair values as of the date of the acquisition.

In connection with the acquisition, the Company recorded the following amounts based upon its purchase price allocation during the year ended December 31, 2012 (in thousands, except weighted-average useful lives):


	Amount		Weighted-Average Useful Lives
Current assets:
Cash and cash equivalents	$	97,748
Billed and accrued receivables, net		65,329
Other current assets		16,791

Total current assets acquired		179,868

Noncurrent assets:
Property and equipment		18,440
Goodwill		256,244
Software		87,517	5 - 10 years
Customer relationships		108,690	10 - 20 years
Trademarks		4,500	3 years
Covenant not to compete		360	3 years
Deferred income tax		40,634
Other noncurrent assets		11,004

Total assets acquired		707,257

Current liabilities:
Deferred revenue		34,671
Accrued employee compensation		34,689
Other current liabilities		28,387

Total current liabilities acquired		97,747

Noncurrent liabilities:
Deferred income tax		15,795
Other noncurrent liabilities acquired		6,431

Total liabilities acquired		119,973

Net assets acquired	$	587,284

Factors contributing to the purchase price that resulted in the goodwill (which is not tax deductible) include the acquisition of management, sales, and technology personnel with the skills to market new and existing products of the Company, enhanced global product capabilities, and complementary products and customers.

Unaudited Pro Forma Financial Information

The pro forma financial information in the table below presents the combined results of operations for ACI and ORCC as if the acquisition had occurred January 1, 2012 and S1 as if the acquisition had occurred on January 1, 2011 (in thousands, except per share data). The pro forma information is shown for illustrative purposes only and is not necessarily indicative of future results of operations of the Company or results of operations of the Company that would have actually occurred had the transactions been in effect for the periods presented. This pro forma information is not intended to represent or be indicative of actual results had the acquisition occurred as of the beginning of each period, nor is it necessarily indicative of future results and does not reflect potential synergies, integration costs, or other such costs or savings. Certain pro forma adjustments have been made to net income for the three and six months ended June 30, 2013 and 2012 to give effect to estimated adjustments to expenses to remove the amortization on eliminated ORCC and S1 historical identifiable intangible assets and added amortization expense for the value of identified intangibles acquired in the acquisitions (primarily acquired software, customer relationships, trade names, and covenants not to compete), adjustments to interest expense to reflect the elimination of preexisting ORCC and S1 debt and added estimated interest expense on the Company’s additional Term Credit Facility and Revolving Credit Facility borrowings and to eliminate share-based compensation expense for eliminated positions. Additionally, certain transaction expenses that are a direct result of the acquisitions have been excluded from the three and six months ended June 30, 2013 and 2012.


	Pro Forma Results of Operations for the Three Months Ended June 30,				Pro Forma Results of Operations for the Six Months Ended June 30,
	2013		2012		2013		2012
Total Revenues	$	205,830	$	199,864	$	401,276	$	411,546
Net income		4,430		6,009		2,648		6,010
Income per share
Basic	$	0.11	$	0.15	$	0.07	$	0.15
Diluted	$	0.11	$	0.15	$	0.07	$	0.15