Business Combinations | 9 Months Ended |
Mar. 31, 2015 |
Business Combination, Contingent Consideration Arrangements [Abstract] | |
Business Combinations | | | | | | | | | | | | | | | | |
3 | Business Combinations | | | | | | | | | | | | | | |
|
Acquisition of CAP |
|
On November 20, 2014, we acquired 100% of the equity interests of CAP, for approximately £284.8 million ($449.7 million) in cash paid at closing. CAP is a leading provider of real-time, high-accuracy valuations and specifications for new and used vehicles in the United Kingdom. CAP's solutions provide pricing transparency for vehicle transactions and enable buyers and sellers of vehicles to make accurate pricing decisions. The acquisition of CAP creates the only United Kingdom-based enterprise with decision support data and software solutions spanning vehicle valuation, validation, collision and mechanical repair and total cost of ownership. We financed the acquisition of CAP through the issuance of additional senior unsecured notes (Note 9) as well as cash on hand. CAP has been assigned to our EMEA segment. We have included the results of operations of CAP in our consolidated statements of income from the acquisition date. Revenues and net income earned by CAP were $15.6 million and $1.7 million, respectively, for the period from the acquisition date through March 31, 2015. |
|
We have accounted for the acquisition of CAP under the acquisition method of accounting and, accordingly, the total purchase price has been allocated to the acquired tangible and identifiable intangible assets and assumed liabilities based on their estimated fair values on the acquisition date. The excess of the purchase price over the aggregate fair values was recorded as goodwill. Of the purchase price for CAP, we have preliminarily allocated £185.8 million ($293.3 million) to goodwill and £122.7 million ($193.6 million) to identifiable intangible assets. The goodwill recorded in the acquisition represents future enhancements to the software and database, future customer relationships and markets, and the workforce. The goodwill recorded in the CAP acquisition is not expected to be tax deductible for U.S. federal income tax purposes. |
|
The following table summarizes the preliminary purchase price allocation for the acquisition of CAP (in thousands): |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Goodwill | $ | 293,303 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Intangible assets | 193,640 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Cash | 4,606 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Accounts receivable | 9,352 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Other assets acquired | 2,876 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Accounts payable and other current liabilities assumed | (4,720 | ) | | | | | | | | | | | | |
Deferred revenue | (16,925 | ) | | | | | | | | | | | | |
Deferred tax liabilities | $ | (32,476 | ) | | | | | | | | | | | | |
Total | $ | 449,656 | | | | | | | | | | | | | |
| | | | | | | | | | | |
|
|
Identifiable intangible assets acquired from CAP were as follows: |
| | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Value (in thousands) | | Weighted Average Amortizable Life (in years) | | | | | | | | | | |
Customer relationships | $ | 78,365 | | | 19.8 | | | | | | | | | | |
| | | | | | | | | |
Technology | 58,900 | | | 10 | | | | | | | | | | |
| | | | | | | | | |
Trademarks | 56,375 | | | Indefinite | | | | | | | | | | |
| | | | | | | | | |
Total | $ | 193,640 | | | | | | | | | | | | | |
| | | | | | | | | |
|
|
|
We are amortizing the acquired identifiable intangible assets on an accelerated basis to reflect the pattern in which the economic benefits of the intangible assets are consumed. |
|
We valued the purchased trademark and technology assets under the income approach using the relief from royalty method, which assumes value to the extent that the acquired company is relieved of the obligation to pay royalties for the benefits received from them. We valued the purchased customer relationships asset under the income approach using the excess earnings methodology based upon estimated future discounted cash flows attributable to revenues projected to be generated from those customers. |
|
In connection with the acquisition of CAP, we incurred direct and incremental costs of $4.5 million, consisting of legal and professional fees, which are included in acquisition and related costs in our consolidated statements of income. |
|
The following table presents the unaudited pro forma combined results of Solera and CAP as though the acquisition of CAP occurred at the beginning of fiscal year 2014. The unaudited pro forma financial information is presented for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisition had occurred at the beginning of fiscal year 2014. The unaudited pro forma financial information reflects all material, recurring adjustments directly attributable to the acquisition of CAP, including amortization of acquired intangible assets, interest expense associated with the senior unsecured notes issued in November 2014 to finance our acquisition of CAP and any related tax effects. Amounts are in thousands, except per share data. |
|
|
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2015 | | Three Months Ended March 31, 2014 | | Nine Months Ended March 31, 2015 | | Nine Months Ended March 31, 2014 |
| (unaudited) | | (unaudited) |
Revenues | $ | 280,994 | | | $ | 272,118 | | | $ | 861,393 | | | $ | 746,955 | |
|
Net income (loss) attributable to Solera Holdings, Inc. | 29,146 | | | 15,088 | | | 40,945 | | | (30,754 | ) |
|
Net income (loss) attributable to Solera Holdings, Inc. per common share—basic | 0.43 | | | 0.22 | | | 0.59 | | | (0.45 | ) |
|
Net income (loss) attributable to Solera Holdings, Inc. per common share—diluted | 0.43 | | | 0.22 | | | 0.59 | | | (0.45 | ) |
|
|
|
|
Acquisition of I&S |
|
On July 29, 2014, we acquired 100% of the operating entities and other assets comprising I&S, for approximately $279.4 million in cash paid at closing. Operating under the brand names of LYNX Services, GTS Services, and GLAXIS, I&S is a leading provider of software and business management tools, third-party claims administration, first notice of loss and network management services to the U.S. auto and property repair industries, specializing in glass claims. The acquisition of I&S allows us to expand our relationship with insurance companies in the U.S. and abroad with workflow tools and third-party management services for glass, property, and collision claims as well as providing business management solutions to a broad network of auto repair and flat glass retailers. I&S has been included in our Americas segment. We have included the results of operations of I&S in our consolidated statements of income from the acquisition date. Revenues earned and net loss incurred by I&S were $40.2 million and $(2.2) million, respectively, for the period from the acquisition date through March 31, 2015. |
|
We have accounted for the acquisition of I&S under the acquisition method of accounting and, accordingly, the total purchase price has been allocated to the acquired tangible and identifiable intangible assets and assumed liabilities based on their estimated fair values on the acquisition date. The excess of the purchase price over the aggregate fair values was recorded as goodwill. Of the purchase price for I&S, we have preliminarily allocated $153.5 million to goodwill and $129.6 million to identifiable intangible assets. The goodwill recorded in the acquisition represents future enhancements to the software and database, future customer relationships and markets, and the workforce. All of the goodwill recorded in the I&S acquisition is expected to be tax deductible. |
|
|
The following table summarizes the preliminary purchase price allocation for the acquisition of I&S (in thousands): |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Goodwill | $ | 153,451 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Intangible assets | 129,560 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Accounts receivable | 2,836 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Other assets acquired | 2,648 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Accounts payable | (6,839 | ) | | | | | | | | | | | | |
Accrued expenses and other current liabilities assumed | (2,240 | ) | | | | | | | | | | | | |
Total | $ | 279,416 | | | | | | | | | | | | | |
| | | | | | | | | | | |
|
Identifiable intangible assets acquired from I&S were as follows: |
| | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Value (in thousands) | | Weighted Average Amortizable Life (in years) | | | | | | | | | | |
Customer relationships | $ | 76,240 | | | 19.2 | | | | | | | | | | |
| | | | | | | | | |
Technology | 31,670 | | | 15 | | | | | | | | | | |
| | | | | | | | | |
Trademarks | 21,650 | | | Indefinite | | | | | | | | | | |
| | | | | | | | | |
Total | $ | 129,560 | | | | | | | | | | | | | |
| | | | | | | | | |
|
We are amortizing the acquired identifiable intangible assets on an accelerated basis to reflect the pattern in which the economic benefits of the intangible assets are consumed. |
|
We valued the purchased trademark and technology assets under the income approach using the relief from royalty method, which assumes value to the extent that the acquired company is relieved of the obligation to pay royalties for the benefits received from them. We valued the purchased customer relationships asset under the income approach using the excess earnings methodology based upon estimated future discounted cash flows attributable to revenues projected to be generated from those customers. |
|
In connection with the acquisition of I&S, we incurred direct and incremental costs of $2.0 million, consisting of legal and professional fees, which are included in acquisition and related costs in our consolidated statements of income. |
|
The following table presents the unaudited pro forma combined results of Solera and I&S as though the acquisition of I&S occurred at the beginning of fiscal year 2014. The unaudited pro forma financial information is presented for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisition had occurred at the beginning of fiscal year 2014. The unaudited pro forma financial information reflects all material, recurring adjustments directly attributable to the acquisition of I&S, including amortization of acquired intangible assets and any related tax effects. Amounts are in thousands, except per share data. |
|
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2015 | | Three Months Ended March 31, 2014 | | Nine Months Ended March 31, 2015 | | Nine Months Ended March 31, 2014 |
| (unaudited) | | (unaudited) |
Revenues | $ | 280,994 | | | $ | 277,063 | | | $ | 848,687 | | | $ | 761,895 | |
|
Net income (loss) attributable to Solera Holdings, Inc. | 29,146 | | | 20,680 | | | 48,176 | | | (15,396 | ) |
|
Net income (loss) attributable to Solera Holdings, Inc. per common share—basic | 0.43 | | | 0.3 | | | 0.7 | | | (0.23 | ) |
|
Net income (loss) attributable to Solera Holdings, Inc. per common share—diluted | 0.43 | | | 0.3 | | | 0.7 | | | (0.23 | ) |
|
|
Other Acquisitions |
|
In addition to CAP and I&S, we acquired three businesses during the nine months ended March 31, 2015 for approximately $32.9 million in cash paid at closing and additional future cash payments of up to $19.8 million contingent upon the achievement of certain financial performance, product-related, integration and other objectives. These acquisitions are immaterial, both individually and in the aggregate. The purchase price allocation for these acquisitions reflected in the accompanying consolidated balance sheet as of March 31, 2015 are preliminary. |
|
During the nine months ended March 31, 2014, we acquired four businesses for approximately $50.2 million in cash paid at closing and additional future cash payments of up to $30.5 million contingent upon the achievement of certain financial performance, product-related, integration and other objectives. The acquisitions completed during the nine months ended March 31, 2014 were immaterial both individually and in the aggregate. |
|
Contingent Purchase Consideration |
|
At March 31, 2015, the maximum aggregate amount of remaining contingent cash payments associated with our business combinations is $108.3 million which is payable through fiscal year 2018. |