Business Combinations And Divestitures

12 Months Ended

Dec. 31, 2013

Business Combinations And Divestitures [Abstract]

Business Combinations

4.           BUSINESS COMBINATIONS AND DIVESTITURES

2013

On September 16, 2013 the Company acquired Saperion AG (“Saperion”). Saperion is a European-based leader in ECM solutions, focused on providing document archive and workflow solutions. The acquisition expands Perceptive Software's European-based footprint in the ECM market, and will further strengthen the Company's strategy of providing the platform, products and solutions that help companies manage their unstructured information challenges. The purchase accounting for the acquisition of Saperion has not been finalized as certain income tax matters are still being evaluated.

Of the total cash payment of $72.3 million to acquire Saperion, $72.2 million was paid to acquire all of the issued and outstanding shares of Saperion, while $0.1 million relates to assets acquired by the Company that were recognized separately from the acquisition.

On October 3, 2013 the Company acquired PACSGEAR, Inc. (“PACSGEAR”). PACSGEAR is a leading provider of connectivity solutions for healthcare providers to capture, manage and share medical images and related documents and integrate them with existing picture archiving and communication systems and electronic medical records (“EMR”) systems. With this acquisition, Perceptive Software will be uniquely positioned to offer a vendor-neutral, standards-based clinical content platform for capturing, managing, accessing and sharing patient imaging information and related documents within healthcare facilities through an EMR and between facilities via PACSGEAR technology.

Of the total cash payment of $54.1 million, $53.9 million was paid to acquire all of the issued and outstanding shares of PACSGEAR. Additionally, $0.2 million of the total cash payment was used to pay certain transaction costs and other obligations of the sellers.

On March 1, 2013 the Company acquired AccessVia, Inc. (“AccessVia”) and Twistage, Inc. (“Twistage”). AccessVia provides industry-leading signage solutions to create and produce retail shelf-edge materials, all from a single platform, which can be directed to a variety of output devices and published to digital signs or electronic shelf tags. AccessVia, when combined with Lexmark's MPS and expertise in delivering print and document process solutions to the retail market, will enable customers to quickly design and produce in-store signage for better and more timely merchandising in a highly distributed store environment. Twistage offers an industry-leading, pure cloud software platform for managing video, audio and image content. When combined with Lexmark, Twistage will enable customers to capture, manage and access all of their content, including rich media content assets, within the context of their business processes and enterprise applications.

Of the total cash payment of $31.5 million, $29.0 million was paid to acquire all of the issued and outstanding shares of AccessVia and Twistage. Additionally, $2.3 million of the total cash payment was used to pay certain transaction costs and other obligations of the sellers and $0.2 million relates to assets acquired by the Company that were recognized separately from the acquisitions.

The following table summarizes the assets acquired and liabilities assumed as of the acquisition date for Saperion, PACSGEAR, AccessVia and Twistage. The intangible assets subject to amortization are being amortized on a straight-line basis over their estimated useful lives as of the acquisition date:

	Estimated Fair Value						Weighted-Average Useful Life (years)
	Saperion		PACSGEAR		AccessVia and Twistage
Cash	$	6.5	$	1.6	$	0.9
Trade receivables		3.0		2.7		1.3
Inventory		0.2		1.0		-
Other current assets		1.3		1.5		0.3
Property, plant and equipment		0.4		0.2		1.0
Identifiable intangible assets:
Developed technology		15.8		25.8		7.7	7.1
Customer relationships		19.4		2.9		11.1	6.7
Trade names		2.1		0.3		0.1	2.8
In-process technology (1)		0.5		-		-
Other long-term assets		0.3		-		0.1
Accounts payable		(0.5	)	-		(1.5	)
Deferred revenue		(3.0	)	(1.7	)	(2.6	)
Other current liabilities		(4.1	)	(2.4	)	(2.0	)
Deferred tax liability, net (2)		(10.2	)	-		(4.2	)
Total identifiable net assets		31.7		31.9		12.2
Goodwill		40.5		22.0		16.8
Total purchase price	$	72.2	$	53.9	$	29.0

(1) Amortization to begin upon completion of the project.

(2) Deferred tax liability, net primarily relates to purchased identifiable intangible assets and is shown net of deferred tax assets.

The fair value of trade receivables approximates its carrying value of $7.0 million. The gross amount due from customers is $8.7 million, of which $1.7 million was estimated to be uncollectible as of the date of acquisition.

Of the $79.3 million of goodwill resulting from the acquisitions, all of which was assigned to the Company's Perceptive Software segment, $22.0 million is expected to be deductible for income tax purposes. The goodwill recognized comprises the value of expected synergies arising from the acquisitions that are complementary to the Perceptive Software business. The total estimated fair value of intangible assets acquired was $85.7 million, with a weighted-average useful life of 6.8 years.

The purchase of Saperion is included in Purchase of businesses, net of cash acquired in the Consolidated Statements of Cash Flows for the year ended December 31, 2013 in the amount of $65.7 million. Total cash acquired in the acquisition of Saperion was $6.5 million. The Company also acquired intangible assets in the form of non-compete agreements from certain shareholders in the acquisition of Saperion. These agreements were valued at $0.1 million and were recognized separately from the acquisition.

The values in the table above include measurement period adjustments determined in 2013 related to the acquisition of Saperion affecting Deferred revenue $(0.1) million and Goodwill $0.1 million. The adjustments were based on facts and circumstances obtained subsequent to the acquisition that existed at the date of acquisition.

The purchase of PACSGEAR is included in Purchase of businesses, net of cash acquired in the Consolidated Statements of Cash Flows for the year ended December 31, 2013 in the amount of $52.3 million. Total cash acquired in the acquisition of PACSGEAR was $1.6 million.

The purchases of AccessVia and Twistage are included in Purchase of businesses, net of cash acquired in the Consolidated Statements of Cash Flows for the year ended December 31, 2013 in the amount of $28.1 million. Total cash acquired in the acquisitions of AccessVia and Twistage was $0.9 million. The Company also acquired intangible assets in the form of non-compete agreements from certain employees of AccessVia and Twistage. These agreements were valued at $0.2 million and were recognized separately from the acquisitions.

The values in the table above include measurement period adjustments determined in 2013 related to the acquisitions of AccessVia and Twistage affecting Other current assets $0.2 million, Other current liabilities $0.1 million, Deferred tax liability, net $(1.8) million and Goodwill $1.5 million. The measurement period adjustments were based on information obtained subsequent to the acquisition related to certain income tax matters contemplated by the Company at the acquisition date.

A change to the acquisition date value of the identifiable net assets during the measurement period (up to one year from the acquisition date) will affect the amount of the purchase price allocated to goodwill. Changes to the purchase price allocation are adjusted retrospectively to the acquisition date if material.

Acquisition-related costs of approximately $1.7 million were charged directly to operations and were included in Selling, general and administrative on the Consolidated Statements of Earnings for the year ended December 31, 2013. Acquisition-related costs include finder's fees, legal, advisory, valuation, accounting, and other fees incurred to effect the business combination. Acquisition-related costs above do not include travel and integration expenses.

Because the current levels of revenue and net earnings for AccessVia, Twistage, Saperion and PACSGEAR are not material, individually or in the aggregate, to the Company's Consolidated Statements of Earnings, supplemental pro forma and actual revenue and net earnings disclosures have been omitted.

2012

Acquisition of BDGB Enterprise Software (Lux) S.C.A.

On February 29, 2012, the Company acquired all of the issued and outstanding shares in BDGB Enterprise Software (Lux) S.C.A. (“Brainware”). Brainware is a leading provider of intelligent data capture software. The acquisition builds upon and strengthens the Company's end-to-end business process solutions and expands the reach of Perceptive Software's portfolio of leading content management and business process management (“BPM”) solutions.

Of the total cash payment of $148.2 million, $147.3 million was paid to acquire the outstanding shares of Brainware. Additionally, $0.8 million of the total cash payment was used to pay certain transaction costs of the seller and $0.1 million was accounted for as a post-combination expense in the Company's financial statements.

The following table summarizes the assets acquired and liabilities assumed as of the acquisition date:

	Estimated Fair Value		Weighted-Average Useful Life (years)
Cash	$	0.3
Trade receivables		4.4
Other current assets		1.0
Property, plant and equipment		0.2
Identifiable intangible assets:
Trade names		4.7	2.0
Customer relationships		16.6	7.0
Non-compete agreements		0.2	1.0
Purchased technology		40.5	5.0
Indemnification assset		2.5
Accounts payable		(2.6	)
Short-term borrowings		(4.0	)
Deferred revenue		(2.9	)
Other current liabilities		(4.2	)
Other long-term liabilities		(5.7	)
Deferred tax liability, net (1)		(7.8	)
Total identifiable net assets		43.2
Goodwill		104.1
Total purchase price	$	147.3

(1) Deferred tax liability, net primarily relates to purchased identifiable intangible assets and is shown net of deferred tax assets.

The values above include measurement period adjustments determined in 2012 affecting Trade receivables of $(2.2) million, Other current assets $0.8 million, Deferred tax liability, net $(0.1) million, Identifiable intangible assets $0.1 million and Goodwill $1.4 million. The measurement period adjustments were based primarily on information obtained subsequent to the acquisition related to certain trade receivables conditions that existed at the acquisition date as well as certain income tax matters contemplated by the Company at the acquisition date.

The fair value of trade receivables approximated the carrying value of $4.4 million. The gross amount due from customers is $10.0 million, of which $5.6 million was estimated to be uncollectible as of the date of acquisition.

The total estimated fair value of intangible assets acquired was $62.0 million, with a weighted-average useful life of 5.3 years.

The Company assumed $4.0 million of short term debt in the acquisition. The debt was repaid in the first quarter of 2012 after the acquisition date and is included in Repayment of assumed debt in the financing section of the Company's Consolidated Statements of Cash Flows for the year ended December 31, 2012. There was no gain or loss recognized on the extinguishment of the debt.

Goodwill of $104.1 million arising from the acquisition was assigned to the Perceptive Software segment. The goodwill recognized comprises the value of expected synergies arising from the acquisition that are complementary to the Perceptive Software business. None of the goodwill recognized is expected to be deductible for income tax purposes.

The acquisition of Brainware is included in Purchase of businesses, net of cash acquired in the investing section of the Consolidated Statements of Cash Flows for the year ended December 31, 2012 in the amount of $147 million, which is the total purchase price less cash acquired of $0.3 million.

During the first quarter of 2012, certain employees of Brainware were granted restricted stock units by the Company. Because the Company was not obligated to issue replacement share-based payment awards to the employees, the awards are accounted for as a separate transaction and recognized as post-combination expense over the requisite service period. These awards are not material for separate disclosure.

Certain income tax-related contingencies totaling $5.7 million were recognized by the Company as of the acquisition date. The Company is indemnified for this matter in the purchase agreement for an amount not to exceed the proceeds actually received by the selling shareholders in consummation of the acquisition. An indemnification asset of $2.5 million was initially recognized and measured on the same basis as the indemnified item, taking into account factors such as collectability. The measurement of the indemnification asset is subject to changes in management's assessment of changes in both the indemnified item and collectability. The indemnification asset was reduced by $0.6 million in 2013 commensurate with a decrease in the related liability. The reduction of the indemnification asset was recorded in Other expense (income), net in 2013 on the Consolidated Statements of Earnings.

Acquisition-related costs of approximately $3.6 million were charged directly to operations and were included in Selling, general and administrative on the Consolidated Statements of Earnings. Acquisition-related costs include finder's fees, legal, advisory, valuation, accounting, and other fees incurred to effect the business combination. Acquisition-related costs above do not include travel and integration expenses.

Because Brainware's current levels of revenue and net earnings are not material to the Company's Consolidated Statements of Earnings, supplemental pro forma revenue and net earnings disclosures have been omitted.

Other Acquisitions

On December 28, 2012, the Company acquired all of the membership interests of Acuo Technologies, LLC (“Acuo”) in a cash transaction valued at $43.8 million. Perceptive Software and Acuo will offer a unique set of technologies to the healthcare sector — ECM, vendor neutral archives with clinical content viewing, and database conversion — that combine to manage the entire range of content within the healthcare enterprise.

On March 13, and March 16, 2012, the Company acquired all of the issued and outstanding shares of Nolij Corporation (“Nolij”) and ISYS Search Software Pty Ltd. (“ISYS”), respectively, in cash transactions valued at $31.9 million and $29.8 million, respectively. Nolij is a prominent provider of web-based imaging, document management and workflow solutions for the higher education market. The acquisition of Nolij deepens Perceptive Software's domain expertise in education, while also providing innovative web-based solutions that can be extended to apply to other industries. ISYS is a leading provider of high performance enterprise and federated search and document filtering software. The acquisition of ISYS strengthens Perceptive Software's ECM and BPM solutions, allowing customers to seamlessly access needed content, stored anywhere in the enterprise, in the context of the business process in which they are working. This broadening and deepening of Lexmark's capabilities further enhances the solutions expertise offered to its MPS customers.

The following table summarizes the assets acquired and liabilities assumed in the acquisitions of Acuo, Nolij and ISYS as of the respective acquisition dates:

	Estimated Fair Value		Weighted-Average Useful Life (years)
Cash	$	5.3
Trade receivables		4.2
Other current assets		2.5
Property, plant and equipment		1.0
Identifiable intangible assets:
Trade names and trademarks		0.8	1.9
Customer relationships		18.3	5.7
Non-compete agreements		0.1	3.0
Purchased technology		42.7	5.0
In-process technology (1)		1.2
Other assets		0.1
Accounts payable		(0.4	)
Deferred revenue		(6.7	)
Other current liabilities		(11.5	)
Other long-term liabilities		(0.5	)
Deferred tax liability, net (2)		(9.9	)
Total identifiable net assets		47.2
Goodwill		58.3
Total purchase price	$	105.5

(1) The in-process technology was not subject to amortization at the acquisition date. A portion of the acquired in-process technology valued at $0.3 million was written off in 2012 subsequent to the acquisition as the related project was abandoned. Amortization was commenced for the balance of the in-process technology in 2013 upon completion of the related project.

(2) Deferred tax liability, net primarily relates to purchased identifiable intangible assets and is shown net of deferred tax assets.

The values above include measurement period adjustments determined in 2012 affecting Identifiable intangible assets $8.7 million, Deferred revenue $1.3 million, Deferred tax liability, net $(0.4) million and Goodwill $(9.4) million. The purchase price for ISYS increased by $0.2 million due to certain adjustments contemplated in the purchase agreement. The measurement period adjustments were based on information obtained subsequent to the acquisition related to certain income tax matters contemplated by the Company at the acquisition date. Additionally, the fair values of assets acquired and liabilities assumed were initially based on estimates, and were subsequently based on a more thorough valuation. The acquired companies consisted mostly of technology and other related assets and processes to be utilized by the Company's Perceptive Software segment.

The values above also include measurement period adjustments determined during 2013 related to the Company's acquisition of Acuo in the fourth quarter of 2012 affecting Other current assets $(0.3) million, Accounts payable $(0.1) million, Other current liabilities $(1.5) million, and Goodwill $1.9 million. The measurement period adjustments were determined based on facts and circumstances that existed at the acquisition date and were adjusted retrospectively to the consolidated financial results.

The total estimated fair value of intangible assets acquired was $63.1 million, with a weighted-average useful life of 5.2 years. The intangible assets subject to amortization are being amortized on a straight-line basis over their estimated useful lives as of the respective acquisition dates.

The goodwill recognized in the acquisitions of Acuo, Nolij and ISYS was assigned to the Perceptive Software segment and comprises the value of expected synergies arising from the acquisitions that are complementary to the Perceptive Software business. Goodwill of $17.3 million that resulted from the Acuo acquisition is expected to be deductible for income tax purposes. Goodwill of $41.0 million that resulted from the acquisitions of Nolij and ISYS is not expected to be deductible for income tax purposes.

The purchase of Acuo is included in Purchase of businesses, net of cash acquired in the Consolidated Statements of Cash Flows for 2012 in the amount of $40.5 million. Total cash acquired in the acquisition of Acuo was $3.3 million. The Company also acquired intangible assets in the form of covenants not to compete from certain employees and members of Acuo. These covenants were valued at $0.4 million and were recognized separately from the acquisition. The purchases of Nolij and ISYS are included in Purchase of businesses, net of cash acquired in the Consolidated Statements of Cash Flows for 2012 in the amount of $57.8 million. Total cash acquired in the acquisitions of Nolij and ISYS was $2.0 million. Included in Cash and cash equivalents on the Company's Consolidated Statements of Financial Position is $2.1 million which is restricted in use as it is due to a former shareholder of Nolij. This amount has been recognized as a liability incurred to a former shareholder. The liability was increased by $0.2 million in 2013 when the portion of the purchase price placed in escrow upon acquisition was released.

Acquisition-related costs of approximately $1.3 million were charged directly to operations and were included in Selling, general and administrative on the Consolidated Statements of Earnings for the year ended December 31, 2012. Acquisition-related costs include finder's fees, legal, advisory, valuation, accounting, and other fees incurred to effect the business combination. Acquisition-related costs above do not include travel and integration expenses.

Because current levels of revenue and net earnings for Nolij, ISYS and Acuo are not material to the Company's Consolidated Statements of Earnings, supplemental pro forma revenue and net earnings disclosures have been omitted.

2011

Acquisition of Pallas Athena Holdings B.V.

On October 18, 2011, the Company acquired all issued and outstanding shares in Pallas Athena Holdings B.V. (“Pallas Athena”) in a cash transaction valued at approximately $50.2 million. Pallas Athena is a leading provider of BPM, document output management and process mining software capabilities. The acquisition allows the Company to further strengthen its fleet management solutions and services with a broader range of workflow solutions. The acquisition also will enable the Company's Perceptive Software segment to expand its presence in EMEA, while concurrently leveraging the Company's growing worldwide sales force to sell these software solutions globally.

Of the $50.2 million total cash payment, $41.4 million was paid to acquire the outstanding shares of Pallas Athena, $7.1 million was used to repay debt and short-term borrowings, $1.2 million was used to pay seller transaction fees, and $0.5 million was used to repay other obligations of Pallas Athena.

The following table summarizes the assets acquired and liabilities assumed as of the acquisition date.

	Estimated Fair Value		Weighted-Average Useful Life (years)
Trade receivables	$	2.1
Other assets		0.3
Property, plant and equipment		0.2
Identifiable intangible assets:
Trade names and trademarks (1)		2.6	10.0
Customer relationships		7.8	5.0
Non-compete agreements		0.1	3.0
Purchased technology		8.9	5.0
In-process technology (2)		1.3
Accounts payable		(1.9	)
Short-term borrowings		(5.0	)
Deferred revenue		(0.2	)
Other liabilities		(1.6	)
Long-term debt		(2.1	)
Deferred tax liability, net (3)		(4.6	)
Total identifiable net assets		7.9
Goodwill		33.5
Total purchase price	$	41.4

(1) The estimated useful life of the trade names was shortened to approximately 2.5 years subsequent to the acquisition, resulting in accelerated amortization of the asset.

(2) The in-process technology was not subject to amortization at the acquisition date, but began amortizing upon completion of the projects in 2012.

(3) Deferred tax liability, net primarily relates to purchased identifiable intangible assets and is shown net of deferred tax assets.

The total estimated fair value of intangible assets acquired was $20.7 million, with a weighted-average useful life of 5.7 years. The intangible assets subject to amortization are being amortized on a straight-line basis over their estimated useful lives as of the acquisition date.

The Company assumed $5.0 million of short-term borrowings and $2.1 million of long-term debt in the acquisition. These amounts were repaid shortly after the acquisition and are included in Repayment of assumed debt in the financing section of the Company's Consolidated Statements of Cash Flows for the year ended December 31, 2011. There was no gain or loss recognized on the extinguishment of the debt.

Goodwill of $33.5 million arising from the acquisition was assigned to the Perceptive Software reportable segment and consisted largely of projected future revenue and profit growth, including benefits from Lexmark's international structure and sales channels and entity-specific synergies expected from combining Pallas Athena with Lexmark's business. None of the goodwill recognized is expected to be deductible for income tax purposes.

The acquisition of Pallas Athena is included in Purchase of businesses, net of cash acquired in the investing section of the Consolidated Statements of Cash Flows for the year ended December 31, 2011 in the amount of $41.4 million, which is the total purchase price.

Acquisition-related costs of approximately $2 million were charged directly to operations and were included in Selling, general and administrative on the Consolidated Statements of Earnings for the year ended December 31, 2011. Acquisition-related costs include finder's fees, legal, advisory, valuation, accounting, and other fees incurred to effect the business combination.

Because Pallas Athena's current levels of revenue and net earnings are not material to the Company's Consolidated Statements of Earnings, supplemental pro forma revenue and net earnings disclosures have been omitted.

Divestiture

In August 2012, the Company announced restructuring actions including exiting the development and manufacturing of its remaining inkjet hardware. On April 1, 2013, the Company and Funai Electric Co., Ltd. (“Funai”) entered into a Master Inkjet Sale Agreement of the Company's inkjet-related technology and assets to Funai for total cash consideration of $100 million, subject to working capital adjustments. Included in the sale were one of the Company's subsidiaries, certain intellectual property and other assets of the Company. The Company must also provide certain transition services to Funai and will continue to sell supplies for its current inkjet installed base. The sale closed in the second quarter of 2013.

In addition to the $100 million of cash consideration, the Company received a subsequent working capital adjustment of $0.9 million. The Company derecognized the following upon the sale:

Cash and cash equivalents	$	2.3
Inventory		3.0
Prepaid expenses and other current assets		0.2
Property, plant and equipment, net		27.8
Goodwill		1.1
Other assets		2.1
Accounts payable		(1.9	)
Accrued liabilities		(2.4	)
Other liabilities		(2.6	)
Accumulated other comprehensive income		(10.3	)
Carrying value of disposal group	$	19.3

The Company recognized a gain of $73.5 million upon the sale recorded in Gain on sale of inkjet-related technology and assets on the Consolidated Statements of Earnings for the year ended December 31, 2013. The gain, which was recognized in ISS, consisted of total consideration of $100.9 offset partially by the carrying value of the disposal group of $19.3 million and $8.1 million of expenses incurred during the second quarter of 2013 to effect the sale.

Of the $100.9 million of cash proceeds received, or $98.6 million net of the $2.3 million cash balance held by the subsidiary included in the sale, $97.6 million was presented in investing activities for the sale of the business and $1.0 million was included in operating activities for transition services on the Consolidated Statements of Cash Flows for the year ended December 31, 2013.