Business Acquisitions

9 Months Ended

Jun. 30, 2011

Business Acquisitions

4.   Business Acquisitions

Fiscal 2011 Acquisitions

On June 15, 2011, we acquired all of the outstanding capital stock of Equitrac Corporation (“Equitrac”), a leading provider of print management solutions, for cash consideration of approximately $162 million. The acquisition was a taxable stock purchase and the goodwill resulting from this acquisition is not expected to be deductible for tax purposes. The results of operations of Equitrac have been included in our results of operations from June 15, 2011.

On June 16, 2011, we acquired all of the outstanding capital stock of SVOX A.G. (“SVOX”), a German based seller of speech recognition, dialog, and text-to-speech software products for the automotive, mobile and consumer electronics industries. Total purchase consideration was €87.0 million which consists of cash consideration of €57.0 million ($80.9 million based on the exchange rate as of the date of acquisition) and a deferred acquisition payment of €30.0 million ($43.0 million based on the exchange rate as of the date of acquisition). The deferred acquisition payment is payable in cash or shares of our common stock, at our option; €8.3 million of the deferred acquisition payment is due on June 16, 2012 and the remaining €21.7 million is due on December 31, 2012. The acquisition was a taxable stock purchase and the goodwill resulting from this acquisition is not expected to be deductible for tax purposes. The results of operations of SVOX have been included in our results of operations from June 16, 2011.

A summary of the preliminary allocation of the purchase consideration for Equitrac and SVOX is as follows (in thousands):

	Equitrac			SVOX
Total purchase consideration:
Cash	$	161,950		$	80,919
Deferred acquisition payment		—			42,990
Total purchase consideration	$	161,950		$	123,909
Allocation of the purchase consideration:
Cash	$	115		$	—
Accounts receivable(a)		10,724			910
Inventory		2,462			—
Goodwill		87,705			92,478
Identifiable intangible assets(b)		91,900			42,165
Other assets		10,617			2,728
Total assets acquired		203,523			138,281
Current liabilities		(3,262	)		(9,542	)
Deferred tax liability		(38,311	)		(4,830	)
Total liabilities assumed		(41,573	)		(14,372	)
Net assets acquired	$	161,950		$	123,909

(a)	Accounts receivable have been recorded at their estimated fair values, which consists of the gross accounts receivable assumed of $12.7 million, reduced by a fair value reserve of $1.1 million representing the portion of contractually owed accounts receivable which we do not expect to be collected.
(b)	The following are the identifiable intangible assets acquired and their respective weighted average useful lives, as determined based on preliminary valuations (table in thousands, except for years):

	Equitrac				SVOX
			Weighted Average				Weighted Average
	Amount		Life (Years)		Amount		Life (Years)
Customer relationships	$	55,800		15.0	$	35,612		13.4
Core and completed technology		22,000		7.0		6,268		5.0
Trade name		14,100		10.0		285		3.0
Total	$	91,900			$	42,165

Other Fiscal 2011 Acquisitions

During fiscal 2011, we acquired two additional businesses, primarily to expand our product offerings and enhance our technology base. The results of operations of these acquisitions have been included in our consolidated results from their respective acquisition dates. The total consideration for these acquisitions was $82.1 million, paid in cash. In allocating the total purchase consideration for these acquisitions based on estimated fair values, we preliminarily recorded $42.4 million of goodwill and $34.0 million of identifiable intangible assets. The allocations of the purchase consideration are based upon preliminary valuations and our estimates and assumptions are subject to change. Intangible assets acquired included primarily customer relationships and core and completed technology with weighted average useful lives of 11.5 years. The acquisitions were stock acquisitions and the goodwill resulting from these transactions is not expected to be deductible for tax purposes.

Proforma Results

In addition to the acquisitions of Equitrac and SVOX discussed above, on December 30, 2009, we acquired all of the outstanding capital stock of SpinVox Limited (“Spinvox”), a UK-based privately-held company engaged in the business of providing voicemail-to-text services. The following table shows unaudited pro forma results of operations as if we had acquired SpinVox, Equitrac and SVOX on October 1, 2009 (dollars in thousands, except per share amounts):

	Three Months Ended					Nine Months Ended
	June 30,					June 30,
	2011		2010			2011		2010
Revenue	$	348,877	$	287,521		$	1,007,734	$	865,305
Net income (loss)		39,857		(5,236	)		34,564		(55,147	)
Net income (loss) per share	$	0.13	$	(0.02	)	$	0.11	$	(0.19	)

We have not furnished pro forma financial information related to our other fiscal 2011 and 2010 acquisitions because such information is not material, individually or in the aggregate, to our financial results. The unaudited pro forma results of operations are not necessarily indicative of the actual results that would have occurred had the transactions actually taken place at the beginning of the periods indicated.

Acquisition-Related Costs, net

The components of acquisition-related costs, net are as follows (dollars in thousands):

	Three Months Ended					Nine Months Ended
	June 30,					June 30,
	2011		2010			2011		2010
Transition and integration costs	$	453	$	3,383		$	1,506	$	12,035
Professional service fees		7,775		3,079			11,107		14,933
Acquisition-related adjustments		367		(337	)		1,297		(76	)
Total	$	8,595	$	6,125		$	13,910	$	26,892

The increase in acquisition-related costs, net for the three months ended June 30, 2011, as compared to the three months ended June 30, 2010, was primarily driven by a reduction in transition and integration costs offset by an increase in professional service fees. For the three months ended June 30, 2010, transition and integration costs consisted primarily of costs associated with transitional employees from our acquisitions of SpinVox and eCopy. For the three months ended June 30, 2011, professional service fees consisted of expenses related to our third quarter 2011 acquisitions.

The decrease for the nine months ended June 30, 2011, as compared to the nine months ended June 30, 2010, was primarily driven by a reduction in transition and integration costs and professional services fees. For the nine months ended June 30, 2010, transition and integration costs consisted primarily of the costs associated with transitional employees from our acquisitions of SpinVox and eCopy; professional services consisted of expenses related to our acquisition of SpinVox in December 2009 and approximately $2.2 million that had been capitalized as of September 30, 2009 related to transaction costs incurred in prior periods that was required to be expensed upon our adoption of ASC 805, Business Combinations, in fiscal 2010.