Acquisition

9 Months Ended

Sep. 30, 2011

Acquisition [Abstract]

Acquisition

(5) Acquisition — For the acquisition described below, the results of operations and the estimated fair value of the assets acquired and liabilities assumed have been included in the Company’s condensed consolidated financial statements from the date of the acquisition, March 3, 2011.

Amcom Software, Inc. On March 3, 2011, the Company acquired Amcom pursuant to an Agreement and Plan of Merger by and among the Company, Arch Wireless, Inc., a Delaware corporation and a wholly owned subsidiary of the Company (“Arch”), USMO Acquisition Co., a Delaware corporation (“Merger Sub”), Amcom, a Delaware corporation, the stockholders of Amcom named therein and Norwest Equity Partners IX, L.P., as the stockholders’ representative (the “Merger Agreement”).

Pursuant to the terms and subject to the conditions of the Merger Agreement, the Merger Sub merged with and into Amcom, with Amcom surviving the merger and becoming an indirect wholly owned subsidiary of the Company. The aggregate merger consideration the Company paid to the stockholders and stock option holders of Amcom was approximately $141.6 million, $15.0 million of which was placed into an escrow fund to satisfy potential working capital adjustments and indemnification liabilities of Amcom and its stockholders. The acquisition was funded by approximately $117.5 million of cash on hand and new debt of $24.1 million through a credit facility provided by Wells Fargo Capital Finance, LLC (“Wells Fargo”). The acquisition also resulted in the assumption of existing Wells Fargo debt of $27.8 million (see Note 14). The debt is secured by a lien on substantially all of the existing assets, interests in assets and proceeds owned or acquired by the Company. The Company also acquired cash of $7.4 million from Amcom.

The purchase price is allocated to underlying assets and liabilities based on their estimated fair values at the date of acquisition. The preliminary purchase price allocation includes goodwill and other intangible assets. Recognition of goodwill is largely attributed to the assembled workforce of Amcom and other factors. Goodwill is currently assigned to the Company’s software operations, which is a reportable segment for the quarter ended September 30, 2011 (see Note 22). None of the goodwill recognized from the Amcom acquisition is expected to be deductible for income tax purposes. During the second quarter of 2011, the Company reduced accounts payable and accrued expenses and other liabilities by $0.1 million with an offsetting reduction to goodwill. The Company will continue to identify potential adjustments to the purchase price and the fair value of assets acquired and liabilities assumed. The Company anticipates finalizing the purchase price as soon as practicable but no later than one-year from the acquisition date or March 3, 2012. The following table represents the preliminary purchase price allocation as adjusted through September 30, 2011:

	(Dollars in thousands)
Cash and cash equivalents		$  15,758
Receivables		8,366
Inventory		1,965
Prepaids and other current assets		5,023
Property and equipment		1,358
Other intangibles		43,539
Goodwill		131,058
Other assets		70
Accounts payable and accrued expenses		(13,876)
Customer deposits		(3,347)
Deferred revenue		(4,074)
Deferred income tax liabilities		(16,161)
Long-term debt		(27,750)
Other liabilities		(334)
Preliminary acquisition consideration		$141,595

The purchase includes the assumption of gross customer accounts receivable totaling $8.7 million. The Company estimates that approximately $0.3 million of these receivables will not be collected. Therefore, the receivables are recorded at the estimated fair value of $8.4 million. Cash and cash equivalents include $8.4 million transferred to Amcom by the Company on March 3, 2011 to redeem outstanding stock options and settle other expenses on March 11, 2011. Accounts payable and accrued expenses include a liability of $8.4 million for the redemption of these stock options and other expenses.

In allocating the purchase price, the Company considered, among other factors, analyses of historical financial performance and estimates of future performance of Amcom’s contracts. The components of intangible assets associated with the acquisition were customer-related, marketing-related, contract-based and technology-based valued preliminarily at $25.0 million, $5.7 million, $5.7 million and $7.1 million, respectively. Customer-related intangible assets represent the underlying relationships and agreements with Amcom’s existing customers. Marketing-related intangible assets represent the fair value of the Amcom trade name. Contract-based intangible assets are for non-compete agreements with two executives and represent the amount of lost business that could occur if the executives, in the absence of non-compete agreements, were to compete with the Company. Technology-based intangible assets represent internally developed software applications that are used in Amcom’s operations.

The following unaudited pro forma summary presents consolidated information of the Company as if the acquisition had occurred at the beginning of the periods presented. The pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition and borrowings with Wells Fargo had occurred at the beginning of the periods presented. These amounts have been calculated after applying the Company’s accounting policies and adjusting the results of Amcom to reflect the additional amortization expense resulting from recognizing intangible assets, the interest expense effect of the financing necessary to complete the acquisition and the consequential tax effects.

	For the Nine Months Ended September 30,
	2011		2010
	(Dollars in thousands)
Revenues	$	187,644	$	209,993
Net income		62,098		70,769
Basic net income per common share		2.81		3.17
Diluted net income per common share		2.76		3.12

During the nine months ended September 30, 2011, the Company expensed $2.7 million in transaction costs related to the acquisition. These costs were included in general and administrative expenses in the accompanying condensed consolidated results of operations. The pro forma net income presented does not include these non-recurring expenses for transaction costs.