Business Combination

3 Months Ended

Mar. 31, 2014

Business Combinations [Abstract]

Business Combination

3. BUSINESS COMBINATION

On January 22, 2014, the Company acquired 100% of the equity of Mainstreet Commerce LC (“Mainstreet”), a provider of cloud-based distributed order management solutions, for total cash consideration of $19.4 million. $10.0 million of the total consideration is held in escrow and will be released ratably in quarterly payments through January 2016. $7.0 million of the amount in escrow is reserved for payments to key Mainstreet employees for post combination employment services, and therefore is recorded as a prepayment in the Company’s condensed consolidated balance sheet, and will be recognized in the Company’s post combination financial statements as compensation expense over the employment period. The remaining $3.0 million in escrow is being withheld following the close of the transaction as protection against certain losses the Company may incur in the event of certain breaches of representations, warranties and covenants and other specified claims set forth in the purchase agreement, and therefore is included in the purchase price of $12.4 million. For federal income tax purposes, the transaction is treated as an asset acquisition. The goodwill resulting from this transaction is expected to be deductible for tax purposes. During the three months ended March 31, 2014, the Company incurred transaction costs in connection with the acquisition of $0.1 million, which are included in general and administrative expenses. Including prior periods not presented, the Company has incurred transaction costs in connection with the acquisition of $0.5 million through March 31, 2014.

Under the acquisition method of accounting, the Company allocated the purchase price to the identifiable assets and liabilities based on their estimated fair value, which was determined by management using the information available as of the date of the acquisition (Level 3 inputs). The Company believes this information provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed, but certain items may be subject to change as additional information is received about facts and circumstances that existed at the date of acquisition. Thus, the provisional measurements of fair value set forth above are subject to change. The Company is still conducting its review of the allocation of intangibles and expects to finalize the valuation as soon as practicable, but not later than one year from the acquisition date.

Methodologies used in valuing the intangible assets include, but are not limited to, the replacement cost method for customer relationships, relief from royalty for trademarks and multiple period excess earnings method for developed technology. The excess of the purchase price over the total net identifiable assets has been recorded as goodwill which includes synergies expected from the expanded service capabilities and the value of the assembled work force in accordance with GAAP. The Company did not record any in-process research and development charges in connection with the acquisition.

The allocation of the Mainstreet consideration to the assets acquired and obligations assumed was as follows (in thousands):

Cash	$	261
Accounts receivable		511
Developed technology		2,500
Customer relationships		300
Trademarks		10
Goodwill		8,966
Other assets / liabilities, net		(151	)
Total purchase price	$	12,397

The Company will amortize the customer relationships approximately over two years and trademarks over one year on a straight-line basis. The Company will amortize the developed technology over five years based upon the pattern in which the economic benefits related to the developed technology are realized; however, amounts are not less than straight-line. Comparative pro forma financial information for this acquisition has not been presented because the acquisition is not material to the Company’s consolidated results of operations.