Business Combinations

6 Months Ended

Jun. 30, 2011

Business Combinations

Business Combinations

8. Business Combinations

triVIN Holdings, Inc. Acquisition

On January 31, 2011, we acquired all of the outstanding shares of triVIN Holdings, Inc., now known as DealerTrack Processing Solutions, Inc., for a purchase price of $125.5 million, net of acquired cash, and reflecting the final working capital adjustment. DealerTrack Processing Solutions is a leading provider of automobile title management services to lenders and vehicle registration services to automobile dealers. We expect this acquisition will significantly expand our transaction business and further strengthen our relationship with lenders and automobile dealers. We expensed approximately $0.5 million of professional fees associated with the acquisition in the fourth quarter of 2010 and $0.1 million and $0.3 million for the three and six months ended June 30, 2011, respectively.

This business combination was accounted for under the acquisition method of accounting, resulting in the total purchase price being allocated to the assets acquired and liabilities assumed according to their estimated fair values at the date of acquisition as follows (in thousands):

Current assets	$	33,442
Property and equipment		825
Non-current assets		6,526
Intangible assets		83,760
Goodwill		74,217
Total assets acquired		198,770
Total liabilities assumed		(58,406	)
Net assets acquired	$	140,364

Included in current assets is approximately $14.9 million of cash acquired. The liabilities assumed includes a $33.5 million deferred tax liability that relates to the future amortization of certain acquired intangibles.

Goodwill represents the excess of the purchase price over the fair values of the acquired net tangible and intangible assets. In accordance with the provisions of ASC 350, goodwill is not amortized but will be tested for impairment at least annually. The allocated value of goodwill of $74.2 million primarily relates to the anticipated synergies resulting from combining DealerTrack Processing Solutions with our current products and the acquired workforce. The allocated value of goodwill was reduced by $0.3 million from March 31, 2011 due to an adjustment made to the liabilities assumed. Neither the acquired goodwill nor intangible assets are deductible for tax purposes.

The amounts allocated to acquired intangible assets, and their associated weighted-average useful lives which were determined based on the period which the assets are expected to contribute directly or indirectly to our future cash flows, consist of the following:

				Weighted-
				Average
	Amount			Useful Life
	(In thousands)			(Years)
Customer relationships		$	43,900		6.4
Technology			27,500		5.0
State DMV contractual relationships			6,190		6.0
Non-compete agreements			5,180		3.0
Trade names			990		3.0
Total acquired identifiable intangible assets		$	83,760		5.7

The results of DealerTrack Processing Solutions were included in our consolidated statement of operations from the date of acquisition. DealerTrack Processing Solutions revenue from the date of acquisition through June 30, 2011, was $25.8 million. We are unable to provide DealerTrack Processing Solutions earnings since the date of acquisition as we do not have stand alone earnings reporting for that business.

Unaudited Pro Forma Summary of Operations

The accompanying unaudited pro forma summary represents our consolidated results of operations as if the acquisition of DealerTrack Processing Solutions had been completed as of January 1, 2010. The unaudited pro forma financial information includes the accounting effects of the business combination, including adjustments to the amortization of intangible assets, professional fees associated with the acquisition, and interest expense on short-term and long-term debt which was not acquired by DealerTrack. The unaudited pro forma information does not necessarily reflect the actual results that would have been achieved, nor is it necessarily indicative of our future consolidated results.

	Three Months Ended June 30,					Six Months Ended June 30,
	2011		2010			2011			2010
	(In thousands, except per share data)
Net revenue	$	89,051	$	76,544		$	171,021		$	146,271
Net income (loss)		2,563		(706	)		(152	)		(4,804	)
Basic net income (loss) per share		0.06		(0.02	)		(0.00	)		(0.12	)
Diluted net income (loss) per share		0.06		(0.02	)		(0.00	)		(0.12	)