v2.4.0.6
Document and Entity Information (USD $)
12 Months Ended
Dec. 31, 2011
Mar. 15, 2012
Jun. 30, 2011
Document Information      
Entity Registrant Name EBIX INC    
Entity Central Index Key 0000814549    
Current Fiscal Year End Date --12-31    
Entity Filer Category Accelerated Filer    
Document Type 10-K    
Document Period End Date Dec. 31, 2011    
Document Fiscal Year Focus 2011    
Document Fiscal Period Focus FY    
Amendment Flag false    
Entity Common Stock, Shares Outstanding   36,444,178  
Entity Well-known Seasoned Issuer No    
Entity Voluntary Filers Yes    
Entity Current Reporting Status Yes    
Entity Public Float     $ 564,509,202
v2.4.0.6
Condensed Consolidated Statements of Income (Unaudited) (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Operating revenue: $ 168,969 $ 132,188 $ 97,685
Operating expenses:      
Cost of services provided 33,589 29,599 21,274
Product development 19,208 13,607 11,362
Sales and marketing 13,642 6,372 5,040
General and administrative 26,268 24,065 16,798
Amortization and depreciation 7,514 6,038 3,955
Total operating expenses 100,221 79,681 58,429
Operating income 68,748 52,507 39,256
Interest income 557 519 199
Interest expense (759) (902) (1,070)
Other non-operating income 647 6,319 89
Foreign exchange gain 4,302 1,211 1,358
Income before income taxes 73,495 59,654 39,832
Income tax provision (2,117) (635) (1,010)
Net income $ 71,378 $ 59,019 $ 38,822
Basic earnings per common share $ 1.89 $ 1.69 $ 1.24
Diluted earnings per common share $ 1.75 $ 1.51 $ 1.03
Basic weighted average shares outstanding 37,742 34,845 31,398
Diluted weighted average shares outstanding 40,889 39,018 38,014
v2.4.0.6
Condensed Consolidated Balance Sheets (Unaudited) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2011
Dec. 31, 2010
Current assets:    
Cash and cash equivalents $ 23,696 $ 23,397
Short-term investments 1,505 6,300
Trade accounts receivable, less allowances of $1,719 and $1,126, respectively 31,133 26,028
Deferred tax asset, net 2,981 0
Other current assets 4,502 5,057
Total current assets 63,817 60,782
Property and equipment, net 8,834 7,806
Goodwill 259,218 180,602
Intangibles, net 38,386 22,574
Indefinite-lived intangibles 30,453 30,552
Deferred tax asset, net 9,412 0
Other assets 1,062 984
Total assets 411,182 303,300
Current liabilities:    
Accounts payable and accrued liabilities 18,719 15,344
Accrued payroll and related benefits 5,034 4,536
Short term debt 6,667 5,000
Current portion of convertible debt, net of discount of $0 and $56, respectively 0 4,944
Current portion of long term debt and capital lease obligation 165 426
Deferred revenue 16,460 8,610
Current deferred rent 266 0
Other current liabilities 2,468 225
Total current liabilities 49,779 39,085
Revolving line of credit 31,750 25,000
Other long term debt and capital lease obligations, less current portion 8,468 205
Deferred tax liability, net 0 3,534
Put option liability 0 537
Deferred revenue 328 126
Deferred rent 939 554
Other liabilities 3,803 2,991
Total liabilities 95,067 72,032
Commitments and Contingencies, Note 7      
Stockholders’ equity:    
Convertible Series D Preferred stock, $.10 par value, 500,000 shares authorized, no shares issued and outstanding at December 31, 2011 and 2010 0 0
Common stock, $.10 par value, 60,000,000 shares authorized, 36,418,385 issued and 36,377,876 outstanding at December 31, 2011 and 36,057,791 issued and 36,017,282 outstanding at December 31, 2010 3,638 3,602
Additional paid-in capital 179,518 153,221
Treasury stock (40,509 shares as of December 31, 2011 and December 31, 2010) (76) (76)
Retained earnings 137,559 67,642
Accumulated other comprehensive income (4,524) 6,879
Total stockholders’ equity 316,115 231,268
Total liabilities and stockholders’ equity $ 411,182 $ 303,300
v2.4.0.6
Condensed Consolidated Balance Sheets (Parenthetical) (Unaudited) (USD $)
In Thousands, except Share data, unless otherwise specified
Dec. 31, 2011
Dec. 31, 2010
Current Assets:    
Allowance for doubtful accounts $ 1,719 $ 1,126
Current Liabilities:    
Unamortize Discount, convertible debt $ 0 $ 56
Stockholders' Equity:    
Preferred stock, par value $ 0.10 $ 0.10
Preferred stock, shares authorized 500,000 500,000
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
Common stock, par value $ 0.10 $ 0.10
Common stock, shares authorized 60,000,000 60,000,000
Common stock, shares issued 36,418,385 36,057,791
Common stock, shares outstanding 36,377,876 36,017,282
Treasury stock, shares 40,509 40,509
v2.4.0.6
Condensed Consolidated Statements of Stockholders' Equity and Comprehensive Income (Unaudited) (USD $)
In Thousands, except Share data, unless otherwise specified
Total
Common Stock
Treasury Stock
Additional Paid-in Capital
Retained Earnings
Accumulated Other Comprehensive Income
Comprehensive Income Total
Beginning Balance, Value at Dec. 31, 2008 $ 70,142 $ 981 $ (1,178) $ 111,641 $ (30,199) $ (11,103)  
Beginning Balance, Issued Shares at Dec. 31, 2008   30,019,365          
Beginning Balance, Treasury Shares at Dec. 31, 2008     (179,235)        
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Net income 38,822       38,822   38,822
Cumulative translation adjustment 11,452         11,452 11,452
Comprehensive income             50,274
Exercise of stock options, Shares   302,163          
Exercise of stock options, Value 1,565 10   1,555      
Deferred compensation and amortization related to options and restricted stock 1,369     1,369      
Repurchases of common stock, Shares   (48,672)          
Repurchase of treasury stock, Shares     (31,950)        
Repurchases of common stock, Value (505) (2) (205) (298)      
Retirement of treasury stock, Shares   (170,676) 170,676        
Retirement of treasury stock, Value 0   1,307 (1,307)      
Conversion of principal and interest on Convertible promisorry notes, Shares   2,790,186          
Conversion of principal and interest on Convertible promissary notes, Value 22,355 93   22,262      
Effect 3-1 stock split 0 2,295   (2,295)      
Imputed interest on issuance of convertible debt 534     534      
Shares subscribed for business acquisition, Shares   1,488,984          
Shares subscribed for business acquisition, Value 25,000 50   24,950      
Vesting of restricted stock, Shares   93,258          
Vesting of restricted stock, Value 9 16   (7)      
Ending Balance, Value at Dec. 31, 2009 170,743 3,443 (76) 158,404 8,623 349  
Ending Balance, Issued Shares at Dec. 31, 2009   34,474,608          
Ending Balance, Treasury Shares at Dec. 31, 2009     (40,509)        
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Net income 59,019       59,019   59,019
Cumulative translation adjustment 6,530         6,530 6,530
Comprehensive income             65,549
Exercise of stock options, Shares   1,252,785          
Exercise of stock options, Value 1,236 125   1,111      
Deferred compensation and amortization related to options and restricted stock 1,850     1,850      
Repurchases of common stock, Shares   (669,978)          
Repurchases of common stock, Value (10,650) (67)   (10,583)      
Conversion of principal and interest on Convertible promisorry notes, Shares   760,040          
Conversion of principal and interest on Convertible promissary notes, Value 1,712 76   1,636      
APIC Adjustment for stock option 828     828      
Vesting of restricted stock, Shares   240,336          
Vesting of restricted stock, Value 0 25   (25)      
Ending Balance, Value at Dec. 31, 2010 231,268 3,602 (76) 153,221 67,642 6,879  
Ending Balance, Issued Shares at Dec. 31, 2010 36,057,791 36,057,791          
Ending Balance, Treasury Shares at Dec. 31, 2010     (40,509)        
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Net income 71,378       71,378   71,378
Cumulative translation adjustment (11,403)         (11,403) (11,403)
Comprehensive income             59,975
Exercise of stock options, Shares   69,509          
Exercise of stock options, Value 51 8   43      
Repurchases of common stock, Shares   (3,510,973)          
Repurchases of common stock, Value (63,659) (351)   (63,308)      
Conversion of principal and interest on Convertible promisorry notes, Shares               
Conversion of principal and interest on Convertible promissary notes, Value (1,851)      (1,851)      
Deferred compensation and amortization related to options and restricted stock 2,205     2,205      
Shares subscribed for business acquisition, Shares   3,650,914          
Shares subscribed for business acquisition, Value 87,476 365   87,111      
APIC Adjustment for stock option 2,111     2,111      
Vesting of restricted stock, Shares   151,144          
Vesting of restricted stock, Value 0 14   (14)      
Dividends paid (1,461)       (1,461)    
Ending Balance, Value at Dec. 31, 2011 $ 316,115 $ 3,638 $ (76) $ 179,518 $ 137,559 $ (4,524)  
Ending Balance, Issued Shares at Dec. 31, 2011 36,418,385 36,418,385          
Ending Balance, Treasury Shares at Dec. 31, 2011     (40,509)        
v2.4.0.6
Condensed Consolidated Statements of Cash Flow (Unaudited) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Cash flows from operating activities:      
Net income $ 71,378 $ 59,019 $ 38,822
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization 7,514 6,038 3,955
Provision for doubtful accounts 976 1,143 321
Provision for deferred taxes (5,083) (1,752) (2,615)
Unrealized foreign exchange gain on forward contracts 2,346 (1,304) (500)
Unrealized foreign exchange gain (5,795) (598) 0
Unrealized gain on put option (537) (6,059) (89)
Share-based compensation 2,205 1,850 1,369
Debt discount amortization on convertible debt 21 327 0
Reduction of acquisition earnout (2,847) (1,500) 0
Changes in assets and liabilities, net of acquisitions:      
Accounts receivable (2,903) (3,018) (8,619)
Other assets 1,647 (955) (577)
Accounts payable and accrued expenses 1,525 (356) 1,127
Accrued payroll and related benefits (532) 165 587
Deferred rent (261) (125) 27
Other liabilities 836 (61) 109
Deferred revenue 796 (35) (40)
Net cash provided by operating activities 71,286 52,779 33,877
Cash flows from investing activities:      
Purchases of marketable securities (3,098) (11,507) (4,133)
Maturities of marketable securities 7,600 7,006 3,870
Capital expenditures (2,829) (1,754) (3,129)
Net cash used in investing activities (13,320) (24,406) (47,427)
Cash flows from financing activities:      
Proceeds from / Repayments to line of credit, net 6,750 1,900 (1,846)
Proceeds from term loan 16,250 10,157 0
Proceeds from the issuance of convertible debt 0 0 25,000
Principal payments of term loan obligation (6,407) (5,000) 0
Repurchase of common stock (63,659) (10,650) (505)
Settlement on conversion of convertible debt (6,761) (22,521) 0
Payments of long term debt 0 0 (742)
Payments for capital lease obligations (300) (804) (293)
Proceeds from exercise of common stock options 51 1,236 1,565
Dividends paid (1,461) 0 0
Net cash provided by financing activities (55,537) (25,682) 23,179
Effect of foreign exchange rates on cash and cash equivalents (2,130) 1,479 123
Net change in cash and cash equivalents 299 4,170 9,752
Cash and cash equivalents at the beginning of the year 23,397 19,227 9,475
Cash and cash equivalents at the end of the year 23,696 23,397 19,227
Supplemental disclosures of cash flow information:      
Interest paid 710 526 1,125
Income taxes paid 3,796 2,396 4,752
ADAM
     
Cash flows from investing activities:      
Acquisition of businesses, net of cash acquired 3,529 0 0
MCN
     
Cash flows from investing activities:      
Investment, net of cash acquired (381) (2,931) 0
Trades Monitor
     
Cash flows from investing activities:      
Acquisition of businesses, net of cash acquired 0 (2,749) 0
Connective Technologies
     
Cash flows from investing activities:      
Acquisition of businesses, net of cash acquired 0 (1,337) 0
USIX
     
Cash flows from investing activities:      
Acquisition of businesses, net of cash acquired 0 (7,131) 0
E-Trek
     
Cash flows from investing activities:      
Acquisition of businesses, net of cash acquired 0 (1,011) 0
IDS
     
Cash flows from investing activities:      
Acquisition of businesses, net of cash acquired 0 0 (1,000)
Health Connect Systems [Member]
     
Cash flows from investing activities:      
Acquisition of businesses, net of cash acquired (17,945) 0 0
Periculum
     
Cash flows from investing activities:      
Investment, net of cash acquired 0 (6) (200)
Acclamation
     
Cash flows from investing activities:      
Acquisition of businesses, net of cash acquired 0 0 (85)
ConfirmNet
     
Cash flows from investing activities:      
Investment, net of cash acquired (184) (2,975) (3,279)
Facts
     
Cash flows from investing activities:      
Investment, net of cash acquired (12) (11) (6,215)
Peak Performance
     
Cash flows from investing activities:      
Acquisition of businesses, net of cash acquired 0 0 (7,894)
EZ Data
     
Cash flows from investing activities:      
Acquisition of businesses, net of cash acquired $ 0 $ 0 $ (25,362)
v2.4.0.6
Description of Business and Summary of Significant Accounting Policies
12 Months Ended
Dec. 31, 2011
Description of Business and Summary of Significant Accounting Policies [Abstract]  
Business Description and Accounting Policies [Text Block]
Description of Business and Summary of Significant Accounting Policies
Description of Business—Ebix, Inc. and subsidiaries (“Ebix” or the “Company”) is an international supplier of on-demand software and e-commerce solutions to the insurance industry. Ebix provides various application software products for the insurance industry ranging from carrier systems, agency systems and exchanges to custom software development for all entities involved in the insurance and financial industries. Products include data exchanges, carrier systems, agency systems, and feature fully customizable and scalable on-demand software designed to improve the way insurance professionals manage all aspects of distribution, including: marketing, sales, service, accounting and management. The Company has its headquarters in Atlanta, Georgia and also operated in eight other countries during 2011 including Australia, Canada, China, India, Japan, New Zealand, Singapore, and Brazil. International revenue accounted for 29%, 29% and 25% of total revenue in 2011, 2010 and 2009, respectively.
The Company’s revenues are derived from four product channels. Presented in the table below is the breakout of our revenue streams for each of those product channels for the years ended December 31, 2011, 2010 and 2009.
 
 
For the Year Ended
December 31,
(dollar amounts in thousands)
 
2011
 
2010
 
2009
Exchanges
 
$
130,638

 
$
94,212

 
$
60,764

Broker Systems
 
18,006

 
13,841

 
11,599

Business Process Outsourcing (“BPO”)
 
14,944

 
15,586

 
14,698

Carrier Systems
 
5,381

 
8,549

 
10,624

Totals
 
$
168,969

 
$
132,188

 
$
97,685

Summary of Significant Accounting Policies
Basis of Presentation—The consolidated financial statements include the accounts of Ebix and its wholly-owned subsidiaries which include:

Ebix.com, International, Inc., a Delaware corporation
Ebix International, LLC, a Delaware limited liability company
Ebix Insurance Agency, Inc., an Illinois corporation
EbixLife Inc., a Utah corporation
Finetre Corporation, an Indiana corporation
Ebix BPO Division — San Diego, a California corporation
Jenquest, Inc., a California corporation
Acclamation Systems, Inc., a Pennsylvania corporation
FACTS Services Inc., a Florida corporation
E-Z Data, Acquisition Sub, LLC, a California limited liability company
Peak Performance Solutions, Inc., a Delaware limited liability company
ADAM, Inc., a Georgia corporation
Agency Solutions.com, LLC (d.b.a. HealthConnect Systems), a Delaware limited liability company
Ebix Software India Private Limited
Ebix Software India SEZ, Private Limited
Premier Ebix Exchange Software Private Ltd.
Ebix Australia Pty,. Ltd.
Ebix Australia (VIC) Pty. Ltd.
Ebix Exchange-Australia PTY LTD
Ebix New Zealand
Ebix New Zealand Holdings
Ebix Singapore PTE LTD
Ebix Latin America, LLC, a Georgia limited liability company
EIH Holdings AB, a Swedish business corporation
EIH Holdings KB, a Swedish business partnership
Ebix Asia Holdings Inc., a Mauritius business corporation.
USIX Technology, S.A.., a Brazilian corporation
MCN Technology & Consulting, Ltda., a Brazilian limited liability company.

The effect of inter-company balances and transactions has been eliminated.

Use of Estimates—The preparation of consolidated financial statements in conformity with generally accepted accounting principles ("GAAP") in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and reported amounts of revenue and expenses during the reporting periods. Management has made material estimates primarily with respect to revenue recognition and deferred revenue, accounts receivable, acquired intangible assets, and the provision for income taxes. Actual results may be materially different from those estimates.

ReclassificationCertain of the prior year balances including the note thereto have been reclassified to conform to the current year presentation.
Segment Reporting—Since the Company, from the perspective of its chief operating decision maker, allocates resources and evaluates business performance as a single entity that provides software and related services to a single industry on a worldwide basis, the Company reports as a single segment. The applicable enterprise-wide disclosures are included in Note 16.
Cash and Cash Equivalents—The Company considers all highly liquid investments with an original maturity of three months or less at the time of purchase to be cash equivalents. Such investments are stated at cost, which approximates fair value. The Company does maintain cash balances in banking institutions in excess of federally insured amounts and therefore is exposed to the related potential credit risk associated with such cash deposits.
Short-term Investments—The Company’s short-term investments consist of certificates of deposits with established commercial banking institutions with readily determinable fair values. Ebix accounts for investments that are reasonably expected to be realized in cash, sold or consumed during the year as short-term investments that are available-for-sale. The carrying amount of investments in marketable securities approximates fair value. The carrying value of our short-term investments was $1.5 million and $6.3 million at December 31, 2011 and 2010, respectively.
Fair Value of Financial Instruments—The Company follows the relevant GAAP guidance regarding the determination and measurement of the fair value of financial instruments in which fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction value hierarchy which requires an entity to maximize the use of observable inputs when measuring fair value. The guidance describes the following three levels of inputs that may be used in the methodology to measure fair value:
Level 1 — Quoted prices available in active markets for identical investments as of the reporting date;
Level 2 — Inputs other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date; and,
Level 3 — Unobservable inputs, which are to be used in situations where there is little or no market activity for the asset or liability and wherein the reporting entity makes estimates and assumptions related to the pricing of the asset or liability including assumptions regarding risk.
A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
The Company has the following financial instruments to which it had to consider fair values and had to make fair assessments:
Foreign currency hedges for which the fair values are measured as a Level 2 instrument.
Common share-based put option for which the fair value was measured as Level 2 instrument.
Short-term investments for which the fair values are measured as a Level 1 instrument.
The Company believes the carrying amount of its commercial line of credit, term loan, and capital lease obligations are a reasonable estimate of their fair value due to the short remaining maturity of these items and/or their fluctuating interest rates.
Revenue Recognition and Deferred Revenue—The Company derives its revenues primarily from professional and support services, which includes revenue generated from subscription and transaction fees pertaining to services delivered over our exchanges or from our application service provider (“ASP”) platforms, software development projects and associated fees for consulting, implementation, training, and project management provided to customers using our systems, and business process outsourcing revenue ("BPO"). Sales and value-added taxes are not included in revenues, but rather are recorded as a liability until the taxes assessed are remitted to the respective taxing authorities.
In accordance with the Financial Accounting Standards Board ("FASB"), GAAP, and Securities and Exchange Commission Staff Accounting ("SEC") accounting guidance on revenue recognition the Company considers revenue earned and realizable when: (a) persuasive evidence of the sales arrangement exists, (b) the arrangement fee is fixed or determinable, (c) service delivery or performance has occurred, (d) customer acceptance has been received, if contractually required, and (e) collectability of the arrangement fee is probable. The Company typically uses signed contractual agreements as persuasive evidence of a sales arrangement. We apply the provisions of the relevant FASB accounting pronouncements related to all transactions involving the license of software where the software deliverables are considered more than inconsequential to the other elements in the arrangement. For contracts that contain multiple deliverables, we analyze the revenue arrangements in accordance with the appropriate authoritative guidance, which provides criteria governing how to determine whether goods or services that are delivered separately in a bundled sales arrangement should be considered as separate units of accounting for the purpose of revenue recognition. Deliverables are accounted for separately if they meet all of the following criteria: a) the delivered item has value to the customer on a stand-alone basis; b) there is objective and reliable evidence of the fair value of the undelivered items; and c) if the arrangement includes a general right of return relative to the delivered items, the delivery or performance of the undelivered items is probable and substantially controlled by the Company.
The Company begins to recognize revenue from license fees for its ASP products upon granting customer access to the respective processing platform. Transaction services fee revenue for this use of our exchanges or ASP platforms is recognized as the transactions occur and are generally billed in arrears. Revenues from BPO arrangements, which include data entry and call center services, and insurance certificate creation and tracking services, are recognized as the services are performed. Service fees for hosting arrangements are recognized over the requisite service period. Revenue derived from the licensing of third party software products in connection with sales of the Company’s software licenses is recognized upon delivery together with the Company’s licensed software products. Fees for training, data conversion, installation, and consulting services fees are recognized as revenue when the services are performed. Revenue for maintenance and support services are recognized ratably over the term of the support agreement.
Software development arrangements involving significant customization, modification or production are accounted for in accordance with the appropriate technical accounting guidance issued by the FASB using the percentage-of-completion method. The Company recognizes revenue using periodic reported actual hours worked as a percentage of total expected hours required to complete the project arrangement and applies the percentage to the total arrangement fee.
Deferred revenue includes payments or billings that have been received or made prior to performance and, in certain cases, cash collections and pertain to maintenance and support, initial setup or registration fees under hosting agreements, and software license fees received in advance of delivery and acceptance. Approximately $8.3 million and $5.0 million of deferred revenue were included in accounts receivable at December 31, 2011 and 2010, respectively.
Accounts Receivable and the Allowance for Doubtful Accounts Receivable—Reported accounts receivable as of December 31, 2011 include $31.1 million of trade receivables net of the $1.7 million estimated allowance for doubtful accounts receivable. Included in accounts receivable is $5.2 million of unbilled receivables. There was approximately $8.3 million of deferred revenue included in accounts receivable, billed and unbilled, at December 31, 2011. At December 31, 2010 the Company had $26.0 of trade accounts receivable net of the $1.1 million estimated allowance for doubt accounts receivable, and included $4.6 million of unbilled receivables. There was approximately $5.0 million of deferred revenue included in accounts receivable, billed and unbilled, at December 31, 2010. Management specifically analyzes accounts receivable and historical bad debts, write-offs, customer concentrations, customer credit-worthiness, current economic trends, and changes in our customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. Bad debt expense was $1.0 million, $1.2 million, and $321 thousand for the year ended December 31, 2011, 2010, and 2009 respectively.
Costs of Services Provided—Costs of services provided consist of data processing costs, customer support costs including personnel costs to maintain our proprietary databases, costs to provide customer call center support, hardware and software expense associated with transaction processing systems and exchanges, telecommunication and computer network expense, and occupancy costs associated with facilities where these functions are performed. Depreciation expense is not included in costs of services provided.
Goodwill and Indefinite-Lived Intangible Assets— Goodwill represents the cost in excess of the fair value of the identifiable net assets from the businesses that we acquire. In accordance with the relevant FASB accounting guidance, goodwill is tested for impairment at the reporting unit level on an annual basis or on an interim basis if an event occurred or circumstances change that would indicate that fair value of a reporting unit decreased below its carrying value. Potential impairment indicators include a significant change in the business climate, legal factors, operating performance indicators, competition, and the sale or disposition of a significant portion of the business. In 2011 the Company is applying the new guidance concerning goodwill impairment evaluation. In accordance with this new technical guidance the Company first assessed certain qualitative factors to determine whether the existence of events or circumstances would indicate that it is more likely than not that the fair value of any of our reporting units was less than their than its carrying amount. If after assessing the totality of events or circumstances, we were to determine that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then we would not perform the two-step quantitative impairment testing described further below.
The aforementioned two-step quantitative testing process involves comparing the reporting unit carrying values to their respective fair values; we determine fair value of our reporting units by applying the discounted cash flow method using the present value of future estimated net cash flows. If the fair value of a reporting unit exceeds its carrying value, then no further testing is required. However, if a reporting unit’s fair value were to be less than its carrying value, we would then determine the amount of the impairment charge, if any, which would be the amount that the carrying value of the reporting unit’s goodwill exceeded its implied value. Projections of cash flows are based on our views of growth rates, operating costs, anticipated future economic conditions and the appropriate discount rates relative to risk and estimates of residual values. We believe that our estimates are consistent with assumptions that marketplace participants would use in their estimates of fair value. The use of different estimates or assumptions for our projected discounted cash flows (e.g., growth rates, future economic conditions, discount rates and estimates of terminal values) when determining the fair value of our reporting units could result in different values and may result in a goodwill impairment charge. We perform our annual goodwill impairment evaluation and testing as of September 30 each year. During the years ended December 31, 2011, 2010, and 2009, we had no impairment of our reporting unit goodwill balances.
During 2011 the Company recorded $60.1 million of goodwill in connection with the recent acquisitions of ADAM, Inc. ("ADAM") acquired in February 2011 and $20.4 million of goodwill in connection with the acquisition of Health Connect Systems ("HCS") acquired in November 2011. Also during 2011 the Company recognized a net reduction in the amount of $257 thousand in regards to adjustments to recorded goodwill in connection with business acquisitions made during the years 2008 to 2010. During 2010 the Company recorded $19.2 million of goodwill in connection with the acquisitions of MCN Technology & Consulting (“MCN”), Trades Monitor Australia Pty (“Trades Monitor”), Connective Technologies, Inc. (“Connective Technologies”), E-Trek Solutions PTE Ltd, (“E-Trek”), and USIX Technology, S.A.
Changes in the carrying amount of goodwill for the year ended December 31, 2011 and 2010 are as follows:
 
December 31, 2011
 
December 31, 2010
 
(In thousands)
Beginning Balance
$
180,602

 
$
157,245

Additions
80,259

 
19,211

Foreign currency translation adjustments
(1,643
)
 
4,146

Ending Balance
$
259,218

 
$
180,602

The Company’s indefinite-lived assets are associated with the estimated fair value of the contractual customer relationships existing with the property and casualty insurance carriers in Australia using our property and casualty ("P&C") data exchange and with ten corporate customers using our client relationship management (“CRM”) platform in the United States. Prior to these underlying business acquisitions Ebix had pre-existing contractual relationships with these carriers and corporate clients. The contracts are renewable at little or no cost, and Ebix intends to continue to renew these contracts indefinitely and has the ability to do so. The proprietary technology supporting the P&C data exchange and CRM platform, and used to deliver services to these carriers and corporate clients, cannot feasibly be effectively replaced in the foreseeable future, and accordingly the cash flows forthcoming from these customers are expected to continue indefinitely. With respect to the determination of the indefinite life, the Company considered the expected use of these intangible assets, historical experience in renewing or extending similar arrangements, and the effects of competition, and concluded that there were no indications from these factors to suggest that the expected useful life of these customer relationships would be finite. The Company concluded that no legal, regulatory, contractual, or competitive factors limited the useful life these intangible assets and therefore their life was considered to be indefinite, and accordingly the Company expects these customer relationships to remain the same for the foreseeable future. The fair values of these indefinite-lived intangible assets were based on the analysis of discounted cash flow (“DCF”) models extended out fifteen to twenty years. In that indefinite-lived does not imply an infinite life, but rather means that the subject customer relationships are expected to extend beyond the foreseeable time horizon, we utilized fifteen to twenty year DCF projections, as the valuation models that were applied consider a fifteen to twenty year time frame to be an indefinite period. Indefinite-lived intangible assets are not amortized, but rather are tested for impairment annually. We perform our annual impairment testing of indefinite-lived intangible assets as of September 30th of each year. During the years ended December 31, 2011, 2010, and 2009, we had no impairments to the recorded balances of our indefinite-lived intangible assets. We perform the impairment test for our indefinite-lived intangible assets by comparing the asset’s fair value to its carrying value. An impairment charge is recognized if the asset’s estimated fair value is less than its carrying value.
Purchased Intangible Assets—Purchased intangible assets represent the estimated fair value of acquired intangible assets from the businesses that we acquire in the U.S. and foreign countries in which we operate. These purchased intangible assets include customer relationships, developed technology, informational databases, and trademarks. We amortize these intangible assets on a straight-line basis over their estimated useful lives, as follows:
 
Life
Category
(yrs)
Customer relationships
4-20

Developed technology
3-12

Trademarks
5-15

Non-compete agreements
5

Database
10

Intangible assets as of December 31, 2011 and December 31, 2010 are as follows:
 
 
December 31,
 
 
2011
 
2010
 
 
(In thousands)
Intangible assets:
 
 
 
 
Customer relationships
 
$
40,289

 
$
24,001

Developed technology
 
11,640

 
9,343

Trademarks
 
2,188

 
218

Non-compete agreements
 
418

 
418

Backlog
 
140

 
140

Database
 
207

 
213

Total intangibles
 
54,882

 
34,333

Accumulated amortization
 
(16,496
)
 
(11,759
)
Intangibles, net
 
$
38,386

 
$
22,574

Indefinite-lived intangibles:
 
 
 
 
Customer/territorial relationships
 
$
30,453

 
$
30,552

Income Taxes— The Company follows the asset and liability method of accounting for income taxes pursuant to the pertinent guidance issued by the FASB. Deferred income taxes are recorded to reflect the tax consequences on future years of differences between the tax basis of assets and liabilities, and operating loss and tax credit carry forwards, and their financial reporting amounts at each period end using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. In assessing the realizability of the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. A valuation allowance is recorded for the portion of the deferred tax assets that are not expected to be realized based on the levels of historical taxable income and projections for future taxable income over the periods in which the temporary differences will be deductible.
The Company follows the provisions of FASB accounting guidance on accounting for uncertain income tax positions. The guidance utilizes a two-step approach for evaluating tax positions. Recognition (“Step 1”) occurs when an enterprise concludes that a tax position, based solely on its technical merits is more likely than not to be sustained upon examination. Measurement (“Step 2”) is only addressed if Step 1 has been satisfied. Under Step 2, the tax benefit is measured at the largest amount of benefit, determined on a cumulative probability basis that is more likely than not to be realized upon final settlement. As used in this context, the term “more likely than not” is interpreted to mean that the likelihood of occurrence is greater than 50%.
Foreign Currency Translation—The functional currency of the Company’s foreign subsidiaries is generally the local currency of the country in which the subsidiary operates. The assets and liabilities of foreign subsidiaries are translated into U.S. dollars at the rates of exchange at the balance sheet dates. Income and expense accounts are translated at the average exchange rates in effect during the period. Gains and losses resulting from translation adjustments are included as a component of other comprehensive income in the accompanying consolidated balance sheets. Foreign exchange transaction gains and losses that are derived from transactions denominated in a currency other than the subsidiary’s functional currency are included in the determination of net income.
Advertising—Advertising costs are expensed as incurred. Advertising costs amounted to $1.0 million, $973 thousand, and $548 thousand in 2011, 2010 and 2009, respectively, and are included in sales and marketing expenses in the accompanying consolidated statements of income.
Sales Commissions —Certain sales commission paid with respect to subscription-based revenues are deferred and subsequently amortized into operating expenses ratably over the term of the related customer subscription contracts. As of December 31, 2011 and 2010, $402 thousand and $100 thousand, respectfully, of sales commissions were deferred and included in other current assets on the accompanying consolidated balance sheet. During the year ended December 31, 2011 the Company amortized $465 thousand of previously deferred sales commissions and included this expense in sales and marketing costs on the accompanying consolidated income statement.
Property and Equipment—Property and equipment is stated at cost less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the assets’ estimated useful lives. Leasehold improvements are amortized over the shorter of the expected life of the improvements or the remaining lease term. Repairs and maintenance are charged to expense as incurred and major improvements that extend the life of the asset are capitalized and depreciated over the expected remaining life of the related asset. Gains and losses resulting from sales or retirements are recorded as incurred, at which time related costs and accumulated depreciation are removed from the Company’s accounts. Fixed assets acquired in acquisitions are recorded at fair value. The estimated useful lives applied by the Company for property and equipment are as follows:
 
Life
Asset Category
(yrs)
Computer equipment
5

Furniture, fixtures and other
7

Buildings
30

Leasehold improvements
Life of the lease

Recent Accounting Pronouncements
The following is a summary brief discussion of recently released accounting pronouncements that are pertinent to the Company’s business:
In June 2011, the FASB issued new financial reporting guidance regarding the reporting of "other comprehensive income, or (OCI)". This guidance revises the manner in which entities present comprehensive income in their financial statements. The new guidance requires entities to report components of comprehensive income in either (1) a continuous statement of comprehensive income, or (2) two separate but consecutive statements. Under the two-statement approach, the first statement would include components of net income, which is consistent with the income statement format used currently, and the second statement would include components of OCI. Under either method, entities must display adjustments for items that are reclassified from OCI to net income in both net income and OCI. The new reporting guidance does not change the items that must be reported in OCI. This new reporting standard is effective for interim and annual periods beginning after December 15, 2011, however, the FASB recently decided to defer the effective date for the part of this new guidance that would require adjustments of items out of accumulated other income to be presented as components of both net income and other comprehensive income in financial statements. Those changes would have been effective for annual and interim periods beginning on or after December 15, 2011, but are now deferred until FASB can adequately evaluate the costs and benefits of this presentation requirement. After adoption, the guidance must be applied retrospectively for all periods presented in the financial statements. The Company will adopt this new guidance promptly when required, however we do not expect that it will have a material impact on our financial position or operating results as the only element of comprehensive income relevant to Ebix is in regards to cumulative foreign currency translation adjustments.
In September 2011, the FASB issued new technical guidance regarding an entity's evaluation of goodwill for possible impairment. Under this new guidance an entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If after assessing the totality of events or circumstances, an entity determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step quantitative impairment test is unnecessary. This new technical guidance was effective for fiscal years beginning after December 15, 2011. Early adoption was permitted for annual and interim goodwill impairment evaluations performed as of a date before September 2011, if an entity's financial statements for the most recent annual or interim period have not yet been issued. The Company elected to adopt early and accordingly applied this new guidance to its 2011 annual impairment evaluation of goodwill.
In December 2010, the Emerging Issues Task Force of the FASB reached consensus regarding the disclosure of pro forma information for business combinations. This new guidance addressed the diversity in practice concerning the interpretation of the pro forma revenue and earnings disclosure requirements for business combinations. The guidance specifies that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination had occurred as of the beginning of the comparable prior annual reporting period only. The amendments also expand the supplemental pro forma disclosures to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The amendments affect any public entity that enters into business combinations that are material on an individual or aggregate basis. The new guidance was applicable to business combinations for which the acquisition date is on or after the first annual reporting period beginning on or after December 15, 2010. The Company adopted this new guidance in 2011 and applied it to the disclosures regarding our recent acquisitions of ADAM, completed in February 2011, and Health Connect, completed in November 2011.
In January 2010, the FASB issued new guidance regarding disclosures about fair value measurements. The guidance requires additional disclosures and clarifies some existing disclosure requirements about fair value measurement as set forth in earlier related guidance. Specifically this new guidance requires a reporting entity to disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the transfers; and for fair value measurements using significant unobservable inputs, a reporting entity should present separately information about purchases, sales, issuances, and settlements. Also a reporting entity should provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements. This new guidance was effective for interim and annual reporting periods beginning after December 15, 2009. The Company adopted and applied this technical guidance in 2010.
In September 2009, FASB issued amended revenue recognition guidance related to revenue arrangements with multiple deliverables. This new pronouncement: (a) provides application guidance on whether multiple deliverables exist in an arrangement with a customer, and if so, how the arrangement consideration should be separated and allocated; (b) requires an entity to allocate revenue using estimated selling prices of deliverables if vendor-specific objective evidence (“VSOE”) or third party evidence (“TPE”) of selling prices is not available; and, (c) eliminates the use of the “residual method” to allocate revenue. This guidance was to be applied on a prospective basis for revenue arrangements entered into in fiscal years beginning on or after June 15, 2010, with earlier application permitted. Alternatively, an entity can elect to adopt new guidance on a retrospective basis. The Company adopted this new guidance in 2011 and its adoption did not have a material impact on the Company's consolidated results of operation.
Also in September 2009, the FASB issued new guidance related to certain revenue arrangements that include software elements and provides guidance on determining whether software deliverables in an arrangement that include tangible products are within the scope of existing software revenue guidance. This guidance is to be applied on a prospective basis for revenue arrangements entered into in fiscal years beginning on or after June 15, 2010, with earlier application permitted. Alternatively, an entity can elect to adopt new guidance on a retrospective basis. The Company adopted this new guidance in 2011 and its adoption did not have a material impact on the Company's consolidated results of operation.
v2.4.0.6
Earnings per Share and Stock Splits
12 Months Ended
Dec. 31, 2011
Earnings Per Share and Stock Splits [Abstract]  
Earnings per Share and Stock Splits [Text Block]
Earnings per Share and Stock Splits
The basic and diluted earnings per share (“EPS”), and the basic and diluted weighted average shares outstanding for all periods presented in the accompanying Consolidated Statements of Income have been adjusted to reflect the retroactive effect of the Company’s three-for-one stock split dated January 4, 2010.
 
 
For the year ended
December 31,
 
 
(In thousands, except per share amounts)
Earnings per share:
 
2011
 
2010
 
2009
Basic earnings per common share
 
$
1.89

 
$
1.69

 
$
1.24

Diluted earnings per common share
 
$
1.75

 
$
1.51

 
$
1.03

Basic weighted average shares outstanding
 
37,742

 
34,845

 
31,398

Diluted weighted average shares outstanding
 
40,889

 
39,018

 
38,014


To calculate diluted earnings per share, interest expense related to convertible debt excluding imputed interest, was added back to net income as follows:
 
 
For the year ended
December 31,
 
 
(in thousands)
 
 
2011
 
2010
 
2009
Net income
 
$
71,378

 
$
59,019

 
$
38,822

Convertible debt interest (excludes imputed interest)
 

 
10

 
466

Net income for diluted earnings per share purposes
 
$
71,378

 
$
59,029

 
$
39,288

Diluted shares outstanding *
 
40,889

 
39,018

 
38,014

Diluted earnings per common share *
 
$
1.75

 
$
1.51

 
$
1.03


*
 
Adjusted to reflect the effect of the 3-for-1 stock split dated January 4, 2010
Basic EPS is equal to net income divided by the weighted average number of shares of common stock outstanding for the period. Diluted EPS takes into consideration common stock equivalents which for the Company consist of stock options, restricted stock, and convertible debt. With respect to stock options, diluted EPS is calculated as if the Company had additional common stock outstanding from the beginning of the year or the date of grant or issuance, net of assumed repurchased shares using the treasury stock method. With respect to convertible debt, diluted EPS is calculated as if the debt instrument had been converted at the beginning of the reporting period or the date of issuance, whichever is later. Diluted EPS is equal to net income plus interest expense on convertible debt, divided by the combined sum of the weighted average number of shares outstanding and common stock equivalents. At December 31, 2011 there were 90,000 potentially issuable shares with respect to stock options which could dilute EPS in the future but which were excluded from the diluted EPS calculation because presently their effect is anti-dilutive. Diluted shares outstanding determined as follows for each years ending December 31, 2011, 2010, and 2009.
 
 
For the year ended
December 31,
 
 
2011
 
2010
 
2009
Basic wtd. avg. shares outstanding
 
37,741,927

 
34,845,126

 
31,398,263

Incremental shares for common stock equivalents
 
3,147,516

 
4,173,187

 
6,616,094

Diluted shares outstanding
 
40,889,443


39,018,313

 
38,014,357


On October 10, 2009 the Company’s Board of Directors approved a 3-for-1 stock split on shares of its common stock (“the “2010 Stock Split”) in the form of a stock dividend. The 2010 Stock Split was effective as of January 4, 2010 for all shares outstanding as of the close of business on December 21, 2009 (the record date). As a result of the 2010 Stock Split, every share of the Company’s common stock was converted into three shares of the Company’s common stock. Each stockholder’s percentage ownership in the Company and proportional voting power remains unchanged after the 2010 Stock Split. Furthermore, as a result of the 2010 Stock Split approximately 23.0 million additional shares of common stock were issued and the Company’s issued and outstanding common stock increased to approximately 34.5 and 34.4 million shares, respectively. The issuance of the additional shares has been accounted for as a stock dividend by the transfer of approximately $2.3 million from additional paid-in capital to common stock. Shares reserved for issuance under the Company’s 1996 Incentive Compensation Program, as amended and restated in 2006, and for the Company’s outstanding convertible promissory notes issued in August 2009 were similarly adjusted.

v2.4.0.6
Business Acquisitions
12 Months Ended
Dec. 31, 2011
Business Combinations [Abstract]  
Business Combination Disclosure [Text Block]
Business Acquisitions
The Company’s business acquisitions are accounted for under the purchase method of accounting in accordance with the FASB’s accounting guidance on the accounting for business combinations. Accordingly, the consideration paid by the Company for the businesses it purchases is allocated to the assets and liabilities acquired based upon their estimated fair values as of the date of the acquisition. The excess of the purchase price over the estimated fair values of assets acquired and liabilities assumed is recorded as goodwill. Recognized goodwill pertains to the value of the expected synergies to be derived from combining the operations of the businesses we acquire including the value of the acquired workforce.

The Company's consistent practice is that immediately after a business acquisitions made all functions including infrastructure, sales and marketing, administrative, product development, are integrated tightly to ensure that efficiencies are maximized and redundancies eliminated. The company integrates all and where appropriate centralizes certain key functions such as product development, information technology, marketing, sales, administration after an acquisition, to also ensure that the Company can rapidly leverage cross-selling opportunities and to realize cost efficiencies. While doing so, the Company's resources and infrastructure is leveraged to work across multiple functions making it neither practical nor feasible to accurately and separately track and disclose the earnings from the business combinations we have executed after they have been acquired.
2011 Acquisitions
Health Connect Systems. — Effective November 15, 2011, Ebix acquired Health Connect Systems, Inc. (“Health Connect”). Health Connect, with operations based out of Fresno, California, is leading online Exchange for buyers and sellers of health insurance and employee benefits. Ebix acquired all of the outstanding stock of Health Connect for aggregate cash consideration in the amount of $18.0 million, which was funded with internal resources using available cash reserves. The former shareholders of Health Connect retain the right to earn up to an additional $4.0 million if certain incremental revenue targets are achieved over the two-year anniversary date subsequent to the effective date of the acquisition. In summary in regards to the Health Connect acquisition the Company recorded goodwill in the amount of $20.4 million, and definite lived assets with respect to acquired customer relationships in the amount of $1.2 million and acquired developed technology in the amount of $256 thousand.

ADAM, Inc. —Effective February 7, 2011 Ebix closed the merger of Atlanta, Georgia based ADAM, Inc. ("ADAM") with a wholly owned subsidiary of Ebix. Under the terms of the merger agreement, all of the ADAM shareholders received, at a fixed exchange ratio, 0.3122 shares of Ebix common stock for each share of ADAM common stock. Ebix issued approximately 3.65 million shares of Ebix common stock with a fair value of $87.5 million pursuant to the merger agreement. This issuance of shares increased the Company's diluted common share count to approximately 42.07 million shares as of acquisition date. In addition Ebix paid approximately $944 thousand in cash for unexercised ADAM stock options. ADAM is a leading provider of health information and benefits technology solutions in the United States. $23.1 million of Adam's operating revenues recognized since February 7, 2011 are included in the Company's revenues reported in its consolidated statement of income for the year ended December 31, 2011. The revenue derived from ADAM's portfolio of products and services is included in the Company's Exchange division. The Company accounted for this acquisition by recording $15.4 million of intangible assets pertaining to customer relationships, $2.1 million of intangible assets pertaining to acquired technology, and $2.0 million of intangible assets pertaining to acquired trademarks and the remaining portion of the purchase price consideration paid to goodwill in the amount of $60.1 million.
2010 Acquisitions
During the year ended December 31, 2010, Ebix completed several relatively small business acquisitions which are detailed further in the following paragraphs.
During the Company’s third quarter ending September 30, 2010, Ebix: (a) acquired all of the stock of Brazilian-based USIX Technology, S.A. (“USIX”), a provider of broker systems and related services for insurance carriers across Latin America; and, (b) acquired all of the stock of Singapore based E-Trek Solutions PTE Ltd, (“E-Trek”) a provider of underwriting and claims processing services for the insurance industry in Singapore.
During the Company’s second quarter ending June 30, 2010, Ebix: (a) acquired all of the assets of Houston, Texas based Connective Technologies, Inc. (“Connective Technologies”) a premier provider of on-demand software solutions for property and casualty insurance carriers in the United States; and, (b) acquired all of the stock of Australian based Trades Monitor a provider of insurance related software services for the Australian insurance industry.
During the Company’s first quarter ending March 31, 2010, Ebix acquired all of the stock of Brazilian based MCN Technology & Consulting (“MCN”) a provider of software development and consulting services for insurance companies, insurance brokers, and financial institutions in Brazil.
The aggregate net cash consideration paid by Ebix for all of these acquisitions was $15.2 million and the former shareholders or owners of the acquired companies retained the right to earn up to an additional $12.9 million if certain incremental revenue targets were achieved over the two-year anniversary date subsequent to their respective effective dates of the acquisition. The Company had originally accrued $8.7 million upon analysis of the fair value of the contingent liabilities and the expected performance of the operating units. Since then $381 thousand of the accrued earnout liability has been paid, and as of December 31, 2011 $7.6 million of the estimated contingent liability remains included in the Company's consolidated balance sheet. The results of operations for each of the business combinations described in the preceding paragraphs have been included in the Company’s consolidated financial statements as of and since each of their respective effective dates of the acquisition.

2009 Acquisitions
E-Z Data, Inc. — Effective October 1, 2009, the Company acquired E-Z Data, Inc. ("E-Z Data'), with principal offices in Pasadena, CA, a provider of on-demand customer relationship management (“CRM”) solutions for insurance companies, brokers, agents, investment dealers, and financial advisers. The Company acquired the business operations and intellectual property of E-Z Data for an aggregate purchase price of $50.53 million paid to E-Z Data’s shareholders consisting of cash consideration in the amount of $25.53 million paid at closing and $25.00 million in shares of our common stock valued at the average market closing price for the three most recent days prior to September 30, 2009. Furthermore, under the terms of the agreement the E-Z Data sellers held a put option exercisable during the thirty-day period immediately following the two-year anniversary date of the business acquisition, which if exercised would have enabled them to sell the underlying shares of common stock back to the Company at a price of $15.11 per share, which represented a 10% discount off of the per-share value established on the effective date of the closing of the acquisition. This put option is described in more detail in Note 11. The Company funded the cash portion of the purchase price using the proceeds from the Company’s two convertible promissory notes issued in August 2009. The Company added the E-Z Data’s product line to its Exchange division. In summary in regards to the E-Z Data acquisition the Company recorded goodwill in the amount of $43.8 million, an indefinite-life intangible asset of $14.2 million with respect to existing contractual relationships with corporate clients, definite lived intangible assets with respect to acquired retail customer relationships in the amount of $3.8 million , $418 thousand with respect and to non-compete agreements, and $2.3 million with respect to acquired developed technology.
Peak Performance Solutions, Inc. — Effective October 1, 2009, Ebix acquired Peak Performance Solutions, Inc. ("Peak"). Pursuant to the terms of the stock purchase agreement, the Company paid Peak’s shareholders $8.0 million in cash for all of Peak’s outstanding stock. Peak, with operations based out of Columbus, OH, provides comprehensive, end-to-end insurance software and technology solutions to insurance companies and self-insured entities for workers’ compensation claims processing, risk management administration, and managed care tracking. The acquisition agreement also provided for additional contingent consideration up to an amount of $1.5 million if certain revenue targets were achieved over the one-year period subsequent to the effective date of the acquisition. At the acquisition date management estimated that the full $1.5 million earn out would be achieved and paid out, and therefore the amount was accrued and included in the original purchase price allocation. The Company funded this acquisition with internal resources using available cash reserves. In summary in regards to the Peak acquisition the Company recorded goodwill in the amount of $7.5 million, and intangible assets with respect to acquired customer relationships in the amount of $2.1 million and acquired developed technology in the amount of $509 thousand. During 2010 the Company recognized a $1.5 million reduction to reported general and administrative expenses associated with the reversal of the previously recorded contingent liability earnout obligation because during the subsequent 2010 earnout period the defined revenue targets were not achieved by the Peak operations.
Facts Services, Inc. — Effective May 1, 2009, Ebix, Inc. acquired Facts Services, Inc. ("Facts"), a Miami, Florida based provider of fully automated software solutions for health care payers specializing in claims processing, employee benefits, and managed care. Facts’ products are available in either an ASP or self-hosted model. The Company paid the Facts shareholders $7.0 million for all of Facts’ stock. The Company included Facts’ operations with its Pittsburgh health services division operating under the name of EbixHealth, which includes operating results of Facts starting with the second quarter of 2009. Ebix financed this acquisition with internal resources using available cash reserves. The Company recognized $4.7 million of goodwill and $2.2 million of intangible assets, primarily customer relationships in connection with the acquisition of Facts.
The following table summarizes the net assets acquired as a result of the acquisitions that occurred during 2011 and 2010:
 
 
December 31,
(In thousands)
 
2011
 
2010
Current assets
 
$
9,710

 
$
1,511

Property and equipment
 
1,626

 
411

Intangible assets
 
20,970

 
5,028

Deferred tax asset, (net)
 
9,294

 

Goodwill
 
80,516

 
19,194

Total assets acquired
 
122,116

 
26,144

Less: liabilities assumed
 
(15,696
)
 
(10,427
)
Net assets acquired
 
$
106,420

 
$
15,717


The following table summarizes the separately identified intangible assets acquired as a result of the acquisitions that occurred during 2011 and 2010:
 
 
December 31,
 
 
2011
 
2010
 
 
 
 
Weighted
Average
 
 
 
Weighted
Average
Intangible asset Category
 
Fair Value
 
Useful Life
 
Fair Value
 
Useful Life
 
 
(in thousands)
 
(in years)
 
(in thousands)
 
(in years)
Customer relationships
 
$
16,594

 
11.7

 
$
3,778

 
13.2

Developed technology
 
2,406

 
5.3

 
1,058

 
7.6

Non-compete agreements
 

 

 
192

 
10

Trademarks
 
1,970

 
13.4

 

 

Total acquired intangible assets
 
$
20,970

 
11.2

 
$
5,028

 
11.9

Estimated aggregate future amortization expense for the intangible assets recorded as part of the business acquisitions described above and other prior acquisitions is as follows:
 
 
Estimated Amortization Expenses (in thousands):
 
For the year ended December 31, 2012
$
4,741

For the year ended December 31, 2013
4,687

For the year ended December 31, 2014
4,380

For the year ended December 31, 2015
3,713

For the year ended December 31, 2016
3,395

For the years ended after December 31, 2017
17,470

 
 

 
$
38,386

 
 

The Company recorded $4.8 million, $3.7 million, and $2.4 million of amortization expense related to acquired intangible assets for the year ended December 31, 2011, 2010, and 2009, respectively.
v2.4.0.6
Pro Forma Financial Information
12 Months Ended
Dec. 31, 2011
Pro Forma Financial Information [Abstract]  
Pro Forma Financial Information [Text Block]
Pro Forma Financial Information (re: 2011 and 2010 acquisitions)
This unaudited pro forma financial information is provided for informational purposes only and does not project the Company’s results of operations for any future period:
 
 
As Reported
2011
 
Pro Forma
2011
 
As Reported
2010
 
Pro Forma
2010
 
 
 
 
(unaudited)
 
 
 
(unaudited)
 
 
(In thousands)
Revenue
 
$
168,969

 
$
179,052

 
$
132,188

 
$
174,254

Net Income
 
$
71,378

 
$
72,086

 
$
59,019

 
$
62,533

Basic EPS*
 
$
1.89

 
$
1.89

 
$
1.69

 
$
1.62

Diluted EPS*
 
$
1.75

 
$
1.75

 
$
1.51

 
$
1.47

*
 
Adjusted to reflect the effect of the 3-for-1 stock split dated January 4, 2010; see Note 2.
The preceding unaudited pro forma financial information for the year 2011 includes twelve months of pro forma financial results from the acquisitions of ADAM and Health Connect as if these acquisitions had been made on January 1, 2010, whereas the Company’s reported financial statements for the year 2011 include only approximately eleven months of financial results for ADAM, and approximately two months of financial results for Health Connect.
Similarly, the unaudited pro forma financial information for the year 2010 includes twelve months of pro forma financial results from the acquisitions of ADAM, Health Connect, MCN, Trades Monitor, Connective Technologies, E-Trek, and USIX as if these acquisitions had been made on January 1, 2010, whereas the Company’s reported financial statements for the year 2010 include only the following actual financial results: none for ADAM and Health Connect, eleven months for MCN; nine months for Trades Monitor; seven months for Connective Technologies; six months for E-Trek and, four months for USIX.

v2.4.0.6
Commercial Bank Financing Facility
12 Months Ended
Dec. 31, 2011
Debt Disclosure [Abstract]  
Debt Disclosure [Text Block]
Commercial Bank Financing Facility
On April 20, 2011 the Company entered into a seventh amendment to a credit agreement (the “Seventh Amendment”) with Bank of America, N.A. ("BOA"), as administrative agent, which further amended the initial credit agreement dated February 12, 2010, as previously amended. The Seventh Amendment increased the existing revolving credit facility from $25 million to $35 million with its term ending on April 20, 2014, and the $10 million secured term loan was increased to $20 million and now amortizes over a three year period with quarterly principal and interest payments that commenced on June 30, 2011 and a final payment of all remaining outstanding principal and accrued interest due on April 20, 2014. The entire credit facility has a variable interest rate currently set at LIBOR plus 1.50%. The Company deferred the origination costs in connection with this expanded and amended credit facility, and is amortizing these costs into interest expense over the three-year life of the credit agreement. As of December 31, 2011 the Company's Consolidated Balance Sheet includes $148 thousand of remaining deferred financing costs.
The revolving credit facility is used by the Company to fund working capital requirements primarily in support of current operations, expanding operations and associated growth, and strategic business acquisitions. The underlying financing agreement contains financial covenants regarding the Company's annualized EBITDA, fixed charge coverage ratio, and leverage ratio, as well as certain restrictive covenants pertaining to such matters incurring new debt, the aggregate amount of repurchases of the Company's equity shares, and the consummation of new business acquisitions. The Company currently is in compliance with all such financial and restrictive covenants, and there have been no violations thereof or in the event of noncompliance, appropriate waivers having been obtained.
Originally in February 2010 the Company entered into the initial credit facility with BOA. The financing was comprised of a two-year, $25 million secured revolving credit facility, and a $10 million secured term loan which amortized over a two year period with quarterly principal and interest payments that commenced on March 31, 2010 and a final payment of all remaining outstanding principal and accrued interest that was to be due on February 12, 2012. The interest rate applicable to the entire BOA credit facility was LIBOR plus 1.50%.
At December 31, 2011 the outstanding balance on the revolving line of credit was $31.8 million and the facility carried an interest rate of 1.75%. This balance is included in long-term liabilities section of the Consolidated Balance Sheet. During the twelve months ending December 31, 2011 the average and maximum outstanding balance on the revolving line of credit was $20.9 million and $34.8 million, respectively, and the weighted average interest rate was 1.74%.

At December 31, 2010 the outstanding balance on the revolving line of credit was $25.0 million and the facility carried an interest rate of 1.77%. This balance was included in the long-term liabilities section of the Consolidated Balance Sheets. During the twelve month period ending December 31, 2010 the average and maximum outstanding balance on the revolving line of credit was $18.7 million and $25.0 million respectively, and the weighted average interest rate was 1.78%.
At December 31, 2011, the outstanding balance on the term loan was $15.0 million of which $6.7 million is due within twelve months. This term loan also carried an interest rate of 1.75%. During the twelve months ended December 31, 2011 payments in the aggregate amount of $6.3 million were made against the term loan and the weighted average interest rate was 1.74%. The balance of the term loan is included in the respective current and long-term liabilities section of the Consolidated Balance Sheets.

At December 31, 2010 the outstanding balance on the term loan was $5.0 million and it carried an interest rate of 1.77%. During the twelve months ended December 31, 2010 payments in the aggregate amount of $5.0 million were made against the term loan, and the weighted average interest rate was 1.78%. The balance of the term loan was included in the current liabilities section of the Consolidated Balance Sheets.


v2.4.0.6
Convertible Debt
12 Months Ended
Dec. 31, 2011
Convertible Debt [Abstract]  
Convertible Debt [Text Block]
Convertible Debt
The counterparties to our convertible debt arrangements are and were significant shareholders of the Company’s common stock.
In August 2009 the Company entered into a Convertible Note Purchase Agreement with the Rennes Foundation in an original amount of $5.0 million, which amount is convertible into shares of common stock at a conversion price of $16.66 per share (the "Note"). The Note had a 0.0% stated interest rate and no warrants were issued. The Note was to be payable in full at its maturity date of August 25, 2011. The Company applied imputed interest on this convertible note using an interest rate of 1.75% and discounted their carrying value accordingly. During the twelve months ending December 31, 2011 the Company recognized $21 thousand of interest expense on the Note. With respect to this convertible note, and in accordance with its terms, as was understood between the Company and the holder, upon a conversion election by the holder, the Company had to satisfy the related original principal balance in cash and could satisfy the conversion spread (that being the excess of the conversion value over the related original principal component) in either cash or stock at option of the Company. On April 18, 2011, the Rennes Foundation elected to fully convert the Note. The Company settled this conversion election by paying $5.00 million in cash with respect to the principal component, and paying $1.8 million in cash with respect to the conversion spread. The Company also recognized a pre-tax gain in the amount of $108 thousand with respect the settlement of this convertible debt.
Also in August 2009 the Company issued two convertible promissory notes raising a total of $20.0 million. Specifically the Company entered into a Convertible Note Purchase Agreement with Whitebox in an original amount of $19.0 million, which amount was convertible into shares of common stock at a conversion price of $16.00 per share. The note had a 0.0% stated interest rate and no warrants were issued. The note was to payable in full at its maturity date of August 26, 2011. Also at this time the Company entered into a Convertible Note Purchase Agreement with IAM Mini-Fund 14 Limited, a fund managed by Whitebox, in an original amount of $1.0 million, which amount was convertible into shares of common stock at a conversion price of $16.00 per share. The note had a 0.0% stated interest rate and no warrants were issued. The note was to be payable in full at its maturity date of August 26, 2011. The Company also applied imputed interest on these convertible notes using an interest rate of 1.75% and discounted their carrying value accordingly. During the twelve months ending December 31, 2010 the Company recognized $328 thousand of interest expense in regards to these notes. With respect to each of these convertible notes, and in accordance with the terms of the notes, as understood between the Company and each of the holders, upon a conversion election by the holder the Company was to satisfy the related original principal balance in cash and could satisfy the conversion spread (that being the excess of the conversion value over the related original principal component) in either cash or stock at option of the Company. On November 10, 2010 Whitebox VSC, Ltd and IAM Mini-Fund 14 Limited elected to fully convert all of the remaining Convertible Promissory Notes. The Company settled these conversion elections by paying $20 million in cash with respect to the principal component, paying $2.5 million in cash for a portion of the conversion spread, and issuing 283,378 shares of Ebix common stock for the remainder of the conversion spread. The Company also recognized a pre-tax gain in the amount of $24 thousand with respect the settlement of this convertible debt.
In regards to the convertible promissory notes issued in August 2009 and discussed in the preceding paragraphs the Company followed the FASB accounting guidance related to the accounting for convertible debt instruments that may be partially or wholly settled in cash upon conversion. This guidance requires an entity to account separately for the liability and equity components of these types of convertible debt instruments in a manner that reflects the Company’s nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods. This guidance requires bifurcation of the debt and equity components, re-classification of the then derived equity component, and then accretion of the resulting discount on the debt as part of interest expense recognized in the income statement. The application of this accounting guidance with respect to these convertible debt instruments resulted in the Company recording $24.2 million as the carrying amount of the debt component, and $852 thousand as debt discount and the carrying amount for the equity component. The bifurcation of these convertible debt instruments was based on the calculated fair value of similar debt instruments at August 2009 that did not have a conversion feature and associated equity component. The annual interest rate determined for such similar debt instruments in August 2009 was 1.75%. The resulting discount was amortized to interest expense over the two year term of the convertible notes. We recognized non-cash interest expense of $21 thousand and $328 thousand during years ended December 31, 2011 and 2010, respectively, as related to the amortization of the discount on the liability component. For federal income tax purposes, the issuance of the convertible notes is considered to be an issuance of debt with an original issue discount and the amortization of this discount in future periods is not deductible for tax purposes. Therefore, upon issuance of the debt, we recorded an adjustment of $318 thousand to increase our deferred tax liabilities (included in other liabilities) and a corresponding reduction of the related equity component which is in included in additional paid-in capital. Because the principal amount of the convertible notes must be settled in cash upon conversion, the convertible notes will only impacted diluted earnings per share when the average price of our common stock exceeded the conversion price, and then only to the extent of the incremental shares associated with the conversion spread. We included the effect of the additional shares that could have been issued from conversion in our diluted net income per share calculation using the treasury stock method.
The Company also previously had a $15.0 million convertible note with Whitebox, originally dated July 11, 2008. On February 3, 2010, Whitebox fully converted the remaining principal on the $15 million note in the amount of $4.39 million and accrued interest in the amount of $62 thousand into 476,662 shares of the Company’s common stock.
As of December 31, 2011 the Company has no remaining convertible debt obligations.

v2.4.0.6
Commitments and Contingencies
12 Months Ended
Dec. 31, 2011
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies Disclosure [Text Block]
Commitments and Contingencies
Contingencies—Between July 14, 2011 and July 21, 2011, securities class action complaints were filed against the Company and certain of its officers in the United States District Court for the Southern District of New York and in the United States District Court for the Northern District of Georgia.  The complaints assert claims against (i) the Company and the Company's CEO and CFO for alleged violations of Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rule 10b-5 promulgated thereunder and (ii) the Company's CEO and CFO as alleged controlling persons.  The complaints generally allege false statements in earnings reports, SEC filings, press releases, and other public statements that allegedly caused the Company's stock to trade at artificially inflated prices. Plaintiff seeks an unspecified amount of damages.  The New York action has been transferred to Georgia and has been consolidated with the Georgia action, now styled In re: Ebix, Inc. Securities Litigation, Civil Action No. 1:11-CV-02400-RSW (N.D. Ga.).  In September 2011, a related derivative complaint was filed against the Company and each of its Directors in the Superior Court of Fulton County, Georgia, styled Nauman v. Raina, et al., Civil Action File No. 2011-cv-205276. The derivative action has been stayed pending resolution of the Defendants' Motion to Dismiss in the federal action. A Consolidated Amended Complaint (“CAC”) was filed by Plaintiffs on November 28, 2011, in the federal action. On January 12, 2012, the Company filed a Motion to Dismiss the CAC, which raises various defenses that the CAC fails to state a claim. Plaintiffs filed their Response on February 23, 2012. The Company believes that the complaints are legally insufficient.
In the normal course of business, the Company is involved in various other claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate likely disposition of these matters will not have a material adverse effect on the Company's business, consolidated financial position, results of operations or liquidity.
Lease Commitments—The Company leases office space under non-cancelable operating leases with expiration dates ranging through 2018, with various renewal options. Capital leases range from three to five years and are primarily for computer equipment. There were multiple assets under various individual capital leases at December 31, 2011 and 2010.
Commitments for minimum rentals under non-cancellable leases and debt obligations as of December 31, 2011 were as follows:
Year
 
Debt
 
Capital Leases
 
Operating Leases
 
 
(in thousands)
2012
 
$
6,667

 
$
198

 
$
4,196

2013
 
6,667

 
128

 
3,489

2014
 
33,416

 
20

 
2,615

2015
 

 

 
1,594

2016
 

 

 
1,347

Thereafter
 

 

 
3,246

Total
 
$
46,750

 
$
346

 
$
16,487

Less: amount representing interest
 

 
(46
)
 
 
Present value of obligations under capital leases
 

 
$
300

 
 
Less: current portion
 
(6,667
)
 
(165
)
 
 
Long-term obligations
 
$
40,083

 
$
135

 
 
Rental expense for office facilities and certain equipment subject to operating leases for 2011, 2010 and 2009 was $4.6 million, $4.0 million and $2.7 million, respectively.
Sublease income for 2011, 2010 and 2009 was $0, $145 thousand, $141 thousand, respectively.
Self Insurance—For most of the Company’s U.S. employees, the Company is currently self-insured for its health insurance and has a stop loss policy that limits the individual liability to $100 thousand per person and the aggregate liability to 125% of the expected claims based upon the number of participants and historical claims. As of December 31, 2011 and 2010, the amount accrued on the Company’s consolidated balance sheet was $384 thousand and $269 thousand, respectively. The maximum potential estimated cumulative liability for the annual contract period, which ends in September 2012, is $2.5 million.
v2.4.0.6
Share-based Compensation
12 Months Ended
Dec. 31, 2011
Share-based Compensation [Abstract]  
Share-Based Compensation [Text Block]
Share-based Compensation
Stock Options—The Company accounts for compensation expense associated with stock options issued to employees, Directors, and non-employees based on their fair value, which is calculated using an option pricing model, and is recognized over the service period, which is usually the vesting period. At December 31, 2011, the Company has one equity based compensation plan. No stock options were granted to employees during 2011, 2010 and 2009; however, options were granted to Directors in 2011, 2010 and 2009. Stock compensation expense of $537 thousand, $444 thousand and $216 thousand was recognized during the years ending December 31, 2011, 2010 and 2009, respectively, on outstanding and unvested options.
The fair value of options granted during is estimated on the date of grant using the Black-Scholes option pricing model. The following table includes the weighted- average assumptions used in estimating the fair values and the resulting weighted-average fair value of stock options granted in the periods presented:
 
 
Year Ended December 31, 2011
 
Year Ended December 31, 2010
 
Year Ended December 31, 2009
Weighted average fair values of stock options granted
 
$
20.58

 
$
21.70

 
$
17.58

Expected volatility
 
59.0
%
 
54.9
%
 
63.2
%
Expected dividends
 
.74
%
 
%
 
%
Weighted average risk-free interest rate
 
.33
%
 
.72
%
 
1.16
%
Expected life of stock options
 
3.5 years

 
3.5 years

 
3.5 years

A summary of stock option activity for the years ended December 31, 2011, 2010 and 2009 is as follows:
 
Within Plans
 
Outside Plan
 
Weighted
Average
Exercise Price
 
Weighted
Average
Remaining
Contractual
Term (Years)
 
Aggregate Intrinsic
Value