v2.4.0.8
Document and Entity Information Document (USD $)
12 Months Ended
Dec. 31, 2013
Mar. 14, 2014
Jun. 30, 2013
Entity Information [Line Items]      
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, 2013    
Document Fiscal Year Focus 2013    
Document Fiscal Period Focus FY    
Amendment Flag false    
Entity Common Stock, Shares Outstanding   38,369,855  
Entity Well-known Seasoned Issuer No    
Entity Voluntary Filers No    
Entity Current Reporting Status Yes    
Entity Public Float     $ 301,779,798
v2.4.0.8
Consolidated Statements of Income (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Income Statement [Abstract]      
Operating revenue $ 204,710 $ 199,370 $ 168,969
Operating expenses:      
Costs of services provided 40,471 38,133 33,589
Product development 26,798 24,825 19,208
Sales and marketing 15,848 16,687 13,642
General and administrative 36,480 33,562 26,268
Amortization and depreciation 10,107 9,155 7,514
Total operating expenses 129,704 122,362 100,221
Operating income 75,006 77,008 68,748
Interest income 518 441 557
Interest expense (1,226) (1,541) (759)
Non-operating income (loss) - put options 342 190 647
Non-operating expense - securities litigation (4,226) 0 0
Foreign exchange gain (loss) (262) 1,931 4,302
Income before income taxes 70,152 78,029 73,495
Income tax provision (10,878) (7,460) (2,117)
Net income $ 59,274 $ 70,569 $ 71,378
Basic earnings per common share (in dollars per share) $ 1.58 $ 1.91 $ 1.89
Diluted earnings per common share (in dollars per share) $ 1.53 $ 1.80 $ 1.75
Basic weighted average shares outstanding (in shares) 37,588 36,948 37,742
Diluted weighted average shares outstanding (in shares) 38,642 39,100 40,889
v2.4.0.8
Consolidated Statements of Comprehensive Income (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Statement of Comprehensive Income [Abstract]      
Net income $ 59,274 $ 70,569 $ 71,378
Other comprehensive income (loss):      
Foreign currency translation adjustments (5,376) (2,394) (11,403)
Total other comprehensive income (loss) (5,376) (2,394) (11,403)
Comprehensive income $ 53,898 $ 68,175 $ 59,975
v2.4.0.8
Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2013
Dec. 31, 2012
Current assets:    
Cash and cash equivalents $ 56,674 $ 36,449
Short-term investments 801 971
Trade accounts receivable, less allowances of $1,049 and $1,157, respectively 39,070 37,298
Deferred tax asset, net 256 1,835
Other current assets 5,548 5,116
Total current assets 102,349 81,669
Property and equipment, net 8,528 10,082
Goodwill 337,068 326,748
Intangibles, net 50,734 52,591
Indefinite-lived intangibles 30,887 30,887
Deferred tax asset, net 20,616 11,245
Other assets 3,682 3,724
Total assets 553,864 516,946
Current liabilities:    
Accounts payable and accrued liabilities 17,818 15,497
Accrued payroll and related benefits 6,482 5,431
Short term debt 13,062 11,344
Liability – securities litigation settlement 4,226 0
Current portion of long term debt and capital lease obligation, net of discount of $10 and $13, respectively 827 915
Put option liability 845 0
Deferred revenue 18,918 19,888
Current deferred rent 254 237
Other current liabilities 106 113
Total current liabilities 66,675 56,690
Revolving line of credit 22,840 37,840
Other long term debt and capital lease obligation, less current portion, net of discount of $38 and $78, respectively 20,124 31,592
Put option liability 0 1,186
Deferred revenue 391 375
Long term deferred rent 2,185 1,449
Other liabilities 13,141 6,429
Total liabilities 135,639 149,791
Commitments and Contingencies, Note 6      
Temporary equity, Note 20 5,000 5,000
Stockholders’ equity:    
Convertible Series D Preferred stock, $.10 par value, 500,000 shares authorized, no shares issued and outstanding at December 31, 2013 and 2012 0 0
Common stock, $.10 par value, 60,000,000 shares authorized, 38,088,391 issued and 38,047,882 outstanding at December 31, 2013 and 37,131,777 issued and 37,091,268 outstanding at December 31, 2012 3,805 3,709
Additional paid-in capital 164,216 164,346
Treasury stock (40,509 shares as of December 31, 2013 and December 31, 2012) (76) (76)
Retained earnings 257,574 201,094
Accumulated other comprehensive loss (12,294) (6,918)
Total stockholders’ equity 413,225 362,155
Total liabilities, temporary equity and stockholders’ equity 553,864 516,946
Contingent Accrued Earn-out Acquisition Consideration [Member]
   
Current liabilities:    
Contingent liability for accrued earn-out acquisition consideration 4,137 3,265
Contingent liability for accrued earn-out acquisition consideration $ 10,283 $ 14,230
v2.4.0.8
Consolidated Balance Sheets (Parentheticals) (USD $)
In Thousands, except Share data, unless otherwise specified
Dec. 31, 2013
Dec. 31, 2012
Current Assets:    
Allowance for doubtful accounts $ 1,049 $ 1,157
Unamortized debt discount, current 10 13
Unamortized debt discount, noncurrent $ 38 $ 78
Stockholders' Equity:    
Preferred stock, par value (per share) $ 0.1 $ 0.1
Preferred stock, shares authorized 500,000 500,000
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
Common stock, par value (per share) $ 0.10 $ 0.10
Common stock, shares authorized 60,000,000 60,000,000
Common stock, shares issued 38,088,391 37,131,777
Common stock, shares outstanding 38,047,882 37,091,268
Treasury stock, shares 40,509 40,509
v2.4.0.8
Consolidated Statements Stockholders' Equity (USD $)
Total
Common Stock
Treasury Stock
Additional Paid-in Capital
Retained Earnings
Accumulated Other Comprehensive Loss
Beginning Balance, Value at Dec. 31, 2010 $ 231,268,000 $ 3,602,000 $ (76,000) $ 153,221,000 $ 67,642,000 $ 6,879,000
Beginning Balance, Issued Shares at Dec. 31, 2010   36,057,791        
Beginning Balance, Treasury Shares at Dec. 31, 2010     (40,509)      
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net income 71,378,000       71,378,000  
Cumulative translation adjustment (11,403,000)         (11,403,000)
Exercise of stock options, Shares   69,509        
Exercise of stock options, Value 51,000 8,000   43,000    
Repurchase of common stock, Shares   (3,510,973)        
Repurchase of common stock, Value (63,659,000) (351,000)   (63,308,000)    
Settlement on conversion of convertible debt, Shares   0        
Settlement on conversion of convertible debt, Value (1,851,000) 0   (1,851,000)    
Deferred compensation and amortization related to options and restricted stock 2,205,000     2,205,000    
Business acquisition, number of common shares issued   3,650,914        
Shares subscribed for business acquisition 87,476,000 365,000   87,111,000    
APIC adjustment for stock options 2,111,000     2,111,000    
Vesting of restricted stock, Shares   151,144        
Vesting of restricted stock, Value 0 14,000   (14,000)    
Forfeiture of certain shares to satisfy exercise costs and the recipients income tax obligations related to stock options exercised and restricted stock vested 0          
Dividends paid (1,461,000)       (1,461,000)  
Ending Balance, Value at Dec. 31, 2011 316,115,000 3,638,000 (76,000) 179,518,000 137,559,000 (4,524,000)
Ending Balance, Issued Shares at Dec. 31, 2011   36,418,385        
Ending Balance, Treasury Shares at Dec. 31, 2011     (40,509)      
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net income 70,569,000       70,569,000  
Cumulative translation adjustment (2,394,000)         (2,394,000)
Exercise of stock options, Shares   1,361,542        
Exercise of stock options, Value 1,020,000 137,000   883,000    
Repurchase of common stock, Shares   (983,818)        
Repurchase of common stock, Value (18,374,000) (99,000)   (18,275,000)    
Deferred compensation and amortization related to options and restricted stock 2,083,000     2,083,000    
Share subscribed for business acquisition, Shares   296,560        
Equity instruments 0 30,000   (30,000)    
APIC adjustment for stock options 1,162,000     1,162,000    
Vesting of restricted stock, Shares   89,308        
Vesting of restricted stock, Value 0 8,000   (8,000)    
Forfeiture of certain shares to satisfy exercise costs and the recipients income tax obligations related to stock options exercised and restricted stock vested, Shares   (50,200)        
Forfeiture of certain shares to satisfy exercise costs and the recipients income tax obligations related to stock options exercised and restricted stock vested (992,000) (5,000)   (987,000)    
Dividends paid (7,034,000)       (7,034,000)  
Ending Balance, Value at Dec. 31, 2012 362,155,000 3,709,000 (76,000) 164,346,000 201,094,000 (6,918,000)
Ending Balance, Issued Shares at Dec. 31, 2012 37,131,777 37,131,777        
Ending Balance, Treasury Shares at Dec. 31, 2012     (40,509)      
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net income 59,274,000       59,274,000  
Cumulative translation adjustment (5,376,000)         (5,376,000)
Exercise of stock options, Shares   1,251,633        
Exercise of stock options, Value 2,161,000 125,000   2,036,000    
Repurchase of common stock, Shares   (250,900)        
Repurchase of common stock, Value (2,492,000) (25,000)   (2,467,000)    
Deferred compensation and amortization related to options and restricted stock 1,941,000     1,941,000    
APIC adjustment for stock options 37,000     37,000    
Vesting of restricted stock, Shares   76,576        
Vesting of restricted stock, Value 0 8,000   (8,000)    
Forfeiture of certain shares to satisfy exercise costs and the recipients income tax obligations related to stock options exercised and restricted stock vested, Shares   (120,695)        
Forfeiture of certain shares to satisfy exercise costs and the recipients income tax obligations related to stock options exercised and restricted stock vested (1,681,000) (12,000)   (1,669,000)    
Dividends paid (2,794,000)       (2,794,000)  
Ending Balance, Value at Dec. 31, 2013 $ 413,225,000 $ 3,805,000 $ (76,000) $ 164,216,000 $ 257,574,000 $ (12,294,000)
Ending Balance, Issued Shares at Dec. 31, 2013 38,088,391 38,088,391        
Ending Balance, Treasury Shares at Dec. 31, 2013     (40,509)      
v2.4.0.8
Consolidated Statements of Cash Flow (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Net income $ 59,274 $ 70,569 $ 71,378
Adjustments to reconcile net income to cash provided by operating activities:      
Depreciation and amortization 10,107 9,155 7,514
Provision for doubtful accounts 1,147 442 976
Provision for deferred taxes (10,368) (7,505) (5,927)
Unrealized foreign exchange (gain)/losses on forward contracts 0 0 2,346
Unrealized foreign exchange (gain)/losses (237) 443 (5,795)
Unrealized gain on put option (341) (191) (537)
Share-based compensation 1,941 2,083 2,205
Debt discount amortization on convertible debt 42 39 21
Reduction of acquisition earn-out contingent liability (10,253) (699) (2,847)
Changes in current assets and liabilities, net of acquisitions:      
Accounts receivable (3,347) (2,023) (2,903)
Other assets 80 (371) 1,647
Accounts payable and accrued expenses 1,135 730 1,525
Accrued payroll and related benefits (1,866) (594) (532)
Deferred rent (87) (132) (261)
Reserve for potential uncertain income tax return positions 6,817 2,745 200
Liability – securities litigation settlement 4,226 0 0
Other liabilities (225) (2,384) 836
Deferred revenue (983) (12) 796
Net cash provided by operating activities 57,062 72,295 70,642
Cash flows from investing activities:      
Purchases of marketable securities 0 (785) (3,098)
Maturities of marketable securities 107 1,466 7,600
Capital expenditures (1,230) (1,965) (2,829)
Net cash used in investing activities (8,840) (63,375) (13,320)
Cash flows from financing activities:      
Proceeds from / (Repayment) to line of credit, net (15,000) 6,090 6,750
Proceeds from term loan 0 45,000 16,250
Proceeds from the issuance of note payable 0 161 0
Principal payments on term loan obligation (8,938) (19,125) (6,407)
Repurchase of common stock (2,492) (18,374) (63,659)
Settlement on conversion of convertible debt 0 0 (6,761)
Payments of long term debt (665) (600) 0
Payments for capital lease obligations (277) (284) (300)
Excess tax benefit from share-based compensation 3,237 1,044 644
Proceeds from exercise of common stock options 2,161 1,020 51
Forfeiture of certain shares to satisfy exercise costs and the recipients income tax obligations related to stock options exercised and restricted stock vested (1,681) (992) 0
Dividends paid (2,794) (7,034) (1,461)
Net cash provided (used) by financing activities (26,449) 6,906 (54,893)
Effect of foreign exchange rates on cash and cash equivalents (1,548) (3,073) (2,130)
Net change in cash and cash equivalents 20,225 12,753 299
Cash and cash equivalents at the beginning of the year 36,449 23,696 23,397
Cash and cash equivalents at the end of the year 56,674 36,449 23,696
Supplemental disclosures of cash flow information:      
Interest paid 1,169 1,350 710
Income taxes paid 13,779 8,590 3,796
BSI [Member]
     
Cash flows from investing activities:      
Investments in acquired businesses, net of cash acquired 0 (992) 0
Taimma [Member]
     
Cash flows from investing activities:      
Investments in acquired businesses, net of cash acquired 0 (5,003) 0
Payments of acquisition earn-out contingencies (2,250) 0 0
Fintechnix [Member]
     
Cash flows from investing activities:      
Investments in acquired businesses, net of cash acquired 0 (4,713) 0
Planetsoft [Member]
     
Adjustments to reconcile net income to cash provided by operating activities:      
Unrealized gain on put option (341)    
Cash flows from investing activities:      
Investments in acquired businesses, net of cash acquired 0 (35,078) 0
TriSystems [Member]
     
Cash flows from investing activities:      
Investments in acquired businesses, net of cash acquired 0 (9,277) 0
Curepet, Inc. [Member]
     
Cash flows from investing activities:      
Investment in Curepet, Inc. 0 (2,000) 0
ADAM
     
Cash flows from investing activities:      
Investments in acquired businesses, net of cash acquired 0 0 3,529
MCN
     
Cash flows from investing activities:      
Payments of acquisition earn-out contingencies 0 (1,537) (381)
Qatarlyst [Member]
     
Cash flows from investing activities:      
Investments in acquired businesses, net of cash acquired (4,740) 0 0
USIX [Member]
     
Cash flows from investing activities:      
Payments of acquisition earn-out contingencies (727) (1,466) 0
Health Connect Systems [Member]
     
Cash flows from investing activities:      
Investments in acquired businesses, net of cash acquired 0 0 (17,945)
Payments of acquisition earn-out contingencies 0 (2,000) 0
ConfirmNet
     
Cash flows from investing activities:      
Payments of acquisition earn-out contingencies 0 0 (184)
Facts [Member]
     
Cash flows from investing activities:      
Payments of acquisition earn-out contingencies $ 0 $ (25) $ (12)
v2.4.0.8
Description of Business and Summary of Significant Accounting Policies
12 Months Ended
Dec. 31, 2013
Accounting Policies [Abstract]  
Description of Business and Summary of Significant Accounting Policies
Description of Business and Summary of Significant Accounting Policies
Description of Business— Ebix, Inc. and its subsidiaries (“Ebix” or the “Company”) is an international supplier of on-demand software and e-commerce solutions for the insurance industry. Ebix provides various software solutions and products for the insurance industry ranging from data exchanges, carrier systems, and agency systems, to custom software development for business entities across the insurance industry. The Company's products feature fully customizable and scalable on-demand software designed to streamline the way insurance professionals manage distribution, marketing, sales, customer service, and accounting activities. The Company has its headquarters in Atlanta, Georgia and also conducts operating activities in Australia, Canada, China, India, Japan, New Zealand, Singapore, United Kingdom and Brazil. International revenue accounted for 31.8%, 29.3%, and 28.5% of the Company’s total revenue in 2013, 2012, and 2011, respectively.
The Company’s revenues are derived from four product/service groups. Presented in the table below is the breakout of our revenue streams for each of those product/service groups for the years ended December 31, 2013 , 2012 and 2011.
 
For the Year Ended
 
December 31,
(dollar amounts in thousands)
 
2013
 
2012
 
2011
Exchanges
 
$
163,925

 
$
159,678

 
$
130,638

Broker Systems
 
18,378

 
18,612

 
18,006

Business Process Outsourcing (“BPO”)
 
15,678

 
16,140

 
14,944

Carrier Systems
 
6,729

 
4,940

 
5,381

Totals
 
$
204,710

 
$
199,370

 
$
168,969



Summary of Significant Accounting Policies
Basis of Presentation— The consolidated financial statements include the accounts of Ebix and its wholly owned subsidiaries. The effect of inter-company balances and transactions has been eliminated.

Use of Estimates—The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") 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 those reporting periods. Management has made material estimates primarily with respect to revenue recognition and deferred revenue, accounts receivable, acquired intangible assets, contingent earnout liabilities in connection with business acquisitions, business investments, and the provision for income taxes. Actual results may be materially different from those estimates.
     
ReclassificationCertain of the reported balances and results for prior year or prior quarters, including the notes thereto, have been reclassified to conform to the current year presentation. In particular the short-term and long-term portions of the contingent liability for accrued earn-out acquisition consideration is now disclosed separately in the respective sections of the consolidated balance sheets rather than in other current liabilities or other liabilities. The change in reserve for potential uncertain income tax return positions had been previously netted against the provision for deferred taxes line in the consolidated statements of cash flows, it is now shown separately. Also the excess tax benefits from share-based compensation is now reported as a component of financing cash flows rather than being netted against the provision for deferred taxes as a component of operating cash flows in the consolidated statements of cash flows.
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 their fair value. The carrying value of our short-term investments was $801 thousand and $971 thousand at December 31, 2013 and 2012, 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 valuation 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.
As of December 31, 2013 and 2012 the Company has the following financial instruments to which it had to consider fair values and had to make fair assessments:
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.
Contingent accrued earn-out business acquisition consideration liabilities for which fair values are measured as Level 3 instruments. These contingent consideration liabilities were recorded at fair value on the acquisition date and are remeasured periodically based on the then assessed fair value and adjusted if necessary. The increases or decreases in the fair value of contingent consideration payable can result from changes in anticipated revenue levels and changes in assumed discount periods and rates. As the fair value measure is based on significant inputs that are not observable in the market, they are categorized as Level 3.

Other financial instruments not measured at fair value on the Company's consolidated balance sheets at December 31, 2013 and 2012 but which require disclosure of their fair values include: cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, accrued payroll and related benefits, capital lease obligations debt under the revolving line of credit and term loans with Citibank, and business investments. The estimated fair value of such instruments at December 31, 2013 and 2012 reasonably approximates their carrying value as reported on the consolidated balance sheets.
Additional information regarding the Company's assets and liabilities that are measured at fair value on a recurring basis is presented in the following tables:

 
 
Fair Values at Reporting Date Using*
Descriptions
 
Balance at December 31, 2013
Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)
Significant Other Observable Inputs (Level 2)
Significant Unobservable Inputs (Level 3)
 
 
(In thousands)
Assets
 
 
 
 
 
Available-for-sale securities:
 
 
 
 
 
Commercial bank certificates of deposits
 
$
801

$
801

$

$

Total assets measured at fair value
 
$
801

$
801

$

$

 
 
 
 
 
 
Liabilities
 
 
 
 
 
Derivatives:
 
 
 
 
 
Common share-based put option (a)
 
$
845

$

$
845

$

Contingent accrued earn-out acquisition consideration (b)
 
14,420



14,420

Total liabilities measured at fair value
 
$
15,265

$

$
845

$
14,420

 
 
 
 
 
 
(a) In connection with the acquisition of PlanetSoft effective June 1, 2012, Ebix issued a put option to the PlanetSoft's three shareholders. The put option, which expires in June 2014, is exercisable during the thirty-day period immediately following the two-year anniversary date of the business acquisition, which if exercised would enable them to sell the underlying 296,560 shares of Ebix common stock they received as part of the purchase consideration, back to the Company at a price of $16.86 per share, which represents the per-share value established on the effective date of the closing of Ebix's acquisition of PlanetSoft. In accordance with the relevant authoritative accounting literature a portion of the total purchase consideration was allocated to this put liability based on its initial fair value, which was determined to be $1.4 million using a Black-Scholes model. The inputs used in the valuation of the put option include term, stock price volatility, current stock price, exercise price, and the risk free rate of return.
(b) The income valuation approach is applied and the valuation inputs include the contingent payment arrangement terms, projected cash flows, rate of return, and probability assessments.
* During the year ended December 31, 2013 there were no transfers between fair value Levels 1, 2 or 3.

 
 
Fair Values at Reporting Date Using*
Descriptions
 
Balance at December 31, 2012
Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)
Significant Other Observable Inputs (Level 2)
Significant Unobservable Inputs (Level 3)
 
 
(In thousands)
Assets
 
 
 
 
 
Available-for-sale securities:
 
 
 
 
 
Commercial bank certificates of deposits ($213 thousand is recorded in the long term asset section of the consolidated balance sheets)
 
$
1,184

1,184



Total assets measured at fair value
 
$
1,184

$
1,184

$

$

 
 
 
 
 
 
Liabilities
 
 
 
 
 
Derivatives:
 
 
 
 
 
Common share-based put option (a)
 
$
1,186


1,186


Contingent accrued earn-out acquisition consideration (b)
 
17,495



17,495

Total liabilities measured at fair value
 
$
18,681

$

$
1,186

$
17,495

 
 
 
 
 
 
(a) In connection with the acquisition of PlanetSoft effective June 1, 2012, Ebix issued a put option to the PlanetSoft's three shareholders. The put option, which expires in June 2014, is exercisable during the thirty-day period immediately following the two-year anniversary date of the business acquisition, which if exercised would enable them to sell the underlying 296,560 shares of Ebix common stock they received as part of the purchase consideration, back to the Company at a price of $16.86 per share, which represents the per-share value established on the effective date of the closing of Ebix's acquisition of PlanetSoft. In accordance with the relevant authoritative accounting literature a portion of the total purchase consideration was allocated to this put liability based on its initial fair value, which was determined to be $1.4 million using a Black-Scholes model. The inputs used in the valuation of the put option include term, stock price volatility, current stock price, exercise price, and the risk free rate of return.
(b) The income valuation approach is applied and the valuation inputs include the contingent payment arrangement terms, projected cash flows, rate of return, and probability assessments.
* During the year ended December 31, 2012 there were no transfers between fair value Levels 1, 2 or 3.


     For the Company's assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3), the following table provides a reconciliation of the beginning and ending balances for each category therein, and gains or losses recognized during the year.

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Contingent Liability for Accrued Earn-out Acquisition Consideration
 
Balance at December 31, 2013
 
Balance at December 31, 2012
 
 
(in thousands)
 
 
 
 
 
Beginning balance
 
$
17,495

 
7,590

 
 
 
 
 
Total remeasurement adjustments:
 
 
 
 
       (Gains) or losses included in earnings **
 
(10,253
)
 
(699
)
       (Gains) or losses recorded against goodwill
 

 

       Foreign currency translation adjustments ***
 
730

 
(143
)
 
 
 
 
 
Acquisitions and settlements
 
 
 
 
       Business acquisitions
 
9,425

 
16,258

       Settlements
 
(2,977
)
 
(5,511
)
 
 
 
 
 
Ending balance
 
$
14,420

 
$
17,495

 
 
 
 
 
The amount of total (gains) or losses for the year included in earnings or changes to net assets, attributable to changes in unrealized (gains) or losses relating to assets or liabilities still held at year-end.
 
$
(9,954
)
 
$
(802
)
 
 
 
 
 
** recorded as a component of reported general and administrative expenses
 
 
*** recorded as a component of other comprehensive income within stockholders' equity
 
 



Quantitative Information about Level 3 Fair Value Measurements
The significant unobservable inputs used in the fair value measurement of the Company's contingent consideration liabilities designated as Level 3 are as follows:
  
 
 
 
 
 
 
(in thousands)
 
Fair Value at  December 31, 2013
 
             Valuation Technique
 
Significant Unobservable
Input
Contingent acquisition consideration:
(Taimma, PlanetSoft, TriSystems, and Qatarlyst acquisitions)
 
$14,420
 
Discounted cash flow
 
Expected future annual revenue streams and probability of achievement



  
 
 
 
 
 
 
(in thousands)
 
Fair Value at  December 31, 2012
 
             Valuation Technique
 
Significant Unobservable
Input
Contingent acquisition consideration:
(USIX, HealthConnect, Taimma, PlanetSoft, and TriSystems acquisitions)
 
$17,495
 
Discounted cash flow
 
Expected future annual revenue streams and probability of achievement


Sensitivity to Changes in Significant Unobservable Inputs
As presented in the table above, the significant unobservable inputs used in the fair value measurement of contingent consideration related to business acquisitions are forecasts of expected future annual revenues as developed by the Company's management and the probability of achievement of those revenue forecasts. The discount rate used in these calculations is 1.75%. Significant increases (decreases) in these unobservable inputs in isolation would likely result in a significantly (lower) higher fair value measurement.
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.
The Company follows the relevant technical accounting guidance regarding revenue recognition as issued by the Financial Accounting Standards Board ("FASB") and the Securities and Exchange Commission's ("SEC"). 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 or is reasonably assured, 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 for all arrangement deliverables; 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. Under the relevant accounting guidance, when multiple-deliverables included in an arrangement are to be separated into different units of accounting, the arrangement consideration is allocated to the identified separate units of accounting based on their relative fair values. We determine the relative selling price for a deliverable based on vendor-specific objective evidence of selling price (“VSOE”), if available, or third-party evidence ("TPE") in the alternative if available, or finally our best estimate of selling price (“BESP”), if VSOE or TPE is not available.
The Company begins to recognize revenue from license fees for its exchange (SAAS) and 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 primarily pertain to maintenance and support fees, initial setup or registration fees under hosting agreements, software license fees received in advance of delivery and acceptance, and software development fees paid in advance of completion and delivery. Approximately $6.7 million and $7.0 million of deferred revenue were included in billed accounts receivable at December 31, 2013 and 2012, respectively.
Accounts Receivable and the Allowance for Doubtful Accounts Receivable—Reported accounts receivable as of December 31, 2013 include $31.2 million of trade receivables stated at invoice billed amounts (net of a $1.05 million estimated allowance for doubtful accounts receivable), and $7.9 million of unbilled receivables. Reported accounts receivable at December 31, 2012 include $28.5 million of trade receivables stated at invoice billed amounts (net of a $1.16 million estimated allowance for doubtful accounts receivable), and $8.8 million
of unbilled receivables. The unbilled receivables pertain to certain professional service engagements and long-term development projects for which the timing of billing is tied to contractual milestones. The Company adheres to such contractually stated performance milestones and accordingly issues invoices to customers as per contract billing schedules. Accounts receivable are written off against the allowance for doubtful accounts receivable when the Company has exhausted all reasonable collection efforts. Management specifically analyzes the aging of accounts receivable and historical bad debts, write-offs, customer concentrations, customer credit-worthiness, current economic trends, and changes in our customer payment patterns when evaluating the adequacy of the allowance for doubtful accounts receivable. Bad debt expense was $1.1 million, $442 thousand, and $1.0 million for the year ended December 31, 2013, 2012, and 2011 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. Starting in 2011, the Company applied the then new guidance concerning goodwill impairment evaluation. In accordance with that 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 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, the appropriate discount rates relative to risk, and estimates of residual values and terminal 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, 2013, 2012, and 2011, we had no impairment of our reporting unit goodwill balances.



The following table summarizes the goodwill recorded in connection with the acquisitions that occurred during 2013 and 2012:
Company acquired
 
Date acquired
 
(in thousands)
Qatarlyst ("Qatarlyst")
 
April 2013
 
$
11,136

Total during 2013
 
 
 
$
11,136

 
 
 
 
 
Benefit Software, Inc. ("BSI")
 
March 2012
 
$
3,243

Taimma Communications, Inc. ("Taimma")
 
April 2012
 
7,557

PlanetSoft Holdings, Inc. ("PlanetSoft")
 
June 2012
 
44,116

Fintechnix Pty Limited ("Fintechnix")
 
June 2012
 
3,706

TriSystems, Ltd. ("Trisystems")
 
August 2012
 
8,754

Total during 2012
 
 
 
$
67,376

In addition, during 2012 the Company recorded a $25 thousand increase to goodwill, in connection to a 2009 acquisition, for an earn-out payment not previously recognized.
Changes in the carrying amount of goodwill for the years ended December 31, 2013 and 2012 are as follows:

 
December 31, 2013
 
December 31, 2012
 
(in thousands)
Beginning Balance
$
326,748

 
$
259,218

Additions, net (see Note 3)
11,136

 
67,401

Foreign currency translation adjustments
(816
)
 
129

Ending Balance
$
337,068

 
$
326,748



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 certain large 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 that is 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 of 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, 2013, 2012, and 2011, 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
7-20

Developed technology
3-12

Trademarks
3-15

Non-compete agreements
5

Database
10


Intangible assets as of December 31, 2013 and December 31, 2012, are as follows:
 
December 31,
 
2013
 
2012
 
(In thousands)
Finite-lived intangible assets:
 
 
 
Customer relationships
$
62,408

 
$
57,638

Developed technology
14,630

 
14,025

Trademarks
2,646

 
2,638

Non-compete agreements
538

 
538

Backlog
140

 
140

Database
212

 
212

Total intangibles
80,574

 
75,191

Accumulated amortization
(29,840
)
 
(22,600
)
Finite-lived intangibles, net
$
50,734

 
$
52,591

 
 
 
 
Indefinite-lived intangibles:
 
 
 
Customer/territorial relationships
$
30,887

 
$
30,887



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—Historically the functional currency for the Company's foreign subsidiaries in India and Singapore had been the Indian rupee and Singapore dollar, respectively. As a result of the Company's rapid growth, including the acquisition of PlanetSoft in June 2012, the expansion of its intellectual property research and development activities in its Singapore subsidiary, and the expansion of its product development activities and information technology enabled services for the insurance industry provided by its India subsidiary in support of Ebix's operating divisions across the world (both of which are transacted in U.S. dollars), management undertook a reconsideration of functional currency designations for these two foreign subsidiaries in India and Singapore, and concluded that effective July 1, 2012 the functional currency for these entities should be changed to the U.S. dollar. Management believes that the acquisition of PlanetSoft in combination with the other recent business acquisitions, and the cumulative effect of business acquisitions made over the last few years which necessitated the rapid growth of the Company's operations in India and Singapore, were indicative of a significant change in the economic facts and circumstances that justified the reconsideration and ultimate change in the functional currency. Had the change in the functional currency designation for our India and Singapore subsidiaries not been made, the Company would have incurred and recognized approximately $49 thousand of additional foreign currency exchange gains during the year ended December 31, 2012. Furthermore, a portion of monetary assets and liabilities for these two foreign subsidiaries that are denominated in foreign currencies are re-measured into U.S. dollars at the exchange rates in effect at each reporting date. These corresponding re-measurement gains and losses are included as a component of foreign currency exchange gains and losses in the accompanying Consolidated Statements of Income and amounted to a $151 thousand loss for the year ended December 31, 2012.
The functional currency of the Company's other foreign subsidiaries is the local currency of the country in which the subsidiary operates. The assets and liabilities of these 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 accumulated 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, $1.4 million, and $1.0 million in 2013, 2012, and 2011, 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, 2013 and 2012, $434 thousand and $442 thousand, respectfully, of sales commissions were deferred and included in other current assets on the accompanying Consolidated Balance Sheets. During the years ended December 31, 2013 and 2012 the Company amortized $915 thousand and $1.1 million, respectively, of previously deferred sales commissions and included this expense in sales and marketing costs on the accompanying Consolidated Statements of Income.
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 July 2013, the FASB issued Accounting Standards Update No. 2013-11, "Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists". This accounting standard states that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. This accounting standards update applies to all entities that have unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists at the reporting date. The accounting standards update is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Early adoption is permitted. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The Company will adopt this new standard in 2014, and it may have an effect on how unrecognized tax benefits are accounted for and presented in the Company's balance sheet.
In July 2012, the FASB issued Accounting Standards Update No. 2012-02, "Testing Indefinite-Lived Intangible Assets for Impairment" (the revised standard). The revised standard is intended to reduce the cost and complexity of testing indefinite-lived intangible assets other than goodwill for impairment. It allows companies to perform a qualitative assessment to determine whether further impairment testing of indefinite-lived intangible assets is necessary, similar in approach to the goodwill impairment test. If, after assessing the totality of events and circumstances, an entity concludes that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the entity is not required to take further action. However, if an entity concludes otherwise, then it is required to determine the fair value of the indefinite-lived intangible asset and perform the quantitative impairment test by comparing the fair value with the carrying amount in accordance the related technical accounting guidance. The revised standard is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted. The Company has not yet adopted this new guidance, and accordingly applied quantitative methods to evaluate its indefinite-lived intangible assets for impairment during 2013. The Company expects to adopt this new financial accounting standard in 2014 for use in its annual impairment evaluations of indefinite-lived intangible assets, which are performed as of September of each year.
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. After adoption, the guidance must be applied retrospectively for all periods presented in the financial statements. The Company adopted this new guidance during 2012. It did not 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, and its adoption did not have a material impact on the Company's statements of financial position or operations.
v2.4.0.8
Supplemental Schedule of Noncash Financing Activities
12 Months Ended
Dec. 31, 2013
Supplemental Cash Flow Elements [Abstract]  
Supplemental Schedule of Noncash Financing Activities
Supplemental schedule of noncash financing activities:
Effective June 1, 2012, Ebix acquired PlanetSoft, Inc. for aggregate consideration in the amount of $40.0 million. Under terms of the merger agreement, the former PlanetSoft shareholders received, as part of the aggregate purchase consideration, 296,560 shares of Ebix common stock with a fair value of $5.0 million.
        
Effective February 7, 2011, Ebix acquired ADAM, Inc. for aggregate consideration in the approximate amount of $88.4 million. Under the terms of the merger agreement, all of the ADAM shareholders received 3.65 million shares of Ebix common stock with a fair value of $87.5 million as part of the purchase consideration.
    
v2.4.0.8
Earnings per Share
12 Months Ended
Dec. 31, 2013
Earnings Per Share [Abstract]  
Earnings per Share
Earnings per Share

The basic and diluted earnings per share (“EPS”), and the basic and diluted weighted average shares outstanding for all periods as presented in the accompanying Consolidated Statements of Income are shown below :
 
 
For the year ended
December 31,
 
 
(In thousands, except per share amounts)
Earnings per share:
 
2013
 
2012
 
2011
Basic earnings per common share
 
$
1.58

 
$
1.91

 
$
1.89

Diluted earnings per common share
 
$
1.53

 
$
1.80

 
$
1.75

Basic weighted average shares outstanding
 
37,588

 
36,948

 
37,742

Diluted weighted average shares outstanding
 
38,642

 
39,100

 
40,889


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 and restricted stock. 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. Diluted EPS is equal to net income divided by the combined sum of the weighted average number of shares outstanding and common stock equivalents. At December 31, 2013, 2012, and 2011 there were 315,000, 90,000, and 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 are determined as follows for each years ending December 31, 2013, 2012, and 2011:

 
 
For the year ended
December 31,
 
 
(in thousands)
 
 
2013
 
2012
 
2011
Basic weighted average shares outstanding
 
37,588

 
36,948

 
37,742

Incremental shares for common stock equivalents
 
1,054

 
2,152

 
3,147

Diluted shares outstanding
 
38,642

 
39,100

 
40,889




v2.4.0.8
Business Acquisitions
12 Months Ended
Dec. 31, 2013
Business Combinations [Abstract]  
Business Acquisitions
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 in part 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 practice is that, immediately after a business acquisition is consummated, to tightly integrate all functions including infrastructure, sales and marketing, administration, product development, so as to ensure that efficiencies are maximized and redundancies eliminated. Furthermore the Company centralizes certain key functions such as product development, information technology, marketing, sales, human resources, finance, and other general administrative functions after an acquisition, in order to rapidly leverage cross-selling opportunities and to quickly realize cost efficiencies. By executing this integration strategy it becomes 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.

A significant component of the purchase price consideration for many of the Company's business acquisitions is a potential future cash earnout based on reaching certain specified future revenue targets. The Company recognizes these potential obligations as contingent liabilities as reported on its Consolidated Balance Sheets. As discussed in more detail in Note 1, these contingent consideration liabilities are recorded at fair value on the acquisition date and are remeasured quarterly based on the then assessed fair value and adjusted if necessary. As of December 31, 2013, the total of these contingent liabilities was $14.4 million, of which $10.3 million is reported in long-term liabilities, and $4.1 million is included in current liabilities in the Company's Consolidated Balance Sheet. As of December 31, 2012 the total of these contingent liabilities was $17.5 million of which $14.2 million is reported in long-term liabilities, and $3.3 million is included in current liabilities in the Company's Consolidated Balance Sheet.
    During 2012 the Company received a termination fee in connection with a failed business acquisition. In this regard the Company recorded a reduction to general and administrative expense in the approximate amount of $971 thousand (net of directly related internal operating costs incurred by the Company and a portion of the fee that was paid to our investment banker).
2013 Acquisitions
    During 2013 the Company executed and completed one business acquisition, Qatarlyst. The Company accounted for this acquisition by recording $11.1 million of goodwill, $4.8 million of intangible assets pertaining to customer relationships, and $635 thousand of intangible assets pertaining to acquired technology.
2012 Acquisitions
    During 2012 the Company executed and completed five business acquisitions including PlanetSoft, Inc. which is discussed in more detail below; the other acquisitions were not material individually or in the aggregate. The Company accounted for these other four immaterial business acquisitions by recording in the aggregate $23.3 million of goodwill, $7.6 million of intangible assets pertaining to customer relationships, $1.8 million of intangible assets pertaining to acquired technology, $436 thousand of intangible assets for acquired trade names, and $118 thousand of intangible assets for non-compete agreements.
PlanetSoft — Effective June 1, 2012, Ebix closed the merger of California based PlanetSoft Holdings, Inc. ("PlanetSoft"). Under the terms of the merger agreement the former PlanetSoft shareholders received $35.0 million cash and 296,560 shares of Ebix common stock valued at $16.86 per share or $5.0 million in the aggregate. The cash portion of the cash purchase consideration was funded using internal cash reserves and available capacity from the Company's commercial bank revolving line of credit. Furthermore, under the terms of the agreement the PlanetSoft shareholders hold a put option exercisable during the thirty-day period immediately following the two-year anniversary date of the business acquisition, which if exercised would enable them to sell the underlying shares of common stock back to the Company at a price of $16.86 per share, which represents the per-share value established on the effective date of the closing of Ebix's acquisition of PlanetSoft. The initial fair value of this put option liability was determined to be $1.4 million. This put option is described in more detail in Note 10. PlanetSoft is in the business of powering data exchanges that streamline core insurance operations in the areas of client acquisition, underwriting, and distribution management. $11.4 million of PlanetSoft's operating revenues recognized since June 2012 were included in the Company's revenues reported in its Consolidated Statement of Income for the year ended December 31, 2012. The Company's operating revenues as reported in its Consolidated Statement of Income for the year ended December 31, 2013 include $17.2 million of revenue generated by PlanetSoft operations. The revenue derived from PlanetSoft's operations is included in the Company's Exchange division. The Company accounted for this acquisition by recording $44.1 million of goodwill, $9.8 million of intangible assets pertaining to customer relationships, and $540 thousand of intangible assets pertaining to acquired technology. The former shareholders of PlanetSoft retain the right to earn up to an additional cash consideration if certain incremental revenue targets are achieved over the two-year anniversary date subsequent to the effective date of the acquisition. The currently determined approximate fair value of this contingent consideration liability is $992 thousand.
The following table summarizes the fair value of the consideration transferred, net assets acquired and liabilities assumed as a result of the acquisitions that occurred during 2013 and 2012:
 
 
December 31,
(in thousands)
 
2013
 
2012
Fair value of total consideration transferred
 
 
 
 
Cash
 
$
5,025

 
$
56,112

Equity instruments
 

 
5,000

Contingent earn-out consideration arrangement
 
9,425

 
16,450

Secured promissory note issued
 

 
3,000

Total
 
$
14,450

 
$
80,562

 
 
 
 
 
Fair value of assets acquired and liabilities assumed
 
 
 
 
Cash
 
$
285

 
$
1,049

Other current assets
 
485

 
5,213

Property, plant, and equipment
 
144

 
1,328

Other long term assets
 
507

 
331

Intangible assets
 
5,396

 
20,246

Deferred tax liability
 
(947
)
 
(6,018
)
Current and other liabilities
 
(2,556
)
 
(7,586
)
Put option liability
 

 
(1,377
)
Net assets acquired, excludes goodwill
 
3,314

 
13,186

 
 
 
 
 
Goodwill
 
11,136

 
67,376

 
 
 
 
 
Total net assets acquired
 
$
14,450

 
$
80,562


In addition, during 2012 the Company recorded a $25 thousand increase to goodwill, in connection to a 2009 acquisition, for an earn-out payment not previously recognized.
The following table summarizes the separately identified intangible assets acquired as a result of the acquisitions that occurred during 2013 and 2012:
 
 
December 31,
 
 
2013
 
2012
 
 
 
 
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
 
$
4,761

 
11.0
 
$
17,365

 
10.9
Developed technology
 
635

 
5.0
 
2,327

 
4.5
Non-compete agreements
 

 
0.0
 
118

 
5.0
Trademarks
 

 
0.0
 
436

 
10.0
Total acquired intangible assets
 
$
5,396

 
10.3
 
$
20,246

 
10.1


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 ending December 31, 2014
$
7,244

For the year ending December 31, 2015
6,589

For the year ending December 31, 2016
6,202

For the year ending December 31, 2017
5,791

For the year ending December 31, 2018
5,198

Thereafter
19,710

 
 

 
$
50,734

 
 


The Company recorded $7.3 million, $6.1 million, and $4.8 million of amortization expense related to acquired intangible assets for the years ended December 31, 2013, 2012, and 2011, respectively.
v2.4.0.8
Pro Forma Financial Information (re: 2013 and 2012 acquisitions)
12 Months Ended
Dec. 31, 2013
Pro Forma Financial Information [Abstract]  
Pro Forma Financial Information (re: 2013 and 2012 acquisitions)
Pro Forma Financial Information (re: 2013 and 2012 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.
The aggregated unaudited pro forma financial information pertaining to all of the Company's acquisitions made during 2013 and 2012, which includes the acquisitions of Qatarlyst, BSI, Taimma, PlanetSoft, Fintechnix, and TriSystems as presented in the table below is provided for informational purposes only and does not project the Company's expected results of operations for any future period. No effect has been given in this pro forma information for future synergistic benefits that may still be realized as a result of combining these companies or costs that may yet be incurred in integrating their operations. The 2013 and 2012 pro forma financial information below assumes that all such business acquisitions were made on January 1, 2012, whereas the Company's reported financial statements for 2013 only includes the operating results from the businesses since the effective date that they were acquired by Ebix, and thusly includes only nine months of actual financial results of Qatarlyst. Similarly, the 2012 pro forma financial information below includes a full year of results for Taimma, BSI, PlanetSoft, Fintechnix, TriSystems, and Qatarlyst as if they had been acquired on January 1, 2012, whereas the Company's reported financial statements for the 2012 only includes nine months of actual financial results for BSI and Taimma, seven months for PlanetSoft, seven months for Fintechnix, five months for TriSystems, and no financial results for Qatarlyst.

 
 
As Reported
2013
 
Pro Forma
2013
 
As Reported
2012
 
Pro Forma
2012
 
 
 
 
(unaudited)
 
 
 
(unaudited)
 
 
(In thousands, except per share amounts)
Revenue
 
$
204,710

 
$
205,619

 
$
199,370

 
$
215,004

Net Income
 
$
59,274

 
$
57,966

 
$
70,569

 
$
57,008

Basic EPS*
 
$
1.58

 
$
1.54

 
$
1.91

 
$
1.54

Diluted EPS*
 
$
1.53