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8-K/A - FORM 8-K/A - ACI WORLDWIDE, INC.d540288d8ka.htm
EX-23.2 - EX-23.2 - ACI WORLDWIDE, INC.d540288dex232.htm
EX-99.1 - EX-99.1 - ACI WORLDWIDE, INC.d540288dex991.htm

Exhibit 99.2

UNAUDITED CONDENSED COMBINED PRO FORMA FINANCIAL INFORMATION

The following unaudited pro forma condensed combined statement of income for the year ended December 31, 2012 are presented on a pro forma basis to give effect to the tender offer (the “Offer”) and related transactions as if they had been completed on January 1, 2012. The following unaudited pro forma combined balance sheet as of December 31, 2012 is presented on a pro forma basis to give effect to the offer and related transactions as if they had been completed on December 31, 2012.

The following unaudited pro forma condensed combined financial statements, or the “pro forma financial statements,” were derived from and should be read in conjunction with:

 

   

the consolidated financial statements of ACI Worldwide, Inc. (“ACI”) as of and for the year ended December 31, 2012 and the related notes included in the ACI Form 10-K, filed March 1, 2013, which is incorporated by reference in this Form 8-K/A;

 

   

the consolidated financial statements of Online Resources Incorporated (“ORCC”) as of and for the year ended December 31, 2012 and the related notes included in the ORCC consolidated financial statements, which is filed as Exhibit 99.1 of this form 8-K/A;

The consolidated financial statements of ACI and ORCC as of December 31, 2012 and for the year ended December 31, 2012 have been adjusted in the pro forma financial statements to give effect to items as disclosed in Note 4. The pro forma financial statements should be read in conjunction with the accompanying notes to the pro forma financial statements.

The unaudited pro forma adjustments were based on publicly available information, including the ACI 10-K, and the ORCC 2012 consolidated financial statements provided in Exhibit 99.1 of this Form 8-K/A. The unaudited pro forma adjustments were also based on certain assumptions and estimates that ACI believes are reasonable based on such publicly available information. Additional information may exist that could materially affect the assumptions and estimates and related pro forma adjustments. Pro forma adjustments have been included only to the extent appropriate information is known, factually supportable and reasonably available to ACI.

The pro forma financial statements have been presented for informational purposes only. The pro forma financial statements are not necessarily indicative of what the combined company’s financial position or results of operations actually would have been had the offer been completed as of the dates indicated. In addition, the pro forma financial statements do not purport to project the future financial position or operating results of the combined company. There were no material transactions between ACI and ORCC during the periods presented in the pro forma financial statements that would need to be eliminated.

The pro forma financial statements have been prepared using the acquisition method of accounting under generally accepted accounting principles in the United States (“U.S. GAAP”). ACI has been treated as the acquirer in the offer for accounting purposes. Assumptions and estimates underlying the pro forma adjustments are described in the accompanying notes, which should be read in conjunction with the pro forma financial statements.

Acquisition accounting is dependent upon certain valuations and other studies that have not yet been completed. Accordingly, the pro forma adjustments are preliminary and have been made solely for the purpose of preparing the pro forma financial statements and are based upon preliminary information available at the time of the preparation of this Form 8-K/A. Differences between these preliminary estimates and the final acquisition accounting may occur and these differences could have a material impact on the pro forma financial statements and the combined company’s future results of operations and financial position.

The pro forma financial statements do not reflect any cost savings or other synergies that the combined company may achieve as a result of the offer or the costs to integrate the operations of ACI and ORCC or the costs necessary to achieve these cost savings and other synergies. The effects of the foregoing items could, individually or in the aggregate, materially impact the pro forma financial statements.


The following table presents unaudited condensed combined pro forma balance sheet data at December 31, 2012 (expressed in thousands of U.S. dollars, except share and per share data) giving effect to the acquisition of ORCC Shares as if such acquisition had occurred at December 31, 2012:

Unaudited Pro Forma Condensed Combined

Balance Sheet

As of December 31, 2012

 

     ACI
Worldwide, Inc.
    Online
Resources
Corporation
(Note 2)
    Pro Forma
Adjustments
(Note 4)
    Pro Forma
Combined
 

ASSETS

        

Current assets

        

Cash and cash equivalents

   $ 76,329      $ 12,213      $ 19,447 (a)    $ 107,989   

Restricted Cash

     —          1,585        —          1,585   

Billed receivables, net of allowances for doubtful accounts

     176,313        21,011        —          197,324   

Accrued receivables

     41,008        —          —          41,008   

Deferred income taxes, net

     34,342        4,713        14,364 (b)      53,419   

Recoverable income taxes

     5,572        —          —          5,572   

Prepaid expenses

     16,746        2,068        —          18,814   

Other current assets

     5,816        2,771        —          8,587   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

     356,126        44,361        33,811        434,298   
  

 

 

   

 

 

   

 

 

   

 

 

 

Property and equipment, net

     41,286        7,470        —          48,756   

Software, net

     129,314        10,325        55,515 (c)      195,154   

Goodwill

     501,141        181,516        (92,570 ) (d)      590,087   

Other intangible assets, net

     127,900        5,922        96,278 (e)      230,100   

Deferred income taxes, net

     63,370        27,992        (29,691 ) (b)      61,671   

Other noncurrent assets

     31,749        8,752        2,726 (b), (f)      43,227   
  

 

 

   

 

 

   

 

 

   

 

 

 

TOTAL ASSETS

   $ 1,250,886      $ 286,338      $ 66,069      $ 1,603,293   
  

 

 

   

 

 

   

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

        

Current liabilities

        

Accounts payable

   $ 33,926      $ 1,966      $ —        $ 35,892   

Accrued employee compensation

     35,194        4,355        —          39,549   

Current portion of term credit facility

     17,500        10,900        19,100 (g)      47,500   

Deferred revenue

     139,863        6,558        (5,256 ) (b)      141,165   

Income taxes payable

     3,542        —          —          3,542   

Deferred income taxes, net

     174        —          —          174   

Accrued and other current liabilities

     36,400        9,387        —          45,787   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities

     266,599        33,166        13,844        313,609   
  

 

 

   

 

 

   

 

 

   

 

 

 

Deferred revenue

     51,519        3,954        (3,954 ) (b)      51,519   

Note payable under term credit facility

     168,750        —          270,000 (g)      438,750   

Note payable under revolving credit facility

     188,000        —          —          188,000   

Deferred income taxes, net

     14,940        —          32,858 (b)      47,798   

Other noncurrent liabilities

     26,721        1,039        1,500 (b)      29,260   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

     716,529        38,159        314,248        1,068,936   
  

 

 

   

 

 

   

 

 

   

 

 

 

Redeemable convertible preferred stock

     —          130,378        (130,378 ) (h)      —     

Stockholders’ equity

        

Common stock

     232        3        (3 ) (h)      232   

Treasury stock

     (186,784     (3,175     3,175 (h)      (186,784

Additional paid-in capital

     534,953        224,578        (224,578 ) (h)      534,953   

Retained earnings

     199,987        (103,615     103,615 (h)      199,987   

Accumulated other comprehensive loss

     (14,031     10        (10 ) (h)      (14,031
  

 

 

   

 

 

   

 

 

   

 

 

 

Total stockholders’ equity

     534,357        117,801        (117,801     534,357   
  

 

 

   

 

 

   

 

 

   

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

   $ 1,250,886      $ 286,338      $ 66,069      $ 1,603,293   
  

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Statements, which are an integral part of these statements.


The following table sets forth unaudited condensed combined pro forma results of operations for the year ended December 31, 2012 (expressed in thousands of U.S. dollars, except share and per share data) giving effect to the acquisition of ORCC Shares as if such acquisition had occurred at January 1, 2012:

Unaudited Pro Forma Condensed Combined

Statement of Income

For the Year Ended December 31, 2012

 

     ACI
Worldwide, Inc.
    Online
Resources
Corporation
(Note 2)
    Pro Forma
Adjustments
(Note 4)
    Pro Forma
Combined
 

Revenues:

        

Software license fees

   $ 221,846      $ —        $ —        $ 221,846   

Maintenance fees

     199,876        4,070        —          203,946   

Services

     131,536        2,936        —          134,472   

Software hosting fees

     113,321        158,850        —          272,171   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     666,579        165,856        —          832,435   
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses:

        

Cost of software license fees (1)

     23,592        —          889 (i)      24,481   

Cost of maintenance, services, and hosting fees (1)

     202,052        85,042        —          287,094   

Research and development

     133,759        —          —          133,759   

Selling and marketing

     87,054        17,019        —          104,073   

General and administrative

     108,747        59,528        —          168,275   

Depreciation and amortization

     37,003        12,478        10,577  (j)      60,058   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     592,207        174,067        11,466        777,740   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     74,372        (8,211     (11,466     54,695   

Other income (expense):

        

Interest income

     914        126        —          1,040   

Interest expense

     (10,417     (1,614     (7,730 ) (k)      (19,761

Other, net

     399        (94     —          305   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other income (expense)

     (9,104     (1,582     (7,730     (18,416
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     65,268        (9,793     (19,196     36,279   

Income tax expense (benefit)

     16,422        (3,137     (7,294 ) (l)      5,991   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 48,846      $ (6,656   $ (11,902   $ 30,288   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) per share information

        

Weighted average shares outstanding

        

Basic

     38,696        N/A        —          38,696   

Diluted

     39,905        N/A        1 (m)      39,906   

Income (loss) per share

        

Basic

   $ 1.26        N/A        $ 0.78   

Diluted

   $ 1.22        N/A        $ 0.76   

 

(1) The cost of software license fees excludes charges for depreciation but includes amortization of purchased and developed software for resale. The cost of maintenance, services, and hosting fees excludes charges for depreciation.

See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Statements, which are an integral part of these statements.


Notes to the Unaudited Pro Forma Condensed Combined Financial Statements

1. Description of Transaction

On March 11, 2013, the ACI Worldwide, Inc. (the “Company” or “ACI”) completed the exchange offer for Online Resources Corporation (“ORCC”) and all its subsidiaries. The Company paid cash of $3.85 per share of common stock for approximately $132.9 million and $127.2 million for the Series A-1 Convertible Preferred Stock for a total purchase price of $260.1 million (the “Merger”). As a leading provider of online banking and full service bill pay solutions, the acquisition of ORCC adds Electronic Bill Presentment and Payment (“EBPP”) solutions as a strategic part of ACI’s Universal Payments portfolio. It also strengthens the Company’s online banking capabilities with complementary technology, and expands the Company’s leadership in serving community banking and credit union customers.

Each outstanding option to acquire ORCC common stock was canceled and terminated at the effective time of the Merger and converted into the right to receive an equivalent number of options to purchase ACI common stock. Each ORCC restricted stock unit was vested immediately prior to the effective time of the Merger and received $3.85 per share.

The Company used $300.0 million of senior bank financing arranged through Wells Fargo Bank, National Association, as Administrative Agent, to fund the acquisition.

2. Basis of Presentation

These pro forma financial statements were prepared using the acquisition method of accounting in accordance with Financial Accounting Standards Board’s Accounting Standards Codification (ASC) 805, Business Combinations, and use the fair value concepts defined in ASC 820, Fair Value Measurements and Disclosures. Certain reclassifications have been made to the historical financial statements of ORCC to conform with ACI’s presentation as detailed in the following tables:

 


     Balance Sheet
as of December 31, 2012
 
     (in thousands and unaudited)  
     Historical
Online  Resources
Corporation
    Reclassification     Reclassified
Online  Resources
Corporation
 

ASSETS

      

Current assets

      

Cash and cash equivalents

   $ 12,213      $ —          12,213   

Restricted Cash

     1,585        —          1,585   

Billed receivables, net

     —          21,011        21,011   

Accounts receivable

     21,011        (21,011     —     

Deferred implementation costs

     2,465        (2,465     —     

Deferred income taxes, net

     4,713        —          4,713   

Prepaid expenses

     —          2,068        2,068   

Prepaid expenses and other current assets

     2,374        (2,374     —     

Other current assets

     —          2,771        2,771   
  

 

 

   

 

 

   

 

 

 

Total current assets

     44,361        —          44,361   

Property and equipment, net

     17,795        (10,325     7,470   

Software, net

     —          10,325        10,325   

Goodwill

     181,516        —          181,516   

Other intangible assets, net

     5,922        —          5,922   

Deferred income taxes, net

     27,992        —          27,992   

Deferred implementation costs, less current portion

     1,447        (1,447     —     

Other noncurrent assets

     7,305        1,447        8,752   
  

 

 

   

 

 

   

 

 

 

TOTAL ASSETS

   $ 286,338      $ —        $ 286,338   
  

 

 

   

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

      

Current liabilities

      

Accounts payable

   $ 1,966      $ —          1,966   

Accrued expenses

     8,756        (8,756     —     

Accrued employee compensation

     4,355        —          4,355   

Current portion of term credit facility

     10,900        —          10,900   

Deferred revenue

     6,558        —          6,558   

Accrued and other current liabilities

     631        8,756        9,387   
  

 

 

   

 

 

   

 

 

 

Total current liabilities

     33,166        —          33,166   

Deferred revenue

     3,954        —          3,954   

Other noncurrent liabilities

     1,039        —          1,039   
  

 

 

   

 

 

   

 

 

 

Total liabilities

     38,159        —          38,159   

Redeemable convertible preferred stock

     130,378        —          130,378   

Stockholders’ equity

      

Common stock

     3        —          3   

Treasury stock

     (3,175     —          (3,175

Additional paid-in capital

     224,578        —          224,578   

Retained earnings / (Accumulated Deficit)

     (103,615     —          (103,615

Accumulated other comprehensive loss

     10        —          10   
  

 

 

   

 

 

   

 

 

 

Total stockholders’ equity

     117,801        —          117,801   
  

 

 

   

 

 

   

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

   $ 286,338      $ —        $ 286,338   
  

 

 

   

 

 

   

 

 

 


     Statement of Operations
for the year ended December 31, 2012
 
     (in thousands and unaudited)  
     Historical
Online  Resources
Corporation
    Reclassification     Reclassified
Online  Resources
Corporation
 

Revenues:

      

Software license fees

   $ —        $ —          —     

Maintenance fees

     —          4,070        4,070   

Services

     —          2,936        2,936   

Account presentation services

     11,410        (11,410     —     

Payment services

     120,738        (120,738     —     

Relationship management services

     6,076        (6,076     —     

Professional services and other

     27,632        (27,632     —     

Software hosting fees

     —          158,850        158,850   
  

 

 

   

 

 

   

 

 

 

Total revenues

     165,856        —          165,856   
  

 

 

   

 

 

   

 

 

 

Expenses:

      

Cost of software license fees

     —          —          —     

Cost of goods sold

     84,219        (84,219     —     

Implementation and other costs

     5,578        (5,578     —     

Cost of maintenance, services, and hosting fees

     —          85,042        85,042   

Research and development

     —          —          —     

Selling and marketing

     19,624        (2,605     17,019   

Reserve for potential legal liability

     18,300        (18,300     —     

General and administrative

     35,630        23,898        59,528   

Systems and development

     10,716        (10,716     —     

Depreciation and amortization

     —          12,478        12,478   
  

 

 

   

 

 

   

 

 

 

Total expenses

     174,067        —          174,067   
  

 

 

   

 

 

   

 

 

 

Operating loss

     (8,211     —          (8,211

Other income (expense):

      

Interest income

     126        —          126   

Interest expense

     (1,614     —          (1,614

Other, net

     (94     —          (94
  

 

 

   

 

 

   

 

 

 

Total other income (expense)

     (1,582     —          (1,582
  

 

 

   

 

 

   

 

 

 

Loss before income taxes

     (9,793     —          (9,793

Income tax benefit

     (3,137     —          (3,137
  

 

 

   

 

 

   

 

 

 

Net loss

   $ (6,656   $ —        $ (6,656
  

 

 

   

 

 

   

 

 

 

Further review of ORCC’s accounting policies could identify additional differences between the accounting policies of the two companies that, when conformed, could have a material impact on the financial statements of ACI as a combined company. At this time, ACI is not aware of any differences that would have a material impact on the financial statements of ACI as a combined company.

ASC 805 requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the consummation of the combination. In addition, ASC 805 establishes that the consideration transferred be measured at the consummation of the combination at the then-current market price.


ASC 820 defines the term “fair value” and sets forth the valuation requirements for any asset or liability measured at fair value, expands related disclosure requirements and specifies a hierarchy of valuation techniques based on the nature of the inputs used to develop the fair value measures. Fair value is defined in ASC 820 as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” This is an exit price concept for the valuation of the asset or liability. In addition, market participants are assumed to be buyers and sellers in the principal (or the most advantageous) market for the asset or liability. Fair value measurements for an asset assume the highest and best use by these market participants. As a result of these standards, ACI may be required to record assets which are not intended to be used or sold and/or to value assets at fair value measures that do not reflect ACI’s intended use of those assets. Many of these fair value measurements can be highly subjective and it is also possible that other persons, applying reasonable judgment to the same facts and circumstances, could develop and support a range of alternative estimated amounts.

3. Consideration Transferred

The following is a summary of consideration transferred to consummate the offer:

 

      Number of
Shares
     Per Share
Price
     Cash  

(in thousands except per share amounts)

                    

Cash for Common Stock Tendered

     33,235       $ 3.85       $ 127,955   

Cash for restricted stock units

     1,297       $ 3.85         4,992   

Cash for Preferred Shares:

        

Special Value Expansion Fund, LLC

           37,736   

Special Value Opportunities Fund, LLC

           89,434   
        

 

 

 

Total acquisition price

         $ 260,118   
        

 

 

 

The Company incurred approximately $4.7 million in transaction related expenses during the three months ended March 31, 2013, including fees to the investment bank, legal and other professional fees. The transaction related expenses have not been included in the pro forma adjustments.


4. Pro Forma Adjustments

Adjustments included in the column under the heading “Pro Forma Adjustments” represent the following:

 

  (a) To adjust the cash balance as follows:

 

     (in thousands)  

Cash Received from Incremental Term Loan

   $ 300,000   

Payment to ORCC Common share holders

     (132,947

Payment to ORCC preferred share holders

     (127,170

Payment of outstanding ORCC debt balance

     (10,900

Payment of financing costs

     (9,536
  

 

 

 

Net incremental cash

   $ 19,447   
  

 

 

 

 

  (b) A fair value adjustment to net assets acquired of $245.0 million primarily to eliminate ORCC’s existing goodwill and intangible assets as well as certain deferred revenue and corresponding deferred tax adjustments.

The pro forma balance sheet adjustments reflect the effect of the acquisition assuming the acquisition occurred on December 31, 2012.

 

     (in thousands)  

Net assets acquired

   $ 248,179   

Fair value adjustments to net assets acquired

     (245,047

Goodwill

     88,946   

Software

     65,840   

Other intangible assets

     102,200   
  

 

 

 
   $ 260,118   
  

 

 

 

The amounts above are considered preliminary. The allocation of purchase price is based upon certain external valuations and other analyses that have not been completed as of the date of this filing, including, but not limited to, certain tax matters, property and equipment, intangible assets, and deferred revenue. Critical estimates in valuing certain intangible assets include but are not limited to future expected cash flows from customer relationships, and acquired developed technologies; brand awareness and market position, as well as assumptions about the period of time the brand will continue to be used in our product portfolio; and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Accordingly, the purchase price allocations are preliminary and are subject to future adjustments during the maximum one-year allocation period. Differences between these preliminary estimates and the final acquisition accounting may occur and these differences could have a material impact on the pro forma financial statements and the combined company’s future results of operations and financial position.

The Company believes that if there were to be any substantial changes in the purchase price allocation it would be to software or other identifiable intangibles assets. The Company is unable to quantify the effect of potential adjustments until the valuation is finalized. The table below illustrates the effect of a 10% increase or decrease in software and other identifiable intangible assets on the pro forma financial statements:

 

(in thousands)

   Estimated Pro-
Forma Value
     Effect of 10%
Increase
     Effect of 10%
Decrease
 

Software

     65,840         72,424         59,256   

Other indentifiable intangible assets

     102,200         112,420         91,980   

Amortization expense for the above intangible assets is estimated at $14.8 million annually. A 10% decrease or increase in the intangibles value would decrease or increase, respectively, that estimate by $1.5 million annually.

 

  (c) To adjust acquired software as follows:

 

     (in thousands)  

Eliminate existing software balance

   $ (10,325

Add: acquired software balance

     65,840   
  

 

 

 

Total

   $ 55,515   
  

 

 

 

 

  (d) To adjust goodwill as follows:

 

     (in thousands)  

Eliminate existing goodwill

   $ (181,516

Add: preliminary estimate of goodwill for acquisition of ORCC

     48,471   
  

 

 

 

Total

   $ (133,045
  

 

 

 

 

  (e) To adjust acquired intangibles as follows:

 

     (in thousands)  

Eliminate existing intangibles balance

   $ (5,922

Add: trade names

     3,050   

Add: customer relationships

     99,150   
  

 

 

 

Total

   $ 96,278   
  

 

 

 

 

  (f) To adjust for $9,536 thousand of debt issuance costs from the new incremental term loan secured to finance the transaction.

 

  (g) To adjust for the payoff of ORCC’s outstanding debt and the addition of the current portion and long term portion of the new incremental term loan secured to finance the transaction

 

  (h) To eliminate ORCC’s equity accounts

 

  (i) To add the amortization of newly acquired software.

 

  (j) To adjust amortization expense on acquired intangibles as follows:

 

     (in thousands)  

Eliminate amortization for ORCC’s existing acquired intangibles

   $ (3,354

Add: amortization on acquired intangibles

     13,931   
  

 

 

 

Total

   $ 10,577   
  

 

 

 

 

  (k) To adjust interest expense as follows:

 

     (in thousands)  

Eliminate ORCC’s historic interest expense and debt issuance costs

   $ 1,612   

Add: estimated interest expense on incremental term debt

     (7,380

Add: estimated amortization of incremental debt issuance costs

     (1,962
  

 

 

 

Total

   $ (7,730
  

 

 

 

For purposes of calculating the pro forma interest expense, ACI used a rate of 2.46%, the interest rate as of March 31, 2013 on the incremental term loan, for the year ended December 31, 2012.

 

 

  (l) Reflects the income tax benefit of the adjustments described above at ACI’s domestic statutory tax rate of 38%.

 

  (m) To adjust diluted shares for the impact of ORCC’s stock options converted to ACI stock options.