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Condensed Consolidated Financial Statements | 6 Months Ended
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Jun. 30, 2015
Accounting Policies [Abstract] |
Condensed Consolidated Financial Statements |
1. | Condensed Consolidated Financial Statements
The unaudited condensed consolidated financial statements include the accounts of ACI Worldwide, Inc. and its wholly-owned subsidiaries (collectively, the “Company”). All intercompany balances and transactions have been eliminated. The condensed consolidated financial statements as of June 30, 2015, and for the three and six months ended June 30, 2015 and 2014, are unaudited and reflect all adjustments of a normal recurring nature, which are, in the opinion of management, necessary for a fair presentation, in all material respects, of the financial position and operating results for the interim periods. The condensed consolidated balance sheet as of December 31, 2014 is derived from the audited financial statements. The condensed consolidated financial statements contained herein should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2014, filed on February 26, 2015. Results for the three and six months ended June 30, 2015 are not necessarily indicative of results that may be attained in the future. The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States (“U.S. 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 date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Receivables, net Receivables represent amounts billed and amounts earned that are to be billed in the near future. Included in accrued receivables are services and software hosting revenues earned in the current period but billed in the following period as well as license revenues that are determined to be fixed and determinable but that will be billed in future periods.
(in thousands) |  | June 30, 2015 |  |  | December 31, 2014 |
Billed Receivables |  | $ | 177,730 |  |  | $ | 200,392 |
Allowance for doubtful accounts |  |  | (5,058 | ) |  |  | (4,806 | )
Billed, net |  |  | 172,672 |  |  |  | 195,586 |
Accrued Receivables |  |  | 48,297 |  |  |  | 31,520 |
Receivables, net |  | $ | 220,969 |  |  | $ | 227,106 |
Other Current Assets and Other Current Liabilities
(in thousands) |  | June 30, 2015 |  |  | December 31, 2014 |
Settlement deposits |  | $ | 5,198 |  |  | $ | 13,252 |
Settlement receivables |  |  | 5,935 |  |  |  | 11,032 |
Current debt issuance costs |  |  | 5,857 |  |  |  | 6,244 |
Other |  |  | 7,371 |  |  |  | 9,889 |
Total other current assets |  | $ | 24,361 |  |  | $ | 40,417 |
(in thousands) |  | June 30, 2015 |  |  | December 31, 2014 |
Settlement payables |  | $ | 10,682 |  |  | $ | 21,715 |
Accrued interest |  |  | 7,209 |  |  |  | 7,256 |
Vendor financed licenses |  |  | 14,535 |  |  |  | 7,340 |
Royalties payable |  |  | 2,722 |  |  |  | 4,070 |
Other |  |  | 23,038 |  |  |  | 27,124 |
Total other current liabilities |  | $ | 58,186 |  |  | $ | 67,505 |
Individuals and businesses settle their obligations to the Company’s various clients, primarily utility and other public sector clients, using credit or debit cards or via ACH payments. The Company creates a receivable for the amount due from the credit or debit card company and an offsetting payable to the client. Once confirmation is received that the funds have been received, the Company settles the obligation to the client. Due to timing, in some instances, the Company may receive the funds into bank accounts controlled by and in the Company’s name that are not disbursed to its clients by the end of the day resulting in a settlement deposit on the Company’s books. Off Balance Sheet Accounts The Company also enters into agreements with certain clients to process payment funds on their behalf. When an automated clearing house or automated teller machine network payment transaction is processed, a transaction is initiated to withdraw funds from the designated source account and deposit them into a settlement account, which is a trust account maintained for the benefit of the Company’s clients. A simultaneous transaction is initiated to transfer funds from the settlement account to the intended destination account. These “back to back” transactions are designed to settle at the same time, usually overnight, such that the funds are received from the source at the same time as the funds are sent to their destination. However, due to the transactions being with various financial institutions there may be timing differences that result in float balances. These funds are maintained in accounts for the benefit of the client which are separate from the Company’s corporate assets. As the Company does not take ownership of the funds, those settlement accounts are not included in the Company’s balance sheet. The Company is entitled to interest earned on the fund balances. The collection of interest on these settlement accounts is considered in the Company’s determination of its fee structure for clients and represents a portion of the payment for services performed by the Company. The amount of off balance sheet settlement funds as of June 30, 2015 and December 31, 2014 were $223.4 million and $224.9 million, respectively. Goodwill Changes in the carrying amount of goodwill attributable to each reporting unit with goodwill balances during the six months ended June 30, 2015 were as follows:
(in thousands) |  | Americas |  |  | EMEA |  |  | Asia/ Pacific |  |  | Total |
Gross Balance prior to December 31, 2014 |  | $ | 523,914 |  |  | $ | 240,303 |  |  | $ | 64,378 |  |  | $ | 828,595 |
Total impairment prior to December 31, 2014 |  |  | (47,432 | ) |  |  | — |  |  |  | — |  |  |  | (47,432 | )
Balance, December 31, 2014 |  |  | 476,482 |  |  |  | 240,303 |  |  |  | 64,378 |  |  |  | 781,163 |
Goodwill from acquisitions (1) |  |  | (788 | ) |  |  | (229 | ) |  |  | — |  |  |  | (1,017 | )
Foreign currency translation adjustments |  |  | (647 | ) |  |  | (2,068 | ) |  |  | (2,152 | ) |  |  | (4,867 | )
Balance, June 30, 2015 |  | $ | 475,047 |  |  | $ | 238,006 |  |  | $ | 62,226 |  |  | $ | 775,279 |
(1) | Goodwill from acquisitions relates to adjustments in the goodwill recorded for the acquisition of Retail Decisions Europe Limited and Retail Decisions, Inc. (collectively “ReD”) as discussed in Note 2. The purchase price allocation for ReD is preliminary as of June 30, 2015 and accordingly is subject to future changes during the maximum one-year allocation period.
In accordance with ASC 350, Intangibles – Goodwill and Other, we assess goodwill for impairment annually during the fourth quarter of our fiscal year using October 1 balances or when there is evidence that events or changes in circumstances indicate that the carrying amount of the asset may not be recovered. We evaluate goodwill at the reporting unit level and have identified our reportable segments, Americas, EMEA, and Asia/Pacific, as our reporting units. Recoverability of goodwill is measured using a discounted cash flow model incorporating discount rates commensurate with the risks involved. Use of a discounted cash flow model is common practice in impairment testing in the absence of available transactional market evidence to determine the fair value. The calculated fair value was substantially in excess of the current carrying value for all reporting units based upon our October 1, 2014 annual impairment test and there have been no indications of impairment in the subsequent periods. Revenue Vendor Specific Objective Evidence (“VSOE”) ASC 985-605, Revenue Recognition: Software, requires the seller of software that includes post contract customer support (maintenance or “PCS”) to establish VSOE of fair value of the undelivered element of the contract in order to account separately for the PCS revenue. The Company establishes VSOE of fair value of PCS by reference to stated renewals for all identified market segments. The Company also considers factors such as whether the period of the initial PCS term is relatively long when compared to the term of the software license or whether the PCS renewal is significantly below the Company’s normal pricing practices. In determining whether PCS pricing is significantly below the Company’s normal pricing practice, the Company considers the population of stated renewal rates that are within a reasonably narrow range of the median within the identified market segment over the trailing 12 month period. Certain of the Company’s software license arrangements include PCS terms that fail to achieve VSOE of fair value due to non-substantive renewal periods, or contain a range of possible non-substantive PCS renewal amounts. For these arrangements, VSOE of fair value of PCS does not exist and revenues for the software license, PCS and services, if applicable, are considered to be one accounting unit and are therefore recognized ratably over the longer of the contractual service term or PCS term once the delivery of both services has commenced. The Company typically classifies revenues associated with these arrangements in accordance with the contractually specified amounts, which approximate fair value assigned to the various elements, including software license, maintenance and services, if applicable. This allocation methodology has been applied to the following amounts included in revenues in the condensed consolidated statements of income from arrangements for which VSOE of fair value does not exist for each undelivered element:
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
(in thousands) |  | 2015 |  |  | 2014 |  |  | 2015 |  |  | 2014 |
License |  | $ | 1,918 |  |  | $ | 5,784 |  |  | $ | 3,925 |  |  | $ | 12,640 |
Maintenance |  |  | 872 |  |  |  | 2,197 |  |  |  | 1,815 |  |  |  | 4,413 |
Services |  |  | 131 |  |  |  | 5 |  |  |  | 234 |  |  |  | 13 |
Total |  | $ | 2,921 |  |  | $ | 7,986 |  |  | $ | 5,974 |  |  | $ | 17,066 |
Recently Issued Accounting Standards In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, which states that entities should present the debt issuance costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs is reported as interest expense. The effective date for the revised standard is for fiscal years beginning after December 15, 2016, with early adoption permitted. The Company does not expect the impact of this standard to have a material impact on our financial position, results of operations, or cash flow. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (“ASC 606”). This ASU supersedes the revenue recognition requirements in Accounting Standard Codification 605, Revenue Recognition, and most industry-specific guidance. The standard requires that entities recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which a company expects to be entitled in exchange for those goods or services. On July 9, 2015, the FASB deferred the effective date for this ASU to fiscal years beginning after December 15, 2017, and for interim periods within those fiscal years. The standard permits the use of either the retrospective or cumulative effect transition method. At this time, the Company has not selected a transition method. The Company is currently assessing the impact of the adoption of ASU 2014-09 on its financial position, results of operations, and cash flow.

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