Adaptec 2001 Annual Report Download - page 23

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23
Amortization of Deferred Stock Compensation
We recorded total deferred stock compensation expense of $41.2 million in 2001 compared to
$36.3 million in 2000 and $5.1 million in 1999.
In 2001, our amortization of deferred stock compensation increased compared to 2000 due to
accelerated vesting related to certain employees terminated as a result of our two
restructurings.
Our acquisitions of AAN etcom, Abrizio, QED, Sw itchOn, Toucan, and Extreme in 2000
contributed $16.2 million to deferred stock compensation amortization in 2000 and all of the
expense in 1999. An additional, $20.1 million of the expense in 2000 related to the unearned
compensation recognized on the Malleable and Datum purchase acquisitions.
Amortization of Goodwill and Impairment of Intangibles
Non-cash goodwill charges increased to $44.0 million in 2001 from $36.4 million in 2000 and
$1.9 million in 1999 primarily as a result of the goodwill recorded in connection with the
Malleable and Datum acquisitions, which were completed in mid 2000.
During the second quarter of 2001, we discontinued further development of the technology
acquired in the purchase of Malleable. We do not expect to have any future cash flows related
to the Malleable assets and have no alternative use for the technology. Accordingly, w e
recorded an impairment charge of $189.0 million, equal to the remaining net book value of
goodwill and intangible assets related to Malleable. As a result, there was no remaining
Malleable goodw ill or intangibles to amortize in the second half of 2001.
In the fourth quarter of 2001, due to a continued decline in current market conditions and a
delay in the introduction of certain products to the market, w e completed an assessment of the
future revenue potential and estimated costs associated with all acquired technologies. As a
result of this review, w e recorded an impairment charge of $79.3 million related to the acquired
goodwill and intangibles recognized in the purchase of Datum. The impairment charge was
calculated by the excess of the carrying value of assets over the present value of estimated
future cash flow related to these assets. The impairment charge reduced the amounts subject to
amortization for the remainder of the year.
Costs of Merger
We did not make any pooling acquisitions and therefore, did not incur any merger costs in
2001.
In 2000, w e completed five pooling acquisitions and incurred $38.0 million of merger costs. In
1999, w e completed one pooling acquisition and incurred $0.9 million of merger costs. These
charges consist primarily of investment banking and other professional fees.