Adaptec 2005 Annual Report Download - page 81

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Table of Contents
(in thousands)
Estimated
fair value
EPON products $ 18,500
AFE projects 2,000
Total in-process research and development $ 20,500
Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired. In accordance with Statement of
Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” goodwill will not be amortized but will instead be tested for impairment
annually or more frequently if certain indicators are present.
The pro forma financial information presented below gives effect to the acquisitions of Passave and the Storage Semiconductor Business as if both acquisitions
had occurred as of the beginning of each fiscal year presented below. If the acquisitions had occurred at the beginning of 2005, the $35.3 million charge for
in-process research and development and acquisition-related costs would have been expensed in 2005. Amortization of intangible assets would have been higher
by $43.3 million, and $6.0 million, in 2005 and 2006, respectively. In addition, stock-based compensation would have been higher by $17.4 million and $3.9
million in 2005 and 2006, respectively, due to amortization of expense associated with unvested options assumed with exercise prices below fair market value on
the acquisition date.
The pro forma results do not purport to represent what the Company’s results of operations actually would have been if the transactions had occurred on the date
indicated or what the results of operations will be in future periods.
(in thousands)
December 31,
2006
December 31,
2005
Pro forma revenues $ 461,429 $ 446,387
Pro forma net loss (66,454) (64,775)
Pro forma basic and diluted net loss per share $ (0.33) $ (0.32)
NOTE 3. Derivative Instruments
The Company generates revenues in U.S. dollars but incurs a portion of its operating expenses in various foreign currencies, primarily the Canadian dollar. To
minimize the short-term impact of foreign currency fluctuations on the Company’s operating expenses, the Company uses currency forward contracts.
Currency forward contracts that are used to hedge exposures to variability in forecasted foreign currency cash flows are designated as cash flow hedges. The
maturities of these instruments are less than twelve months. For these derivatives, the gain or loss from the effective portion of the hedge is initially reported as a
component of other comprehensive income in stockholders’ equity and subsequently reclassified to earnings in the same period in which the hedged transaction
affects earnings. The gain or loss from the ineffective portion of the hedge is recognized as interest income or expense immediately.
At December 30, 2007, the Company had twelve currency forward contracts outstanding that qualified and were designated as cash flow hedges. The U.S. dollar
notional amount of these
75
Source: PMC SIERRA INC, 10-K, February 22, 2008