Adobe 2003 Annual Report Download - page 75

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2003 and for hedging relationships designated after June 30, 2003. The adoption of SFAS 149 did not have
a material impact on our consolidated financial position, results of operations or cash flows.
In May 2003, the FASB issued Statement of Financial Accounting Standards No. 150 (“SFAS 150”),
“Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.” SFAS
150 requires that certain financial instruments, which under previous guidance were accounted for as
equity, must now be accounted for as liabilities. The financial instruments affected include mandatory
redeemable stock, certain financial instruments that require or may require the issuer to buy back some of
its shares in exchange for cash or other assets and certain obligations that can be settled with shares of
stock. SFAS 150 is effective for all financial instruments entered into or modified after May 31, 2003, and
otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The
adoption of SFAS 150 did not have a material impact on our consolidated financial position, results of
operations or cash flows.
Note 2. Acquisitions
On May 19, 2003, we purchased the technology assets of Syntrillium, a privately held company, for
$16.5 million cash. Syntrillium developed, published and marketed digital audio tools including its
recording application, Cool Edit Pro (renamed Adobe Audition), all of which have been added to our
existing line of professional digital imaging and video products. By adding Adobe Audition and the other
tools to our existing line of products, we have improved the Adobe video workflow and expanded the
products and tools available to videographers, DVD authors and independent filmmakers. In connection
with the purchase, we allocated $13.7 million to goodwill, $2.7 million to purchased technology and $0.1
million to tangible assets. We also accrued $0.1 million in acquisition-related legal and accounting fees.
Goodwill has been allocated to our Digital Imaging and Video segment. Purchased technology is being
amortized to cost of product revenue over its estimated useful life of three years. The consolidated financial
statements include the operating results of the purchased technology assets from the date of purchase. Pro
forma results of operations have not been presented because the effect of this acquisition was not material.
In April 2002, we acquired all of the outstanding common stock of Accelio. Accelio was a provider of
Web-enabled solutions that helped customers manage business processes driven by electronic forms. The
acquisition of Accelio broadened our ePaper solution business. At the date of acquisition, the aggregate
purchase price was $70.2 million, which included the issuance of 1.8 million shares of common stock of
Adobe, valued at $68.4 million, and cash of $1.8 million.
The following table summarizes the purchase price allocation:
Cash and cash equivalents .............................................................................................. $ 9,117
Accounts receivable, net................................................................................................. 11,906
Other current assets ........................................................................................................ 4,735
Purchased technology..................................................................................................... 2,710
Goodwill......................................................................................................................... 77,009
In-process research and development ............................................................................. 410
Trademarks and other intangible assets .......................................................................... 1,029
Total assets acquired .................................................................................................. 106,916
Current liabilities............................................................................................................ (18,176)
Liabilities recognized in connection with the business combination .............................. (16,196)
Deferred revenue ............................................................................................................ (2,360)
Total liabilities assumed............................................................................................. (36,732)
Net assets acquired................................................................................................. $ 70,184
We allocated $2.7 million to purchased technology and $0.4 million to in-process research and
development. The amount allocated to purchased technology represented the fair market value of the
technology for each of the existing products, as of the date of the acquisition. The purchased technology
was assigned a useful life of three years and is being amortized to cost of product revenue. The amount
allocated to in-process research and development was expensed at the time of acquisition due to the state of
the development of certain products and the uncertainty of the technology.
The remaining purchase price was allocated to goodwill and was assigned to our ePaper segment
(which was renamed Intelligent Documents beginning in fiscal 2004). In accordance with SFAS No. 142,