Adobe 2010 Annual Report Download - page 95

ADOBE SYSTEMS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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In-process research and development—In-process research and development (“IPR&D”) was expensed to amortization
of purchased intangibles and incomplete technology in our Consolidated Statements of Income upon acquisition as it
represents incomplete Omniture research and development projects that had not reached technological feasibility and had no
alternative future use as of the date of the acquisition. Technological feasibility is established when an enterprise has
completed all planning, designing, coding, and testing activities that are necessary to establish that a product can be produced
to meet its design specifications including functions, features, and technical performance requirements. The estimated fair
value of $4.6 million was determined by estimating the net cash flows expected to be generated from the project and
discounting the net cash flows to their present value.
Goodwill—Approximately $1.3 billion has been allocated to goodwill. Goodwill represents the excess of the purchase price
over the fair value of the underlying acquired net tangible and intangible assets. The factors that contributed to the recognition of
goodwill included securing buyer-specific synergies that increase revenue and profits and are not otherwise available to a
marketplace participant, acquiring a talented workforce, and cost savings opportunities. The goodwill recorded in connection
with Omniture has been allocated to the Omniture and Creative Solutions reportable segments of $1.1 billion and $0.2
billion, respectively, based on expected revenue and cost synergies to be gained as a result of the acquisition.
Restructuring—$11.3 million of the overall purchase price was allocated to restructuring and related primarily to costs
for severance and associated benefits, outplacement services, and cost of redundant facilities. See Note 11 for further details
of the amounts accrued during fiscal 2010 and 2009.
Taxes—As part of our accounting for the Omniture acquisition, a portion of the overall purchase price was allocated to
goodwill and acquired intangible assets. Amortization expense associated with acquired intangible assets is not deductible for
tax purposes. Thus, approximately $172.6 million, included in the net tangible assets, was established as a deferred tax
liability for the future amortization of the intangible assets.
Any impairment charges made in the future associated with goodwill will not be tax deductible and will result in an
increased effective income tax rate in the quarter the impairment is recorded.
Pro Forma Results
The financial information in the table below summarizes the combined results of operations of Adobe and Omniture, on
a pro forma basis, as though the companies had been combined as of the beginning of the periods presented. The pro forma
financial information is presented for informational purposes only and is not indicative of the results of operations that would
have been achieved if the acquisition had taken place on November 29, 2008 or of results that may occur in the future.
The following pro forma financial information for fiscal 2009 and 2008 combines the historical results for Adobe for the
years ended November 27, 2009 and November 28, 2008 and the historical results of Omniture for the period January 1, 2009
through October 23, 2009 and the year ended December 31, 2008 (in thousands):
2009
2008
Net revenues .................................................................................................................
$
3,168,731
$
3,835,799
Net income ....................................................................................................................
$
308,904
$
742,749
Basic net income per share ...........................................................................................
$
0.59
$
1.38
Shares used in computing basic net income per share ..................................................
524,470
539,373
Diluted net income per share ........................................................................................
$
0.58
$
1.35
Shares used in computing diluted net income per share ...............................................
531,293
549,883
In addition to the acquisition of Omniture, we acquired one other company during fiscal 2009 for cash consideration of
approximately $35.3 million. The impact of this acquisition was not material to our consolidated balance sheets and results of
operations.
NOTE 3. CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
Cash equivalents consist of instruments with remaining maturities of three months or less at the date of purchase. We
classify all of our cash equivalents and short-term investments as “available-for-sale.” In general, these investments are free
of trading restrictions. We carry these investments at fair value, based on quoted market prices or other readily available
market information. Unrealized gains and losses, net of taxes, are included in accumulated other comprehensive income,
which is reflected as a separate component of stockholders’ equity in our Consolidated Balance Sheets. Gains and losses are