Classmates.com 2005 Annual Report Download - page 89

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accounting principle be applied as if it were adopted prospectively from the earliest date practicable. In addition, SFAS No. 154 makes a
distinction between retrospective application of an accounting principle and the restatement of financial statements to reflect the correction of an
error. SFAS No. 154 is effective for accounting changes and corrections of errors made beginning in the March 2006 quarter. The Company does
not expect the implementation of SFAS No. 154 to have a material impact on the Company’s financial position, results of operations or cash
flows.
2. ACQUISITIONS
PhotoSite
In March 2005, the Company acquired certain assets related to PhotoSite, the online digital photo-sharing business of Homestead
Technologies, Inc., for approximately $10.1 million in cash, including acquisition costs, and entered into a related licensing and support
agreement with Homestead Technologies. Included in the purchase price of $10.1 million is a $1.5 million payment due in March 2006, which is
included in accrued liabilities at December 31, 2005. The acquisition was accounted for under the purchase method in accordance with SFAS
No. 141,
Business Combinations . The primary reason for the acquisition was to acquire PhotoSite’s software and services to expand the
Company’s subscription offerings.
The purchase price was allocated to the net assets acquired based on their estimated fair values, including identifiable intangible assets. The
purchase price allocation is considered final. The following table summarizes the net liabilities assumed and the intangible assets and goodwill
acquired in connection with the acquisition (in thousands):
The weighted average amortizable life of the acquired intangible assets is 4.8 years. The $5.7 million of goodwill acquired is deductible for
tax purposes. The pro forma effect of the transaction is immaterial to the consolidated financial statements.
Classmates Online, Inc.
In November 2004, the Company acquired Classmates, which operates Classmates.com (www.classmates.com), connecting millions of
members throughout the U.S. and Canada with friends and acquaintances from school, work and the military. Its Classmates International
subsidiary also operates leading community-based networking sites in Sweden (www.klasstraffen.com), and in Germany (www.stayfriends.de).
The acquisition was accounted for under the purchase method in accordance with SFAS No. 141. The primary reason for the acquisition was to
acquire Classmates’ services and account
F- 20
Description
Estimated
Fair
Value
Estimated
Amortizable
Life
Net liabilities assumed:
Property and equipment
$
4
Deferred revenue
(190
)
Total net liabilities assumed
(186
)
Intangible assets acquired:
Pay accounts
330
2 years
Proprietary rights
20
5 years
Software and technology
4,200
5 years
Total intangible assets acquired
4,550
Goodwill
5,738
Total purchase price
$
10,102