Lexmark 2011 Annual Report Download - page 99

$41.4 million, which is the total purchase price. Of the total purchase price, $4.1 million was placed in
escrow for a period of 18 months following the completion of the acquisition to secure indemnification
obligations of the sellers relating to the accuracy of representations and warranties and the satisfaction
of covenants. The acquisition consideration held in escrow does not meet the definition of contingent
consideration as provided under the accounting guidance for business combinations. The amount held
in escrow was included in the acquisition accounting as part of the consideration transferred by the
Company as representations and warranties were expected to be valid as of the acquisition date.
During the fourth quarter of 2011, certain employees of Pallas Athena were granted restricted stock
units by the Company. Because the Company was not obligated to issue replacement share-based
payment awards to the employees, the awards are accounted for as a separate transaction and
recognized as post-combination expense over the requisite service period. The awards are included in
the disclosures provided in Note 6 to the Notes to Consolidated Financial Statements and are not
material for separate disclosure.
Acquisition-related costs of approximately $2 million, including $1.2 million of seller transaction fees
paid by the Company (discussed previously), were charged directly to operations and were included in
Selling, general and administrative on the Consolidated Statements of Earnings. Acquisition-related
costs include finder’s fees, legal, advisory, valuation, accounting, and other fees incurred to effect the
business combination. Acquisition-related costs above do not include travel and integration expenses.
Although there were no material contingencies recognized on the date of acquisition, future
adjustments to the purchase price allocation could result if new information is obtained during the
measurement period about facts and circumstances that existed at the acquisition date. Specifically,
employee-related contingencies were identified but were not recognized on the acquisition date on the
basis that a reliable estimate of fair value could not be determined and the Company’s assessment that
the existence of a liability was not probable. Furthermore, the Company was specifically indemnified for
these matters in the purchase agreement. However, it is reasonably possible that a liability and an
indemnification asset existed on the date of acquisition. The amount of such liability was estimated to
be in the range of $0 million to $6 million. If a liability were to be recognized in the future, an
indemnification asset would also be recognized at the same time and measured on the same basis as
the indemnified item, subject to the need for a valuation allowance for uncollectible amounts.
Because Pallas Athena’s current levels of revenue and net earnings are not material to the Company’s
Consolidated Statements of Earnings, supplemental pro forma revenue and net earnings disclosures
have been omitted.
Acquisition of Perceptive Software, Inc.
On June 7, 2010, the Company acquired all issued and outstanding stock of Perceptive Software, Inc.
(“Perceptive Software”) for $280 million in cash, or $266.8 million net of cash acquired. Perceptive
Software is a leading provider of enterprise content management (“ECM”) software and solutions. The
acquisition builds upon and strengthens Lexmark’s current industry-focused document workflow
solutions and managed print services and enables the Company to immediately participate in the
adjacent, growing market segment of ECM software solutions.
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