Logitech 2012 Annual Report Download - page 270

LOGITECH INTERNATIONAL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The total cash consideration paid of $382.3 million included $37.0 million deposited into an escrow account
as security for indemnification claims under the merger agreement and $0.5 million deposited in a stockholder
representative expense fund. The escrow trustee disbursed 50% of the escrow fund to the former holders of LifeSize
capital stock, vested options and warrants in December 2010, and the remaining fifty percent was disbursed in June
2011, subject to indemnification claims.
In connection with the merger, Logitech also agreed to establish a cash and stock option retention and incentive
plan for certain LifeSize employees, linked to the achievement of LifeSize performance targets. The duration of
the plan’s performance period was two years, from January 1, 2010 to December 31, 2011. The total available cash
incentive was $9.0 million over the two year performance period. The Company paid the entire $9.0 million in
available cash incentive during fiscal year 2012. In December 2009, options to purchase 850,000 Logitech shares
were issued in connection with the retention and incentive plan.
The acquisition has been accounted for using the purchase method of accounting. Accordingly, the total
consideration was allocated to the tangible and intangible assets acquired and liabilities assumed based on their
estimated fair values as of the acquisition date. Fair values were determined by Logitech management based on
information available at the date of acquisition.
The allocation of total consideration to the assets acquired and liabilities assumed based on the estimated fair
value of LifeSize was as follows (in thousands):
December 11,
2009
Estimated
Life
Tangible assets acquired ....................................... $ 33,635
Deferred tax asset, net ......................................... 8,828
Intangible assets acquired
Existing technology ........................................ 30,000 4 years
Patents and core technology ................................. 4,500 3 years
Trademark/trade name...................................... 7,600 5 years
Customer relationships and other ............................. 31,500 5 years
Goodwill................................................. 307,241 —
423,304
Liabilities assumed ........................................... (26,985)
Debt assumed................................................ (13,505)
Total consideration......................................... $382,814
The deferred tax asset primarily relates to the tax benefit of a net operating loss carryforward, net of the deferred
tax liability related to intangible assets. The existing technology of LifeSize relates to the platform technology used
in LifeSize’s high-definition video conferencing systems. The value of the technology was determined based on the
present value of estimated expected cash flows attributable to the technology, assuming the highest and best use by
a market participant. The patents and core technology represent awarded patents, filed patent applications and core
architectures, trade secrets or processes used in LifeSize’s current and planned future products. Trademark/trade
name relates to the LifeSize brand names. The value of the patents, core technology and trademark/trade name
was estimated by capitalizing the estimated profits saved as a result of acquiring or licensing the asset. Customer
relationships and other relates to the ability to sell existing, in-process, and future versions of the technology and
services to LifeSize’s existing customer base, valued based on projected discounted cash flows generated from
customers in place. The intangible assets acquired are amortized on a straight-line basis over their estimated useful
Note 14 — Acquisitions and Divestitures (Continued)
260