Plantronics 2008 Annual Report Download - page 71

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65
(in thousands)
Fair Value
at August
18, 2005
Total cash consideration $ 165,156
Less cash balance acquired 7,577
157,579
Allocated to:
Prepaid compensation 1,067
Inventory 27,524
Other current assets 17,630
Property, plant, and equipment, net 8,290
Identifiable intangible assets 108,300
Deferred tax assets 4,424
Current liabilities assumed (29,368)
Deferred tax liability (22,691)
Goodwill $ 42,403
Goodwill was recorded based on the residual purchase price after allocating the purchase price to the fair market value of tangible and
intangible assets acquired less liabilities assumed. Goodwill arises as a result of, among other factors, future unidentified new
products, new technologies and new customers as well as the implicit value of future cost savings as a result of the combining of
entities. The goodwill arising from this acquisition was allocated to the AEG segment and is not deductible for tax purposes under
Internal Revenue Code Section 197.
The fair value and estimated useful lives (amortization period) of identifiable intangible assets acquired are as follows:
(in thousands) Fair Value Useful Life
Existing technology $ 24,200 6 years
OEM relationships 700 7 years
Customer relationships 17,600 8 years
Trade name - inMotion 5,000 8 years
Trade name - Altec Lansing 59,100 Not amortized
In-process technology 900 Fully expensed in the second
fiscal quarter of 2006
Total $ 107,500
Existing technology represents audio products that had been introduced into the market, were generating revenue and/or had reached
technological feasibility as of the close of the transaction. The value was calculated based on the present value of the future estimated
cash flows derived from this technology applying a 10% discount rate. Existing technology is estimated to have a useful life of six
years and is being amortized on a straight-line basis to cost of revenues.
The fair value of customer relationships with OEMs and non-OEMs, which includes major retailers and distributors, was calculated
based on the present value of the future estimated cash flows that can be attributed to the existing OEM and non-OEM customer
relationships applying a 19% discount rate. Based on historical attrition rates and technological obsolescence, the useful life of the
customer relationships was estimated to be seven years for OEM customer relationships and eight years for non-OEM customer
relationships and is being amortized on a straight-line basis to selling, general and administrative expense.
The value of the trade name “inMotion,” was calculated based on the present value of the capitalized royalties saved on the use of the
inMotion trade name applying a 12% discount rate. The inMotion trade name is relatively new and relates to specific niches of the
Docking Audio market. Based on product life cycles, history relating to the category of products for which the inMotion brand is
utilized, and similar product trademarks within the retail industry, the estimated remaining useful life was determined to be eight years
and is being amortized on a straight-line basis to selling, general, and administrative expense.
The value of the trade name, “Altec Lansing,” was also calculated based on the present value of the capitalized royalties saved on the