SanDisk 2006 Annual Report Download - page 136

Net Tangible Liabilities. The preliminary allocation of Matrix purchase price to the tangible and identifiable
intangible assets acquired and liabilities assumed is summarized below (in thousands). The preliminary allocation
was based on management’s estimates of fair value, which included a third-party appraisal. The allocation of the
purchase price may be subject to change based on final estimates of fair value, primarily related to acquisition-
related restructuring.
Cash................................................................ $ 9,432
Accounts receivable .................................................... 6,956
Inventory ............................................................ 4,010
Property and equipment, net .............................................. 1,919
Other assets .......................................................... 1,786
Total assets acquired .................................................... 24,103
Accounts payable ...................................................... (2,302)
Other liabilities ........................................................ (23,081)
Total liabilities assumed ................................................. (25,383)
Net tangible liabilities acquired . . . ......................................... $ (1,280)
Purchase Price Allocation. The allocation of the purchase price to the tangible and intangible assets acquired
and liabilities assumed is as follows (in thousands):
Net tangible liabilities acquired............................................ $ (1,280)
Acquired in-process technology............................................ 39,600
Acquisition-related restructuring ........................................... (17,462)
Deferred income tax assets, net............................................ 13,666
Goodwill ............................................................ 145,492
Other intangible assets:
Core technology ..................................................... 76,300
Developed product technology........................................... 11,400
Customer relationships ................................................ 14,100
281,816
Assumed unvested equity instruments to be expensed ........................... 14,563
Purchase price ........................................................ $296,379
The core and developed product technology as a result of the acquisition of Matrix are being amortized over an
estimated useful life of seven years, and the customer relationships are being amortized over an estimated useful life
of three years. No residual value has been estimated for the intangible assets. In accordance with SFAS 142, the
Company will not amortize the goodwill, but will evaluate it at least annually for impairment.
Acquisition-Related Restructuring. During the first quarter of fiscal 2006, the Company established its plans
to integrate the Matrix operations, which included exiting duplicative facilities and recorded $17.5 million for
acquisition-related restructuring activities, of which $17.4 million relates to excess lease obligations. The lease
obligations extend through the end of the lease term in 2016. These acquisition-related restructuring liabilities were
included in the purchase price allocation of the cost to acquire Matrix. As of December 31, 2006, the outstanding
accrual balance was $16.3 million. The reduction in the accrual balance was primarily related to excess lease
obligation payments.
In-process Technology. As part of the Matrix purchase agreement, a certain amount of the purchase price was
allocated to acquired in-process technology, which was determined through established valuation techniques in the
Annual Report
F-37
Notes to Consolidated Financial Statements — (Continued)