Shutterfly 2014 Annual Report Download - page 94

Download and view the complete annual report

Please find page 94 of the 2014 Shutterfly annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 130

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130

the aggregate fair values was recorded as goodwill. In addition, RSUs were granted to certain Penguin
Digital employees contingent upon their continued employment for a period of three years. Also, PBRSUs
were granted to certain Penguin Digital employees contingent on achieving certain performance
milestones and continued employment for a period of three years. These awards will be recorded as stock-
based compensation over the vesting period.
Of the total purchase price, $2.9 million was allocated to developed technology and is being amortized
over an estimated useful life of three years, $0.9 million was allocated to in-process research and
development, and $0.2 million was allocated to the active user base which will be amortized over an
estimated useful life of two years. The assets and liabilities acquired totaled approximately $0.1 million and
$0.2 million, respectively. The remaining excess purchase price of approximately $3.2 million was allocated
to goodwill primarily representing the assembled workforce and synergies from the accelerated time to
market. In addition, $0.9 million was recorded as a deferred tax liability which represents the difference
between the assigned values of the assets acquired and the tax basis of those assets offset by net operating
loss carryforwards. The offset is recorded as additional goodwill. The results of operations for the acquired
business have been included in the consolidated statement of operations for the period subsequent to the
acquisition. Penguin Digital’s results of operations for periods prior to this acquisition were not material to
the consolidated statement of income and, accordingly, pro forma financial information has not been
presented.
Photoccino Ltd.
On May 25, 2012, the Company acquired Photoccino Ltd. (‘‘Photoccino’’) for a total aggregate cash
purchase price of $4.6 million. Photoccino has developed technologies for photo ranking, analysis and
organization which will allow customers to more efficiently organize and select the best photos from their
archives so they can quickly and easily create photo books, calendars, cards, and photo gifts. Photoccino’s
technology applies proprietary algorithms to analyze and evaluate the quality and content of photos, ranks
them, and automatically creates photo products using the customer’s best images. The acquisition was
accounted for as a non-taxable purchase transaction and, accordingly, the purchase price has been
allocated to the acquired tangible assets, liabilities assumed, and identifiable intangible assets acquired
based on their estimated fair values on the acquisition date. The excess of the purchase price over the
aggregate fair values was recorded as goodwill. In addition, restricted stock awards were granted to certain
Photoccino employees contingent upon their continued employment for a period of three years and will be
recorded as stock-based compensation over the vesting period.
Of the total purchase price, $3.0 million was allocated to developed technology and is being amortized
over an estimated useful life of five years, $0.7 million was allocated to in-process research and
development, and $0.1 million was allocated to non-compete agreements with the founders which will be
amortized over an estimated useful life of two years. The assets and liabilities acquired totaled
approximately $0.1 million. The remaining excess purchase price of approximately $0.7 million was
allocated to goodwill primarily representing the assembled workforce. In addition, $0.9 million was
recorded as a deferred tax liability representing the difference between the assigned values of the assets
acquired and the tax basis of those assets, with the offset recorded as additional goodwill. The results of
operations for the acquired business have been included in the consolidated statement of operations for
the period subsequent to the Company’s acquisition of Photoccino. Photoccino’s results of operations for
periods prior to this acquisition were not material to the consolidated statement of operations and,
accordingly, pro forma financial information has not been presented.
93