Adaptec 2002 Annual Report Download - page 64

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The acquisitions of Octera, Datum and Malleable were accounted for using the purchase method of accounting
and accordingly, the Consolidated Financial Statements include the operating results of each acquisition
from the respective acquisition dates.
The fair value of the common shares of the Company issued to acquire Malleable, Datum, and Octera was based
on the closing market price of the Company's stock a short period before and after the date the terms of the
acquisitions were agreed to by the parties and announced to the public.
The total consideration, including acquisition costs, was allocated based on the estimated fair values of
the net assets acquired on the respective acquisition dates as follows:
(in thousands) Octera Datum Malleable Total
−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−
Tangible assets $ 258 $ 3,788 $ 2,031 $ 6,077
Intangible assets:
Internally developed software − − 500 500
Assembled workforce − 250 400 650
Goodwill 1,881 106,356 232,303 340,540
Unearned compensation 14,197 8,363 29,033 51,593
In process research and development − 6,700 31,500 38,200
Liabilities assumed (316) (143) (1,932) (2,391)
−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−
$ 16,020 $ 125,314 $ 293,835 $ 435,169
============== =============== =============== ===============
A portion of the purchase price of each acquisition was allocated to unearned
compensation based on the value of certain unvested shares and options of the
Company issued to effect each acquisition. The fair value of the common shares
that were issued to acquire Malleable and that were subject to vesting
provisions based on continuing employment was recorded as unearned compensation.
The intrinsic value of the unvested shares and options issued to acquire Datum
and Octera, which were acquired after July 1, 2000, was allocated to unearned
compensation. Unearned compensation will be recognized as compensation cost over
the respective remaining future service periods.
Purchased In Process Research and Development
The amounts allocated to in process research and development ("IPR&D") were
determined through independent valuations using established valuation techniques
in the high−technology industry. The value allocated to IPR&D was based upon the
forecasted operating after−tax cash flows from the technology acquired, giving
effect to the stage of completion at the acquisition date. Estimated future cash
flows related to the IPR&D were made for each project based on the Company's
estimates of revenues, operating expenses and income taxes from the project.
These estimates were consistent with historical pricing, margins and expense
levels for similar products.
Revenues were estimated based on relevant market size and growth factors,
expected industry trends, individual product sales cycles and the estimated life
of each product's underlying technology. Estimated operating expenses, income
taxes and charges for the use of contributory assets were deducted from
estimated revenues to determine estimated after−tax cash flows for each project.
These future cash flows were further adjusted for the value contributed by any
core technology and development efforts expected to be completed post
acquisition.
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