Avid 2004 Annual Report Download - page 65

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51
As of December 31, 2004 and 2003, the finished goods inventory included deferred costs of $9.0 million and $14.0 million,
respectively, associated with product shipped to customers for which revenue had not yet been recognized.
E. PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
Depreciable
December 31,
Life
2004
2003
Computer and video equipment and software
2 to 5 years
$92,862
$82,813
Office equipment
3 years
6,872
7,004
Furniture and fixtures
3 years
7,101
6,458
Leasehold improvements
3 to 10 years
20,865
19,470
127,700
115,745
Less accumulated depreciation and amortization
98,608
92,522
$29,092
$23,223
Depreciation and amortization expense related to property and equipment was $12.0 million, $10.9 million and $11.6 million
for the years ended December 31, 2004, 2003 and 2002, respectively. The Company wrote off fully depreciated assets with
gross values of $6.2 million, $2.1 million and $42.4 million in 2004, 2003 and 2002, respectively.
Included in Computer and video equipment and software is equipment purchased under capital leases (see Note H) of
approximately $1.9 million at December 31, 2004 and 2003, with accumulated amortization of $1.3 million and $0.7 million as
of December 31, 2004 and 2003, respectively.
F. ACQUISITIONS
M-Audio
In August 2004, Avid completed the acquisition of M-Audio, a leading provider of digital audio and MIDI (Music Industry
Digital Interface) solutions for electronic musicians and audio professionals. Avid paid cash of $79.6 million, net of cash
acquired, of which $0.5 million will be paid out over a two year period, and issued stock and options with a fair value of
$96.5 million. The market price of $42.72 used to value the Avid shares was based on the five-day average closing price of
the stock during the period beginning two days before and ending two days after the date that the terms of the acquisition
were agreed to and announced publicly. The weighted average fair value of $35.14 used to value the options was
calculated using the same five-day average, less the weighted average exercise price of the options. Avid also incurred $3.3
million of transaction costs. The Company has integrated M-Audio into its Audio segment and will market its line of audio
products alongside Digidesign's digital audio workstations for the professional and home/hobbyist markets. The goodwill of
$122.0 million resulting from the purchase price allocation reflects the value of the underlying enterprise as well as
synergies that Avid expects to realize, including incremental sales of Digidesign products. The following table summarizes
the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition (in thousands):
Accounts receivable
$7,288
Inventories
13,420
Other current assets
903
Equipment and other long-term assets
1,520
Identifiable intangible assets:
Customer relationships
28,000
Trade name
4,700
Non-compete covenant
1,200
Completed technology
4,500
Goodwill
122,022
Total assets acquired
183,553