Avid 2004 Annual Report Download - page 66

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Accounts payable
(4,626)
Other current liabilities
(5,066)
Deferred compensation related to stock options issued
5,500
Net assets acquired
$179,361
As part of the purchase agreement, Avid may be required to make additional payments to the former shareholders and
option holders of M-Audio of up to $45.0 million, contingent upon the operating results of M-Audio through December 31,
2005. These payments, if required, will be made through the issuance of additional Avid shares or options based on the ten-
day average closing price of the stock ending two days prior to the date the earn-out shares are distributed. Any additional
Avid shares issued to the former shareholders of M-Audio will be recorded as additional purchase price allocated to
goodwill. Any additional Avid options issued to former option holders of M-Audio will be recorded as stock-based
compensation expense because future service is required for it to be earned.
The identifiable intangible assets are being amortized over their estimated useful lives of twelve years for customer
relationships, six years for the trade name, four years for the developed technology and two years for the non-compete
covenant. Amortization expense totaled $1.8 million for the year ended December 31, 2004 and accumulated amortization
of these intangible assets was $1.8 million at December 31, 2004. The $122.0 million of goodwill was assigned to the
Company’s Audio segment and will not be amortized, in accordance with the requirements of SFAS No. 142, "Goodwill
and Other Intangible Assets". This goodwill and the identifiable intangible assets are not deductible for tax purposes.
Avid Nordic AB
In September 2004, the Company acquired Avid Nordic AB, a Sweden-based reseller of Avid products operating in the
Nordic and Benelux regions of Europe, for cash, net of cash acquired, of Euro 6.1 million ($7.4 million) plus transaction
costs of $0.3 million. The Company previously had no ownership interest in Avid Nordic AB. The acquisition allows
Avid to directly serve customers in this region. The following table summarizes the estimated fair value of the assets
acquired and liabilities assumed in the transaction (in thousands):
Accounts receivable
$3,702
Inventories
2,516
Other current assets
589
Equipment and other long-term assets
671
Identifiable intangible assets
4,700
Goodwill
1,955
Total assets acquired
14,133
Accounts payable
(2,571)
Note payable
(1,203)
Other current liabilities
(1,057)
Long term deferred tax liability
(1,645)
Net assets acquired
$7,657
As part of the purchase agreement, Avid may be required to make additional payments to the former shareholders of Avid
Nordic AB of up to Euro 1.3 million ($1.8 million) contingent upon the operating results of Avid Nordic AB through
August 31, 2005. Any such payments will be recorded as additional purchase consideration, allocated to goodwill.
The identifiable intangible asset represents customer relationships developed in the region by Avid Nordic AB. This asset
will be amortized over its estimated useful life of five years. Amortization expense totaled $0.3 million for the year ended
December 31, 2004 and accumulated amortization of this asset was $0.3 million at December 31, 2004. The goodwill of
$2.0 million resulting from the purchase price allocation reflects the value of the assembled workforce and existing
infrastructure in the region. This goodwill was assigned to the Video and Film Editing and Effects segment and will not be
amortized in accordance with the requirements of SFAS No. 142. This goodwill and the customer relationships intangible
asset are not deductible for tax purposes. During the quarter ended December 31, 2004, the goodwill was increased by $0.4
million to $2.4 million due to a reduction in the estimated fair value of inventory and other current assets acquired from
Avid Nordic AB. The note payable represented an overdraft facility with a bank, which was paid in full in December 2004.