Avid 2008 Annual Report Download - page 72

Download and view the complete annual report

Please find page 72 of the 2008 Avid 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 102

  • 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

67
G. DIVESTITURES, ACQUISITIONS, GOODWILL AND INTANGIBLE ASSETS
Divestitures
In November 2008, the Company sold its Softimage 3D animation product line, which was part of its Professional
Video segment to Autodesk, Inc. The Company received $26.5 million of the $33.5 million dollar purchase price in
the fourth quarter of 2008, with the remaining balance to be held in escrow with scheduled distribution dates in 2009
and 2010. Goodwill of $15.8 million and amortizing intangible assets of $0.2 million were included in the assets sold
as part of this divestiture. The Company recognized a gain of approximately $11.5 million as a result of this
transaction, which does not include the proceeds held in escrow. In accordance with the guidance of EITF Issue 98-3,
the Company determined that the Softimage 3D animation product line constituted a business, and, therefore, the gain
on sale of this business included an allocation of $15.8 million of goodwill from the Professional Video reporting unit.
Even though the Softimage 3D animation product line constituted a business, the Company determined that this
business did not represent a component of the Company that would require the presentation of the divestiture as a
discontinued operation. This decision was based on the fact that the Softimage product line does not have operations
or cash flows that are clearly distinguishable and largely independent from the rest of the Professional Video reporting
unit.
In December 2008, the Company sold its PCTV product line, which was part of its Consumer Video segment, to
Hauppauge Computer Works, Inc. for total proceeds of approximately $4.7 million comprised of $2.2 million in cash
and a note valued at $2.5 million. Amortizing intangible assets with a value of $1.6 million were included in the assets
sold as part of this divestiture. PCTV inventory valued at $7.5 million was classified as held-for-sale in accordance
with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, and included in “other current
assets” in the Company’s consolidated balance sheet as of December 31, 2008. The Company will be reimbursed for
the cost of any PCTV inventory sold by the buyer and expects that the inventory will be sold over the next twelve
months. The Company recognized a gain of approximately $1.8 million as a result of this transaction. In accordance
with the guidance of EITF Issue 98-3, the Company determined that the PCTV product line would not be able to
continue to conduct normal, self-sustaining operations and, therefore, did not constitute a business and also should not
be reported as a discontinued operation.
Acquisitions
Pinnacle
In 2005, the Company completed the acquisition of Pinnacle and allocated the total purchase price of $441.4 million
as follows: $91.8 million to net assets acquired, $90.8 million to amortizable identifiable intangible assets, $32.3
million to in-process R&D that was expensed at the time of acquisition, and the remaining $226.5 million to goodwill.
During 2006, the Company continued its analysis of the fair values of certain assets and liabilities, in particular
accruals for employee terminations, facilities closures and contract terminations; inventory reserves; deferred tax
assets and tax reserves; and certain other accruals. Accordingly, the Company recorded adjustments to these assets
and liabilities, resulting in a $12.7 million increase in the value of the net assets acquired and a corresponding
decrease to goodwill. In the fourth quarter of 2006, the Company recorded a goodwill impairment charge of $53.0
million as discussed below in the Goodwill and Amortizing Identifiable Intangible Assets section of this footnote. As
of December 31, 2006, total goodwill related to the Pinnacle acquisition was $213.8 million, with $82.7 million
assigned to the Company’s Professional Video segment and $78.1 million assigned to its Consumer Video segment.
2006 Acquisitions
In 2006, the Company acquired Sibelius, Sundance Digital and Medea. As of December 31, 2008, the goodwill
balances related to the Sibelius, Sundance Digital and Medea acquisitions were $13.2 million allocated to the Audio
segment, $10.6 million allocated to the Professional Video segment and $8.1 million allocated to the Professional
Video segment, respectively. In connection with these acquisitions, the Company allocated $0.9 million to in-process
R&D, which was expensed at the time of acquisition, and $18.6 million to identifiable intangible assets for customer
relationships, developed technology, trade names, non-compete covenants and order backlog, with estimated useful
lives of six years, two and one-half to four years, six years, and one-half year, respectively.