Avid 2009 Annual Report Download - page 68

63
Acquisitions
On January 1, 2009, the Company adopted ASC topic 805, Business Combinations (formerly SFAS No. 141 (revised 2007),
Business Combinations), which made significant changes to the accounting and reporting standards for business
acquisitions. ASC topic 805 establishes principles and requirements for an acquirer’s financial statement recognition and
measurement of the assets acquired; the liabilities assumed, including those arising from contractual contingencies; any
contingent consideration; and any noncontrolling interest in the acquiree at the acquisition date. It also requires the acquirer
to recognize direct acquisition costs as an expense in the statement of operations and to recognize changes in the amount of
its deferred tax benefits that are recognizable as a result of a business combination either in income from continuing
operations in the period of the combination or directly in contributed capital, depending on the circumstances. Additionally,
ASC topic 805 provides guidance for, among other things, the impairment testing of acquired research and development
intangible assets and assets that the acquirer intends not to use. The Company applied the accounting provisions of ASC
topic 805 to acquisitions completed during 2009, and the impact of adoption of ASC topic 805 is reflected in the
Company’s consolidated financial statements as of and for the year ended December 31, 2009.
On July 31, 2009, the Company acquired all the outstanding shares of MaxT Systems Inc. (―MaxT‖), a Canada-based
developer of server-based media management and editing technology, for cash, net of cash acquired, of $4.4 million. The
Company’s allocation of the purchase price resulted in $3.3 million allocated to amortizable identifiable intangible assets
and the remaining $1.1 million to goodwill. In addition, the Company recorded related net deferred tax liabilities of $0.8
million, increasing the goodwill to $1.9 million. The goodwill, which reflects the value of the assembled workforce and the
synergies the Company expects to realize by incorporating MaxT’s media management and editing technology into future
solutions offered to customers, is reported within the Video segment and is not deductible for tax purposes.
The amortizable identifiable intangible assets acquired include developed technology of $2.3 million, customer
relationships of $0.5 million, a patent of $0.3 million, non-compete agreements of $0.1 million and trade names of $0.1
million. The Company used the income approach to determine the values of the identifiable intangible assets. The income
approach presumes that the value of an asset can be estimated by the net economic benefit to be received over the life of the
asset discounted to present value. The weighted-average discount rate (or rate of return) used to determine the value of
MaxT’s intangible assets was 22% and the effective tax rate used was 35%.
The values of the customer relationships and trade names are both being amortized on a straight-line basis over their
estimated useful lives of one-half year, and the non-compete agreements and patent are being amortized over their
estimated useful lives of one year and four and one-half years, respectively. The value of the developed technology is being
amortized over the greater of the amount calculated using the ratio of current quarter revenues to the total of current quarter
and anticipated future revenues, and the straight-line method, over the estimated useful life of four and one-half years. The
weighted-average amortization period for the amortizable identifiable intangible assets is approximately three and one-half
years. Amortization expense for MaxT intangibles totaled $0.9 million in 2009.
The results of operations of MaxT have been included in the results of operations of the Company since the date of
acquisition. The Company’s results of operations giving effect to the MaxT acquisition as if it had occurred at the
beginning of 2008 would not differ materially from reported results.
Goodwill
Goodwill resulting from the Company’s acquisitions consisted of the following at December 31, 2009, 2008 and 2007 (in
thousands):
2009
2008
2007
Video
Audio
Total
Video
Audio
Total
Video
Audio
Total
Goodwill
$
257,890
$
141,205
$
399,095
$
256,070
$
141,205
$
397,275
$
272,168
$
141,416
$
413,584
Accumulated
impairment losses
(107,600
)
(64,300
)
(171,900
)
(107,600
)
(64,300
)
(171,900
)
(53,000
)
—
(53,000
)
$
150,290
$
76,905
$
227,195
$
148,470
$
76,905
$
225,375
$
219,168
$
141,416
$
360,584