Citrix 2000 Annual Report Download - page 49

47
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS −− (CONTINUED)
alternative future use. The allocations resulted in pre−tax charges to the
Company's operations of approximately $2.7 million in the first quarter of 1998,
$10.7 million in the second quarter of 1998, $2.4 million in the third quarter
of 1998, and $2.3 million in the third quarter of 1999 associated with the
acquisitions of Insignia, APM, VDOnet, and ViewSoft, respectively.
In January 1998, the Company licensed certain in−process software
technology from EPiCON, Inc. for approximately $8.0 million, payable in cash
under a three−year licensing agreement. A portion of the licensing fee was
allocated to in−process research and development, which had no alternative
future use. The allocation resulted in a pre−tax charge of approximately $2.6
million to the Company's operations in the first quarter of 1998. In December
1999, the Company amended its license agreement with EPiCON to allow the Company
access to additional software technology and to extend the exclusive license
term for an additional $4.0 million, of which $1.3 million was paid in cash at
the amendment date.
As of the date of each of the transactions, the Company concluded that the
respective in−process technologies had no alternative future uses after taking
into consideration the potential use of the technologies in different products,
the stage of development and life cycle of each project, resale of the software,
and internal use. The value of the respective purchased IPR&D was expensed at
the time of each of the transactions.
In February 2000, the Company acquired all of the operating assets of the
Innovex Group, Inc. ("Innovex"), a privately owned e−business consulting
services organization specializing in the design, development and implementation
of Web−based solutions and systems integration. The purchase price was
approximately $47.8 million, of which $28.7 million, excluding $275,000 in
transaction costs, was paid at the closing date. The balance is payable in equal
installments 18 and 24 months after the closing date, contingent on future
events, as set forth in the acquisition agreement. Contingent payment to be made
at future dates, if any, will be accounted for primarily as additional purchase
price and amortized over the remaining life of the intangible assets acquired.
Each of the acquisitions was accounted for under the purchase method of
accounting. The consolidated financial statements reflect the operations of the
acquired businesses for the periods after their respective dates of acquisition.
The purchase consideration was allocated to the acquired assets and
liabilities based on fair values as follows:
INSIGNIA EPICON APM VDONET VIEWSOFT INNOVEX
−−−−−−−− −−−−−−− −−−−−−− −−−−−−− −−−−−−−− −−−−−−−
(IN THOUSANDS)
Net assets acquired (net liabilities
assumed)............................... $ 400 $ −− $ (800) $ (100) $ 128 $ 2,259
Purchased identifiable intangibles....... 12,550 9,416 26,900 5,568 2,200 9,908
Purchased in−process research and
development............................ 2,700 2,584 10,700 2,432 2,300 −−
Goodwill................................. 1,850 −− 3,600 −− 28,904 16,788
−−−−−−− −−−−−−− −−−−−−− −−−−−−− −−−−−−− −−−−−−−
Total purchase consideration........ $17,500 $12,000 $40,400 $ 7,900 $33,532 $28,955
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The acquired core technology in the APM acquisition consisted primarily of
a Java software product that would operate in a MetaFrame server environment. At
the time of acquisition, it was anticipated that there was a growing need and
momentum in the market to develop and run Java client applications. Since the
acquisition, the market has not developed as anticipated. In the second quarter
of 2000, management changed the Java application server to a Java Performance
Pack product, which adds performance enhancements and management tools to other
Citrix products. By the fourth quarter of 2000, the Company had developed a Java
Performance Pack and was assessing the market demand for this technology. As of
December 31, 2000, the Company did not believe that there were sufficient
projected cash flows to support the net book value of the
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