Citrix 2006 Annual Report Download - page 28

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Under the purchase method of accounting, the purchase
price for the 2006 Acquisitions was allocated to the
acquired companies’ net tangible and intangible assets
based on their estimated fair values as of the date of the
completion of the acquisition. The allocation of the total
purchase price is summarized below (in thousands):
Purchase Price
Allocation
Asset
Life
Current assets $ 5,153
Property and equipment 1,595 Various
Other assets 4,543
In-process research and development 1,000
Intangible assets 20,910 3-6 years
Goodwill 44,353 Indefinite
Assets acquired 77,554
Current liabilities assumed (9,530)
Net assets acquired, including direct transaction costs $ 68,024
Current assets acquired and current liabilities assumed in
connection with the 2006 Acquisitions consisted mainly
of short-term investments, accounts receivable, inventory,
other accrued expenses, short-term debt and deferred
revenues. Other assets consisted primarily of deferred
tax assets.
Intangible assets acquired in the 2006 Acquisitions are
comprised of core technologies, customer relationships,
trade name and covenants not to compete. The valuation
of the acquired technologies was based on the estimated
discounted future cash flows associated with the acquired
companies’ existing products. The value of customer
relationships was determined based on the acquired
companies’ estimated future discounted cash flows of
the relationships in place after considering historical
and expected buying patterns of customers, expected
cash flows from current customers, the duration of
support contracts and the application of charges of other
contributory assets. The valuation of the trade name for the
2006 Acquisitions was determined based on assigning a
royalty rate to the revenue stream that was expected from
the products using the trade names. The pre-tax royalty
rate was applied to the product revenue and discounted to
a present value. The value of the covenants not to compete
was determined by using a discounted income approach
that considered the value of the agreements in place
adjusted for competition, among other things. The goodwill
recorded in relation to the 2006 Acquisitions was assigned
to the Americas segment and is not deductible for
tax purposes.
2005 Acquisitions
During 2005, we acquired all of the issued and outstanding
capital stock of two privately held companies, NetScaler,
Inc. and Teros, Inc., collectively, the 2005 Acquisitions, for
a total of $172.8 million in cash, 6.6 million shares of our
common stock valued at $154.8 million and estimated
direct transaction costs of $6.2 million. We also assumed
approximately $20.6 million in non-vested stock-based
compensation upon the closing of the NetScaler, Inc.,
or NetScaler, transaction that was accounted for in
accordance with FASB Interpretation No. 44, Accounting
for Certain Transactions Involving Stock Compensation (an
Interpretation of APB Opinion No. 25) and was recorded
as deferred compensation in the accompanying 2005
consolidated balance sheet . The assumed awards
had an excess of fair value over intrinsic value of $0.5
million, which is reflected in the total consideration for
the transaction. The 2005 Acquisitions further extend
our Application Delivery Infrastructure, which is designed
to offer comprehensive solutions across all dimensions
of application delivery. The results of operations of the
acquired companies are included as part of our results
beginning after their respective dates of acquisition and
revenues from the acquired products are included in our