EMC 2003 Annual Report Download - page 47

employee relocations. We will finalize our integration plans and related liabilities in 2004. Finalization of our plans may result in additional liabilities which
will increase goodwill. The following summarizes the obligations recognized in connection with the Documentum acquisition and activity to date (table in
thousands):
Category Obligation
Current
Utilization
Ending
Balance
Involuntary termination benefits $ 718 $ – $ 718
Lease terminations 4,970 – 4,970
Total $ 5,688 $ – $5,688
The following pro forma information assumes the LEGATO and Documentum acquisitions occurred as of the beginning of each year presented. The pro
forma results are not necessarily indicative of what actually would have occurred had the acquisition been in effect for the periods presented (table in
thousands, except per share data):
Year ended December 31,
2003 2002
Revenue $6,735,862 $5,975,523
Net income (loss) 393,919 (433,579)
Net income (loss) per weighted average share, basic $ 0.16 $ (0.18)
Net income (loss) per weighted average share, diluted $ 0.16 $ (0.18)
Other acquisitions
In September 2002, we acquired all of the outstanding common and preferred stock of Prisa Networks, Inc. ("Prisa"), a software development company,
for $22.0 million in cash. The purchase price has been allocated to Prisa's assets and liabilities based upon their fair market value at the date of acquisition.
The final purchase price allocation resulted in $4.5 million being allocated to developed technology, $1.9 million to an OEM contract and $10.0 million to
goodwill, all of which are classified within our information storage products segment. The consolidated financial statements include the operating results of
Prisa from the date of acquisition. Pro forma results of operations have not been presented because the effects of the acquisition were not material to us. The
intangible assets, with the exception of the goodwill, are being amortized on a straight-line basis over their estimated useful life of four years. None of the
goodwill is deductible for income tax purposes.
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EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATMENTS
A summary of the assets acquired and liabilities assumed is as follows (table in thousands):
Fair value of assets acquired $ 23,483
Cash paid for stock, net of cash acquired (21,993)
Liabilities assumed $ 1,490
In September 2002, we acquired 1.8 million shares of Series A Preferred Stock of Diligent Technologies Corporation ("Diligent"), a software
development company, in exchange for our equity interest in one of our wholly owned subsidiaries, which had a net book value of $4.6 million. In
October 2002, we acquired an additional 2.0 million shares of Series A Preferred Stock of Diligent for a purchase price of $5.0 million. As a result of these
transactions, we own approximately 24% of the outstanding equity in Diligent, which is majority owned by two former EMC employees. Our investment in
Diligent is being accounted for under the equity method. As of December 31, 2003, the carrying value of the investment was $2.3 million.
In 2001, we acquired all of the outstanding shares of capital stock of FilePool N.V. and Luminate Software Corporation ("Luminate"), both software
development companies, as well as other minor acquisitions, for an aggregate consideration, including stock options, of $112.5 million, net of cash acquired.
We accounted for these acquisitions under the purchase method of accounting. Pro forma results of operations have not been presented because the effects of
these acquisitions were not material to us on either an individual or an aggregate basis. Based upon the final purchase price allocation, an aggregate of
$20.0 million was allocated to developed technology and an aggregate of $89.3 million was allocated to goodwill, including the impact of deferred taxes. The
intangible assets, with the exception of the goodwill arising from the Luminate and FilePool N.V. acquisitions, are being amortized on a straight-line basis
over their estimated useful life of five years.
A summary of the assets acquired and liabilities assumed in the 2001 transactions set forth above is as follows (table in thousands):
Fair value of assets acquired $ 119,484
Cash paid for stock, net of cash acquired (111,455)
Liabilities assumed $ 8,029
In July 2001, the FASB issued FAS No. 142, "Goodwill and Other Intangible Assets." FAS No. 142 ceased goodwill amortization but requires testing for
impairment on an annual basis or more frequently if events or changes in circumstances indicate that the asset might be impaired. FAS No. 142 also requires
purchased intangible assets other than goodwill to continue to be amortized over their estimated useful lives. Based on impairment tests performed, there was
no impairment to goodwill during fiscal years 2003 or 2002.