Ingram Micro 2008 Annual Report Download - page 67

In 2003, the Company obtained full ownership in Ingram Macrotron AG, a German-based distribution
company, by acquiring the remaining interest of approximately 3% held by minority shareholders. Subsequently,
court actions have been filed by several of the minority shareholders contesting the adequacy of the purchase price
paid for their shares. In the fourth quarter of 2008, based on available information, the Company recorded an
estimated liability of $5,786 to the minority shareholders for an increased assessment of the value of the shares,
which resulted in the addition to EMEA’s goodwill bythe same amount. A final resolution of the purchase price may
result in additional payments to the minority shareholders, which are less, or greater, than the current accrual.
In the fourth quarter of 2008, the Company recorded a payable of $1,000 to the sellers of AVAD for the final
earn-out in accordance with the 2005 provisions of the purchase agreement, resulting in an increase of goodwill for
the same amount.
In the fourthquarter of 2007, the Company closed thesale ofits Asian semiconductor businessfor a cash price of
$18,245. As a result, the Company recorded a pre-tax gain of $2,859, which is reported as a reduction to SG&A
expenses in the Company’s consolidated statement of income. The Company allocated $5,758 of Asia-Pacific
goodwill as part of the disposition of the semiconductor business and the determination of the associated gain on sale.
In the second quarter of 2007, the Company acquired certain assets and liabilities of DBL Distributing Inc.
(“DBL”). DBL was acquired for $102,174, which includes an initial cash price of $96,502, including related
acquisition costs, plus an estimated working capital adjustment of $5,672, which is subject to a final true-up to be
agreed to by the two parties. The purchase pricewas allocated to the assets acquired and liabilities assumed based on
their estimated fair values on the transaction date, resulting in goodwill of $59,720, trade names of $11,600 with
estimated useful lives of 20 years and other intangible assets of $12,800 primarily related to customer relationships
and non-compete agreements with estimated useful lives of up to eight years. In the first half of 2008, the Company
made adjustments to the purchase price allocation above, primarily resulting from an increase in the balance of
certain preacquisition liabilities, by $6,930. These adjustments yielded an increase of goodwill for the same
amount. Under the terms of the purchase agreement, the parties also agreed that $10,000 of the purchase price would
be held in an escrow account to cover indemnification of any claims arising from pre-acquisition contingent
liabilities until the later of June 2008 or the final resolution of any such claims. In March 2008, the Company served
a notice of claim with the seller for indemnification for certain pre-acquisition liabilities in accordance with the
terms of the purchase agreement, and also notified the seller and the escrow agent, Union Bank of California, that it
was extending the term of the escrow for an additional year. In June 2008, at the request of the seller, the escrow
funds were disbursed to the seller by the escrow agent without any notice to the Company. The $10,000 is now on
deposit with another financial institution and the Company has obtained a preliminary injunction preventing any
disposition of the funds from that financial institution without order of the Court.
In the first quarter of 2007, the Company acquired all the outstanding shares of VPN Dynamics and a minority
interest of 49% in a related company, Securematics. The Company’s interests in these related entities were acquired
for an initial aggregate purchase price of $26,791, including contingent consideration for the achievement of a
milestone plus related acquisition costs. The Company has a call option and the sellers have a put option for the
remaining 51% interest held by the shareholders of Securematics at a purchase price of $1,000, which both parties
has agreed will be executed in March 2012. The option price of $1,000 has been recorded in accrued expenses in the
Company’s consolidated balance sheet at January 3,2009 and December 29,2007. The results ofSecurematics have
been consolidated in accordance with Financial Accounting Standards Board Interpretation No. 46 “Consolidation
of Variable Interest Entities.” The purchase price was allocated to the assets acquired and liabilities assumed based
on their estimated fair values on the transaction date, resulting in goodwill of $20,691, trade names of $3,800 with
estimated useful lives of 20 years, other intangible assets of $4,000, primarily related to customer relationships and
non-compete agreements with estimated useful lives of up to five years, and a deferred tax liability of $3,178 related
to the intangible assets, none of which are deductible for tax purposes. In 2008, the Company made an adjustment to
the purchase price allocation associated with these acquisitions to reflect a reduction in tax-related liabilities at the
date of purchase totaling $57 and a decrease of goodwill for the same amount. In connection with the Company’s
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INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)