Logitech 2006 Annual Report Download - page 136

LOGITECH INTERNATIONAL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The total purchase price was allocated to the fair values of assets acquired and liabilities assumed as follows
(in thousands):
Tangible assets acquired ............................................... $ 3,410
Intangible assets acquired:
Database ....................................................... 5,700
Technology ..................................................... 2,400
Trademark/trade name ............................................ 900
Customer contracts ............................................... 600
Goodwill ....................................................... 23,163
36,173
Liabilities assumed ................................................... (2,339)
Deferred tax liability related to intangible assets acquired .................... (1,734)
Transaction costs .................................................... (1,550)
Total consideration ............................................... $30,550
The acquired database consists of various proprietary databases developed by Intrigue, including its device
and infrared database, which support infrared-controlled devices made by manufacturers. The acquired
technology relates to developed software used in Intrigue’s line of advanced remote controls. Trademark/trade
name relates to the Harmony brand name under which the remote controls are sold and which Logitech has
continued to use in its product portfolio. Customer contracts relate to certain existing relationships with
distributors through established contracts. The value of the database, acquired technology and trademark/trade
name were determined using the royalty savings approach, which estimates the value of the assets by capitalizing
the royalties saved as a result of acquiring the assets. The value of the customer contracts was determined using
the cost savings approach, which estimates the amount saved by the Company as a result of acquiring the asset.
The acquired intangible assets are amortized on a straight-line basis over their estimated useful lives. The
database is being amortized over an estimated useful life of ten years and all other acquired intangible assets are
being amortized over estimated useful lives of five years. Goodwill associated with the acquisition is not subject
to amortization and is not expected to be deductible for income tax purposes.
Note 4 — Investments:
In July 2003, the Company made a $15.1 million cash investment in the Anoto Group AB (“Anoto”), a
publicly traded Swedish technology company from which Logitech licenses its digital pen technology. The
investment represented approximately 9.5% of Anoto’s outstanding shares as of March 31, 2006. The Company
accounts for the investment as available-for-sale securities and reported its fair value of $36.3 million based on
quoted market prices on the balance sheet as of March 31, 2006. During fiscal year 2006, the Company recorded
a gross unrealized gain of $21.3 million associated with the Anoto investment, which is included net of tax in
accumulated other comprehensive loss. In connection with the investment, a Logitech executive was elected to
the Anoto board of directors. The license agreement requires Logitech to pay a license fee for the rights to use
the Anoto technology and a license fee on the sales value of digital pen solutions sold by Logitech. Also, the
agreement includes non-recurring engineering (“NRE”) service fees primarily for specific development and
maintenance of Anoto’s licensed technology. During fiscal year 2006, expenses incurred for license fees to
Anoto were $.5 million. Expenses incurred for license fees and NRE service fees to Anoto were $.7 million in
fiscal year 2005.
In April 2006, the Company sold 42% of its Anoto stock and recognized a gain of $6.6 million, which will
be included in other income, net in the first quarter of fiscal year 2007. The Company’s remaining interest
represents approximately 5.5% of Anoto’s outstanding shares.
F-13
CG
LISA