Logitech 2011 Annual Report Download - page 210

198
The following table presents the changes in fair value of the Company’s auction rate securities during fiscal
years 2011 and 2010:
March 31,
2011 2010
Auction rate securities, beginning balance....................................... $994 $1,637
Unrealized gain ......................................................... 744 —
Unrealized loss.......................................................... (43)(643)
Auction rate securities, ending balance.......................................... $1,695 $994
Note 6 — Acquisitions and Divestitures
Paradial
On July 6, 2010, Logitech acquired substantially all of the assets and employees of Paradial AS, a Norwegian
company providing firewall and NAT (network address translation) traversal solutions for video communications.
The acquisition will allow the Company to closely integrate firewall and NAT traversal across its video
communications product portfolio, enabling end-to-end HD video calling over highly protected networks. The
acquisition has been treated as an acquisition of a business and has been accounted for using the purchase method of
accounting. The total consideration paid of $7.3 million was allocated based on estimated fair values to $7.0 million
of identifiable intangible assets and $0.1 million of assumed liabilities, with the remaining balance allocated to
goodwill. The intangible assets acquired are amortized on a straight-line basis over their estimated useful lives
of five years. The goodwill associated with the acquisition is not subject to amortization and is not expected to be
deductible for income tax purposes.
LifeSize
On December 11, 2009, pursuant to a merger agreement signed November 10, 2009, Logitech acquired LifeSize
Communications, Inc., an Austin, Texas-based privately-held company specializing in high definition video
communication products and services. Logitech expects the acquisition to drive growth in video communication
for the enterprise and small-to-medium business markets by leveraging the two companies’ technology expertise,
including camera design, firewall traversal, video compression and bandwidth management.
The total consideration paid to acquire LifeSize was $382.8 million, not including cash acquired of $3.7 million.
In addition, Logitech incurred $6.6 million in transaction costs, which are included in operating expenses. Logitech
paid $382.3 million in cash to the holders of all outstanding shares of LifeSize capital stock, all vested options
issued by LifeSize, and all outstanding warrants to purchase LifeSize stock. As part of the acquisition, Logitech
assumed all outstanding unvested LifeSize stock options and unvested restricted stock held by continuing LifeSize
employees at December 11, 2009. The assumed options are exercisable for a total of approximately 1.0 million
Logitech shares and the assumed restricted stock was exchanged for 0.1 million Logitech shares. The stock options
and restricted stock continue to have the same terms and conditions as under LifeSize’s option plan. The fair value
attributable to precombination employee services for the stock options assumed, which is part of the consideration
paid to acquire LifeSize, was $0.5 million. The weighted average fair value of $12.07 per share for the stock
options assumed was determined using a Black-Scholes-Merton option-pricing valuation model with the following
weighted-average assumptions: expected term of 2.0 years, expected volatility of 57%, and risk-free interest rate
of 0.7%.
The total cash consideration paid of $382.3 million included $37.0 million deposited into an escrow account
as security for indemnification claims under the merger agreement and $0.5 million deposited in a stockholder
representative expense fund. The escrow trustee disbursed 50% of the escrow fund to the former holders of LifeSize
capital stock, vested options and warrants in December 2010, and the remaining fifty percent will be disbursed in
June 2011, subject to indemnification claims.