Logitech 2011 Annual Report Download - page 211

ANNUAl REPORT
199
In connection with the merger, Logitech also agreed to establish a cash and stock option retention and incentive
plan for certain LifeSize employees, linked to the achievement of LifeSize performance targets. The duration of
the plan’s performance period is two years, from January 1, 2010 to December 31, 2011. The total available cash
incentive is $9.0 million over the two year performance period. As of March 31, 2011, approximately $5.6 million
has been accrued for this cash incentive. In December 2009, options to purchase 850,000 Logitech shares were
issued in connection with the retention and incentive plan.
The acquisition has been accounted for using the purchase method of accounting. Accordingly, the total
consideration was allocated to the tangible and intangible assets acquired and liabilities assumed based on their
estimated fair values as of the acquisition date. Fair values were determined by Logitech management based on
information available at the date of acquisition.
The allocation of total consideration to the assets acquired and liabilities assumed based on the estimated fair
value of LifeSize was as follows (in thousands):
December 11,
2009 Estimated Life
Tangible assets acquired ....................................... $33,635
Deferred tax asset, net ......................................... 8,828
Intangible assets acquired
Existing technology ........................................ 30,000 4 years
Patents and core technology ................................. 4,500 3 years
Trademark/trade name...................................... 7,600 5 years
Customer relationships and other ............................. 31,500 5 years
Goodwill................................................. 307,241 —
423,304
Liabilities assumed ........................................... (26,985)
Debt assumed................................................ (13,505)
Total consideration......................................... $382,814
The deferred tax asset primarily relates to the tax benefit of a net operating loss carryforward, net of the deferred
tax liability related to intangible assets. The existing technology of LifeSize relates to the platform technology used
in LifeSize’s high-definition video conferencing systems. The value of the technology was determined based on the
present value of estimated expected cash flows attributable to the technology, assuming the highest and best use by
a market participant. The patents and core technology represent awarded patents, filed patent applications and core
architectures, trade secrets or processes used in LifeSize’s current and planned future products. Trademark/trade
name relates to the LifeSize brand names. The value of the patents, core technology and trademark/trade name
was estimated by capitalizing the estimated profits saved as a result of acquiring or licensing the asset. Customer
relationships and other relates to the ability to sell existing, in-process, and future versions of the technology and
services to LifeSize’s existing customer base, valued based on projected discounted cash flows generated from
customers in place. The intangible assets acquired are amortized on a straight-line basis over their estimated useful
lives. The goodwill associated with the acquisition is primarily attributable to the opportunities and economies of
scale from combining the operations and technologies of Logitech and LifeSize. This goodwill is not subject to
amortization and is not expected to be deductible for income tax purposes. The debt that Logitech assumed as part
of the acquisition was repaid in full on December 18, 2009.
Unaudited pro forma financial information
The unaudited pro forma financial information in the table below summarizes the combined results of operations
of Logitech and LifeSize during the fiscal years ended March 31, 2010 and 2009 as though the acquisition took place
as of the beginning of each fiscal year. The pro forma financial information also includes certain adjustments such