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Table of Contents
Infrant Technologies, Inc.
On May 16, 2007, the Company completed the acquisition of 100% of the outstanding shares of Infrant Technologies, Inc. (“Infrant”), a
developer of network attached storage products. The aggregate purchase price was $60 million, paid in cash. Under the terms of the acquisition
agreement, Infrant shareholders received a total additional payout of $20 million in cash over the three years following closure of the acquisition
as specific revenue targets were reached. $10 million was paid in November 2008 and $10 million was paid in April 2010.
The November 2008 payment of $10 million resulted in an increase in goodwill of $8.7 million, the recognition of compensation expense
of $650,000, and a reduction in taxes payable of $620,000.
The April 2010 payment of $10 million resulted in an increase in goodwill of $8.5 million, the recognition of compensation expense of
$677,000, and a reduction in taxes payable of $869,000. The Company had accrued for $113,000 of this $677,000 in compensation expense in
the year ended December 31, 2009.
The results of Infrant’s operations have been included in the consolidated financial statements since the date of acquisition. The historical
results of Infrant prior to the acquisition were not material to the Company’s results of operations.
The accompanying consolidated financial statements reflect an initial purchase price of approximately $60.3 million, consisting of cash,
and other costs directly related to the acquisition as follows (in thousands):
In accordance with the purchase method of accounting, the Company allocated the total purchase price to tangible assets, liabilities and
identifiable intangible assets based on their estimated fair values. Goodwill was recorded based on the residual purchase price after allocating the
purchase price to the fair market value of tangible and intangible assets acquired less liabilities assumed. Purchased intangibles are amortized on
a straight-line basis over their respective estimated useful lives. Goodwill arises as a result of, among other factors, future unidentified new
products and new technologies as well as the implicit value of future cost savings as a result of the combining of entities. The total allocation of
the purchase price in 2007 was as follows (in thousands):
None of the goodwill recognized related to Infrant is deductible for income tax purposes.
70
Purchase price
60,000
Direct acquisition costs
254
Total consideration
60,254
Cash and cash equivalents
2,787
Accounts receivable
1,202
Inventories
3,504
Deferred income taxes
667
Prepaid expenses and other current assets
36
Property and equipment
128
Intangibles
22,700
Goodwill
38,185
Accounts payable
(697
)
Accrued employee compensation
(396
)
Other accrued liabilities
(1,048
)
Deferred income tax liability
(6,814
)
Total purchase price allocation
60,254