Netgear 2011 Annual Report Download - page 76

Table of Contents
Of the $900,000 of goodwill recorded on the acquisition of Leaf, approximately $471,000 and $900,000 was deductible for federal and
state income tax purposes, respectively.
The $2.0 million in acquired intangible assets was designated as existing technology. The value was calculated based on the present value
of the future estimated cash flows derived from projections of future revenue attributable to existing technology. This $2.0 million will be
amortized over its estimated useful life of seven years.
CP Secure International Holding Limited
On December 18, 2008, the Company completed the acquisition of certain intellectual property and other assets of CP Secure International
Holding Limited (“CP Secure”), a privately-held provider of integrated network security solutions. The aggregate purchase price was $14.0
million, paid in cash. Under the terms of the acquisition agreement, CP Secure shareholders received a total additional payout of $3.5 million in
cash as developed products passed certain acceptance criteria. This additional payout was earned and paid in the year ended December 31, 2009,
and was accounted for as additional purchase price and recorded as a $3.5 million increase to goodwill.
The results of CP Secure’s operations have been included in the consolidated financial statements since the date of acquisition. The
historical results of operations of CP Secure prior to the acquisition were not material to the Company’s results of operations.
The accompanying consolidated financial statements reflect a purchase price of approximately $14.6 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. Purchased intangibles are amortized on a straight-line basis over their
respective estimated useful lives. 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. 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
allocation of the purchase price in December 2008 was as follows (in thousands):
Of the $10.7 million of goodwill recorded on the acquisition of CP Secure, $5.3 million and $10.7 million is deductible for federal and
state income tax purposes, respectively. Of the $3.5 million additional payout recorded as goodwill in the year ended December 31, 2009, $1.7
million and $3.5 million are deductible for federal and state income tax purposes, respectively.
72
Purchase price
$
14,000
Direct acquisition costs
635
Total consideration
$
14,635
Inventories
$
82
Property and equipment, net
49
Intangibles, net
3,900
Goodwill
10,686
Other accrued liabilities
(82
)
Total purchase price allocation
$
14,635