Plantronics 2007 Annual Report Download - page 86

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82 P l a n t r o n i c s
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, new technologies and new customers as well
as the implicit value of future cost savings as a result of the combining of entities. The goodwill arising
from this acquisition is not deductible for tax purposes under Internal Revenue Code Section 197.
Existing technology represents audio enhancement products that were generating revenue and/or had
reached technological feasibility as of the close of the transaction. The value of one component of existing
technology was calculated based on the present value of the capitalized royalties saved on the use of the
technology, applying a 40% discount rate. The value of the second component of existing technology was
calculated based on the present value of the future estimated cash flows derived from the technology
applying a 19% discount rate. Existing technology is estimated to have a useful life of ten years and is
being amortized on a straight-line basis to cost of revenues.
Altec Lansing Technologies, Inc.
On August 18, 2005, the Company completed the acquisition of 100% of the outstanding shares of Altec
Lansing Technologies, Inc., a privately-held Pennsylvania corporation (“Altec Lansing”) for a cash
purchase price including acquisition costs of approximately $165 million. The Company paid for the
acquisition by drawing down $45.0 million on its credit facility and the remainder was paid using its cash
and cash equivalents and short-term investments. Altec Lansing, headquartered in Milford, PA, has a
manufacturing plant in Dongguan, China, and sales offices in the U.S., Europe, and Asia. Altec Lansing
had approximately 1,400 employees on the date of acquisition. See Note 18 for a description of Altec
Lansing’s business.
The results of operations of Altec Lansing have been included in the Company’s consolidated results of
operations beginning on August 18, 2005.
The accompanying consolidated financial statements reflect the purchase price of approximately $165
million, consisting of cash and other costs directly related to the acquisition as follows:
(in thousands)
Paid to Altec Lansing $154,273
Payment of Altec Lansing pre-existing debt 9,906
Direct acquisition costs 977
Total cash consideration $165,156
The purchase price has been allocated to the tangible and identifiable intangible assets and liabilities
acquired on the basis of their respective fair values on the acquisition date.