SanDisk 2006 Annual Report Download - page 134

Direct transaction costs of $15 million include investment banking, legal and accounting fees, and other
external costs directly related to the acquisition. As of December 31, 2006, substantially all costs for accounting,
legal, and other professional services have been paid.
Net Tangible Assets. The preliminary allocation of the msystems purchase price to the tangible assets
acquired and liabilities assumed is summarized below (in thousands). The preliminary allocation was based on
management’s estimates of fair value, which included a third-party appraisal. The allocation of the purchase price
may be subject to change based on final estimates of fair value, primarily related to acquisition-related restruc-
turing, deferred taxes and actual transaction costs.
Cash ............................................................... $ 41,657
Short-term investments ................................................. 101,445
Accounts receivable ................................................... 163,275
Inventory ........................................................... 133,512
Property and equipment, net ............................................. 38,790
Other assets ......................................................... 49,127
Total assets acquired ................................................... 527,806
Accounts payable ..................................................... (133,263)
Other liabilities ....................................................... (180,555)
Total liabilities assumed ................................................ (313,818)
Net tangible assets acquired.............................................. $213,988
Purchase Price Allocation. In accordance with SFAS 141, the total preliminary purchase price was allocated
to msystems’ net tangible and intangible assets based upon their estimated fair values as of November 19, 2006. The
excess purchase price over the value of the net tangible and identifiable intangible assets was recorded as goodwill.
The fair values assigned to tangible and intangible assets acquired and liabilities assumed are based on estimates
and assumptions of management. Some of these estimates are subject to change, particularly those estimates
relating to potential restructuring activities, deferred taxes and actual transaction costs.
The following represents the allocation of the preliminary purchase price to the acquired net assets of
msystems (in thousands):
Net tangible assets acquired ............................................. $ 213,988
Goodwill . . . ........................................................ 759,250
Other identifiable intangible assets:
Core technology .................................................... 235,500
Trademarks ....................................................... 4,000
Customer relationships ............................................... 66,000
Backlog . . ........................................................ 5,000
Supply agreement .................................................. 2,000
Total other identifiable intangible assets .................................. 312,500
Acquired in-process technology .......................................... 186,000
Deferred tax liability .................................................. (31,339)
Assumed unvested stock-based awards to be expensed ......................... 55,339
Total preliminary estimated purchase price .................................. $1,495,738
The core technology and customer relationships are being amortized over an estimated useful life of five years.
Backlog, trademarks and the supply agreement are being amortized over an estimated useful life of six months to
Annual Report
F-35
Notes to Consolidated Financial Statements — (Continued)