Shutterfly 2011 Annual Report Download - page 61

Download and view the complete annual report

Please find page 61 of the 2011 Shutterfly annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 123

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123

Goodwill
Changes in the carrying amount of goodwill are as follows (in thousands):
Accrued Liabilities
Note 5 — Acquisitions
WMSG, Inc.
On November 5, 2010, the Company acquired certain assets and liabilities of WMSG, Inc. (“WMSG”)
for a total aggregate purchase price
of $6.0 million. This acquisition enabled the Company to provide a complete solution for variable digital print marketers and other print-on-
demand opportunities. WMSG was a privately-
held, digital direct marketing specialist with strong data management and marketing analytics
capabilities located in Dallas, Texas. The acquisition was accounted for as a purchase transaction and accordingly, the purchase price was
allocated to tangible assets acquired and identifiable intangible assets acquired based on their estimated fair values on the acquisition date. The
excess of the purchase price over the aggregate fair values was recorded as goodwill.
The total aggregate purchase price of $6.0 million was comprised of $5.8 million cash consideration, net of $0.2 million cash acquired. The
Company recorded the assets acquired at fair value at the date of acquisition. The adjusted purchase price was allocated to tangible assets of
$0.6 million and intangible assets of $2.4 million which was comprised of $1.3 million in developed core technology, $0.9 million in customer
relationships and $0.2 million in non-
compete agreements. The intangible assets will be amortized over their estimated useful lives ranging from
two to five years. The remaining excess purchase price of approximately $2.9 million was allocated to goodwill. The results of operations for
WMSG have been included in the consolidated statement of operations for the period subsequent to the acquisition date. Acquisition-
related
costs were included in general and administrative expenses in the Company’
s consolidated statement of operations for year ended December 31,
2010.
TinyPictures, Inc.
On September 10, 2009, the Company acquired all of the outstanding common shares and securities convertible into common shares of
TinyPictures, Inc. (“TinyPictures”)
for a total aggregate purchase price of $1.3 million. The Company also granted $1.3 million in contingent
consideration in the form of performance-based restricted stock units (“PBRSUs”)
to continuing employees. Vesting of the PBRSUs is
contingent on achieving certain performance milestones and continued employment. TinyPictures developed applications that enabled users to
share images and videos to others across mobile networks and social networking platforms. The acquisition was accounted for as a non-
taxable
purchase transaction and, accordingly, the purchase price has been allocated to the tangible assets, liabilities assumed, and identifiable intangible
assets acquired based on their estimated fair values on the acquisition date. The excess of the purchase price over the aggregate fair values was
recorded as goodwill. Stock based compensation associated with the PBRSUs will be recognized when the achievement of the performance
milestones are deemed probable.
Table of Contents
Balance, December 31, 2008
$
7,724
Acquisition of business
544
Goodwill adjustments
-
Balance, December 31, 2009
8,268
Acquisition of business
2,895
Goodwill adjustments
-
Balance, December 31, 2010
$
11,163
December 31,
2010
2009
In thousands
Accrued marketing expenses
$
11,766
$
10,548
Accrued production costs
8,551
7,241
Accrued income and sales taxes
7,342
5,517
Accrued compensation
5,701
5,227
Accrued purchases
1,313
1,228
Accrued other
4,158
3,032
$
38,831
$
32,793
52