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Acquisitions
6 Months Ended
Jun. 30, 2012
Business Combinations [Abstract]  
Acquisitions
Acquisitions
On October 4, 2011, we acquired the secure data storage hardware of IronKey Systems Inc. (IronKey) for a cash payment of $19.0 million. During the three months ended June 30, 2012, we recorded an adjustment to the purchase price related to working capital in the amount of $0.6 million. As the purchase accounting for this acquisition was finalized in 2011, the adjustment was recorded as a charge to restructuring and other in the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2012.
On June 4, 2011, we acquired the assets of MXI Security, a leader in high-security and privacy technologies, from Memory Experts International Inc., (MXI). The purchase price included future contingent consideration totaling between $0.0 and $45.0 million with an estimated fair value of $9.2 million at the time of the acquisition. The amount of contingent consideration was to be based on incremental revenue and gross margin percent from MXI and MXI-based Defender branded products.
During the second quarter of 2012, the MXI Security contingent consideration agreement was amended in light of the IronKey acquisition that occurred late in 2011. Under the amended agreement, the amount of contingent consideration will continue to range between $0.0 and $45.0 million, and will be based on incremental gross profit (revenue less cost of goods sold) and gross margin percent from MXI branded products, IronKey products and all other Defender branded products as well as future Imation Mobile Security products. Actual payments under the amended contingent consideration agreement could occur in three separate periods of time until the agreement expires on December 31, 2013. The first and the second earn-out payments each range between $0.0 and $25.0 million with the sum of the first and second payments being up to a maximum of $25.0 million. The first earn-out payment was not achieved.
We remeasure the remaining contingent consideration each reporting period. At June 30, 2012, the estimated fair value of this contingent consideration obligation was determined to be $6.4 million, resulting in a decrease of $2.8 million which was recorded as a benefit in restructuring and other in the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2012. See Note 12 - Fair Value Measurements for further discussion of our valuation technique.
On February 28, 2011 we acquired substantially all of the assets of BeCompliant Corporation, doing business as Encryptx (Encryptx). The purchase price included future contingent consideration with an estimated fair value of $1.3 million at the time of the acquisition. During the six months ended June 30, 2012, we paid $0.7 million of the consideration. The final contingent consideration payment will be determined based on certain 2012 milestones and any amount due will be paid during the first quarter of 2013. Based on our analysis of fair value as of June 30, 2012, the fair value of the remaining consideration did not change significantly.