Acquisitions and Divestitures

Acquisitions

On December 31, 2012, we acquired Nexsan Corporation (Nexsan), a provider of disk-based storage systems with a portfolio of disk-based and hybrid disk-and-solid-state storage systems, for a purchase price of $120.1 million. The acquisition resulted in $65.5 million of goodwill. During the three months ended March 31, 2013, the purchase price was adjusted to reflect working capital variances in accordance with the merger agreement. This adjustment resulted in a decrease to goodwill of $1.6 million and a cash receipt for this amount. As of March 31, 2013, our purchase price allocation is preliminary pending final evaluation of income tax balances. See Note 6 - Intangible Assets and Goodwill for more information regarding goodwill. We have not shown proforma results for the comparative period for the acquisition of Nexsan as it is not material to our Condensed Consolidated Results of Operations.

On June 4, 2011, we acquired the assets of MXI Security (MXI). The purchase price included a contingent consideration arrangement with an estimated fair value of $0.6 million at December 31, 2012. See Note 4 - Acquisitions in our 2012 Annual Report on Form 10-K for further information regarding the contingent consideration.

We remeasure the estimated fair value of the remaining contingent consideration each reporting period. At March 31, 2013, our estimated fair value of this contingent consideration obligation was determined to be $0.5 million. The $0.1 million decrease in the fair value of this contingent consideration obligation from December 31, 2012 was recorded as a benefit in the restructuring and other line in the Condensed Consolidated Statements of Operations. 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 $0.6 million at December 31, 2012. The final contingent consideration payment of $0.8 million was determined based on certain 2012 milestones and was paid during the first quarter of 2013. In the Condensed Consolidated Statement of Cash Flows, $0.5 million was presented in cash flows from financing activities and the remaining $0.3 million was presented in cash flows from operating activities as it pertains to the excess of actual payments over the initially recognized fair value of the contingent consideration.

Discontinued Operations

On February 13, 2013, we announced our plans to divest our XtremeMac and Memorex consumer electronics businesses. The consumer storage business under the Memorex^TM and TDK Life on Record^TM brands will be retained. These divestitures are part of the acceleration of our strategic transformation that we announced during the fourth quarter of 2012 in conjunction with our plan to increase focus on data storage and security. As a part of exiting these disposal groups, we plan to sell the assets directly associated with these businesses, which primarily include inventory, tooling and intangible assets. We are in varying degrees of negotiations for the sale of these assets and believe such sales are probable to be consummated in the next 12 months. We have classified inventory of $24.8 million, intangible assets of $1.7 million and tooling of $1.6 million as assets held for sale as of March 31, 2013. The operating results for these businesses are presented in our Condensed Consolidated Statements of Operations as discontinued operations for all periods presented and only reflect revenues and expenses that are directly attributable to these businesses that will be eliminated from ongoing operations. Activity from the operations of these businesses will continue to be recorded and classified as discontinued operations until the sale of each business is consummated.

The key components from discontinued operations were as follows:



	Three Months Ended
	March 31,
(In millions)	2013			2012
Net revenue	$	11.2		$	18.4

Loss from operations of discontinued businesses, before income taxes	$	(5.5	)	$	(3.3	)
Income tax benefit	—			(0.3		)
Discontinued operations	$	(5.5	)	$	(3.0	)