Hypercom Corporation Annual Report - CiteSeer

elated intangible assets and the Company’s intended future use of the intangible assets. Deferred tax liabilities in the amount of $20.6
million were recorded based upon conclusions regarding the tax positions that were taken.
Of the total $74.2 million of intangible assets, $62.7 million is reported in NEMEA and $11.5 million in SEMEA. Intangible
assets in these business segments are subject to translation adjustment for currency changes.
Goodwill. Of the total purchase price, approximately $84.0 million was allocated to goodwill. Goodwill represents the excess
of the purchase price of an acquired business over the fair value of the underlying net tangible and intangible assets. Goodwill is not
amortized but instead will be tested for impairment at least annually (more frequently if certain indicators are present). In the event
that the management of the combined company determines that the value of goodwill has become impaired, the combined company
will incur an accounting charge for the amount of impairment during the fiscal quarter in which the determination is made.
See Note 4 for a discussion of impairment charges related to the Company’s goodwill and intangible assets.
The following represents the pro forma results of operations for the year ended December 31, 2009, 2008 and 2007 and gives
effect to the acquisition of TeT as if the acquisition was consummated at the beginning of fiscal year 2007. The unaudited pro forma
results of operations are not necessarily indicative of what would have occurred had the acquisition been made as of the beginning of
the period or of the results that may occur in the future. Net loss includes additional interest expense of $2.4 million and amortization
of intangible assets related to the acquisition of $2.8 million for the first quarter of 2008. The unaudited pro forma information is as
follows (dollars in thousands, except for per share data):
2009 2008 2007
Total net revenue $ 406,903 $ 477,386 $ 482,093
Net loss $ (6,868 ) $ (94,063 ) $ (20,158 )
Net loss per share — basic and diluted $ (0.13 ) $ (1.76 ) $ (0.38 )
4. Intangible Assets and Goodwill
Intangible assets consist of the following at December 31, 2009 and 2008 (dollars in thousands):
Gross Carrying
Amount
December 31, 2009 December 31, 2008
Accumulated
Amortization Net
- 62 -
Gross Carrying
Amount
Accumulated
Amortization Net
Capitalized software $ 3,327 $ (1,874 ) $ 1,453 $ 4,699 $ (3,597 ) $ 1,102
Customer and supplier
relationships 56,692 (11,875 ) 44,817 55,517 (4,266 ) 51,251
Unpatented technology 3,078 (2,694 ) 384 3,039 (1,851 ) 1,188
Trademarks, trade names 3,636 (1,687 ) 1,949 3,562 (930 ) 2,632
Service know-how 1,330 (388 ) 942 1,330 (255 ) 1,075
Other 150 (116 ) 34 149 (86 ) 63
$ 68,213 $ (18,634 ) $ 49,579 $ 68,296 $ (10,985 ) $ 57,311
Amortization of these intangibles is provided on the straight-line method over their estimated useful lives:
Capitalized software 8 months - 3 years
Customer relationships 4 - 10 years
Unpatented technology 2 - 10 years
Trademarks, trade names 2 - 10 years
Service know-how 10 years
Other Other
In 2008, the Company determined that $8.8 million of intangible assets were impaired. Of the total write-down, $2.4 million is
related to the Company’s 2006 acquisition of TPI and $6.4 million from its 2008 acquisition of TeT. The Company performed the
impairment test for these assets primarily due to the decline in its stock price that caused its book value to exceed its market
capitalization, which was an indication that these assets may not be recoverable. The primary reason for these impairment charges
relates to economic conditions and ongoing operations, which has caused the Company to reduce its estimates of projected cash flows.
Amortization expense related to intangible assets used in continuing operations was $9.7 million, $9.9 million and $2.3 million
for the years ended December 31, 2009, 2008 and 2007, respectively. Based on the intangible assets recorded at December 31, 2009,