Henry Schein 2012 Annual Report Download - page 78
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Please find page 78 of the 2012 Henry Schein 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.HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(in thousands, except per share data)
68
Note 1 – Significant Accounting Policies – (Continued)
Acquisitions
The net assets of businesses purchased are recorded at their fair value at the acquisition date and our
consolidated financial statements include their results of operations from that date. Any excess of acquisition
consideration over the fair value of identifiable net assets acquired is recorded as goodwill. The major classes of
assets and liabilities that we generally allocate purchase price to, excluding goodwill, include identifiable intangible
assets (i.e., trademarks and trade names, customer relationships and lists and non-compete agreements), property,
plant and equipment, deferred taxes and other current and long-term assets and liabilities. The estimated fair value
of identifiable intangible assets is based on critical estimates, judgments and assumptions derived from: analysis of
market conditions; discount rate; discounted cash flows; customer retention rates; and estimated useful lives. Some
prior owners of such acquired subsidiaries are eligible to receive additional purchase price cash consideration if
certain financial targets are met. For acquisitions completed prior to 2009, we accrue liabilities that may arise from
these transactions when we believe that the outcome of the contingency is determinable beyond a reasonable doubt.
For 2009 and future acquisitions, we accrue liabilities for the estimated fair value of additional purchase price
adjustments at the time of acquisition. Any adjustments to these accruals are recorded in our consolidated
statement of income. For the years ended December 29, 2012, December 31, 2011 and December 25, 2010, there
were no material adjustments recorded in our consolidated statement of income relating to changes in estimated
contingent purchase price liabilities.
Redeemable Noncontrolling Interests
Some minority shareholders in certain of our subsidiaries have the right, at certain times, to require us to
acquire their ownership interest in those entities at fair value. Their interests in these subsidiaries are classified
outside permanent equity on our consolidated balance sheets and are carried at the estimated redemption amounts.
The redemption amounts have been estimated based on expected future earnings and cash flow and, if such
earnings and cash flow are not achieved, the value of the redeemable noncontrolling interests might be impacted.
Changes in the estimated redemption amounts of the noncontrolling interests subject to put options are reflected at
each reporting period with a corresponding adjustment to Additional paid-in capital. Future reductions in the
carrying amounts are subject to a “floor” amount that is equal to the fair value of the redeemable noncontrolling
interests at the time they were originally recorded. The recorded value of the redeemable noncontrolling interests
cannot go below the floor level. These adjustments do not impact the calculation of earnings per share.
Goodwill and Other Indefinite-Lived Intangible Assets
Goodwill and other indefinite-lived intangible assets (primarily trademarks) are not amortized, but are subject
to impairment analysis at least once annually. Such impairment analyses for goodwill require a comparison of the
fair value to the carrying value of reporting units. We regard our reporting units to be our operating segments:
health care distribution (global dental, medical and animal health) and technology and value-added services.
During the fiscal year ended December 31, 2011, we adopted the provisions of Accounting Standards Update
2011-08, “Intangibles-Goodwill and Other (Topic 350): Testing Goodwill for Impairment” (“ASU 2011-08”),
which allows us to use qualitative factors to determine whether it is more likely than not that the fair values of our
reporting units are less than their carrying values. The factors that we consider in developing our qualitative
assessment included:
• Macroeconomic conditions consisting of the overall sales growth of our business and the overall sales
growth of each of our operating segments. We also consider our growth in market share in the markets in
which we compete;
• Credit markets and our ability to access debt facilities at favorable terms;
• Key personnel and management expertise, as well as our growth strategies for the next several years; and
• Our expectations of selling or disposing all, or a portion, of a reporting unit.