Henry Schein 2012 Annual Report Download - page 92
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(in thousands, except per share data)
82
Note 9 – Business Acquisitions and Other Transaction – (Continued)
Effective December 31, 2009, we acquired a majority interest in Butler Animal Health Holding Company, LLC
(“Butler Holding”), the holding company of BAHS, a distributor of companion animal health supplies to
veterinarians. We contributed certain assets and liabilities with a net book value of approximately $86.0 million
related to our United States animal health business to BAHS and paid approximately $42.0 million in cash to
acquire 50.1% of the equity interests in Butler Holding indirectly through W.A. Butler Company, a holding
company that was partially owned by Oak Hill Capital Partners (“OHCP”). As part of a recapitalization at closing,
BAHS combined with our animal health business to form Butler Schein Animal Health (“BSAH”), while incurring
approximately $127.0 million in incremental debt used primarily to finance Butler Holding stock redemptions. As
a result, BSAH had incurred $320.0 million of debt at closing, $37.5 million of which was provided by Henry
Schein, Inc. and is eliminated in the accompanying consolidated financial statements. See below for a discussion of
the refinancing of debt incurred as part of the acquisition of BAHS.
Total consideration for the acquisition of BAHS, including $96.1 million of value for noncontrolling interests,
was $351.1 million, summarized as follows:
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et cash consideration paid by Henry Schein, Inc. ............................................................................................ $ 41,990
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et book value of the United States animal health operations' assets and liabilities contributed ...................... 86,048
Fair value of noncontrolling interest in BAHS ................................................................................................... 96,110
Incremental debt incurred ................................................................................................................................... 127,000
Total consideration ........................................................................................................................................ $ 351,148
We estimated the $96.1 million fair value of noncontrolling interest in BAHS as of the acquisition date by
applying an income approach as our valuation technique. Our income approach followed a discounted cash flow
method, which applied our best estimates of future cash flows and an estimated terminal value discounted to
present value at a rate of return taking into account the relative risk of the cash flows. To confirm the
reasonableness of the value derived from the income approach, we also analyzed the values of comparable
companies which are publicly traded.
The total consideration of $351.1 million was allocated as follows:
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et assets of BAHS at fair value:
Current assets ..................................................................................................................................................... $ 164,789
Intangible assets:
Trade name (useful life 3 years) ...................................................................................................................... 10,000
Customer relationships (useful life 12 years) .................................................................................................. 140,000
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on-compete agreements (useful life 2 years) ................................................................................................ 2,600
Goodwill ............................................................................................................................................................. 270,714
Other assets ........................................................................................................................................................ 14,138
Current liabilities ................................................................................................................................................ (62,770)
Bank indebtedness .............................................................................................................................................. (200,100)
Deferred income tax liabilities ........................................................................................................................... (74,271)
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et book value of our assets and liabilities contributed ..................................................................................... 86,048
Total allocation of consideration ..................................................................................................................... $ 351,148
The goodwill recognized is primarily attributable to expected synergies and the assembled workforce of BAHS.
The goodwill is not expected to be tax deductible for income tax purposes. As a result of our contributed business
being under the control of Henry Schein, Inc. before and after the transaction, the assets and liabilities of this
business remain at their original historical accounting basis in the accompanying consolidated financial statements.