Walgreens 2015 Annual Report Download - page 91

Other Acquisitions and Divestitures
The aggregate purchase price of all businesses acquired in fiscal 2015, excluding Alliance Boots, net of cash
received was $371 million for fiscal 2015. In fiscal 2015, the Company acquired Liz Earle Beauty Co. Ltd,
owner of the Liz Earle skincare brand in addition to other asset acquisitions, primarily pharmacy prescription
files. These acquisitions added $126 million to goodwill and $255 million to intangible assets. Any remaining
fair value relates to immaterial amounts of tangible assets, less liabilities assumed. Operating results of the
businesses acquired have been included in the Consolidated Statements of Earnings from their respective
acquisition dates forward. Pro forma results of the Company, assuming all of the other acquisitions had occurred
at the beginning of each period presented, would not be materially different from the results reported.
Additionally, in fiscal 2015 the Company completed the sale of a majority interest in its subsidiary, Walgreens
Infusion Services to Madison Dearborn Partners (“MDP”). Walgreens Infusion Services became a new
independent, privately-held company named Option Care Inc. MDP owns a majority interest in the new
company. Walgreens Boots Alliance owns a significant minority interest and has representatives on the
company’s board of directors.
In fiscal 2014, the Company acquired certain assets of Kerr Drug and its affiliates for $170 million. This
acquisition included 76 retail locations as well as a specialty pharmacy business and a distribution center. The
Kerr Drug acquisition added $42 million to goodwill and $54 million to intangible assets, primarily prescription
files and payer contracts, with $74 million allocated to net tangible assets. Additionally, the Company completed
the sale of a majority interest in its subsidiary, Take Care Employer Solutions, LLC (“Take Care Employer”) to
Water Street Healthcare Partners (“Water Street”). At the same time, Water Street made an investment in CHS
Health Services (“CHS”), an unrelated entity and merged CHS with Take Care Employer to create a leading
worksite health company dedicated to improving the cost and quality of employee health care. Water Street owns
a majority interest in the new company while the Company owns a significant minority interest and has
representatives on the new company’s board of directors.
9. Goodwill and Other Intangible Assets
Goodwill and other indefinite-lived intangible assets are not amortized, but are evaluated for impairment
annually during the fourth quarter, or more frequently if an event occurs or circumstances change that would
more likely than not reduce the fair value of a reporting unit below its carrying value. As part of the Company’s
impairment analysis for each reporting unit, the Company engaged a third party appraisal firm to assist in the
determination of estimated fair value for each unit. This determination included estimating the fair value using
both the income and market approaches. The income approach requires management to estimate a number of
factors for each reporting unit, including projected future operating results, economic projections, anticipated
future cash flows and discount rates. The market approach estimates fair value using comparable marketplace fair
value data from within a comparable industry grouping.
The determination of the fair value of the reporting units and the allocation of that value to individual assets and
liabilities within those reporting units requires the Company to make significant estimates and assumptions.
These estimates and assumptions primarily include, but are not limited to: the selection of appropriate peer group
companies; control premiums appropriate for acquisitions in the industries in which the Company competes; the
discount rate; terminal growth rates; and forecasts of revenue, operating income, depreciation and amortization
and capital expenditures. The allocation requires several analyses to determine the fair value of assets and
liabilities including, among other things, trade names and trademarks, pharmacy licenses, customer relationships
and purchased prescription files. Although the Company believes its estimates of fair value are reasonable, actual
financial results could differ from those estimates due to the inherent uncertainty involved in making such
estimates. Changes in assumptions concerning future financial results or other underlying assumptions could
have a significant impact on either the fair value of the reporting units, the amount of the goodwill impairment
charge, or both. The Company also compared the sum of the estimated fair values of its reporting units to the
Company’s total value as implied by the market value of its equity and debt securities. This comparison indicated
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