Black & Decker 2010 Annual Report Download - page 87

The transaction has been accounted for using the acquisition method of accounting which requires, among
other things, the assets acquired and liabilities assumed be recognized at their fair values as of the merger
date. The following table summarizes the estimated fair values of major assets acquired and liabilities assumed
as part of the Merger:
(Millions of Dollars) 2010
Cash ..................................................................... $949.4
Accounts and notes receivable . ................................................. 907.3
Inventory ................................................................. 1,070.1
Prepaid expenses and other current assets ......................................... 257.5
Property, plant and equipment . ................................................. 569.9
Trade names ............................................................... 1,505.5
Customer relationships ....................................................... 383.7
Licenses, technology and patents ................................................ 112.3
Other assets ............................................................... 200.1
Short-term borrowings........................................................ (175.0)
Accounts payable ........................................................... (479.6)
Accrued expenses and other current liabilities ...................................... (830.9)
Long-term debt ............................................................. (1,657.1)
Post-retirement benefits ....................................................... (768.8)
Deferred taxes.............................................................. (703.6)
Other liabilities ............................................................. (513.3)
Total identifiable net assets . . . ................................................. $827.5
Goodwill ................................................................. 3,829.0
Total consideration transferred . ................................................. $4,656.5
As of the merger date, the expected fair value of accounts receivable approximated the historical cost. The
gross contractual receivable was $951.7 million, of which $44.4 million was not expected to be collectible.
The amount allocated to trade names includes $1.362 billion for indefinite-lived trade names. The weighted-
average useful lives assigned to the finite-lived intangible assets are trade names — 14 years; customer
relationships — 15 years; and licenses, technology and patents — 12 years.
Black & Decker has three primary areas of contingent liabilities: environmental, risk insurance (predominantly
product liability and workers compensation) and uncertain tax liabilities. Additionally, Black & Decker is
involved in various lawsuits in the ordinary course of business, including litigation and administrative
proceedings involving commercial disputes and employment matters. Some of these lawsuits include claims
for punitive as well as compensatory damages. The majority of the contingent liabilities are recorded at fair
value in purchase accounting, aside from those pertaining to uncertainty in income taxes which are an
exception to the fair value basis of accounting; however certain environmental matters that are more legal in
nature are recorded at the probable and estimable amount.
Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and
represents the expected revenue and cost synergies of the combined business, assembled workforce, and the
going concern nature of Black & Decker. It is estimated that $167.7 million of goodwill, relating to Black &
Decker’s pre-merger historical tax basis, will be deductible for tax purposes.
The purchase price allocation for Black & Decker is substantially complete. As the Company finalizes its
purchase price allocation, it is anticipated that additional purchase price adjustments will be recorded relating
to certain environmental remediation liabilities for ongoing feasibility study results, tax matters, and for other
minor items. Such adjustments will be recorded during the measurement period in the first quarter of 2011. A
single estimate of fair value results from a complex series of judgments about future events and uncertainties
and relies heavily on estimates and assumptions. The Company’s judgments used to determine the estimated
fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially
impact the Company’s results from operations. The finalization of the Company’s purchase accounting
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