CVS 2004 Annual Report Download - page 38
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estimated assets acquired and liabilities assumed as of July 31, 2004
In millions
Cash and cash equivalents $ 3.0
Accounts receivable 366.1
Inventories 927.8
Other current assets 67.1
Total current assets 1,364.0
Property and equipment 455.1
Goodwill 1,011.9
Intangible assets 501.0
Other assets 133.2
Total assets acquired 3,465.2
Accounts payable 500.1
Accrued expenses 275.9
Total current liabilities 776.0
Other long-term liabilities 469.7
Total liabilities 1,245.7
Net assets acquired 2,219.5
The following pro forma combined results of operations have
been provided for illustrative purposes only and do not purport
to be indicative of the actual results that would have been
achieved by the combined companies for the periods presented or
that will be achieved by the combined companies in the future:
In millions, except per share amounts 2004 2003
Pro forma:(1)(2)
Net Sales $ 34,564.3 $ 33,830.0
Net Earnings 907.0 865.5
Basic earnings per share $ 2.24 $ 2.16
Diluted earnings per share 2.17 2.14
(1) The pro forma combined results of operations assume that the
acquisition of the Acquired Businesses occurred at the beginning
of each period presented. Such results have been prepared by adjusting
the historical results of the Company to include the historical results
of the Acquired Businesses, the incremental interest expense and the
impact of the preliminary purchase price allocation discussed above.
(2) The pro forma combined results of operations do not include any cost
savings that may result from the combination of the Company and the
Acquired Businesses or any costs that will be incurred by the Company
to integrate the Acquired Businesses.
36 | Notes to Consolidated Financial Statements
3 ²
²Goodwill and other intangibles
Goodwill represents the excess of the purchase price over
the fair value of net assets acquired. The Company accounts
for goodwill and intangibles under SFAS No. 142, “Goodwill
and Other Intangible Assets.” As such, goodwill and other
indefinite-lived assets are not amortized, but are subject to
annual impairment reviews, or more frequent reviews if events
or circumstances indicate there may be an impairment. When
evaluating goodwill for potential impairment, the Company first
compares the fair value of the reporting unit, based on estimated
future discounted cash flows, with its carrying amount. If the
estimated fair value of the reporting unit is less than its carrying
amount, an impairment loss calculation is prepared. The
impairment loss calculation compares the implied fair value
of reporting unit goodwill with the carrying amount of that
goodwill. If the carrying amount of reporting unit goodwill
exceeds the implied fair value of that goodwill, an impairment
loss is recognized in an amount equal to that excess. During
the third quarter of 2004, the Company performed its required
annual goodwill impairment test, which concluded there was
no impairment of goodwill.
The carrying amount of goodwill was $1,898.5 million and
$889.0 million as of January 1, 2005 and January 3, 2004,
respectively. During 2004, gross goodwill increased $1,009.5
million, primarily due to the acquisition of the Acquired
Businesses. There was no impairment of goodwill during 2004.
Intangible assets other than goodwill are required to be
separated into two categories: finite-lived and indefinite-lived.
Intangible assets with finite useful lives are amortized over their
estimated useful life, while intangible assets with indefinite
useful lives are not amortized. The Company currently has
no intangible assets with indefinite lives.
Following is a summary of the Company’s amortizable intangible assets as of the respective balance sheet dates:
Jan. 1, 2005 Jan. 3, 2004
GROSS GROSS
CARRYING ACCUMULATED CARRYING ACCUMULATED
In millions AMOUNT AMORTIZATION AMOUNT AMORTIZATION
Customer lists and Covenants not to compete(1) $ 1,102.8 $ (321.8) $ 571.3 $ (241.4)
Favorable leases and Other(1) 173.8 (86.9) 152.3 (78.5)
$ 1,276.6 $ (408.7) $ 723.6 $ (319.9)
(1) The increase in the gross carrying amount during 2004 was primarily due to the acquisition of the Acquired Businesses.