Cardinal Health 2009 Annual Report Download - page 98

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directed at the critical care ventilation, respiratory diagnostics and clinical services and other medical and
surgical products markets. Through the tender offers, a total of approximately 29.3 million shares of Viasys
common stock were validly tendered for $42.75 per share, which represented approximately 88% of all
outstanding shares of Viasys. On June 28, 2007, the Company acquired from Viasys a number of additional
shares so that it would hold more than 90% of the outstanding shares on a fully diluted basis. The same day,
Viasys merged with a subsidiary of the Company to complete the transaction.
The cash transaction was valued at approximately $1.5 billion, including the assumption of approximately
$217.8 million of liabilities, which included $54.2 million of debt. Viasys employees with outstanding stock
options elected to either receive a cash payment or convert their options into options to purchase the Company’s
Common Shares. Certain Viasys employees elected to convert their options, which resulted in those employees
receiving the right to purchase a total of approximately 0.1 million Common Shares of the Company.
The preliminary valuation of the acquired assets and liabilities resulted in goodwill of approximately
$1.0 billion and identifiable intangible assets of $442.0 million as reported at June 30, 2007. The final valuation,
completed in fiscal 2008, resulted in an $81.5 million reclassification from goodwill to identifiable intangible
assets. The Company identified and valued intangible assets related to trade names and trademarks, developed
technology and customer relationships. The detail by category is as follows:
Category
Amount
(in millions)
Average
Life (Years)
Trade names and trademarks ..................................... $171.6 Indefinite
Developed technology .......................................... 65.1 10
Customer relationships .......................................... 286.8 15
Total identifiable intangible assets ................................. $523.5
During fiscal 2007, the Company recorded a charge of $83.9 million related to the write-off of estimated
IPR&D costs associated with the Viasys acquisition. This charge was based on the Company’s preliminary
estimate of the fair value of IPR&D. During fiscal 2008, the Company completed the valuation of IPR&D and
recorded a $25.0 million adjustment to reduce the total write-off of IPR&D associated with the Viasys
acquisition to $58.9 million. The portion of the purchase price allocated to IPR&D represents the estimated fair
value of the research and development projects in-process at the time of the acquisition. These projects had not
yet reached technological feasibility, were deemed to have no alternative use and, accordingly, were charged to
special items expense in accordance with FIN No. 4.
In addition, during fiscal 2007 the Company completed other acquisitions that individually were not
significant. The aggregate purchase price of these acquisitions, which was paid in cash, was approximately
$173.8 million with potential maximum contingent payments of $52.3 million. Assumed liabilities of these
acquired businesses were approximately $22.4 million. The consolidated financial statements include the results
of operations from each of these business combinations from the date of acquisition. Had the transactions
occurred at the beginning of fiscal 2006, consolidated results of operations would not have differed materially
from reported results.
Purchase Accounting Accruals
In connection with restructuring and integration plans related to its acquisition of Viasys, the Company
accrued, as part of its acquisition adjustments, a liability of $17.4 million for legal and recall charges,
$11.3 million related to employee termination and relocation costs, $10.9 million related to the closure of certain
facilities and $2.0 million for other restructuring charges. As of June 30, 2009, the Company had paid $5.1
million of legal and recall related costs, $7.8 million of employee-related costs and $8.4 million associated with
facility closures.
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