Cardinal Health 2011 Annual Report Download - page 78

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We determined the estimated fair value of the contingent consideration obligation based on a probability
-
we
i
g
h
te
di
ncome approac
hd
er
i
ve
df
rom EBITDA est
i
mates an
d
pro
b
a
bili
ty assessments w
i
t
h
respect to t
h
e
l
ikelihood of achievin
g
the various EBITDA tar
g
ets. The fair value measurement is based on si
g
nificant inputs
not observable in the market and thus represents a Level 3 fair value measurement. At each reporting date, we
reva
l
ue t
h
e cont
i
ngent cons
id
erat
i
on o
bli
gat
i
on to est
i
mate
df
a
i
rva
l
ue an
d
recor
d
c
h
anges
i
n
f
a
i
rva
l
ue as
i
ncome
o
r expense in our consolidated statement of earnin
g
s as acquisition-related costs. Chan
g
es in the fair value of th
e
contingent consideration obligation may result from changes in the terms of the contingent payments, changes i
n
di
scount per
i
o
d
san
d
rates, c
h
anges
i
nt
h
et
i
m
i
ng an
d
amount o
f
EBITDA est
i
mates, an
d
c
h
anges
i
n pro
b
a
bili
t
y
a
ssumptions with respect to the timin
g
and likelihood of achievin
g
the EBITDA tar
g
ets. Actual pro
g
ress towar
d
a
chieving the EBITDA targets for the remaining measurement periods may be different than our expectations o
f
per
f
ormance
i
n
f
uture measurement per
i
o
d
s. Fa
il
ure to meet current expectat
i
ons o
f
progress cou
ld i
ncrease t
h
e
probabilit
y
of not achievin
g
the tar
g
ets within the measurement periods and result in a material reduction in th
e
f
air value of the contingent consideration obligation. The fair value of the contingent consideration obligatio
n
was
$
75.4 million as of June 30, 2011, compared to the initial valuation of
$
92.0 million. The
$
16.6 million
d
ecrease in the contin
g
ent consideration liabilit
y
reflects a cash pa
y
ment of $10.2 million for the firs
t
measurement period and changes in our estimate of performance in future measurement periods.
T
he followin
g
table summarizes the fair values of the assets acquired and liabilities assumed as of th
e
a
c
q
uisition date for the three ac
q
uisitions described above
:
(
in millions) Kinra
y
Yon
g
Y
u
P
4
Healthcare
I
dentifiable intan
g
ible assets
T
ra
d
e names
(
1
)
.
...........................................
$
1
6.8
$
4.3
$
16.
0
Customer re
l
at
i
ons
hi
ps (2
)
....................................
11
6
.
05
1.7 1
63
.
0
Non-compete a
g
reements
(3)
..................................
0
.
00
.
09
.
7
O
t
h
er
(
4
)
.
................................................. 0.0 0.
0
37.
0
T
otal identifiable intan
g
ible assets acquired
..........................
132.8
5
6.0 22
5
.
7
Cas
h
an
d
equ
i
va
l
ents ........................................ 0.0 3.
9
0.
0
T
ra
d
e rece
i
va
bl
es, net
.......................................
29
7.
3 243
.
89
.
2
I
nventorie
s
................................................
180.8 133.1 0.
1
P
roperty an
d
equ
i
pment, net ..................................
3
.
53
.7 2.
3
O
t
h
er assets
...............................................
18
.
85
2.
0
2.
8
A
ccounts pa
y
abl
e
...........................................
(
268.
5
) (218.8) (1.2
)
O
t
h
er accrue
dli
a
bili
t
i
es .....................................
.
(
12.4
)(
55.8
)(
8.3
)
Sh
ort-term
b
orrow
i
n
gs
.
......................................
0
.
0
(
56.1) 0.
0
Lon
g
-term obli
g
ation
s
.
...................................... 0.
0
(1.3) 0.
0
C
ont
i
ngent cons
id
erat
i
on o
bli
gat
i
o
n
.
...........................
0
.
00
.
0
(
92.0
)
T
otal identifiable net assets ac
q
uire
d
.
..............................
.
35
2.3 160.
5
138.
6
G
oo
dwill
..................................................
9
83.7 23
9
.8 367.
5
T
ota
l
net assets acqu
i
re
d
.
.......................................
.
$
1
,
336.0
$
400.3
$
506.
1
(1) The weighted average lives of the trade names relating to the Kinray and Yong Yu acquisitions range from
two to t
h
ree years. P4 Hea
l
t
h
care tra
d
e names
h
ave
i
n
d
e
fi
n
i
te
li
ves.
(2) The wei
g
hted avera
g
e lives of customer relationships ran
g
e from 4 to 1
5y
ears.
(3) The weighted average life of non-compete agreements is five years
.
(4) T
h
ewe
i
g
h
te
d
average
li
ves o
f
ot
h
er
id
ent
ifi
e
di
ntang
ibl
e assets range
f
rom 2 to 10 years.
Fiscal 2010
D
ur
i
n
gfi
sca
l
2010, we comp
l
ete
d
an acqu
i
s
i
t
i
on t
h
at
i
n
di
v
id
ua
lly
was not s
ig
n
ifi
cant. T
h
ea
gg
re
g
ate
purchase price of this acquisition, which was paid in cash, was $32.0 million, includin
g
the assumption o
f
5
2