Cardinal Health 2013 Annual Report Download - page 41

Cardinal Health, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
39
In conjunction with the preparation of our consolidated financial
statements for fiscal 2013, we recently completed our annual goodwill
impairment test, which we perform annually in the fourth quarter. As
previously disclosed in our Quarterly Reports on Form 10-Q for the
quarters ended December 31, 2012, and March 31, 2013, our Nuclear
Pharmacy Services division has experienced significant softness in the
low-energy diagnostics market. We performed interim goodwill impairment
testing for this reporting unit during the three months ended December
31, 2012 and determined that there was no impairment, as the fair value
of the reporting unit was estimated to be in excess of its carrying amount.
During the second half of fiscal 2013, we experienced sustained volume
declines and price erosion for the core, low-energy products provided by
this division. In addition, we experienced reduced sales for some existing
high-energy diagnostic products, slower-than-expected adoption of new
high-energy diagnostic products, and recent reimbursement
developments that may adversely impact the future growth of these
products. Using this information, we adjusted our outlook and long-term
business plans for this division during our annual budgeting process, which
we recently concluded. This update resulted in significant reductions in
the anticipated future cash flows and estimated fair value for this reporting
unit.
Using a combination of the income-based approach (using a discount rate
of 10 percent) and the market-based approach, the fair value of this
reporting unit was estimated to be below the carrying amount and therefore
indicated impairment. The second step of the impairment test resulted in
the impairment of the entire $829 million carrying amount of goodwill for
this reporting unit. Our fair value estimates utilize significant unobservable
inputs and thus represent Level 3 fair value measurements.
Other Intangible Assets
Other intangible assets are amortized over periods ranging from one to
twenty years. The following tables summarize other intangible assets by
class at June 30:
2013
(in millions) Gross
Intangible Accumulated Amortization Net Intangible
Indefinite-life intangibles:
Trademarks and other $ 11 $ — $ 11
Total indefinite-life intangibles 11 — 11
Definite-life intangibles:
Customer relationships 982 230 752
Trademarks, trade names and patents 209 49 160
Non-compete agreements 15 10 5
Other 101 56 45
Total definite-life intangibles 1,307 345 962
Total other intangible assets $ 1,318 $ 345 $ 973
2012
(in millions) Gross
Intangible Accumulated Amortization Net Intangible
Indefinite-life intangibles:
Trademarks and other $ 17 $ — $ 17
Total indefinite-life intangibles 17 — 17
Definite-life intangibles:
Customer relationships 473 141 332
Trademarks, trade names and patents 45 36 9
Non-compete agreements 14 8 6
Other 93 43 50
Total definite-life intangibles 625 228 397
Total other intangible assets $ 642 $ 228 $ 414
Total amortization of intangible assets was $121 million, $79 million and
$68 million for fiscal 2013, 2012 and 2011, respectively. Estimated annual
amortization of intangible assets is as follows: $180 million, $150 million,
$136 million, $124 million and $90 million for fiscal 2014 through 2018.
The increase in definite-life intangible assets and amortization during fiscal
2013 is primarily due to the acquisition of AssuraMed. See Note 2 for
further discussion of this acquisition.
6. Long-Term Obligations and Other Short-Term
Borrowings
The following table summarizes long-term obligations and other short-
term borrowings at June 30:
(in millions) 2013 2012
1.7% Notes due 2018 $ 399 $ —
1.9% Notes due 2017 250 250
3.2% Notes due 2022 247 250
3.2% Notes due 2023 549 —
4.0% Notes due 2015 524 536
4.6% Notes due 2043 349 —
4.625% Notes due 2020 527 538
5.5% Notes due 2013 —304
5.8% Notes due 2016 301 305
5.85% Notes due 2017 157 160
6.0% Notes due 2017 200 206
7.0% Debentures due 2026 124 125
7.8% Debentures due 2016 37 37
Other obligations 190 183
Total $ 3,854 $ 2,894
Less: current portion of long-term obligations and
other short-term borrowings 168 476
Long-term obligations, less current portion $ 3,686 $ 2,418