Cardinal Health 2014 Annual Report Download - page 38

Cardinal Health, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
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property to the estimated fair value, less costs to sell, of $24
million, which is included in prepaid expenses and other in the
consolidated balance sheets. The fair value was estimated
using inputs such as broker listings and sales agreements and
thus represents a Level 2 nonrecurring fair value measurement.
Also in connection with our Medical segment restructuring plan,
during fiscal 2013 we recognized an $11 million loss to write
down our gamma sterilization assets in El Paso, Texas.
During fiscal 2013, we recognized an $829 million ($799 million,
net of tax) goodwill impairment charge related to our Nuclear
Pharmacy Services division, as discussed further in Note 5. We
also recognized an $8 million loss during fiscal 2013 to write
down commercial software under development within our
Pharmaceutical segment in connection with our decision to
discontinue this project.
During fiscal 2012, we recognized a $16 million loss to write
down an indefinite-life intangible asset related to the P4
Healthcare trade name, an asset within our Pharmaceutical
segment. We rebranded P4 Healthcare under the Cardinal
Health Specialty Solutions name.
5. Goodwill and Other Intangible Assets
Goodwill
The following table summarizes the changes in the carrying
amount of goodwill, by segment and in total:
(in millions) Pharmaceutical (1) Medical Total
Balance at June 30, 2012 $ 2,876 $ 1,102 $ 3,978
Goodwill acquired, net of
purchase price adjustments 40 1,409 1,449
Foreign currency
translation adjustments and
other 7 (4) 3
Impairment (829) — (829)
Balance at June 30, 2013 $ 2,094 $ 2,507 $ 4,601
Goodwill acquired, net of
purchase price adjustments 68 216 284
Foreign currency translation
adjustments and other (4) (3) (7)
Balance at June 30, 2014 $ 2,158 $ 2,720 $ 4,878
(1) At June 30, 2014 and 2013, the accumulated goodwill impairment loss
was $829 million.
Fiscal 2014
The increase in the Medical segment goodwill during
fiscal 2014 is primarily due to the AccessClosure acquisition.
Goodwill recognized in connection with this acquisition primarily
represents the expected benefits from synergies of integrating
this business, the existing workforce of the acquired entity, and
expected growth from new customers, new products, and
improvements to existing technologies. See Note 2 for further
discussion of this acquisition.
Fiscal 2013
The increase in the Medical segment goodwill during
fiscal 2013 is primarily due to the AssuraMed acquisition.
Goodwill recognized in connection with this acquisition primarily
represents the expected benefits from synergies of integrating
this business, the existing workforce of the acquired entity,
expected growth from new customers and long-term brand
value. See Note 2 for further discussion of this acquisition.
The decrease in the Pharmaceutical segment goodwill during
fiscal 2013 is primarily due to an $829 million ($799 million, net
of tax) non-cash goodwill impairment charge related to our
Nuclear Pharmacy Services division, which is included in
impairments and loss on disposal of assets in our consolidated
statements of earnings. This impairment charge did not impact
our liquidity, cash flows from operations, or compliance with debt
covenants.
As a result of significant softness in the low-energy diagnostics
market, we performed interim goodwill impairment testing for
our Nuclear Pharmacy Services division 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
reimbursement developments that could have adversely
impacted 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. This
update resulted in significant reductions in the anticipated future
cash flows and estimated fair value for this reporting unit.
We completed our annual goodwill impairment test for fiscal
2013, which we perform annually in the fourth quarter, in
conjunction with the preparation of our fiscal 2013 consolidated
financial statements. 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.