Cardinal Health 2015 Annual Report Download - page 56

Notes to Financial Statements
55 Cardinal Health | Fiscal 2015 Form 10-K
that a performance target that affects vesting and that could be
achieved after the requisite service period be treated as a
performance condition. This guidance will be effective for us in the
first quarter of fiscal 2017, with early adoption permitted. We do not
expect the adoption of this guidance to have a material impact on
our financial position or results of operations.
In May 2014, the FASB issued amended accounting guidance related
to revenue recognition. This guidance is based on the principle that
revenue is recognized in an amount that reflects the consideration
to which an entity expects to be entitled in exchange for the transfer
of goods or services to customers. The guidance also requires
additional disclosure about the nature, amount, timing and
uncertainty of revenue and cash flows arising from customer
contracts, including significant judgments and changes in judgments
and assets recognized from costs incurred to obtain or fulfill a
contract. In July 2015, the FASB finalized a proposal to defer the
effective date for one year beyond the originally specified effective
date. This amendment will be effective for us in the first quarter of
fiscal 2019. We are continuing to evaluate the options for adoption
and the impact on our financial position and results of operations.
In April 2014, the FASB issued amended accounting guidance related
to the reporting of discontinued operations and disclosures of
disposals of components of an entity. The amended guidance
changes the thresholds for disposals to qualify as discontinued
operations and requires additional disclosures. This amendment will
be effective for us in the first quarter of fiscal 2016, with early adoption
permitted. We will adopt this guidance on a prospective basis, and
we do not expect the adoption to impact our financial position or
results of operations.
In July 2013, the FASB issued amended accounting guidance related
to the presentation of an unrecognized tax benefit when a net
operating loss carryforward, a similar tax loss, or a tax credit
carryforward exists. This guidance requires an entity to present an
unrecognized tax benefit, or a portion of an unrecognized tax benefit,
as a reduction to a deferred tax asset for a net operating loss
carryforward, a similar tax loss, or a tax credit carryforward, unless
certain conditions exists. We adopted this guidance in the first quarter
of fiscal 2015. The adoption of this guidance did not impact our
financial position or results of operations.
In March 2013, the FASB issued amended accounting guidance
related to a parent company's accounting for the cumulative
translation adjustment upon derecognition of certain subsidiaries or
group of assets within a foreign entity or of an investment in a foreign
entity. The amended guidance requires the release of any cumulative
translation adjustment into net income only upon complete or
substantially complete liquidation of a controlling interest in a
subsidiary or a group of assets within a foreign entity. Also, it requires
the release of all or a pro rata portion of the cumulative translation
adjustment to net income in the case of sale of an equity method
investment that is a foreign entity. We adopted this amended
guidance in the first quarter of fiscal 2015. The adoption of this
guidance did not impact our financial position or results of operations.
2. Acquisitions
While we have completed acquisitions impacting both the
Pharmaceutical and Medical segments during fiscal 2015, the pro
forma results of operations and the results of operations for acquired
businesses since the acquisition dates have not been separately
disclosed because the effects were not significant compared to the
consolidated financial statements, individually or in the aggregate.
The cash paid for these acquisitions, net of cash acquired, was $503
million. During the three months ended June 30, 2015, we completed
the largest of these acquisitions for a purchase price of approximately
$193 million, which was paid in cash, and potential maximum
contingent payments of $30 million.
The Harvard Drug Group
On July 2, 2015, we completed the acquisition of The Harvard Drug
Group ("Harvard Drug") for $1.1 billion, net of cash acquired, using
existing cash and proceeds from the debt offering in June 2015. The
acquisition of Harvard Drug, a distributor of generic pharmaceuticals,
over-the-counter healthcare and related products to retail,
institutional and alternate care customers, is expected to enhance
our Pharmaceutical segment's generic pharmaceutical distribution
and related service businesses. Harvard Drug also manufactures
and repackages generic pharmaceuticals and over-the-counter
health care products.
Cordis
On March 1, 2015, we entered into a binding offer letter with Ethicon,
Inc., a wholly-owned subsidiary of Johnson & Johnson, to purchase
its Cordis business for a purchase price of $1.9 billion in cash, subject
to certain adjustments. On May 27, 2015, Ethicon accepted the offer
and countersigned the stock and asset purchase agreement, which
we previously executed. The acquisition of Cordis, a manufacturer
and distributor of interventional cardiology devices and endovascular
solutions, is expected to expand the Medical segment's portfolio of
self-manufactured products and its geographic scope. We expect to
finance the acquisition using proceeds from the registered debt
offering in June 2015, as described in Note 7, and cash on hand.
Cordis is a global company, with operations in more than 50 countries.
The acquisition is expected to close in approximately 20 principal
countries during the second quarter of fiscal 2016 and in the
remaining countries afterward, subject to regulatory approval and
customary closing conditions. Transaction and integration costs
associated with the acquisition of Cordis were $44 million during fiscal
2015, and are included in amortization and other acquisition-related
costs in the consolidated statements of earnings.
AccessClosure
On May 9, 2014, we completed the acquisition of Access Closure,
Inc. ("AccessClosure") for $320 million in an all-cash transaction. We
funded the acquisition with cash on hand. The acquisition of
AccessClosure, a manufacturer and distributor of extravascular
closure devices, expands the Medical segment's portfolio of self-
manufactured products.
The assessment of the fair value of assets acquired and liabilities
assumed for AccessClosure was completed during fiscal 2015 and