McKesson 2014 Annual Report Download - page 73
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McKESSON CORPORATION
FINANCIAL NOTES (Continued)
70
The following table summarizes the preliminary recording of the fair values of the assets acquired and liabilities assumed as
of the acquisition date. Due to the recent timing of the acquisition, these amounts are subject to change within the measurement
period as our fair value assessments are finalized.
(In millions)
Amounts
Recognized as of
Acquisition Date
(Provisional)
Receivables $ 3,425
Other current assets, net of cash and cash equivalents acquired 2,413
Goodwill 3,570
Intangible assets 3,018
Other long-term assets 1,272
Current liabilities (4,096)
Short-term borrowings and current portion of long-term debt (1,990)
Long-term debt (322)
Other long-term liabilities (1,293)
Fair value of net assets, less cash and cash equivalents 5,997
Less: Noncontrolling Interests (1,500)
Net assets acquired, net of cash and cash equivalents $ 4,497
Included in the purchase price allocation are acquired identifiable intangibles of $3,018 million, the fair value of which was
primarily determined by applying the income approach, using several significant unobservable inputs for projected cash flows and
a discount rate. These inputs are considered Level 3 inputs under the fair value measurements and disclosure guidance. Acquired
intangibles primarily consist of $1,574 million of customer relationships, $1,202 million of pharmacy licenses and $172 million
of trademarks. The estimated weighted average life of the customer relationships, pharmacy licenses, trademarks and total intangible
assets are eleven years, twenty-six years, fourteen years and seventeen years.
The fair value of Celesio’s long-term debt was determined by quoted market prices in a less active market and other observable
inputs from available market information, which are considered to be Level 2 inputs under the fair value measurements and
disclosure guidance. The fair values of the conversion options on Celesio’s convertible bonds, which are classified as current
liabilities, were determined by using an option pricing model that uses observable market data for all inputs, such as historical
volatility of the Company’s common stock, risk-free interest rate and other factors that are considered to be Level 2 inputs under
the fair value measurements and disclosure guidance.
The fair value of the noncontrolling interests on the date of acquisition of $1,500 million was made up of the following
components:
(In millions)
Amounts
Recognized as of
Acquisition Date
(Provisional)
Fair value of Celesio common shares not acquired by McKesson $ 1,412
Fair value of Celesio’s previously existing noncontrolling interests 88
Total $ 1,500
The fair value of the noncontrolling interests for the Celesio common shares that were not acquired by McKesson was
determined by a quoted market price that is considered to be a Level 1 input under the fair value measurements and disclosure
guidance.