Cardinal Health 2014 Annual Report Download - page 37

Cardinal Health, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
35
following table summarizes the estimated fair values of the
assets acquired and liabilities assumed at the acquisition date
for AssuraMed:
(in millions) Amount
Weighted-Average
Useful Lives of
Identifiable Intangible
Assets
Identifiable intangible assets:
Customer relationships $ 460 9
Trade names 160 11
Other 7 3
Total identifiable intangible
assets 627 9
Cash and equivalents 25
Trade receivables 103
Inventories 69
Prepaid expenses and other 102
Property and equipment 40
Accounts payable (71)
Other accrued liabilities (24)
Deferred income taxes and other
liabilities (180)
Total identifiable net assets
acquired 691
Goodwill 1,404
Total net assets acquired $ 2,095
Our fair value estimates utilize significant unobservable inputs
and thus represent Level 3 fair value measurements. The
estimated fair value of the identifiable intangible assets was
determined primarily using an income-based approach, which
includes market participant expectations of the cash flows that
an asset could generate over its remaining useful life,
discounted back to present value using an appropriate rate of
return. The useful lives were determined primarily using inputs
such as projected customer retention rates, expected trade
name utilization periods, and projected technology
obsolescence rates. For AccessClosure and AssuraMed, the
discount rates used to arrive at the present value of identifiable
intangible assets were 10 and 9.5 percent, respectively, to reflect
the internal rate of return and uncertainty in the cash flow
projections.
3. Restructuring and Employee Severance
The following table summarizes restructuring and employee
severance costs related to our restructuring activities:
(in millions) 2014 (3) 2013 (4) 2012
Employee-related costs (1) $ 13 $ 59 $ 20
Facility exit and other costs (2) 18 12 1
Total restructuring and
employee severance $ 31 $ 71 $ 21
(1) Employee-related costs primarily consist of termination benefits provided
to employees who have been involuntarily terminated and duplicate
payroll costs during transition periods.
(2) Facility exit and other costs primarily consist of lease termination costs,
accelerated depreciation, equipment relocation costs, project consulting
fees and costs associated with restructuring our delivery of information
technology infrastructure services.
(3) Includes $10 million of primarily facility exit and other costs related to the
restructuring within our Medical segment described further below.
(4) Includes $30 million of employee-related costs and $10 million of facility
exit and other costs related to the restructuring within our Medical segment
described further below.
On January 30, 2013, we announced a restructuring plan within
our Medical segment. Under this restructuring plan, among
other things, we have reorganized our Medical segment, moved
production of procedure kits from our facility in Waukegan,
Illinois to other facilities, and consolidated office space in
Waukegan, Illinois. In addition, we are selling property in
Waukegan, Illinois and are exiting our gamma sterilization
business in El Paso, Texas.
We currently estimate the total costs associated with this
restructuring plan to be approximately $74 million on a pre-tax
basis, of which $18 million was recognized in fiscal 2014,
including the loss to write down the property in Waukegan,
Illinois as discussed in Note 4. Costs of $51 million associated
with this restructuring plan were recognized in fiscal 2013,
including the loss to write down our gamma sterilization assets
as discussed in Note 4. The estimated $5 million remaining costs
to be recognized in fiscal 2015 consist of facility exit and other
costs.
During the fourth quarter of fiscal 2013, we recognized $11
million of employee-related costs related to a restructuring plan
within our Nuclear Pharmacy Services division.
The following table summarizes activity related to liabilities
associated with restructuring and employee severance:
(in millions)
Employee-
Related Costs
Facility Exit
and Other Costs Total
Balance at June 30, 2011 $ 6 $ 4 $ 10
Additions 22 1 23
Payments and other
adjustments (12) (3) (15)
Balance at June 30, 2012 $ 16 $ 2 $ 18
Additions 63 2 65
Payments and other
adjustments (24) (2) (26)
Balance at June 30, 2013 $ 55 $ 2 $ 57
Additions 23 1 24
Payments and other
adjustments (54) (3) (57)
Balance at June 30, 2014 $ 24 $ — $ 24
4. Impairments and Loss on Disposal of
Assets
In connection with our Medical segment restructuring plan
discussed in Note 3, the property in Waukegan, Illinois meets
the criteria for classification as held for sale. As a result, during
fiscal 2014, we recognized an $8 million loss to write down this