Note 4 — Acquisitions, Goodwill, and Acquired Intangible Assets

In the six months ended June 30, 2011, we acquired certain companies for an aggregate purchase price of $686 million. The primary reasons for these acquisitions, none of which was individually material to our consolidated financial statements, were to expand our customer base and sales channels. Acquisition-related costs were expensed as incurred and were not significant. The aggregate purchase price of these acquisitions was allocated as follows (in millions):


Purchase price
Cash paid, net of cash acquired	$	577
Existing equity interest		89
Stock options assumed		20

	$	686


Allocation
Goodwill	$	553
Intangible assets (1):
Marketing-related		120
Contract -based		5
Customer-related		71

		196

Fixed assets		88
Deferred tax assets		42
Other assets acquired		77
Deferred tax liabilities		(61	)
Debt		(68	)
Other liabilities assumed (2)		(141	)

	$	686

(1)	Acquired intangible assets have estimated useful lives of between 2 and 10 years.

(2)	Includes a $38 million contingent liability related to historic tax exposures.

In addition to cash and the fair value of vested stock options, the aggregate purchase price included the estimated fair value of our previous, noncontrolling interest in one of the acquired companies. We remeasured this equity interest to fair value at the acquisition date and recognized a non-cash gain of $6 million in “equity-method investment activity, net of tax,” in our Q1 2011 consolidated statement of operations. The fair value of assumed stock options was estimated using the Black-Scholes model. We determined the estimated fair value of identifiable intangible assets acquired primarily by using the income and cost approaches. Purchased identifiable intangible assets are included within “Other assets” on our consolidated balance sheets and are being amortized to operating expenses on a straight-line or accelerated basis over their estimated useful lives.

Pro Forma Financial Information (unaudited)

The acquired companies were consolidated into our financial statements starting on their respective acquisition dates. The aggregate net sales and net losses of the acquired companies recorded in our consolidated statement of operations from the respective acquisition dates through June 30, 2011 were $169 million and $20 million, which are primarily related to Q2 2011 activity. The following pro forma financial information presents the results as if these acquisitions had occurred at the beginning of 2010 (in millions):


	Six Months
	Ended June 30,
	2011		2010
	(in millions)
Net sales	$	19,884	$	13,918
Net income		366		480

Goodwill

Goodwill is generally not deductible for tax purposes and is primarily related to expected sales growth from future product offerings and customers, together with certain intangible assets that do not qualify for separate recognition. The following summarizes our goodwill activity in 2011 by segment (in millions):


	North America		International		Consolidated
Goodwill - January 1, 2011	$	1,116	$	233	$	1,349
New acquisitions		388		165		553
Other adjustments (1)		3		4		7

Goodwill - June 30, 2011	$	1,507	$	402	$	1,909

(1)	Primarily includes changes in foreign exchange.