Acquisitions and Dispositions

12 Months Ended

Dec. 31, 2014

Acquisitions and Dispositions Disclosure

Acquisitions and Dispositions [Text Block]

Note 2. Acquisitions and Dispositions

The company’s acquisitions have historically been made at prices above the fair value of the acquired identifiable assets, resulting in goodwill, due to expectations of the synergies that will be realized by combining the businesses. These synergies include the elimination of redundant facilities, functions and staffing; use of the company’s existing commercial infrastructure to expand sales of the acquired businesses’ products; and use of the commercial infrastructure of the acquired businesses to cost-effectively expand sales of company products.

Acquisitions have been accounted for using the purchase method of accounting, and the acquired companies’ results have been included in the accompanying financial statements from their respective dates of acquisition. Acquisition transaction costs are recorded in selling, general and administrative expenses as incurred.

2014

On February 3, 2014, the company completed the acquisition of Life Technologies Corporation, within the Life Sciences Solutions segment, for a total purchase price of $15.30 billion, net of cash acquired, including the assumption of $2.28 billion of debt. The company issued debt and common stock in late 2013 and early 2014 to partially fund the acquisition (Notes 9 and 11). Life Technologies provides innovative products and services to customers conducting scientific research and genetic analysis, as well as those in applied markets, such as forensics and food safety testing. The acquisition of Life Technologies extends customer reach and broadens the company’s offerings in biosciences; genetic, medical and applied sciences; and bioproduction. Life Technologies’ revenues totaled $3.87billion in 2013. The purchase price exceeded the fair value of the identifiable net assets and, accordingly, $7.17 billion was allocated to goodwill, substantially none of which is tax deductible.

In addition, in 2014, the company acquired an animal health diagnostics company, within the Life Sciences Solutions segment, and a distributor of analytical instruments, within the Analytical Instruments segment, for an aggregate of $36 million, net of cash acquired.

During 2014, the company made contingent purchase price payments totaling $13 million for acquisitions completed prior to 2014. The contingent purchase price payments were contractually due to the sellers upon achievement of certain performance criteria at the acquired businesses.

		The components of the purchase price and net assets acquired for 2014 acquisitions are as follows:
(In millions)			Life Technologies		Other		Total
Purchase Price
	Cash paid		$	13,487.3	$	47.3	$	13,534.6
	Debt assumed			2,279.5		—		2,279.5
	Cash acquired			(463.0)		(11.5)		(474.5)
			$	15,303.8	$	35.8	$	15,339.6
Net Assets Acquired
	Current assets		$	1,755.5	$	18.5	$	1,774.0
	Property, plant and equipment			748.1		1.1		749.2
	Definite-lived intangible assets:
		Customer relationships		5,883.0		7.0		5,890.0
		Product technology		2,626.9		5.5		2,632.4
		Tradenames and other		619.1		—		619.1
	Indefinite-lived intangible assets:
		In-process research and development		58.4		—		58.4
	Goodwill			7,167.0		12.5		7,179.5
	Other assets			246.7		0.1		246.8
	Liabilities assumed			(3,800.9)		(8.9)		(3,809.8)
			$	15,303.8	$	35.8	$	15,339.6

The weighted-average amortization periods for intangible assets acquired in 2014 are 16 years for customer relationships, 11 years for product technology and 9 years for definite-lived tradenames and other. The weighted average amortization period for all definite-lived intangible assets acquired in 2014 is 14 years.

2013

During 2013, the company made contingent purchase price and post closing adjustment payments totaling $40 million for acquisitions completed prior to 2013. The contingent purchase price payments were contractually due to the sellers upon achievement of certain performance criteria at the acquired businesses.

2012

In September 2012, the company acquired One Lambda, a provider of transplant diagnostics, for approximately $885 million, net of cash acquired, including related real estate plus $25 million of additional contingent consideration based upon the achievement of specified operating results in the year following the acquisition.The company recorded $13 million as the fair value of contingent consideration at the acquisition date and an additional $12 million as a charge to selling, general and administrative expense in 2013. The $25 million contingent purchase price obligation was paid in 2013. The acquisition was within the Specialty Diagnostics segment. The acquisition of One Lambda enhanced the segment’s presence in specialty in vitro diagnostics and added new capabilities to the company’s transplant-testing workflow. Revenues of One Lambda were $182 million in 2011. The purchase price exceeded the fair value of the identifiable net assets and, accordingly, $274 million was allocated to goodwill, all of which is tax deductible.

In May 2012, the company acquired, within the Laboratory Products and Services segment, Doe & Ingalls Management, LLC, a North Carolina-based channel for specialty production chemicals and provider of customized supply-chain services to the life sciences and microelectronics industries, for $175 million. The acquisition expands the segment’s products and services that address the production market. Revenues of Doe & Ingalls totaled approximately $110 million in 2011. The purchase price exceeded the fair value of the identifiable net assets and, accordingly, $81 million was allocated to goodwill, $53 million of which is tax deductible.

In addition, in 2012, the company acquired,within the Analytical Instruments segment, a manufacturer and supplier of radioactive isotope identifiers, x-ray and gamma-ray detectors and spectroscopy systems used to detect radioactive and other nuclear materials in security and environmental settings and a manufacturer of miniature NMR spectrometers. The company acquired, within the Specialty Diagnostics segment, a business that holds proprietary technology for tests to diagnose pre-eclampsia and eclampsia. The aggregate consideration for these acquisitions was $25 million plus contingent consideration of up to $15 million.

The company made contingent purchase price and post closing adjustment payments totaling $6 million in 2012, for acquisitions completed prior to 2012. The contingent purchase price payments were contractually due to the sellers upon achievement of certain performance criteria at the acquired businesses.

The components of the purchase price and net assets acquired for 2012 acquisitions, as revised in 2013 for finalization of the valuation process are as follows:

(In millions)			One Lambda		Doe & Ingalls		Other		Total
Purchase Price
	Cash paid		$	886.3	$	174.9	$	25.4	$	1,086.6
	Fair value of contingent consideration			13.1		1.5		5.3		19.9
	Cash acquired			(1.3)		—		—		(1.3)
			$	898.1	$	176.4	$	30.7	$	1,105.2
Net Assets Acquired
	Current assets		$	110.2	$	21.9	$	2.1	$	134.2
	Property, plant and equipment			30.2		11.6		0.1		41.9
	Intangible assets:
		Customer relationships		330.7		68.1		3.2		402.0
		Product technology		172.5		1.1		13.9		187.5
		Tradenames and other		17.2		16.8		—		34.0
	Goodwill			274.0		81.1		15.5		370.6
	Other assets			—		0.5		—		0.5
	Liabilities assumed			(36.7)		(24.7)		(4.1)		(65.5)
			$	898.1	$	176.4	$	30.7	$	1,105.2

The weighted average amortization periods for intangible assets acquired in 2012 are 13 years for customer relationships, 11 years for product technology and 13 years for tradenames and other. The weighted average amortization period for all intangible assets in the above table is 13 years.

Unaudited Pro Forma Information

The company acquired Life Technologies in February 2014. Revenues of Life Technologies after the date of acquisition are included in the accompanying statement of income and totaled approximately $3.61 billion in 2014. Immediately upon the closing of the acquisition, the company began integrating Life Technologies and as such the legacy and acquired businesses are now sharing various selling, general and administrative functions. As a result, computing a separate measure of Life Technologies’ stand-alone profitability for periods after the acquisition date is not practical.

Had the acquisition of Life Technologiesbeen completed as of the beginning of 2013, the company’s pro forma results for2014 and 2013 would have been as follows:

(In millions except per share amounts)		2014		2013
Revenues		$	17,169.2	$	16,831.4
Income from Continuing Operations		$	2,203.2	$	1,008.4
Net Income		$	2,202.1	$	1,002.6
Earnings per Share from Continuing Operations:
	Basic	$	5.52	$	2.55
	Diluted	$	5.46	$	2.53
Earnings per Share:
	Basic	$	5.51	$	2.54
	Diluted	$	5.46	$	2.51

Pro forma results include non-recurring pro forma adjustments that were directly attributable to the business combination to reflect amounts as if the acquisition had been completed as of the beginning of 2013, as follows:

• Pre-tax charge to selling, general and administrative expenses of $231.4million in2013, for acquisition-related transaction costs incurred by the company and Life Technologies;
• Pre-tax charge to cost of revenues of $301.4million in2013, for the sale of Life Technologies inventories revalued at the date of acquisition;
• Pre-tax charge of $91.7million in2013, for monetizing equity awards held by Life Technologies’ employees at the date of acquisition;
• Pre-tax charge of $37.6million in2013, to conform the accounting policies of Life Technologies with the company's accounting policies; and
• Pre-tax reduction of revenues of $8.1million and $23.9million in2014 and 2013, respectively, for revaluing Life Technologies’ deferred revenue obligations to fair value.

These pro forma results of operations have been prepared for comparative purposes only, and they do not purport to be indicative of the results of operations that actually would have resulted had the acquisition occurred on the date indicated or that may result in the future.

The company’s results would not have been materially different from its pro forma results had the company’s other 2014 acquisitions occurred at the beginning of 2013.

Dispositions

On August 15, 2014, the company sold its Cole-Parmer specialty channel business, part of the Laboratory Products and Services segment, for $480 million in cash, net of cash divested. The sale of this business resulted in a pre-tax gain of approximately $134 million, included in restructuring and other costs (income), net. Due to the low tax basis in the Cole-Parmer business, the tax provision related to the sale slightly exceeded the pre-tax gain, resulting in a $4 million after-tax loss on the sale of the business. Revenues and operating income of the business sold were approximately $232 million and $43 million, respectively, for the year ended December 31, 2013 and $149 million and $28 million, respectively, in 2014 through the date of sale.

The assets and liabilities of the Cole-Parmer business were as follows at June 28, 2014:

	June 28,
(In millions)		2014
Current Assets		$	39.5
Long-term Assets			400.3
Current Liabilities			15.5
Long-term Liabilities			84.1

On March 21, 2014, the company sold its legacy sera and media, gene modulation and magnetic beads businesses to GE Healthcare for $1.06 billion, net of cash divested, or $0.8 billion of after-tax proceeds. The businesses were included principally in the Life Sciences Solutions segment. Divestiture of these businesses was a condition to obtaining antitrust approval for the Life Technologies acquisition. Revenues and operating income of the businesses sold were approximately $250 million and $64 million, respectively, for the year ended December 31, 2013 and $61 million and $12 million, respectively, in 2014 through the date of sale. The sale of these businesses resulted in a pre-tax gain of approximately $761 million, included in restructuring and other costs (income), net.

The assets and liabilities of the businesses sold in March 2014 were as follows at December 31, 2013:

	December 31,
(In millions)		2013
Current Assets		$	74.3
Long-term Assets			229.3
Current Liabilities			6.4
Long-term Liabilities			22.0

In October 2012, the company sold its laboratory workstations business (see Note 15).