Medtronic 2016 Annual Report Download - page 64

Table of Contents
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Milestone Payments We acquire assets still in development, enter into research and development arrangements, and sponsor
certain clinical trials that often require milestone and/or royalty payments to a third-party, contingent upon the occurrence of certain
future events. Milestone payments may be required upon the successful achievement of an important point in the development
life cycle of a product or upon certain pre-designated levels of achievement in clinical trials. In addition, if required by the
arrangement, we may have to make royalty payments based on a percentage of sales related to the product under development or
in the event that regulatory approval for marketing is obtained. In situations where we have no ability to influence the achievement
of the milestone or otherwise avoid the payment, we have included those milestone or minimum royalty payments in the preceding
table. However, the majority of these arrangements give us the discretion to unilaterally make the decision to stop development
of a product or cease progress of a clinical trial, which would allow us to avoid making the contingent payments. Although we
are unlikely to cease development if a device successfully achieves clinical testing objectives, these payments are not included in
the table of contractual obligations because of the contingent nature of these payments and our ability to avoid them if we decided
to pursue a different path of development or testing. See Note 2 to the consolidated financial statements in “Item 8. Financial
Statements and Supplementary Data” in this Annual Report on Form 10-K for additional information regarding contingent
consideration.
Indemnification provisions In the normal course of business, we periodically enter into agreements that require us to indemnify
customers or suppliers for specific risks, such as claims for injury or property damage arising out of our products or the negligence
of our personnel or claims alleging that our products infringe third-party patents or other intellectual property. Our maximum
exposure under these indemnification provisions cannot be estimated, and we have not accrued any liabilities within our
consolidated financial statements or included any indemnification provisions in our commitments table. Historically, we have not
experienced significant losses on these types of indemnification obligations.
Acquisitions
Information regarding acquisitions is included in Note 2 to the consolidated financial statements in “Item 8. Financial Statements
and Supplementary Data” in this Annual Report on Form 10-K.
We periodically acquire certain tangible or intangible assets from enterprises that do not otherwise qualify for accounting as a
business combination. These transactions are reflected in the consolidated statements of cash flows as a component of investing
activities under other investing activities, net.
New Accounting Pronouncements
Information regarding new accounting pronouncements is included in Note 1 to the consolidated financial statements in “Item 8.
Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.
Cautionary Factors That May Affect Future Results
This Annual Report, and other written reports and oral statements made by or with the approval of one of the Company’s executive
officers from time to time, may include “forward-looking” statements. Forward-looking statements broadly include our current
expectations or forecasts of future results. Our forward-looking statements generally relate to our growth and growth strategies,
developments in the markets for our products, financial results, product development launches and effectiveness, research and
development strategy, regulatory approvals, competitive strengths, restructuring and cost-saving initiatives, intellectual property
rights, litigation and tax matters, government investigations, mergers and acquisitions, divestitures, market acceptance of our
products, accounting estimates, financing activities, ongoing contractual obligations, working capital adequacy, value of our
investments, our effective tax rate, our expected returns to shareholders, and sales efforts. Such statements can be identified by
the use of terminology such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “intend,” “looking ahead,” “may,”
“plan,” “possible,” “potential,” “project,” “should,” “will,” and similar words or expressions. Forward-looking statements in this
Annual Report include, but are not limited to, statements regarding our ability to drive long-term shareholder value, development
and future launches of products and continued or future acceptance of products in our operating segments; expected timing for
completion of research studies relating to our products; market positioning and performance of our products, including stabilization
of certain product markets; unanticipated issues that may affect U.S. FDA and non-U.S. regulatory approval of new products;
increased presence in new markets, including markets outside the U.S.; changes in the market and our market share; acquisitions
and investment initiatives, as well as integration of acquired companies into our operations; the resolution of tax matters; the
effectiveness of our development activities in reducing patient care costs and hospital stay lengths; our approach towards cost
containment; our expectations regarding health care costs; the elimination of certain positions or costs related to restructuring
initiatives; outcomes in our litigation matters and government investigations; general economic conditions; the adequacy of
available working capital and our working capital needs; our payment of dividends and redemption of shares; the continued strength
of our balance sheet and liquidity; our accounts receivable exposure; and the potential impact of our compliance with governmental
regulations and accounting guidance. One must carefully consider forward-looking statements and understand that such statements