Medtronic 2008 Annual Report Download - page 70

novel spinal technology and techniques that have both current
application and the potential for future patentable commercial
products. The agreement requires the payment of total consideration
of $1,350 for (i) the purchase of a portfolio of more than 100 issued U.S.
patents, (ii) over 110 pending U.S. patent applications and numerous
foreign counterparts to these patents and patent applications and
(iii) the settlement of all litigation. A value of $550 was assigned to the
settlement of past damages between the parties and was recorded as
an expense in the fourth quarter of fiscal year 2005. The remaining
consideration, including $3 of direct acquisition costs, was allocated
between $628 of acquired technology based intangible assets that had
an estimated useful life of 17 years at the time of acquisition and $175
of IPR&D that was expensed on the date of acquisition related to spinal
technology based devices that had not yet reached technological
feasibility and had no future alternative use. The patents pertain to
novel spinal technology and techniques that have the potential for
future patentable commercial products in the area of spinal surgery.
During the first quarter of fiscal year 2006, the Company paid $1,320 and
committed to three future installments of $10 to be paid in May 2006,
2007 and 2008. The future installments of $10 were paid in May 2006,
2007 and 2008.
During the first quarter of fiscal year 2006, the Company also entered
into a royalty bearing, non-exclusive patent cross-licensing agreement
with NeuroPace, Inc. Under the terms of the agreement, the two
companies cross-licensed patents and patent applications of
neurological technology related to direct electrical stimulation or
monitoring of the brain. On the date of the agreement, $20 was
expensed as IPR&D related to the licensed technology since
technological feasibility of the project had not yet been reached and
such technology had no future alternative use. This licensed technology
is expected to enhance the Company’s ability to further develop and
expand its therapies for neurological disorders.
Contingent Consideration Certain of the Company’s acquisitions involve
the potential for the payment of future contingent consideration upon
the achievement of certain product development milestones and/or
various other favorable operating conditions. While it is not certain if
and/or when these payments will be made, the Company has developed
an estimate of the potential contingent consideration for each of its
acquisitions with an outstanding potential obligation. At April 25, 2008,
the estimated potential amount of future contingent consideration that
the Company is expected to pay associated with all acquisitions is
approximately $131. The milestones associated with the contingent
consideration must be reached in future periods ranging from fiscal
years 2009 to 2016 in order for the consideration to be paid.
5. Investments
The carrying amounts of cash and cash equivalents approximate fair
value due to their short maturities.
Information regarding the Company’s short-term and long-term
investments at April 25, 2008 is as follows:
Cost
Unrealized
Gains
Unrealized
Losses
Fair
Value
Corporate debt securities $ 942 $ 2 $ (15) $ 929
Auction rate securities 198 — (22) 176
Mortgage backed securities 693 3 (17) 679
Government and agency
securities 478 1 (3) 476
Other asset backed securities 382 1 (12) 371
Marketable equity securities 14 — (1) 13
Cost method, equity method
and other investments 231 — — 231
Total short-term and
long-term investments
$ 2,938
$ 7
$ (70
)
$ 2,875
Information regarding the Company’s short-term and long-term
investments at April 27, 2007 is as follows:
Cost
Unrealized
Gains
Unrealized
Losses
Fair
Value
Corporate debt securities $ 1,578 $ 1 $ (3) $ 1,576
Auction rate securities 870 — — 870
Mortgage backed securities 887 2 (4) 885
Government and agency
securities 831 1 (2) 830
Certificates of deposit 110 — — 110
Other asset backed securities 555 1 (1) 555
Marketable equity securities 11 16 (1) 26
Cost method, equity method
and other investments 173 — — 173
Total short-term and
long-term investments
$ 5,015
$ 21
$ (11
)
$ 5,025
Notes to Consolidated Financial Statements
(continued)
(dollars in millions, except per share data)
66 Medtronic, Inc.