Medtronic 2009 Annual Report Download - page 73

Download and view the complete annual report

Please find page 73 of the 2009 Medtronic annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 106

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106

69
Medtronic, Inc.
transactions. In connection therewith, the Company also resolved
all outstanding litigation and disputes with Dr. Alt and certain of
his controlled companies. The agreements required the payment
of total consideration of $75 million, $74 million of which was
capitalized as technology based intangible assets that had an
estimated useful life of 11 years at the time of acquisition. The
acquired patents or licenses pertain to the cardiac rhythm disease
management field and have both current application and potential
for future patentable commercial products.
In July 2006, the Company acquired substantially all of the
assets of Odin Medical Technologies, Ltd. (Odin), a privately held
company. Prior to the acquisition, the Company had an equity
investment in Odin, which was accounted for under the cost
method of accounting. Odin focused on the manufacture of the
PoleStar intra-operative Magnetic Resonance Image (iMRI)-
Guidance System which was already exclusively distributed by the
Company. This acquisition was expected to help the Company
further drive the acceptance of iMRI guidance in neurosurgery.
The consideration for Odin was approximately $21 million, which
included $6 million in upfront cash and a $2 million milestone
payment made in the three months ended October 27, 2006. The
$8 million in net cash paid resulted from the $21 million in
consideration less the value of the Company’s prior investment
in Odin and Odin’s existing cash balance. In connection with
the acquisition of Odin, the Company acquired $9 million of
technology-based intangible assets that had an estimated useful
life of 12 years at the time of acquisition. Total goodwill was $12
million and was deductible for tax purposes. The results of
operations related to Odin have been included in the Company’s
consolidated statements of earnings since the date of the
acquisition. The pro forma impact of Odin was not significant
to the results of the Company for the fiscal year ended April
27, 2007.
Contingent Consideration Certain of the Company’s business
combinations or purchases of intellectual property 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 24, 2009, the estimated potential
amount of future contingent consideration that the Company is
expected to make associated with all business combinations or
purchases of intellectual property is approximately $397 million.
The milestones associated with the contingent consideration must
be reached in future periods ranging from fiscal years 2010 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 24, 2009 is as follows:
(in millions) Cost
Unrealized
Gains
Unrealized
Losses
Fair
Value
Corporate debt securities $ 817 $ 8 $ (20) $ 805
Auction rate securities 199 — (80) 119
Mortgage backed securities 789 9 (52) 746
Government and agency
securities 693 5 (1) 697
Certificates of deposit 2 — — 2
Other asset backed
securities 297 3 (22) 278
Marketable equity securities 12 — — 12
Cost method, equity
method and other
investments(1) 515 — — 515
Total short-term and long-
term invest me nts $ 3,324 $25 $(175) $ 3,174
(1) Includes $221 million for the 15 percent equity interest in Shandong Weigao
Group Medical Polymer Company Limited (Weigao), which was acquired on
December 18, 2008. The cash paid for the investment was included in other
investing activities, net on the consolidated statement of cash flows.
Information regarding the Company’s short-term and long-term
investments at April 25, 2008 is as follows:
(in millions) 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