Medtronic 2010 Annual Report Download - page 67

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63
Medtronic, Inc.
asset resulting from the continued decline in the international
real estate market.
In connection with the global realignment initiative, as of
the end of the first quarter of fiscal year 2009, the Company
identified approximately 900 positions for elimination which were
achieved through both voluntary and involuntary separation. As
of October 30, 2009, the global realignment initiative was
substantially complete.
A summary of the activity related to the global realignment
initiative is presented below:
Global Realignment Initiative
(in millions)
Employee
Termination
Costs
Asset
Write-downs Total
Balance April 25, 2008 $ 25 $— $ 25
Restructuring charges 91 5 96
Reversal of excess accrual (7) — (7)
Payments/write-downs (89) (5) (94)
Currency adjustment, net (5) — (5)
Balance April 24, 2009 $ 15 $— $ 15
Restructuring charges — 5 5
Reversal of excess accrual (8) — (8)
Payments/write-downs (9) (5) (14)
Currency adjustment, net 2 — 2
Balance October 30, 2009 $ — $— $ —
5. Acquisitions, IPR&D and Certain Acquisition-
Related Costs
During the first quarter of fiscal year 2010, the Company adopted
the new authoritative guidance related to business combinations.
The new authoritative guidance establishes principles and
requirements for how an acquirer recognizes and measures in its
financial statements the identifiable assets acquired, the liabilities
assumed, any noncontrolling interests in the acquiree and the
goodwill acquired. The underlying purchase method of accounting
for acquisitions was retained, but the new guidance incorporates
a number of changes. These changes include the capitalization of
IPR&D, expensing of acquisition related costs and the recognition
of contingent purchase price consideration at fair value at
the acquisition date. In addition, changes in accounting for
deferred tax asset valuation allowances and acquired income tax
uncertainties after the measurement period will be recognized
in earnings rather than as an adjustment to the cost of the
acquisition. This accounting treatment for taxes is applicable to
acquisitions consummated both prior to and subsequent to the
adoption of the new authoritative guidance. The adoption of the
new authoritative guidance did not change the requirement to
expense IPR&D immediately with respect to asset acquisitions.
With the exception of deferred tax asset valuation allowances and
acquired income tax uncertainties related to previous acquisitions,
this new authoritative guidance has been applied prospectively to
business combinations beginning in fiscal year 2010.
Pending Acquisition
On April 29, 2010 the Company announced the signing of a
definitive agreement to acquire ATS Medical, Inc. (ATS Medical).
ATS Medical is a leading developer, manufacturer and marketer of
products and services focused on cardiac surgery, including heart
valves and surgical cryoablation technology. Under the terms of
the agreement, the Company will pay $4.00 per share in cash for
each share of ATS Medical stock. The total value of the transaction
is expected to be approximately $370 million, which includes the
purchase of ATS Medical stock and assumption of net debt. The
transaction is expected to close this summer and is subject to
customary closing conditions, including approval by ATS Medical’s
shareholders and U.S. and foreign regulatory clearances.
Fiscal Year 2010
Invatec S.p.A. In April 2010, the Company acquired privately held
Invatec S.p.A. (Invatec), a developer of innovative medical
technologies for the interventional treatment of cardiovascular
disease, and two affiliated companies. Invatec’s two affiliated
companies are Fogazzi, which provides polymer technology to
Invatec; and Krauth Cardiovascular, which distributes Invatec
products in Germany. Under the terms of the agreement, the
transaction included an initial up-front payment of $350 million,
which includes the assumption and settlement of existing Invatec
debt. The agreement also includes potential additional payments
of up to $150 million contingent upon achievement of certain
milestones. Total consideration for the transaction was valued at
approximately $468 million, which includes the $350 million
up-front payment plus the estimated fair value of additional
milestone based contingent consideration of $118 million.
The potential contingent payments consist of up to $75 million
upon reaching a revenue milestone in fiscal year 2011 and up to
$75 million upon reaching a product development milestone by
fiscal year 2013. The Company has recorded the acquisition date
estimated fair value of the contingent milestone payments of $118
million as a component of the consideration transferred as part of
the acquisition of Invatec.
The Company has accounted for the acquisition of Invatec as a
business combination. Under business combination accounting,
the assets and liabilities were recorded as of the acquisition date,