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66 Medtronic, Inc.
Notes to Consolidated Financial Statements
(continued)
milestone consideration is remeasured at the estimated fair value
at each reporting period with the change in fair value recognized
as income or expense within acquisition-related items in the
consolidated statements of earnings. The Company measures the
initial liability and remeasures the liability on a recurring basis
using Level 3 inputs as defined under authoritative guidance for
fair value measurements. See Note 6 for further information
regarding fair value measurements.
During the third quarter of fiscal year 2011, the Company
decreased the undiscounted future contingent consideration by
$81 million to reflect the achievement and subsequent payment
of a revenue milestone to the former shareholders of CoreValve
in accordance with the fiscal year 2009 acquisition agreement.
At April 29, 2011, the estimated maximum potential amount of
undiscounted future contingent consideration that the Company
is expected to make associated with all completed business
combinations or purchases of intellectual property prior to April
24, 2009 was approximately $240 million. The milestones
associated with the contingent consideration must be reached in
future periods ranging from fiscal years 2012 to 2016 in order for
the consideration to be paid.
The fair value of contingent milestone payments associated
with acquisitions subsequent to April 24, 2009 was remeasured
as of April 29, 2011 and April 30, 2010 at $335 million and $118
million, respectively. As of April 29, 2011, $269 million was
reflected in other long-term liabilities and $66 million was reflected
in other accrued expenses in the consolidated balance sheet. As
of April 30, 2010, $118 million was reflected in other long-term
liabilities. The following table provides a reconciliation of the
beginning and ending balances of contingent milestone payments
associated with acquisitions subsequent to April 24, 2009
measured at fair value that used significant unobservable inputs
(Level 3):
Fiscal Year
(in millions) 2011 2010
Beginning Balance $ 118 $ —
Purchase price contingent consideration 203 118
Change in fair value of contingent consideration 14 —
Ending Balance $ 335 $ 118
5. Investments
The Company invests in short-term and long-term investments,
which consist primarily of marketable debt and equity securities.
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 29, 2011 is as follows:
(in millions) Cost
Unrealized
Gains
Unrealized
Losses
Fair
Value
Available-for-sale
securities:
Corporate debt securities $ 1,947 $ 20 $ (6) $ 1,961
Auction rate securities 167 — (34) 133
Mortgage-backed securities 783 10 (8) 785
U.S. government and
agency securities 2,731 26 (1) 2,756
Foreign government and
agency securities 130 1 — 131
Certificates of deposit 119 — — 119
Other asset-backed
securities 351 1 (3) 349
Marketable equity
securities 186 55 (4) 237
Trading securities:
Exchange-traded funds 33 6 — 39
Cost method, equity
method, and other
investments 656 — — 656
Total short-term and
long-term investments $ 7,103 $119 $(56) $ 7,166
Information regarding the Company’s short-term and long-term
investments at April 30, 2010 is as follows:
(in millions) Cost
Unrealized
Gains
Unrealized
Losses
Fair
Value
Available-for-sale
securities:
Corporate debt securities $ 2,130 $ 16 $ (12) $ 2,134
Auction rate securities 194 — (52) 142
Mortgage-backed
securities 724 8 (15) 717
U.S. government and
agency securities 2,745 9 (1) 2,753
Foreign government and
agency securities 118 1 — 119
Certificates of deposit 256 — — 256
Other asset-backed
securities 315 1 (3) 313
Marketable equity
securities 1 — — 1
Trading securities:
Exchange-traded funds 29 1 — 30
Cost method, equity
method, and other
investments 542 — — 542
Total short-term and
long-term investments $ 7,054 $ 36 $ (83) $ 7,007