Medtronic 2012 Annual Report Download - page 123

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Medtronic, Inc.
Notes to Consolidated Financial Statements (Continued)
106
subsidiary operating in Puerto Rico, and proposed adjustments associated with the tax effects of the
Company’s acquisition of Kyphon. Associated with the Kyphon acquisition, Medtronic entered into an
intercompany transaction whereby the Kyphon U.S. tangible assets were sold to another wholly-owned
subsidiary in a taxable transaction. The IRS has disagreed with the Company’s valuation and proposed that
all U.S. goodwill, the value of the ongoing business, and the value of the workforce in place be included in
the tangible asset sale. The Company disagrees that these items were sold, as well as with the IRS valuation
of these items. The Company is currently attempting to resolve these matters at the IRS Appellate level
and will proceed through litigation, if necessary.
The Company’s reserve for the uncertain tax positions related to these significant unresolved matters
with the IRS, as described above, is subject to a high degree of estimation and management judgment.
Resolution of these significant unresolved matters, or positions taken by the IRS or foreign tax authorities
during future tax audits, could have a material impact on the Company’s financial results in future periods.
The Company continues to believe that its reserves for uncertain tax positions are appropriate and have
meritorious defenses for its tax filings and will vigorously defend them during the audit process, appellate
process, and through litigation in courts, as necessary.
15. Retirement Benefit Plans
The Company sponsors various retirement benefit plans, including defined benefit pension plans
(pension benefits), post-retirement medical plans (post-retirement benefits), defined contribution savings
plans, and termination indemnity plans, covering substantially all U.S. employees and many employees
outside the U.S. The cost of these plans was $319 million, $368 million, and $237 million in fiscal years 2012,
2011, and 2010, respectively.
In the U.S., the Company maintains a qualified pension plan designed to provide guaranteed minimum
retirement benefits to all eligible U.S. employees. Pension coverage for non-U.S. employees of the Company
is provided, to the extent deemed appropriate, through separate plans. In addition, U.S. and Puerto Rico
employees of the Company are also eligible to receive specified Company paid health care and life insurance
benefits through the Company’s post-retirement benefits. In addition to the benefits provided under the
qualified pension plan, retirement benefits associated with wages in excess of the IRS allowable limits are
provided to certain employees under a non-qualified plan.
As of April 27, 2012 and April 29, 2011, the net underfunded status of the Company’s benefit plans was
$621 million and $253 million, respectively.