Medtronic 2013 Annual Report Download - page 94

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75732me_10K.indd 79 7/1/13 6:36 PM
Table of Contents
Medtronic, Inc.
Notes to Consolidated Financial Statements (Continued)
The recurring Level 3 fair value measurements of the contingent consideration liability include the following significant
unobservable inputs:
Fair Value at Valuation
($ in millions) April 26, 2013 Technique Unobservable Input Range
Discount rate 13% - 24%
Revenue-based payments $ 138 Discounted cash flow Probability of payment 100%
Projected fiscal year of payment 2014 - 2019
Discount rate 5.9%
Product development-
based payments $ 4 Discounted cash flow Probability of payment
Projected fiscal year of payment
100%
2016
At April 26, 2013, 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 $200 million. The Company estimates the milestones associated with the contingent consideration will
be reached in fiscal year 2014 and thereafter.
The fair value of contingent milestone payments associated with acquisitions subsequent to April 24, 2009 as of April 26, 2013
and April 27, 2012 was $142 million and $231 million, respectively. As of April 26, 2013, $120 million was reflected in other
long-term liabilities and $22 million was reflected in other accrued expenses in the consolidated balance sheet. As of April 27,
2012, $200 million was reflected in other long-term liabilities and $31 million was reflected in other accrued expenses in the
consolidated balance sheet. The portion of the milestone payments related to the acquisition date fair value of contingent
consideration have been reported as financing activities in the consolidated statements of cash flows. Amounts paid in excess of
the original acquisition date fair value of contingent consideration have been reported as operating activities in the consolidated
statements of cash flows. The following table provides a reconciliation of the beginning and ending balances of contingent milestone
payments associated with acquisitions subsequent to April 24, 2009:
Fiscal Year
(in millions) 2013 2012
Beginning Balance $ 231 $ 325
Purchase price contingent consideration 3 2
Contingent milestone payments (30) (141)
Change in fair value of contingent consideration (62) 45
Ending Balance $ 142 $ 231
76