Medtronic 2008 Annual Report Download - page 46

The transaction was financed through a combination of $3.303 billion
cash on hand, the issuance of $600 million short-term commercial
paper and borrowing $300 million through a new long-term unsecured
revolving credit facility.
The results of operations related to Kyphon have been included in
our consolidated statements of earnings since the date of the acquisition
and include the full amortization of a $34 million inventory write-up
recorded as part of the Kyphon acquisition accounting. The pro forma
impact of Kyphon was significant to our results for fiscal year 2008.
See Note 4 to the consolidated financial statements for the unaudited
pro forma results of operations for fiscal years 2008 and 2007.
On November 1, 2007, we recorded an IPR&D charge of $20 million
related to the acquisition of Setagon, Inc. (Setagon), a development stage
company focused on commercially developing metallic nanoporous
surface modification technology. The acquisition will provide us with
exclusive rights to use and develop Setagon’s Controllable Elution
Systems technology in the treatment of cardiovascular disease. Total
consideration for Setagon was approximately $20 million in cash,
subject to purchase price increases, which would be triggered by the
achievement of certain milestones.
On June 25, 2007, we exercised a purchase option and acquired
substantially all of the O-arm Imaging System (O-arm) assets of
Breakaway Imaging, LLC (Breakaway), a privately held company. Prior to
the acquisition, we had the exclusive rights to distribute and market the
O-arm. The O-arm provides multi-dimensional surgical imaging for use
in spinal and orthopedic surgical procedures. The acquisition is
expected to bring the O-arm into a broad portfolio of image guided
surgical solutions. Total consideration for Breakaway was approximately
$26 million in cash, subject to purchase price increases, which would
be triggered by the achievement of certain milestones. The pro forma
impact of the acquisition of Breakaway was not significant to our results
for fiscal year 2008 and 2007. The results of operations related to
Breakaway have been included in our consolidated statement of
earnings since the date of acquisition.
On March 26, 2007, we acquired manufacturing assets, know-how
and an exclusive license to intellectual property related to the
manufacture and distribution of EndoSheath products from Vision-
Sciences, Inc. (VSI), which was accounted for as a purchase of assets. The
license acquired from VSI expanded our existing U.S. distribution rights
of EndoSheath products to worldwide distribution rights. The
EndoSheath is a sterile disposable sheath that fits over a fiberoptic
endoscope preventing contamination of the scope during procedures
and allowing reuse of the scope without further sterilization. The
consideration paid was $27 million in cash which was primarily allocated
to technology-based intangible assets with an estimated useful life of
10 years. The purchase price is subject to increases triggered by the
achievement of certain milestones.
On September 15, 2006, we acquired and/or licensed selected patents
and patent applications owned by Dr. Eckhard Alt (Dr. Alt), or certain of
his controlled companies in a series of transactions. In connection
therewith, we 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.
On July 25, 2006, we acquired substantially all of the assets of
Odin Medical Technologies, Ltd. (Odin), a privately held company. Prior
to the acquisition, we had an equity investment in Odin, which was
accounted for under the cost method of accounting. Odin focused on
the manufacture of the PoleStar iMRI-Guidance System which we
already exclusively distributed. We expect this acquisition to help 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. The $8 million in
net cash paid resulted from the $21 million in consideration less
the value of our prior investment in Odin and Odin’s existing cash
balance. The pro forma impact of Odin was not significant to our results
for fiscal year 2007. The results of operations related to Odin have been
included in our consolidated statements of earnings since the date of
the acquisition.
New Accounting Pronouncements
Information regarding new accounting pronouncements is included in
Note 1 to the consolidated financial statements.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
(continued)
42 Medtronic, Inc.