Medtronic 2015 Annual Report Download - page 136

Medtronic plc
Notes to Consolidated Financial Statements (Continued)
the milestones were not achieved by the applicable dates and that none of the milestones were payable. On April 7, 2009,
Michael Lesh and Erik Van Der Burg, acting jointly as the Shareholder Representatives for the former shareholders of Appriva
Medical, filed a motion to amend their previously dismissed complaints in Superior Court of the State of Delaware. The
plaintiffs asserted several claims, including breach of contract, fraudulent inducement and violation of California securities law.
On May 1, 2013, the jury returned a verdict finding that ev3 breached the merger agreement and awarded $175 million in
damages plus interest to the plaintiffs. On September 30, 2014, the Delaware Supreme Court reversed the jury’s verdict and
remanded the case for a new trial. See “Accrued Certain Litigation Charges” within Note 1 for additional discussion.
Medtronic has received subpoenas or document requests from the Attorneys General in Massachusetts, California, Oregon,
Illinois, and Washington seeking information regarding sales, marketing, clinical, and other information relating to the INFUSE
bone graft product. The Company is fully cooperating with these requests.
On December 3, 2013, Medtronic, Inc. received a subpoena for records from the U.S. Attorney’s Office for the District of
Minnesota requesting information relating to Medtronic, Inc’s compliance with the Trade Agreements Act. In April 2015, the
Company settled this matter with no admission of liability and recorded a certain litigation charge of $4 million in fiscal year
2015.
On May 2, 2011, the U.S. Attorney’s Office for the District of Massachusetts issued a subpoena to ev3, a subsidiary of the
Company, requesting production of documents relating to sales and marketing and other issues in connection with several
neurovascular products. The matters under investigation relate to activities prior to Covidien’s acquisition of ev3 in 2010. ev3
complied as required with the subpoena and cooperated with the investigation. The Company is fully cooperating with these
requests.
On September 2, 2014, the U.S. Department of Health and Human Services, Office of Inspector General and the U.S. Attorney’s
Office for the Northern District of California, issued a subpoena requesting production of documents relating to sales and
marketing practices associated with certain of ev3’s peripheral vascular products. The Company is fully cooperating with these
requests.
Except as noted above, the Company has not recorded an expense related to damages in connection with the issued subpoenas
because any potential loss is not currently probable or reasonably estimable under U.S. GAAP. Additionally, the Company
cannot reasonably estimate the range of loss, if any, that may result from these matters.
Income Taxes
In March 2009, the U.S. Internal Revenue Service (IRS) issued its audit report on Medtronic, Inc. for fiscal years 2005 and
2006. Medtronic, Inc. reached agreement with the IRS on some, but not all matters related to these fiscal years. On
December 23, 2010, the IRS issued a statutory notice of deficiency with respect to the remaining issues. Medtronic, Inc. filed a
Petition with the U.S. Tax Court on March 21, 2011 objecting to the deficiency. During October and November 2012,
Medtronic, Inc. reached resolution with the IRS on various matters, including the deductibility of a settlement payment.
Medtronic, Inc. and the IRS agreed to hold one issue, the calculation of amounts eligible for the one-time repatriation holiday,
because such specific issue was being addressed by other taxpayers in litigation with the IRS. The remaining unresolved issue
for fiscal years 2005 and 2006 relates to the allocation of income between Medtronic, Inc. and its wholly-owned subsidiary
operating in Puerto Rico, which is one of the Company’s key manufacturing sites. The Tax Court proceeding with respect to this
issue began on February 3, 2015 and ended on March 12, 2015. The Company expects a ruling from the Tax Court sometime
during fiscal year 2017.
In October 2011, the IRS issued its audit report on Medtronic, Inc. for fiscal years 2007 and 2008. Medtronic, Inc. reached
agreement with the IRS on some but not all matters related to these fiscal years. The significant issues that remain unresolved
relate to the allocation of income between Medtronic, Inc. and its wholly-owned subsidiary operating in Puerto Rico and
proposed adjustments associated with the tax effects of the Company’s acquisition of Kyphon Inc. (Kyphon). During the fourth
quarter of fiscal year 2015, a tentative settlement was reached with the IRS for the Kyphon acquisition matters. As a result, the
Company recorded a $329 million certain tax adjustment, including interest, during fiscal year 2015.
In April 2014, the IRS issued its audit report on Medtronic, Inc. for fiscal years 2009, 2010, and 2011. Medtronic, Inc. reached
agreement with the IRS on some but not all matters related to these fiscal years. The significant issues that remain unresolved
126