Medtronic 2015 Annual Report Download - page 92

Medtronic plc
Notes to Consolidated Financial Statements (Continued)
The preliminary fair values of the assets acquired and liabilities assumed are as follows:
(estimated in millions)
Accounts receivable $ 1,349
Inventories 2,222
Other current assets 2,949
Property, plant, and equipment 2,354
Goodwill 29,586
Intangible assets 26,265
Other assets 747
Total assets acquired 65,472
Short-term borrowings 1,011
Other current liabilities 2,331
Long-term debt 4,623
Long-term deferred tax liabilities 4,736
Other long-term liabilities 2,783
Total liabilities assumed 15,484
Net assets acquired $ 49,988
Goodwill has been allocated to the Minimally Invasive Therapies Group, Cardiac and Vascular Group, Restorative Therapies
Group, and Diabetes Group. Goodwill is calculated as the excess of the consideration transferred over the net assets recognized
and represents the expected revenue and cost synergies of the combined company, which are further described above. Goodwill
recognized as a result of the acquisition is not deductible for tax purposes. See Note 7 for additional information about goodwill
and other intangible assets.
Contingent liabilities assumed as part of the Acquisition total $2.2 billion and are included in accrued income taxes,other
accrued expenses,long-term accrued income taxes, and other long-term liabilities. These contingent liabilities include $1.5
billion related to income taxes (including uncertain tax positions and guarantee commitments), $0.5 billion related to legal
claims (including product liability), and $0.2 billion related to environmental matters. Contingent liabilities are recorded at their
estimated fair values, aside from those pertaining to uncertainty in income taxes which are an exception to the fair value basis of
accounting. Legal matters and certain environmental matters that are legal in nature are recorded at their respective probable and
estimable amounts. See Note 16 for additional background on contingent liabilities. The estimated fair values noted above are
preliminary and are subject to change upon finalization of the purchase accounting assessment and may have a material impact
on the Company’s results of operations and financial position.
Actual and Pro Forma Impact
The Company’s consolidated financial statements for the fiscal year ended April 24, 2015 include Covidien’s results of
operations from the Acquisition Date through April 24, 2015. Net sales and operating loss attributable to Covidien during this
period and included in Medtronic’s consolidated financial statements for the fiscal year ended April 24, 2015 total $2.683
billion and $423 million, respectively. The $423 million operating loss includes $623 million of amortization from the step-up
in fair value of inventory acquired, $379 million of intangible asset amortization, $218 million of acquisition-related charges,
and $142 million of restructuring charges, net, all of which relate to the Covidien acquisition.
The following unaudited pro forma information gives effect to Medtronic’s acquisition of Covidien as if the acquisition had
occurred on April 27, 2013, the first day of fiscal year 2014, and had been included in the Company’s consolidated statements
of income for fiscal years 2015 and 2014.
(in millions) 2015 2014
Pro forma net sales $ 28,369 $ 27,380
Pro forma net income $ 3,944 $ 3,280
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