Medtronic 2010 Annual Report Download - page 68

64Medtronic, Inc.
Notes to Consolidated Financial Statements
(continued)
at their respective fair values, and consolidated with the Company.
The purchase price allocation is based on estimates of the fair
value of assets acquired and liabilities assumed. Due to the short
period of time that elapsed between the close of the acquisition
and year end, the entire purchase price is considered preliminary.
The preliminary purchase price has been allocated as follows:
(in millions)
Current assets $ 89
Property, plant and equipment 32
IPR&D 114
Other intangible assets 228
Goodwill 150
Long-term deferred tax assets 9
Total assets acquired 622
Current liabilities 46
Long-term deferred tax liabilities, net 108
Total liabilities assumed 154
Net assets acquired $ 468
In connection with the acquisition of Invatec, the Company
acquired $228 million of technology-based intangible assets with
an estimated useful life of 12 years. Also as part of the acquisition,
the Company recorded, in total, $114 million and $150 million for
IPR&D and goodwill, respectively. The value attributable to IPR&D
has been capitalized as an indefinite-lived intangible asset. The
IPR&D primarily relates to the future launch of Invatec’s drug
eluting balloons into the U.S. market. Development costs incurred
on the project, estimated to be approximately $44 million, will be
expensed as incurred. The establishment of goodwill was primarily
due to the expected revenue growth that is attributable to
increased market penetration from future products and customers.
The goodwill is not deductible for tax purposes.
In connection with the acquisition, the Company began to
assess and formulate a plan for the elimination of duplicative
positions and the termination of certain contractual obligations.
As a result, the Company incurred approximately $12 million of
acquisition related expenses in fiscal year 2010 which were
classified as purchased IPR&D and certain acquisition-related costs.
The pro forma impact of the above acquisition was not
significant to the results of the Company for the fiscal years ended
April 30, 2010, April 24, 2009 and April 25, 2008. The results of
operations related to the acquisition have been included in the
Company’s consolidated statements of earnings since the date
the company was acquired.
Other Acquisitions and IPR&D Charges
In February 2010, the Company recorded an IPR&D charge of $11
million related to the asset acquisition of Arbor Surgical
Technologies, Inc.’s bovine pericardial heart valve technology.
In August 2009, the Company acquired certain intangible assets
related to the distribution of coronary products within the
CardioVascular Japan business. In connection with the acquisition,
the Company recorded $29 million of intangible assets with an
estimated useful life of five years.
Fiscal Year 2009
CoreValve, Inc. In April 2009, the Company acquired privately held
CoreValve Inc. (CoreValve). Under the terms of the agreement
announced in February 2009, the transaction included an initial
up-front payment, including direct acquisition costs, of $700
million plus potential additional payments contingent upon
achievement of certain clinical and revenue milestones. CoreValve
develops percutaneous, catheter-based transfemoral aortic valve
replacement products that are approved in certain markets
outside the U.S.
The Company has accounted for the acquisition of CoreValve as
a business combination. Under business combination accounting,
the assets and liabilities of CoreValve were recorded as of the
acquisition date, at their respective fair values, and consolidated
with the Company. The purchase price allocation is based on
estimates of the fair value of assets acquired and liabilities
assumed. The purchase price has been allocated as follows:
(in millions)
Current assets $ 20
Property, plant and equipment 7
IPR&D 123
Other intangible assets 291
Goodwill 424
Total assets acquired 865
Current liabilities 65
Long-term deferred tax liabilities 100
Total liabilities assumed 165
Net assets acquired $ 700
In connection with the acquisition of CoreValve, the Company
acquired $291 million of technology-based intangible assets with
an estimated useful life of 12 years. Also as part of the acquisition,
the Company recognized, in total, $123 million and $424 million
for IPR&D and goodwill, respectively. The IPR&D was expensed on
the date of acquisition and primarily relates to the future launch
of CoreValve’s catheter-based transfemoral aortic valve into the
U.S. market. For purposes of valuing the acquired IPR&D, the