Medtronic 2014 Annual Report Download - page 89

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Medtronic, Inc.
Notes to Consolidated Financial Statements (Continued)
Acquisition-Related Items
During fiscal year 2014, the Company recorded net charges from acquisition-related items of $117 million, primarily including
IPR&D and long-lived asset impairment charges of $236 million related to the Ardian, Inc. (Ardian) acquisition and income of
$138 million related to the change in fair value of contingent consideration associated with acquisitions subsequent to April 29,
2009. The Ardian impairment resulted from the Company’s January 2014 announcement that the U.S. pivotal trial in renal
denervation for treatment-resistant hypertension, Symplicity HTN-3, failed to meet its primary efficacy endpoint. Based on the
results of the trial, the Company suspended enrollment of its renal denervation hypertension trials that were being conducted in
the U.S., Japan, and India. These impairment charges consisted of $192 million related to IPR&D and $44 million related to
other long-lived assets. For additional information regarding these impairment assessments, refer to Note 6. The change in fair
value of contingent consideration primarily related to adjustments for Ardian, which are based on annual revenue growth
through fiscal year 2015. As there was no projected revenue growth through fiscal year 2015, no contingent consideration
remained as of April 25, 2014. These amounts are included within acquisition-related items in the consolidated statements of
earnings.
Fiscal Year 2013
China Kanghui Holdings
On November 1, 2012, the Company acquired China Kanghui Holdings (Kanghui). Kanghui is a Chinese manufacturer and
distributor of orthopedic products in trauma, spine, and joint reconstruction. Total consideration for the transaction was
approximately $816 million. The total value of the transaction, net of Kanghui’s cash, was approximately $797 million. Based
on the acquisition valuation, the Company acquired $288 million of technology-based assets and $53 million of tradenames and
customer-related intangible assets that each had a weighted average estimated useful life of 11 years and $409 million of
goodwill. The acquired goodwill is not deductible for tax purposes.
The Company accounted for the acquisition of Kanghui as a business combination using the acquisition method of accounting.
The assets acquired and liabilities assumed were recorded at their respective fair values as of the acquisition date. The fair
values of the assets acquired and liabilities assumed are as follows:
(in millions)
Current assets $ 106
Property, plant, and equipment 56
Intangible assets 341
Goodwill 409
Other assets 11
Total assets acquired 923
Current liabilities 29
Long-term deferred tax liabilities, net 77
Other long-term liabilities 1
Total liabilities assumed 107
Net assets acquired $ 816
Acquisition-Related Items
During fiscal year 2013, the Company recorded net income from acquisition-related items of $49 million, primarily including
income of $62 million related to the change in fair value of contingent consideration associated with acquisitions subsequent to
April 29, 2009. The change in fair value of contingent consideration primarily related to the reduction in fair value of contingent
consideration associated with Ardian due to a slower commercial ramp in Europe. Additionally, the Company recorded
transaction-related expenses of $13 million. These amounts are included within acquisition-related items in the consolidated
statements of earnings.
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