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Acquisitions and Acquisition-Related Items | 12 Months Ended
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Apr. 28, 2017
Business Combinations [Abstract] |
Acquisitions and Acquisition-Related Items | Acquisitions and Acquisition-Related Items The Company had various acquisitions and other acquisition-related activity during fiscal year 2017. The Company accounted for the acquisitions noted below as business combinations using the acquisition method of accounting. In accordance with authoritative guidance on business combination accounting, the assets and liabilities of the businesses acquired were recorded and consolidated on the acquisition date at their respective fair values. Goodwill resulting from business combinations is largely attributable to future yet to be defined technologies, new customer relationships, existing workforce of the acquired businesses, and synergies expected to arise after the Company's acquisition of these businesses. The pro forma impact of these acquisitions was not significant, either individually or in the aggregate, to the results of the Company for fiscal year 2017. The results of operations of acquired businesses have been included in the Company’s consolidated statements of income since the date each business was acquired. The fair values of the assets acquired and liabilities assumed from acquisitions during fiscal year 2017 are as follows:
(in millions) | HeartWare International, Inc. |  | Smith & Nephew's Gynecology Business |  | All Other |  | Total
Other current assets | $ | 351 |  |  | $ | — |  |  | $ | 23 |  |  | $ | 374 |
Property, plant, and equipment | 14 |  |  | 3 |  |  | 4 |  |  | 21 |
Other intangible assets | 625 |  |  | 167 |  |  | 65 |  |  | 857 |
Goodwill | 427 |  |  | 180 |  |  | 125 |  |  | 732 |
Other assets | 55 |  |  | — |  |  | 16 |  |  | 71 |
Total assets acquired | 1,472 |  |  | 350 |  |  | 233 |  |  | 2,055 |
Current liabilities | 143 |  |  | — |  |  | 10 |  |  | 153 |
Deferred tax liabilities | 6 |  |  | — |  |  | 7 |  |  | 13 |
Long-term debt | 245 |  |  | — |  |  | — |  |  | 245 |
Other liabilities | 6 |  |  | — |  |  | 4 |  |  | 10 |
Total liabilities assumed | 400 |  |  | — |  |  | 21 |  |  | 421 |
Net assets acquired | $ | 1,072 |  |  | $ | 350 |  |  | $ | 212 |  |  | $ | 1,634 |
HeartWare International, Inc. On August 23, 2016, the Company's Cardiac and Vascular Group acquired HeartWare International, Inc. (HeartWare), a medical device company that develops and manufactures miniaturized implantable heart pumps, or ventricular assist devices, to treat patients around the world suffering from advanced heart failure. Total consideration for the transaction was approximately $1.1 billion. Based upon a preliminary acquisition valuation, the Company acquired $602 million of technology-based and customer-related intangible assets and $23 million of tradenames, with estimated useful lives of 15 and 5 years, respectively, and $427 million of goodwill. The acquired goodwill is not deductible for tax purposes. In addition, the Company acquired $245 million of debt through the acquisition, of which the Company redeemed $203 million as part of a cash tender offer in August 2016. The remaining $42 million of debt acquired is due December 2017 and is recorded within current debt obligations on the consolidated balance sheets. The allocation of consideration is considered preliminary, primarily with respect to certain contingencies. The Company expects to finalize the allocation of purchase price within the one-year measurement period. Sales attributable to HeartWare were $155 million for fiscal year 2017. Smith & Nephew's Gynecology Business On August 5, 2016, the Company's Minimally Invasive Therapies Group acquired Smith & Nephew's gynecology business, which expands and strengthens Medtronic's minimally invasive surgical offerings and further complements its existing global gynecology business. Total consideration for the transaction was approximately $350 million. The Company acquired $167 million of customer-related and technology-related intangible assets with useful lives of 13 years and $180 million of goodwill. The acquired goodwill is deductible for tax purposes. Sales attributable to Smith & Nephew's gynecology business were $45 million for fiscal year 2017. For information on the Company's fiscal year 2016 acquisitions, refer to Note 2 to the consolidated financial statements included in the Company's Annual report on Form 10-K for the fiscal year ended April 29, 2016. Acquisition-Related Items During fiscal year 2017, the Company recognized acquisition-related items expense of $230 million, including $10 million recognized within cost of products sold in the consolidated statements of income, primarily related to integration-related expenses incurred in connection with the Covidien acquisition. The expenses incurred in connection with the Covidien acquisition include $225 million of professional services and integration expenses and $23 million of accelerated or incremental stock compensation expense. Acquisition-related items expense also includes expenses incurred in connection with the HeartWare acquisition and planned divestiture of a portion of the Patient Monitoring and Recovery business, partially offset by the change in fair value of contingent consideration as a result of revised revenue forecasts and the timing of anticipated regulatory milestones. During fiscal year 2016, the Company recognized acquisition-related items expense of $283 million, primarily related to expenses incurred in connection with the Covidien acquisition. The expenses incurred in connection with the Covidien acquisition include $219 million of professional services and integration expenses and $58 million of accelerated or incremental stock compensation expense. During fiscal year 2015, the Company recognized acquisition-related items expense of $550 million, primarily related to expenses incurred in connection with the Covidien acquisition. The expenses incurred in connection with the Covidien acquisition include $275 million of professional services and integration expenses, $189 million of accelerated or incremental stock compensation expense, and $69 million of incremental officer and director excise tax. Contingent Consideration Certain of the Company’s business combinations involve potential payment of future consideration that is contingent upon the achievement of certain product development milestones and/or contingent on the acquired business reaching certain performance milestones. A liability is recorded for the estimated fair value of the contingent consideration on the acquisition date. The fair value of the contingent consideration is remeasured at each reporting period using Level 3 inputs, and the change in fair value is recognized within acquisition-related items in the consolidated statements of income. Contingent consideration payments related to the acquisition date fair value are reported as financing activities in the consolidated statements of cash flows. Amounts paid in excess of the original acquisition date fair value are reported as operating activities in the consolidated statements of cash flows. The fair value of contingent consideration is measured using projected payment dates, discount rates, probabilities of payment, and projected revenues (for revenue-based considerations). Projected revenues are based on the Company’s most recent internal operational budgets and long-range strategic plans. Changes in projected revenues, probabilities of payment, discount rates, and projected payment dates may result in adjustments to the fair value measurements. The recurring Level 3 fair value measurements of contingent consideration include the following significant unobservable inputs:
(in millions) | Fair Value at April 28, 2017 |  | Valuation Technique |  | Unobservable Input |  | Range
|  |  |  |  | Discount rate |  | 11% - 32.5%
Revenue-based payments | $ | 106 |  |  | Discounted cash flow |  | Probability of payment |  | 30% - 100%
|  |  |  |  |  | Projected fiscal year of payment |  | 2018 - 2026
|  |  |  |  | Discount rate |  | 0.3% - 5.5%
Product development-based payments | $ | 140 |  |  | Discounted cash flow |  | Probability of payment |  | 75% - 100%
|  |  |  |  |  | Projected fiscal year of payment |  | 2018 - 2025
The fair value of contingent consideration at April 28, 2017 and April 29, 2016 was $246 million and $377 million, respectively. At April 28, 2017, $180 million was reflected in other liabilities and $66 million was reflected in other accrued expenses in the consolidated balance sheets. At April 29, 2016, $311 million was reflected in other liabilities and $66 million was reflected in other accrued expenses in the consolidated balance sheets. The following table provides a reconciliation of the beginning and ending balances of contingent consideration:
| Fiscal Year
(in millions) | 2017 |  | 2016
Beginning Balance | $ | 377 |  |  | $ | 264 |
Purchase price contingent consideration | 28 |  |  | 149 |
Contingent consideration payments | (76 | ) |  | (22 | )
Change in fair value of contingent consideration | (83 | ) |  | (14 | )
Ending Balance | $ | 246 |  |  | $ | 377 |

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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