Discontinued Operations

9 Months Ended

Jan. 27, 2012

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations Disclosure

Note 3 – Discontinued Operations

On November 16, 2011, the Company and Bain Capital Partners, LLC (Bain Capital) entered into a definitive agreement under which Bain Capital would acquire Physio-Control and related entities, excluding certain assets and liabilities, for cash in a transaction valued at approximately $405 million excluding potential earn-outs and any working capital adjustments. As of January 27, 2012, the Company classified the results of operations of the Physio-Control business, which were previously presented as a component of the Cardiac and Vascular Group operating segment, as discontinued operations in the condensed consolidated statements of earnings for all periods presented. The assets and liabilities of this business to be sold met the accounting criteria to be classified as held for sale and have been aggregated and reported on separate lines in the condensed consolidated balance sheets for all periods presented.

On January 30, 2012, the Company completed the sale of the Physio-Control business to Bain Capital. The Company sold $161 million in net assets and received $385million in net cash, excluding potential earn-outs, which are based upon fiscal year 2012 and 2013 Physio-Control performance in accordance with the agreement. The amount of cash received was less than the original transaction value of approximately $405 million due to an estimated working capital adjustment of $20 million that occurred at the time of closing. This amount may be adjusted based on the final closing balance sheet in accordance with the agreement. The assets and liabilities sold were comprised of Physio-Control's U.S. and international assets and liabilities, excluding international accounts receivable and accounts payable, and certain compensation related liabilities assumed by Bain Capital. Additionally, the Company has entered into a Transition Services Agreement (TSA) with Physio-Control in which the Company will be providing transition services to ensure continuity of business for Physio-Control as it establishes stand-alone processes separate from Medtronic. The TSA requires the Company to continue to provide certain back-office support functions to Physio-Control in the areas of finance, facilities, human resources, customer service, IT, quality and regulatory, and operations. The timeframe for these services ranges from three to 12 months following the closing date. The Company will be compensated for the services specified in the TSA. The Company will record the income earned from the TSA in other expense in the condensed consolidated statements of earnings.

The following is a summary of the operating results of Physio-Control for discontinued operations for the three and nine months ended January 27, 2012 and January 28, 2011:

	Three months ended				Nine months ended
	January 27,		January 28,		January 27,		January 28,
(in millions)	2012		2011		2012		2011
Discontinued operations:
Net sales	$	112	$	104	$	323	$	297
Earnings from operations of Physio-Control	$	23	$	16	$	48	$	39
Physio-Control divestiture-related costs		(12)		-		(24)		-
Income tax expense		(5)		(5)		(9)		(13)
Deferred income tax benefit on sale		84		-		84		-
Earnings from discontinued operations	$	90	$	11	$	99	$	26

During the three and nine months ended January 27, 2012, the Company recorded an $84 million deferred income tax benefit in discontinued operations. In accordance with authoritative guidance, the Company is required to establish a deferred tax asset on the difference between its tax and book basis in the shares of Physio-Control, up to the expected amount of gain. In the fourth quarter of fiscal year 2012 the deferred income tax benefit will reverse upon the finalization of the sale. The Company anticipates recognizing a gain of $220 to $235 million in the fourth quarter of fiscal year 2012. Additionally, during the three months ended January 27, 2012, the Company recorded $12 million of Physio-Control divestiture-related costs in discontinued operations. During the nine months ended January 27, 2012, the Company reclassified $12 million of Physio-Control divestiture-related costs previously recorded in acquisition-related items within continuing operations on the condensed consolidated statements of earnings in the first and second quarters of fiscal year 2012 to discontinued operations.

The following is a summary of the Physio-Control assets and liabilities held for sale as of January 27, 2012 and April 29, 2011:

	January 27,		April 29,
	2012		2011
(in millions)
ASSETS
U.S. accounts receivable, net	$	47	$	63
Inventories		71		77
Deferred tax assets, net		25		20
Prepaid expenses and other assets		13		6
Property, plant, and equipment, net		28		23
Goodwill		22		18
Other intangible assets, net		44		51
Total assets held for sale	$	250	$	258
LIABILITIES
Accounts payable and other accrued expenses	$	65	$	64
Accrued compensation		22		21
Deferred tax liabilities, net		2		3
Total liabilities held for sale	$	89	$	88