CFO Gary Ellis, during a conference call yesterday discussing the company’s Q4 results, said the dispute concerned the $3.3 billion in overseas cash Medtronic used to buy Kyphon.
"This relates to an issue we’ve had that was raised by the IRS related to our acquisition of Kyphon several years ago and which we used a combination of basically OUS cash and U.S. cash," Ellis said. "It was a major outstanding issue we had with the IRS and we’re happy to get this when settled and move beyond it."
The $329 million charge included the $275 million settlement and another $54 million in interest, he said.
Ellis said the IRS settlement does not affect its onging beef with the tax bureau over the pricing of transfers among the company’s various units in 2005 and 2006. Medtronic is disputing the IRS’s adjustments of those transactions. The tax bureau wants Medtronic to cough up $958 million in relation to the transfer pricing. Last month the U.S. Tax Court denied a request by the IRS to issue a partial summary judgment in the case.
Medtronic yesterday reported fiscal 4th-quarter results that beat Wall Street’s expectations on both the top and bottom lines, despite a slide into red ink.
The company posted a loss of -$1 million, or 0¢ per share, on sales growth of 60.0% to $7.30 billion for the 3 months ended April 24, compared with the same period last year. But adjusted to exclude 1-time items, earnings per share were $1.16, a full nickel ahead of The Street, where analysts were looking for earnings of $1.11 on sales of $7.19 billion.
For the full year, Medtronic reported a profit decline of -12.7% to $2.68 billion, or $2.41 per share, on sales growth of 19.1% to $20.26 billion compared with fiscal 2014. Adjusted to exclude 1-time items, earnings per share were $4.28, 11¢ under The Street’s forecast. Analysts were looking for full-year sales of $27.73 billion.
"I am encouraged by our strong 4th-quarter performance, the 1st quarter that reflects the combined results of Medtronic and 3. In addition to making solid progress on our integration of Covidien, these results reflect disciplined execution across our three core strategies of therapy innovation, globalization, and economic value," chairman & CEO Omar Ishrak said in prepared remarks. "As we look ahead to fiscal year 2016, we remain focused on consistently delivering on our strategic and financial commitments. We feel the company is well positioned to be a catalyst in transforming healthcare to a value-based model, using medical technology and services to deliver improved outcomes and efficiency, together with our provider partners around the world."
Medtronic said it expects to report EPS of $4.30 to $4.40 for fiscal 2016 on constant-currency sales growth of 4% to 6%.
MDT shares closed up 0.2% at $76.88 apiece yesterday.