Medtronic 2008 Annual Report Download - page 42

Maturity by Fiscal Year
(dollars in millions) Total 2009 2010 2011 2012 2013 Thereafter
Contractual obligations related to off-balance sheet arrangements:
Foreign currency contracts(1) $ 6,613 $ 3,812 $ 2,026 $ 775 $ — $ — $ —
Operating leases(2) 261 88 59 35 19 29 31
Inventory purchases(3) 749 323 174 103 30 27 92
Commitments to fund minority investments/contingent acquisition consideration(4) 478 280 53 22 16 22 85
Interest payments(5) 558 124 124 111 64 64 71
Other(6) 210 44 45 32 15 5 69
Total
$ 8,869
$ 4,671
$ 2,481
$ 1,078
$ 144
$ 147
$ 348
Contractual obligations reflected in the balance sheet:
Long-term debt, excluding capital leases(7) $ 5,829 $ 94 $ — $ 2,908 $ — $ 2,200 $ 627
Capital leases(8) 78 11 13 16 17 20 1
Other(9) 11 10 — 1 — — —
Total
$ 5,918
$ 115
$ 13
$ 2,925
$ 17
$ 2,220
$ 628
(1) As these obligations were entered into as hedges, the majority of these obligations will be offset by losses/gains on the related assets, liabilities and transactions being hedged.
(2) Certain leases require us to pay real estate taxes, insurance, maintenance and other operating expenses associated with the leased premises. These future costs are not included in the
schedule above.
(3) We have included inventory purchase commitments which are legally binding and specify minimum purchase quantities. These purchase commitments do not exceed our projected
requirements and are in the normal course of business. These commitments do not include open purchase orders.
(4) Certain commitments related to the funding of minority investments and/or previous acquisitions are contingent upon the achievement of certain product-related milestones and various
other favorable operational conditions. While it is not certain if and/or when these payments will be made, the maturity dates included in this table reflect our best estimates. These
commitments also include amounts related to our agreement to form a joint venture with Shandong Weigao Group Medical Polymer Company Limited (Weigao), which was announced
in December 2007, to market therapies in the spine and orthopedics sector throughout China. In addition, we agreed to acquire a 15 percent equity interest in Weigao for approximately
$220 million. We expect to close the transaction in the first half of fiscal year 2009.
(5) Interest payments in the table above reflect the interest on our outstanding debt, including the $4.400 billion of Senior Convertible Notes, $1.000 billion of Senior Notes, $94 million of
Contingent Convertible Debentures and the $300 million Credit Agreement with the Bank of Tokyo-Mitsubishi UFJ, Ltd. The interest rate on each outstanding obligation varies and interest
is payable semi-annually on the Senior Convertible Notes and the Contingent Convertible Debentures. The interest rate is 1.500 percent on the $2.200 billion Senior Convertible Notes due
2011 and 1.625 percent on the $2.200 billion Senior Convertible Notes due 2013, 4.375 percent on the $400 million of Senior Notes due 2010, 4.750 percent on the $600 million of Senior
Notes due 2015, and 1.250 percent on the Contingent Convertible Debentures due 2021. Interest on the $300 million Credit Agreement with the Bank of Tokyo-Mitsubishi UFJ, Ltd. due 2011
is variable and paid quarterly.
(6) These obligations include certain research and development arrangements.
(7) Long-term debt in the table above includes $4.400 billion Senior Convertible Notes issued in April 2006, $1.000 billion Senior Notes issued in September 2005 and $94 million related to our
Contingent Convertible Debentures, and the $300 million Credit Agreement with the Bank of Tokyo-Mitsubishi UFJ, Ltd. In September 2006, we repurchased $1.877 billion of Contingent
Convertible Debentures as a result of certain holders exercising their put options. The table above also includes the impact of the five year interest rate swap entered into in November 2005
and the eight year interest rate swap entered into in June 2007.
(8) Capital lease obligations include a sale-leaseback agreement entered into in the fourth quarter of fiscal year 2006 whereby certain manufacturing equipment was sold and is being leased
by us over a seven year period.
(9) These obligations primarily relate to the agreement with Michelson that settled all outstanding litigation and disputes between Michelson and the Company. See Note 4 to the consolidated
financial statements for further discussion.
Debt and Capital
In October 2005 and June 2007, our Board of Directors authorized the
repurchase of up to 40 million and 50 million shares of our common
stock, respectively. In addition, in April 2006, the Board of Directors
made a special authorization for the repurchase of up to 50 million
shares in connection with the $4.400 billion Senior Convertible Note
offering (see below for further discussion).
Shares are repurchased from time to time to support our stock-based
compensation programs and to take advantage of favorable market
conditions. During fiscal years 2008 and 2007, we repurchased
approximately 30.7 million shares and 21.7 million shares at an average
price of $50.28 and $47.83, respectively. The amounts disclosed as
repurchased for fiscal year 2007 include 544,224 shares that we obtained
as part of the final settlement of the previously announced and
executed accelerated share repurchase program. Excluding the shares
obtained in the settlement of the accelerated share repurchase program,
for fiscal year 2007 we repurchased 21.2 million shares at an average
price of $49.06. As of April 25, 2008, we have approximately 34.3 million
shares remaining under current buyback authorizations approved by
the Board of Directors.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
(continued)
38 Medtronic, Inc.