Medtronic 2008 Annual Report Download - page 75

The terms of the New Debentures are consistent with the terms of
the Old Debentures noted above, except that: (i) the New Debentures
require the Company to settle all conversions for a combination of cash
and shares of the Company’s common stock, if any, in lieu of only shares.
Upon conversion of the New Debentures the Company will pay holders
cash equal to the lesser of the principal amount of the New Debentures
or their conversion value, and shares of the Company’s common stock
to the extent the conversion value exceeds the principal amount of the
New Debentures; and (ii) the New Debentures require the Company to
pay only cash (in lieu of shares of the Company’s common stock or a
combination of cash and shares of the Company’s common stock)
when the Company repurchases the New Debentures at the option of
the holder or when the Company repurchases the New Debentures in
connection with a change of control.
In September 2006, as a result of certain holders of the New
Debentures and Old Debentures exercising their put options, the
Company repurchased $1,835 of the New Debentures for cash and $42
of the Old Debentures for cash. The Company may be required to
repurchase the remaining debentures at the option of the holders in
September 2008, 2011 or 2016. Twelve months prior to the put options
becoming exercisable, the remaining balance of the New Debentures
and the Old Debentures will be classified as short-term borrowings. At
each balance sheet date without a put option within the subsequent
four quarters, the remaining balance will be classified as long-term debt.
Accordingly, during the second quarter of fiscal year 2008, $93 of New
Debentures and $1 of the Old Debentures were reclassified from
long-term debt to short-term borrowings due to the put option
becoming exercisable in September 2008. For put options exercised by
the holders of the New Debentures and the Old Debentures, the
purchase price is equal to the principal amount of the applicable
debenture plus any accrued and unpaid interest thereon to the
repurchase date. If the put option is exercised, the Company will pay
holders the repurchase price solely in cash (or, for the Old Debentures,
in cash or stock at the Company’s option). As of April 25, 2008,
approximately $93 aggregate principal amount of New Debentures
remain outstanding and approximately $1 aggregate principal amount
of Old Debentures remain outstanding. The Company can redeem the
debentures for cash at any time.
Commercial Paper The Company maintains a commercial paper
program that allows the Company to have a maximum of $2,250 in
commercial paper outstanding, with maturities up to 364 days from the
date of issuance. At April 25, 2008 and April 27, 2007, outstanding
commercial paper totaled $874 and $249, respectively. During fiscal
years 2008 and 2007, the weighted average original maturity of the
commercial paper outstanding was approximately 35 and 56 days,
respectively, and the weighted average interest rate was 4.46 percent
and 5.26 percent, respectively.
Bank Borrowings Bank borrowings consist primarily of borrowings from
non-U.S. banks at interest rates considered favorable by management
and where natural hedges can be gained for foreign exchange purposes.
Credit Arrangements The Company has existing unsecured lines of
credit of approximately $2,795 with various banks at April 25, 2008. The
existing lines of credit include a five-year $1,750 syndicated credit facility
dated December 20, 2006 that will expire on December 20, 2011 (Credit
Facility). The Credit Facility provides backup funding for the commercial
paper program and may also be used for general corporate purposes.
The Credit Facility provides the Company with the ability to increase
its capacity by an additional $500 at any time during the life of the
five-year term of the agreement. The Company can also request the
extension of the Credit Facility maturity date for one additional year on
December 20, 2008, the second anniversary of the date of this facility.
Interest rates on these borrowings are determined by a pricing matrix,
based on the Company’s long-term debt ratings, assigned by Standard
and Poor’s Ratings Group and Moody’s Investors Service. Facility fees
are payable on the credit facilities and are determined in the same
manner as the interest rates.
On November 2, 2007, the Company entered into a new Credit
Agreement (the “New Credit Agreement”) with the Bank of Tokyo-
Mitsubishi UFJ, Ltd. (the “New Lender”). The New Credit Agreement
provides for a $300 unsecured revolving credit facility (the “New
Facility”) maturing November 2, 2010. In addition to certain initial fees,
the Company is obligated to pay a commitment fee based on the total
revolving commitment. Interest rates on these borrowings are
determined by a pricing matrix, based on the Company’s long-term
debt ratings, assigned by Standard and Poor’s Ratings Group and
Moody’s Investors Service. The New Credit Agreement contains
customary representations and warranties of the Company as well as
affirmative covenants regarding the Company. Upon the occurrence of
an event of default as defined under the New Credit Agreement, the
New Lender could elect to declare all amounts outstanding under the
New Facility to be immediately due and payable.
As of April 25, 2008 and April 27, 2007, $300 and $0, respectively, were
outstanding on all available lines of credit.
71Medtronic, Inc.