Medtronic 2008 Annual Report Download - page 87

(ERISA) and the various guidelines which govern the plans outside the
U.S., the majority of anticipated fiscal year 2009 contributions will
be discretionary.
Retiree benefit payments, which reflect expected future service, are
anticipated to be paid as follows:
U.S.
Pension
Benefits
Non-U.S.
Pension
Benefits Post-Retirement Benefits
Fiscal Year
Gross
Payments
Gross
Payments
Gross
Payments
Gross Medicare
Part D Receipts
2009 $ 24 $ 9 $ 7 $ 1
2010 29 10 8 1
2011 33 11 9 1
2012 37 13 10 2
2013 43 14 11 1
2014–2018 315 89 77 12
Total
$ 481
$ 146
$ 122
$ 18
In August 2006, the Pension Protection Act was signed into law in
the U.S. The Pension Protection Act replaces the funding requirements
for defined benefit pension plans by subjecting defined benefit plans
to 100 percent of the current liability funding target. Defined benefit
plans with a funding status of less than 80 percent of the current liability
are defined as being “at risk.” The Pension Protection Act was effective
for the 2008 plan year. The Company’s U.S. qualified defined benefit
plans are funded in excess of 80 percent, and therefore the Company
expects that the plans will not be subject to the “at risk” funding
requirements of the Pension Protection Act and that the law will not
have a material impact on future contributions.
The healthcare cost trend rate for post-retirement benefit plans was
9 percent at April 25, 2008. The trend rate is expected to decline to
5 percent over a five-year period. Assumed healthcare cost trend rates
have a significant effect on the amounts reported for the healthcare
plans. A one-percentage-point change in assumed healthcare cost
trend rates would have the following effects:
One-Percentage-
Point Increase
One-Percentage-
Point Decrease
Effect on post-retirement
benefit cost $ 3 $ (2)
Effect on post-retirement
benefit obligation 10 (10)
Defined Contribution Savings Plans The Company has defined
contribution savings plans that cover substantially all U.S. employees
and certain non-U.S. employees. The general purpose of these plans is
to provide additional financial security during retirement by providing
employees with an incentive to make regular savings. Company
contributions to the plans are based on employee contributions and
Company performance and starting in fiscal year 2006 the entire match
is made in cash. Expense under these plans was $78, $64 and $83 in
fiscal years 2008, 2007 and 2006, respectively.
Effective May 1, 2005, the Company froze participation in the existing
defined benefit pension plan in the U.S. and implemented two new
plans including an additional defined benefit pension plan and a new
defined contribution pension plan, respectively: the Personal Pension
Account (PPA) and the Personal Investment Account (PIA). Employees
in the U.S. hired on or after May 1, 2005 have the option to participate
in either the PPA or the PIA. Participants in the PPA receive an annual
allocation of their salary and bonus on which they will receive an
annual guaranteed rate of return which is based on the 10-year Treasury
bond rate. Participants in the PIA also receive an annual allocation of
their salary and bonus; however, they are allowed to determine how to
invest their funds among identified fund alternatives. The cost associated
with the PPA is included in the U.S. Pension Benefits in the tables
presented earlier. The defined contribution cost associated with the PIA
was approximately $30, $25 and $18 in fiscal years 2008, 2007 and
2006, respectively.
14. Leases
The Company leases office, manufacturing and research facilities and
warehouses, as well as transportation, data processing and other
equipment under capital and operating leases. A substantial number
of these leases contain options that allow the Company to renew at the
fair rental value on the date of renewal.
Future minimum payments under capitalized leases and non-
cancelable operating leases at April 25, 2008 are:
Fiscal Year
Capitalized
Leases
Operating
Leases
2009 $ 15 $ 88
2010 17 59
2011 19 35
2012 19 19
2013 21 29
2014 and thereafter 1 31
Total minimum lease payments $ 92 $ 261
Less amounts representing interest (14) N/A
Present value of net minimum
lease payments
$ 78
N/A
Rent expense for all operating leases was $135, $112 and $89 in fiscal
years 2008, 2007 and 2006, respectively.
In April 2006, the Company entered into a sale-leaseback agreement
with a financial institution whereby certain manufacturing equipment
was sold to the financial institution and is being leased by the Company
over a seven year period. The transaction has been recorded as a capital
83Medtronic, Inc.