Medtronic 2009 Annual Report Download - page 83

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79
Medtronic, Inc.
Concentrations of Credit Risk
Financial instruments, which potentially subject the Company
to significant concentrations of credit risk, consist principally
of interest-bearing investments, forward exchange derivative
contracts and trade accounts receivable.
The Company maintains cash and cash equivalents, investments
and certain other financial instruments (including forward
exchange contracts) with various major financial institutions. The
Company performs periodic evaluations of the relative credit
standings of these financial institutions and limits the amount of
credit exposure with any one institution.
Concentrations of credit risk with respect to trade accounts
receivable are limited due to the large number of customers and
their dispersion across many geographic areas. The Company
monitors the creditworthiness of its customers to which it grants
credit terms in the normal course of business. However, a
significant amount of trade receivables are with national
healthcare systems in many countries. Although the Company
does not currently foresee a credit risk associated with these
receivables, repayment is dependent upon the financial stability
of the economies of those countries. As of April 24, 2009 and April
25, 2008, no customer represented more than 10 percent of the
outstanding accounts receivable.
10. Interest Expense/(Income), net
Interest income and interest expense for fiscal years 2009, 2008
and 2007 are as follows:
Fiscal Year
(in millions) 2009 2008 2007
Interest income $(188) $(364) $(382)
Interest expense 217 255 228
Interest expense/(income), net $ 29 $(109) $(154)
Interest income includes interest earned on the Company’s cash
and cash equivalents, short- and long-term investments and the
net realized gains or losses on the sale or impairment of AFS debt
securities. See Note 5 for further discussion of these items.
Interest expense includes the expense associated with the
interest that the Company pays on its outstanding borrowings,
including short- and long-term instruments and the amortization
of debt issuance costs.
11. Shareholders’ Equity
Repurchase of Common Stock In June 2007, the Company’s Board
of Directors authorized the repurchase of up to 50 million shares
of the Company’s stock. 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 Note 8 for further discussion).
Shares are repurchased from time to time to support the
Company’s stock-based compensation programs and to take
advantage of favorable market conditions. The Company
repurchased approximately 16.5 million and 30.7 million shares at
an average price of $45.94 and $50.28, respectively, during fiscal
years 2009 and 2008. As of April 24, 2009, the Company has
approximately 17.8 million shares remaining under the buyback
authorizations approved by the Board of Directors. The Company
accounts for repurchases of common stock using the par value
method and shares repurchased are cancelled.
Shareholder Rights Plan On October 26, 2000, the Company’s
Board of Directors adopted a Shareholder Rights Plan and declared
a dividend of one preferred share purchase right (a “right”) for
each outstanding share of common stock with a par value of
$0.10 per share. Each right will allow the holder to purchase
1/5000 of a share of Series A Junior Participating Preferred Stock
at an exercise price of $400 per share, once the rights become
exercisable. The rights are not exercisable or transferable apart
from the common stock until 15 days after the public
announcement that a person or group (the Acquiring Person) has
acquired 15 percent or more of the Company’s common stock or
15 business days after the announcement of a tender offer which
would increase the Acquiring Person’s beneficial ownership to 15
percent or more of the Company’s common stock. After any
person or group has become an Acquiring Person, each right
entitles the holder (other than the Acquiring Person) to purchase,
at the exercise price, common stock of the Company having a
market price of two times the exercise price. If the Company is
acquired in a merger or other business combination transaction,
each exercisable right entitles the holder to purchase, at the
exercise price, common stock of the acquiring company or an
affiliate having a market price of two times the exercise price of
the right.