Medtronic 2010 Annual Report Download - page 87

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Medtronic, Inc.
credit terms in the normal course of business. However, a
significant amount of trade receivables are with national healthcare
systems in many countries. In light of the current economic state
of many foreign countries, the Company continues to monitor
their creditworthiness. 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 30, 2010 and April 24, 2009, no
customer represented more than 10 percent of the outstanding
accounts receivable.
11. Interest Expense, Net
Interest income and interest expense for fiscal years 2010, 2009
and 2008 are as follows:
Fiscal Year
(in millions) 2010 2009 2008
Interest income $(156) $(188) $(364)
Interest expense 402 371 400
Interest expense, net $ 246 $183 $ 36
Interest expense, net for fiscal years 2010, 2009 and 2008 has
been retrospectively adjusted for the impact of the adoption of
the new authoritative guidance for convertible debt. See Note 2
for additional information.
Interest income includes interest earned on the Company’s
cash and cash equivalents, short- and long-term investments,
the net realized and unrealized gain or loss on trading securities
and the net realized gain or loss on the sale or impairment of
available-for-sale debt securities. See Note 6 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 and debt discounts.
12. Shareholders’ Equity
Repurchase of Common Stock In June 2007 and June 2009, the
Company’s Board of Directors authorized the repurchase of up to
50 million and 60 million shares of the Company’s stock,
respectively. Shares are repurchased from time to time to support
the Company’s stock-based compensation programs and to return
capital to shareholders. The Company repurchased approximately
27.0 million and 16.5 million shares at an average price of $38.10
and $45.94, respectively, during fiscal years 2010 and 2009. As of
April 30, 2010, the Company has approximately 50.8 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.
The Board of Directors may redeem the rights for $0.005 per
right at any time before any person or group becomes an Acquiring
Person. The Board may also reduce the threshold at which a
person or group becomes an Acquiring Person from 15 percent to
no less than 10 percent of the outstanding common stock. The
rights expire on October 26, 2010.
13. Stock Purchase and Award Plans
Under the fair value recognition provision of U.S. GAAP for
accounting for stock-based compensation, the Company measures
stock-based compensation expense at the grant date based on
the fair value of the award and recognizes the compensation
expense over the requisite service period, which is generally the
vesting period. The Company elected the modified-perspective
method of adopting this guidance, under which prior periods
were not retroactively restated. The provisions of this guidance
apply to awards granted after the April 29, 2006 effective date.
Stock-based compensation expense for the non-vested portion of
awards granted prior to the effective date is being recognized