Medtronic 2013 Annual Report Download - page 105

75732me_10K.indd 90 6/25/13 6:39 PM
Table of Contents
Medtronic, Inc.
Notes to Consolidated Financial Statements (Continued)
(issued at a discount) and an equity component. The resulting debt discount was amortized over the period the 2013 Senior
Convertible Notes were outstanding as additional non-cash interest expense.
In separate private transactions, the Company sold warrants to issue shares of the Company’s common stock at an exercise price
of $76.56 per share. Pursuant to these transactions, warrants for 41 million shares of the Company’s common stock may be settled
over a specified period that began in July 2011 and warrants for 41 million shares of the Company’s common stock may be settled
over a specified period beginning in July 2013 (the settlement dates). As of April 26, 2013 and April 27, 2012, warrants for 41
million shares of the Company’s common stock had expired.
The Company concluded that the warrants were indexed to its own stock and should be classified in shareholders' equity and
not separated as a derivative. The warrants were recorded as an addition to equity as of the trade date. The carrying amount of
the equity component as of April 26, 2013 and April 27, 2012 was $547 million.
The following table provides interest expense amounts related to the Senior Convertible Notes.
(in millions)
Interest cost related to contractual interest coupon
Interest cost related to amortization of the discount
2013
$ 35
90
Fiscal Year
2012
$ 36 $
87
2011
68
172
Commercial Paper The Company maintains a commercial paper program that allows the Company to have a maximum of
$2.250 billion in commercial paper outstanding, with maturities up to 364 days from the date of issuance. As of April 26, 2013
and April 27, 2012, outstanding commercial paper totaled $125 million and $950 million, respectively. During fiscal years 2013
and 2012, the weighted average original maturity of the commercial paper outstanding was approximately 89 and 102 days,
respectively, and the weighted average interest rate was 0.18 percent and 0.15 percent, respectively. The issuance of commercial
paper reduces the amount of credit available under the Company's existing lines of credit.
Bank Borrowings Approximately $218 million of the $224 million outstanding bank borrowings as of April 26, 2013 were short-
term advances to certain non-U.S. subsidiaries under credit agreements with various banks. These advances are guaranteed by the
Company. Bank borrowings consist primarily of borrowings at interest rates considered favorable by management and where
natural hedges can be gained for foreign exchange purposes.
Lines of Credit The Company has a $2.250 billion syndicated credit facility dated December 17, 2012 which expires on December
17, 2017 (Credit Facility). The Credit Facility provides the Company with the ability to increase its borrowing capacity by an
additional $750 million at any time during the term of the agreement. At each anniversary of the date of the Credit Facility, but
not more than twice prior to the maturity date, the Company can also request a one-year extension of the maturity date. The Credit
Facility provides backup funding for the commercial paper program. The Credit Facility replaced the Company's four-year $2.250
billion syndicated credit facility which was scheduled to expire on December 9, 2014. As of April 26, 2013 and April 27, 2012,
no amounts were outstanding on the committed lines of credit.
Interest rates on these borrowings are determined by a pricing matrix, based on the Company’s long-term debt ratings assigned
by Standard & Poor’s Ratings Services and Moody’s Investors Service. Facility fees are payable on the credit facilities and are
determined in the same manner as the interest rates. The agreements also contain customary covenants, all of which the Company
remains in compliance with as of April 26, 2013.
Senior Notes Senior Notes are unsecured, senior obligations of the Company and rank equally with all other secured and
unsubordinated indebtedness of the Company. The indentures under which the Senior Notes were issued contain customary
covenants, all of which the Company remains in compliance with as of April 26, 2013. The Company used the net proceeds from
the sale of the Senior Notes primarily for working capital and general corporate purposes, which include the repayment of other
indebtedness of the Company.
In March 2013, the Company issued three tranches of Senior Notes (collectively, the 2013 Senior Notes) with an aggregate face
value of $3.000 billion. The first tranche consisted of $1.000 billion of 1.375 percent Senior Notes due 2018. The second tranche
consisted of $1.250 billion of 2.750 percent Senior Notes due 2023. The third tranche consisted of $750 million of 4.000 percent
Senior Notes due 2043. Interest on each series of the 2013 Senior Notes is payable semi-annually on April 1 and October 1 of
each year, commencing on October 1, 2013. The Company used the net proceeds from the sale of the 2013 Senior Notes for
working capital and general corporate purposes, including repayment of indebtedness.
87