Medtronic 2013 Annual Report Download - page 83

Download and view the complete annual report

Please find page 83 of the 2013 Medtronic annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 145

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145

75732me_10K.indd 68 7/1/13 6:36 PM
Table of Contents
Medtronic, Inc.
Notes to Consolidated Financial Statements (Continued)
expense, net or cost of products sold in the consolidated statements of earnings, depending on the underlying transaction that is being
hedged.
The Company uses forward currency exchange rate contracts to offset its exposure to the change in value of specific foreign
currency denominated assets and liabilities. These forward currency exchange rate contracts are not designated as hedges, and
therefore, changes in the value of these freestanding derivatives are recognized currently in earnings, thereby offsetting the current
earnings effect of the related change in value of foreign currency denominated assets and liabilities.
The Company uses forward starting interest rate derivative instruments to manage the exposure to interest rate volatility with
regard to future issuances of fixed-rate debt. These derivative instruments are designated as cash flow hedges under U.S. GAAP.
The effective portion of the gain or loss on the derivative is reported as a component of accumulated other comprehensive loss
and beginning in the period or periods in which the planned debt issuance occurs, the gain or loss is then reclassified into interest
expense, net over the term of the related debt.
The Company uses interest rate derivative instruments to manage its exposure to interest rate movements and to reduce borrowing
costs by converting fixed-rate debt into floating-rate debt. The objective of the instruments is to more effectively manage the
Company’s borrowing costs and interest rate risk. These derivative instruments are designated as fair value hedges under U.S.
GAAP. Changes in the fair value of the derivative instrument are recorded in interest expense, net, and are offset by changes in
the fair value on the underlying debt instrument. Interest expense, net includes interest payments made or received under interest
rate derivative instruments.
In addition, the Company has collateral credit agreements with its primary derivative counterparties. Under these agreements,
either party is required to post eligible collateral when the market value of transactions covered by the agreement exceeds specific
thresholds, thus limiting credit exposure for both parties.
Earnings Per Share Basic earnings per share is computed based on the weighted average number of common shares outstanding.
Diluted earnings per share is computed based on the weighted average number of common shares outstanding, increased by the
number of additional shares that would have been outstanding had the potentially dilutive common shares been issued and reduced
by the number of shares the Company could have repurchased from the proceeds from issuance of the potentially dilutive shares.
Potentially dilutive shares of common stock include stock options and other stock-based awards granted under stock-based
compensation plans and shares committed to be purchased under the employee stock purchase plan.
65