Medtronic 2014 Annual Report Download - page 104

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Medtronic, Inc.
Notes to Consolidated Financial Statements (Continued)
warrants were recorded as an addition to equity as of the trade date. The carrying amount of the equity component as of
April 25, 2014 and April 26, 2013 was $547 million.
The following table provides interest expense amounts related to the Senior Convertible Notes.
Fiscal Year
(in millions) 2013 2012
Interest cost related to contractual interest coupon $ 35 $ 36
Interest cost related to amortization of the discount 90 87
Contractual maturities of debt for the next five fiscal years and thereafter, excluding the debt discount, the fair value of
outstanding interest rate swap agreements, and the remaining deferred gains from terminated interest rate swap agreements are
as follows:
(in millions)
Fiscal Year
2015 $ 1,601
2016 1,112
2017 531
2018 1,018
2019 419
Thereafter 7,184
Total debt 11,865
Less: Current portion of debt 1,601
Long-term portion of debt $ 10,264
9. Derivatives and Foreign Exchange Risk Management
The Company uses operational and economic hedges, as well as currency exchange rate derivative contracts and interest rate
derivative instruments, to manage the impact of currency exchange and interest rate changes on earnings and cash flows. In
order to minimize earnings and cash flow volatility resulting from currency exchange rate changes, the Company enters into
derivative instruments, principally forward currency exchange rate contracts. These contracts are designed to hedge anticipated
foreign currency transactions and changes in the value of specific assets and liabilities. At inception of the forward contract, the
derivative is designated as either a freestanding derivative or a cash flow hedge. The primary currencies of the derivative
instruments are the Euro and Japanese Yen. The Company does not enter into currency exchange rate derivative contracts for
speculative purposes. The gross notional amount of all currency exchange rate derivative instruments outstanding at April 25,
2014 and April 26, 2013 was $8.051 billion and $6.812 billion, respectively. The aggregate currency exchange rate (losses)
gains were $(1) million, $25 million, and $(183) million, in fiscal years 2014, 2013, and 2012, respectively. These (losses) gains
represent the net impact to the consolidated statements of earnings for the exchange rate derivative instruments presented below,
as well as the remeasurement (losses) gains on foreign currency denominated assets and liabilities.
The information that follows explains the various types of derivatives and financial instruments used by the Company, how and
why the Company uses such instruments, how such instruments are accounted for, and how such instruments impact the
Company’s consolidated balance sheets, statements of earnings, and statements of cash flows.
Freestanding Derivative Forward Contracts
Freestanding derivative forward contracts are used to offset the Company’s exposure to the change in value of specific foreign
currency denominated assets and liabilities. These derivatives are not designated as hedges, and therefore, changes in the value
of these forward contracts are recognized in earnings, thereby offsetting the current earnings effect of the related change in
value of foreign currency denominated assets and liabilities. The cash flows from these contracts are reported as operating
96