Medtronic 2014 Annual Report Download - page 116

Download and view the complete annual report

Please find page 116 of the 2014 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 147

  • 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
  • 146
  • 147

Medtronic, Inc.
Notes to Consolidated Financial Statements (Continued)
The Company’s effective income tax rate from continuing operations varied from the U.S. federal statutory tax rate as follows:
Fiscal Year
2014 2013 2012
U.S. federal statutory tax rate 35.0% 35.0% 35.0%
Increase (decrease) in tax rate resulting from:
U.S. state taxes, net of federal tax benefit 0.6 0.5 0.9
Research and development credit (0.5) (1.1) (0.6)
Domestic production activities (0.4) (0.3) (0.5)
International (17.7) (16.7) (16.9)
Puerto Rico Excise Tax (1.6) (1.3) (1.4)
Impact of restructuring charges, net, certain litigation charges, net, and
acquisition-related items 5.6 2.0 0.3
Reversal of excess tax accruals (1.9) — (0.8)
Valuation allowance release — (0.2) (0.8)
Other, net (1.8) 0.5 2.4
Effective tax rate 17.3% 18.4% 17.6%
In fiscal year 2014, the Company recorded a $71 million net tax benefit associated with the reversal of excess tax accruals. This
net tax benefit included $63 million related to the settlement of certain issues reached with the U.S. Internal Revenue Service
(IRS) involving the review of the Company’s fiscal years 2009 through 2011 domestic income tax returns and the remaining
amount related to the resolution of various state and foreign audit proceedings covering multiple years and issues. The
$71 million net tax benefit was recorded in the provision for income taxes in the consolidated statement of earnings for fiscal
year 2014.
In fiscal year 2012, the Company entered into a sale-leaseback agreement that was recorded as a capital lease and as a result of
the transaction, the Company recorded a $33 million tax benefit associated with the release of a valuation allowance associated
with the usage of a capital loss carryover. The $33 million tax benefit was recorded in the provision for income taxes in the
consolidated statement of earnings for fiscal year 2012.
The Company has not provided U.S. income taxes on approximately $20.529 billion, $18.123 billion, and $16.033 billion of
undistributed earnings, net, from non-U.S. subsidiaries as of April 25, 2014, April 26, 2013, and April 27, 2012, respectively.
These earnings are indefinitely reinvested outside the U.S. and are available for use by the Company’s non-U.S. operations. The
Company continues to be focused on goals to grow its business through increased globalization of the Company. Determination
of the amount of unrecognized deferred tax liability on these undistributed earnings is not practicable.
Currently, the Company’s operations in Puerto Rico, Switzerland, and Singapore have various tax incentive grants. The tax
reductions as compared to the local statutory rate favorably impacted earnings per diluted share by $0.42 in fiscal year 2014,
$0.42 in fiscal year 2013, and $0.43 in fiscal year 2012. Unless these grants are extended, they will expire between fiscal years
2015 and 2027. The Company’s historical practice has been to renew, extend, or obtain new tax incentive grants upon expiration
of existing tax incentive grants. If the Company is not able to renew, extend, or obtain new tax incentive grants, the expiration
of existing tax incentive grants could have a material impact on the Company’s financial results in future periods. The
expiration of a tax incentive grant in fiscal year 2015 is not expected to have a material impact on the provision for income taxes
in the consolidated statements of earnings in future years.
108