Medtronic 2014 Annual Report Download - page 66

Senior Notes due 2021, and $675 million 3.125 percent 2012 Senior Notes due 2022. For additional information regarding the
interest rate swap agreements, refer to Note 9 to the consolidated financial statements in “Item 8. Financial Statements and
Supplementary Data” in this Annual Report on Form 10-K.
We maintain a commercial paper program that allows us 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, outstanding commercial paper totaled
$125 million. No amounts were outstanding as of April 25, 2014. During fiscal years 2014 and 2013, the weighted average
original maturity of the commercial paper outstanding was approximately 53 and 89 days, respectively, and the weighted
average interest rate was 0.09 percent and 0.18 percent, respectively. The issuance of commercial paper reduces the amount of
credit available under our existing line of credit.
We have a $2.250 billion syndicated credit facility dated December 17, 2012 which expires on December 17, 2017 (Credit
Facility). The Credit Facility provides backup funding for the commercial paper program and may also be used for general
corporate purposes. The Credit Facility provides us with the ability to increase its borrowing capacity by an additional $750
million at any time during the term of the agreement. As of April 25, 2014 and April 26, 2013, no amounts were outstanding on
the committed line of credit.
The $337 million of outstanding bank borrowings as of April 25, 2014 were short-term advances to certain non-U.S.
subsidiaries under credit agreements with various banks. These advances are guaranteed by the Company. We have bank
borrowings at interest rates considered favorable by management and where natural hedges can be gained for foreign exchange
purposes.
At April 25, 2014, our Moody’s ratings remain unchanged as compared to those at April 26, 2013 with a long-term debt rating
of A2 and short-term debt rating of P-1. On December 13, 2013, S&P Ratings Services raised our long-term debt rating to AA-,
compared to A+ at April 26, 2013. This upgrade reflects S&P Ratings Services’ reassessment of Medtronic’s financial risk
profile given its cash balances and sizable liquid investment portfolio. S&P Ratings Services’ short-term debt rating remains
unchanged at A-1+ as compared to the rating at April 26, 2013.
Subsequent to our announcement regarding our planned $42.9 billion acquisition of Covidien, on June 16, 2014, S&P Ratings
Services placed Medtronic’s long-term debt rating of AA- on CreditWatch, reflecting its expectation of a potential future one-
or two- notch downgrade, as a result of the anticipated increase in net leverage, if the transaction is consummated. S&P Ratings
Services also noted that they expect to lower Medtronic’s short-term debt rating from A-1+ to A-1 if the transaction goes
through as expected. We do not expect this CreditWatch to have a significant impact on our liquidity or future flexibility to
access additional liquidity given our strong balance sheet, our syndicated credit facility and related commercial paper program
discussed above and within the “Liquidity and Capital Resources” section of this management’s discussion and analysis, and the
subsequent Credit Agreements entered into in June 2014. See Note 21 to the consolidated financial statements in “Item 8.
Financial Statements and Supplementary Data” in this Annual Report on Form 10-K for additional information regarding our
planned acquisition of Covidien and related Credit Agreements.
Interest rates on advances on our line of credit are determined by a pricing matrix, based on our long-term debt ratings assigned
by S&P Ratings Services and Moody’s. 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 we remain in compliance with as of
April 25, 2014.
Acquisitions
Fiscal Year 2014
On December 30, 2013, we acquired TYRX, a privately-held developer of antibiotic drug and implanted medical device
combinations. TYRX’s products include those designed to reduce surgical site infections associated with implantable
pacemakers, defibrillators, and spinal cord neurostimulators. Under the terms of the agreement, the transaction included an
initial up-front payment of $159 million, representing a purchase price net of acquired cash, including the assumption and
settlement of existing TYRX debt and direct acquisition costs. Total consideration for the transaction was approximately $222
million, which included estimated fair values for product development-based and revenue-based contingent consideration of $25
million and $35 million, respectively. The product development-based contingent consideration includes a future potential
payment of $40 million upon achieving certain milestones, and the revenue-based contingent consideration payments equal
TYRX’s actual annual revenue growth for our fiscal years 2015 and 2016.
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