Medtronic 2015 Annual Report Download - page 20

minerals, known as “conflict minerals” (tantalum, tin, tungsten (or their ores), and gold) which are mined from the Democratic
Republic of the Congo and adjoining countries. Pursuant to these requirements, we are required to report on Form SD the
procedures we employ to determine the sourcing of such minerals and metals produced from those minerals. There are costs
associated with complying with these disclosure requirements, including for diligence in regards to the sources of any conflict
minerals used in our products, in addition to the cost of remediation and other changes to products, processes, or sources of
supply as a consequence of such verification activities. In addition, the implementation of these rules could adversely affect the
sourcing, supply, and pricing of materials used in our products. As of the date of our conflict minerals report for the 2014
calendar year, we were unable to obtain the necessary information on conflict minerals from all of our suppliers and were
unable to determine that all of our products are conflict free. We may continue to face difficulties in gathering this information
in the future. We may face reputational challenges if we determine that certain of our products contain minerals not determined
to be conflict free or if we are unable to sufficiently verify the origins for all conflict minerals used in our products through the
procedures we implement.
Working Capital Practices
Our goal is to carry sufficient levels of inventory to ensure adequate supply of raw materials from suppliers and meet the
product delivery needs of our customers. We also provide payment terms to customers in the normal course of business and
rights to return product under warranty to meet the operational demands of our customers.
Employees
On April 24, 2015, we employed more than 92,000 employees (including full-time equivalent employees). Our employees are
vital to our success. We believe we have been successful in attracting and retaining qualified personnel in a highly competitive
labor market due to our competitive compensation and benefits, and our rewarding work environment.
Seasonality
Worldwide sales, including U.S. sales, do not reflect a significant degree of seasonality; however, the number of medical
procedures incorporating Medtronic products is generally lower during summer months, due to summer vacation schedules in
the northern hemisphere, particularly in European countries. In addition, pulse oximetry sales can be impacted by flu season.
Government Regulation and Other Considerations
Our products are subject to regulation by numerous government agencies, including the U.S. FDA and similar agencies outside
the U.S. To varying degrees, each of these agencies requires us to comply with laws and regulations governing the development,
testing, manufacturing, labeling, marketing, and distribution of our products. Our business is also affected by U.S. and foreign
patient privacy laws, cost containment initiatives and environmental health and safety laws and regulations. The primary laws
and regulations that affect our business are described below.
The laws applicable to us are subject to change and are subject to evolving interpretations. If a governmental authority were to
conclude that we are not in compliance with applicable laws and regulations, Medtronic and its officers and employees could be
subject to severe criminal and civil penalties including substantial fines and damages, and exclusion from participation as a
supplier of product to beneficiaries covered by Medicare or Medicaid.
Product Approval Processes
Authorization to commercially distribute a new medical device or technology in the U.S. is generally received in one of two
ways. The first, known as pre-market notification or the 510(k) process, requires us to demonstrate that our new medical device
or technology is substantially equivalent to a legally marketed medical device or technology. In this process, we must submit
data that supports our equivalence claim. If human clinical data is required, it must be gathered in compliance with U.S. FDA
investigational device exemption regulations. We must receive an order from the U.S. FDA finding substantial equivalence to
another legally marketed medical device or technology before we can commercially distribute the new medical device or
technology. Modifications to cleared medical devices or technologies can be made without using the 510(k) process if the
changes do not significantly affect safety or effectiveness. Covidien products are generally subject to the pre-market notification
process. A very small number of our devices are exempt from pre-market review.
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