Medtronic 2015 Annual Report Download - page 68

As expected, subsequent to the closing of our acquisition of Covidien, on January 26, 2015 and January 27, 2015, S&P Ratings
Services and Moody’s, respectively, lowered Medtronic’s short-term debt rating and long-term debt rating, due to the increase
in net leverage as a result of the Covidien transaction and related financing.
We do not expect Moody’s and S&P Ratings Services’ rating downgrades to have a significant impact on our liquidity or future
flexibility to access additional liquidity given our balance sheet, our $3.500 billion Amended and Restated Revolving Credit
Facility and related $3.500 billion 2015 Commercial Paper Program discussed above and within the “Debt and Capital” section
of this management’s discussion and analysis.
Our net cash position in fiscal year 2015 decreased by $19.019 billion as compared to fiscal year 2014 and resulted primarily
from the $17 billion 2015 Senior Notes and $3 billion borrowed under the Term Loan Credit Agreement to fund the
approximately $16 billion cash consideration portion of the acquisition of Covidien, to pay certain transaction and financing
expenses, and for working capital and general corporate purposes, which may include repayment of indebtedness. See the
“Summary of Cash Flows” section of this management’s discussion and analysis for further information.
We have future contractual obligations and other minimum commercial commitments that are entered into in the normal course
of business. We believe our off-balance sheet arrangements do not have a material current or anticipated future effect on our
consolidated earnings, financial position, or cash flows. See the “Off-Balance Sheet Arrangements and Long-Term Contractual
Obligations” section of this management’s discussion and analysis for further information.
Notes 1 and 16 to the consolidated financial statements in “Item 8. Financial Statements and Supplementary Data” in this
Annual Report on Form 10-K provide information regarding amounts we have accrued related to significant legal proceedings.
In accordance with U.S. GAAP, we record a liability in our consolidated financial statements for these actions when a loss is
known or considered probable and the amount can be reasonably estimated. For the fiscal year ended April 24, 2015, we have
made payments related to certain legal proceedings. For information regarding these charges, please see the “Special (Gains)
Charges, Net, Restructuring Charges, Net, Certain Litigation Charges, Net, Acquisition-Related Items, and Certain Tax
Adjustments” section of this management’s discussion and analysis.
As of April 24, 2015 and April 25, 2014, approximately $17.7 billion and $14.0 billion, respectively, of cash, cash equivalents,
and investments in marketable debt and equity securities were held by our non-U.S. subsidiaries. As we continue to focus on
goals to grow our business globally, and emerging markets continue to be a significant driver of this growth, this has resulted in
us permanently reinvesting our non-U.S. cash in our non-U.S. operations. Although our current intent remains that these funds
be indefinitely reinvested in non-U.S. subsidiaries, from time to time we evaluate our legal entity structure supporting our
business operations. To the extent such evaluation results in a change to our overall business structure, we may be required to
accrue for additional tax obligations. If the portion of these funds held by U.S. controlled non-U.S. subsidiaries were repatriated
to the U.S., the amounts would generally be subject to U.S. tax. We provide for tax liabilities in our financial statements with
respect to amounts that we expect to repatriate; however, no tax liabilities are recorded for amounts that we consider to be
permanently reinvested outside of Ireland. Our current plans do not foresee a need to repatriate earnings that are designated as
permanently reinvested in order to fund our operations or meet currently anticipated liquidity and capital investment needs.
We have investments in marketable debt securities that are classified and accounted for as available-for-sale. Our debt securities
include U.S. government and agency securities, foreign government and agency securities, corporate debt securities, certificates
of deposit, mortgage-backed securities, other asset-backed securities, debt funds, and auction rate securities. Some of our
investments may experience reduced liquidity due to changes in market conditions and investor demand. Our auction rate
security holdings have experienced reduced liquidity in recent years due to changes in investor demand. Although our auction
rate securities are currently illiquid and other securities could become illiquid, we believe we could liquidate a substantial
amount of our portfolio without incurring a material impairment loss.
For the fiscal year ended April 24, 2015, the total other-than-temporary impairment losses on available-for-sale debt securities
were not significant. Based on our assessment of the credit quality of the underlying collateral and credit support available to
each of the remaining securities in which we are invested, we believe we have recorded all necessary other-than-temporary
impairments as we do not have the intent to sell, nor is it more likely than not that we will be required to sell, before recovery of
the amortized cost. However, as of April 24, 2015, we have $174 million of gross unrealized losses on our aggregate short-term
and long-term available-for-sale debt securities of $14.666 billion; if market conditions deteriorate, some of these holdings may
experience other-than-temporary impairment in the future which could have a material impact on our financial results.
Management is required to use estimates and assumptions in its valuation of our investments, which requires a high degree of
judgment, and therefore, actual results could differ materially from those estimates. See Note 6 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 fair value measurements.
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