Medtronic 2016 Annual Report Download - page 104

Table of Contents
Medtronic plc
Notes to Consolidated Financial Statements (Continued)
101
Concentrations of Credit Risk
Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist principally of
interest-bearing investments, forward exchange derivative contracts, and trade accounts receivable.
The Company maintains cash and cash equivalents, investments, and certain other financial instruments (including currency
exchange rate and interest rate derivative contracts) with various major financial institutions. The Company performs periodic
evaluations of the relative credit standings of these financial institutions and limits the amount of credit exposure with any one
institution. In addition, the Company has collateral credit agreements with its primary derivatives counterparties. Under these
agreements, either party is required to post eligible collateral when the market value of transactions covered by the agreement
exceeds specific thresholds, thus limiting credit exposure for both parties. As of April 29, 2016, the Company posted net cash
collateral of $25 million to its counterparties. As of April 24, 2015, the Company received net cash collateral of $330 million from
its counterparties. The collateral received was recorded in cash and cash equivalents, with the offset recorded as an increase in
other accrued expenses on the consolidated balance sheets. The collateral posted was recorded in Prepaid expenses and other
current assets, with the offset recorded as a decrease in cash and cash equivalents on the consolidated balance sheets.
Global concentrations of credit risk with respect to trade accounts receivable are limited due to the large number of customers and
their dispersion across many geographic areas. The Company monitors the creditworthiness of its customers to which it grants
credit terms in the normal course of business. However, a significant amount of trade receivables are with hospitals that are
dependent upon governmental health care systems in many countries. The current economic conditions in many countries outside
the U.S. may continue to increase the average length of time it takes the Company to collect on its outstanding trade receivables
in these countries as certain payment patterns have been impacted. Although the Company does not currently foresee a significant
credit risk associated with the outstanding accounts receivable, repayment is dependent upon the financial stability of the economies
of these countries.
9. Shareholders’ Equity
Share Capital
Medtronic plc is authorized to issue 2.6 billion Ordinary Shares, $0.0001 par value; 40 thousand Euro Deferred Shares, €1.00 par
value; 128 million Preferred Shares, $0.20 par value; and 500 thousand A Preferred Shares, $1.00 par value.
Euro Deferred Shares
During the Transactions, the Company issued 40 thousand Euro Deferred Shares at their par value of €1.00 per share. The holders
of the Euro Deferred Shares are not entitled to receive any dividend or distribution and are not entitled to receive notice of, nor
attend, speak or vote at any general meeting of the Company. On a return of assets, whether on liquidation or otherwise, the Euro
Deferred Shares are entitled to only the repayment of the amounts paid up on such shares, after repayment of the capital paid up
on the ordinary shares. Euro Deferred shareholders are not entitled to any further participation in the assets or profits of the
Company. On March 23, 2016, the Euro Deferred Shares were transferred back to the Company and were subsequently canceled.
A Preferred Shares
The Company issued 624 A Preferred Shares, par value $1.00, each to three of its advisors in connection with the Transactions,
for a total of 1,872 A Preferred Shares outstanding with an aggregate consideration of $75 thousand. The holders of A Preferred
Shares are entitled to payment of dividends prior to any other class of shares in the Company equal to twice the dividend to be
paid per Company ordinary share. On a return of assets, whether on liquidation or otherwise, the A Preferred Shares are entitled
to repayment of the capital paid up thereon in priority to any repayment of capital to the holders of any other shares and the holders
of the A Preferred Shares shall not be entitled to any further participation in the assets or profits of the Company. The holders of
the A Preferred Shares are not entitled to receive notice of, nor to attend, speak, or vote at any general meeting of the Company.
Dividends
The timing, declaration and payment of future dividends to holders of our ordinary and A Preferred shares falls within the discretion
of the Company's Board of Directors and depends upon many factors, including the statutory requirements of Irish law, the
Company's earnings and financial condition, the capital requirements of our businesses, industry practice and any other factors
the Board of Directors deems relevant.