Medtronic 2008 Annual Report Download - page 45

In connection with the issuance of the contingent convertible
debentures, Senior Notes, Senior Convertible Notes and commercial
paper, Standard and Poor’s Ratings Group and Moody’s Investors Service
issued us strong long-term debt ratings of AA- and A1, respectively, and
strong short-term debt ratings of A-1+ and P-1, respectively. These
ratings remain unchanged from the same periods of the prior year.
On November 2, 2007, we entered into a new Credit Agreement
(the “New Credit Agreement”) with the Bank of Tokyo-Mitsubishi UFJ,
Ltd. (the “New Lender”). The New Credit Agreement provides for a
$300 million unsecured revolving credit facility (the “New Facility”)
maturing November 2, 2010. In addition to certain initial fees, we are
obligated to pay a commitment fee based on the total revolving
commitment. Interest rates on these borrowings are determined by a
pricing matrix, based on our long-term debt ratings, assigned by
Standard and Poor’s Ratings Group and Moody’s Investors Service. The
New Credit Agreement contains customary representations and
warranties of the Company as well as affirmative covenants regarding
the Company. Upon the occurrence of an event of default as defined
under the New Credit Agreement, the New Lender could elect to
declare all amounts outstanding under the New Facility to be
immediately due and payable.
We have existing unsecured lines of credit of approximately
$2.795 billion with various banks at April 25, 2008. The existing lines of
credit include a five-year $1.750 billion syndicated credit facility dated
December 20, 2006 that will expire on December 20, 2011 (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 capacity
by an additional $500 million at any time during the life of the five-year
term of the agreement. We can also request the extension of the Credit
Facility maturity date for one additional year on December 20, 2008, the
second anniversary of the date of this facility.
Interest rates on these borrowings are determined by a pricing matrix,
based on our long-term debt ratings, assigned by Standard and Poor’s
Ratings Group and Moody’s Investors Service. Facility fees are payable
on the credit facilities and are determined in the same manner as the
interest rates. The agreements also contain other customary covenants,
all of which we remain in compliance with as of April 25, 2008.
As of April 25, 2008, we have unused credit lines and commercial
paper capacity of approximately $1.945 billion.
Acquisitions
On April 15, 2008, we recorded an IPR&D charge of $42 million related
to the acquisition of NDI Medical (NDI), a development stage company
focused on commercially developing technology to stimulate the dorsal
genital nerve as a means to treat urinary incontinence. Total consideration
for NDI was approximately $42 million which included $39 million in
cash and the forgiveness of $3 million of pre-existing loans provided to
NDI. The acquisition will provide us with exclusive rights to develop and
use NDI’s technology in the treatment of urinary urge incontinence. This
payment was expensed as IPR&D since technological feasibility of the
underlying projects had not yet been reached and such technology has
no future alternative use.
On November 2, 2007, we consummated the acquisition of Kyphon
and it became our wholly owned subsidiary. Kyphon develops and
markets medical devices designed to restore and preserve spinal
function using minimally invasive technology. Kyphon’s primary
products are used in balloon kyphoplasty for the treatment of spinal
compression fractures caused by osteoporosis or cancer, and in the IPD
procedure for treating the symptoms of lumbar spinal stenosis. It is
expected that the acquisition of Kyphon will add to the growth of our
existing Spinal business by extending its product offerings into some
of the fastest growing product segments of the spine market, enabling
us to provide physicians with a broader range of therapies for use at all
stages of the care continuum.
Under the terms of the agreement announced on July 27, 2007,
Kyphon shareholders received $71 per share in cash for each share of
Kyphon common stock they owned. Total consideration for the
transaction was $4.203 billion which includes payments to Kyphon
shareholders for the cancellation of outstanding shares, the assumption
and settlement of existing Kyphon debt, and payment of direct
acquisition costs. Total debt assumed relates to Kyphon’s obligations
under existing credit and term loan facilities and outstanding senior
convertible notes. As of the date of the transaction, the existing credit
and term loan facilities were fully paid and terminated. The senior
convertible notes were converted by the holders in the weeks following
the close of the transaction and have been included in the total
purchase consideration above. In addition, the total consideration
includes the proceeds of unwinding the related convertible note
hedges and cancellation and payment of the warrants to the hedge
participants that were originally issued by Kyphon in February 2007.
41Medtronic, Inc.