Medtronic 2011 Annual Report Download - page 84

80 Medtronic, Inc.
Notes to Consolidated Financial Statements
(continued)
11. Shareholders’ Equity
Repurchase of Common Stock In June 2007 and June 2009, the
Company’s Board of Directors authorized the repurchase of up
to 50 million and 60 million shares of the Company’s stock,
respectively. Shares are repurchased from time to time to support
the Company’s stock-based compensation programs and to return
capital to shareholders. The Company repurchased approximately
30.1 million and 27.0 million shares at an average price of $37.86
and $38.10, respectively, during fiscal years 2011 and 2010. As of
April 29, 2011, the Company has approximately 20.7 million shares
remaining under the buyback authorizations approved by the
Board of Directors. In June 2011, the Company’s Board of Directors
authorized the repurchase of an additional 75 million shares
of the Company’s common stock. The Company accounts for
repurchases of common stock using the par value method and
shares repurchased are cancelled.
Shareholder Rights Plan On October 26, 2000, the Company’s
Board of Directors adopted a Shareholder Rights Plan and
declared a dividend of one preferred share purchase right (a
“right”) for each outstanding share of common stock with a par
value of $0.10 per share. Each right will allow the holder to
purchase 1/5000 of a share of Series A Junior Participating
Preferred Stock at an exercise price of $400 per share, once the
rights become exercisable. The rights are not exercisable or
transferable apart from the common stock until 15 days after the
public announcement that a person or group (the Acquiring
Person) has acquired 15 percent or more of the Company’s
common stock or 15 business days after the announcement of
a tender offer which would increase the Acquiring Person’s
beneficial ownership to 15 percent or more of the Company’s
common stock. After any person or group has become an
Acquiring Person, each right entitles the holder (other than the
Acquiring Person) to purchase, at the exercise price, common
stock of the Company having a market price of two times the
exercise price. If the Company is acquired in a merger or other
business combination transaction, each exercisable right entitles
the holder to purchase, at the exercise price, common stock of the
acquiring company or an affiliate having a market price of two
times the exercise price of the right. The rights expired on October
26, 2010.
12. Stock Purchase and Award Plans
Under the fair value recognition provision of U.S. GAAP for
accounting for stock-based compensation, the Company measures
stock-based compensation expense at the grant date based on
the fair value of the award and recognizes the compensation
expense over the requisite service period, which is generally the
vesting period. The Company elected the modified-prospective
method of adopting this guidance, under which prior periods
were not retroactively restated. The provisions of this guidance
apply to awards granted after the April 29, 2006 effective date.
Stock-based compensation expense for the non-vested portion of
awards granted prior to the effective date is being recognized
over the remaining service period using the fair-value based
compensation expense estimated under the prior guidance’s pro
forma disclosures.
Stock awards are granted under the Medtronic, Inc. 2008 Stock
Award and Incentive Plan (2008 Plan). The 2008 Plan was approved
by the Company’s shareholders in August 2008 which was
amended by shareholders in August 2009. This 2008 Plan provides
for the grant of non-qualified and incentive stock options, stock
appreciation rights, restricted stock, restricted stock units,
performance awards, and other stock and cash-based awards.
As of April 29, 2011, there were approximately 53 million shares
available for future grants under the 2008 Plan.
Stock Options Stock option awards are granted at exercise prices
equal to the closing price of the Company’s common stock on the
grant date. The majority of the Company’s stock option awards
are non-qualified stock options with a 10-year life and a four-year
ratable vesting term. In fiscal year 2011, the Company granted
stock options under the 2008 Plan.
Restricted Stock Awards Restricted stock and restricted stock
units (collectively referred to as restricted stock awards) are
granted to officers and key employees. Restricted stock awards
are subject to forfeiture if employment terminates prior to the
lapse of the restrictions. The Company grants restricted stock
awards that typically cliff vest after four years. Restricted stock
awards are expensed over the vesting period. The Company also
grants shares of performance-based restricted stock that typically
cliff vest after three years only if the Company has also achieved