Medtronic 2012 Annual Report Download - page 39

these receivables could adversely affect our results of operations. Further, there are concerns for the
overall stability and suitability of the Euro as a single currency, given the economic and political challenges
facing individual Eurozone countries. Continuing deterioration in the creditworthiness of the Eurozone
countries, the withdrawal of one or more member countries from the EU, or the failure of the Euro as a
common European currency could adversely affect the Company’s revenues, financial condition or results
of operations.
We are subject to a variety of market and financial risks due to our international operations that
could adversely affect those operations or our profitability and operating results.
Our operations in countries outside the U.S., which accounted for 45 percent of our net sales for the
year ended April 27, 2012, are accompanied by certain financial and other risks. We intend to continue to
pursue growth opportunities in sales outside the U.S., especially in emerging markets, which could expose
us to greater risks associated with international sales and operations. Our profitability and international
operations are, and will continue to be, subject to a number of risks and potential costs, including:
• local product preferences and product requirements,
• longer-term receivables than are typical in the U.S.,
• fluctuations in foreign currency exchange rates,
• less intellectual property protection in some countries outside the U.S. than exists in the U.S.,
• trade protection measures and import and export licensing requirements,
• work force instability,
• political and economic instability, and
• the potential payment of U.S. income taxes on certain earnings of our subsidiaries outside the U.S.
upon repatriation.
In particular, the Obama Administration has announced potential legislative proposals to tax profits of
U.S. companies earned abroad. While it is impossible for us to predict whether these and other proposals
will be implemented, or how they will ultimately impact us, they may materially impact our results of
operations if, for example, our profits earned abroad are subject to U.S. income tax, or we are otherwise
disallowed deductions as a result of these profits.
Finally, changes in foreign currency exchange rates may reduce the reported value of our foreign
currency revenues, net of expenses, and cash flows. We cannot predict changes in currency exchange rates,
the impact of exchange rate changes, nor the degree to which we will be able to manage the impact of
currency exchange rate changes.
Our international operations expose us to legal and regulatory risks, which could have a material
effect on our business.
In addition to market and financial risks, our profitability and international operations are, and will
continue to be, subject to risks relating to changes in foreign medical reimbursement programs and policies
and changes in foreign legal and regulatory requirements. In addition, our international operations are
governed by various U.S. laws and regulations, including Foreign Corrupt Practices Act (FCPA) and other
similar laws that prohibit us and our business partners from making improper payments or offers of payment
to foreign governments and their officials and political parties for the purpose of obtaining or retaining
business. Global enforcement of anti-corruption laws has increased substantially in recent years, with more
frequent voluntary self-disclosures by companies, aggressive investigations and enforcement proceedings by
U.S. and foreign governmental agencies, and assessment of significant fines and penalties against companies
and individuals. Our international operations create the risk of unauthorized payments or offers of payments
by one of our employees, consultants, sales agents or distributors, because these parties are not always
subject to our control. It is our policy to implement safeguards to discourage these practices. However, our
existing safeguards and any future improvements may prove to be less than effective, and our employees,
consultants, sales agents or distributors may engage in conduct for which we might be held responsible. Any
alleged or actual violations of these regulations may subject us to government scrutiny, severe criminal or
civil sanctions and other liabilities, including limitations on our ability to export products outside the U.S.,
and could negatively affect our business, reputation, operating results and financial condition. In addition,
the government may seek to hold us liable for successor liability FCPA violations committed by any
companies in which we invest or that we acquire.
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