Medtronic 2013 Annual Report Download - page 41

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Table of Contents
The continuing development of many of our products depends upon us maintaining strong relationships with physicians.
If we fail to maintain our working relationships with physicians, many of our products may not be developed and marketed in line
with the needs and expectations of the professionals who use and support our products, which could cause a decline in our earnings
and profitability. The research, development, marketing, and sales of many of our new and improved products is dependent upon
our maintaining working relationships with physicians. We rely on these professionals to provide us with considerable knowledge
and experience regarding the development, marketing, and sale of our products. Physicians assist us as researchers, marketing and
product consultants, inventors, and public speakers. If we are unable to maintain our strong relationships with these professionals
and continue to receive their advice and input, the development and marketing of our products could suffer, which could have a
material adverse effect on our consolidated earnings, financial condition, and/or cash flows.
Negative conditions in the global credit market may impair our commercial paper program, our auction rate securities, and
our other fixed income securities, which may cause us losses and liquidity issues.
We have investments in marketable debt securities that are classified and accounted for as available-for-sale. Our debt securities
include U.S. and foreign government and agency securities, corporate debt securities, certificates of deposit, and mortgage-backed
and other asset-backed securities, including auction rate securities. Market conditions over the past several years have included
periods of significant economic uncertainty and at times general market distress, especially in the banking and financial services
sector. During these periods of economic uncertainty, we may experience reduced liquidity across the fixed-income investment
market, including the securities that we invest in. In the event we need to sell these securities, we may not be able to do so in a
timely manner or for a value that is equal to the underlying principal. In addition, we may be required to adjust the carrying value
of the securities and record an impairment charge. If we determine that the fair value of such securities is temporarily impaired,
we would record a temporary impairment as a component of accumulated other comprehensive loss within shareholders’ equity.
If it is determined that the fair value of these securities is other-than-temporarily impaired, we would record a loss in our consolidated
statements of earnings, which could materially adversely impact our results of operations and financial condition.
Negative market conditions may also impair our ability to access the capital markets through the issuance of commercial paper
or debt securities, or may impact our ability to sell such securities at a reasonable price and may negatively impact our ability to
borrow from financial institutions.
Our products are continually the subject of clinical trials conducted by us, our competitors, or other third parties, the results
of which may be unfavorable, or perceived as unfavorable, and could have a material adverse effect on our business, financial
condition, and results of operations.
As a part of the regulatory process of obtaining marketing clearance for new products and new indications for existing products,
we conduct and participate in numerous clinical trials with a variety of study designs, patient populations, and trial endpoints.
Unfavorable or inconsistent clinical data from existing or future clinical trials conducted by us, by our competitors, or by third
parties, or the market’s or U.S. FDA’s perception of this clinical data, may adversely impact our ability to obtain product approvals,
our position in, and share of, the markets in which we participate, and our business, financial condition, and results of operations.
Failure to integrate acquired businesses into our operations successfully could adversely affect our business.
As part of our strategy to develop and identify new products and technologies, we have made several acquisitions in recent years
and may make additional acquisitions in the future. Our integration of the operations of acquired businesses requires significant
efforts, including the coordination of information technologies, research and development, sales and marketing, operations,
manufacturing, and finance. These efforts result in additional expenses and involve significant amounts of management’s time
that cannot then be dedicated to other projects. Our failure to manage and coordinate the growth of the combined company
successfully could also have an adverse impact on our business. In addition, we cannot be certain that the businesses we acquire
will become profitable or remain so. If our acquisitions are not successful, we may record unexpected impairment charges. Factors
that will affect the success of our acquisitions include:
• the presence or absence of adequate internal controls and/or significant fraud in the financial systems of
acquired companies,
• adverse developments arising out of investigations by governmental entities of the business practices of
acquired companies, including potential liability imposed by FCPA,
• any decrease in customer loyalty and product orders caused by dissatisfaction with the combined companies’
product lines and sales and marketing practices, including price increases,
• our ability to retain key employees, and
• the ability of the combined company to achieve synergies among its constituent companies, such as
increasing sales of the combined company’s products, achieving cost savings, and effectively combining
technologies to develop new products.
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