Medtronic 2014 Annual Report Download - page 22

exchange rate changes on earnings and cash flow. See “Item 7A. Quantitative and Qualitative Disclosures About Market Risk”
and Note 9 to the consolidated financial statements in “Item 8. Financial Statements and Supplementary Data” in this Annual
Report on Form 10-K. In addition, the repatriation of certain earnings of subsidiaries outside the U.S. may result in substantial
U.S. tax cost.
Production and Availability of Raw Materials
We manufacture most of our products at 41 manufacturing facilities located in various countries throughout the world. The
largest of these manufacturing facilities are located in Arizona, California, Colorado, Connecticut, Florida, Indiana,
Massachusetts, Michigan, Minnesota, New Jersey, Texas, Puerto Rico, Canada, France, Germany, Ireland, Italy, Mexico, The
Netherlands, The People’s Republic of China, Singapore, and Switzerland. We purchase many of the components and raw
materials used in manufacturing these products from numerous suppliers in various countries. For reasons of quality assurance,
sole source availability, or cost effectiveness, certain components and raw materials are available only from a sole supplier. We
work closely with our suppliers to help ensure continuity of supply while maintaining high quality and reliability. Due to the
U.S. FDA’s requirements regarding manufacturing of our products, we may not be able to quickly establish additional or
replacement sources for certain components or materials. Generally, we have been able to obtain adequate supplies of such raw
materials and components. However, a sudden or unexpected reduction or interruption in supply, and an inability to develop
alternative sources for such supply, could adversely affect our operations. Moreover, as directed by the Dodd-Frank Wall Street
Reform and Consumer Protection Act (Dodd-Frank), the SEC has implemented reporting and disclosure requirements related to
the use of certain minerals, known as “conflict minerals”: tantalum, tin, tungsten (or their ores), and gold; which are mined from
the Democratic Republic of the Congo and adjoining countries. Pursuant to these requirements, we are required to report on
Form SD the procedures we employ to determine the sourcing of such minerals and metals produced from those minerals. There
are costs associated with complying with these disclosure requirements, including for diligence in regards to the sources of any
conflict minerals used in our products, in addition to the cost of remediation and other changes to products, processes, or
sources of supply as a consequence of such verification activities. In addition, the implementation of these rules could adversely
affect the sourcing, supply, and pricing of materials used in our products. As of the date of our conflict minerals report for the
2013 calendar year, we were unable to obtain the necessary information on conflict minerals from all of our suppliers and were
unable to determine that all of our products are conflict free. We may continue to face difficulties in gathering this information
in the future. We may face reputational challenges if we determine that certain of our products contain minerals not determined
to be conflict free or if we are unable to sufficiently verify the origins for all conflict minerals used in our products through the
procedures we implement.
Working Capital Practices
Our goal is to carry sufficient levels of inventory to ensure adequate supply of raw materials from suppliers and meet the
product delivery needs of our customers. We also provide payment terms to customers in the normal course of business and
rights to return product under warranty to meet the operational demands of our customers.
Employees
On April 25, 2014, we employed more than 49,000 employees (including full-time equivalent employees). Our employees are
vital to our success. We believe we have been successful in attracting and retaining qualified personnel in a highly competitive
labor market due to our competitive compensation and benefits, and our rewarding work environment.
Seasonality
Worldwide sales, including U.S. sales, do not reflect any significant degree of seasonality; however, the number of medical
procedures incorporating Medtronic products is generally lower during summer months, due to summer vacation schedules in
the northern hemisphere, particularly in European countries.
Government Regulation and Other Considerations
Our medical devices are subject to regulation by numerous government agencies, including the U.S. FDA and similar agencies
outside the U.S. To varying degrees, each of these agencies requires us to comply with laws and regulations governing the
development, testing, manufacturing, labeling, marketing, and distribution of our medical devices. Our business is also affected
by U.S. and foreign patient privacy laws, cost containment initiatives and environmental health and safety laws and regulations.
The primary laws and regulations that affect our business are described below.
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