Medtronic 2014 Annual Report Download - page 59

fiscal year 2014, amortization expense was $349 million as compared to $331 million in fiscal year 2013. The $18 million
increase in amortization expense for fiscal year 2014 was primarily due to the third quarter fiscal year 2013 acquisition of
Kanghui and the second quarter fiscal year 2014 acquisition of Cardiocom, partially offset by reduced ongoing amortization
expense from certain intangible assets that became fully amortized.
In fiscal year 2013, amortization expense was $331 million, a decrease of $4 million from $335 million in fiscal year 2012. The
decrease was primarily due to certain intangible assets that became fully amortized and life extension of certain patents, thereby
reducing ongoing amortization expense, partially offset by amortization expense related to the third quarter fiscal year 2013
acquisition of Kanghui and the second quarter fiscal year 2012 acquisitions of Salient and PEAK.
Other Expense, Net Other expense, net includes royalty income and expense, realized equity security gains and losses,
realized foreign currency transaction and derivative gains and losses, impairment charges on equity securities, the Puerto Rico
excise tax, and the U.S. medical device excise tax. In fiscal year 2014, other expense, net was $181 million, an increase of $73
million from $108 million in the prior fiscal year. The increase was primarily due to the full year impact of the U.S. medical
device excise tax that went into effect January 1, 2013, partially offset by net realized foreign currency gains. In addition, the
increase for fiscal year 2014 was partially offset by income from a license related to our Endovascular business. The U.S.
medical device excise tax for fiscal year 2014 was $112 million compared to $21 million in the prior fiscal year. Total net
realized foreign currency gains recorded in other expense, net were $43 million in fiscal year 2014 compared to gains of $27
million in the prior fiscal year.
In fiscal year 2013, other expense, net was $108 million, a decrease of $256 million from $364 million in the prior fiscal year.
The decrease was primarily due to the impact of foreign currency gains and losses. Total foreign currency gains recorded in
fiscal year 2013 were $27 million compared to losses of $195 million in the prior fiscal year. In addition, the realized gains on
certain available-for-sale marketable equity securities increased compared to the prior fiscal year, which were substantially
offset by the U.S. medical device excise tax of $21 million that went into effect January 1, 2013.
Interest Expense, Net Interest expense, net includes interest earned on our cash, cash equivalents and investments, interest
incurred on our outstanding borrowings, amortization of debt issuance costs and debt discounts, the net realized and unrealized
gain or loss on trading securities, ineffectiveness on interest rate derivative instruments, and the net realized gain or loss on the
sale or impairment of available-for-sale debt securities. In fiscal year 2014, interest expense, net was $108 million, as compared
to $151 million in fiscal year 2013. For fiscal year 2014, the decrease in interest expense, net was the result of decreased interest
expense due to reduced amortization of debt discount as a result of the April 2013 repayment of $2.200 billion of Senior
Convertible Notes, partially offset by increased debt. The decrease in interest expense, net during fiscal year 2014 was also due
to increased interest income earned on higher investment balances, as compared to fiscal year 2013.
In fiscal year 2013, interest expense, net was $151 million, as compared to $149 million in fiscal year 2012. For fiscal year
2013, interest expense, net remained consistent with fiscal year 2012. Compared to fiscal year 2012, increased interest income
from higher investment balances and increased realized gains on sales of available-for-sale debt securities were offset by
increased interest expense from higher average outstanding long-term debt.
See our discussion in the “Liquidity and Capital Resources” section of this management’s discussion and analysis for more
information regarding our investment portfolio.
Income Taxes
Fiscal Year
Percentage Point
Increase (Decrease)
(dollars in millions) 2014 2013 2012 FY14/13 FY13/12
Provision for income taxes $ 640 $ 784 $ 730 N/A N/A
Effective tax rate 17.3% 18.4% 17.6% (1.1) 0.8
Net tax impact of special charges, restructuring charges,
net, certain litigation charges, net, acquisition-related
items, and certain tax adjustments 0.7 (0.5) 0.5 1.2 (1.0)
Non-GAAP nominal tax rate(1) 18.0% 17.9% 18.1% 0.1 (0.2)
(1) Non-GAAP nominal tax rate is defined as the income tax provision as a percentage of earnings before income taxes,
excluding special charges, restructuring charges, net, certain litigation charges, net, acquisition-related items, and certain
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