Medtronic 2008 Annual Report Download - page 44

2010. We pay variable interest equal to the three-month London
Interbank Offered Rate (LIBOR) minus 55 basis points and we receive a
fixed interest rate of 4.375 percent. The outstanding market value of this
swap agreement was an $8 million unrealized gain at April 25, 2008. The
unrealized gain of $8 million at April 25, 2008 is recorded in long-term
debt with the offset recorded in other long-term assets on the
consolidated balance sheets. There was no unrealized gain or loss at
April 27, 2007.
In June 2007, we entered into an eight year interest rate swap
agreement with a notional amount of $300 million. This interest rate
swap agreement was designated as a fair value hedge of the changes
in fair value of a portion of our fixed-rate $600 million Senior Notes due
2015. We pay variable interest equal to the three-month LIBOR minus
90 basis points and we receive a fixed interest rate of 4.750 percent. The
outstanding market value of this swap agreement was a $27 million
unrealized gain at April 25, 2008. The unrealized gain of $27 million at
April 25, 2008 is recorded in long-term debt with the offset recorded in
other long-term assets on the consolidated balance sheets.
In September 2001, we completed a $2.013 billion private placement
of 1.250 percent Contingent Convertible Debentures due September
2021 (Old Debentures). Interest is payable semi-annually. Each Old
Debenture is convertible into shares of common stock at an initial
conversion price of $61.81 per share; however, the Old Debentures are
not convertible before their final maturity unless the closing price of
our common stock reaches 110 percent of the conversion price for 20
trading days during a consecutive 30 trading day period. In September
2002 and 2004, as a result of certain holders of the Old Debentures
exercising their put options, we repurchased $39 million and $1 million,
respectively, of the Old Debentures for cash.
On January 24, 2005, we completed an exchange offer whereby
holders of approximately $1.930 billion of the total principal amount of
the Old Debentures exchanged their existing securities for an equal
principal amount of 1.250 percent Contingent Convertible Debentures,
Series B due 2021 (New Debentures), as described below. Following the
completion of the exchange offer, we repurchased approximately
$2 million of the Old Debentures for cash.
The terms of the New Debentures are consistent with the terms of
the Old Debentures noted above, except that: (i) the New Debentures
require us to settle all conversions for a combination of cash and shares
of our common stock, if any, in lieu of only shares. Upon conversion of
the New Debentures, we will pay holders cash equal to the lesser of the
principal amount of the New Debentures or their conversion value,
and shares of our common stock to the extent the conversion value
exceeds the principal amount of the New Debentures; and (ii) the
New Debentures require us to pay only cash (in lieu of shares of our
common stock or a combination of cash and shares of our common
stock) when we repurchase the New Debentures at the option of the
holder or when we repurchase the New Debentures in connection with
a change of control.
In September 2006, as a result of certain holders of the New
Debentures and Old Debentures exercising their put options, we
repurchased $1.835 billion of the New Debentures for cash and
$42 million of the Old Debentures for cash. We may be required to
repurchase the remaining debentures at the option of the holders in
September 2008, 2011 or 2016. Twelve months prior to the put options
becoming exercisable, the remaining balance of the New Debentures
and the Old Debentures will be classified as short-term borrowings. At
each balance sheet date without a put option within the subsequent
four quarters, the remaining balance will be classified as long-term debt.
Accordingly, during the second quarter of fiscal year 2008, $93 million
of New Debentures and $1 million of the Old Debentures were
reclassified from long-term debt to short-term borrowings due to the put
option becoming exercisable in September 2008. For put options
exercised by the holders of the New Debentures and the Old
Debentures, the purchase price is equal to the principal amount of the
applicable debenture plus any accrued and unpaid interest thereon to
the repurchase date. If the put option is exercised, we will pay holders
the repurchase price solely in cash (or, for the Old Debentures, in cash
or stock at our option). As of April 25, 2008, approximately $93 million
aggregate principal amount of New Debentures remain outstanding
and approximately $1 million aggregate principal amount of Old
Debentures remain outstanding. We can redeem the debentures for
cash at any time.
We maintain a commercial paper program that allows us to have a
maximum of $2.250 billion in commercial paper outstanding, with
maturities up to 364 days from the date of issuance. At April 25, 2008
and April 27, 2007, outstanding commercial paper totaled $874 million
and $249 million, respectively. During fiscal years 2008 and 2007, the
weighted average original maturity of the commercial paper
outstanding was approximately 35 and 56 days, respectively, and the
weighted average interest rate was 4.46 percent and 5.26 percent,
respectively.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
(continued)
40 Medtronic, Inc.