Medtronic 2008 Annual Report Download - page 71

Activity related to the Company’s short-term and long-term investment portfolio is as follows:
Fiscal Year
2008 2007 2006
Debt(1)
Equity
(2)
Debt(1) Equity
(2)
Debt(1) Equity
(2)
Proceeds from sales $ 8,531 $ 26 $ 10,870 $ 24 $ 6,620 $ 7
Gross realized gains $ 31 $ 16 $ 3 $ 16 $ — $ —
Gross realized losses $ (5) $ — $ (1) $ — $ (1) $ —
Impairment losses recognized $ 3 $ 4 $ — $ 26 $ — $ 45
(1) Includes AFS debt securities.
(2) Includes marketable equity securities, cost method, equity method and other investments.
The April 25, 2008 balance of AFS debt securities by contractual
maturity is shown in the following table. Within the table, maturities of
mortgage-backed securities have been allocated based upon timing of
estimated cash flows, assuming no change in the current interest rate
environment. Actual maturities may differ from contractual maturities
because the issuers of the securities may have the right to prepay
obligations without prepayment penalties.
April 25, 2008
Due in one year or less $ 701
Due after one year through five years 1,657
Due after five years through ten years 77
Due after ten years 196
Total debt securities
$ 2,631
As of April 25, 2008, the Company has $116 in debt securities
that have been in an unrealized loss position for more than twelve
months. The aggregate amount of unrealized losses for these
investments is $6. These investments are in high quality, investment
grade securities. The Company does not consider these unrealized
losses to be other-than-temporary as it has the intent and ability to hold
these investments long enough to avoid realizing any significant losses.
The total fair value of all investments currently in an unrealized loss
position as of April 25, 2008 is $1,683.
The Company has investments in marketable debt securities that are
classified and accounted for as available-for-sale. The Company’s debt
securities include government securities, commercial paper, corporate
bonds, bank certificates of deposit and mortgage backed and other
asset backed securities including auction rate securities. Market
conditions during the third and fourth quarters of fiscal year 2008 and
subsequent to the Company’s fiscal year-end continue to indicate
significant uncertainty on the part of investors on the economic outlook
for the U.S. and for financial institutions that have potential exposure to
the sub-prime housing market. This uncertainty has created reduced
liquidity across the fixed income investment market, including certain
securities in which the Company has invested. As a result, some of the
Company’s investments have experienced reduced liquidity including
unsuccessful monthly auctions for auction rate security holdings. As of
April 25, 2008, all of the investments in auction rate fixed income
securities have been reclassified from short-term investments to long-
term investments on the consolidated balance sheet due to the fact that
they are currently not trading, and current conditions in the general
debt markets have reduced the likelihood that the securities will
successfully auction within the next 12 months. Auction rate securities
that did not successfully auction reset to the maximum rate as
prescribed in the underlying indenture and all of the Company’s
holdings continue to be current with their interest payments.
For the fiscal year ended April 25, 2008, the Company recognized a
$3 impairment loss on AFS debt securities. Based on the Company’s
assessment of the credit quality of the underlying collateral and credit
support available to each of the remaining securities in which invested,
the Company believes no other-than-temporary impairment has
occurred as the Company has the ability and the intent to hold these
investments long enough to avoid realizing any significant loss.
As of April 25, 2008 and April 27, 2007, the aggregate carrying amount
of equity and other securities without a quoted market price and
67Medtronic, Inc.