Medtronic 2009 Annual Report Download - page 44

40 Medtronic, Inc.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
(continued)
In the normal course of business, we periodically enter into
agreements that require us to indemnify customers or suppliers
for specific risks, such as claims for injury or property damage
arising out of our products or the negligence of our personnel or
claims alleging that our products infringe third-party patents or
other intellectual property. Our maximum exposure under these
indemnification provisions cannot be estimated, and we have not
accrued any liabilities within our consolidated financial statements
or included any indemnification provisions in our commitments
table. Historically, we have not experienced significant losses on
these types of indemnification obligations.
We believe our off-balance sheet arrangements do not have a
material current or anticipated future effect on our consolidated
earnings, financial position or cash flows. Presented below is a
summary of contractual obligations and other minimum
commercial commitments as of April 24, 2009. See Notes 8, 9 and
15 to the consolidated financial statements for additional
information regarding long-term debt, foreign currency contracts
and lease obligations, respectively. Additionally, see Note 13 to
the consolidated financial statements for additional information
regarding accrued income tax obligations, which are not reflected
in the table below.
Maturity by Fiscal Year
(dollars in millions) Total 2010 2011 2012 2013 2014 Thereafter
Contractual obligations related to off-balance sheet arrangements:
Foreign currency contracts(1) $ 5,296 $ 3,546 $ 1,501 $ 249 $ — $ — $ —
Operating leases(2) 237 77 50 31 23 21 35
Inventory purchases(3) 509 296 132 36 17 12 16
Commitments to fund minority investments/contingent acquisition consideration(4) 491 89 214 90 25 8 65
Interest payments(5) 1,354 182 173 131 131 95 642
Other(6) 213 63 48 36 19 15 32
Total $ 8,100 $ 4,253 $ 2,118 $ 573 $ 215 $ 151 $ 790
Contractual obligations reflected in the balance sheet:
Long-term debt, excluding capital leases(7) $ 6,665 $ — $ 2,600 $ 15 $ 2,200 $ 550 $1,300
Capital leases(8) 67 14 16 17 20 — —
Total $ 6,732 $ 14 $ 2,616 $ 32 $ 2,220 $ 550 $1,300
(1) As these obligations were entered into as hedges, the majority of these obligations will be offset by losses/gains on the related assets, liabilities and transactions
being hedged.
(2) Certain leases require us to pay real estate taxes, insurance, maintenance and other operating expenses associated with the leased premises. These future costs are not
included in the schedule above.
(3) We have included inventory purchase commitments which are legally binding and specify minimum purchase quantities. These purchase commitments do not exceed our
projected requirements and are in the normal course of business. These commitments do not include open purchase orders.
(4) Certain commitments related to the funding of minority investments and/or previous acquisitions are contingent upon the achievement of certain product-related
milestones and various other favorable operational conditions. While it is not certain if and/or when these payments will be made, the maturity dates included in this
table reflect our best estimates.
(5) Interest payments in the table above reflect the interest on our outstanding debt, including the $1.250 billion of New Senior Notes, $4.400 billion of Senior Convertible
Notes, $1.000 billion of Senior Notes and $15 million of Contingent Convertible Debentures. The interest rate on each outstanding obligation varies and interest is payable
semi-annually. The interest rate is 4.500 percent on $550 million of the New Senior Notes, 5.600 percent on $400 million of the New Senior Notes, 6.500 percent on $300
million of the New Senior Notes, 1.500 percent on the $2.200 billion Senior Convertible Notes due 2011 and 1.625 percent on the $2.200 billion Senior Convertible Notes
due 2013, 4.375 percent on the $400 million of Senior Notes due 2010, 4.750 percent on the $600 million of Senior Notes due 2015 and 1.250 percent on the Contingent
Convertible Debentures due 2021.
(6) These obligations include certain research and development arrangements.
(7) Long-term debt in the table above includes $1.250 billion New Senior Notes, $4.400 billion Senior Convertible Notes issued in April 2006, and $1.000 billion Senior Notes
issued in September 2005 and $15 million related to our Contingent Convertible Debentures. The table above excludes the remaining fair value from the five year interest
rate swap entered into in November 2005 and the eight year interest rate swap agreement entered into in June 2007 that were terminated in December 2008. See Note 8
to the consolidated financial statements for additional information regarding the interest rate swap agreement terminations.
(8) Capital lease obligations include a sale-leaseback agreement entered into in fiscal year 2006 whereby certain manufacturing equipment was sold and is being leased by
us over a seven year period.