Medtronic 2009 Annual Report Download - page 74

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70 Medtronic, Inc.
Notes to Consolidated Financial Statements
(continued)
Activity related to the Company’s short-term and long-term investment portfolio is as follows:
Fiscal Year
2009 2008 2007
(in millions) Debt(1) Equity(2) Debt(1) Equity(2) Debt(1) Equity(2)
Proceeds from sales $ 2,845 $— $ 8,531 $26 $ 10,870 $24
Gross realized gains $ 35 $— $ 31 $16 $ 3 $16
Gross realized losses $ (8) $— $ (5) $— $ (1) $—
Impairment losses recognized $ 38 $ 4 $ 3$ 4$ —$26
(1) Includes available-for-sale (AFS) debt securities.
(2) Includes marketable equity securities, cost method, equity method and other investments.
The April 24, 2009 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.
(in millions)
April 24,
2009
Due in one year or less $ 732
Due after one year through five years 1,724
Due after five years through ten years 50
Due after ten years 141
Total debt securities $2,647
As of April 24, 2009, the Company has $421 million 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 $154 million. As of April 24, 2009, the
Company has $682 million in debt securities that have been in an
unrealized loss position for less than twelve months. The aggregate
amount of unrealized losses for these investments is $21 million.
The majority of 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 investments in marketable debt securities detailed above
are classified and accounted for as available-for-sale and include
corporate debt securities, government and agency securities,
certificates of deposit and mortgage backed and other asset
backed securities including auction rate securities. Market
conditions during fiscal year 2009 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. 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.
For the fiscal year ended April 24, 2009, the Company recognized
other-than-temporary impairment losses on AFS debt securities
of $38 million. 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 it has recorded all necessary other-than-temporary
impairments as the Company has the ability and the intent to
hold these investments long enough to avoid realizing any further
losses. For additional discussion, see the “Liquidity and Capital
Resources” section of management’s discussion and analysis.
As of April 24, 2009 and April 25, 2008, the aggregate carrying
amount of equity and other securities without a quoted market
price and accounted for using the cost or equity method was
$515 million and $231 million, respectively. The total carrying
value of these investments is reviewed quarterly for changes
in circumstance or the occurrence of events that suggest the
Company’s investment may not be recoverable. The fair value of
cost or equity method investments is not estimated if there are
no identified events or changes in circumstances that may have a
material adverse effect on the fair value of the investment.