Medtronic 2010 Annual Report Download - page 44

40 Medtronic, Inc.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
(continued)
Debt and Capital
In June 2007 and June 2009, our Board of Directors authorized
the repurchase of up to 50 million and 60 million shares of our
common stock, respectively.
Shares are repurchased from time to time to support our
stock-based compensation programs and to take advantage of
favorable market conditions. During fiscal years 2010 and 2009,
we repurchased approximately 27.0 million shares and 16.5 million
shares at an average price of $38.10 and $45.94, respectively. As of
April 30, 2010, we have approximately 50.8 million shares
remaining under current buyback authorizations approved by the
Board of Directors.
In March 2010, we issued three tranches of Senior Notes
(collectively, the 2010 Senior Notes) with the aggregate face value
of $3.000 billion. The first tranche consisted of $1.250 billion of
3.000 percent Senior Notes due 2015, the second tranche
consisted of $1.250 billion of 4.450 percent Senior Notes due 2020
and the third tranche consisted of $500 million of 5.550 percent
Senior Notes due 2040. All three tranches were issued at a
discount which resulted in an effective interest rate of 3.002
percent, 4.470 percent and 5.564 percent, respectively. Interest on
each series of 2010 Senior Notes is payable semi-annually, on
March 15 and September 15 of each year, commencing September
15, 2010. The 2010 Senior Notes are unsecured senior obligations
that rank equally with all other unsecured and unsubordinated
indebtedness. The indentures under which the 2010 Senior Notes
were issued contain customary covenants, all of which we remain
in compliance with as of April 30, 2010. We used the net proceeds
from the sale of the 2010 Senior Notes for working capital and
general corporate uses, which may include repayment of our
indebtedness that matures in fiscal year 2011. This includes the
$2.200 billion of 1.500 percent Senior Convertible Notes due 2011
and the $400 million of 2005 Senior Notes due 2010.
In March 2009, we issued three tranches of Senior Notes
(collectively, the 2009 Senior Notes) with the aggregate face value
of $1.250 billion. The first tranche consisted of $550 million of
4.500 percent Senior Notes due 2014, the second tranche
consisted of $400 million of 5.600 percent Senior Notes due 2019
and the third tranche consisted of $300 million of 6.500 percent
Senior Notes due 2039. The first tranche was issued at par, the
second tranche was issued at a discount which resulted in an
effective interest rate of 5.609 percent and the third tranche was
issued at a discount which resulted in an effective interest rate of
6.519 percent. Interest on each series of 2009 Senior Notes is
payable semi-annually, on March 15 and September 15 of each
year. The 2009 Senior Notes are unsecured senior obligations that
rank equally with all other unsecured and unsubordinated
indebtedness. The indentures under which the 2009 Senior Notes
were issued contain customary covenants, all of which we remain
in compliance with as of April 30, 2010. We used the net proceeds
from the sale of the 2009 Senior Notes for repayment of a
portion of our outstanding commercial paper and for general
corporate uses.
In April 2006, we issued $2.200 billion of 1.500 percent Senior
Convertible Notes due 2011 and $2.200 billion of 1.625 percent
Senior Convertible Notes due 2013 (collectively, the Senior
Convertible Notes). The Senior Convertible Notes were issued at
par and pay interest in cash semi-annually in arrears on April 15
and October 15 of each year. The Senior Convertible Notes are
unsecured unsubordinated obligations and rank equally with all
other unsecured and unsubordinated indebtedness. The Senior
Convertible Notes have an initial conversion price of $56.14 per
share. The Senior Convertible Notes may only be converted:
(i) during any calendar quarter if the closing price of our common
stock reaches 140 percent of the conversion price for 20 trading
days during a specified period, or (ii) if specified distributions to
holders of our common stock are made or specified corporate
transactions occur, or (iii) during the last month prior to maturity
of the applicable notes. Upon conversion, a holder would receive:
(i) cash equal to the lesser of the principal amount of the note or
the conversion value and (ii) to the extent the conversion value
exceeds the principal amount of the note, shares of our common
stock, cash or a combination of common stock and cash, at our
option. In addition, upon a change in control, as defined in the
applicable indentures, the holders may require us to purchase for
cash all or a portion of their notes for 100 percent of the principal
amount of the notes plus accrued and unpaid interest, if any, plus
a number of additional make-whole shares of our common stock,
as set forth in the applicable indenture. The indentures under
which the Senior Convertible Notes were issued contain customary
covenants, all of which we remain in compliance with as of April
30, 2010. A total of $2.500 billion of the net proceeds from these
note issuances were used to repurchase common stock. As of
April 30, 2010, pursuant to provisions in the indentures relating to
the increase of our quarterly dividend to shareholders, the
conversion rates for each of the Senior Convertible Notes is now
18.2508, which correspondingly changed the conversion price per
share for each of the Senior Convertible Notes to $54.79. See Note
9 to the consolidated financial statements for further discussion
of the accounting treatment of these Senior Convertible Notes.