Medtronic 2011 Annual Report Download - page 42

38 Medtronic, Inc.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
(continued)
for acquisitions increased in comparison to the prior fiscal year
as a result of the current year acquisitions primarily driven by
ATS Medical, Osteotech, and Ardian. The increase in acquisition
spending was more than offset by decreased investing in
marketable securities in fiscal year 2011 which resulted in net
sales of $194 million as compared to net purchases of $3.687
billion in the prior fiscal year. The increased investing in marketable
securities in fiscal year 2010 resulted primarily from investing the
proceeds from the $3.000 billion debt issuance.
Our net cash used in investing activities was $4.759 billion for
the fiscal year ended April 30, 2010 compared to $2.740 billion for
the same period of the prior fiscal year. Cash used for acquisitions
decreased in comparison to the fiscal year ended April 24, 2009 as
the acquisitions of Restore Medical, Inc. (Restore), CryoCath,
Ablation Frontiers, and CoreValve were included in fiscal year
2009. The reduction in acquisition spending was more than offset
by increased investing in marketable securities in fiscal year 2010,
which resulted in net purchases of $3.687 billion as compared to
net purchases of $115 million in fiscal year 2009. The increased
investing in marketable securities resulted from investing the
proceeds of the fiscal year 2010 $3.000 billion debt issuance.
Financing Activities We had net cash used in financing activities
of $2.006 billion for the fiscal year ended April 29, 2011 compared
to net cash provided by financing activities of $764 million for the
fiscal year ended April 30, 2010. Proceeds from net short- and
long-term borrowings were approximately $2.518 billion lower in
fiscal year 2011 as compared to fiscal year 2010, primarily due
to the lesser $1.000 billion debt issuance in fiscal year 2011
compared to the $3.000 billion debt issuance in the prior fiscal
year. Additionally, during fiscal year 2011 we repaid $2.200 billion
of our Senior Convertible Notes that were due in April 2011 and
$400 million of our 2005 Senior Notes that were due in September
2010. Our cash returned to shareholders in the form of dividends
and the repurchase of common stock was $172 million higher
compared to fiscal year 2010.
Our net cash provided by financing activities was $764 million
for the fiscal year ended April 30, 2010 compared to $845 million
used in financing activities for the fiscal year ended April 24, 2009.
Proceeds from net short- and long-term borrowings were
approximately $2.219 billion higher in fiscal year 2010 as compared
to fiscal year 2009, primarily due to the debt issuance of $3.000
billion during fiscal year 2010. Our cash returned to shareholders
in the form of dividends and the repurchase of common stock
was $335 million higher in fiscal year 2010 as compared to fiscal
year 2009.
Off-Balance Sheet Arrangements and Long-Term
Contractual Obligations
We acquire assets still in development, enter into research and
development arrangements, and sponsor certain clinical trials
that often require milestone and/or royalty payments to a third-
party, contingent upon the occurrence of certain future events.
Milestone payments may be required contingent upon the
successful achievement of an important point in the development
life cycle of a product or upon certain pre-designated levels of
achievement in clinical trials. In addition, if required by the
arrangement, we may have to make royalty payments based on a
percentage of sales related to the product under development or
in the event that regulatory approval for marketing is obtained. In
situations where we have no ability to influence the achievement
of the milestone or otherwise avoid the payment, we have
included those milestone or minimum royalty payments in the
following table. However, the majority of these arrangements
give us the discretion to unilaterally make the decision to stop
development of a product or cease progress of a clinical trial,
which would allow us to avoid making the contingent payments.
Although we are unlikely to cease development if a device
successfully achieves clinical testing objectives, these payments
are not included in the table of contractual obligations because of
the contingent nature of these payments and our ability to avoid
them if we decided to pursue a different path of development or
testing. See Note 4 for additional information regarding contingent
consideration.
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.