Medtronic 2016 Annual Report Download - page 105

Table of Contents
Medtronic plc
Notes to Consolidated Financial Statements (Continued)
102
Ordinary Share Repurchase Program
Shares are repurchased from time to time to support the Company’s stock-based compensation programs and to return capital to
shareholders. During fiscal years 2016 and 2015, the Company repurchased approximately 38 million and 30 million shares at an
average price of $74.92 and $64.53, respectively. In June 2015, the Company's Board of Directors authorized, subject to the ongoing
existence of sufficient distributable reserves, the redemption of 80 million of the Company's ordinary shares. As of April 29, 2016,
the Company had used 8 million of the 80 million shares authorized under the repurchase program, leaving 72 million shares
available for future repurchases. The Company accounts for repurchases of ordinary shares using the par value method and shares
repurchased are canceled.
10. Stock Purchase and Award Plans
The Company measures stock-based compensation expense at the grant date based on the fair value of the award and recognizes
the compensation expense over the requisite service period, which is generally the vesting period.
The Medtronic, Inc. 2013 Stock Award and Incentive Plan was originally approved by the Company's shareholders in August 2013.
In January 2015, the Company's Board of Directors approved an amendment to and assumption of the existing Medtronic, Inc.
2013 Stock Award and Incentive Plan, which created the new Medtronic plc 2013 Stock Award and Incentive Plan (2013 Plan).
In fiscal year 2016, the Company granted stock awards under the 2013 Plan. The 2013 Plan provides for the grant of non-qualified
and incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, and other stock
and cash-based awards. As of April 29, 2016, there were approximately 27 million shares available for future grants under the
2013 Plan.
Share Options Options are granted at the exercise price equal to the closing price of the Company’s ordinary share on the grant
date. The majority of the Company’s options are non-qualified options with a 10-year life and a 4-year ratable vesting term. In
fiscal year 2016, the Company granted share options under the 2013 Plan.
Restricted Stock Awards Restricted stock and restricted stock units (collectively referred to as restricted stock awards) are
granted to officers and key employees. The Company grants restricted stock awards that typically cliff vest after four years. The
expense recognized for restricted stock awards is equal to the grant date fair value, which is equal to the closing stock price on the
date of grant. Restricted stock awards are expensed over the vesting period and are subject to forfeiture if employment terminates
prior to the lapse of the restrictions. The Company also grants shares of performance-based restricted stock awards that typically
cliff vest after three years only if the Company has also achieved certain performance objectives. Performance awards are expensed
over the performance period based on the probability of achieving the performance objectives.
Shares of restricted stock are considered issued and outstanding shares of the Company at the grant date and have the same dividend
and voting rights as other ordinary shares. Restricted stock units are not considered issued or outstanding ordinary shares of the
Company. Dividend equivalent units are accumulated on restricted stock units during the vesting period. In fiscal year 2016, the
Company granted restricted stock units under the 2013 Plan. As of April 29, 2016, all restricted stock awards outstanding were
restricted stock units.
Employees Stock Purchase Plan The Medtronic plc Amended and Restated 2014 Employees Stock Purchase Plan (ESPP) allows
participating employees to purchase the Company's ordinary shares at a discount through payroll deductions. The expense
recognized for shares purchased under the Company’s ESPP is equal to the 15 percent discount the employee receives at the end
of the calendar quarter purchase period.
Employees can contribute between 2 percent and 10 percent of their wages or the statutory limit under the U.S. Internal Revenue
Code toward the purchase of newly issued ordinary shares of the Company at 85 percent of its market value at the end of the
calendar quarter purchase period. Employees purchased 2 million shares at an average price of $61.66 per share in the fiscal year
ended April 29, 2016. As of April 29, 2016, plan participants have had approximately $12 million withheld to purchase the
Company's ordinary shares at 85 percent of its market value on July 1, 2016, the last trading day before the end of the calendar
quarter purchase period. At April 29, 2016, approximately 20 million ordinary shares were available for future purchase under the
ESPP.
Stock Option Valuation Assumptions The Company uses the Black-Scholes option pricing model (Black-Scholes model) to
determine the fair value of stock options as of the grant date. The fair value of stock options under the Black-Scholes model requires
management to make assumptions regarding projected employee stock option exercise behaviors, risk-free interest rates, volatility
of the Company’s stock price, and expected dividends.