Medtronic 2008 Annual Report Download - page 80

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The following table illustrates the effect on net earnings and net
earnings per share for fiscal year 2006 if the Company had applied the
fair value recognition provisions of SFAS No. 123 to its stock-based
employee compensation:
Fiscal Year
2006
Net earnings, as reported $ 2,547
Add: Stock-based compensation expense included
in net earnings(1) 16
Less: Stock-based compensation expense determined
under fair value based method for all awards(1) (142)
Pro forma net earnings
$ 2,421
Basic earnings per share:
As reported $ 2.11
P r o f o r m a $ 2.01
Diluted earnings per share:
As reported $ 2.09
P r o f o r m a $ 1.98
(1) Compensation expense is net of related tax effects.
Tax Impacts of Stock-Based Compensation Prior to the adoption of SFAS
No. 123(R), benefits of tax deductions in excess of recognized share-
based compensation expense were reported on the consolidated
statement of cash flows as operating cash flows. Under SFAS No. 123(R),
such excess tax benefits are reported as financing cash flows. Although
total cash flows under SFAS No. 123(R) remain unchanged from what
would have been reported under prior accounting standards, net
operating cash flows are reduced and net financing cash flows are
increased due to the adoption of SFAS No. 123(R). For the fiscal years
ended April 25, 2008 and April 27, 2007, there were excess tax benefits
of $40 and $36, respectively, which are classified as financing cash flows.
For the fiscal year ended April 28, 2006, there were excess tax benefits
of $99, which was classified as an operating cash flow.
Stock Options The following table summarizes all stock option activity, including activity from options assumed or issued as a result of acquisitions,
during fiscal years 2008, 2007 and 2006:
Fiscal Year
2008 2007 2006
Options
(in thousands)
Wtd. Avg.
Exercise Price
Options
(in thousands)
Wtd. Avg.
Exercise Price
Options
(in thousands)
Wtd. Avg.
Exercise Price
Beginning balance
90,906
$ 46.99 88,838 $ 46.23 87,655 $ 43.65
Granted 9,436 48.13 10,529 48.64 13,740 56.16
Assumed from Kyphon acquisition 3,486 27.73 — — — —
Exercised (9,111) 37.80 (6,089) 37.37
(10,617
) 37.53
Canceled (2,273) 50.18 (2,372) 50.22 (1,940) 47.59
Outstanding at year-end
92,444
$ 47.21
90,906
$ 46.99
88,838
$ 46.23
Exercisable at year-end
67,741
$ 46.80 67,017 $ 45.47 63,123 $ 44.13
For options outstanding and exercisable at April 25, 2008, the weighted average remaining contractual life was 5.65 years and 4.61 years,
respectively. The total intrinsic value, calculated as the closing stock price at year-end less the option exercise price, of options exercised during fiscal
years 2008, 2007 and 2006 was $138, $88 and $187, respectively. For options outstanding and exercisable at April 25, 2008, the total intrinsic value
of in-the-money options was $325 and $257, respectively. The Company issues new shares when stock option awards are exercised. Cash received
from the exercise of stock options for the fiscal year ended April 25, 2008 was $325 and the related tax benefits realized were $40. Unrecognized
compensation expense related to outstanding stock options as of April 25, 2008 was $260, pre-tax, and is expected to be recognized over a weighted
average period of 2.5 years and will be adjusted for any future changes in estimated forfeitures.
Notes to Consolidated Financial Statements
(continued)
(dollars in millions, except per share data)
76 Medtronic, Inc.