Medtronic 2009 Annual Report Download - page 94

90 Medtronic, Inc.
Notes to Consolidated Financial Statements
(continued)
Defined Contribution Savings Plans The Company has defined
contribution savings plans that cover substantially all U.S.
employees and certain non-U.S. employees. The general purpose
of these plans is to provide additional financial security during
retirement by providing employees with an incentive to make
regular savings. Company contributions to the plans are based on
employee contributions and Company performance and starting
in fiscal year 2006 the entire match is made in cash. Expense
under these plans was $103 million, $85 million and $64 million in
fiscal years 2009, 2008 and 2007, respectively.
Effective May 1, 2005, the Company froze participation in the
existing defined benefit pension plan in the U.S. and implemented
two new plans including an additional defined benefit pension
plan and a new defined contribution pension plan, respectively:
the Personal Pension Account (PPA) and the Personal Investment
Account (PIA). Employees in the U.S. hired on or after May 1, 2005
have the option to participate in either the PPA or the PIA.
Participants in the PPA receive an annual allocation of their salary
and bonus on which they will receive an annual guaranteed
rate of return which is based on the 10-year Treasury bond rate.
Participants in the PIA also receive an annual allocation of their
salary and bonus; however, they are allowed to determine how to
invest their funds among identified fund alternatives. The cost
associated with the PPA is included in the U.S. Pension Benefits
in the tables presented earlier. The defined contribution cost
associated with the PIA was approximately $37 million, $30 million
and $25 million in fiscal years 2009, 2008 and 2007, respectively.
15. Leases
The Company leases office, manufacturing and research facilities
and warehouses, as well as transportation, data processing and
other equipment under capital and operating leases. A substantial
number of these leases contain options that allow the Company
to renew at the fair rental value on the date of renewal.
Future minimum payments under capitalized leases and non-
cancelable operating leases at April 24, 2009 are:
(in millions)
Fiscal Year
Capitalized
Leases
Operating
Leases
2010 $17 $ 77
2011 19 50
2012 19 31
2013 21 23
2014 — 21
2015 and thereafter — 35
Total minimum lease payments $76 $237
Less amounts representing interest (9) N/A
Present value of net minimum
lease payments $67 N/A
Rent expense for all operating leases was $150 million, $135
million and $112 million in fiscal years 2009, 2008 and 2007,
respectively.
In April 2006, the Company entered into a sale-leaseback
agreement with a financial institution whereby certain
manufacturing equipment was sold to the financial institution
and is being leased by the Company over a seven year period.
The transaction has been recorded as a capital lease and included
in the preceding table. Payments for the remaining balance of
the sale-leaseback agreement are due semi-annually. The lease
provides for an early buyout option whereby the Company, at its
option, could repurchase the equipment at a predetermined fair
market value in calendar year 2009.
16. Contingencies
The Company is involved in a number of legal actions. The
outcomes of these legal actions are not within the Company’s
complete control and may not be known for prolonged periods
of time. In some actions, the claimants seek damages, as well as
other relief, including injunctions barring the sale of products
that are the subject of the lawsuit, that could require significant
expenditures or result in lost revenues. In accordance with SFAS
No. 5, the Company records a liability in the consolidated financial
statements for these actions when a loss is known or considered
probable and the amount can be reasonably estimated. If the
reasonable estimate of a known or probable loss is a range, and