Medtronic 2011 Annual Report Download - page 82

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78 Medtronic, Inc.
Notes to Consolidated Financial Statements
(continued)
billion 1.625 percent Senior Convertible Notes due 2013. Upon
termination, the contracts were in an asset position, resulting in
cash receipts of $51 million, which included $11 million of accrued
interest. The gain from terminating the interest rate swap
agreements increased the outstanding balance of the Senior
Convertible Notes and is being amortized as a reduction of
interest expense over the remaining life of the Senior Convertible
Notes. The cash flows from the termination of these interest rate
swap agreements have been reported as operating activities in
the consolidated statement of cash flows.
In December 2009, the Company entered into three five-year
fixed-to-floating interest rate swap agreements, two with notional
amounts of $75 million each and one with a notional amount
of $100 million. These interest rate swap agreements were
designated as fair value hedges of the fixed interest rate obligation
under the Company’s $550 million 4.500 percent Senior Notes due
2014. On the first $75 million interest rate swap agreement, the
Company pays variable interest equal to the three-month LIBOR
plus 181.25 basis points and it receives a fixed interest rate of
4.500 percent. For the second $75 million interest rate swap
agreement, the Company pays variable interest equal to the
three-month LIBOR plus 196.50 basis points and it receives a
fixed interest rate of 4.500 percent. For the $100 million interest
rate swap agreement, the Company pays variable interest equal
to the three-month LIBOR plus 198.10 basis points and it receives
a fixed interest rate of 4.500 percent.
In June 2009, the Company entered into two five-year fixed-to-
floating interest rate swap agreements with notional amounts of
$150 million each. These interest rate swap agreements were
designated as fair value hedges of the fixed interest rate obligation
under the Company’s $550 million 4.500 percent Senior Notes due
2014. On the first interest rate swap agreement, the Company
pays variable interest equal to the one-month LIBOR plus 134.00
basis points and it receives a fixed interest rate of 4.500 percent.
For the second interest rate swap agreement, the Company pays
variable interest equal to the one-month LIBOR plus 137.25 basis
points and it receives a fixed interest rate of 4.500 percent.
As of April 29, 2011 and April 30, 2010, the market value of
outstanding interest rate swap agreements was an unrealized
gain of $109 million and $31 million, respectively, and the market
value of the hedged items was an unrealized loss of $110 million
and $33 million, respectively, which was recorded in other assets
with the offset recorded in long-term debt on the consolidated
balance sheets. The fair value hedges outstanding during fiscal
years 2011 and 2010 resulted in ineffectiveness of $(4) million and
$(2) million, respectively, which were recorded as increases in
interest expense, net on the consolidated statements of earnings.
During fiscal years 2011, 2010, and 2009, the Company did not
have any ineffective fair value hedging instruments. In addition,
the Company did not recognize any gains or losses during fiscal
years 2011, 2010, or 2009 on firm commitments that no longer
qualify as fair value hedges.
Balance Sheet Presentation
The following tables summarize the location and fair value amounts of derivative instruments reported in the consolidated balance
sheets as of April 29, 2011 and April 30, 2010. The fair value amounts are presented on a gross basis and are segregated between
derivatives that are designated and qualify as hedging instruments and those that are not, and are further segregated by type of contract
within those two categories.
Asset Derivatives Liability Derivatives
April 29, 2011
(in millions)
Balance Sheet
Location
Fair
Value
Balance Sheet
Location
Fair
Value
Derivatives designated as hedging instruments
Foreign currency exchange rate contracts
Prepaid expenses and
other current assets $ 19 Other accrued expenses $235
Interest rate contracts Other assets 109
Foreign currency exchange rate contracts Other assets 1 Other long-term liabilities 64
Total derivatives designated as hedging instruments $129 $299
Derivatives not designated as hedging instruments
Foreign currency exchange rate contracts
Prepaid expenses and
other current assets $ 1 Other accrued expenses $ 4
Total derivatives not designated as hedging instruments $ 1 $ 4
Total derivatives $130 $303