Medtronic 2011 Annual Report Download - page 96

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92 Medtronic, Inc.
Notes to Consolidated Financial Statements
(continued)
The initial health care cost trend rates for post-retirement
benefit plans was 7.75 percent for pre-65 and 7.50 percent for
post-65 at April 29, 2011. Based on actuarial data, the trend rates
are expected to decline to 5.0 percent over a five-year period.
Assumed health care cost trend rates have a significant effect on
the amounts reported for the health care plans. A one-percentage-
point change in assumed health care cost trend rates would have
the following effects:
(in millions)
One-Percentage-
Point Increase
One-Percentage-
Point Decrease
Effect on post-retirement
benefit cost $ 2 $ (2)
Effect on post-retirement
benefit obligation 13 (12)
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 $147 million, $110 million, and
$103 million in fiscal years 2011, 2010, and 2009, 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 U.S. Pension Benefits
in the tables presented earlier. The defined contribution cost
associated with the PIA was approximately $46 million, $41
million, and $37 million in fiscal years 2011, 2010, and 2009,
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 29, 2011 are:
(in millions)
Fiscal Year
Capitalized
Leases
Operating
Leases
2012 $ 4 $118
20134 86
20143 63
20153 34
20163 22
2017 and thereafter 31 35
Total minimum lease payments $ 48 $358
Less amounts representing interest (14) N/A
Present value of net minimum
lease payments $ 34 N/A
Rent expense for all operating leases was $148 million, $154
million, and $150 million in fiscal years 2011, 2010, and 2009,
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 was being leased by the Company over a seven-year period.
The transaction was recorded as a capital lease. Payments for the
remaining balance of the sale-leaseback agreement were due
semi-annually. The lease provided 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. The Company exercised its early buyout option in fiscal year
2010 which resulted in converting the lease to a term loan. The
balance of the related term loan at April 29, 2011 was $31 million.
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