Medtronic 2012 Annual Report Download - page 116

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Medtronic, Inc.
Notes to Consolidated Financial Statements (Continued)
99
creditworthiness of its customers to which it grants credit terms in the normal course of business. However,
a significant amount of trade receivables are with hospitals that are dependent upon governmental health
care systems in many countries. The current economic conditions in many countries outside the U.S.
(particularly the recent economic challenges faced by Italy, Spain, Portugal, and Greece), have deteriorated
and may continue to increase the average length of time it takes the Company to collect on its outstanding
accounts receivable in these countries as certain payment patterns have been impacted. As of April 27, 2012
and April 29, 2011, the Company’s aggregate accounts receivable balance for Italy, Spain, Portugal, and
Greece, net of the allowance for doubtful accounts, was $967 million and $952 million, respectively. The
Company continues to monitor the creditworthiness of customers located in these and other geographic
areas. In the past, accounts receivable balances with certain customers in these countries have accumulated
over time and were subsequently settled as large lump-sum payments. In the fourth quarter of fiscal year
2012, the Company received a $101 million payment from a customer in Italy. Although the Company does
not currently foresee a significant credit risk associated with the outstanding accounts receivable, repayment
is dependent upon the financial stability of the economies of these countries. As of April 27, 2012 and
April 29, 2011, no one customer represented more than 10 percent of the Company’s outstanding accounts
receivable.
11. Interest Expense, Net
Interest income and interest expense for fiscal years 2012, 2011, and 2010 are as follows:
Fiscal Year
__________________________________________
(in millions) 2012 2011 2010
___________ ___________ ___________ ___________
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (200) $ (172) $ (156)
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 349 450 402
___________ ___________ ___________
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 149 $ 278 $ 246
___________ ___________ ___________
___________ ___________ ___________
Interest income includes interest earned on the Company’s cash and cash equivalents, short- and long-
term investments, the net realized and unrealized gain or loss on trading securities, ineffectiveness on interest
rate derivative instruments, and the net realized gain or loss on the sale or impairment of available-for-sale
debt securities. See Note 6 for further discussion of these items.
Interest expense includes the expense associated with the interest on the Company’s outstanding
borrowings, including short- and long-term instruments, ineffectiveness on interest rate derivative
instruments, and the amortization of debt issuance costs and debt discounts.
12. Shareholders’ Equity
Repurchase of Common Stock Shares are repurchased from time to time to support the Company’s
stock-based compensation programs and to return capital to shareholders. In June 2009 and June 2011, the
Company’s Board of Directors authorized the repurchase of 60 million and 75 million shares of the
Company’s common stock, respectively. The Company repurchased approximately 37.3 million and
30.1 million shares at an average price of $38.64 and $37.86, respectively, during fiscal years 2012 and 2011.
As of April 27, 2012, the Company had used the entire amount authorized under the June 2009 repurchase
program and 16.6 million of the 75.0 million shares authorized under the June 2011 repurchase program,
leaving 58.4 million shares available for future repurchases. The Company accounts for repurchases of
common stock using the par value method and shares repurchased are cancelled.
13. Stock Purchase and Award Plans
Under the fair value recognition provisions of U.S. GAAP for accounting for stock-based compensation,
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.