Medtronic 2012 Annual Report Download - page 65

As of April 27, 2012, we believe our strong balance sheet and liquidity provide us with flexibility in the
future. We believe our existing cash and investments, as well as our $2.250 billion syndicated credit facility
and related commercial paper program ($950 million of commercial paper outstanding as of April 27, 2012),
will satisfy our foreseeable working capital requirements for at least the next 12 months. However, we
periodically consider various financing alternatives and may, from time to time, seek to take advantage of
favorable interest rate environments or other market conditions. We also generally expect to refinance
maturities of long-term debt. At April 27, 2012, our Moody’s Investors Service ratings remain unchanged as
compared to the fiscal year ended April 29, 2011 with long-term debt ratings of A1 and strong short-term
debt ratings of P-1. On February 14, 2012, Standard & Poor’s Ratings Services downgraded our long-term
debt ratings to A+, compared to AA- for the fiscal year ended April 29, 2011. The downgrade of our long-
term debt rating by Standard & Poor’s reflects their expectations for near-term revenue growth in the low
single digits, caused by declines in CRDM and Spinal sales, combined with increased debt leverage over the
past several years. We do not expect this downgrade to have a significant impact on our liquidity or future
flexibility to access additional liquidity given our strong balance sheet, existing cash and investments, as
well as our syndicated credit facility and related commercial paper program discussed above. Standard &
Poor’s Ratings Services short-term debt ratings remain unchanged at A-1+ as compared to the fiscal year
ended April 29, 2011.
Our net cash position in fiscal year 2012 increased by $1.099 billion as compared to fiscal year 2011. See
the “Summary of Cash Flows” section of this management’s discussion and analysis for further information.
We have future contractual obligations and other minimum commercial commitments that are entered
into in the normal course of business. We believe our off-balance sheet arrangements do not have a material
current or anticipated future effect on our consolidated earnings, financial position, or cash flows. See the
“Off-Balance Sheet Arrangements and Long-Term Contractual Obligations” section of this management’s
discussion and analysis for further information.
Note 17 to the consolidated financial statements in “Item 8. Financial Statements and Supplementary
Data” in this Annual Report on Form 10-K provides information regarding amounts we have accrued
related to significant legal proceedings. In accordance with U.S. GAAP, we record a liability in our
consolidated financial statements for these actions when a loss is known or considered probable and the
amount can be reasonably estimated. For the fiscal year ended April 27, 2012, we have made payments
related to certain legal proceedings. For information regarding these payments, please see the “Restructuring
Charges, Net, Certain Litigation Charges, Net, and Acquisition-Related Items” section of this management’s
discussion and analysis.
A significant amount of our earnings occur outside the U.S., and are deemed to be indefinitely
reinvested in non-U.S. subsidiaries, resulting in a majority of our cash, cash equivalents, and investments
being held by such non-U.S. subsidiaries. As of April 27, 2012 and April 29, 2011, approximately $9.882 billion
and $7.215 billion, respectively, of cash, cash equivalents, and short- and long-term investments in marketable
debt and equity securities were held by our non-U.S. subsidiaries. These funds are available for use by our
worldwide operations; however, if these funds were repatriated to the U.S. or used for U.S. operations, the
amounts would generally be subject to U.S. tax. As a result, we continue to accumulate earnings overseas
for investment in our business outside the U.S. and to use cash generated from U.S. operations and short-
and long-term borrowings to meet our U.S. cash needs. Should we require more capital in the U.S. than is
generated by our domestic operations, we could elect to repatriate earnings from our non-U.S. subsidiaries
or raise additional capital in the U.S. through debt or equity issuances. These alternatives could result in
higher effective tax rates, increased interest expense, or other dilution of our earnings.
Cash and cash equivalents at April 27, 2012 also include $153 million of cash invested in short-term
instruments held in an indemnification trust established for self-insurance coverage for our directors and
officers. These investments are restricted and can only be used to indemnify or advance expenses related to
claims against our directors and/or officers.
We have investments in marketable debt securities that are classified and accounted for as available-
for-sale. Our debt securities include U.S. government and agency securities, foreign government and agency
securities, corporate debt securities, certificates of deposit, mortgage-backed securities, other asset-backed
securities, and auction rate securities. Some of our investments may experience reduced liquidity due to
changes in market conditions and investor demand. Our auction rate security holdings have experienced
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