Medtronic 2013 Annual Report Download - page 106

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Table of Contents
Medtronic, Inc.
Notes to Consolidated Financial Statements (Continued)
As of April 26, 2013 and April 27, 2012, the Company had interest rate swap agreements designated as fair value hedges of
underlying fixed-rate obligations including the Company’s $1.250 billion 3.000 percent 2010 Senior Notes due 2015, $600 million
4.750 percent 2005 Senior Notes due 2015, $500 million 2.625 percent 2011 Senior Notes due 2016, $500 million 4.125 percent
2011 Senior Notes due 2021, and $675 million 3.125 percent 2012 Senior Notes due 2022. For additional information regarding
the interest rate swap agreements, refer to Note 9.
Contractual maturities of long-term debt for the next five fiscal years and thereafter, including current portions, capital leases, and
excluding the debt discount, the fair value impact of outstanding interest rate swap agreements, and the remaining deferred gains
from terminated interest rate swap agreements are as follows:
(in millions)
Fiscal Year Obligation
2014 $ 564
2015 1,266
2016 1,112
2017 30
2018 1,018
Thereafter 6,104
Total long-term debt 10,094
Less: Current portion of long-term debt 564
Long-term portion of long-term debt $ 9,530
9. Derivatives and Foreign Exchange Risk Management
The Company uses operational and economic hedges, as well as currency exchange rate derivative contracts and interest rate
derivative instruments to manage the impact of currency exchange and interest rate changes on earnings and cash flows. In order
to minimize earnings and cash flow volatility resulting from currency exchange rate changes, the Company enters into derivative
instruments, principally forward currency exchange rate contracts. These contracts are designed to hedge anticipated foreign
currency transactions and changes in the value of specific assets and liabilities. At inception of the forward contract, the derivative
is designated as either a freestanding derivative or a cash flow hedge. The primary currencies of the derivative instruments are the
Euro and the Japanese Yen. The Company does not enter into currency exchange rate derivative instruments for speculative
purposes. The gross notional amount of all currency exchange rate derivative instruments outstanding at April 26, 2013 and
April 27, 2012 was $6.812 billion and $5.136 billion, respectively. The aggregate currency exchange rate gains (losses) were $25
million, $(183) million, and $92 million, in fiscal years 2013, 2012, and 2011, respectively. These gains (losses) represent the net
impact to the consolidated statements of earnings for the derivative instruments presented below, offset by remeasurement gains
(losses) on foreign currency denominated assets and liabilities.
The information that follows explains the various types of derivatives and financial instruments used by the Company, how and
why the Company uses such instruments, how such instruments are accounted for, and how such instruments impact the Company’s
consolidated balance sheets, statements of earnings. and statements of cash flows.
Freestanding Derivative Forward Contracts
Freestanding derivative forward contracts are used to offset the Company’s exposure to the change in value of specific foreign
currency denominated assets and liabilities. These derivatives are not designated as hedges, and therefore, changes in the value
of these forward contracts are recognized in earnings, thereby offsetting the current earnings effect of the related change in value
of foreign currency denominated assets and liabilities. The cash flows from these contracts are reported as operating activities in
the consolidated statements of cash flows. The gross notional amount of these contracts, not designated as hedging instruments,
outstanding at April 26, 2013 and April 27, 2012 was $2.059 billion and $2.039 billion, respectively.
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