Medtronic 2013 Annual Report Download - page 129

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Table of Contents
Medtronic, Inc.
Notes to Consolidated Financial Statements (Continued)
The Company’s U.S. qualified defined benefit plans are funded in excess of 80 percent and, therefore, the Company expects that
the plans will not be subject to the “at risk” funding requirements of the Pension Protection Act and that the law will not have a
material impact on future contributions.
The initial health care cost trend rates for post-retirement benefit plans was 7.75 percent for pre-65 and 7.00 percent for post-65
at April 26, 2013. 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 $ (1)
Effect on post-retirement benefit obligation 13 (10)
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 since fiscal year 2006, the entire match has been made in cash. Expense
under these plans was $163 million, $106 million, and $147 million in fiscal years 2013, 2012, and 2011, 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 ten-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 $50 million, $48 million, and $46
million in fiscal years 2013, 2012, and 2011, 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 26, 2013 are:
(in millions) Capitalized Operating
Fiscal Year Leases Leases
2014 $ 18 $ 104
2015 18 74
2016 17 48
2017 34 27
2018 22 14
Thereafter 85 27
Total minimum lease payments $ 194 $ 294
Less amounts representing interest (30) N/A
Present value of net minimum lease payments $ 164 N/A
Rent expense for all operating leases, including discontinued operations in prior years, was $140 million, $153 million, and $148
million in fiscal years 2013, 2012, and 2011, respectively.
In April 2012, the Company entered into a $165 million sale-leaseback agreement with a financial institution whereby certain
manufacturing equipment was sold to the financial institution and is being leased by the Company over a ten-year period. The
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