Medtronic 2015 Annual Report Download - page 116

Medtronic plc
Notes to Consolidated Financial Statements (Continued)
program, leaving 29.7 million shares available for future repurchases. In June 2015, the Company’s Board of Directors
authorized, subject to the ongoing existence of sufficient distributable reserves, the redemption of an additional 80 million of the
Company’s ordinary shares. The Company accounts for repurchases of ordinary shares using the par value method and shares
repurchased are canceled.
11. Stock Purchase and Award Plans
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.
In January 2015, the Company’s Board of Directors approved an amendment to and assumption of the existing Medtronic, Inc.
2013 Stock Award and Incentive Plan. In fiscal year 2015, the Company granted stock awards under the Medtronic plc 2013
Stock Award and Incentive Plan (2013 Plan). The 2013 Plan was approved by the Company’s shareholders in August 2013 and
amended in January 2015. The 2013 Plan provides for the grant of non-qualified and incentive stock options, stock appreciation
rights, restricted stock, restricted stock units, performance awards, and other stock and cash-based awards. As of April 24, 2015,
there were approximately 41 million shares available for future grants under the 2013 Plan.
Share Options Options are granted at the exercise price equal to the closing price of the Company’s ordinary share on the
grant date. The majority of the Company’s options are non-qualified options with a 10-year life and a 4-year ratable vesting
term. In fiscal year 2015, the Company granted share options under the 2013 Plan.
Restricted Stock Awards Restricted stock and restricted stock units (collectively referred to as restricted stock awards) are
granted to officers and key employees. Restricted stock awards are subject to forfeiture if employment terminates prior to the
lapse of the restrictions. The Company grants restricted stock awards that typically cliff vest after four years. Restricted stock
awards are expensed over the vesting period. The Company also grants shares of performance-based restricted stock awards that
typically cliff vest after three years only if the Company has also achieved certain performance objectives. Performance awards
are expensed over the performance period based on the probability of achieving the performance objectives. Shares of restricted
stock are considered issued and outstanding shares of the Company at the grant date and have the same dividend and voting
rights as other ordinary shares. Restricted stock units are not considered issued or outstanding ordinary shares of the Company.
Dividend equivalent units are accumulated on restricted stock units during the vesting period. In fiscal year 2015, the Company
granted restricted stock units under the 2013 Plan. As of April 24, 2015, all restricted stock awards outstanding were restricted
stock units.
Employees Stock Purchase Plan The Medtronic plc Amended and Restated 2014 Employees Stock Purchase Plan (ESPP)
allows participating employees to purchase the Company’s ordinary shares at a discount through payroll deductions. Employees
can contribute up to the lesser of 10 percent of their wages or the statutory limit under the U.S. Internal Revenue Code toward
the purchase the Company’s ordinary shares at 85 percent of its market value at the end of the calendar quarter purchase period.
Employees purchased 1 million shares at an average price of $57.66 per share in the fiscal year ended April 24, 2015. As of
April 24, 2015, plan participants have had approximately $11 million withheld to purchase the Company’s ordinary shares at 85
percent of its market value on June 30, 2015, the last trading day before the end of the calendar quarter purchase period. At
April 24, 2015, approximately 22 million ordinary shares were available for future purchase under the ESPP.
Valuation Assumptions The Company uses the Black-Scholes option pricing model (Black-Scholes model) to determine the
fair value of stock options as of the grant date. The fair value of stock options under the Black-Scholes model requires
management to make assumptions regarding projected employee stock option exercise behaviors, risk-free interest rates,
volatility of the Company’s stock price, and expected dividends.
The expense recognized for shares purchased under the Company’s ESPP is equal to the 15 percent discount the employee
receives at the end of the calendar quarter purchase period. The expense recognized for restricted stock awards is equal to the
grant date fair value, which is equal to the closing stock price on the date of grant.
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