Medtronic 2015 Annual Report Download - page 71

We also have a $3.500 billion syndicated line of credit facility ($3.500 Billion Revolving Credit Facility) which expires in
January 2020. The current $3.500 Billion Revolving Credit Facility was amended and restated from a previous $2.250 billion
line of credit facility upon the close of the Transaction. The $3.500 Billion Revolving Credit Facility provides backup funding
for the commercial paper program and may also be used for general corporate purposes. The $3.500 Billion Revolving Credit
Facility provides us with the ability to increase its borrowing capacity by an additional $500 million at any time during the term
of the agreement. At each anniversary date of the $3.500 Billion Revolving Credit Facility, but not more than twice prior to the
maturity date, the Company could also request a one-year extension of the maturity date. As of April 24, 2015 and April 25,
2014, no amounts were outstanding on the committed line of credits.
Interest rates on advances on our $3.500 Billion Revolving Credit Facility are determined by a pricing matrix, based on our
long-term debt ratings assigned by S&P Ratings Services and Moody’s. For additional information on our credit ratings status
by S&P Ratings Services and Moody’s refer to “Liquidity and Capital Resources” section of this Management’s Discussion and
Analysis. Facility fees are payable on the credit facility and are determined in the same manner as the interest rates. The
agreements also contain customary covenants, all of which we remain in compliance with as of April 24, 2015.
We utilize Senior Notes that are unsecured, senior obligations that rank equally with all other secured and unsubordinated
indebtedness to meet our long-term financing needs. We use the net proceeds from the sale of the Senior Notes primarily for
working capital and general corporate purposes and in the case of Senior Notes issued on December 10, 2014, to finance the
Covidien acquisition and related expenses. Long-term debt as of April 24, 2015 was $33.752 billion compared to $10.315
billion as of April 25, 2014. The indentures under which the Senior Notes have been issued contain customary covenants, all of
which we remain in compliance with as of April 24, 2015.
As of January 26, 2015, Covidien had $5.000 billion aggregate principal amount of senior notes issued and outstanding, on
which the Company recorded a fair value adjustment, as required upon acquisition, which resulted in a premium totaling $607
million.
On December 10, 2014, we issued seven tranches of the 2015 Senior Notes with an aggregate face value of $17 billion. In
addition, on January 26, 2015, we also borrowed $3.000 billion for a term of three years under a term loan agreement. We used
these combined proceeds to fund the approximately $16 billion cash consideration portion of the approximately $50 billion
acquisition of Covidien, to pay certain transaction and financing expenses, and for working capital and general corporate
purposes, which may include repayment of indebtedness.
In February 2014, the Company issued four tranches of Senior Notes (collectively, the 2014 Senior Notes) with an aggregate
face value of $2.000 billion. The Company used the net proceeds from the sale of the 2014 Senior Notes for working capital and
general corporate purposes, including repayment of our indebtedness.
For additional information regarding our debt agreements, refer to Note 8 of the consolidated financial statements in “Item 8.
Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.
Off-Balance Sheet Arrangements and Long-Term Contractual Obligations
We acquire assets still in development, enter into research and development arrangements, and sponsor certain clinical trials that
often require milestone and/or royalty payments to a third-party, contingent upon the occurrence of certain future events.
Milestone payments may be required contingent upon the successful achievement of an important point in the development life
cycle of a product or upon certain pre-designated levels of achievement in clinical trials. In addition, if required by the
arrangement, we may have to make royalty payments based on a percentage of sales related to the product under development
or in the event that regulatory approval for marketing is obtained. In situations where we have no ability to influence the
achievement of the milestone or otherwise avoid the payment, we have included those milestone or minimum royalty payments
in the following table. However, the majority of these arrangements give us the discretion to unilaterally make the decision to
stop development of a product or cease progress of a clinical trial, which would allow us to avoid making the contingent
payments. Although we are unlikely to cease development if a device successfully achieves clinical testing objectives, these
payments are not included in the table of contractual obligations because of the contingent nature of these payments and our
ability to avoid them if we decided to pursue a different path of development or testing. See Note 2 to the consolidated financial
statements in “Item 8. Financial Statements and Supplementary Data” in this Annual Report on Form 10-K for additional
information regarding contingent consideration.
In the normal course of business, we periodically enter into agreements that require us to indemnify customers or suppliers for
specific risks, such as claims for injury or property damage arising out of our products or the negligence of our personnel or
claims alleging that our products infringe third-party patents or other intellectual property. Our maximum exposure under these
61