Medtronic 2016 Annual Report Download - page 59

Table of Contents
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In April 2016, the Company completed a cash tender offer and redemption of $2.7 billion of senior notes for $3.0 billion of total
consideration. We recognized a loss on debt extinguishment of $163 million, which included cash premiums and accelerated
amortization of deferred financing costs and debt discounts and premiums. The loss on debt extinguishment was recorded in the
interest expense in the consolidated statement of income. In addition to the loss on debt extinguishment, we recognized $20 million
of interest expense due to the acceleration of net losses on forward starting interest rate derivatives, which had been terminated
at the time of original debt issuances, relating to the portion of debt extinguished in the tender offer.
Rating for Fiscal Year Ended(1)
April 29, 2016 April 24, 2015
Standard & Poor's (S&P) Ratings Services
Long-term debt A A
Short-term debt A-1 A-1
Moody's Investors Service (Moody's)
Long-term debt A3 A3
Short-term debt P-2 P-2
(1) Agency ratings are subject to change, and there can be no assurance that a ratings agency will continue to provide ratings and/or
maintain its current ratings. A security rating is not a recommendation to buy, sell or hold securities, and may be subject to revision or
withdrawal at any time by the rating agency, and each rating should be evaluated independently of any other rating.
Standard & Poor's (S&P) Ratings Services' and Moody's Investors Service long-term debt rating and short-term debt rating at
April 29, 2016 were unchanged as compared to the ratings at April 24, 2015. We do not expect the Moody's and S&P Ratings
Services' ratings to have a significant impact on our liquidity or future flexibility to access additional liquidity given our balance
sheet, our $3.5 billion revolving credit facility and related commercial paper program, discussed above and within the “Debt and
Capital” section of this management's discussion and analysis.
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, and/or cash flows.
Notes 1 and 15 to the consolidated financial statements in “Item 8. Financial Statements and Supplementary Data” in this Annual
Report on Form 10-K provide 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. Actual settlements may be different than estimated and could
have a material impact on our consolidated earnings, financial position, and/or cash flows.
We provide for tax liabilities in our financial statements with respect to amounts that we expect to repatriate from subsidiaries (to
the extent the repatriation would be subject to tax); however, no tax liabilities are recorded for amounts that we consider to be
permanently reinvested. Our current plans do not foresee a need to repatriate funds that are designated as permanently reinvested
in order to fund our operations or meet currently anticipated liquidity and capital investment needs. However, we evaluate our
legal entity structure supporting our business operations, and to the extent such evaluation results in a change to our overall business
structure, we may be required to accrue for additional tax obligations.
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, corporate debt securities, mortgage-backed securities, other asset-backed securities,
debt funds, 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 continue to experience reduced liquidity due to low investor
demand. Although our auction rate securities are currently illiquid and other securities could become illiquid, we believe we could
liquidate a substantial amount of our portfolio without incurring a material impairment loss.
For the fiscal year ended April 29, 2016, the total other-than-temporary impairment losses on available-for-sale debt securities
were not significant. Based on our assessment of the credit quality of the underlying collateral and credit support available to each
of the remaining securities in which we are invested, we believe we have recorded all necessary other-than-temporary impairments
as we do not have the intent to sell, nor is it more likely than not that we will be required to sell, before recovery of the amortized
cost. However, as of April 29, 2016, we have $327 million of gross unrealized losses on our aggregate short-term and long-term
available-for-sale debt securities of $9.7 billion; if market conditions deteriorate, some of these holdings may experience other-
than-temporary impairment in the future which could have a material impact on our financial results. Management is required to
use estimates and assumptions in its valuation of our investments, which requires a high degree of judgment, and therefore, actual