ý | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 26, 2013 |
MEDTRONIC, INC. | |
(Exact name of registrant as specified in its charter) | |
Minnesota | 41-0793183 |
(State of incorporation) | (I.R.S. Employer Identification No.) |
Large accelerated filer x | Accelerated filer o | |
Non-accelerated filer o | Smaller Reporting Company o |
Item | Description | Page | ||
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6. | ||||
Three months ended | |||||||
July 26, 2013 | July 27, 2012 | ||||||
(in millions, except per share data) | |||||||
Net sales | $ | 4,083 | $ | 4,008 | |||
Costs and expenses: | |||||||
Cost of products sold | 1,022 | 973 | |||||
Research and development expense | 360 | 385 | |||||
Selling, general, and administrative expense | 1,416 | 1,405 | |||||
Special charges | 40 | — | |||||
Restructuring charges | 18 | — | |||||
Acquisition-related items | (96 | ) | 5 | ||||
Amortization of intangible assets | 86 | 80 | |||||
Other expense, net | 44 | 39 | |||||
Interest expense, net | 40 | 33 | |||||
Total costs and expenses | 2,930 | 2,920 | |||||
Earnings before income taxes | 1,153 | 1,088 | |||||
Provision for income taxes | 200 | 224 | |||||
Net earnings | $ | 953 | $ | 864 | |||
Basic earnings per share | $ | 0.94 | $ | 0.84 | |||
Diluted earnings per share | $ | 0.93 | $ | 0.83 | |||
Basic weighted average shares outstanding | 1,009.7 | 1,029.8 | |||||
Diluted weighted average shares outstanding | 1,021.2 | 1,037.1 | |||||
Cash dividends declared per common share | $ | 0.2800 | $ | 0.2600 |
Three months ended | |||||||
July 26, 2013 | July 27, 2012 | ||||||
(in millions) | |||||||
Net earnings | $ | 953 | $ | 864 | |||
Other comprehensive income (loss), net of tax: | |||||||
Unrealized gain (loss) on investments, net of tax expense (benefit) of $(54) and $3, respectively | (95 | ) | 6 | ||||
Translation adjustment | (3 | ) | (116 | ) | |||
Net change in retirement obligations, net of tax expense of $9 and $13, respectively | 14 | 30 | |||||
Unrealized gain on derivatives, net of tax expense of $0 and $20, respectively | — | 38 | |||||
Other comprehensive loss | (84 | ) | (42 | ) | |||
Comprehensive income | $ | 869 | $ | 822 |
July 26, 2013 | April 26, 2013 | ||||||
(in millions, except per share data) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 828 | $ | 919 | |||
Investments | 10,576 | 10,211 | |||||
Accounts receivable, less allowance of $101 and $98, respectively | 3,627 | 3,727 | |||||
Inventories | 1,778 | 1,712 | |||||
Tax assets | 576 | 539 | |||||
Prepaid expenses and other current assets | 705 | 744 | |||||
Total current assets | 18,090 | 17,852 | |||||
Property, plant, and equipment | 6,192 | 6,152 | |||||
Accumulated depreciation | (3,748 | ) | (3,662 | ) | |||
Property, plant, and equipment, net | 2,444 | 2,490 | |||||
Goodwill | 10,333 | 10,329 | |||||
Other intangible assets, net | 2,620 | 2,673 | |||||
Long-term tax assets | 188 | 232 | |||||
Other assets | 1,297 | 1,324 | |||||
Total assets | $ | 34,972 | $ | 34,900 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Short-term borrowings | $ | 1,543 | $ | 910 | |||
Accounts payable | 627 | 681 | |||||
Accrued compensation | 712 | 1,011 | |||||
Accrued income taxes | 118 | 88 | |||||
Deferred tax liabilities | 15 | 16 | |||||
Other accrued expenses | 1,270 | 1,244 | |||||
Total current liabilities | 4,285 | 3,950 | |||||
Long-term debt | 9,637 | 9,741 | |||||
Long-term accrued compensation and retirement benefits | 774 | 752 | |||||
Long-term accrued income taxes | 1,214 | 1,168 | |||||
Long-term deferred tax liabilities | 343 | 340 | |||||
Other long-term liabilities | 200 | 278 | |||||
Total liabilities | 16,453 | 16,229 | |||||
Commitments and contingencies (Notes 3 and 19) | |||||||
Shareholders’ equity: | |||||||
Preferred stock— par value $1.00 | — | — | |||||
Common stock— par value $0.10 | 100 | 102 | |||||
Retained earnings | 18,995 | 19,061 | |||||
Accumulated other comprehensive loss | (576 | ) | (492 | ) | |||
Total shareholders’ equity | 18,519 | 18,671 | |||||
Total liabilities and shareholders’ equity | $ | 34,972 | $ | 34,900 |
MEDTRONIC, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) | |||||||
Three months ended | |||||||
July 26, 2013 | July 27, 2012 | ||||||
(in millions) | |||||||
Operating Activities: | |||||||
Net earnings | $ | 953 | $ | 864 | |||
Adjustments to reconcile net earnings to net cash provided by operating activities: | |||||||
Depreciation and amortization | 208 | 197 | |||||
Amortization of debt discount and issuance costs | 2 | 23 | |||||
Acquisition-related items | (96 | ) | 5 | ||||
Provision for doubtful accounts | 14 | 14 | |||||
Deferred income taxes | 30 | (16 | ) | ||||
Stock-based compensation | 31 | 36 | |||||
Change in operating assets and liabilities, net of effect of acquisitions: | |||||||
Accounts receivable, net | 85 | 214 | |||||
Inventories | (95 | ) | (61 | ) | |||
Accounts payable and accrued liabilities | (330 | ) | (67 | ) | |||
Other operating assets and liabilities | 181 | 129 | |||||
Certain litigation charges, net | — | (6 | ) | ||||
Net cash provided by operating activities | 983 | 1,332 | |||||
Investing Activities: | |||||||
Acquisitions, net of cash acquired | (17 | ) | (23 | ) | |||
Additions to property, plant, and equipment | (78 | ) | (103 | ) | |||
Purchases of investments | (2,757 | ) | (2,740 | ) | |||
Sales and maturities of investments | 2,195 | 1,895 | |||||
Other investing activities, net | (9 | ) | (5 | ) | |||
Net cash used in investing activities | (666 | ) | (976 | ) | |||
Financing Activities: | |||||||
Acquisition-related contingent consideration | (1 | ) | (15 | ) | |||
Change in short-term borrowings, net | 761 | (284 | ) | ||||
Repayment of short-term borrowings (maturities greater than 90 days) | (125 | ) | (200 | ) | |||
Proceeds from short-term borrowings (maturities greater than 90 days) | — | 575 | |||||
Payments on long-term debt | (4 | ) | (6 | ) | |||
Dividends to shareholders | (281 | ) | (267 | ) | |||
Issuance of common stock | 568 | 24 | |||||
Repurchase of common stock | (1,340 | ) | (470 | ) | |||
Net cash used in financing activities | (422) | (643) | |||||
Effect of exchange rate changes on cash and cash equivalents | 14 | (76 | ) | ||||
Net change in cash and cash equivalents | (91 | ) | (363 | ) | |||
Cash and cash equivalents at beginning of period | 919 | 1,172 | |||||
Cash and cash equivalents at end of period | $ | 828 | $ | 809 | |||
Supplemental Cash Flow Information | |||||||
Cash paid for: | |||||||
Income taxes | $ | 70 | $ | 109 | |||
Interest | 27 | 32 |
($ in millions) | Fair Value at July 26, 2013 | Valuation Technique | Unobservable Input | Range | ||||
Discount rate | 13% - 24% | |||||||
Revenue-based payments | $41 | Discounted cash flow | Probability of payment | 100% | ||||
Projected fiscal year of payment | 2014 - 2019 | |||||||
Discount rate | 5.9% | |||||||
Product development-based payments | $4 | Discounted cash flow | Probability of payment | 100% | ||||
Projected fiscal year of payment | 2016 |
Three months ended | |||||||
(in millions) | July 26, 2013 | July 27, 2012 | |||||
Beginning Balance | $ | 142 | $ | 231 | |||
Purchase price contingent consideration | — | 5 | |||||
Contingent consideration payments | (1 | ) | (26 | ) | |||
Change in fair value of contingent consideration | (96 | ) | 5 | ||||
Ending Balance | $ | 45 | $ | 215 |
(in millions) | Employee Termination Costs | Other Costs | Total | ||||||||
Balance as of April 26, 2013 | $ | 147 | $ | 23 | $ | 170 | |||||
Restructuring charges | — | 18 | 18 | ||||||||
Payments | (41 | ) | (17 | ) | (58 | ) | |||||
Balance as of July 26, 2013 | $ | 106 | $ | 24 | $ | 130 |
(in millions) | Cost | Unrealized Gains | Unrealized Losses | Fair Value | |||||||||||
Available-for-sale securities: | |||||||||||||||
Corporate debt securities | $ | 4,801 | $ | 37 | $ | (33 | ) | $ | 4,805 | ||||||
Auction rate securities | 118 | — | (11 | ) | 107 | ||||||||||
Mortgage-backed securities | 1,067 | 4 | (12 | ) | 1,059 | ||||||||||
U.S. government and agency securities | 3,631 | 7 | (39 | ) | 3,599 | ||||||||||
Foreign government and agency securities | 29 | — | — | 29 | |||||||||||
Certificates of deposit | 6 | — | — | 6 | |||||||||||
Other asset-backed securities | 628 | 1 | (2 | ) | 627 | ||||||||||
Debt funds | 436 | 3 | (9 | ) | 430 | ||||||||||
Marketable equity securities | 69 | 58 | — | 127 | |||||||||||
Trading securities: | |||||||||||||||
Exchange-traded funds | 47 | 8 | — | 55 | |||||||||||
Cost method, equity method, and other investments | 616 | — | — | NA | |||||||||||
Total | $ | 11,448 | $ | 118 | $ | (106 | ) | $ | 10,844 |
(in millions) | Cost | Unrealized Gains | Unrealized Losses | Fair Value | |||||||||||
Available-for-sale securities: | |||||||||||||||
Corporate debt securities | $ | 4,587 | $ | 78 | $ | (4 | ) | $ | 4,661 | ||||||
Auction rate securities | 118 | — | (15 | ) | 103 | ||||||||||
Mortgage-backed securities | 1,050 | 8 | (5 | ) | 1,053 | ||||||||||
U.S. government and agency securities | 3,882 | 17 | (1 | ) | 3,898 | ||||||||||
Foreign government and agency securities | 38 | — | — | 38 | |||||||||||
Certificates of deposit | 6 | — | — | 6 | |||||||||||
Other asset-backed securities | 539 | 2 | — | 541 | |||||||||||
Marketable equity securities | 82 | 75 | (2 | ) | 155 | ||||||||||
Trading securities: | |||||||||||||||
Exchange-traded funds | 45 | 5 | — | 50 | |||||||||||
Cost method, equity method, and other investments | 549 | — | — | NA | |||||||||||
Total | $ | 10,896 | $ | 185 | $ | (27 | ) | $ | 10,505 |
July 26, 2013 | April 26, 2013 | ||||||||||||||
(in millions) | Investments | Other Assets | Investments | Other Assets | |||||||||||
Available-for-sale securities | $ | 10,521 | $ | 268 | $ | 10,161 | $ | 294 | |||||||
Trading securities | 55 | — | 50 | — | |||||||||||
Cost method, equity method, and other investments | — | 616 | — | 549 | |||||||||||
Total | $ | 10,576 | $ | 884 | $ | 10,211 | $ | 843 |
July 26, 2013 | |||||||||||||||
Less than 12 months | More than 12 months | ||||||||||||||
(in millions) | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | |||||||||||
Corporate debt securities | $ | 2,243 | $ | (31 | ) | $ | 13 | $ | (2 | ) | |||||
Auction rate securities | — | — | 107 | (11 | ) | ||||||||||
Mortgage-backed securities | 697 | (9 | ) | 44 | (3 | ) | |||||||||
U.S. government and agency securities | 1,630 | (39 | ) | — | — | ||||||||||
Other asset-backed securities | 301 | (2 | ) | — | — | ||||||||||
Debt funds | 155 | (9 | ) | — | — | ||||||||||
Total | $ | 5,026 | $ | (90 | ) | $ | 164 | $ | (16 | ) |
April 26, 2013 | |||||||||||||||
Less than 12 months | More than 12 months | ||||||||||||||
(in millions) | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | |||||||||||
Corporate debt securities | $ | 544 | $ | (1 | ) | $ | 13 | $ | (3 | ) | |||||
Auction rate securities | — | — | 103 | (15 | ) | ||||||||||
Mortgage-backed securities | 195 | (1 | ) | 44 | (4 | ) | |||||||||
U.S. government and agency securities | 291 | (1 | ) | — | — | ||||||||||
Marketable equity securities | 14 | (2 | ) | — | — | ||||||||||
Total | $ | 1,044 | $ | (5 | ) | $ | 160 | $ | (22 | ) |
Three months ended | |||||||||||||||
July 26, 2013 | July 27, 2012 | ||||||||||||||
(in millions) | Debt (a) | Equity (b) | Debt (a) | Equity (b) | |||||||||||
Proceeds from sales | $ | 2,163 | $ | 32 | $ | 1,871 | $ | 24 | |||||||
Gross realized gains | 6 | 18 | 17 | 8 | |||||||||||
Gross realized losses | (5 | ) | — | (3 | ) | — | |||||||||
Impairment losses recognized | — | — | — | (6 | ) |
(in millions) | July 26, 2013 | ||
Due in one year or less | $ | 1,512 | |
Due after one year through five years | 6,847 | ||
Due after five years through ten years | 1,759 | ||
Due after ten years | 114 | ||
Total | $ | 10,232 |
Fair Value as of July 26, 2013 | Fair Value Measurements Using Inputs Considered as | ||||||||||||||
(in millions) | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets: | |||||||||||||||
Corporate debt securities | $ | 4,805 | $ | — | $ | 4,795 | $ | 10 | |||||||
Auction rate securities | 107 | — | — | 107 | |||||||||||
Mortgage-backed securities | 1,059 | — | 1,044 | 15 | |||||||||||
U.S. government and agency securities | 3,599 | 1,639 | 1,960 | — | |||||||||||
Foreign government and agency securities | 29 | — | 29 | — | |||||||||||
Certificates of deposit | 6 | — | 6 | — | |||||||||||
Other asset-backed securities | 627 | — | 627 | — | |||||||||||
Debt funds | 430 | — | 430 | — | |||||||||||
Marketable equity securities | 127 | 127 | — | — | |||||||||||
Exchange-traded funds | 55 | 55 | — | — | |||||||||||
Derivative assets | 314 | 186 | 128 | — | |||||||||||
Total assets | $ | 11,158 | $ | 2,007 | $ | 9,019 | $ | 132 | |||||||
Liabilities: | |||||||||||||||
Derivative liabilities | $ | 73 | $ | 58 | $ | 15 | $ | — | |||||||
Contingent consideration associated with acquisitions subsequent to April 24, 2009 | 45 | — | — | 45 | |||||||||||
Total liabilities | $ | 118 | $ | 58 | $ | 15 | $ | 45 |
Fair Value as of April 26, 2013 | Fair Value Measurements Using Inputs Considered as | ||||||||||||||
(in millions) | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets: | |||||||||||||||
Corporate debt securities | $ | 4,661 | $ | — | $ | 4,651 | $ | 10 | |||||||
Auction rate securities | 103 | — | — | 103 | |||||||||||
Mortgage-backed securities | 1,053 | — | 1,039 | 14 | |||||||||||
U.S. government and agency securities | 3,898 | 1,833 | 2,065 | — | |||||||||||
Foreign government and agency securities | 38 | — | 38 | — | |||||||||||
Certificates of deposit | 6 | — | 6 | — | |||||||||||
Other asset-backed securities | 541 | — | 541 | — | |||||||||||
Marketable equity securities | 155 | 155 | — | — | |||||||||||
Exchange-traded funds | 50 | 50 | — | — | |||||||||||
Derivative assets | 394 | 213 | 181 | — | |||||||||||
Total assets | $ | 10,899 | $ | 2,251 | $ | 8,521 | $ | 127 | |||||||
Liabilities: | |||||||||||||||
Derivative liabilities | $ | 58 | $ | 40 | $ | 18 | $ | — | |||||||
Contingent consideration associated with acquisitions subsequent to April 24, 2009 | 142 | — | — | 142 | |||||||||||
Total liabilities | $ | 200 | $ | 40 | $ | 18 | $ | 142 |
Valuation Technique | Unobservable Input | Range (Weighted Average) | |
Auction rate securities | Discounted cash flow | Years to principal recovery | 2 yrs. - 12 yrs. (3 yrs.) |
Illiquidity premium | 6% |
Three months ended July 26, 2013 | |||||||||||||||||||
(in millions) | Total Level 3 Investments | Corporate debt securities | Auction rate securities | Mortgage- backed securities | Other asset- backed securities | ||||||||||||||
Balance as of April 26, 2013 | $ | 127 | $ | 10 | $ | 103 | $ | 14 | $ | — | |||||||||
Total unrealized gains (losses) included in other comprehensive income | 5 | — | 4 | 1 | — | ||||||||||||||
Balance as of July 26, 2013 | $ | 132 | $ | 10 | $ | 107 | $ | 15 | $ | — | |||||||||
Three months ended July 27, 2012 | |||||||||||||||||||
(in millions) | Total Level 3 Investments | Corporate debt securities | Auction rate securities | Mortgage- backed securities | Other asset- backed securities | ||||||||||||||
Balance as of April 27, 2012 | $ | 172 | $ | 10 | $ | 127 | $ | 29 | $ | 6 | |||||||||
Total unrealized gains (losses) included in other comprehensive income | 2 | — | 2 | — | — | ||||||||||||||
Settlements | (1 | ) | — | — | (1 | ) | — | ||||||||||||
Balance as of July 27, 2012 | $ | 173 | $ | 10 | $ | 129 | $ | 28 | $ | 6 |
(in millions, except interest rates) | Maturity by Fiscal Year | Payable as of July 26, 2013 | Payable as of April 26, 2013 | |||||||
3.000 percent five-year 2010 senior notes | 2015 | $ | 1,250 | $ | 1,250 | |||||
4.750 percent ten-year 2005 senior notes | 2016 | 600 | 600 | |||||||
2.625 percent five-year 2011 senior notes | 2016 | 500 | 500 | |||||||
1.375 percent five-year 2013 senior notes | 2018 | 1,000 | 1,000 | |||||||
5.600 percent ten-year 2009 senior notes | 2019 | 400 | 400 | |||||||
4.450 percent ten-year 2010 senior notes | 2020 | 1,250 | 1,250 | |||||||
4.125 percent ten-year 2011 senior notes | 2021 | 500 | 500 | |||||||
3.125 percent ten-year 2012 senior notes | 2022 | 675 | 675 | |||||||
2.750 percent ten-year 2013 senior notes | 2023 | 1,250 | 1,250 | |||||||
6.500 percent thirty-year 2009 senior notes | 2039 | 300 | 300 | |||||||
5.550 percent thirty-year 2010 senior notes | 2040 | 500 | 500 | |||||||
4.500 percent thirty-year 2012 senior notes | 2042 | 400 | 400 | |||||||
4.000 percent thirty-year 2013 senior notes | 2043 | 750 | 750 | |||||||
Interest rate swaps | 2015 - 2022 | 89 | 181 | |||||||
Deferred gains from interest rate swap terminations | - | 43 | 50 | |||||||
Capital lease obligations | 2015 - 2025 | 147 | 152 | |||||||
Bank borrowings | 2015 | 3 | 3 | |||||||
Discount | 2018-2043 | (20 | ) | (20 | ) | |||||
Total Long-Term Debt | $ | 9,637 | $ | 9,741 |
(in millions) | Three months ended | |||||||||
Derivatives Not Designated as Hedging Instruments | Location | July 26, 2013 | July 27, 2012 | |||||||
Foreign currency exchange rate contracts | Other expense, net | $ | 29 | $ | 47 |
Three months ended July 26, 2013 | ||||||||||
Gross (Losses) Gains Recognized in OCI on Effective Portion of Derivative | Effective Portion of (Losses) Gains on Derivative Reclassified from Accumulated Other Comprehensive Loss into Income | |||||||||
(in millions) | ||||||||||
Derivatives in Cash Flow Hedging Relationships | Amount | Location | Amount | |||||||
Foreign currency exchange rate contracts | $ | (27 | ) | Other expense, net | $ | 32 | ||||
Cost of products sold | (15 | ) | ||||||||
Total | $ | (27 | ) | $ | 17 | |||||
Three months ended July 27, 2012 | ||||||||||
Gross (Losses) Gains Recognized in OCI on Effective Portion of Derivative | Effective Portion of (Losses) Gains on Derivative Reclassified from Accumulated Other Comprehensive Loss into Income | |||||||||
(in millions) | ||||||||||
Derivatives in Cash Flow Hedging Relationships | Amount | Location | Amount | |||||||
Foreign currency exchange rate contracts | $ | 130 | Other expense, net | $ | 23 | |||||
Cost of products sold | (2 | ) | ||||||||
Total | $ | 130 | $ | 21 |
July 26, 2013 | |||||||||||
Asset Derivatives | Liability Derivatives | ||||||||||
(in millions) | Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | |||||||
Derivatives designated as hedging instruments | |||||||||||
Foreign currency exchange rate contracts | Prepaid expenses and other current assets | $ | 142 | Other accrued expenses | $ | 47 | |||||
Interest rate contracts | Other assets | 128 | Other long-term liabilities | 15 | |||||||
Foreign currency exchange rate contracts | Other assets | 44 | Other long-term liabilities | 10 | |||||||
Total derivatives designated as hedging instruments | $ | 314 | $ | 72 | |||||||
Derivatives not designated as hedging instruments | |||||||||||
Foreign currency exchange rate contracts | Prepaid expenses and other current assets | $ | — | Other accrued expenses | $ | 1 | |||||
Total derivatives not designated as hedging instruments | $ | — | $ | 1 | |||||||
Total derivatives | $ | 314 | $ | 73 |
April 26, 2013 | |||||||||||
Asset Derivatives | Liability Derivatives | ||||||||||
(in millions) | Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | |||||||
Derivatives designated as hedging instruments | |||||||||||
Foreign currency exchange rate contracts | Prepaid expenses and other current assets | $ | 150 | Other accrued expenses | $ | 34 | |||||
Interest rate contracts | Other assets | 181 | Other long-term liabilities | 18 | |||||||
Foreign currency exchange rate contracts | Other assets | 63 | Other long-term liabilities | 5 | |||||||
Total derivatives designated as hedging instruments | $ | 394 | $ | 57 | |||||||
Derivatives not designated as hedging instruments | |||||||||||
Foreign currency exchange rate contracts | Prepaid expenses and other current assets | $ | — | Other accrued expenses | $ | 1 | |||||
Total derivatives not designated as hedging instruments | $ | — | $ | 1 | |||||||
Total derivatives | $ | 394 | $ | 58 |
July 26, 2013 | Gross Amount Not Offset on the Balance Sheet | |||||||||||||||
(in millions) | Gross Amount of Recognized Assets (Liabilities) | Financial Instruments | Cash Collateral (Received) or Pledged | Net Amount | ||||||||||||
Derivative Assets | ||||||||||||||||
Foreign currency exchange rate contracts | $ | 186 | $ | (48 | ) | $ | (13 | ) | $ | 125 | ||||||
Interest rate contracts | 128 | (25 | ) | (4 | ) | 99 | ||||||||||
$ | 314 | $ | (73 | ) | $ | (17 | ) | $ | 224 | |||||||
Derivative Liabilities | ||||||||||||||||
Foreign currency exchange rate contracts | $ | (58 | ) | $ | 58 | $ | — | $ | — | |||||||
Interest rate contracts | (15 | ) | 15 | — | — | |||||||||||
$ | (73 | ) | $ | 73 | $ | — | $ | — | ||||||||
Total | $ | 241 | $ | — | $ | (17 | ) | $ | 224 |
April 26, 2013 | Gross Amount Not Offset on the Balance Sheet | |||||||||||||||
(in millions) | Gross Amount of Recognized Assets (Liabilities) | Financial Instruments | Cash Collateral (Received) or Pledged | Net Amount | ||||||||||||
Derivative Assets | ||||||||||||||||
Foreign currency exchange rate contracts | $ | 213 | $ | (42 | ) | $ | (24 | ) | $ | 147 | ||||||
Interest rate contracts | 181 | (16 | ) | (6 | ) | 159 | ||||||||||
$ | 394 | $ | (58 | ) | $ | (30 | ) | $ | 306 | |||||||
Derivative Liabilities | ||||||||||||||||
Foreign currency exchange rate contracts | $ | (40 | ) | $ | 40 | $ | — | $ | — | |||||||
Interest rate contracts | (18 | ) | 18 | — | — | |||||||||||
$ | (58 | ) | $ | 58 | $ | — | $ | — | ||||||||
Total | $ | 336 | $ | — | $ | (30 | ) | $ | 306 |
(in millions) | July 26, 2013 | April 26, 2013 | |||||
Finished goods | $ | 1,201 | $ | 1,174 | |||
Work in process | 253 | 248 | |||||
Raw materials | 324 | 290 | |||||
Total | $ | 1,778 | $ | 1,712 |
(in millions) | Cardiac and Vascular Group | Restorative Therapies Group | Diabetes Group | Total | |||||||||||
Balance as of April 26, 2013 | $ | 2,624 | $ | 6,361 | $ | 1,344 | $ | 10,329 | |||||||
Currency adjustment, net | — | 4 | — | 4 | |||||||||||
Balance as of July 26, 2013 | $ | 2,624 | $ | 6,365 | $ | 1,344 | $ | 10,333 |
(in millions) | Purchased Technology and Patents | Trademarks and Tradenames | Acquired IPR&D | Other | Total | ||||||||||||||
Other intangible assets as of July 26, 2013: | |||||||||||||||||||
Original cost | $ | 3,900 | $ | 408 | $ | 365 | $ | 112 | $ | 4,785 | |||||||||
Accumulated amortization | (1,764 | ) | (323 | ) | — | (78 | ) | (2,165 | ) | ||||||||||
Carrying value | $ | 2,136 | $ | 85 | $ | 365 | $ | 34 | $ | 2,620 | |||||||||
Other intangible assets as of April 26, 2013: | |||||||||||||||||||
Original cost | $ | 3,896 | $ | 408 | $ | 363 | $ | 104 | $ | 4,771 | |||||||||
Accumulated amortization | (1,702 | ) | (320 | ) | — | (76 | ) | (2,098 | ) | ||||||||||
Carrying value | $ | 2,194 | $ | 88 | $ | 363 | $ | 28 | $ | 2,673 |
(in millions) Fiscal Year | Estimated Amortization Expense | ||
Remaining 2014 | $ | 252 | |
2015 | 321 | ||
2016 | 309 | ||
2017 | 287 | ||
2018 | 271 | ||
2019 | 226 | ||
Thereafter | 589 | ||
Total estimated amortization expense | $ | 2,255 |
Three months ended | |||||||
(in millions) | July 26, 2013 | July 27, 2012 | |||||
Balance at the beginning of the period | $ | 35 | $ | 31 | |||
Warranty claims provision | 11 | 6 | |||||
Settlements made | (8 | ) | (6 | ) | |||
Balance at the end of the period | $ | 38 | $ | 31 |
Three months ended | |||||||
(in millions) | July 26, 2013 | July 27, 2012 | |||||
Interest income | $ | (50 | ) | $ | (56 | ) | |
Interest expense | 90 | 89 | |||||
Interest expense, net | $ | 40 | $ | 33 |
Three months ended | |||||||
(in millions, except per share data) | July 26, 2013 | July 27, 2012 | |||||
Numerator: | |||||||
Net earnings | $ | 953 | $ | 864 | |||
Denominator: | |||||||
Basic – weighted average shares outstanding | 1,009.7 | 1,029.8 | |||||
Effect of dilutive securities: | |||||||
Employee stock options | 6.6 | 1.4 | |||||
Employee restricted stock units | 4.8 | 5.7 | |||||
Other | 0.1 | 0.2 | |||||
Diluted – weighted average shares outstanding | 1,021.2 | 1,037.1 | |||||
Basic earnings per share: | $ | 0.94 | $ | 0.84 | |||
Diluted earnings per share: | $ | 0.93 | $ | 0.83 |
Three months ended | |||||||
(in millions) | July 26, 2013 | July 27, 2012 | |||||
Stock options | $ | 8 | $ | 11 | |||
Restricted stock awards | 19 | 21 | |||||
Employee stock purchase plan | 4 | 4 | |||||
Total stock-based compensation expense | $ | 31 | $ | 36 | |||
Cost of products sold | $ | 3 | $ | 3 | |||
Research and development expense | 6 | 7 | |||||
Selling, general, and administrative expense | 22 | 26 | |||||
Total stock-based compensation expense | $ | 31 | $ | 36 | |||
Income tax benefits | (8 | ) | (10 | ) | |||
Total stock-based compensation expense, net of tax | $ | 23 | $ | 26 |
U.S. Pension Benefits | Non-U.S. Pension Benefits | Post-Retirement Benefits | |||||||||||||||||||||
Three months ended | Three months ended | Three months ended | |||||||||||||||||||||
(in millions) | July 26, 2013 | July 27, 2012 | July 26, 2013 | July 27, 2012 | July 26, 2013 | July 27, 2012 | |||||||||||||||||
Service cost | $ | 27 | $ | 26 | $ | 14 | $ | 11 | $ | 5 | $ | 5 | |||||||||||
Interest cost | 24 | 23 | 7 | 7 | 3 | 4 | |||||||||||||||||
Expected return on plan assets | (35 | ) | (32 | ) | (9 | ) | (8 | ) | (5 | ) | (4 | ) | |||||||||||
Amortization of net actuarial loss | 21 | 18 | 2 | 2 | — | 1 | |||||||||||||||||
Net periodic benefit cost | $ | 37 | $ | 35 | $ | 14 | $ | 12 | $ | 3 | $ | 6 |
(in millions) | Unrealized Gain (Loss) on Investments | Cumulative Translation Adjustments (a) | Net Change in Retirement Obligations | Unrealized Gain (Loss) on Derivatives | Total Accumulated Other Comprehensive Loss | |||||||||||||||
Balance as of April 26, 2013, net of tax | $ | 97 | $ | 285 | $ | (852 | ) | $ | (22 | ) | $ | (492 | ) | |||||||
Other comprehensive (loss) income before reclassifications, before tax | (131 | ) | (3 | ) | — | 15 | (119 | ) | ||||||||||||
Tax benefit (expense) | 48 | — | — | (5 | ) | 43 | ||||||||||||||
Other comprehensive (loss) income before reclassifications, net of tax | (83 | ) | (3 | ) | — | 10 | (76 | ) | ||||||||||||
Reclassifications, before tax | (18 | ) | — | 23 | (15 | ) | (10 | ) | ||||||||||||
Tax benefit (expense) | 6 | — | (9 | ) | 5 | 2 | ||||||||||||||
Reclassifications, net of tax | (12 | ) | (b) | — | 14 | (c) | (10 | ) | (d) | (8 | ) | |||||||||
Other comprehensive (loss) income, net of tax | (95 | ) | (3 | ) | 14 | — | (84 | ) | ||||||||||||
Balance as of July 27, 2013, net of tax | $ | 2 | $ | 282 | $ | (838 | ) | $ | (22 | ) | $ | (576 | ) |
Three months ended | |||||||
(in millions) | July 26, 2013 | July 27, 2012 | |||||
Cardiac and Vascular Group | $ | 2,160 | $ | 2,115 | |||
Restorative Therapies Group | 1,554 | 1,529 | |||||
Diabetes Group | 369 | 364 | |||||
Total Net Sales | $ | 4,083 | $ | 4,008 |
Three months ended | |||||||
(in millions) | July 26, 2013 | July 27, 2012 | |||||
Cardiac and Vascular Group | $ | 756 | $ | 738 | |||
Restorative Therapies Group | 421 | 399 | |||||
Diabetes Group | 75 | 90 | |||||
Total Reportable Segments’ Earnings Before Income Taxes | 1,252 | 1,227 | |||||
Special charges | (40 | ) | — | ||||
Restructuring charges | (18 | ) | — | ||||
Acquisition-related items | 96 | (5 | ) | ||||
Interest expense, net | (40 | ) | (33 | ) | |||
Corporate | (97 | ) | (101 | ) | |||
Earnings Before Income Taxes | $ | 1,153 | $ | 1,088 |
(in millions) | July 26, 2013 | April 26, 2013 | |||||
Cardiac and Vascular Group | $ | 7,245 | $ | 6,941 | |||
Restorative Therapies Group | 10,068 | 10,058 | |||||
Diabetes Group | 1,846 | 1,857 | |||||
Total Net Assets of Reportable Segments | 19,159 | 18,856 | |||||
Short-term borrowings | (1,543 | ) | (910 | ) | |||
Long-term debt | (9,637 | ) | (9,741 | ) | |||
Corporate | 10,540 | 10,466 | |||||
Total Net Assets | $ | 18,519 | $ | 18,671 |
Three months ended | |||||||
(in millions) | July 26, 2013 | July 27, 2012 | |||||
United States | $ | 2,196 | $ | 2,227 | |||
Europe and Canada | 1,046 | 1,009 | |||||
Asia-Pacific | 656 | 611 | |||||
Other Foreign | 185 | 161 | |||||
Total Net Sales | $ | 4,083 | $ | 4,008 |
Three months ended | ||||||||||
(dollars in millions) | July 26, 2013 | July 27, 2012 | % Change | |||||||
Cardiac and Vascular Group | $ | 2,160 | $ | 2,115 | 2 | % | ||||
Restorative Therapies Group | 1,554 | 1,529 | 2 | |||||||
Diabetes Group | 369 | 364 | 1 | |||||||
Total Net Sales | $ | 4,083 | $ | 4,008 | 2 | % |
Three months ended | ||||||||||
(dollars in millions) | July 26, 2013 | July 27, 2012 | % Change | |||||||
Defibrillation Systems | $ | 655 | $ | 675 | (3 | )% | ||||
Pacing Systems | 474 | 463 | 2 | |||||||
AF and Other | 64 | 55 | 16 | |||||||
CARDIAC RHYTHM DISEASE MANAGEMENT | 1,193 | 1,193 | — | |||||||
CORONARY | 435 | 433 | — | |||||||
STRUCTURAL HEART | 313 | 280 | 12 | |||||||
ENDOVASCULAR | 219 | 209 | 5 | |||||||
TOTAL CARDIAC AND VASCULAR GROUP | 2,160 | 2,115 | 2 | |||||||
Core Spine | 641 | 645 | (1 | ) | ||||||
BMP | 124 | 141 | (12 | ) | ||||||
SPINE | 765 | 786 | (3 | ) | ||||||
NEUROMODULATION | 428 | 419 | 2 | |||||||
SURGICAL TECHNOLOGIES | 361 | 324 | 11 | |||||||
TOTAL RESTORATIVE THERAPIES GROUP | 1,554 | 1,529 | 2 | |||||||
DIABETES GROUP | 369 | 364 | 1 | |||||||
TOTAL | $ | 4,083 | $ | 4,008 | 2 | % |
• | Increasing pricing pressures, competition, and fluctuations in foreign currency. We saw less pricing pressure in the first quarter of fiscal year 2014 with the launch of several new products and believe our new technologies may continue to partially mitigate future pricing pressures. |
• | Fluctuations in U.S. and certain Western Europe market growth rates for our defibrillation and pacing system products. |
• | Continued acceptance and future growth from the Evera family of ICDs, which received Conformité Européene (CE) Mark approval in February 2013 and U.S. FDA and Japan PMDA approval in May 2013. The Evera family of ICDs have increased battery longevity, advanced shock reduction technology, and a contoured shape with thin, smooth edges that better fits inside the body. |
• | Continued acceptance and future growth from the Viva/Brava family of CRT-D devices and the Attain Performa portfolio of quadripolar leads. The Viva/Brava family of CRT-D devices utilizes a new algorithm, called AdaptivCRT, which improves patients’ response rate to CRT-D therapy by preserving the patients’ normal heart rhythms and continually adapting to individual patient needs. Our Viva/Brava CRT-D devices received CE Mark approval in August 2012 and U.S. FDA approval in May 2013. Paired with Medtronic Viva/Brava Quad CRT-D, Attain Performa leads provide additional options for physicians to optimize patient therapy. Our Attain Performa left-heart leads received CE Mark approval in March 2013. |
• | Continued and future growth from the Advisa DR MRI SureScan pacing system. The Advisa DR MRI SureScan is our second-generation magnetic resonance imaging (MRI) pacing system and is the first system to combine advanced pacing technology with proven MRI access. The Advisa DR MRI SureScan was launched in Europe during the fourth quarter of fiscal year 2010, in the U.S. in February 2013, and in Japan in the second quarter of fiscal year 2013. |
• | Continued and future growth from the Arctic Front system, including the second generation Arctic Front Advance Cardiac Cryoballoon launched in the second fiscal quarter of fiscal year 2013. The Arctic Front system is a cryoballoon indicated for the treatment of drug refractory paroxysmal atrial fibrillation. The cryoballoon treatment involves a minimally invasive procedure that efficiently creates circumferential lesions around the pulmonary vein, which is the source of erratic electrical signals that cause irregular heartbeat. |
• | Continued acceptance of the Resolute Integrity drug-eluting coronary stent and the Integrity bare metal stent. The Resolute Integrity drug-eluting coronary stent was launched in Japan at the end of August 2012, in the U.S. in February 2012, and in Europe in August 2010. Also, in February 2013, the U.S. FDA approved longer lengths of our Resolute Integrity drug-eluting coronary stent, providing access to a larger portion of the U.S. drug-eluting stent market. We expect approval for longer lengths of our Resolute Integrity drug-eluting coronary stent in Japan during fiscal year 2014. The global stent market continues to experience year-over-year declines, including increasing pricing pressure resulting from government austerity programs and reimbursement cuts in Western Europe and India. |
• | Continued and future acceptance of renal denervation therapies. Commercially, we are still in the pre-reimbursement phase in many countries, and will likely remain in that phase until we obtain additional clinical data. Our Symplicity Catheter System, which addresses uncontrolled hypertension through renal denervation, or ablation of the nerves lining the renal arteries, has received CE Mark approval and Australia’s Therapeutic Goods Administration listing, and was approved in Canada by the Therapeutic Products Directorate in the fourth quarter of fiscal year 2012. We anticipate CE Mark approval for our Symplicity Spyral multi-electrode catheter this fiscal year, which will significantly reduce ablation time. We recently completed patient enrollment in our U.S. pivotal study and remain on track for U.S. approval in late fiscal year 2015. Enrollment in our Symplicity Trial in Japan is also underway. |
• | Continued worldwide growth of the Valiant Captivia Thoracic Stent Graft System. The Valiant Captivia Thoracic Stent Graft System was launched in the U.S. in the fourth quarter of fiscal year 2012 and in Japan and China in the first quarter of fiscal year 2013. We anticipate U.S. FDA approval of a dissection indication for the Valiant Captivia Thoracic Stent Graft System in the fourth quarter of fiscal year 2014. |
• | Continued and future acceptance of the Endurant II AAA Stent Graft System. Our Endurant II AAA Stent Graft System was launched in Europe in the third quarter of fiscal year 2012, in the U.S. in the first quarter of fiscal year 2013, and in Japan in the first quarter of fiscal year 2014. |
• | Continued acceptance of our CoreValve transcatheter heart valve technologies for the replacement of the aortic valve. The CoreValve System has received CE Mark approval and is currently available outside the U.S. The CoreValve 31 millimeter received CE Mark approval in the first quarter of fiscal year 2012. The CoreValve Evolut 23 millimeter valve, which promotes better sealing and provides future recapturability, was launched in Europe in the first quarter of fiscal year 2013. On August 26, 2013, Medtronic's sale or use of the CoreValve product in Germany was enjoined. We continue to make progress on the CoreValve System in the U.S. pivotal study; and remain on track to commercialize in the U.S. in fiscal year 2015. Additionally, patent litigation is pending in both the U.S. and Germany; for additional information, see Note 19 to the current period’s condensed consolidated financial statements. |
• | Continued and future growth from our Engager transcatheter aortic valve implantation system. The Engager System was launched in Europe in the fourth quarter of fiscal year 2013. |
• | Changes in procedural volumes, competitive and pricing pressure, reimbursement challenges, impacts from changes in the mix of our product offerings, and fluctuations in foreign currency. |
• | Market acceptance and continued adoption of innovative new products, such as our Solera product line, Bryan ACD Instrument Set, and other biologics products, including MAGNIFUSE and GRAFTON products, and POWEREASE, a powered instrument solution for Solera. |
• | Market acceptance and continued market penetration of BKP. We remain focused on generating evidence to better demonstrate the clinical and economic benefits for BKP. We will continue to tailor our BKP product offering to meet market needs and respond to competitive challenges. We anticipate additional continued pricing pressures and competitive alternatives in the U.S. and European markets. |
• | Spine sales continue to be negatively affected by the June 2011 articles in The Spine Journal, and by the reaction from inquiries by governmental authorities, relating to our INFUSE bone graft product. The Spine Journal articles suggested that some physicians' peer-reviewed studies may have underreported complications and adverse events associated with INFUSE. These articles did not question the integrity of the data provided by Medtronic to the U.S. FDA for product approval or the disclosure of safety issues on the product's Instructions for Use for approved indications. In August 2011, we provided a grant to Yale University to oversee two independent, systematic reviews of data from completed clinical studies of INFUSE bone graft, as well as data from other Medtronic studies of rhBMP-2, the protein used in INFUSE. Yale independently assembled a panel of experts and commissioned Oregon Health & Sciences University and University of York in the United Kingdom to conduct the analyses of the data. The two systematic reviews, which were summarized in articles published in the Annals of Internal Medicine in June 2013, concluded, among other things, that INFUSE is an effective therapy in certain types of spine surgery, and that INFUSE entails a number of risks that should be considered by physicians and patients. Looking ahead, the Company expects continued scientific and clinical |
• | Acceptance of Kanghui's broad portfolio of trauma, spine, and large-joint reconstruction products focused on the growing value segment. |
• | European and U.S. adoption of stimulators and leads approved for full-body MRI scans to treat chronic pain. U.S. FDA approval was received for the SureScan MRI system in the first quarter of fiscal year 2014 and the full launch will occur in the second quarter of fiscal year 2014. |
• | Resolution of issue with the U.S. FDA relating to our Neuromodulation business. In July 2012, we received a U.S. FDA warning letter regarding findings related primarily to our Neuromodulation corrective and preventative action (CAPA) and complaint handling processes. We are currently working with the U.S. FDA to resolve the issues. This warning letter may limit our ability to launch certain new Neuromodulation products in the U.S. until it is resolved. |
• | Continued acceptance of the non-MRI pain stimulators to treat chronic pain, including RestoreSensor, which is currently available in the U.S. and certain international markets. RestoreSensor is a neurostimulator for chronic pain that automatically adjusts to the patients’ position changes. |
• | Continued and future acceptance of our current indications for Medtronic DBS Therapy for the treatment of movement disorders, epilepsy (approved in Europe), and OCD. The DBS Therapy portfolio includes Activa PC, our small and advanced primary cell battery, and Activa RC, a rechargeable DBS device. |
• | Continued acceptance of InterStim Therapy for the treatment of the symptoms of overactive bladder, urinary retention, and bowel incontinence. |
• | Continued growth from Advanced Energy products and strategies to focus on its four core markets of orthopedic, spine, breast, and CRDM replacements. |
• | Continued acceptance of the Surgical Technologies StealthStation S7 and O-Arm Imaging Systems, especially with Synergy Spine 2.0 and the O-Arm 3.1.4. |
• | Increasing competitive and pricing pressures and fluctuations in foreign currency. |
• | Changes in medical reimbursement policies and programs. Continued acceptance and improved reimbursement of CGM technologies. |
• | Continued acceptance from both physicians and patients of insulin-pump and CGM therapy. |
• | Continued and future growth of the Veo insulin pump which is available in certain international markets and offers low-glucose suspend, which assists in protecting against the risk of hypoglycemia by automatically suspending insulin delivery when glucose falls below a specified threshold set by the user. |
• | U.S. FDA approval of the MiniMed 530G system which includes the insulin pump and Enlite sensor. We are working with the U.S. FDA to address its questions on the Diabetes quality system, resulting from its recent audit, and expect to make this technology available to the U.S. population this fiscal year. The Enlite sensor |
Three months ended | |||||
July 26, 2013 | July 27, 2012 | ||||
Cost of products sold | 25.0 | % | 24.3 | % | |
Research and development expense | 8.8 | 9.6 | |||
Selling, general, and administrative expense | 34.7 | 35.1 | |||
Special charges | 1.0 | — | |||
Restructuring charges | 0.4 | — | |||
Acquisition-related items | (2.4 | ) | 0.1 | ||
Amortization of intangible assets | 2.1 | 2.0 | |||
Other expense, net | 1.1 | 1.0 | |||
Interest expense, net | 1.0 | 0.8 |
Three months ended | |||||||
(in millions) | July 26, 2013 | July 27, 2012 | |||||
Special charges | $ | 40 | $ | — | |||
Restructuring charges | 18 | — | |||||
Acquisition-related items | (96 | ) | 5 | ||||
Net tax impact of special charges, restructuring charges, and acquisition-related items | (17 | ) | — | ||||
Total special charges, restructuring charges, and acquisition-related items, net of tax | $ | (55 | ) | $ | 5 |
Three months ended | |||||||
(dollars in millions) | July 26, 2013 | July 27, 2012 | |||||
Provision for income taxes | $ | 200 | $ | 224 | |||
Effective tax rate | 17.3 | % | 20.6 | % | |||
Net tax impact of special charges, restructuring charges, and acquisition-related items | 2.2 | (0.1 | ) | ||||
Non-GAAP nominal tax rate(1) | 19.5 | % | 20.5 | % |
(1) | Non-GAAP nominal tax rate is defined as the income tax provision as a percentage of earnings before income taxes, excluding special charges, restructuring charges, net, certain litigation charges, net, acquisition-related items, and certain tax adjustments. We believe that the resulting non-GAAP financial measure provides useful information to investors because it excludes the effect of these discrete items so that investors can compare our recurring results over multiple periods. Investors should consider this non-GAAP measure in addition to, and not as a substitute for, financial performance measures prepared in accordance with U.S. GAAP. In addition, this non-GAAP financial measure may not be the same or similar to measures presented by other companies. |
(dollars in millions) | July 26, 2013 | April 26, 2013 | |||||
Working capital | $ | 13,805 | $ | 13,902 | |||
Current ratio* | 4.2:1.0 | 4.5:1.0 | |||||
Cash, cash equivalents, and current investments | $ | 11,404 | $ | 11,130 | |||
Less: Short-term borrowings and long-term debt | $ | 11,180 | $ | 10,651 | |||
Net cash position** | $ | 224 | $ | 479 |
* | Current ratio is the ratio of current assets to current liabilities. | |
** | Net cash position is the sum of cash, cash equivalents, and current investments less short-term borrowings and long-term debt and excludes non-current investments that are not considered readily available to fund current operations. |
Three months ended | |||||||
(in millions) | July 26, 2013 | July 27, 2012 | |||||
Cash provided by (used in): | |||||||
Operating activities | $ | 983 | $ | 1,332 | |||
Investing activities | (666 | ) | (976 | ) | |||
Financing activities | (422 | ) | (643 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | 14 | (76 | ) | ||||
Net change in cash and cash equivalents | $ | (91 | ) | $ | (363 | ) |
Maturity by Fiscal Year | ||||||||||||||||||||||||||||
(in millions) | Total | Remaining 2014 | 2015 | 2016 | 2017 | 2018 | Thereafter | |||||||||||||||||||||
Contractual obligations related to off-balance sheet arrangements: | ||||||||||||||||||||||||||||
Operating leases(1) | $ | 297 | $ | 83 | $ | 84 | $ | 58 | $ | 31 | $ | 14 | $ | 27 | ||||||||||||||
Inventory purchases(2) | 145 | 76 | 49 | 14 | — | — | 6 | |||||||||||||||||||||
Commitments to fund minority investments/contingent acquisition consideration(3) | 306 | 15 | 100 | 13 | 101 | — | 77 | |||||||||||||||||||||
Interest payments(4) | 4,189 | 367 | 342 | 290 | 277 | 263 | 2,650 | |||||||||||||||||||||
Other(5) | 154 | 64 | 50 | 14 | 6 | 2 | 18 | |||||||||||||||||||||
Total | $ | 5,091 | $ | 605 | $ | 625 | $ | 389 | $ | 415 | $ | 279 | $ | 2,778 | ||||||||||||||
Contractual obligations reflected in the balance sheet: | ||||||||||||||||||||||||||||
Long-term debt, including current portion(6) | $ | 9,928 | $ | 550 | $ | 1,253 | $ | 1,100 | $ | — | $ | 1,000 | $ | 6,025 | ||||||||||||||
Capital leases | 161 | 10 | 13 | 12 | 30 | 18 | 78 | |||||||||||||||||||||
Total | $ | 10,089 | $ | 560 | $ | 1,266 | $ | 1,112 | $ | 30 | $ | 1,018 | $ | 6,103 |
(1) | Certain leases require us to pay real estate taxes, insurance, maintenance, and other operating expenses associated with the leased premises. These future costs are not included in the schedule above. |
(2) | We have included inventory purchase commitments which are legally binding and specify minimum purchase quantities. These purchase commitments do not exceed our projected requirements and are in the normal course of business. These commitments do not include open purchase orders. |
(3) | Certain commitments related to the funding of cost or equity method investments and/or previous acquisitions are contingent upon the achievement of certain product-related milestones and various other favorable operational conditions. While it is not certain if and/or when these payments will be made, the maturity dates included in this table reflect our best estimates. |
(4) | Interest payments in the table above reflect the contractual interest payments on our outstanding debt, and exclude the impact of the debt discount amortization and impact of interest rate swap agreements. See Note 8 to the current period’s condensed consolidated financial statements for additional information regarding our debt agreements. |
(5) | These obligations include certain research and development arrangements. |
(6) | Long-term debt in the table above includes the $3.000 billion of 2013 Senior Notes, $1.075 billion of 2012 Senior Notes, $1.000 billion of 2011 Senior Notes, $3.000 billion of 2010 Senior Notes, $1.250 billion of 2009 Senior Notes, $600 million of 2005 Senior Notes, and certain bank borrowings. The table above excludes the debt discount, the fair value impact of outstanding interest rate swap agreements, and the unamortized gains from terminated interest rate swap agreements. See Notes 8 and 9 to the current period’s condensed consolidated financial statements for additional information regarding the interest rate swap agreements. |
Three months ended | |||||||
(in millions) | July 26, 2013 | July 27, 2012 | |||||
U.S. net sales | $ | 2,196 | $ | 2,227 | |||
Non-U.S. net sales | 1,887 | 1,781 | |||||
Total net sales | $ | 4,083 | $ | 4,008 |
Fiscal Period | Total Number of Shares Purchased (1) | Average Price Paid per Share | Total Number of Shares Purchased as a Part of Publicly Announced Program | Maximum Number of Shares that May Yet Be Purchased Under the Program | |||||||||
4/27/13-5/24/13 | 8,803,830 | $ | 48.86 | 8,803,830 | 18,436,431 | ||||||||
5/25/13-6/28/13 | 9,587,189 | 52.07 | 9,587,189 | 88,849,242 | |||||||||
6/29/13-7/26/13 | 7,659,163 | 53.53 | 7,659,163 | 81,190,079 | |||||||||
Total | 26,050,182 | $ | 51.41 | 26,050,182 | 81,190,079 |
(1) | In June 2011 and June 2013, the Company’s Board of Directors authorized the repurchase of 75 million and 80 million shares of the Company’s common stock, respectively. As authorized by the Board of Directors our program expires when its total number of authorized shares has been repurchased. |
(a) | Exhibits | |||
12.1 | Medtronic, Inc. Computation of Ratio of Earnings to Fixed Charges. | |||
31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||
31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||
32.1 | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |||
32.2 | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |||
101.INS | XBRL Instance Document | |||
101.SCH | XBRL Schema Document | |||
101.CAL | XBRL Calculation Linkbase Document | |||
101.DEF | XBRL Definition Linkbase Document | |||
101.LAB | XBRL Label Linkbase Document | |||
101.PRE | XBRL Presentation Linkbase Document |
Medtronic, Inc. | ||
(Registrant) | ||
Date: | September 4, 2013 | /s/ Omar Ishrak |
Omar Ishrak | ||
Chairman and Chief Executive Officer | ||
Date: | September 4, 2013 | /s/ Gary L. Ellis |
Gary L. Ellis | ||
Senior Vice President and | ||
Chief Financial Officer |
(in millions, except ratio of earnings to fixed charges) | Three months ended July 26, 2013 | Year ended April 26, 2013 | Year ended April 27, 2012 | Year ended April 29, 2011 | Year ended April 30, 2010 | Year ended April 24, 2009 | ||||||||||||||||||
Earnings: | ||||||||||||||||||||||||
Earnings from continuing operations before income taxes | $ | 1,153 | $ | 4,251 | $ | 4,145 | $ | 3,664 | $ | 3,944 | $ | 2,469 | ||||||||||||
Noncontrolling interest (income) loss | — | (1 | ) | 8 | 8 | 7 | 1 | |||||||||||||||||
Capitalized interest (1) | (1 | ) | (4 | ) | (4 | ) | (4 | ) | (4 | ) | (5 | ) | ||||||||||||
$ | 1,152 | $ | 4,246 | $ | 4,149 | $ | 3,668 | $ | 3,947 | $ | 2,465 | |||||||||||||
Fixed Charges: | ||||||||||||||||||||||||
Interest expense, gross (2) | $ | 91 | $ | 392 | $ | 353 | $ | 454 | $ | 406 | $ | 376 | ||||||||||||
Rent interest factor (3) | 11 | 42 | 46 | 44 | 46 | 45 | ||||||||||||||||||
$ | 102 | $ | 434 | $ | 399 | $ | 498 | $ | 452 | $ | 421 | |||||||||||||
Earnings before income taxes and fixed charges | $ | 1,254 | $ | 4,680 | $ | 4,548 | $ | 4,166 | $ | 4,399 | $ | 2,886 | ||||||||||||
Ratio of earnings to fixed charges | 12 | 11 | 11 | 8 | 10 | 7 |
(1) Capitalized interest relates to construction projects in process. |
(2) Interest expense, gross consists of interest on indebtedness. |
(3) Approximately one-third of rental expense is deemed representative of the interest factor. |
1. | I have reviewed this Quarterly Report on Form 10-Q of Medtronic, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: September 4, 2013 | /s/ Omar Ishrak |
Omar Ishrak Chairman and Chief Executive Officer |
1. | I have reviewed this Quarterly Report on Form 10-Q of Medtronic, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: September 4, 2013 | /s/ Gary L. Ellis |
Gary L. Ellis Senior Vice President and Chief Financial Officer |
(1) | The report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in this report fairly presents, in all material respects, the financial condition and results of operations of Medtronic, Inc. |
Date: September 4, 2013 | /s/ Omar Ishrak |
Omar Ishrak Chairman and Chief Executive Officer |
(1) | The report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in this report fairly presents, in all material respects, the financial condition and results of operations of Medtronic, Inc. |
Date: September 4, 2013 | /s/ Gary L. Ellis |
Gary L. Ellis Senior Vice President and Chief Financial Officer |
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Inventories
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3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 26, 2013
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | Inventories Inventories are stated at the lower of cost or market, with cost determined on a first-in, first-out basis. Inventory balances are as follows:
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Condensed Consolidated Statements of Comprehensive Income (Parenthetical) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | |
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Jul. 26, 2013
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Jul. 27, 2012
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Other Comprehensive Income (Loss), Tax | ||
Unrealized gain/(loss) on investments, tax expense/(benefit) | $ (54) | $ 3 |
Net change in retirement obligations, tax expense/(benefit) | 9 | 13 |
Unrealized gain/(loss) on derivatives, tax expense/(benefit) | $ 0 | $ 20 |
Acquisitions and Acquisition-Related Items
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3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 26, 2013
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Business Combinations [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions and Acquisition-Related Items | Acquisitions and Acquisition-Related Items The Company had no significant acquisitions during the three months ended July 26, 2013 or July 27, 2012. Acquisition-Related Items During the three months ended July 26, 2013, the Company recorded net income from acquisition-related items of $96 million primarily related to the reduction in the fair value of contingent consideration associated with the Ardian, Inc. (Ardian) acquisition. The Ardian contingent earn-out is based on annual revenue growth through fiscal year 2015, and the reduction in fair value is due to a continued slower commercial ramp in Europe and the extended U.S. regulatory process. During the three months ended July 27, 2012, the Company recorded net charges from acquisition-related items of $5 million related to the change in fair value of contingent consideration liabilities associated with acquisitions subsequent to April 29, 2009. Contingent Consideration Certain of the Company’s business combinations and purchases of intellectual property involve the potential for the payment of future contingent consideration upon the achievement of certain product development milestones and/or various other favorable operating conditions. Payment of the additional consideration is generally contingent on the acquired company reaching certain performance milestones, including attaining specified revenue levels or achieving product development targets. Contingent consideration is recorded at the estimated fair value of the contingent consideration on the acquisition date for all acquisitions subsequent to April 24, 2009. The fair value of the contingent consideration is remeasured at the estimated fair value at each reporting period with the change in fair value recognized as income or expense within acquisition-related items in the condensed consolidated statements of earnings. The Company measures the liability on a recurring basis using Level 3 inputs. See Note 7 for further information regarding fair value measurements. Contingent consideration liabilities are measured to fair value using projected payment dates, discount rates, probabilities of payment, and projected revenues (for revenue-based considerations). Projected contingent payment amounts are discounted back to the current period using a discounted cash flow model. Projected revenues are based on the Company’s most recent internal operational budgets and long-range strategic plans. Increases (decreases) in projected revenues, probabilities of payment, discount rates, or projected payment dates may result in higher (lower) fair value measurements. Fluctuations in any of the inputs in isolation may result in a significantly lower (higher) fair value measurement. The recurring Level 3 fair value measurements of the contingent consideration liability include the following significant unobservable inputs:
At July 26, 2013, the estimated maximum amount of undiscounted future contingent consideration that the Company is expected to make associated with all completed business combinations or purchases of intellectual property prior to April 24, 2009 was approximately $200 million. The Company estimates the milestones or other conditions associated with the contingent consideration will be reached in fiscal year 2014 and thereafter. The fair value of contingent consideration associated with acquisitions subsequent to April 24, 2009 as of July 26, 2013 and April 26, 2013 was $45 million and $142 million, respectively. As of July 26, 2013, $31 million was reflected in other long-term liabilities and $14 million was reflected in other accrued expenses in the condensed consolidated balance sheets. As of April 26, 2013, $120 million was reflected in other long-term liabilities and $22 million was reflected in other accrued expenses in the condensed consolidated balance sheets. The portion of the contingent consideration related to the acquisition date fair value of contingent consideration have been reported as financing activities in the condensed consolidated statements of cash flows. Amounts paid in excess of the original acquisition date fair value of contingent consideration have been reported as operating activities in the condensed consolidated statements of cash flows. The following table provides a reconciliation of the beginning and ending balances of contingent consideration associated with acquisitions subsequent to April 24, 2009:
Subsequent Acquisition On August 7, 2013, the Company acquired Cardiocom, LLC (Cardiocom), a privately held developer and provider of integrated solutions for the management of chronic diseases such as heart failure, diabetes, and hypertension. Cardiocom's products and services include remote monitoring and patient-centered software to enable efficient care coordination and specialized telehealth nurse support. The total value of the transaction, net of Cardiocom’s cash, was approximately $193 million. |
Retirement Benefit Plans
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3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 26, 2013
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Compensation and Retirement Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Retirement Benefit Plans | Retirement Benefit Plans The Company sponsors various retirement benefit plans, including defined benefit pension plans (pension benefits), post-retirement medical plans (post-retirement benefits), defined contribution savings plans, and termination indemnity plans, covering substantially all U.S. employees and many employees outside the U.S. The net periodic benefit cost of the plans includes the following components for the three months ended July 26, 2013 and July 27, 2012:
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Retirement Benefit Plans (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | |
---|---|---|
Jul. 26, 2013
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Jul. 27, 2012
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U.S. Pension Benefits
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Net Periodic Benefit Cost | ||
Service cost | $ 27 | $ 26 |
Interest cost | 24 | 23 |
Expected return on plan assets | (35) | (32) |
Amortization of net actuarial loss | 21 | 18 |
Net periodic benefit cost | 37 | 35 |
Non-U.S. Pension Benefits
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||
Net Periodic Benefit Cost | ||
Service cost | 14 | 11 |
Interest cost | 7 | 7 |
Expected return on plan assets | (9) | (8) |
Amortization of net actuarial loss | 2 | 2 |
Net periodic benefit cost | 14 | 12 |
Post-Retirement Benefits
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||
Net Periodic Benefit Cost | ||
Service cost | 5 | 5 |
Interest cost | 3 | 4 |
Expected return on plan assets | (5) | (4) |
Amortization of net actuarial loss | 0 | 1 |
Net periodic benefit cost | $ 3 | $ 6 |
Derivatives and Foreign Exchange Risk Management, Freestanding Derivative Forward Contracts and Cash Flow Hedges (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 3 Months Ended | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 26, 2013
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Apr. 26, 2013
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Jul. 26, 2013
Foreign Currency Exchange Rate Contracts
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Apr. 26, 2013
Foreign Currency Exchange Rate Contracts
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Jul. 26, 2013
Interest Rate Swap
|
Apr. 26, 2013
Interest Rate Swap
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Jul. 26, 2013
Other Expense, Net
Foreign Currency Exchange Rate Contracts
|
Jul. 27, 2012
Other Expense, Net
Foreign Currency Exchange Rate Contracts
|
Jul. 26, 2013
Cash Flow Hedging
|
Jul. 27, 2012
Cash Flow Hedging
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Jul. 26, 2013
Cash Flow Hedging
Foreign Currency Exchange Rate Contracts
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Jul. 27, 2012
Cash Flow Hedging
Foreign Currency Exchange Rate Contracts
|
Jul. 26, 2013
Cash Flow Hedging
Other Expense, Net
Foreign Currency Exchange Rate Contracts
|
Jul. 27, 2012
Cash Flow Hedging
Other Expense, Net
Foreign Currency Exchange Rate Contracts
|
Jul. 26, 2013
Cash Flow Hedging
Interest Expense
Interest Rate Swap
|
Jul. 26, 2013
Cash Flow Hedging
Cost of Products Sold
Foreign Currency Exchange Rate Contracts
|
Jul. 27, 2012
Cash Flow Hedging
Cost of Products Sold
Foreign Currency Exchange Rate Contracts
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Freestanding Derivative Forward Contracts | |||||||||||||||||
Notional amount of foreign currency derivatives not designated as hedging instruments | $ 1,919 | $ 2,059 | |||||||||||||||
Gain (loss) on foreign currency derivatives not designated as hedging instruments | 29 | 47 | |||||||||||||||
Cash Flow Hedges | |||||||||||||||||
Notional amount of cash flow hedge instruments | 4,704 | 4,753 | |||||||||||||||
Maximum remaining maturity of foreign currency derivatives | 3 years | ||||||||||||||||
Gains/(losses) recognized in OCI on effective portion of derivative | (27) | 130 | (27) | 130 | |||||||||||||
Effective portion of gains/(losses) on derivative reclassified from AOCI into income | 17 | 21 | 32 | 23 | 2 | (15) | (2) | ||||||||||
Notional amount of interest rate cash flow hedge | 500 | ||||||||||||||||
Weighted average fixed rate of interest rate derivatives | 2.68% | ||||||||||||||||
Unrealized gain (loss) associated with cash flow hedging instruments | 25 | (18) | |||||||||||||||
After-tax net unrealized (losses)/gains associated with cash flow hedging instruments recorded in AOCI | (22) | (22) | |||||||||||||||
Cash flow hedge unrealized gains to be reclassified over the next 12 months | $ 45 |
Goodwill and Other Intangible Assets, Net
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3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 26, 2013
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Other Intangible Assets, Net | Goodwill and Other Intangible Assets, Net The changes in the carrying amount of goodwill for the three months ended July 26, 2013 are as follows:
Balances of intangible assets, net, excluding goodwill, as of July 26, 2013 and April 26, 2013 are as follows:
Amortization expense for the three months ended July 26, 2013 and July 27, 2012 was $86 million and $80 million, respectively. Estimated aggregate amortization expense based on the current carrying value of amortizable intangible assets, excluding any possible future amortization associated with acquired IPR&D, which has not met technological feasibility, is as follows:
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Investments, Investments Portfolio and AFS Continuous Unrealized Loss Position (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | ||||||||||||||||||||||||||||||||||
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Jul. 26, 2013
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Apr. 26, 2013
|
Jul. 26, 2013
Corporate Debt Securities
|
Apr. 26, 2013
Corporate Debt Securities
|
Jul. 26, 2013
Auction Rate Securities
|
Apr. 26, 2013
Auction Rate Securities
|
Jul. 26, 2013
Mortgage Backed Securities
|
Apr. 26, 2013
Mortgage Backed Securities
|
Jul. 26, 2013
US Government and Agency Securities
|
Apr. 26, 2013
US Government and Agency Securities
|
Jul. 26, 2013
Foreign Government and Agency Securities
|
Apr. 26, 2013
Foreign Government and Agency Securities
|
Jul. 26, 2013
Certificates of Deposit
|
Apr. 26, 2013
Certificates of Deposit
|
Jul. 26, 2013
Other Asset-backed Securities
|
Apr. 26, 2013
Other Asset-backed Securities
|
Jul. 26, 2013
Debt Funds [Member]
|
Jul. 26, 2013
Categories of Investments, Marketable Securities, Available-for-sale Securities [Member]
|
Apr. 26, 2013
Categories of Investments, Marketable Securities, Available-for-sale Securities [Member]
|
Jul. 26, 2013
Exchange Traded Funds
|
Apr. 26, 2013
Exchange Traded Funds
|
Jul. 26, 2013
Debt Securities
|
Jul. 27, 2012
Debt Securities
|
Jul. 26, 2013
Equity Securities
|
Jul. 27, 2012
Equity Securities
|
Jul. 26, 2013
Nonrecurring
|
Apr. 26, 2013
Nonrecurring
|
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Available-for-sale securities: | |||||||||||||||||||||||||||||||||||
Available-for-sale securities, cost | $ 4,801 | $ 4,587 | $ 118 | $ 118 | $ 1,067 | $ 1,050 | $ 3,631 | $ 3,882 | $ 29 | $ 38 | $ 6 | $ 6 | $ 628 | $ 539 | $ 436 | $ 69 | $ 82 | ||||||||||||||||||
Available-for-sale securities, unrealized gains | 37 | 78 | 0 | 0 | 4 | 8 | 7 | 17 | 0 | 0 | 0 | 0 | 1 | 2 | 3 | 58 | 75 | ||||||||||||||||||
Available-for-sale securities, unrealized losses | (33) | (4) | (11) | (15) | (12) | (5) | (39) | (1) | 0 | 0 | 0 | 0 | (2) | 0 | (9) | 0 | (2) | ||||||||||||||||||
Available-for-sale securities, fair value | 4,805 | 4,661 | 107 | 103 | 1,059 | 1,053 | 3,599 | 3,898 | 29 | 38 | 6 | 6 | 627 | 541 | 430 | 127 | 155 | ||||||||||||||||||
Trading securities: | |||||||||||||||||||||||||||||||||||
Trading securities, cost | 47 | 45 | |||||||||||||||||||||||||||||||||
Trading securities, unrealized gains | 8 | 5 | |||||||||||||||||||||||||||||||||
Trading securities, unrealized losses | 0 | 0 | |||||||||||||||||||||||||||||||||
Trading securities, fair value | 55 | 50 | |||||||||||||||||||||||||||||||||
Aggregate carrying amount of investments in equity and other securities that are accounted for using the cost or equity method | 616 | 549 | 616 | 549 | |||||||||||||||||||||||||||||||
Short-term and long-term investments, cost | 11,448 | 10,896 | |||||||||||||||||||||||||||||||||
Short-term and long-term investments, unrealized gains | 118 | 185 | |||||||||||||||||||||||||||||||||
Short-term and long-term investments, unrealized losses | (106) | (27) | |||||||||||||||||||||||||||||||||
Short-term and long-term investments, fair value | 10,844 | 10,505 | |||||||||||||||||||||||||||||||||
AFS Continuous Unrealized Loss Position | |||||||||||||||||||||||||||||||||||
Less than 12 months, fair value | 5,026 | 1,044 | 2,243 | 544 | 0 | 0 | 697 | 195 | 1,630 | 291 | 301 | 155 | 14 | ||||||||||||||||||||||
Less than 12 months, unrealized losses | (90) | (5) | (31) | (1) | 0 | 0 | (9) | (1) | (39) | (1) | (2) | (9) | (2) | ||||||||||||||||||||||
More than 12 months, fair value | 164 | 160 | 13 | 13 | 107 | 103 | 44 | 44 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||
More than 12 months, unrealized losses | (16) | (22) | (2) | (3) | (11) | (15) | (3) | (4) | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||
AFS Gross Realized Gain (Loss) | |||||||||||||||||||||||||||||||||||
Proceeds from sales | 2,163 | [1] | 1,871 | [1] | 32 | [2] | 24 | [2] | |||||||||||||||||||||||||||
Gross realized gains | 6 | [1] | 17 | [1] | 18 | [2] | 8 | [2] | |||||||||||||||||||||||||||
Gross realized losses | 5 | [1] | 3 | [1] | 0 | [2] | 0 | [2] | |||||||||||||||||||||||||||
Impairment losses recognized | $ 0 | [1] | $ 0 | [1] | $ 0 | [2] | $ 6 | [2] | |||||||||||||||||||||||||||
|
Derivatives and Foreign Exchange Risk Management, Fair Value Hedges (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | ||||||
---|---|---|---|---|---|---|---|
Apr. 26, 2013
Interest Rate Swap
|
Jul. 26, 2013
Senior Notes 2010 Due 2015
|
Jul. 26, 2013
Senior Notes 2005 Due 2015
|
Jul. 26, 2013
Senior Notes 2011 Due 2016
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Jul. 26, 2013
Senior Notes 2011 Due 2021
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Jul. 26, 2013
Senior Notes 2012 Due 2022
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Jul. 26, 2013
Fair Value Hedges [Member]
Interest Rate Swap
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Fair Value Hedges | |||||||
Notional amount of interest rate fair value hedges | $ 2,625 | $ 2,625 | |||||
Interest rate derivatives hedged items | the Company’s $1.250 billion 3.000 percent 2010 Senior Notes due 2015, the $600 million 4.750 percent 2005 Senior Notes due 2015, the $500 million 2.625 percent 2011 Senior Notes due 2016, the $500 million 4.125 percent 2011 Senior Notes due 2021, and the $675 million 3.125 percent 2012 Senior Notes due 2022 | ||||||
Principal amount | 1,250 | 600 | 500 | 500 | 675 | ||
Stated interest rate | 3.00% | 4.75% | 2.625% | 4.125% | 3.125% | ||
Unrealized gain on interest rate fair value hedging instruments | 89 | ||||||
Unrealized loss on interest rate fair value hedged items | $ 89 |
Interest Expense, Net (Tables)
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Jul. 26, 2013
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Interest Expense Net [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Interest Expense, Net | Interest income and interest expense for the three months ended July 26, 2013 and July 27, 2012 are as follows:
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Segment and Geographic Information
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Jul. 26, 2013
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment and Geographic Information | Segment and Geographic Information Segment information The Company’s management evaluates performance and allocates resources based on profit and loss from operations before income taxes and interest expense, net, not including special charges, restructuring charges, and acquisition-related items. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies in Note 1 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended April 26, 2013. In the third quarter of fiscal year 2013, the Company revised its management organizational structure and separated the Diabetes business from the Restorative Therapies Group. This change did not impact the manner in which the Company internally manages and reports the results of the Diabetes business or the Restorative Therapies Group. As a result, for fiscal year 2013, the Company continued to function in two reportable segments and two operating segments, consisting of the Cardiac and Vascular Group and the Restorative Therapies Group. In the first quarter of fiscal year 2014, the Company amended the way in which management evaluates performance and allocates resources for the Diabetes business including separating the Diabetes business from the Restorative Therapies Group. As a result, the Company began to operate under three reportable segments and three operating segments with the Diabetes business operating as a separate group. Accordingly, the segment information for the prior year has been restated to present three reportable segments. The Company's Cardiac and Vascular Group consists of four businesses: Cardiac Rhythm Disease Management (CRDM), Coronary, Structural Heart, and Endovascular. The primary products sold by this operating segment include those for cardiac rhythm disorders and cardiovascular disease. The Company's Restorative Therapies Group consists of three businesses: Spine, Neuromodulation, and Surgical Technologies. The primary products sold by this operating segment include those for spinal conditions and musculoskeletal trauma, neurological disorders, urological and digestive disorders, and ear, nose, and throat conditions. The primary products sold by the Company's Diabetes Group include those for diabetes management. Net sales of the Company’s reportable segments include end-customer revenues from the sale of products they each develop and manufacture or distribute. Net sales and earnings before income taxes by reportable segment are as follows:
The following table presents the Company’s net assets by reportable segment:
Geographic information Net sales to external customers by geography are as follows:
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Contingencies
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3 Months Ended |
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Jul. 26, 2013
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Commitments and Contingencies Disclosure [Abstract] | |
Contingencies | Contingencies The Company is involved in a number of legal actions. The outcomes of these legal actions are not within the Company's complete control and may not be known for prolonged periods of time. In some actions, the claimants seek damages, as well as other relief (including injunctions barring the sale of products that are the subject of the lawsuit), that could require significant expenditures or result in lost revenues. In accordance with U.S. GAAP, the Company records a liability in the consolidated financial statements for loss contingencies when a loss is known or considered probable and the amount can be reasonably estimated. If the reasonable estimate of a known or probable loss is a range, and no amount within the range is a better estimate than any other, the minimum amount of the range is accrued. If a loss is reasonably possible but not known or probable, and can be reasonably estimated, the estimated loss or range of loss is disclosed. When determining the estimated loss or range of loss, significant judgment is required to estimate the amount and timing of a loss to be recorded. Estimates of probable losses resulting from litigation and governmental proceedings involving the Company are inherently difficult to predict, particularly when the matters are in early procedural stages, with incomplete scientific facts or legal discovery; involve unsubstantiated or indeterminate claims for damages; potentially involve penalties, fines or punitive damages; or could result in a change in business practice. While it is not possible to predict the outcome for most of the matters discussed, the Company believes it is possible that costs associated with them could have a material adverse impact on the Company's consolidated earnings, financial position, or cash flows. Litigation with Wyeth and Cordis Corporation On February 22, 2008, Wyeth and Cordis Corporation (Cordis) filed a lawsuit against the Company and its subsidiary, Medtronic AVE, Inc., in U.S. District Court for the District of New Jersey, alleging that Medtronic's Endeavor drug-eluting stent infringes three U.S. “Morris” patents alleged to be owned by Wyeth and exclusively licensed to Cordis. On January 19, 2012, the Court found the patent claims asserted against Medtronic to be invalid and entered an Order and Judgment in favor of Medtronic and the other defendants. Wyeth and Cordis have appealed. On June 24, 2013, the Court of Appeals for the Federal Circuit affirmed the District Court's order. The Company is indemnified for the claims made by Wyeth and Cordis. The Company has not recorded an expense related to damages in connection with these matters because any potential loss is not currently probable or reasonably estimable under U.S. GAAP. Additionally, the Company cannot reasonably estimate the range of loss, if any, that may result from this matter. Litigation with Edwards Lifesciences, Inc. On March 19, 2010, the U.S. District Court for the District of Delaware added Medtronic CoreValve LLC (CoreValve) as a party to litigation pending between Edwards Lifesciences, Inc. (Edwards) and CoreValve, Inc. In the litigation, Edwards asserted that CoreValve’s transcatheter aortic valve replacement product infringed three U.S. “Andersen” patents owned by Edwards. Before trial, the court granted summary judgment to Medtronic as to two of the three patents. Following a trial, on April 1, 2010 a jury found that CoreValve willfully infringed a claim on the remaining “Andersen” patent and awarded total lost profit and royalty damages, as of that time, of $74 million. On November 13, 2012, the Court of Appeals for the Federal Circuit upheld the jury verdict. Medtronic filed a petition for certiorari to the United States Supreme Court on May 6, 2013. Medtronic recorded an expense of $245 million related to probable and reasonably estimated damages for this matter in the second quarter of fiscal year 2013, of which $84 million was paid on February 28, 2013. On March 12, 2010, Edwards served a second lawsuit in the Delaware court upon CoreValve, Medtronic Vascular, and Medtronic, asserting that Medtronic's transcatheter aortic valve replacement product from CoreValve infringed three U.S. “Andersen” patents owned by Edwards, including two of the patents that were the subject of the first lawsuit. Medtronic has moved to dismiss the lawsuit. Also pending in the Delaware court is Edwards' claim that the CoreValve transcatheter aortic valve replacement product infringes a “Cribier” patent. This claim is scheduled for trial in calendar year 2014. The Company has not recorded an expense related to damages in connection with these matters because any potential loss is not currently probable or reasonably estimable under U.S. GAAP. Additionally, the Company cannot reasonably estimate the range of loss, if any, that may result from these matters. Edwards has also brought actions in Europe alleging patent infringement. Edwards previously asserted that the CoreValve product infringed an “Andersen” patent in Germany and the United Kingdom, which is a counterpart to the U.S. “Andersen” patents. Courts in both countries found that the CoreValve product does not infringe the European “Andersen” patent and dismissed both cases. On August 30, 2012, Edwards commenced a proceeding in Mannheim, Germany, alleging that Medtronic's CoreValve transcatheter valve infringes three European patents and seeking injunctive and other relief. On June 14, 2013, the Mannheim court dismissed Edwards' case on the merits that Medtronic's CoreValve transcatheter valve infringes the “Cribier” patent. On July 12, 2013, the Mannheim court found that Medtronic's CoreValve transcatheter valve infringes the “Spenser” patent and issued an injunction against Medtronic's sale or use of the CoreValve product in Germany. Medtronic has appealed the court's finding of infringement. On August 26, 2013, Edwards posted a 50 million Euro bond, as mandated by the court, to enforce the injunction. A third proceeding is pending, with a trial hearing scheduled for December 20, 2013. The Company has not recorded an expense related to damages in connection with this matter because any potential loss is not currently probable or reasonably estimable under U.S. GAAP. Additionally, the Company cannot reasonably estimate the range of loss, if any, that may result from this matter. Sprint Fidelis Product Liability Matters In 2007, a putative class action was filed in the Ontario Superior Court of Justice in Canada seeking damages for personal injuries allegedly related to the Company's Sprint Fidelis family of defibrillation leads. On October 20, 2009, the court certified a class proceeding but denied class certification on plaintiffs' claim for punitive damages. Pretrial proceedings are underway. The Company has not recorded an expense related to damages in connection with this matter because any potential loss is not currently probable or reasonably estimable under U.S. GAAP. Additionally, the Company cannot reasonably estimate the range of loss, if any, that may result from this matter. INFUSE Product Liability Litigation As of September 3, 2013, plaintiffs have filed approximately 450 lawsuits against the Company in the U.S. state and federal courts alleging personal injury from the INFUSE bone graft product. Certain law firms have advised the Company that they may bring a large number of similar claims against the Company in the future. The Company has not recorded an expense related to damages in connection with these matters because any potential loss is not currently probable or reasonably estimable under U.S. GAAP. Additionally, the Company cannot reasonably estimate the range of loss, if any, that may result from these matters. Shareholder Related Matters On March 12, 2012, Charlotte Kococinski filed a shareholder derivative action against both the Company and certain of its current and former officers and members of the Board of Directors in the U.S. District Court for the District of Minnesota, setting forth certain allegations, including a claim that defendants violated various purported duties in connection with the INFUSE bone graft product and otherwise. On March 25, 2013, the Court dismissed the case without prejudice. In May 2012, Daniel Himmel and the Saratoga Advantage Trust commenced two other separate shareholder derivative actions in Hennepin County, Minnesota, District Court against the same defendants, making allegations similar to those in the Kococinski case. West Virginia Pipe Trades and Phil Pace, on June 27 and July 3, 2013, respectively, filed putative class action complaints against Medtronic and certain of its officers in the U.S. District Court for the District of Minnesota, alleging that the defendants made false and misleading public statements regarding the INFUSE Bone Graft product during the period of December 8, 2010 through August 3, 2011. The Company has not recorded an expense related to damages in connection with these matters because any potential loss is not currently probable or reasonably estimable under U.S. GAAP. Additionally, the Company cannot reasonably estimate the range of loss, if any, that may result from these matters. Mirowski Medtronic is a licensee to the RE 38,119 patent ('119 Patent) and RE 38,897 patent ('897 Patent) owned by Mirowski Family Ventures, LLC (Mirowski) relating to the treatment of hemodynamic dysfunction. Medtronic and Mirowski dispute the application of the '119 and '897 Patents to certain Medtronic cardiac resynchronization products. On December 17, 2007, Medtronic filed an action in U.S. District Court for the District of Delaware seeking a declaration that none of its products infringe any valid claims of either the '119 or '897 Patents. If certain conditions are fulfilled, the '119 and/or '897 Patents are determined to be valid, and the Medtronic products are found to infringe the '119 and/or '897 Patents, Medtronic will be obligated to pay royalties to Mirowski based upon sales of certain cardiac resynchronization therapy-defibrillator (CRT-D) products. On March 30, 2011, the trial court entered a judgment of non-infringement in Medtronic's favor. On September 16, 2012, the Federal Circuit reversed and remanded the trial court's decision for a new trial, based on its holding that the trial court did not properly allocate the burden of proof in the initial proceedings. Medtronic filed a petition for certiorari to the United States Supreme Court on March 15, 2013, which the Supreme Court granted on May 20, 2013. The Company has not recorded an expense pursuant to U.S. GAAP requirements in connection with this matter because any loss is not probable or reasonably estimable. Additionally, the Company cannot reasonably estimate the range of loss, if any, that may result from this matter. Other Matters The Company has received subpoenas or document requests from certain government bodies seeking information regarding sales, marketing, clinical, and other information relating to the INFUSE bone graft product, including civil investigative demands from the Attorneys General in Massachusetts, California, Oregon, Illinois, and Washington. The Company is fully cooperating with these requests. On September 16, 2009, the Company received a subpoena from the Office of Inspector General for the Department of Health and Human Services in the Eastern District of California requesting production of documents relating to the Company's cardiac rhythm medical devices, including revenue, sales, marketing, and promotional documents, documents relating to reimbursement communications to customers pertaining to the devices, documents relating to scientific studies and registries pertaining to the devices, and documents relating to payments or items of value provided to customers. The Company is fully cooperating with this inquiry. On October 14, 2010, the Company received a subpoena issued by the U.S. Attorney's Office for the Western District of New York pursuant to the Health Insurance Portability & Accountability Act of 1996, relating to the Company's sales, marketing, and reimbursement support practices regarding certain neurostimulation devices. The Company is fully cooperating with this inquiry. On November 9, 2010, the French Competition Authority commenced an investigation of the Company, along with a number of other medical device companies, and the companies' trade association, Syndicat National de l'Industrie des Technologies Medicales (SNITEM), to determine whether such companies or SNITEM engaged in any anticompetitive practices in responding to tenders to purchase certain medical devices. The Company is fully cooperating with the investigation. On August 24, 2011, the Company received a letter from the U.S. Department of Justice requesting information relating to the Company's practices regarding the replacement of insulin pumps for Medicare beneficiaries. The Company is fully cooperating with this inquiry. On May 6, 2013, the Company received a letter from the United States Attorney's Office for the District of Minnesota requesting information relating to the Company's compliance with the Trade Agreements Act. The Company is fully cooperating with this inquiry. The Company has not recorded an expense related to losses in connection with these matters because any potential loss is not currently probable or reasonably estimable under U.S. GAAP. Additionally, the Company cannot reasonably estimate the range of loss, if any, that may result from these matters. In the normal course of business, the Company periodically enters into agreements that require it to indemnify customers or suppliers for specific risks, such as claims for injury or property damage arising out of the Company's products or the negligence of its personnel or claims alleging that its products infringe third-party patents or other intellectual property. The Company's maximum exposure under these indemnification provisions cannot be estimated, and the Company has not accrued any liabilities within the consolidated financial statements. Historically, the Company has not experienced significant losses on these types of indemnifications. |
Special Charages and Certain Litigation Charges, Net Special Charges (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | |
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Jul. 26, 2013
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Jul. 27, 2012
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Special Charges [Abstract] | ||
Special Charges | $ 40 | $ 0 |
Derivatives and Foreign Exchange Risk Management (Tables)
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Jul. 26, 2013
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Foreign Currency Derivative Instruments Not Designated as Hedging Instruments, Gain (Loss) in Statement of Financial Performance | The amount and location of the gains in the condensed consolidated statements of earnings related to derivative instruments, not designated as hedging instruments, for the three months ended July 26, 2013 and July 27, 2012 are as follows:
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Schedule of Cash Flow Hedging Instruments, Statements of Financial Performance and Other Comprehensive Income, Location | The amount of (losses) gains and location of the (losses) gains in the condensed consolidated statements of earnings and other comprehensive income (OCI) related to foreign currency exchange rate contract derivative instruments designated as cash flow hedges for the three months ended July 26, 2013 and July 27, 2012 are as follows:
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Schedule of Derivative Instruments in Statement of Financial Position, Fair Value |
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Offsetting Assets and Liabilities [Table Text Block] | The following table provides information as if the Company had elected to offset the asset and liability balances of derivative instruments, netted in accordance with various criteria as stipulated by the terms of the master netting arrangements with each of the counterparties. Derivatives not subject to master netting arrangements are not eligible for net presentation.
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Stock-Based Compensation (Tables)
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Jul. 26, 2013
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Components and Classification of Stock-based Compensation Expense | The following table presents the components and classification of stock-based compensation expense recognized for the three months ended July 26, 2013 and July 27, 2012:
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Investments (Tables)
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Jul. 26, 2013
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Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Information Regarding Short-term and Long-term Investments | Information regarding the Company’s investments at July 26, 2013 is as follows:
Information regarding the Company’s investments at April 26, 2013 is as follows:
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Information Regarding Available-for-sale and Trading Securities | Information regarding the Company’s condensed consolidated balance sheets presentation at July 26, 2013 and April 26, 2013 is as follows:
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Gross Unrealized Losses and Fair Values of Available-for-sale Securities that Have Been in a Continuous Unrealized Loss Position Deemed to be Temporary for Less than 12 Months and for More than 12 months, Aggregated by Investment Category | The following tables show the gross unrealized losses and fair values of the Company’s available-for-sale securities that have been in a continuous unrealized loss position deemed to be temporary, aggregated by investment category as of July 26, 2013 and April 26, 2013:
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Activity Related to Short-term and Long-term Investment Portfolio | Activity related to the Company’s investment portfolio is as follows:
(a) Includes available-for-sale debt securities. (b) Includes marketable equity securities, cost method, equity method, exchange-traded funds, and other investments. |
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Credit Loss Portion of Other-than-temporary Impairments on Debt Securities Held by the Company | The total other-than-temporary impairment losses on available-for-sale debt securities for the three months ended July 26, 2013 and July 27, 2012 were not significant. |
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Schedule of Available-for-sale Securities Contractual Maturities |
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Income Taxes (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | ||
---|---|---|---|
Jul. 26, 2013
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Jul. 27, 2012
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Apr. 26, 2013
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Income Tax Disclosure [Abstract] | |||
Effective tax rate from continuing operations | 17.30% | 20.60% | |
Net benefit associated with foreign dividend distributions, resolution of certain income tax audits, finalization of certain income tax returns, and changes to uncertain tax position reserves | $ 3 | ||
Gross unrecognized tax benefits | 1,105 | 1,068 | |
Accrued income tax interest and penalties | 98 | ||
Unrecognized tax benefits that would impact effective tax rate | $ 1,065 |
Interest Expense, Net (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | |
---|---|---|
Jul. 26, 2013
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Jul. 27, 2012
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Interest Income and Interest Expense | ||
Interest Income | $ (50) | $ (56) |
Interest Expense | 90 | 89 |
Interest expense, net | $ 40 | $ 33 |
Segment and Geographic Information (Tables)
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3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 26, 2013
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of Revenue from Segments to Consolidated | Net sales and earnings before income taxes by reportable segment are as follows:
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Reconciliation of Operating Profit (Loss) from Segments to Consolidated |
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Reconciliation of Net Assets from Segments to Consolidated | The following table presents the Company’s net assets by reportable segment:
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Schedule of Revenue from External Customers and Long-Lived Assets, by Geographical Areas | Net sales to external customers by geography are as follows:
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Contingencies (Details)
In Millions, unless otherwise specified |
0 Months Ended | 3 Months Ended | 0 Months Ended | 3 Months Ended | 1 Months Ended | 0 Months Ended | |||||
---|---|---|---|---|---|---|---|---|---|---|---|
Aug. 30, 2012
patent
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Jul. 26, 2013
USD ($)
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Jul. 27, 2012
USD ($)
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Apr. 01, 2010
Litigation with Edwards
USD ($)
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Mar. 19, 2010
Litigation with Edwards
patent
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Jul. 26, 2013
Litigation with Edwards
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Oct. 26, 2012
Litigation with Edwards
USD ($)
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May 31, 2012
Shareholder Related Matters
Lawsuits
|
Feb. 28, 2013
Subsequent Event
Litigation with Edwards
USD ($)
|
Aug. 26, 2013
Subsequent Event
Litigation with Edwards
Edwards Lifesciences, Inc. [Member]
EUR (€)
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Sep. 03, 2013
Subsequent Event
INFUSE Product Liability Litigation
Lawsuits
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Loss Contingency, Information about Litigation Matters | |||||||||||
Name of defendant | Medtronic CoreValve LLC | ||||||||||
Name of plaintiff | Edwards Lifesciences, Inc. | ||||||||||
Loss Contingency, Patents Allegedly Infringed, Number | 3 | 3 | |||||||||
Damages awarded to plaintiff | $ 74 | ||||||||||
Loss Contingency, Bond to Enforce Injunction | 50 | ||||||||||
Settlement | |||||||||||
Certain litigation charges, net | 0 | (6) | 245 | ||||||||
Loss Contingency, Settlement Agreement, Consideration | $ 84 | ||||||||||
Loss Contingency, New Claims Filed, Number | 2 | 450 |
Accumulated Other Comprehensive Loss (Notes)
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3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 26, 2013
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Other Comprehensive Income (Loss), before Tax [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Loss | Accumulated Other Comprehensive Loss In the first quarter of fiscal year 2014, the Company prospectively adopted guidance issued by the FASB that requires additional disclosure related to the impact of reclassification adjustments out of AOCI on net income. Changes in AOCI by component are as follows:
(a) Taxes are not provided on cumulative translation adjustments as substantially all translation adjustments relate to earnings that are intended to be indefinitely reinvested outside the U.S. Includes translation of the unrealized gains (losses) on certain foreign exchange rate derivatives held by non-U.S. functional currency entities. (b) Represents net realized gains on sales of available-for-sale securities that were reclassified from AOCI to other expense, net (see Note 6). (c) Includes net amortization of prior service costs and actuarial losses included in net periodic benefit cost (see Note 17). (d) Relates to foreign currency cash flow hedges that were reclassified from AOCI to other expense, net or cost of products sold and forward starting interest rate derivative instruments that were reclassified from AOCI to interest expense, net (see Note 9). |
Condensed Consolidated Balance Sheets (Parenthetical) (USD $)
In Millions, except Per Share data, unless otherwise specified |
Jul. 26, 2013
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Apr. 26, 2013
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Statement of Financial Position [Abstract] | ||
Allowances for accounts receivable | $ 101 | $ 98 |
Preferred stock, par value | $ 1.00 | $ 1.00 |
Common stock, par value | $ 0.10 | $ 0.10 |
Basis of Presentation
|
3 Months Ended |
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Jul. 26, 2013
|
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S.) (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information necessary for a fair presentation of results of operations, comprehensive income, financial condition, and cash flows in conformity with U.S. GAAP. In the opinion of management, the condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the results of Medtronic, Inc. and its subsidiaries (Medtronic or the Company) for the periods presented. Operating results for interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole. The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures at the date of the financial statements and during the reporting period. Actual results could materially differ from these estimates. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended April 26, 2013. The Company revised the classification of certain outstanding checks previously classified as a reduction of cash and cash equivalents in the prior period condensed consolidated balance sheet to accounts payable and revised the prior period condensed consolidated statement of cash flows for the associated impact. These revisions are considered immaterial. The Company’s fiscal years 2014, 2013, and 2012 will end or ended on April 25, 2014, April 26, 2013, and April 27, 2012, respectively. |
Special Charages and Certain Litigation Charges, Net
|
3 Months Ended |
---|---|
Jul. 26, 2013
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Special Charges and Certain Litigation Charges, Net [Abstract] | |
Special Charges and Certain Litigation Charges, Net | Special Charges and Certain Litigation Charges, Net Special Charges During the three months ended July 26, 2013, consistent with the Company's commitment to improving the health of people and communities throughout the world, the Company made a $40 million charitable contribution to the Medtronic Foundation, which is a related party non-profit organization. During the three months ended July 27, 2012, there were no special charges. Certain Litigation Charges, Net The Company classifies material litigation reserves and gains recognized as certain litigation charges, net. During the three months ended July 26, 2013 and July 27, 2012, there were no certain litigation charges, net. |
New Accounting Pronouncements
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3 Months Ended |
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Jul. 26, 2013
|
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New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
New Accounting Pronouncements | New Accounting Pronouncements Recently Adopted In December 2011 and January 2013, the Financial Accounting Standards Board (FASB) issued new accounting guidance related to disclosures on offsetting assets and liabilities on the balance sheet. This newly issued accounting standard requires an entity to disclose both gross and net information about instruments and transactions eligible for offset in the balance sheet as well as instruments and transactions executed under a master netting or similar arrangement and was issued to enable users of financial statements to understand the effects or potential effects of those arrangements on its financial position. The Company retrospectively adopted this accounting guidance in the first quarter of fiscal year 2014. The required disclosures are included in Note 9. Since the accounting guidance only requires disclosure, its adoption did not have a material impact on the Company’s consolidated financial statements. In July 2012, the FASB updated the accounting guidance related to annual and interim indefinite-lived intangible asset impairment testing. The updated accounting guidance allows entities to first assess qualitative factors before performing a quantitative assessment of the fair value of indefinite-lived intangible assets. If it is determined on the basis of qualitative factors that the fair value of indefinite-lived intangible assets is more likely than not less than the carrying amount, the existing quantitative impairment test is required. Otherwise, no further impairment testing is required. The Company adopted this accounting guidance in the first quarter of fiscal year 2014 and its adoption did not have a material impact on the Company’s consolidated financial statements. As indefinite-lived intangible assets are tested for impairment annually in the third quarter, the amended guidance will not be applied until the third quarter of fiscal year 2014. In February 2013, the FASB expanded the disclosure requirements with respect to changes in accumulated other comprehensive income (AOCI). Under this new guidance, companies will be required to disclose the amount of income (or loss) reclassified out of AOCI to each respective line item on the statements of earnings where net income is presented. The guidance allows companies to elect whether to disclose the reclassification either in the notes to the financial statements or parenthetically on the face of the financial statements. In the first quarter of fiscal year 2014, the Company prospectively adopted this guidance. The required disclosures are included in Note 18. Since the accounting guidance only impacts disclosure requirements, its adoption did not have a material impact on the Company’s consolidated financial statements. Not Yet Adopted In March 2013, the FASB issued amended guidance on a parent company's accounting for the cumulative translation adjustment (CTA) recorded in AOCI associated with a foreign entity. The amendment requires a parent to release into net income the CTA related to its investment in a foreign entity when it either sells a part or all of its investment in, or no longer holds a controlling financial interest in a subsidiary or group of assets within a foreign entity. This accounting guidance is effective for the Company beginning in the first quarter of fiscal year 2015, with early adoption permitted. Subsequent to adoption, this amended guidance would impact the Company's financial position and results of operations prospectively in the instance of an event or transaction described above. In July 2013, the FASB issued amended guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, similar tax loss, or tax credit carryforward exists. The guidance requires an unrecognized tax benefit, or a portion of an unrecognized tax benefit, to be presented as a reduction of a deferred tax asset when a net operating loss carryforward, similar tax loss, or tax credit carryforward exists, with certain exceptions. This accounting guidance is effective prospectively for the Company beginning in the first quarter of fiscal year 2015, with early adoption permitted. While the Company is currently evaluating the impact, its adoption is not expected to have a material impact on the Company’s consolidated financial statements. |
Retirement Benefit Plans (Tables)
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3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 26, 2013
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Compensation and Retirement Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Net Periodic Benefit Costs | The net periodic benefit cost of the plans includes the following components for the three months ended July 26, 2013 and July 27, 2012:
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Basis of Presentation (Policies)
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3 Months Ended |
---|---|
Jul. 26, 2013
|
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S.) (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information necessary for a fair presentation of results of operations, comprehensive income, financial condition, and cash flows in conformity with U.S. GAAP. In the opinion of management, the condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the results of Medtronic, Inc. and its subsidiaries (Medtronic or the Company) for the periods presented. Operating results for interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole. The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures at the date of the financial statements and during the reporting period. Actual results could materially differ from these estimates. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended April 26, 2013. |
Fiscal Period | The Company’s fiscal years 2014, 2013, and 2012 will end or ended on April 25, 2014, April 26, 2013, and April 27, 2012, respectively. |
Fair Value Measurements (Tables)
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3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 26, 2013
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Information by Level for Assets and Liabilities that are Measured at Fair Value on a Recurring Basis | The following tables provide information by level for assets and liabilities that are measured at fair value on a recurring basis:
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Fair Value Inputs, Assets, Quantitative Information | The following table represents the range of unobservable inputs utilized in the fair value measurement of auction rate securities classified as Level 3 as of July 26, 2013:
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Reconciliation of Beginning and Ending Balances of Items Measured at Fair Value on a Recurring Basis that Used Significant Unobservable Inputs (Level 3) | The following tables provide a reconciliation of the beginning and ending balances of items measured at fair value on a recurring basis that used significant unobservable inputs (Level 3) for the three months ended July 26, 2013 and July 27, 2012:
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Warranty Obligation (Tables)
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3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 26, 2013
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Product Warranties Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Product Warranty Obligations | Changes in the Company’s product warranty obligations during the three months ended July 26, 2013 and July 27, 2012 consisted of the following:
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Derivatives and Foreign Exchange Risk Management, Credit Risk and Other Disclosures (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | ||
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Jul. 26, 2013
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Jul. 27, 2012
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Apr. 26, 2013
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General Discussion of Derivatives | |||
Notional amount of currency exchange rate derivative instruments | $ 6,623 | $ 6,812 | |
Currency exchange rate gains/(losses) | 3 | 19 | |
Italy, Spain, Portugal and Greece
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Statement [Line Items] | |||
Accounts receivable net of allowance | 783 | 770 | |
Spain
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Statement [Line Items] | |||
Proceeds from customers | 212 | ||
GREECE
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Statement [Line Items] | |||
Deferred Revenue | $ 14 | $ 21 |