Derivatives

9 Months Ended

Jan. 25, 2013

Derivatives [Abstract]

Derivatives

Note 16.  Derivatives

Foreign Currency Exposure

Because we operate in a number of international markets, we are exposed to the impact of foreign currency exchange rate movements on earnings, particularly with respect to the U.S. dollar versus the euro. At times, we enter into foreign currency forward contracts to partially offset our foreign currency exchange gains and losses. As a result of the settlement of our euro-based trade receivables due from our European subsidiary, Cyberonics Europe BVBA, and the simultaneous investment in the subsidiary during the quarter ended January 27, 2012, we have not entered into a foreign currency derivative during fiscal year 2013; however, in the future we may hedge our exposure to foreign currency transactions.

Warrants’ Liability

In September 2005, in conjunction with the issuance of $125 million of senior subordinated convertible notes, all of which have been retired as of September 27, 2012, we sold warrants for $25.2 million to Merrill Lynch International. The warrants were recorded in common stock warrants on our consolidated balance sheets. The warrants entitled the holder to receive the net value for the purchase of 3,012,050 shares of our common stock at $50.00 per share. The warrant agreement was amended during the quarter ended October 26, 2012, and as a result, a portion of the common stock warrants were reclassed to warrants’ liability at a fair value of $3.6 million. At the quarter ended October 26, 2012, we revalued the warrants’ liability at $2.3 million, and recorded a gain of $1.3 million. The warrants were settled during the quarter ended January 25, 2013, refer to “Note 9. Warrants” for further information.

The pre-tax gains (losses) resulting from derivatives that were included in the consolidated statements of income were as follows:

			For the Thirteen Weeks Ended			For the Thirty-Nine Weeks Ended
			January 25,	January 27,		January 25,		January 27,
	Location of gain (loss) recognized in income		2013	2012		2013		2012
Euro forward contracts	Other Expense, Net	$	-	824,550	$	-	$	1,194,550
Warrants' liability	Gain (loss) on warrants' liability	$	(2,112)	-	$	1,325,574	$	-