EX-99.1 2 c58359exv99w1.htm EX-99.1 exv99w1
Exhibit 99.1
(MEDTRONIC LOGO)
NEWS RELEASE
         
 
  Contacts:    
 
        
 
  Chuck Grothaus   Jeff Warren
 
  Public Relations   Investor Relations
 
  763-505-2614   763-505-2696
FOR IMMEDIATE RELEASE
RECORD FOURTH QUARTER CAPS STRONG YEAR FOR MEDTRONIC
International Revenue Growth of 20 Percent
  •   First $4 Billion Sales Quarter in Company History
 
  •   Full Year Revenue of $15.8 Billion Increased 8 Percent
 
  •   Full Year Non-GAAP Diluted EPS of $3.22 Grew 10%; GAAP Diluted EPS of $2.79 Grew 52%
 
  •   Fourth Quarter GAAP Cash Flow from Operations of $1.237 Billion
MINNEAPOLIS – May 25, 2010 – Medtronic, Inc. (NYSE: MDT) today announced financial results for its fourth quarter and fiscal year ended April 30, 2010.
Medtronic recorded fiscal year 2010 revenue of $15.817 billion, an 8 percent increase over fiscal year 2009 revenue on both an as reported and constant currency basis. As reported, fiscal year 2010 net earnings were $3.099 billion, or $2.79 per diluted share, an increase of 50 percent and 52 percent, respectively. As detailed in the attached table, non-GAAP net earnings and diluted earnings per share for fiscal year 2010 were $3.577 billion and $3.22, an increase of 9 percent and 10 percent, respectively.
For the first time in Medtronic’s 61-year history, the company delivered revenue exceeding $4 billion in a quarter. The company reported fourth quarter revenue of $4.196 billion, a 10 percent increase over reported fourth quarter revenue a year ago, or a 6 percent increase on a constant currency basis. As reported, fourth quarter net

 

 

earnings were $954 million, or $0.86 per diluted share, an increase of 826 percent and 856 percent, respectively. As detailed in the attached table, fourth quarter net earnings and diluted earnings per share on a non-GAAP basis were $986 million and $0.89, an increase of 8 percent and 9 percent, respectively. Fourth quarter net earnings and diluted earnings per share reflect a negative impact from U.S. healthcare reform legislation related to the elimination of a federal tax deduction for government subsidies of retiree prescription drug benefits by $14.8 million, or $0.01 per diluted share, respectively.
For the year, international revenue grew to $6.451 billion, up 15 percent over the prior fiscal year and 13 percent on a constant currency basis. In fiscal year 2010, international revenue represented 41 percent of total company revenues. Medtronic generated $1.754 billion in fourth quarter international revenue, an increase of 20 percent over the same period last year and 11 percent on a constant currency basis.
“Across businesses and geographies, we have been executing against our strategy, resulting in a record $4 billion quarter,” said William A. Hawkins, chairman and chief executive officer. “We continue to strengthen our core businesses and have launched new therapies that today address a growing number of unmet chronic medical needs. We have a number of exciting new therapies we are preparing to launch in fiscal 2011, which will further solidify our leadership position in the markets we serve.”
Cardiac Rhythm Disease Management
Cardiac Rhythm Disease Management annual revenue of $5.268 billion increased 5 percent as reported and 4 percent on a constant currency basis. Fourth quarter revenue of $1.409 billion increased 8 percent as reported and 5 percent on a constant currency basis. Fourth quarter implantable cardioverter defibrillator (ICD) revenue of $881 million grew 10 percent on a constant currency basis, and pacing revenue of $495

 

 

million declined 4 percent on a constant currency basis. Fourth quarter CRDM growth was driven by ICD sales in the United States, due in part to a competitor’s suspension of sales, and the growing success of the AF Solutions business outside the United States.
CardioVascular
CardioVascular annual revenue of $2.864 billion increased 18 percent as reported and 16 percent on a constant currency basis. Fourth quarter revenue of $757 million increased 18 percent as reported and 12 percent on a constant currency basis. The Coronary, Structural Heart, and Endovascular businesses grew revenue 9 percent, 17 percent, and 12 percent, respectively, all on a constant currency basis. Strong international growth across the entire CardioVascular segment contributed to the quarterly performance.
Spinal
Spinal annual revenue of $3.500 billion increased 3 percent as reported and 2 percent on a constant currency basis. Fourth quarter Spinal revenue of $880 million was flat as reported and declined 2 percent on a constant currency basis. Outside the United States, Spinal grew 6 percent on a constant currency basis in the quarter, driven by the return to growth of balloon kyphoplasty in Western Europe.
Neuromodulation
Neuromodulation annual revenue of $1.560 billion increased 9 percent as reported and 8 percent on a constant currency basis. Fourth quarter revenue of $411 million increased 6 percent as reported and 4 percent on a constant currency basis. Neuromodulation growth was driven by sales of Activa® PC and RC Deep Brain Stimulation for movement disorders, and InterStim® Therapy for overactive bladder and urinary retention, as well as bowel control outside the United States.

 

 

Diabetes
Diabetes annual revenue of $1.237 billion increased 11 percent as reported and 10 percent on a constant currency basis. Fourth quarter revenue of $332 million increased 12 percent as reported and 8 percent on a constant currency basis. Growth in the quarter was driven by a strong international performance and growth in continuous glucose monitoring sales.
Surgical Technologies
Surgical Technologies annual revenue of $963 million increased 12 percent as reported and 11 percent on a constant currency basis. Fourth quarter revenue of $273 million increased 16 percent as reported and 13 percent on a constant currency basis. The segment experienced broad-based growth across geographies and platforms including strong results from Navigation on sales of its O-Arm® Imaging System in the United States and continued growth in the Ear, Nose and Throat business on capital equipment sales of nerve monitoring, image guided surgery, and power equipment.
Physio-Control
Physio-Control annual revenue of $425 million increased 24 percent as reported and 22 percent on a constant currency basis. Fourth quarter revenue of $134 million increased 60 percent as reported and 52 percent on a constant currency basis. Growth was driven by strong sales of the LIFEPAK 15 monitor/defibrillator and the resumption of unrestricted global shipments early in the quarter following the lifting of United States Food and Drug Administration distribution restrictions.
Guidance
The company today provided its revenue outlook and diluted earnings per share (EPS) guidance for fiscal year 2011.

 

 

For fiscal year 2011, the company expects revenue growth in the range of 5 to 8 percent on a constant currency basis. The company expects diluted EPS in the range of $3.45 to $3.55, which includes approximately $0.05 of dilution from the acquisition of Invatec and the pending ATS Medical acquisition. Excluding the impact of acquisition dilution and the benefit of the extra week in fiscal year 2010, fiscal year 2011 EPS growth is expected to be in the range of 10 percent to 13 percent.
Earnings per share guidance excludes any unusual charges or gains that might occur during the fiscal year and the impact of the non-cash charge to interest expense due to the change in accounting rules governing convertible debt. The guidance provided only reflects information available to the company at this time.
In closing, Hawkins said, “We have the most robust portfolio of products and compelling therapies in the industry, and we remain focused on providing innovative, cost-effective solutions to the global challenge of chronic diseases affecting more people worldwide than ever before.”
Webcast Information
Medtronic will host a webcast today, May 25 at 8 a.m. EDT (7 a.m. CDT), to provide information about its businesses for the public, analysts and news media. This quarterly webcast can be accessed by clicking on the Investors link on the Medtronic home page at www.medtronic.com. This earnings release will be archived at www.medtronic.com/newsroom. Within 24 hours, a replay of the webcast and a transcript of the company’s prepared remarks will be available in the “Events & Presentations” section of the Investors portion of the Medtronic website.
About Medtronic
Medtronic, Inc., headquartered in Minneapolis, is the world’s leading medical

 

 

technology company, alleviating pain, restoring health and extending life for people with chronic disease. Its Internet address is www.medtronic.com
This press release contains forward-looking statements related to expected product introductions and results of Medtronic’s operations, which are subject to risks and uncertainties, such as competitive factors, difficulties and delays inherent in the development, manufacturing, marketing and sale of medical products, government regulation and general economic conditions and other risks and uncertainties described in Medtronic’s periodic reports on file with the Securities and Exchange Commission. Actual results may differ materially from anticipated results. Medtronic does not undertake to update its forward-looking statements. Unless otherwise noted, all comparisons made in this news release are on an “as reported basis,” not on a constant currency basis; references to quarterly figures increasing or decreasing are in comparison to the fourth quarter of fiscal year 2009; and references to annual figures increasing or decreasing are in comparison to fiscal year 2009.
-end-

 

 

MEDTRONIC, INC.
REVENUE BY OPERATING SEGMENT — WORLD WIDE
(Unaudited)
                                                                                     
      FY09   FY09   FY09   FY09   FY09     FY10   FY10   FY10   FY10   FY10
($ millions)     QTR 1   QTR 2   QTR 3   QTR 4   Total     QTR 1   QTR 2   QTR 3   QTR 4   Total
             
REPORTED REVENUE :
                                                                                    
 
                                                                                    
CARDIAC RHYTHM DISEASE MANAGEMENT
     $ 1,303     $ 1,242     $ 1,169     $ 1,300     $ 5,014       $ 1,337     $ 1,278     $ 1,243     $ 1,409     $ 5,268  
Pacing Systems
       526       506       457       494       1,984         536       498       459       495       1,987  
Defibrillation Systems
       764       724       694       780       2,962         775       754       756       881       3,167  
Other
       13       12       18       26       68         26       26       28       33       114  
 
                                                                                    
SPINAL
     $ 859     $ 829     $ 832     $ 881     $ 3,400       $ 915     $ 862     $ 842     $ 880     $ 3,500  
Core Spinal
       638       631       627       666       2,560         696       642       630       664       2,632  
Biologics
       221       198       205       215       840         219       220       212       216       868  
 
                                                                                    
CARDIOVASCULAR
     $ 631     $ 596     $ 565     $ 644     $ 2,437       $ 689     $ 696     $ 722     $ 757     $ 2,864  
Coronary
       349       315       296       332       1,292         353       369       386       382       1,489  
Structural Heart
       195       186       170       195       747         218       206       216       239       880  
Endovascular
       87       95       99       117       398         118       121       120       136       495  
 
                                                                                    
NEUROMODULATION
     $ 348     $ 343     $ 354     $ 389     $ 1,434       $ 373     $ 384     $ 394     $ 411     $ 1,560  
 
                                                                                    
DIABETES
     $ 269     $ 272     $ 277     $ 296     $ 1,114       $ 295     $ 300     $ 311     $ 332     $ 1,237  
 
                                                                                    
SURGICAL TECHNOLOGIES
     $ 202     $ 213     $ 207     $ 235     $ 857       $ 227     $ 224     $ 239     $ 273     $ 963  
 
                                                                                    
PHYSIO-CONTROL
     $ 94     $ 75     $ 90     $ 84     $ 343       $ 97     $ 94     $ 100     $ 134     $ 425  
 
                                                                                    
TOTAL
     $ 3,706     $ 3,570     $ 3,494     $ 3,829     $ 14,599       $ 3,933     $ 3,838     $ 3,851     $ 4,196     $ 15,817  
             
 
                                                                                    
ADJUSTMENTS :
                                                                                    
 
                                                                                    
CURRENCY IMPACT (1)
     $ —     $ —     $ —     $ —     $ —       $ (145 )   $ (16 )   $ 144     $ 131     $ 113  
             
 
                                                                                    
COMPARABLE OPERATIONS (1)
     $ 3,706     $ 3,570     $ 3,494     $ 3,829     $ 14,599       $ 4,078     $ 3,854     $ 3,707     $ 4,065     $ 15,704  
             
 
(1)   Medtronic management believes that in order to properly understand Medtronic’s short-term and long-term financial trends, investors may wish to consider the impact of foreign currency translation on revenue. In addition, Medtronic management uses results of operations before currency translation to evaluate the operational performance of the Company and as a basis for strategic planning. Investors should consider these non-GAAP measures in addition to, and not as a substitute for, financial performance measures prepared in accordance with GAAP.
 
Note:   The data in this schedule has been intentionally rounded to the nearest million and therefore the quarterly revenue may not sum to the fiscal year to date revenue.

 

 

MEDTRONIC, INC.
REVENUE BY OPERATING SEGMENT — US
(Unaudited)
                                                                                     
      FY09   FY09   FY09   FY09   FY09     FY10   FY10   FY10   FY10   FY10
($ millions)     QTR 1   QTR 2   QTR 3   QTR 4   Total     QTR 1   QTR 2   QTR 3   QTR 4   Total
             
REPORTED REVENUE :
                                                                                    
 
                                                                                    
CARDIAC RHYTHM DISEASE MANAGEMENT
     $ 731     $ 702     $ 666     $ 742     $ 2,841       $ 762     $ 721     $ 675     $ 787     $ 2,944  
Pacing Systems
       233       228       206       228       896         247       221       193       212       872  
Defibrillation Systems
       492       472       454       505       1,923         508       492       475       567       2,043  
Other
       6       2       6       9       22         7       8       7       8       29  
 
                                                                                    
SPINAL
     $ 682     $ 647     $ 658     $ 691     $ 2,678       $ 712     $ 662     $ 644     $ 662     $ 2,680  
Core Spinal
       474       463       464       488       1,889         507       457       446       462       1,871  
Biologics
       208       184       194       203       789         205       205       198       200       809  
 
                                                                                    
CARDIOVASCULAR
     $ 253     $ 235     $ 224     $ 265     $ 976       $ 260     $ 252     $ 239     $ 264     $ 1,015  
Coronary
       120       94       88       108       407         103       106       100       111       419  
Structural Heart
       92       90       85       96       364         98       87       86       92       363  
Endovascular
       41       51       51       61       205         59       59       53       61       233  
 
                                                                                    
NEUROMODULATION
     $ 238     $ 249     $ 254     $ 279     $ 1,019       $ 265     $ 272     $ 272     $ 276     $ 1,086  
 
                                                                                    
DIABETES
     $ 167     $ 180     $ 188     $ 200     $ 736       $ 193     $ 201     $ 203     $ 213     $ 810  
 
                                                                                    
SURGICAL TECHNOLOGIES
     $ 127     $ 136     $ 132     $ 149     $ 545       $ 142     $ 140     $ 150     $ 169     $ 601  
 
                                                                                    
PHYSIO-CONTROL
     $ 51     $ 47     $ 50     $ 45     $ 192       $ 57     $ 49     $ 53     $ 71     $ 230  
 
                                                                                    
TOTAL
     $ 2,249     $ 2,196     $ 2,172     $ 2,371     $ 8,987       $ 2,391     $ 2,297     $ 2,236     $ 2,442     $ 9,366  
             
 
                                                                                    
ADJUSTMENTS :
                                                                                    
 
                                                                                    
CURRENCY IMPACT
     $ —     $ —     $ —     $ —     $ —       $ —     $ —     $ —     $ —     $ —  
             
 
                                                                                    
COMPARABLE OPERATIONS
     $ 2,249     $ 2,196     $ 2,172     $ 2,371     $ 8,987       $ 2,391     $ 2,297     $ 2,236     $ 2,442     $ 9,366  
             
 
Note: The data in this schedule has been intentionally rounded to the nearest million and therefore the quarterly revenues may not sum to the fiscal year to date revenue.

 

 

MEDTRONIC, INC.
REVENUE BY OPERATING SEGMENT — INTERNATIONAL
(Unaudited)
                                                                                     
      FY09   FY09   FY09   FY09   FY09     FY10   FY10   FY10   FY10   FY10
($ millions)     QTR 1   QTR 2   QTR 3   QTR 4   Total     QTR 1   QTR 2   QTR 3   QTR 4   Total
             
REPORTED REVENUE :
                                                                                    
 
                                                                                    
CARDIAC RHYTHM DISEASE MANAGEMENT
     $ 572     $ 540     $ 503     $ 558     $ 2,173       $ 575     $ 557     $ 568     $ 622     $ 2,324  
Pacing Systems
       293       278       251       266       1,088         289       277       266       283       1,115  
Defibrillation Systems
       272       252       240       275       1,039         267       262       281       314       1,124  
Other
       7       10       12       17       46         19       18       21       25       85  
 
                                                                                    
SPINAL
     $ 177     $ 182     $ 174     $ 190     $ 722       $ 203     $ 200     $ 198     $ 218     $ 820  
Core Spinal
       164       168       163       178       671         189       185       184       202       761  
Biologics
       13       14       11       12       51         14       15       14       16       59  
 
                                                                                    
CARDIOVASCULAR
     $ 378     $ 361     $ 341     $ 379     $ 1,461       $ 429     $ 444     $ 483     $ 493     $ 1,849  
Coronary
       229       221       208       224       885         250       263       286       271       1,070  
Structural Heart
       103       96       85       99       383         120       119       130       147       517  
Endovascular
       46       44       48       56       193         59       62       67       75       262  
 
                                                                                    
NEUROMODULATION
     $ 110     $ 94     $ 100     $ 110     $ 415       $ 108     $ 112     $ 122     $ 135     $ 474  
 
                                                                                    
DIABETES
     $ 102     $ 92     $ 89     $ 96     $ 378       $ 102     $ 99     $ 108     $ 119     $ 427  
 
                                                                                    
SURGICAL TECHNOLOGIES
     $ 75     $ 77     $ 75     $ 86     $ 312       $ 85     $ 84     $ 89     $ 104     $ 362  
 
                                                                                    
PHYSIO-CONTROL
     $ 43     $ 28     $ 40     $ 39     $ 151       $ 40     $ 45     $ 47     $ 63     $ 195  
 
                                                                                    
TOTAL
     $ 1,457     $ 1,374     $ 1,322     $ 1,458     $ 5,612       $ 1,542     $ 1,541     $ 1,615     $ 1,754     $ 6,451  
             
 
                                                                                    
ADJUSTMENTS :
                                                                                    
 
                                                                                    
CURRENCY IMPACT (1)
     $ —     $ —     $ —     $ —     $ —       $ (145 )   $ (16 )   $ 144     $ 131     $ 113  
             
 
                                                                                    
COMPARABLE OPERATIONS (1)
     $ 1,457     $ 1,374     $ 1,322     $ 1,458     $ 5,612       $ 1,687     $ 1,557     $ 1,471     $ 1,623     $ 6,338  
             
 
(1)   Medtronic management believes that in order to properly understand Medtronic’s short-term and long-term financial trends, investors may wish to consider the impact of foreign currency translation on revenue. In addition, Medtronic management uses results of operations before currency translation to evaluate the operational performance of the Company and as a basis for strategic planning. Investors should consider these non-GAAP measures in addition to, and not as a substitute for, financial performance measures prepared in accordance with GAAP.
 
Note:   The data in this schedule has been intentionally rounded to the nearest million and therefore the quarterly revenue may not sum to the fiscal year to date revenue.

 

 

MEDTRONIC, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
                                 
    Three months ended     Twelve months ended  
    April 30,     April 24,     April 30,     April 24,  
    2010     2009     2010     2009  
    (in millions, except per share data)  
Net sales
  $ 4,196     $ 3,829     $ 15,817     $ 14,599  
 
                                
Costs and expenses:
                               
Cost of products sold
     1,012       932       3,812       3,518  
Research and development expense
     378       368       1,460       1,355  
Selling, general and administrative expense
     1,396       1,313       5,415       5,152  
Special charges
     —       100       —       100  
Restructuring charges
     (12 )     24       50       120  
Certain litigation charges, net
     —       448       374       714  
Purchased in-process research and development (IPR&D) and certain acquisition-related costs
     23       530       23       621  
Other expense, net
     95       53       468       396  
Interest expense, net
     70       52       246       183  
 
                        
Total costs and expenses
    2,962       3,820       11,848       12,159  
 
                        
 
                                
Earnings before income taxes
    1,234       9       3,969       2,440  
 
                                
Provision for income taxes
    280       (94 )     870       370  
 
                        
 
                                
Net earnings
  $ 954     $ 103     $ 3,099     $ 2,070  
 
                        
 
                                
Earnings per share:
                               
 
Basic
   $ 0.87     $ 0.09     $ 2.80     $ 1.85  
 
                        
Diluted
   $ 0.86     $ 0.09     $ 2.79     $ 1.84  
 
                        
 
                                
Weighted average shares outstanding:
                               
 
Basic
     1,101.0       1,119.0       1,106.3       1,121.9  
Diluted
     1,105.5       1,120.8       1,109.4       1,126.3  

 

 

MEDTRONIC, INC.
RECONCILIATION OF CONSOLIDATED GAAP NET EARNINGS
TO CONSOLIDATED NON-GAAP NET EARNINGS
(Unaudited)
(in millions, except per share data)
                         
    Three months ended        
    April 30,     April 24,     Percentage  
    2010     2009     Change  
Net earnings, as reported
   $ 954     $ 103       826 %
Special charges
     —       64  (d)        
Restructuring charges
     (9 )(a)     16  (e)        
Certain litigation charges, net
     —       310  (f)        
IPR&D and certain acquisition-related costs
     17  (b)     530  (g)        
Certain tax adjustments
     —       (132 )(h)        
Impact of adoption of new authoritative convertible debt guidance on interest expense, net
     24  (c)     25  (c)        
 
                    
Non-GAAP net earnings
   $ 986     $ 916       8 %
 
                    
MEDTRONIC, INC.
RECONCILIATION OF CONSOLIDATED GAAP DILUTED EPS
TO CONSOLIDATED NON-GAAP DILUTED EPS
(Unaudited)
                         
    Three months ended        
    April 30,     April 24,     Percentage  
    2010     2009     Change  
Diluted EPS, as reported
   $ 0.86     $ 0.09       856 %
Special charges
     —       0.06  (d)        
Restructuring charges
     (0.01 )(a)     0.02  (e)        
Certain litigation charges, net
     —       0.28  (f)        
IPR&D and certain acquisition-related costs
     0.02  (b)     0.47  (g)        
Certain tax adjustments
     —       (0.12 )(h)        
Impact of adoption of new authoritative convertible debt guidance on interest expense, net
     0.02  (c)     0.02  (c)        
 
                    
Non-GAAP diluted EPS
   $ 0.89     $ 0.82       9 %
 
                    
 
(a)   The $9 million ($0.01 per share) after-tax ($12 million pre-tax) reversal of excess restructuring reserves is related to the fiscal year 2009 initiative that the Company began in the fourth quarter of fiscal year 2009. The $9 million after-tax reversal is primarily a result of a higher than expected percentage of employees identified for elimination finding positions elsewhere within the Company. In addition to disclosing restructuring charges that are determined in accordance with U.S. generally accepted accounting principles (U.S. GAAP), Medtronic management believes that in order to properly understand its short-term and long-term financial trends, investors may find it useful to consider the impact of excluding these restructuring charges. Management believes that the resulting non-GAAP financial measure provides useful information to investors regarding the underlying business trends and performance of the Company’s ongoing operations and is useful for period over period comparisons of such operations. Medtronic management eliminates these restructuring charges when evaluating the operating performance of the Company. 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 as similar measures presented by other companies.

 

 

(b)   The $17 million ($0.02 per share) after-tax IPR&D and certain acquisition-related costs represent a $7 million after-tax ($11 million pre-tax) IPR&D charge related to the Arbor Surgical Technologies, Inc. asset purchase and $10 million after-tax ($12 million pre-tax) of certain acquisition-related costs associated with the acquisition of Invatec, S.p.A. In the above IPR&D charge, technological feasibility of the underlying products had not yet been reached and such technology had no future alternative use. The certain acquisition-related costs include legal fees, severance costs and contract termination costs that were expensed in the period. In addition to disclosing IPR&D and certain acquisition-related costs that are determined in accordance with U.S. GAAP, Medtronic management believes that in order to properly understand its short-term and long-term financial trends, investors may find it useful to consider the impact of excluding these IPR&D and certain acquisition-related costs. Management believes that the resulting non-GAAP financial measure provides useful information to investors regarding the underlying business trends and performance of the Company’s ongoing operations and is useful for period over period comparisons of such operations. Medtronic management eliminates these IPR&D and certain acquisition-related costs when evaluating the operating performance of the Company. 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 as similar measures presented by other companies.
 
(c)   The adoption of Financial Accounting Standards Board (FASB) new authoritative guidance on accounting for convertible debt has resulted in an after-tax impact to net earnings of $24 million ($0.02 per share) and $25 million ($0.02 per share) for the three months ended April 30, 2010 and April 24, 2009, respectively. The pre-tax impact to interest expense, net was $42 million and $39 million for the three months ended April 30, 2010 and April 24, 2009, respectively. In addition to disclosing the financial statement impact of the adoption of this new authoritative guidance that is determined in accordance with U.S. GAAP, Medtronic management believes that in order to properly understand its short-term and long-term financial trends, investors may find it useful to consider the impact of excluding the impact of the adoption of this new guidance. Management believes that the resulting non-GAAP financial measure provides useful information to investors regarding the underlying business trends and performance of the Company’s ongoing operations and is useful for period over period comparisons of such operations. Medtronic management eliminates the impact of the adoption of this new guidance when evaluating the operating performance of the Company. 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 as similar measures presented by other companies.
 
(d)   The $64 million ($0.06 per share) special charge represents an after-tax charitable donation ($100 million pre-tax) made to The Medtronic Foundation. In addition to disclosing special charges that are determined in accordance with U.S. GAAP, Medtronic management believes that in order to properly understand its short-term and long-term financial trends, investors may find it useful to consider the impact of excluding this donation. Management believes that the resulting non-GAAP financial measure provides useful information to investors regarding the underlying business trends and performance of the Company’s ongoing operations and is useful for period over period comparisons of such operations. Medtronic management eliminates this donation when evaluating the operating performance of the Company. 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 as similar measures presented by other companies.
 
(e)   The $16 million ($0.02 per share) after-tax ($27 million pre-tax) restructuring charge is the net impact of a $22 million after-tax charge for restructuring initiatives that the Company began in the fourth quarter of fiscal year 2009, offset by a $6 million after-tax reversal of excess reserves related to the global realignment initiative that began in the fourth quarter of fiscal year 2008. The fiscal year 2009 initiatives were designed to streamline operations and further align resources around the Company’s higher growth opportunities. The initiative impacted most businesses and certain corporate functions. The Company recorded $2 million of the after-tax expense within cost of products sold related to inventory write-offs and production-related asset impairments associated with these restructuring activities. The $6 million after-tax reversal is primarily a result of favorable severance negotiations with certain employee populations outside the U.S. as well as a higher than expected percentage of employees identified for elimination finding positions elsewhere within the Company. In addition to disclosing restructuring charges that are determined in accordance with U.S. GAAP, Medtronic management believes that in order to properly understand its short-term and long-term financial trends, investors may find it useful to consider the impact of excluding these restructuring charges. Management believes that the resulting non-GAAP financial measure provides useful information to investors regarding the underlying business trends and performance of the Company’s ongoing operations and is useful for period over period comparisons of such operations. Medtronic management eliminates these restructuring charges when evaluating the operating performance of the Company. 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 as similar measures presented by other companies.
 
(f)   The $310 million ($0.28 per share) after-tax ($448 million pre-tax) certain litigation charges, net relate to settlements with Johnson & Johnson (J&J) and DePuy Spine (formerly DePuy/AcroMed), a subsidiary of Johnson & Johnson, and Biedermann Motech GmbH (collectively, DePuy). The J&J settlement accounted for $188 million after-tax ($270 million pre-tax) charges and the DePuy settlement accounted for $122 after-tax ($178 million pre-tax) charges. The J&J settlement related to resolution of all royalty disputes with Johnson & Johnson which concern Medtronic’s licensed use of certain patents. The agreement ended all current and potential disputes between the two parties under their 1997 settlement and license agreement relating to coronary angioplasty stent design and balloon material patents.

 

 

    The DePuy settlement relates to patent infringement claims stemming from the Vertex line of multiaxial screws. On June 1, 2009, the U.S. Court of Appeals for the Federal Circuit affirmed the December 2007 ruling of infringement and awarded damages based on lost profits, but reversed certain elements of the original 2007 award. Prior to the U.S. Court of Appeals’ decision, the Company had not recorded expense related to the damages awarded in 2007 as the Company did not believe that an unfavorable outcome in this matter was probable under U.S. GAAP. As a result of the U.S. Court of Appeals’ decision, the Company recorded a reserve of $178 million which covered the revised damages award and pre- and post-judgment interest. Since the DePuy litigation originated prior to April 24, 2009, the Company appropriately recognized this charge in the consolidated financial statements for the fiscal year ended April 24, 2009. In addition to disclosing certain litigation charges, net that are determined in accordance with U.S. GAAP, Medtronic management believes that in order to properly understand its short-term and long-term financial trends, investors may find it useful to consider the impact of excluding these certain litigation charges. Management believes that the resulting non-GAAP financial measure provides useful information to investors regarding the underlying business trends and performance of the Company’s ongoing operations and is useful for period over period comparisons of such operations. Medtronic management eliminates these certain litigation charges when evaluating the operating performance of the Company. 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 as similar measures presented by other companies.
 
(g)   The $530 million ($0.47 per share) after-tax IPR&D charge represents the cumulative impact of several transactions which took place during the fourth quarter of fiscal year 2009:
 
    -$97 million ($97 million pre-tax) related to the acquisition of Ablation Frontiers, Inc.;
 
    -$307 million ($307 million pre-tax) related to the acquisition of Ventor Technologies, Ltd.;
 
    -$123 million ($123 million pre-tax) related to the acquisition of CoreValve, Inc.; and
 
    -$3 million ($3 million pre-tax) related to the purchase of certain intellectual property for use in the Spinal and Diabetes operating segments.
 
    In each of the above transactions, technological feasibility of the underlying products had not yet been reached and such technology had no future alternative use. In addition to disclosing IPR&D charges that are determined in accordance with U.S. GAAP, Medtronic management believes that in order to properly understand its short-term and long-term financial trends, investors may find it useful to consider the impact of excluding these IPR&D charges. Management believes that the resulting non-GAAP financial measure provides useful information to investors regarding the underlying business trends and performance of the Company’s ongoing operations and is useful for period over period comparisons of such operations. Medtronic management eliminates these IPR&D charges when evaluating the operating performance of the Company. 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 as similar measures presented by other companies.
 
(h)   The $132 million ($0.12 per share) certain tax adjustment represents a tax benefit associated with settlements reached in the fourth quarter of fiscal year 2009 with the U.S. Internal Revenue Service, numerous state taxing authorities, and assessments received from various foreign tax authorities. The years under review by the U.S. Internal Revenue Service were with respect to fiscal years 2005 and 2006, while the numerous state and foreign audits covered fiscal years ranging from 1998 through 2008. In addition to disclosing the provision for income taxes that is determined in accordance with U.S. GAAP, Medtronic management believes that in order to properly understand its short-term and long-term financial trends, investors may find it useful to consider the impact of excluding this certain tax adjustment. Management believes that the resulting non-GAAP financial measure provides useful information to investors regarding the underlying business trends and performance of the Company’s ongoing operations and is useful for period over period comparisons of such operations, specifically the effective tax rate. Medtronic management eliminates this certain tax adjustment when evaluating the operating performance of the Company. 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 as similar measures presented by other companies.

 

 

MEDTRONIC, INC.
RECONCILIATION OF CONSOLIDATED GAAP NET EARNINGS
TO CONSOLIDATED NON-GAAP NET EARNINGS
(Unaudited)
(in millions, except per share data)
                         
    Twelve months ended        
    April 30,     April 24,     Percentage  
    2010     2009     Change  
Net earnings, as reported
   $ 3,099     $ 2,070       50 %
Special charges
     —       64  (e)        
Restructuring charges
     41  (a)     82  (f)        
Certain litigation charges, net
     316  (b)     486  (g)        
IPR&D and certain acquisition-related costs
     17  (c)     614  (h)        
Certain tax adjustments
     —       (132 )(i)        
Impact of adoption of new authoritative convertible debt guidance on interest expense, net
     104  (d)     99  (d)        
 
                    
Non-GAAP net earnings
   $ 3,577     $ 3,283       9 %
 
                    
 
                        
MEDTRONIC, INC.
RECONCILIATION OF CONSOLIDATED GAAP DILUTED EPS
TO CONSOLIDATED NON-GAAP DILUTED EPS
(Unaudited)
                         
    Twelve months ended        
    April 30,     April 24,     Percentage  
    2010     2009     Change  
Diluted EPS, as reported
   $ 2.79     $ 1.84       52 %
Special charges
     —       0.06  (e)        
Restructuring charges
     0.04  (a)     0.07  (f)        
Certain litigation charges, net
     0.28  (b)     0.43  (g)        
IPR&D and certain acquisition-related costs
     0.02  (c)     0.55  (h)        
Certain tax adjustments
     —       (0.12 )(i)        
Impact of adoption of new authoritative convertible debt guidance on interest expense, net
     0.09  (d)     0.09  (d)        
 
                    
Non-GAAP diluted EPS
   $ 3.22     $ 2.92       10 %
 
                    
Note: The data in this schedule has been intentionally rounded and therefore the first quarter, second quarter, third quarter and fourth quarter data may not sum to the fiscal year to date totals.
 
(a)   The $41 million ($0.04 per share) after-tax ($57 million pre-tax) restructuring charge is the net impact of a $52 million after-tax charge related to the fiscal year 2009 initiative that the Company began in the fourth quarter of fiscal year 2009, offset by a $9 million after-tax reversal of excess reserves in the fourth quarter of fiscal year 2010 related to the fiscal year 2009 initiative and by a $2 million after-tax net reversal of excess restructuring reserves in the first quarter of fiscal year 2010 related to the global realignment initiative that began in the fourth quarter of fiscal year 2008. The fiscal year 2009 initiative was designed to streamline operations and further align resources around the Company’s higher growth opportunities. This initiative impacts most businesses and certain corporate functions. In the first quarter of fiscal year 2010, the Company recognized expense associated with compensation and early retirement benefits provided to employees which could not be accrued in the fourth quarter of fiscal year 2009. In addition, the Company recorded $4 million

 

 

    of the after-tax expense ($7 million pre-tax) within cost of products sold related to inventory write-offs and production-related asset impairments associated with these restructuring activities. The $2 million after-tax net reversal is primarily a result of a $5 million after-tax reversal due to favorable severance negotiations with certain employee populations outside the U.S. as well as a higher than expected percentage of employees identified for elimination finding positions elsewhere within the Company partially offset by a $3 million after-tax charge the Company recorded in the first quarter of fiscal year 2010 related to the further write-down of a non-inventory related asset resulting from the continued decline in the international real estate market. In addition to disclosing restructuring charges that are determined in accordance with U.S. generally accepted accounting principles (U.S. GAAP), Medtronic management believes that in order to properly understand its short-term and long-term financial trends, investors may find it useful to consider the impact of excluding these restructuring charges. Management believes that the resulting non-GAAP financial measure provides useful information to investors regarding the underlying business trends and performance of the Company’s ongoing operations and is useful for period over period comparisons of such operations. Medtronic management eliminates these restructuring charges when evaluating the operating performance of the Company. 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 as similar measures presented by other companies.
 
(b)   The $316 million ($0.28 per share) after-tax ($374 million pre-tax) certain litigation charges, net relate to settlements with Abbott Laboratories (Abbott) and with W.L. Gore & Associates (Gore). The Abbott settlement accounted for $360 million after-tax ($444 million pre-tax) charges and the Gore settlement accounted for $44 million after-tax ($70 million pre-tax) gain of certain litigation charges, net. The Abbott settlement related to the resolution of all outstanding intellectual property litigation. The terms of the Abbott agreement stipulate that neither party will sue each other in the field of coronary stent and stent delivery systems for a period of at least 10 years, subject to certain conditions. Both parties also agreed to a cross-license of the disputed patents within the defined field. The $444 million pre-tax settlement amount includes a $400 million payment to Abbott and a $42 million success payment made to evYsio Medical Devices, LLC (evYsio). In addition, a $2 million payment was made to evYsio in order to expand the definition of the license field from evYsio. The Gore settlement related to the resolution of outstanding patent litigation related to selected patents in Medtronic’s Jervis and Wiktor patent families. The terms of the agreement stipulate that neither party will sue each other in the defined field of use, subject to certain conditions. In addition and subject to certain conditions, Medtronic granted Gore a worldwide, irrevocable, non-exclusive license in the defined field of use. Gore will also pay Medtronic a quarterly license payment through the fiscal quarter ending October 2018. In addition to disclosing certain litigation charges, net that are determined in accordance with U.S. GAAP, Medtronic management believes that in order to properly understand its short-term and long-term financial trends, investors may find it useful to consider the impact of excluding these certain litigation charges, net. Management believes that the resulting non-GAAP financial measure provides useful information to investors regarding the underlying business trends and performance of the Company’s ongoing operations and is useful for period over period comparisons of such operations. Medtronic management eliminates these certain litigation charges, net when evaluating the operating performance of the Company. 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 as similar measures presented by other companies
 
(c)   The $17 million ($0.02 per share) after-tax IPR&D and certain acquisition-related costs represent a $7 million after-tax ($11 million pre-tax) IPR&D charge related to the Arbor Surgical Technologies, Inc. asset purchase and $10 million after-tax ($12 million pre-tax) of certain acquisition-related costs associated with the acquisition of Invatec, S.p.A. In the above IPR&D charge, technological feasibility of the underlying products had not yet been reached and such technology had no future alternative use. The certain acquisition-related costs include legal fees, severance costs and contract termination costs that were expensed in the period. In addition to disclosing IPR&D and certain acquisition-related costs that are determined in accordance with U.S. GAAP, Medtronic management believes that in order to properly understand its short-term and long-term financial trends, investors may find it useful to consider the impact of excluding these IPR&D and certain acquisition-related costs. Management believes that the resulting non-GAAP financial measure provides useful information to investors regarding the underlying business trends and performance of the Company’s ongoing operations and is useful for period over period comparisons of such operations. Medtronic management eliminates these IPR&D and certain acquisition-related costs when evaluating the operating performance of the Company. 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 as similar measures presented by other companies.
 
(d)   The adoption of Financial Accounting Standards Board (FASB) new authoritative guidance on accounting for convertible debt has resulted in an after-tax impact to net earnings of $104 million ($0.09 per share) and $99 million ($0.09 per share) for the twelve months ended April 30, 2010 and April 24, 2009, respectively. The pre-tax impact to interest expense, net was $167 million and $154 million for the twelve months ended April 30, 2010 and April 24, 2009, respectively. In addition to disclosing the financial statement impact of the adoption of this new authoritative guidance that is determined in accordance with U.S. GAAP, Medtronic management believes that in order to properly understand its short-term and long-term financial trends, investors may find it useful to consider the impact of excluding the impact of the adoption of this new guidance. Management believes that the resulting non-GAAP financial measure provides useful information to investors regarding the underlying business trends and performance of the Company’s ongoing operations and is useful for period over period comparisons of such operations. Medtronic management eliminates the impact of the adoption of this new guidance when evaluating the operating performance of the Company. 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 as similar measures presented by other companies.
 
(e)   The $64 million ($0.06 per share) special charge represents an after-tax charitable donation ($100 million pre-tax) made to The Medtronic Foundation. In addition to disclosing special charges that are determined in accordance with U.S. GAAP, Medtronic management believes that in order to properly understand its short-term and long-term financial trends, investors may find it useful to consider the impact of excluding this donation. Management believes that the resulting non-GAAP financial measure provides useful information to investors regarding the underlying business trends and performance of the Company’s ongoing operations and is useful for period over period comparisons of such operations. Medtronic management eliminates this donation when evaluating the operating performance of the Company. 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 as similar measures presented by other companies.
 
(f)   The $82 million ($0.07 per share) after-tax ($123 million pre-tax) restructuring charge is an accumulation of charges recorded in the first and fourth quarters of fiscal year 2009. As outlined in footnote (e) for the three months ended April 24, 2009, the Company recorded net after-tax charges of $16 million in the fourth quarter of fiscal year 2009 related to initiatives begun in that quarter. In addition, the Company recorded after-tax charges of $66 million in the first quarter of fiscal year 2009 that related to a global realignment initiative that the Company began in the fourth quarter of fiscal year 2008. The 2008/2009 initiatives focused on shifting resources to those areas where the Company has the greatest opportunities for growth and streamlining operations to drive operating leverage. The global realignment initiative impacts most businesses and certain corporate functions. In addition to disclosing restructuring charges that are determined in accordance with U.S. GAAP, Medtronic management believes that in order to properly understand its short-term and long-term financial trends, investors may find it useful to consider the impact of excluding these restructuring charges. Management believes that the resulting non-GAAP financial measure provides useful information to investors regarding the underlying business trends and performance of the Company’s ongoing operations and is useful for period over period comparisons of such operations. Medtronic management eliminates these restructuring charges when evaluating the operating performance of the Company. 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 as similar measures presented by other companies.
 
(g)   The $486 million ($0.43 per share) after-tax ($714 million pre-tax) certain litigation charges, net relate to the accumulation of four separate charges recorded throughout fiscal year 2009. As outlined in footnote (f) for the three months ended April 24, 2009, the Company recorded a $188 million after-tax ($270 million pre-tax) charge related to a settlement of all royalty disputes with Johnson & Johnson (J&J) which concern Medtronic’s licensed use of certain patents and a $122 million after-tax ($178 million pre-tax) charge related to a settlement with DePuy regarding patent infringement claims stemming from the Vertex line of multiaxial screws. In addition, for the three months ended October 24, 2008, the Company recorded a $152 million after-tax ($229 million pre-tax) charge related to the final judgment in separate litigation with Cordis Corporation (Cordis), a subsidiary of J&J, that originated in October 1997, and $24 million after-tax ($37 million pre-tax) related to the settlement of litigation with Fastenetix LLC that originated in May 2006. The second quarter 2009 charge related to litigation with Cordis was in addition to a $243 million pre-tax reserve recorded in the third quarter of fiscal year 2008. In addition to disclosing certain litigation charges that are determined in accordance with U.S. GAAP, Medtronic management believes that in order to properly understand its short-term and long-term financial trends, investors may find it useful to consider the impact of excluding these certain litigation charges. Management believes that the resulting non-GAAP financial measure provides useful information to investors regarding the underlying business trends and performance of the Company’s ongoing operations and is useful for period over period comparisons of such operations. Medtronic management eliminates these certain litigation charges when evaluating the operating performance of the Company. 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 as similar measures presented by other companies.
 
(h)   The $614 million ($0.55 per share) after-tax IPR&D charge represents the cumulative impact of several transactions which took place throughout fiscal year 2009 including:
 
    -$97 million ($97 million pre-tax) related to the acquisition of Ablation Frontiers, Inc., which was recorded in the fourth quarter of fiscal year 2009;
 
    -$307 million ($307 million pre-tax) related to the acquisition of Ventor Technologies, Ltd., which was recorded in the fourth quarter of fiscal year 2009;
 
    -$123 million ($123 million pre-tax) related to the acquisition of CoreValve, Inc., which was recorded in the fourth quarter of fiscal year 2009;
 
    -$72 million ($72 million after-tax) related to the acquisition of CryoCath Technologies, Inc. which was recorded in the third quarter of fiscal year 2009; and

 

 

    -$15 million ($22 million pre-tax) related to the purchase of certain intellectual property for use in the Spinal and Diabetes operating segments which took place in the second and fourth quarters of fiscal year 2009.
 
    In each of the above transactions, technological feasibility of the underlying products had not yet been reached and such technology had no future alternative use. In addition to disclosing IPR&D charges that are determined in accordance with U.S. GAAP, Medtronic management believes that in order to properly understand its short-term and long-term financial trends, investors may find it useful to consider the impact of excluding these IPR&D charges. Management believes that the resulting non-GAAP financial measure provides useful information to investors regarding the underlying business trends and performance of the Company’s ongoing operations and is useful for period over period comparisons of such operations. Medtronic management eliminates these IPR&D charges when evaluating the operating performance of the Company. 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 as similar measures presented by other companies.
 
(i)   The $132 million ($0.12 per share) certain tax adjustment represents a tax benefit associated with settlements reached in the fourth quarter of fiscal year 2009 with the U.S. Internal Revenue Service, numerous state taxing authorities, and assessments received from various foreign tax authorities. The years under review by the U.S. Internal Revenue Service were with respect to fiscal years 2005 and 2006, while the numerous state and foreign audits covered fiscal years ranging from 1998 through 2008. In addition to disclosing the provision for income taxes that is determined in accordance with U.S. GAAP, Medtronic management believes that in order to properly understand its short-term and long-term financial trends, investors may find it useful to consider the impact of excluding this certain tax adjustment. Management believes that the resulting non-GAAP financial measure provides useful information to investors regarding the underlying business trends and performance of the Company’s ongoing operations and is useful for period over period comparisons of such operations, specifically the effective tax rate. Medtronic management eliminates this certain tax adjustment when evaluating the operating performance of the Company. 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 as similar measures presented by other companies.

 

 

MEDTRONIC, INC.
RECONCILIATION OF WORLDWIDE REVENUE GROWTH TO CONSTANT CURRENCY GROWTH
(Unaudited)
(in millions)
                                                 
    Three months ended             Currency Impact on     Constant  
    April 30,     April 24,     Reported     Growth (a)     Currency  
    2010     2009     Growth     Dollar     Percentage     Growth (a)  
Reported Revenue:
                                                
Pacing Systems
   $ 495     $ 494       — %   $ 22       4 %     (4 )%
Defibrillation Systems
     881       780       13       24       3       10  
Other
     33       26       27       1       4       23  
 
                                          
Cardiac Rhythm Disease Management
     1,409       1,300       8       47       3       5  
 
                                          
 
                                                
Core Spinal
     664       666       —       14       2       (2 )
Biologics
     216       215       —       2       —       —  
 
                                          
Spinal
     880       881       —       16       2       (2 )
 
                                          
 
                                                
Coronary
     382       332       15       19       6       9  
Structural Heart
     239       195       23       10       6       17  
Endovascular
     136       117       16       5       4       12  
 
                                          
CardioVascular
     757       644       18       34       6       12  
 
                                          
 
                                                
Neuromodulation
     411       389       6       8       2       4  
Diabetes
     332       296       12       12       4       8  
Surgical Technologies
     273       235       16       8       3       13  
Physio-Control
     134       84       60       6       8       52  
 
                                          
 
                                                
Total
   $ 4,196     $ 3,829       10 %   $ 131       4 %     6 %
 
                                          
 
(a)   Medtronic believes that in order to properly understand Medtronic’s short-term and long-term financial trends, investors may wish to consider the impact of foreign currency translation on revenue. In addition, Medtronic management uses results of operations before currency translation to evaluate the operational performance of the Company and as a basis for strategic planning. Investors should consider these non-GAAP measures in addition to, and not as a substitute for, financial performance measures prepared in accordance with U.S. GAAP.

 

 

MEDTRONIC, INC.
RECONCILIATION OF WORLDWIDE REVENUE GROWTH TO CONSTANT CURRENCY GROWTH
(Unaudited)
(in millions)
                                                 
    Twelve months ended             Currency Impact on     Constant  
    April 30,     April 24,     Reported     Growth (a)     Currency  
    2010     2009     Growth     Dollar     Percentage     Growth (a)  
Reported Revenue:
                                                
Pacing Systems
   $ 1,987     $ 1,984       — %   $ 21       1 %     (1 )%
Defibrillation Systems
     3,167       2,962       7       16       1       6  
Other
     114       68       68       4       6       62  
 
                                          
Cardiac Rhythm Disease Management
     5,268       5,014       5       41       1       4  
 
                                          
 
                                                
Core Spinal
     2,632       2,560       3       14       1       2  
Biologics
     868       840       3       2       —       3  
 
                                          
Spinal
     3,500       3,400       3       16       1       2  
 
                                          
 
                                                
Coronary
     1,489       1,292       15       10       1       14  
Structural Heart
     880       747       18       11       2       16  
Endovascular
     495       398       24       6       1       23  
 
                                          
CardioVascular
     2,864       2,437       18       27       2       16  
 
                                          
 
                                                
Neuromodulation
     1,560       1,434       9       7       1       8  
Diabetes
     1,237       1,114       11       7       1       10  
Surgical Technologies
     963       857       12       8       1       11  
Physio-Control
     425       343       24       7       2       22  
 
                                          
 
                                                
Total
   $ 15,817     $ 14,599       8 %   $ 113       — %     8 %
 
                                          
 
(a)   Medtronic believes that in order to properly understand Medtronic’s short-term and long-term financial trends, investors may wish to consider the impact of foreign currency translation on revenue. In addition, Medtronic management uses results of operations before currency translation to evaluate the operational performance of the Company and as a basis for strategic planning. Investors should consider these non-GAAP measures in addition to, and not as a substitute for, financial performance measures prepared in accordance with U.S. GAAP.

 

 

MEDTRONIC, INC.
RECONCILIATION OF INTERNATIONAL REVENUE GROWTH TO CONSTANT CURRENCY GROWTH
(Unaudited)
(in millions)
                                                 
    Three months ended             Currency Impact on     Constant  
    April 30,     April 24,     Reported     Growth (a)     Currency  
    2010     2009     Growth     Dollar     Percentage     Growth (a)  
Reported Revenue:
                                                
Pacing Systems
   $ 283     $ 266       6 %   $ 22       8 %     (2 )%
Defibrillation Systems
     314       275       14       24       9       5  
Other
     25       17       47       1       6       41  
 
                                          
Cardiac Rhythm Disease Management
     622       558       11       47       8       3  
 
                                          
 
                                                
Core Spinal
     202       178       13       14       7       6  
Biologics
     16       12       33       2       16       17  
 
                                          
Spinal
     218       190       15       16       9       6  
 
                                          
 
                                                
Coronary
     271       224       21       19       8       13  
Structural Heart
     147       99       48       10       10       38  
Endovascular
     75       56       34       5       9       25  
 
                                          
CardioVascular
     493       379       30       34       9       21  
 
                                          
 
                                                
Neuromodulation
     135       110       23       8       8       15  
Diabetes
     119       96       24       12       13       11  
Surgical Technologies
     104       86       21       8       9       12  
Physio-Control
     63       39       62       6       16       46  
 
                                          
 
                                                
Total
   $ 1,754     $ 1,458       20 %   $ 131       9 %     11 %
 
                                          
 
(a)   Medtronic believes that in order to properly understand Medtronic’s short-term and long-term financial trends, investors may wish to consider the impact of foreign currency translation on revenue. In addition, Medtronic management uses results of operations before currency translation to evaluate the operational performance of the Company and as a basis for strategic planning. Investors should consider these non-GAAP measures in addition to, and not as a substitute for, financial performance measures prepared in accordance with U.S. GAAP.

 

 

MEDTRONIC, INC.
RECONCILIATION OF INTERNATIONAL REVENUE GROWTH TO CONSTANT CURRENCY GROWTH
(Unaudited)
(in millions)
                                                 
    Twelve months ended             Currency Impact on     Constant  
    April 30,     April 24,     Reported     Growth (a)     Currency  
    2010     2009     Growth     Dollar     Percentage     Growth (a)  
Reported Revenue:
                                                
Pacing Systems
   $ 1,115     $ 1,088       2 %   $ 21       1 %     1 %
Defibrillation Systems
     1,124       1,039       8       16       1       7  
Other
     85       46       85       4       9       76  
 
                                          
Cardiac Rhythm Disease Management
     2,324       2,173       7       41       2       5  
 
                                          
 
                                                
Core Spinal
     761       671       13       14       2       11  
Biologics
     59       51       16       2       4       12  
 
                                          
Spinal
     820       722       14       16       3       11  
 
                                          
 
                                                
Coronary
     1,070       885       21       10       1       20  
Structural Heart
     517       383       35       11       3       32  
Endovascular
     262       193       36       6       3       33  
 
                                          
CardioVascular
     1,849       1,461       27       27       2       25  
 
                                          
 
                                                
Neuromodulation
     474       415       14       7       1       13  
Diabetes
     427       378       13       7       2       11  
Surgical Technologies
     362       312       16       8       3       13  
 
                                          
Physio-Control
     195       151       29       7       4       25  
 
                                          
 
                                                
Total
   $ 6,451     $ 5,612       15 %   $ 113       2 %     13 %
 
                                          
 
(a)   Medtronic believes that in order to properly understand Medtronic’s short-term and long-term financial trends, investors may wish to consider the impact of foreign currency translation on revenue. In addition, Medtronic management uses results of operations before currency translation to evaluate the operational performance of the Company and as a basis for strategic planning. Investors should consider these non-GAAP measures in addition to, and not as a substitute for, financial performance measures prepared in accordance with U.S. GAAP.

 

 

MEDTRONIC, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
                 
    April 30,     April 24,  
(in millions, except per share data)   2010     2009  
ASSETS
                
 
Current assets:
                
Cash and cash equivalents
   $ 1,400     $ 1,271  
Short-term investments
     2,375       405  
Accounts receivable, less allowances of $67 and $61, respectively
     3,335       3,123  
Inventories
     1,481       1,426  
Deferred tax assets, net
     544       605  
Prepaid expenses and other current assets
     704       622  
 
            
 
                
Total current assets
     9,839       7,452  
 
                
Property, plant and equipment, net
     2,421       2,279  
Goodwill
     8,391       8,195  
Other intangible assets, net
     2,559       2,477  
Long-term investments
     4,632       2,769  
Other assets
     248       416  
 
            
 
                
Total assets
   $ 28,090     $ 23,588  
 
            
 
                
LIABILITIES AND SHAREHOLDERS’ EQUITY
                
 
Current liabilities:
                
Short-term borrowings
   $ 2,575     $ 522  
Accounts payable
     420       382  
Accrued compensation
     1,001       901  
Accrued income taxes
     235       130  
Other accrued expenses
     890       1,212  
 
            
 
                
Total current liabilities
     5,121       3,147  
 
                
Long-term debt
     6,944       6,253  
Long-term accrued compensation and retirement benefits
     516       329  
Long-term accrued income taxes
     595       475  
Long-term deferred tax liabilities, net
     89       115  
Other long-term liabilities
     196       87  
 
            
 
                
Total liabilities
     13,461       10,406  
 
                
Commitments and contingencies
     —       —  
 
Shareholders’ equity:
                
Preferred stock— par value $1.00
     —       —  
Common stock— par value $0.10
     110       112  
Retained earnings
     14,826       13,272  
Accumulated other comprehensive loss
     (307 )     (202 )
 
            
 
                
Total shareholders’ equity
     14,629       13,182  
 
            
 
                
Total liabilities and shareholders’ equity
   $ 28,090     $ 23,588  
 
            

 

 

MEDTRONIC, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
                         
    Fiscal Year  
(in millions)   2010     2009     2008  
Operating Activities:
                        
Net earnings
   $ 3,099     $ 2,070     $ 2,138  
Adjustments to reconcile net earnings to net cash provided by operating activities:
                        
Depreciation and amortization
     772       699       637  
Amortization of discount on senior convertible notes
     167       154       145  
Special charges
     —       —       78  
IPR&D charges
     11       621       390  
Provision for doubtful accounts
     36       23       31  
Deferred income taxes
     144       (171 )     (101 )
Stock-based compensation
     226       237       217  
Excess tax benefit from exercise of stock-based awards
     —       (24 )     (40 )
Change in operating assets and liabilities, net of effect of acquisitions:
                        
Accounts receivable
     (271 )     108       (461 )
Inventories
     158       (212 )     30  
Prepaid expenses and other assets
     33       (121 )     92  
Accounts payable and accrued liabilities
     224       510       (305 )
Other operating assets and liabilities
     97       (26 )     272  
Certain litigation charges, net
     374       714       366  
Certain litigation payments
     (939 )     (704 )     —  
 
                  
 
Net cash provided by operating activities
     4,131       3,878       3,489  
 
                  
 
Investing Activities:
                       
Acquisitions, net of cash acquired
     (350 )     (1,624 )     (4,221 )
Purchase of intellectual property
     (62 )     (165 )     (93 )
Additions to property, plant and equipment
     (573 )     (498 )     (513 )
Purchases of marketable securities
     (7,440 )     (2,960 )     (6,433 )
Sales and maturities of marketable securities
     3,753       2,845       8,557  
Other investing activities, net
     (87 )     (338 )     (87 )
 
                  
 
Net cash used in investing activities
     (4,759 )     (2,740 )     (2,790 )
 
                  
 
Financing Activities:
                       
Change in short-term borrowings, net
     (444 )     (633 )     543  
Payments on long-term debt
     (20 )     (300 )     (12 )
Issuance of long-term debt
     3,000       1,250       300  
Dividends to shareholders
     (907 )     (843 )     (565 )
Issuance of common stock under stock purchase and award plans
     165       416       403  
Excess tax benefit from exercise of stock-based awards
     —       24       40  
Repurchase of common stock
     (1,030 )     (759 )     (1,544 )
 
                  
 
Net cash provided by (used in) financing activities
     764       (845 )     (835 )
 
Effect of exchange rate changes on cash and cash equivalents
     (7 )     (82 )     (60 )
 
                  
 
Net change in cash and cash equivalents
     129       211       (196 )
 
Cash and cash equivalents at beginning of period
     1,271       1,060       1,256  
 
                  
 
Cash and cash equivalents at end of period
   $ 1,400     $ 1,271     $ 1,060  
 
                  
 
Supplemental Cash Flow Information
                       
Cash paid for:
                        
Income taxes
   $ 571     $ 436     $ 717  
Interest
     386       208       258  
Supplemental noncash investing and financing activities:
                        
Reclassification of debentures from short-term to long-term debt
   $ —     $ 15     $ —  
Reclassification of debentures from long-term to short-term debt
     —       —       94  
Reclassification of senior notes from long-term to short-term debt
     400       —       —  
Reclassification of senior convertible notes from long-term to short-term debt
     2,200       —       —