May 22, 2012

Medtronic Reports Fourth Quarter Earnings

Revenue of $4.3 Billion Grew 4% on a Constant Currency Basis; 3% as Reported
Non-GAAP Diluted EPS Growth of 10%; GAAP Diluted EPS Growth of 31%
U.S. Drug-Eluting Stent Revenue of $80 Million Grew 57% on Impressive Resolute™ Integrity® Launch, Doubling U.S. Market Share
Emerging Market Revenue Grew 20% on a Constant Currency Basis; 19% as Reported
Company Sets Initial FY13 Revenue Growth Outlook and EPS Guidance

MINNEAPOLIS--(BUSINESS WIRE)--May. 22, 2012-- Medtronic, Inc. (NYSE:MDT) today announced financial results for its fourth quarter and fiscal year ended April 27, 2012. The company reported...

MINNEAPOLIS--(BUSINESS WIRE)--May. 22, 2012-- Medtronic, Inc. (NYSE:MDT) today announced financial results for its fourth quarter and fiscal year ended April 27, 2012.

The company reported worldwide fourth quarter revenue of $4.297 billion, compared to the $4.167 billion reported in the fourth quarter of fiscal year 2011, an increase of 4 percent on a constant currency basis after adjusting for a $42 million negative foreign currency impact or 3 percent as reported. As reported, fourth quarter net earnings were $991 million, or $0.94 per diluted share, an increase of 28 percent and 31 percent, respectively, over the same period in the prior year. As detailed in the attached table, fourth quarter net earnings and diluted earnings per share on a non-GAAP basis were $1.036 billion and $0.99, an increase of 7 percent and 10 percent, respectively, over the same period in the prior year.

The company reported fiscal year 2012 revenue of $16.184 billion, an increase of 3 percent on a constant currency basis after adjusting for a $273 million positive foreign currency impact or 4 percent as reported. As reported, fiscal year 2012 net earnings were $3.617 billion or $3.41 per diluted share, an increase of 17 percent and 19 percent, respectively. As detailed in the attached table, fiscal year 2012 non-GAAP net earnings and diluted earnings per share were $3.666 billion and $3.46, an increase of 1 percent and 3 percent, respectively.

Fiscal year 2012 international revenue of $7.356 billion grew 7 percent on a constant currency basis or 11 percent as reported. Fourth quarter international revenue of $1.998 billion increased 7 percent on a constant currency basis or 5 percent as reported. International sales accounted for 46 percent of Medtronic’s worldwide revenue in the quarter. Emerging market revenue of $463 million increased 20 percent on a constant currency basis or 19 percent as reported and now represents 11 percent of company revenue.

“I am pleased with our improved revenue growth this quarter in a dynamic healthcare environment,” said Omar Ishrak, Medtronic chairman and chief executive officer. “Our growth was broad-based across our businesses and geographies, including strong U.S. launches of the Resolute™ Integrity® drug-eluting stent and RestoreSensor® spinal cord stimulator and strong growth in emerging markets. As we continue to focus on innovation, globalization, and execution, I see many opportunities for improved growth.”

Cardiac and Vascular Group

The Cardiac and Vascular Group at Medtronic includes the Cardiac Rhythm Disease Management (CRDM) and CardioVascular businesses. The Group had worldwide sales in the quarter of $2.253 billion, representing an increase of 4 percent on a constant currency basis or 3 percent as reported. Cardiac and Vascular Group international sales of $1.288 billion increased 5 percent on a constant currency basis or 3 percent as reported. Group revenue performance was driven by Coronary, Transcatheter Valves, Endovascular, AF Solutions, Renal Denervation, and Peripheral, partially offset by small declines in Pacing and Implantable Cardioverter Defibrillators (ICDs).

CRDM revenue of $1.295 billion was flat on a constant currency basis or down 2 percent as reported. Fourth quarter revenue from ICDs was $744 million, down 1 percent on a constant currency basis, while pacing revenue was $492 million, a decrease of 2 percent on a constant currency basis. Continued growth of the AF Solutions business offset weaker ICD and Pacing sales.

CardioVascular revenue of $958 million grew 10 percent on a constant currency basis or 9 percent as reported. The Coronary business grew worldwide revenue 12 percent on a constant currency basis and U.S. revenue 24 percent on the impressive launch of the Resolute™ Integrity® drug-eluting stent, resulting in a doubling of U.S. drug-eluting stent market share. The Structural Heart and Endovascular & Peripheral businesses grew worldwide revenue 7 percent and 10 percent, respectively, on a constant currency basis.

Restorative Therapies Group

The Restorative Therapies Group at Medtronic includes the Spine, Neuromodulation, Diabetes, and Surgical Technologies businesses. The Group had worldwide sales in the quarter of $2.044 billion, representing an increase of 4 percent as reported and on a constant currency basis. Group revenue was driven by solid performances in Surgical Technologies, Neuromodulation, and Diabetes, partially offset by declines in U.S. Spine. Restorative Therapies Group international sales of $710 million increased 11 percent on a constant currency basis or 9 percent as reported.

Spine revenue of $818 million declined 6 percent on a constant currency basis or declined 7 percent as reported. International sales for the Spine business increased 8 percent on a constant currency basis. Core Spine revenue of $629 million, which includes core metal constructs, interspinous process decompression devices, and balloon kyphoplasty products, declined 3 percent on a constant currency basis. Biologics revenue of $189 million declined 16 percent on a constant currency basis, driven by declines in U.S. sales of INFUSE®, partially offset by revenue growth in Other Biologics.

Neuromodulation revenue of $463 million increased 8 percent on a constant currency basis or 7 percent as reported. Growth was driven by an increase in new implants in pain stimulation, deep brain stimulation (DBS), and stimulation for incontinence indications. Growth in pain stimulation was driven by the successful U.S. and Japan launches of the RestoreSensor® spinal cord stimulator with its proprietary AdaptiveStim® technology. Sales of DBS products were driven by an increased focus on neurologist referrals. In Uro/Gastro, sales of InterStim® Therapy for both urinary and bowel indications drove growth.

Diabetes revenue of $392 million grew 8 percent on a constant currency basis or 7 percent as reported. Growth in the quarter was driven by strong sales of continuous glucose monitoring (CGM) products and consumables. The Enlite™ CGM sensor had solid growth in Europe, and the company continues to make progress on its IDE study for U.S. approval of this next generation sensor.

Surgical Technologies revenue of $371 million grew 25 percent on a constant currency basis or 24 percent as reported. Organic revenue growth accelerated to 14 percent, after adjusting for $34 million of revenue from the Advanced Energy business, consisting of the company’s Salient Surgical Technologies and PEAK Surgical acquisitions. Revenue growth was driven by strong sales of capital equipment in the ENT and Navigation businesses.

Fiscal Year 2013 Revenue Outlook and Earnings per Share Guidance

The company today provided its initial revenue outlook and diluted earnings per share (EPS) guidance for fiscal year 2013.

The company expects fiscal year 2013 revenue growth in the range of 2 to 4 percent on a constant currency basis. The company expects fiscal year 2013 diluted EPS in the range of $3.62 to $3.70, which implies EPS growth of 5 to 7 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 for convertible debt interest expense. The guidance provided only reflects information available to Medtronic at this time.

In closing, Ishrak said, “We are beginning to gain momentum worldwide and are optimistic about our ability to improve long-term growth as we expand globally and identify new opportunities to deliver economic value to the changing health care system.”

Webcast Information

Medtronic will host a webcast today, May 22, 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 and 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., is the world’s leading medical technology company -- alleviating pain, restoring health, and extending life for people with chronic disease.

This press release contains forward-looking statements related to product growth drivers, strategies for growth, regulatory developments, and Medtronic’s future results of 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,” and not on a constant currency basis. References to quarterly figures increasing or decreasing are in comparison to the fourth quarter of fiscal year 2011, and references to annual figures increasing or decreasing are in comparison to fiscal year 2011.

                                             

MEDTRONIC, INC.
WORLD WIDE REVENUE
(Unaudited)

 

    

 

  

 

  

 

  

 

        

 

  

 

  

 

  

 

    

($ millions)

                                            
      FY11   FY11   FY11   FY11   FY11     FY12   FY12   FY12   FY12   FY12
      QTR 1   QTR 2   QTR 3   QTR 4   Total     QTR 1   QTR 2   QTR 3   QTR 4   Total
REPORTED REVENUE :                                            
                                                                   
CARDIAC RHYTHM DISEASE MANAGEMENT     $ 1,226   $ 1,248   $ 1,221   $ 1,315   $ 5,010     $ 1,253   $ 1,268   $ 1,192   $ 1,295     $ 5,007
Pacing Systems       473     472     450     506     1,901       508     511     467     492       1,978
Defibrillation Systems       722     745     735     760     2,962       697     708     674     744       2,822
AF & Other       31     31     36     49     147       48     49     51     59       207
                                             
CARDIOVASCULAR     $ 717   $ 738   $ 774   $ 879   $ 3,109     $ 850   $ 830   $ 837   $ 958     $ 3,475
Coronary       342     350     370     404     1,466       389     376     382     450       1,598
Structural Heart       224     237     241     274     977       275     266     265     289       1,094

Endovascular & Peripheral

       151     151     163     201     666       186     188     190     219       783
                                             
                                             
CARDIAC & VASCULAR GROUP     $ 1,943   $ 1,986   $ 1,995   $ 2,194   $ 8,119     $ 2,103   $ 2,098   $ 2,029   $ 2,253     $ 8,482
                                             
SPINAL     $ 829   $ 850   $ 861   $ 875   $ 3,414     $ 825   $ 839   $ 784   $ 818     $ 3,267
Core Spinal       622     634     626     648     2,530       610     631     596     629       2,467
Biologics       207     216     235     227     884       215     208     188     189       800
                                             
NEUROMODULATION     $ 370   $ 388   $ 401   $ 432   $ 1,592     $ 397   $ 421   $ 419   $ 463     $ 1,700
                                             
DIABETES     $ 312   $ 326   $ 341   $ 368   $ 1,347     $ 355   $ 367   $ 367   $ 392     $ 1,481
                                             
SURGICAL TECHNOLOGIES     $ 235   $ 244   $ 259   $ 298   $ 1,036     $ 266   $ 298   $ 319   $ 371     $ 1,254
                                             
RESTORATIVE THERAPIES GROUP     $ 1,746   $ 1,808   $ 1,862   $ 1,973   $ 7,389     $ 1,843   $ 1,925   $ 1,889   $ 2,044     $ 7,702
                                                                   
TOTAL CONTINUING OPERATIONS     $ 3,689   $ 3,794   $ 3,857   $ 4,167   $ 15,508     $ 3,946   $ 4,023   $ 3,918   $ 4,297     $ 16,184
                                             
ADJUSTMENTS :                                            
                                             
CURRENCY IMPACT (1)                           $ 181   $ 120   $ 13   $ (42 )   $ 273
                                             
COMPARABLE OPERATIONS (1)     $ 3,689   $ 3,794   $ 3,857   $ 4,167   $ 15,508     $ 3,765   $ 3,903   $ 3,905   $ 4,339     $ 15,911
                                                                   

(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.
U.S. REVENUE
(Unaudited)

 

                                            

($ millions)

                                            
      FY11   FY11   FY11   FY11   FY11     FY12   FY12   FY12   FY12   FY12
      QTR 1   QTR 2   QTR 3   QTR 4   Total     QTR 1   QTR 2   QTR 3   QTR 4   Total
REPORTED REVENUE :                                            
                                                                 
CARDIAC RHYTHM DISEASE MANAGEMENT     $ 691   $ 699   $ 651   $ 650   $ 2,690     $ 649   $ 667   $ 619   $ 650   $ 2,584
Pacing Systems       214     210     182     207     812       217     220     197     205     838
Defibrillation Systems       467     481     458     425     1,831       411     423     396     417     1,647
AF & Other       10     8     11     18     47       21     24     26     28     99
                                             
CARDIOVASCULAR     $ 241   $ 248   $ 249   $ 289   $ 1,026     $ 266   $ 264   $ 258   $ 315   $ 1,103
Coronary       92     96     94     101     382       90     85     82     125     383
Structural Heart       89     91     92     101     373       100     98     97     103     398

Endovascular & Peripheral

       60     61     63     87     271       76     81     79     87     322
                                             
                                             
CARDIAC & VASCULAR GROUP     $ 932   $ 947   $ 900   $ 939   $ 3,716     $ 915   $ 931   $ 877   $ 965   $ 3,687
                                             
SPINAL     $ 631   $ 645   $ 646   $ 631   $ 2,553     $ 589   $ 599   $ 555   $ 557   $ 2,300
Core Spinal       439     445     431     429     1,744       398     414     390     394     1,596
Biologics       192     200     215     202     809       191     185     165     163     704
                                             
NEUROMODULATION     $ 261   $ 278   $ 282   $ 286   $ 1,108     $ 272   $ 295   $ 287   $ 315   $ 1,170
                                             
DIABETES     $ 203   $ 213   $ 219   $ 228   $ 863     $ 214   $ 228   $ 226   $ 238   $ 906
                                             
SURGICAL TECHNOLOGIES     $ 149   $ 148   $ 156   $ 179   $ 632     $ 156   $ 184   $ 200   $ 224   $ 765
                                             
RESTORATIVE THERAPIES GROUP     $ 1,244   $ 1,284   $ 1,303   $ 1,324   $ 5,156     $ 1,231   $ 1,306   $ 1,268   $ 1,334   $ 5,141
                                                                 
TOTAL CONTINUING OPERATIONS     $ 2,176   $ 2,231   $ 2,203   $ 2,263   $ 8,872     $ 2,146   $ 2,237   $ 2,145   $ 2,299   $ 8,828
                                             
ADJUSTMENTS :                                            
                                             
CURRENCY IMPACT                           $ -   $ -   $ -   $ -   $ -
                                             
COMPARABLE OPERATIONS     $ 2,176   $ 2,231   $ 2,203   $ 2,263   $ 8,872     $ 2,146   $ 2,237   $ 2,145   $ 2,299   $ 8,828
                                                                 

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.
INTERNATIONAL REVENUE
(Unaudited)

 

                                            

($ millions)

                                            
      FY11   FY11   FY11   FY11   FY11     FY12   FY12   FY12   FY12   FY12
      QTR 1   QTR 2   QTR 3   QTR 4   Total     QTR 1   QTR 2   QTR 3   QTR 4   Total
REPORTED REVENUE :                                            
                                                                   
CARDIAC RHYTHM DISEASE MANAGEMENT     $ 535   $ 549   $ 570   $ 665   $ 2,320     $ 604   $ 601   $ 573   $ 645     $ 2,423
Pacing Systems       259     262     268     299     1,089       291     291     270     287       1,140
Defibrillation Systems       255     264     277     335     1,131       286     285     278     327       1,175
AF & Other       21     23     25     31     100       27     25     25     31       108
                                             
CARDIOVASCULAR     $ 476   $ 490   $ 525   $ 590   $ 2,083     $ 584   $ 566   $ 579   $ 643     $ 2,372
Coronary       250     254     276     303     1,084       299     291     300     325       1,215
Structural Heart       135     146     149     173     604       175     168     168     186       696

Endovascular & Peripheral

       91     90     100     114     395       110     107     111     132       461
                                             
                                             
CARDIAC & VASCULAR GROUP     $ 1,011   $ 1,039   $ 1,095   $ 1,255   $ 4,403     $ 1,188   $ 1,167   $ 1,152   $ 1,288     $ 4,795
                                             
SPINAL     $ 198   $ 205   $ 215   $ 244   $ 861     $ 236   $ 240   $ 229   $ 261     $ 967
Core Spinal       183     189     195     219     786       212     217     206     235       871
Biologics       15     16     20     25     75       24     23     23     26       96
                                             
NEUROMODULATION     $ 109   $ 110   $ 119   $ 146   $ 484     $ 125   $ 126   $ 132   $ 148     $ 530
                                             
DIABETES     $ 109   $ 113   $ 122   $ 140   $ 484     $ 141   $ 139   $ 141   $ 154     $ 575
                                             
SURGICAL TECHNOLOGIES     $ 86   $ 96   $ 103   $ 119   $ 404     $ 110   $ 114   $ 119   $ 147     $ 489
                                             
RESTORATIVE THERAPIES GROUP     $ 502   $ 524   $ 559   $ 649   $ 2,233     $ 612   $ 619   $ 621   $ 710     $ 2,561
                                                                   
TOTAL CONTINUING OPERATIONS     $ 1,513   $ 1,563   $ 1,654   $ 1,904   $ 6,636     $ 1,800   $ 1,786   $ 1,773   $ 1,998     $ 7,356
                                             
ADJUSTMENTS :                                            
                                             
CURRENCY IMPACT (1)                           $ 181   $ 120   $ 13   $ (42 )   $ 273
                                             
COMPARABLE OPERATIONS (1)     $ 1,513   $ 1,563   $ 1,654   $ 1,904   $ 6,636     $ 1,619   $ 1,666   $ 1,760   $ 2,040     $ 7,083
                                                                   

(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     Fiscal year ended
      April 27,     April 29,     April 27,     April 29,
      2012     2011     2012     2011
      (in millions, except per share data)
Net sales     $ 4,297       $ 4,167       $ 16,184       $ 15,508  
                                 
Costs and expenses:                                
Cost of products sold       1,047         1,007         3,889         3,700  
Research and development expense       393         385         1,490         1,472  
Selling, general, and administrative expense       1,462         1,404         5,623         5,427  
Restructuring charges, net       87         259         87         259  
Certain litigation charges, net       90         (47 )       90         245  
Acquisition-related items       13         14         12         14  
Amortization of intangible assets       80         87         335         339  

Other expense, net

       48         92         364         110  

Interest expense, net

       46         68         149         278  
Total costs and expenses       3,266         3,269         12,039         11,844  
                                 
Earnings from continuing operations before income taxes       1,031         898         4,145         3,664  
                                 
Provision for income taxes       143         137         730         609  
                                 
Earnings from continuing operations       888         761         3,415         3,055  
                                 
Discontinued operations, net of tax:                                
Earnings from operations of Physio-Control       -         17         32         43  
Physio-Control divestiture-related costs       (17 )       (2 )       (34 )       (2 )
Deferred income tax benefit reversal       (84 )       -         -         -  
Gain on sale of Physio-Control       204         -         204         -  
Earnings from discontinued operations       103         15         202         41  
                                 
Net earnings     $ 991       $ 776       $ 3,617       $ 3,096  
                                 
Basic earnings per share                                
Earnings from continuing operations     $ 0.85       $ 0.71       $ 3.24       $ 2.84  
Net earnings     $ 0.95       $ 0.73       $ 3.43       $ 2.87  
                                 
Diluted earnings per share                                
Earnings from continuing operations     $ 0.85       $ 0.71       $ 3.22       $ 2.82  
Net earnings     $ 0.94       $ 0.72       $ 3.41       $ 2.86  
                                 
Basic weighted average shares outstanding       1,042.1         1,069.5         1,053.9         1,077.4  
Diluted weighted average shares outstanding       1,049.1         1,075.1         1,059.9         1,081.7  
                                 
Cash dividends declared per common share     $ 0.2425       $ 0.2250       $ 0.9700       $ 0.9000  
                                         
 
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 27,       April 29,       Percentage
      2012       2011       Change
                           
Net earnings, as reported     $ 991         $ 776         28 %
Restructuring charges, net       64   (a)       198   (f)      
Certain litigation charges, net       57   (b)       (47 ) (g)      
Acquisition-related items       13   (c)       14   (h)      
Impact of authoritative convertible debt guidance on interest expense, net       14   (d)       25   (d)      
Physio-Control divestiture-related items       (103 ) (e)       -          
Non-GAAP net earnings     $ 1,036         $ 966   (i)     7 %
                                 
 
MEDTRONIC, INC.
RECONCILIATION OF CONSOLIDATED GAAP DILUTED EPS
TO CONSOLIDATED NON-GAAP DILUTED EPS
(Unaudited)
                           
      Three months ended        
      April 27,       April 29,       Percentage
      2012       2011       Change
                           
Diluted EPS, as reported     $ 0.94         $ 0.72         31 %
Restructuring charges, net       0.06   (a)       0.18   (f)      
Certain litigation charges, net       0.05   (b)       (0.04 ) (g)      
Acquisition-related items       0.01   (c)       0.01   (h)      
Impact of authoritative convertible debt guidance on interest expense, net       0.01   (d)       0.02   (d)      
Physio-Control divestiture-related items       (0.10 ) (e)       -          
Non-GAAP diluted EPS     $ 0.99   (1)     $ 0.90   (1)(i)     10 %
                                 

(1) The data in this schedule has been intentionally rounded to the nearest $0.01, and therefore, may not sum.

(a) The $64 million ($0.06 per share) after-tax ($87 million pre-tax) restructuring charge is the net impact of an $88 million after-tax ($118 million pre-tax) charge related to the fiscal year 2012 initiative, partially offset by a $24 million after-tax ($31 million pre-tax) reversal of excess restructuring reserves related to the fiscal year 2011 initiative. The fiscal year 2012 initiative restructuring charge consisted of employee termination costs, asset write-downs, contract termination fees, and other related costs. The fiscal year 2012 initiative was designed to hold general, administrative and indirect distribution costs flat in certain organizations while prioritizing investment in research and development, sales, and marketing in geographies, businesses, and products where faster growth is anticipated, such as emerging markets and new technologies. The fiscal year 2011 initiative reversal of excess restructuring reserves was due to certain employees identified for elimination finding positions elsewhere within the Company, favorable severance negotiations outside the U.S., and more favorable than expected outcomes in the sub-leasing of previously vacated properties. 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, 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 restructuring 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 or similar to measures presented by other companies.

(b) The $57 million ($0.05 per share) after-tax ($90 million pre-tax) certain litigation charges, net relates to the agreement in principle to settle the federal securities class action initiated by the Minneapolis Firefighters’ Relief Association in December 2008. During the fourth quarter of fiscal year 2012, Medtronic reached a settlement agreement in principle to resolve all of these class claims for $85 million and incurred $5 million in additional litigation fees as a result of the agreement. 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 or similar to measures presented by other companies.

(c) The $13 million ($0.01 per share) after-tax ($13 million pre-tax) acquisition-related items include charges related to the change in fair value of contingent milestone payments associated with acquisitions subsequent to April 29, 2009. In addition to disclosing acquisition-related items 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 acquisition-related items. 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 acquisition-related items 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 or similar to measures presented by other companies.

(d) The Financial Accounting Standards Board (FASB) authoritative guidance for convertible debt accounting has resulted in an after-tax impact to net earnings of $14 million ($0.01 per share) and $25 million ($0.02 per share) for the three months ended April 27, 2012 and April 29, 2011, respectively. The pre-tax impact to interest expense, net was $22 million and $40 million for the three months ended April 27, 2012 and April 29, 2011, respectively. In addition to disclosing the financial statement impact of this 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 this authoritative 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 this authoritative 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 or similar to measures presented by other companies.

(e) The $103 million ($0.10 per share) after-tax ($200 million pre-tax) net gain from Physio-Control divestiture-related items includes a $204 million after-tax ($218 million pre-tax) gain recognized on the sale of Physio-Control on January 30, 2012, partially offset by the reversal of an $84 million deferred income tax benefit recorded in the third quarter of fiscal year 2012 and $17 million of after-tax ($18 million pre-tax) transaction costs. The deferred income tax benefit was recorded in accordance with U.S. GAAP as the Company was required to establish a deferred tax asset on the difference between its tax and book basis in the shares of Physio-Control, up to the expected amount of gain, at the point in time the Company classified Physio-Control as held for sale in the third quarter of fiscal year 2012. In the fourth quarter of fiscal year 2012 when the Company recorded the Physio-Control disposition, the Company wrote-off the deferred tax asset with a corresponding deferred income tax expense. In addition to disclosing Physio-Control divestiture-related items 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 Physio-Control divestiture-related items. 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 Physio-Control divestiture-related items 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 or similar to measures presented by other companies.

(f) The $198 million ($0.18 per share) after-tax ($272 million pre-tax) restructuring charge, net consisted of employee termination costs, asset write-downs, contract termination fees, and other related costs. Included in the employee termination costs were expenses associated with compensation and early retirement benefits provided to certain employees. As part of the asset write-downs, the Company recorded a $9 million after-tax ($11 million pre-tax) expense within cost of products sold related to inventory write-offs of discontinued product lines and production-related asset impairments. The charge includes $2 million after-tax ($2 million pre-tax) of Physio-Control restructuring expense that is included in Physio-Control divestiture-related costs on our consolidated statement of earnings. Additionally, included in the other related costs is an after-tax intangible asset impairment of $12 million ($19 million pre-tax) related to the discontinuance of a product line within the CardioVascular business. The fiscal year 2011 restructuring initiative was designed to restructure the business to align its cost structure to current market conditions and to continue to position the Company for long-term sustainable growth in emerging markets and new technologies. This initiative impacted 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 or similar to measures presented by other companies.

(g) The $47 million ($0.04 per share) after-tax ($47 million pre-tax) certain litigation charges, net relates to the settlement of certain product litigation involving the Sprint Fidelis family of defibrillation leads. During the fourth quarter of fiscal year 2011, Medtronic renegotiated the terms of the October 15, 2010 agreement resulting in a $47 million reversal of the previously recorded amount. 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 or similar to measures presented by other companies.

(h) The $14 million ($0.01 per share) after-tax ($14 million pre-tax) acquisition-related items include charges related to the change in fair value of contingent milestone payments associated with acquisitions subsequent to April 29, 2009. In addition to disclosing acquisition-related items 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 acquisition-related items. 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 acquisition-related items 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 or similar to measures presented by other companies.

(i) Included in our non-GAAP net earnings is $17 million ($0.02 per share and $25 million pre-tax) after-tax income from the operations of the Physio-Control business for the three months ended April 29, 2011, which are included in earnings from discontinued operations on our consolidated statements of earnings. The Company has included this income in its non-GAAP net earnings as the disposition did not occur until the beginning of the fourth quarter of fiscal year 2012 and thus the income was earned through the operations of the Company. 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 net impact of including the operating income of the Physio-Control business. 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. 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.

 
 
MEDTRONIC, INC.
RECONCILIATION OF CONSOLIDATED GAAP NET EARNINGS
TO CONSOLIDATED NON-GAAP NET EARNINGS
(Unaudited)
(in millions, except per share data)
                           
      Fiscal year ended        
      April 27,       April 29,       Percentage
      2012       2011       Change
                           
Net earnings, as reported     $ 3,617         $ 3,096         17 %
Restructuring charges, net       64   (a)       198   (g)      
Certain litigation charges, net       57   (b)       243   (h)      
Certain acquisition-related items       45   (c)       (9 ) (i)      
Impact of authoritative convertible debt guidance on interest expense, net       53   (d)       106   (d)      
Physio-Control divestiture-related items       (170 ) (e)       -          
Executive separation costs       -           9   (j)      
Non-GAAP net earnings     $ 3,666   (f)     $ 3,643   (f)     1 %
                                 
 
MEDTRONIC, INC.
RECONCILIATION OF CONSOLIDATED GAAP DILUTED EPS
TO CONSOLIDATED NON-GAAP DILUTED EPS
(Unaudited)
                           
      Fiscal year ended        
      April 27,       April 29,       Percentage
      2012       2011       Change
                           
Diluted EPS, as reported     $ 3.41         $ 2.86         19 %
Restructuring charges, net       0.06   (a)       0.18   (g)      
Certain litigation charges, net       0.05   (b)       0.22   (h)      
Certain acquisition-related items       0.04   (c)       (0.01 ) (i)      
Impact of authoritative convertible debt guidance on interest expense, net       0.05   (d)       0.10   (d)      
Physio-Control divestiture-related items       (0.16 ) (e)       -          
Executive separation costs       -           0.01   (j)      
Non-GAAP diluted EPS     $ 3.46   (1)(f)     $ 3.37   (1)(f)     3 %
                                 

Note: The data in this schedule has been intentionally rounded and therefore the first, second, third, and fourth quarter data may not sum to the fiscal year to date totals.

(1)The data in this schedule has been intentionally rounded to the nearest $0.01, and therefore, may not sum.

(a) The $64 million ($0.06 per share) after-tax ($87 million pre-tax) restructuring charge is the net impact of an $88 million after-tax ($118 million pre-tax) charge related to the fiscal year 2012 initiative, partially offset by a $24 million after-tax ($31 million pre-tax) reversal of excess restructuring reserves related to the fiscal year 2011 initiative. The fiscal year 2012 initiative restructuring charge consisted of employee termination costs, asset write-downs, contract termination fees, and other related costs. The fiscal year 2012 initiative was designed to hold general, administrative and indirect distribution costs flat in certain organizations while prioritizing investment in research and development, sales, and marketing in geographies, businesses, and products where faster growth is anticipated, such as emerging markets and new technologies. The fiscal year 2011 initiative reversal of excess restructuring reserves was due to certain employees identified for elimination finding positions elsewhere within the Company, favorable severance negotiations outside the U.S., and more favorable than expected outcomes in the sub-leasing of previously vacated properties. 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, 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 restructuring 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 or similar to measures presented by other companies.

(b) The $57 million ($0.05 per share) after-tax ($90 million pre-tax) certain litigation charges, net relates to the agreement in principle to settle the federal securities class action initiated by the Minneapolis Firefighters’ Relief Association in December 2008. During the fourth quarter of fiscal year 2012, Medtronic reached a settlement agreement in principle to resolve all of these class claims for $85 million and incurred $5 million in additional litigation fees as a result of the agreement. 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 or similar to measures presented by other companies.

(c) The $45 million ($0.04 per share) after-tax ($45 million pre-tax) certain acquisition-related items include charges related to the change in fair value of contingent milestone payments associated with acquisitions subsequent to April 29, 2009. In addition to disclosing acquisition-related items 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 acquisition-related items. 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 acquisition-related items 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 or similar to measures presented by other companies.

(d) The Financial Accounting Standards Board (FASB) authoritative guidance for convertible debt accounting has resulted in an after-tax impact to net earnings of $53 million ($0.05 per share) and $106 million ($0.10 per share) for the fiscal years ended April 27, 2012 and April 29, 2011, respectively. The pre-tax impact to interest expense, net was $85 million and $170 million for the fiscal years ended April 27, 2012 and April 29, 2011, respectively. In addition to disclosing the financial statement impact of this 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 this authoritative 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 this authoritative 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 or similar to measures presented by other companies.

(e) The $170 million ($0.16 per share) after-tax ($176 million pre-tax) net gain from Physio-Control divestiture-related items includes a $204 million after-tax ($218 million pre-tax) gain recognized on the sale of Physio-Control, partially offset by $34 million of after-tax ($42 million pre-tax) transaction costs. In addition to disclosing Physio-Control divestiture-related items 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 Physio-Control divestiture-related items. 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 Physio-Control divestiture-related items 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 or similar to measures presented by other companies.

(f) Included in our non-GAAP net earnings is $32 million ($0.03 per share and $48 million pre-tax) and $43 million ($0.04 per share and $64 million pre-tax) after-tax income from the operations of the Physio-Control business for the fiscal years ended April 27, 2012 and April 29, 2011, respectively, which are included in earnings from discontinued operations on our consolidated statements of earnings. The Company has included this income in its non-GAAP net earnings as the disposition did not occur until the beginning of the fourth quarter of fiscal year 2012 and thus the income was earned through the operations of the Company. Additionally, included in our non-GAAP net earnings for the fiscal year ended April 27, 2012 is a $5 million after-tax ($5 million pre-tax) charge for transaction costs incurred related to the acquisitions of Salient Surgical Technologies, Inc. (Salient) and PEAK Surgical, Inc. (PEAK), and a non-cash gain of $38 million after-tax ($38 million pre-tax) related to previously held investments in Salient and PEAK, which are included in acquisition-related items on our consolidated statements of earnings. The Company has included these items in its non-GAAP net earnings to offset the dilution to fiscal year 2012 net earnings in the second half of this fiscal year from Salient and PEAK operations. Medtronic management believes that in order to properly understand its short-term and long-term financial trends, investors may find it useful to consider income from the operations of the Physio-Control business and the net impact of the Salient and PEAK acquisitions. 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. 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.

(g) The $198 million ($0.18 per share) after-tax ($272 million pre-tax) restructuring charge, net consisted of employee termination costs, asset write-downs, contract termination fees, and other related costs. Included in the employee termination costs were expenses associated with compensation and early retirement benefits provided to certain employees. As part of the asset write-downs, the Company recorded a $9 million after-tax ($11 million pre-tax) expense within cost of products sold related to inventory write-offs of discontinued product lines and production-related asset impairments. The charge includes $2 million after-tax ($2 million pre-tax) of Physio-Control restructuring expense that is included in Physio-Control divestiture-related costs on our consolidated statement of earnings. Additionally, included in the other related costs is an after-tax intangible asset impairment of $12 million ($19 million pre-tax) related to the discontinuance of a product line within the CardioVascular business. The fiscal year 2011 restructuring initiative was designed to restructure the business to align its cost structure to current market conditions and to continue to position the Company for long-term sustainable growth in emerging markets and new technologies. This initiative impacted 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 or similar to measures presented by other companies.

(h) The $243 million ($0.22 per share) after-tax ($245 million pre-tax) certain litigation charges, net relate primarily to a settlement involving the Sprint Fidelis family of defibrillation leads and accounting charges for Other Matters litigation. The Sprint Fidelis settlement relates to the resolution of certain outstanding product litigation related to the Sprint Fidelis family of defibrillation leads that were subject to a field action announced October 15, 2007. The terms of the agreement stipulate Medtronic will pay plaintiffs to settle substantially all pending U.S. lawsuits and claims, subject to certain conditions. 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 or similar to measures presented by other companies.

(i) The $9 million ($0.01 per share) after-tax ($14 million pre-tax charge) certain acquisition-related items, net gain included an $85 million after-tax ($85 million pre-tax) gain resulting from the acquisition of Ardian, Inc. (Ardian) partially offset by $39 million after-tax ($55 million pre-tax) of certain acquisition-related costs, $11 million after-tax ($15 million pre-tax) IPR&D charge related to the NeuroPace, Inc. (NeuroPace) cross-licensing agreement, $12 million after-tax ($15 million pre-tax) of IPR&D charges related to asset purchases in the CardioVascular and Surgical Technologies businesses, and $14 million after-tax ($14 million pre-tax) related to the change in fair value of contingent milestone payments associated with acquisitions subsequent to April 29, 2009. As a result of the Ardian acquisition, in accordance with the FASB authoritative guidance on business combinations, Medtronic recognized an $85 million gain resulting from its previously held 11.3 percent ownership position. The certain acquisition-related costs included legal fees, severance costs, change in control costs, banker fees, other professional services fees, and contract termination costs of $16 million after-tax ($24 million pre-tax) related to the acquisition of ATS Medical Inc. and $23 million after-tax ($31 million pre-tax) related to the acquisitions of Osteotech, Inc. and Ardian that were expensed in the period. The NeuroPace IPR&D charge related to a milestone payment under existing terms of a royalty-bearing, non-exclusive patent cross-licensing agreement with NeuroPace that the Company entered into in the first quarter of fiscal year 2006. In the above IPR&D charges, product commercialization had not yet been achieved. As a result, in accordance with the FASB authoritative guidance these charges were immediately expensed as IPR&D since technological feasibility had not yet been reached and such technology had no future alternative use. In addition to disclosing certain acquisition-related items 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 certain acquisition-related items. 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 certain acquisition-related items 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 or similar to measures presented by other companies.

(j) The $9 million ($0.01 per share) after-tax ($14 million pre-tax) executive separation costs include costs associated with the transition and retirement of Chief Executive Officer, William Hawkins. These costs were included in selling, general, and administrative expense on our consolidated statements of earnings. In addition to disclosing executive separation 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 executive separation 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 the impact of these executive separation 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 or similar to measures presented by other companies.

                                           
MEDTRONIC, INC.
RECONCILIATION OF WORLDWIDE REVENUE GROWTH TO CONSTANT CURRENCY GROWTH
(Unaudited)
(in millions)
                                           
      Three months ended               Currency Impact     Constant  
      April 27,   April 29,     Reported         on Growth (a)     Currency  
      2012   2011     Growth         Dollar   Percentage     Growth (a)  
                                           
Reported Revenue:                                          
Pacing Systems     $ 492   $ 506     (3 ) %     $ (5 )   (1 ) %   (2 ) %
Defibrillation Systems       744     760     (2 )         (10 )   (1 )     (1 )  
AF & Other       59     49     20           (2 )   (4 )     24    
Cardiac Rhythm Disease Management       1,295     1,315     (2 )         (17 )   (2 )     -    
                                           
Coronary       450     404     11           (4 )   (1 )     12    
Structural Heart       289     274     5           (5 )   (2 )     7    

Endovascular & Peripheral

       219     201     9           (3 )   (1 )     10    
CardioVascular       958     879     9           (12 )   (1 )     10    
Cardiac & Vascular Group       2,253     2,194     3           (29 )   (1 )     4    
                                           
Core Spinal       629     648     (3 )         (2 )   -       (3 )  
Biologics       189     227     (17 )         (1 )   (1 )     (16 )  
Spinal       818     875     (7 )         (3 )   (1 )     (6 )  
                                           
Neuromodulation       463     432     7           (4 )   (1 )     8    
Diabetes       392     368     7           (4 )   (1 )     8    
Surgical Technologies       371     298     24           (2 )   (1 )     25    
Restorative Therapies Group       2,044     1,973     4           (13 )   -       4    
                                           
Total     $ 4,297   $ 4,167     3   %     $ (42 )   (1 ) %   4   %
                                                   

(a) 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 U.S. GAAP.

                                             
MEDTRONIC, INC.
RECONCILIATION OF WORLDWIDE REVENUE GROWTH TO CONSTANT CURRENCY GROWTH
(Unaudited)
(in millions)
                                             
      Fiscal year ended               Currency Impact     Constant  
      April 27,   April 29,     Reported         on Growth (a)     Currency  
      2012   2011     Growth         Dollar     Percentage     Growth (a)  
                                             
Reported Revenue:                                            
Pacing Systems     $ 1,978   $ 1,901     4   %     $ 47     2 %   2   %
Defibrillation Systems       2,822     2,962     (5 )         47     1     (6 )  
AF & Other       207     147     41           2     2     39    
Cardiac Rhythm Disease Management       5,007     5,010     -           96     2     (2 )  
                                             
Coronary       1,598     1,466     9           42     3     6    
Structural Heart       1,094     977     12           21     2     10    

Endovascular & Peripheral

       783     666     18           15     3     15    
CardioVascular       3,475     3,109     12           78     3     9    
Cardiac & Vascular Group       8,482     8,119     4           174     2     2    
                                             
Core Spinal       2,467     2,530     (2 )         41     2     (4 )  
Biologics       800     884     (10 )         3     -     (10 )  
Spinal       3,267     3,414     (4 )         44     2     (6 )  
                                             
Neuromodulation       1,700     1,592     7           21     2     5    
Diabetes       1,481     1,347     10           18     1     9    
Surgical Technologies       1,254     1,036     21           16     2     19    
Restorative Therapies Group       7,702     7,389     4           99     1     3    
                                             
Total     $ 16,184   $ 15,508     4   %     $ 273     1 %   3   %
                                                 

(a) 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 U.S. GAAP.

                                             
MEDTRONIC, INC.
RECONCILIATION OF INTERNATIONAL REVENUE GROWTH TO CONSTANT CURRENCY GROWTH
(Unaudited)
(in millions)
                                             
      Three months ended               Currency Impact     Constant  
      April 27,     April 29,     Reported         on Growth (a)     Currency  
      2012     2011     Growth         Dollar   Percentage     Growth (a)  
                                             
Reported Revenue:                                            
Pacing Systems     $ 287     $ 299     (4 ) %     $ (5 )   (2 ) %   (2 ) %
Defibrillation Systems       327       335     (2 )         (10 )   (3 )     1    
AF & Other       31       31     -           (2 )   (6 )     6    
Cardiac Rhythm Disease Management       645       665     (3 )         (17 )   (3 )     -    
                                             
Coronary       325       303     7           (4 )   (2 )     9    
Structural Heart       186       173     8           (5 )   (2 )     10    

Endovascular & Peripheral

       132       114     16           (3 )   (2 )     18    
CardioVascular       643       590     9           (12 )   (2 )     11    
Cardiac & Vascular Group       1,288       1,255     3           (29 )   (2 )     5    
                                             
Core Spinal       235       219     7           (2 )   (1 )     8    
Biologics       26       25     4           (1 )   (4 )     8    
Spinal       261       244     7           (3 )   (1 )     8    
                                             
Neuromodulation       148       146     1           (4 )   (3 )     4    
Diabetes       154       140     10           (4 )   (3 )     13    
Surgical Technologies       147       119     24           (2 )   (1 )     25    
Restorative Therapies Group       710       649     9           (13 )   (2 )     11    
                                             
Total     $ 1,998     $ 1,904     5   %     $ (42 )   (2 ) %   7   %
                                                     

(a) 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 U.S. GAAP.

                                               
MEDTRONIC, INC.
RECONCILIATION OF INTERNATIONAL REVENUE GROWTH TO CONSTANT CURRENCY GROWTH
(Unaudited)
(in millions)
                                               
      Fiscal year ended               Currency Impact     Constant  
      April 27,     April 29,     Reported         on Growth (a)     Currency  
     

2012

     2011     Growth         Dollar     Percentage     Growth (a)  
                                               
Reported Revenue:                                              
Pacing Systems     $ 1,140     $ 1,089     5 %     $ 47     5 %   - %
Defibrillation Systems       1,175       1,131     4         47     4     -  
AF & Other       108       100     8         2     2     6  
Cardiac Rhythm Disease Management       2,423       2,320     4         96     4     -  
                                               
Coronary       1,215       1,084     12         42     4     8  
Structural Heart       696       604     15         21     3     12  

Endovascular & Peripheral

       461       395     17         15     4     13  
CardioVascular       2,372       2,083     14         78     4     10  
Cardiac & Vascular Group       4,795       4,403     9         174     4     5  
                                               
Core Spinal       871       786     11         41     5     6  
Biologics       96       75     28         3     4     24  
Spinal       967       861     12         44     5     7  
                                               
Neuromodulation       530       484     10         21     5     5  
Diabetes       575       484     19         18     4     15  
Surgical Technologies       489       404     21         16     4     17  
Restorative Therapies Group       2,561       2,233     15         99     5     10  
                                               
Total     $ 7,356     $ 6,636     11 %     $ 273     4 %   7 %
                                               

(a) 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 U.S. GAAP.

 
MEDTRONIC, INC.
RECONCILIATION OF EMERGING MARKET REVENUE GROWTH TO CONSTANT CURRENCY GROWTH
(Unaudited)
(in millions)
                                   
    Three months ended           Currency Impact   Constant  
    April 27,   April 29,   Reported       on Growth (a)   Currency  
    2012   2011   Growth       Dollar   Percentage   Growth (a)  
                                   
Emerging Market Revenue (b)   $ 463   $ 390   19 %   $ (6 )   (1 ) % 20 %
                                   

(a) 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 U.S. GAAP.

(b) Emerging Market Revenue includes revenue from certain countries located in Central and Eastern Europe, Middle East, Africa, Latin America, and Asia (excluding Japan and Korea).

 
MEDTRONIC, INC.
RECONCILIATION OF SURGICAL TECHNOLOGIES REVENUE GROWTH TO CONSTANT CURRENCY

REVENUE GROWTH ADJUSTED FOR REVENUE FROM ADVANCED ENERGY BUSINESS
(Unaudited)
(in millions)
                         
    Three months       Three months      
    ended       ended     Percentage
    April 27, 2012       April 29, 2011     Change
                         
Surgical Technologies revenue, as reported   $ 371         $ 298       24 %
Foreign currency impact     2           -        
Advanced Energy business revenue     (34 )         -        
Surgical Technologies revenue, adjusted   $ 339   (a)     $ 298       14 %
                             

(a) 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 and the Advanced Energy business on Surgical Technologies’ revenue growth. In addition, Medtronic management uses Surgical Technologies revenue adjusted for foreign currency translation and the Advanced Energy business to evaluate operational performance of the Company. 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 27,     April 29,
    2012     2011

 

 

(in millions, except per share data)

ASSETS

              
               
Current assets:              
Cash and cash equivalents   $ 1,248       $ 1,382  
Short-term investments     1,344         1,046  
Accounts receivable, less allowances of $100 and $96, respectively     3,808         3,761  
Inventories     1,800         1,619  
Deferred tax assets, net     963         523  
Prepaid expenses and other current assets     675         561  
Assets held for sale     -         258  
               
Total current assets     9,838         9,150  
               
Property, plant, and equipment, net     2,473         2,488  
Goodwill     9,934         9,520  
Other intangible assets, net     2,647         2,725  
Long-term investments     7,705         6,116  
Long-term deferred tax assets, net     181         314  
Other assets     305         362  
               
Total assets   $ 33,083       $ 30,675  
               

LIABILITIES AND SHAREHOLDERS’ EQUITY

              
               
Current liabilities:              
Short-term borrowings   $ 3,274       $ 1,723  
Accounts payable     565         495  
Accrued compensation     912         874  
Accrued income taxes     65         50  
Deferred tax liabilities, net     33         7  
Other accrued expenses     1,008         1,489  
Liabilities held for sale     -         88  
               
Total current liabilities     5,857         4,726  
               
Long-term debt     7,359         8,112  
Long-term accrued compensation and retirement benefits     759         480  
Long-term accrued income taxes     1,005         496  
Long-term deferred tax liabilities, net     611         461  
Other long-term liabilities     379         432  
               
Total liabilities     15,970         14,707  
               
Commitments and contingencies              
               
Shareholders’ equity:              

Preferred stock— par value $1.00; 2.5 million shares authorized, none outstanding

     -         -  
Common stock— par value $0.10; 1.6 billion shares authorized, 1,037,194,934 and 1,070,162,109 shares issued and outstanding, respectively     104         107  
Retained earnings     17,482         16,085  
Accumulated other comprehensive loss     (473 )       (224 )
               
Total shareholders’ equity     17,113         15,968  
               
Total liabilities and shareholders’ equity   $ 33,083       $ 30,675  
                   
MEDTRONIC, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
     
    Fiscal Year
    2012     2011     2010
(in millions)                      
Operating Activities:                      
Net earnings   $ 3,617       $ 3,096       $ 3,099  
Adjustments to reconcile net earnings to net cash provided by operating activities:                      
Depreciation and amortization     862         804         772  
Amortization of discount on senior convertible notes     85         171         167  
Gain on sale of Physio-Control     (218 )       -         -  
Acquisition-related items     45         44         11  
Provision for doubtful accounts     66         47         36  
Deferred income taxes     14         153         144  
Stock-based compensation     161         198         225  
Change in operating assets and liabilities, net of effect of acquisitions:                      
Accounts receivable, net     (252 )       (342 )       (271 )
Inventories     (185 )       (101 )       158  
Accounts payable and accrued liabilities     182         (37 )       225  
Other operating assets and liabilities     155         (532 )       130  
Certain litigation charges, net     90         245         374  
Certain litigation payments     (241 )       (5 )       (939 )
                       
Net cash provided by operating activities     4,381         3,741         4,131  
                       
Investing Activities:                      
Acquisitions, net of cash acquired     (617 )       (1,332 )       (350 )
Proceeds from divestiture of Physio-Control     386         -         -  
Purchases of intellectual property     (15 )       (47 )       (62 )
Additions to property, plant, and equipment     (513 )       (501 )       (573 )
Purchases of marketable securities     (8,080 )       (6,249 )       (7,478 )
Sales and maturities of marketable securities     6,104         6,443         3,791  
Other investing activities, net     55         (129 )       (87 )
                       
Net cash used in investing activities     (2,680 )       (1,815 )       (4,759 )
                       
Financing Activities:                      
Change in short-term borrowings, net     (585 )       1,621         (444 )
Issuance of long-term debt     1,210         1,000         3,000  
Payments on long-term debt     (24 )       (2,603 )       (20 )
Dividends to shareholders     (1,021 )       (969 )       (907 )
Issuance of common stock     96         85         165  
Repurchase of common stock     (1,440 )       (1,140 )       (1,030 )
                       
Net cash provided by (used in) financing activities     (1,764 )       (2,006 )       764  
                       
Effect of exchange rate changes on cash and cash equivalents     (71 )       62         (7 )
                       
Net change in cash and cash equivalents     (134 )       (18 )       129  
                       
Cash and cash equivalents at beginning of period     1,382         1,400         1,271  
                       
Cash and cash equivalents at end of period   $ 1,248       $ 1,382       $ 1,400  
                       
Supplemental Cash Flow Information                      
Cash paid for:                      
Income taxes   $ 454       $ 826       $ 571  
Interest     346         447         386  
Supplemental noncash financing activities:                      
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         -         2,200  

 

Source: Medtronic, Inc.

Medtronic, Inc.
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