Medtronic, Inc. : Medtronic Reports Fourth Quarter Earnings
05/22/2012| 07:20am US/Eastern
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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
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
Medtronic, Inc. Amy von Walter, +1-763-505-3780 Public
Relations Jeff Warren, +1-763-505-2696 Investor Relations
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