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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934.
FOR THE FISCAL YEAR ENDED APRIL 30, 1996
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
FOR THE TRANSITION PERIOD FROM _______________ TO _______________
COMMISSION FILE NO. 1-7707
[LOGO]
MEDTRONIC, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
MINNESOTA 41-0793183
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
7000 CENTRAL AVENUE N.E.
MINNEAPOLIS, MINNESOTA 55432
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
TELEPHONE NUMBER: (612) 574-4000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
COMMON STOCK, PAR VALUE $.10 PER SHARE NEW YORK STOCK EXCHANGE, INC.
PREFERRED STOCK PURCHASE RIGHTS NEW YORK STOCK EXCHANGE, INC.
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO
SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES __X__ NO ____
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405
OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF THE REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY
AMENDMENT TO THIS FORM 10-K. ( )
AGGREGATE MARKET VALUE OF VOTING STOCK OF MEDTRONIC, INC. HELD BY NONAFFILIATES
OF THE REGISTRANT AS OF JULY 5, 1996, BASED ON THE CLOSING PRICE OF $53.50 AS
REPORTED ON THE NEW YORK STOCK EXCHANGE:
$12.61 BILLION.
SHARES OF COMMON STOCK OUTSTANDING ON JULY 5, 1996: 239,509,382
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF REGISTRANT'S 1996 ANNUAL SHAREHOLDERS REPORT ARE INCORPORATED BY
REFERENCE INTO PARTS I, II AND IV; PORTIONS OF REGISTRANT'S PROXY STATEMENT FOR
ITS 1996 ANNUAL MEETING ARE INCORPORATED BY REFERENCE INTO PART III.
PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS Medtronic, Inc. (together with its subsidiaries,
"Medtronic" or the "company") was incorporated as a Minnesota corporation in
1957. Medtronic is the world's leading therapeutic medical technology company
specializing in implantable and invasive therapies. Primary products include
implantable pacemaker systems used for treatment of bradycardia, implantable
tachyarrhythmia management systems, mechanical and tissue heart valves, balloon
and guiding catheters used in angioplasty, stents, implantable neurostimulation
and drug delivery systems, and perfusion systems including blood oxygenators,
centrifugal blood pumps, cannula products, and autotransfusion and blood
monitoring systems.
In fiscal 1996 and early fiscal 1997, the company also expanded its
opportunities to meet unmet medical needs by adding new growth platforms through
the acquisition of several companies: Pudenz-Schulte Medical Corporation ("PS
Medical"), which manufactures and distributes cerebrospinal fluid shunts and
neurosurgical implants; Micro Interventional Systems, which develops products
for the minimally invasive treatment of stroke and peripheral vascular diseases;
Synectics Medical AB of Stockholm, Sweden, the world leader in
computer-supported systems to diagnose urological and digestive disorders and
sleep apnea; AneuRx, Inc., which develops minimally invasive aneurysm repair
therapy; and InStent Inc., which develops self-expanding and balloon expandable
stents used in several of the body's fluid passageways.
Medtronic operates in a single industry segment, that of providing products for
medical applications. Its revenues, operating profits and assets for the past
three fiscal years (1994-1996) have been attributable to this single industry
segment. The company does business in more than 120 countries and reports on
three business units -- Pacing, Other Cardiovascular, and Neurological and Other
- -- and three geographic areas -- the Americas, Europe/Middle East/Africa, and
Asia/Pacific.
BUSINESS NARRATIVE. Pacing is the company's largest business unit, consisting
primarily of Bradycardia Pacing, which produces products for treating patients
with slow or irregular heartbeats, and Tachyarrhythmia Management, which
develops products to treat abnormally fast heart rhythms. The bradycardia pacing
systems include pacemakers, leads and accessories. The pacemakers can be
noninvasively programmed by the physician to adjust sensing, electrical pulse
intensity, rate, duration and other characteristics, and can produce impulses to
cause contractions in either the upper or lower heart chamber, or both, in
appropriate relation to heart activity. The company's Model 9790 programmer was
enhanced in fiscal 1996 with improved software and increased memory and, as
before, can be used interchangeably with all of the company's bradycardia
pacemakers as well as with its Jewel(r) line of tachyarrhythmia management
devices. Advances in bradycardia pacing in fiscal 1996 include the commercial
release of the Thera(r) i-series of pacemakers in the U.S., which is a family of
four pacemakers with expanded capabilities for virtually every pacing
application, and release of the CapSure(r)Z and CapSureFix(r) steroid-eluting
leads. These leads deliver more concentrated levels of electrical energy that
extend device life and, in the case of CapSureFix(r), permit anchoring of the
lead in the heart. More than half of Medtronic's revenues are generated from the
sale of implantable cardiac pacemaker systems for treatment of bradycardia.
The Tachyarrhythmia Management business produces implantable devices and
transvenous lead systems for treating ventricular tachyarrhythmias, which are
abnormally fast, and sometimes fatal, heartbeats. The systems offer a tiered
therapy of pacing, cardioversion and defibrillation, and may be implanted
without a thoracotomy, which reduces patient trauma and hospitalization time and
costs. The company's Jewel(r) line of devices was expanded in November 1995 with
the commercial release of the Jewel(r) Active Can(tm) in the U.S. This system
makes implantation possible with a single lead, resulting in faster, less costly
implantation and quicker patient recovery. In July 1996, the Micro Jewel(r)
implantable defibrillator, which offers expanded diagnostic capabilities in a
smaller size device, was cleared by the FDA for commercial release in the U.S.
The Jewel(r) line of devices, like the bradycardia pacemakers, are programmed
with the Model 9790 pacing programmer.
The company's Pacing business unit accounted for 68.2% of Medtronic's net sales
during the fiscal year ended April 30, 1996 ("fiscal 1996"), 66.0% of net sales
in fiscal 1995 and 68.5% of net sales in fiscal 1994.
The Other Cardiovascular business unit is comprised of the Vascular and Cardiac
Surgery business. The Vascular business was established in fiscal 1996 to focus
the company's involvement in minimally invasive therapies for the treatment of
disease and damage to cerebral, coronary and peripheral blood vessels.
Medtronic's primary involvement in the vascular area has been in coronary
angioplasty. The company offers coronary angioplasty balloon and guide catheters
worldwide. The company's Wiktor stent, used in coronary applications, is widely
used outside the U.S. and is awaiting FDA approval in the U.S. Medtronic also
provides EP catheters and ablation systems. Adding to the company's existing
expertise in the vascular area are three newly acquired companies: Micro
Interventional Systems, which develops products for the minimally invasive
treatment of stroke and peripheral vascular diseases; AneuRx, Inc., which
develops minimally invasive aneurysm repair therapy; and InStent Inc., which
develops self-expanding and balloon expandable stents used in several of the
body's fluid passageways.
The Cardiac Surgery business includes the Heart Valves, Cardiopulmonary,
Cannulae and Blood Management businesses. Through a series of strategic
acquisitions over the past decade, Medtronic now markets a complete line of
blood-handling products that form a life-saving circuit by maintaining blood
circulation, oxygen supply and body temperature while the patient is undergoing
emergency treatment or open-heart surgery. The company's Heart Valve business
produces tissue and mechanical valves and repair products for damaged or
diseased heart valves. In March 1996, the Blood Management business received
approval to market commercially in the U.S. its Sequestra(tm) 1000
autotransfusion system, which recovers and processes a patient's blood during
major surgery, minimizing any concern about the transmission of bloodborne
diseases.
The company's Other Cardiovascular business unit accounted for 24.1% of net
sales in fiscal 1996, 26.5% of net sales in fiscal 1995 and 24.0% of net sales
for fiscal 1994.
The company's Neurological and Other business unit consists of the Neurological
business and Developing Businesses and Ventures. The Neurological business
consists of the Neurostimulation business, which produces implantable systems
for spinal cord and brain stimulation, and the Drug Delivery business, which
produces implantable programmable drug delivery systems that are used in
treating chronic intractable pain, tremor and spasticity. These include the
Itrel(r) 3 spinal cord stimulation system, which was commercially released in
Europe and the U.S. in fiscal 1996 and features a patient-operated control unit,
as well as the SynchroMed(r) drug delivery system. The Mattrix(r) stimulator,
which was commercially released in the U.S. in June 1995, is the first
neurostimulation system that offers a dual stimulation mode for more effective
pain management. In November 1995, the company added a new growth platform in
this sector by acquiring PS Medical, which manufactures and distributes
cerebrospinal fluid shunts and neurosurgical implants.
The company's Drug Delivery business is collaborating with several biotechnology
companies to develop therapies for neurodegenerative disorders such as
Alzheimer's disease, Parkinson's disease, and amyotrophic lateral sclerosis or
Lou Gehrig's disease. Compounds for treating these diseases, called neurotrophic
factors, are still in development by these companies. Once they are proven to be
safe and effective, Medtronic believes its drug delivery technology could be
effective in administering these agents directly to their site of action in
precise doses.
The Neurological and Other business unit accounted for 7.7% of net sales for
fiscal 1996, 7.5% of net sales for fiscal 1995 and 7.5% of net sales for fiscal
1994.
Developing Businesses and Ventures focuses on using the company's core
technologies to meet unmet medical needs that are beyond the immediate areas of
focus of the other sectors. In April 1996, the company also added a new growth
platform through the acquisition of Synectics Medical AB of Stockholm, Sweden,
the world leader in computer-supported systems to diagnose urological and
digestive disorders and sleep apnea.
GOVERNMENT REGULATION. Government and private sector initiatives to limit the
growth of health care costs, including price regulation and competitive pricing,
are continuing in several countries in which the company does business,
including the United States. These changes are causing the marketplace to put
increased emphasis on the delivery of more cost-effective medical therapies.
Although the company believes it is well positioned to respond to changes
resulting from this worldwide trend toward cost containment, the uncertainty as
to the outcome of any proposed legislation or changes in the marketplace
precludes the company from predicting the impact these changes may have on
future operating results.
In the United States, the Food and Drug Administration (the "FDA"), among other
governmental agencies, is responsible for regulating the introduction of new
medical devices, including laboratory and manufacturing practices, and labeling
and recordkeeping for medical devices, and review of manufacturers' required
reports of adverse experience to identify potential problems with marketed
medical devices. The FDA can ban certain medical devices, detain or seize
adulterated or misbranded medical devices, order repair, replacement, or refund
of such devices, and require notification of health professionals and others
with regard to medical devices that present unreasonable risks of substantial
harm to the public health. The FDA may also enjoin and restrain certain
violations of the Food, Drug and Cosmetic Act and the Safe Medical Devices Act
pertaining to medical devices, or initiate action for criminal prosecution of
such violations. Many of the devices that Medtronic develops and markets are in
a category for which the FDA has implemented stringent clinical investigation
and premarket clearance requirements. Moreover, the FDA administers certain
controls over the export of such devices from the United States.
Medical device laws are also in effect in many of the countries in which
Medtronic does business outside the United States. These range from
comprehensive device approval requirements for some or all of Medtronic's
medical device products to requests for product data or certifications. The
number and scope of these requirements is increasing.
In the early 1990's the review time by the FDA to clear medical devices for
commercial release lengthened and the number of approvals, both of 510(k)
submissions and pre-market approval applications ("PMA's"), decreased. In
response to public and congressional concern, the FDA has attempted to address
these issues by approving more 510(k) submissions and approving them more
quickly. Some progress has also been made in the number of PMA's and
PMA-Supplements approved, but review times for leading-edge, innovative products
remain long. While the trend is in the right direction, the lengthy approval
time remains a significant issue and various legislative solutions to resolve
this are currently before the U.S. Congress.
In 1994, the U.S. Health Care Financing Administration ("HCFA"), which
establishes Medicare reimbursement policy and practice, determined that medical
devices not cleared for commercial release by the FDA should not be reimbursed
by Medicare. This action for a period of time virtually prevented Medicare
patients from receiving the more advanced devices used in clinical trials and
provided strong incentives for clinical research to move to non-U.S. markets. In
1995, HCFA changed its position by permitting Medicare reimbursement for devices
that are next-generation improvements of devices previously cleared for
marketing. HCFA also clarified that reimbursement would be allowed for
previously cleared devices that are used for new indications. Since most devices
in clinical trials fall into one of these two categories, these changes have
addressed the concerns created by Medicare's 1994 initiatives.
In keeping with the increased emphasis on cost effectiveness in health care
delivery, the current trend among hospitals and other customers of medical
device manufacturers is to consolidate into larger purchasing groups to enhance
purchasing power. The medical device industry has also been consolidating
rapidly, partly in order to offer a broader range of products to large
purchasers. As a result, transactions with customers are more significant, more
complex and tend to involve more long-term contracts than in the past. This
enhanced purchasing power may also increase the pressure on product pricing,
although management is unable to estimate the potential impact at this time.
Management believes that in this climate it is increasingly important to offer a
full line of products in order to better serve the many requirements of
multi-hospital purchasers.
Medtronic is also subject to various environmental laws and regulations both in
the United States and abroad. The operations of the company, like those of other
medical device companies, involve the use of substances regulated under
environmental laws, primarily in manufacturing and sterilization processes.
While it is difficult to quantify the potential impact of compliance with
environmental protection laws, management believes that such compliance will not
have a material impact on the company's financial position, results of
operations or liquidity.
The company operates in an industry susceptible to significant product liability
claims. In recent years, there has been an increased public interest in product
liability claims for implanted medical devices, including pacemakers and leads.
These claims may be brought by individuals seeking relief for themselves or,
increasingly, by groups seeking to represent a class, and the company has
experienced an increase in such claims. In June 1996, the company lost a case
(Lohr v. Medtronic) before the U.S. Supreme Court to determine whether a device
cleared by the FDA for commercial release can later be challenged as unsafe.
While this outcome could potentially increase the cost to the company, and other
medical device makers, to defend product liability claims, it is not expected to
have a material adverse financial impact on the company. In addition, product
liability claims may be asserted against the company in the future relative to
events not known to management at the present time. Management believes that the
company's risk management practices, including insurance coverage, are
reasonably adequate to protect against potential product liability losses.
SALES, MARKETS AND DISTRIBUTION METHODS. The primary markets for Medtronic's
products are hospitals, other medical institutions and physicians in the United
States and other countries around the world. No one customer individually
accounts for a material amount of Medtronic's total sales.
Medtronic sells most of its products and services directly through its staff of
trained, full-time sales representatives. Sales by these representatives
accounted for approximately 95.1% of Medtronic's U.S. sales and approximately
67.5% of its sales from other countries in fiscal 1996. The remaining sales were
made through independent distributors.
RAW MATERIALS AND PRODUCTION. Medtronic generally has vertically integrated
manufacturing operations, and makes its own lithium batteries, feedthroughs,
integrated and hybrid circuits, microprocessors, and certain other components.
Medtronic purchases many of the parts and materials used in manufacturing its
components and products from external suppliers. Medtronic's single- and
sole-sourced materials include biomaterials such as adhesives, polymers,
elastomers and resins; certain integrated circuits and other
electrical/electronic/ mechanical components; power sources, battery anodes,
pyrolytic carbon discs, pharmaceutical preparations such as Lioresal(r)
(baclofen, USP) Intrathecal (registered trademark of CIBA-GEIGY Corporation),
and computer and other peripheral equipment.
Certain of the raw materials and components (e.g., silicone adhesives and
polyurethanes) used in Medtronic products are available only from a sole U.S.
supplier. Materials are purchased from single sources for reasons of quality
assurance and cost effectiveness. Medtronic works closely with its suppliers to
assure continuity of supply while maintaining high quality and reliability.
However, in an effort to reduce potential product liability exposure, certain
suppliers have terminated or are planning to terminate sales of certain
materials and parts to companies that manufacture implantable medical devices.
Medtronic believes that various design, material or supplier alternatives can be
found for these materials and components without a significant interruption in
production.
PATENTS AND LICENSES. Medtronic owns patents on certain of its inventions, and
obtains licenses from others as it deems necessary to its business. Medtronic's
policy is to obtain patents on its inventions whenever practical. Technological
advancement characteristically has been rapid in the medical device industry,
and Medtronic does not consider its business to be materially dependent upon any
individual patent.
COMPETITION AND INDUSTRY. Medtronic sells therapeutic and diagnostic medical
devices in the United States and around the world. In the businesses in which
Medtronic competes, the company faces a mixture of competitors ranging from
large multi-national industrial manufacturers to regional or national
manufacturers that offer a limited selection of products. Important factors to
Medtronic's customers include product reliability and performance, product
technology that provides for improved patient benefits, product price, and
breadth of product lines and related product services provided by the
manufacturer. Major shifts in industry market share have occurred in connection
with product problems, physician advisories and safety alerts, reflecting the
importance and risks of product quality in the medical device industry.
Medtronic is the leading manufacturer and supplier of pacemakers in both the
U.S. and non-U.S. markets. Worldwide, approximately ten manufacturers compete
in the pacemaker industry. In the U.S., Medtronic and three other
manufacturers account for a significant portion of pacemaker sales. Medtronic
and five other manufacturers account for most of the non-U.S. pacemaker
sales.
In the tachyarrhythmia management device market, Medtronic and two other
manufacturers based in the U.S. account for most sales of implantable
defibrillators within and outside the U.S. Medtronic's Jewel(r) PCD(r) devices
are commercially available with the company's Transvene(tm) leads in U.S. and
non-U.S. markets. At least three other companies have devices in various stages
of development and clinical evaluation.
In the vascular market, which includes balloon and guiding catheters, and
implantable stents and grafts, there are numerous competitors worldwide.
Medtronic believes that it is the leading manufacturer and supplier of guiding
catheters worldwide for coronary vascular applications. Medtronic and three
other manufacturers account for most combined balloon and guiding catheter
sales. In stents, Medtronic and two competitors account for most sales
worldwide, with one competitor holding a dominant market position and numerous
new competitors emerging.
Medtronic is the second largest manufacturer and supplier of both tissue and
mechanical heart valves within and outside the U.S. A large manufacturer and
distributor of hospital products and services is the major competitor in tissue
heart valves and another company is the major competitor in mechanical heart
valves. These two companies and Medtronic are the primary manufacturers and
suppliers of heart valves within the U.S. These three companies plus a few other
competitors account for most of the worldwide heart valve sales.
In the blood oxygenator market, there are approximately seven companies that
account for a significant portion of the U. S. and non-U.S. markets.
Medtronic is the market leader in cannula products. Medtronic and four
competitors account for a significant portion of cannulae sales in the U.S.
Medtronic and three competitors account for a significant portion of
autotransfusion sales in both U.S. and non-U.S. markets.
In neurological devices, Medtronic is the leading manufacturer and supplier of
implantable neurostimulation and drug delivery systems. Medtronic and two
competitors account for most sales worldwide.
Market complexity has been intensifying in the medical device industry in recent
years. Factors such as relative patent portfolios, government regulation
(including the regulatory approval process for medical devices), a more rigorous
enforcement climate at the FDA, anticipated health care reform, government
reimbursement systems for health care costs, product liability litigation and
the rapid rate of technological change are increasingly important considerations
for existing medical device manufacturers and any potential entrants to the
industry.
RESEARCH AND DEVELOPMENT. Medtronic spent $236.7 million on research and
development (10.9% of net sales) in fiscal 1996, $191.4 million (11.0% of net
sales) in fiscal 1995 and $156.3 million (11.2% of net sales) in fiscal 1994.
These amounts have been applied toward improving existing products, expanding
their applications, and developing new products. Medtronic's research and
development projects span such areas as sensing and treatment of cardiovascular
disorders (including bradycardia and tachyarrhythmia, fibrillation, and sinus
node abnormalities); improved heart valves, membrane oxygenators and centrifugal
blood pump systems; implantable drug delivery systems for pain, spasticity and
other neurological applications; muscle and neurological stimulators;
therapeutic catheters; coronary stents and treatments for restenosis;
implantable physiologic sensors; cardiac assist systems (cardiomyoplasty) and
other applications of transformed muscle; and materials and coatings to enhance
the blood/device interface.
Medtronic has not engaged in significant customer or government sponsored
research.
EMPLOYEES. On April 30, 1996, Medtronic and its subsidiaries employed 10,526
people on a regular, full-time basis and, including temporary and part-time
employees, a total of 12,350 employees on a full-time equivalent basis.
U.S. AND NON-U.S. OPERATIONS AND EXPORT SALES. Medtronic sells products in
more than 120 countries in three geographic areas: the Americas,
Europe/Middle East/Africa, and Asia/Pacific. For financial reporting
purposes, revenues, profitability, and identifiable assets attributable to
significant geographic areas are presented in Note 13 to the consolidated
financial statements, incorporated herein by reference to Medtronic's 1996
Annual Shareholders Report on page 72. U.S. export sales to unaffiliated
customers comprised less than two percent of Medtronic's consolidated sales
in each of fiscal 1996, 1995 and 1994.
Operation in countries outside the U.S. is accompanied by certain financial and
other risks. Relationships with customers and effective terms of sale frequently
vary by country, often with longer-term receivables than are typical in the U.S.
Inventory management is an important business concern due to the potential for
rapidly changing business conditions and currency exposure. Currency exchange
rate fluctuations can affect income from, and profitability of, non-U.S.
operations. Medtronic attempts to hedge these exposures to reduce the effects of
foreign currency fluctuations on net earnings. Certain countries also limit or
regulate the repatriation of earnings to the United States. Non-U.S. operations
in general present complex tax and money management issues requiring
sophisticated analysis to meet the company's financial objectives.
EXECUTIVE OFFICERS OF MEDTRONIC
Set forth below are the names and ages of current executive officers of
Medtronic, Inc., as well as information regarding their positions with
Medtronic, Inc., their periods of service in these capacities, and their
business experience for the past five or more years. Executive officers
generally serve terms of office of approximately one year. There are no family
relationships among any of the officers named, nor is there any arrangement or
understanding pursuant to which any person was selected as an officer.
WILLIAM W. GEORGE, age 53, has been President and Chief Executive Officer since
May 1991, was President and Chief Operating Officer from March 1989 to April
1991, and has been a director since March 1989. Mr. George has been elected
Chairman of the Board of the company effective August 28, 1996. Prior to joining
the company, Mr. George was President, Space and Aviation Systems Business, at
Honeywell Inc. from December 1987 to March 1989. During his 11 years with
Honeywell, Mr. George served in several other executive positions including
President, Industrial Automation and Control, from May 1987 to December 1987;
and Executive Vice President of that business from January 1983 to May 1987.
GLEN D. NELSON, M.D., age 59, has been Vice Chairman since July 1988, and has
been a director since 1980. From August 1986 to July 1988, he was Executive Vice
President of the company. Dr. Nelson was Chairman and Chief Executive Officer of
American MedCenters, Inc., an HMO management corporation, from July 1984 to
August 1986.
ARTHUR D. COLLINS, JR., age 48, has been Chief Operating Officer since January
1994 and has been a director since August 1994. From June 1992 to January 1994,
Mr. Collins was Executive Vice President and President of Medtronic
International. Mr. Collins has been elected President of the company effective
August 28, 1996. Prior to joining the company, Mr. Collins was Corporate Vice
President, Diagnostic Products, at Abbott Laboratories from October 1989 to May
1992 and Divisional Vice President, Diagnostic Products, from May 1984 to
October 1989. During his 14 years with Abbott, Mr. Collins served in various
general management positions both in the United States and Europe.
BOBBY I. GRIFFIN, age 59, has been Executive Vice President since July 1988, and
President, Pacing, since March 1991. From September 1985 to July 1988, Mr.
Griffin was Vice President of the Pacing Business Unit.
BILL K. ERICKSON, age 52, has been Senior Vice President and President,
Americas, since January 1994. From May 1992 to January 1994, Mr. Erickson was
Senior Vice President and President, U.S. Cardiovascular Sales and Marketing
Division. Mr. Erickson was Senior Vice President, U.S. Cardiovascular Division,
from January 1990 to May 1992 and was Vice President, U.S. Cardiovascular
Distribution, from January 1982 to December 1989.
JANET S. FIOLA, age 54, has been Senior Vice President, Human Resources since
March 1994. She was Vice President, Human Resources, from February 1993 to March
1994, and was Vice President, Corporate Human Resources, from February 1988 to
February 1993.
B. KRISTINE JOHNSON, age 44, has been Senior Vice President and President,
Vascular Business since May 1996. She was Vice President and President,
Tachyarrhythmia Management from May 1995 to April 1996, and Vice President and
General Manager, Tachyarrhythmia Management from January 1990 to April 1995. She
served in various general management positions at the company from April 1982 to
December 1989. Prior to joining the company, Ms. Johnson served in several
management positions at Cargill, Inc. from 1973 to 1982.
PHILIP M. LAUGHLIN, age 49, joined the company as Senior Vice President and
President, Cardiac Surgery, in July 1995. Prior to that he served with Clintec
Nutrition company (worldwide joint venture of Baxter International and Nestle
S.A. in the field of clinical nutrition) as President, North America, from 1994
through July 1995 and as President, United States, from 1989 to 1993. From 1976
to 1989, he held numerous general management positions at Baxter International
in Europe and the Far East, and was most recently Vice President, Operations,
Global Business Group.
RONALD E. LUND, age 61, has been Senior Vice President and General Counsel since
November 1990, and Secretary since July 1992, and was Vice President and General
Counsel from February 1989 to November 1990. Prior to joining the company, Mr.
Lund served as Vice President and Associate General Counsel of The Pillsbury
company from 1984 to February 1989.
JOHN A. MESLOW, age 57, has been Senior Vice President and President,
Neurological Business, since March 1994. He was Vice President and President,
Neurological Business, from March 1991 to March 1994, and was Vice President,
Neurological Division, from March 1985 to March 1991.
ROBERT L. RYAN, age 53, has been Senior Vice President and Chief Financial
Officer since April 1993. Prior to joining the company, Mr. Ryan was Vice
President, Finance, and Chief Financial Officer of Union Texas Petroleum Corp.
from May 1984 to April 1993, Controller from May 1983 to May 1984, and Treasurer
from March 1982 to May 1983.
ITEM 2. PROPERTIES
Medtronic's principal offices are owned by the company and located in the
Minneapolis, Minnesota metropolitan area. Manufacturing or research facilities
are located in Arizona, California, Colorado, Massachusetts, Michigan,
Minnesota, Texas, Puerto Rico, Canada, France, Germany, Italy, the Netherlands,
Sweden and Japan. The company's total manufacturing and research space is
approximately 1.7 million square feet, of which approximately 81% is owned by
the company and the balance is leased.
Medtronic also maintains sales and administrative offices inside the United
States at 78 locations in 27 states or jurisdictions and outside the United
States at 101 locations in 29 countries. Most of these locations are leased.
Medtronic is utilizing substantially all of its currently available productive
space to develop, manufacture and market its products. The company's facilities
are in good operating condition, suitable for their respective uses and adequate
for current needs.
ITEM 3. LEGAL PROCEEDINGS
Note 11 to the consolidated financial statements appearing on page 71 of
Medtronic's 1996 Annual Shareholders Report is incorporated herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR MEDTRONIC'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The information in the sections entitled "Price Range of Medtronic Stock" and
"Investor Information" on page 76 of Medtronic's 1996 Annual Shareholders
Report is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information for the fiscal years 1986 through 1996 on page 73 of Medtronic's
1996 Annual Shareholders Report is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information on pages 56 through 60 of Medtronic's 1996 Annual Shareholders
Report is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements, together with the report thereon of
independent accountants dated May 22, 1996, appearing on pages 61 through 72 of
Medtronic's 1996 Annual Shareholders Report are incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF MEDTRONIC
The information on pages 1 through 5 of Medtronic's Proxy Statement for its 1996
Annual Shareholders' Meeting and on page 9 of such Proxy Statement entitled
"Section 16(a) Beneficial Ownership Reporting Compliance" is incorporated herein
by reference. See also "Executive Officers of Medtronic" on pages 6 and 7
hereof.
ITEM 11. EXECUTIVE COMPENSATION
The sections entitled "Election of Directors -- Director Compensation" and
"Executive Compensation" on pages 7 and 8, and 15 through 20, respectively, of
Medtronic's Proxy Statement for its 1996 Annual Shareholders' Meeting are
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
"Shareholdings of Certain Owners and Management" on page 9 of Medtronic's Proxy
Statement for its 1996 Annual Shareholders' Meeting is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information on pages 7 and 8 of Medtronic's Proxy Statement for its 1996
Annual Shareholders' Meeting concerning services provided to the company by
directors and executive officers in fiscal 1996 is incorporated herein by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. FINANCIAL STATEMENTS
Report of Independent Accountants (incorporated herein by reference to
page 61 of Medtronic's 1996 Annual Shareholders Report)
Statement of Consolidated Earnings -- years ended April 30, 1996, 1995,
and 1994 (incorporated herein by reference to page 62 of Medtronic's 1996
Annual Shareholders Report)
Consolidated Balance Sheet -- April 30, 1996 and 1995 (incorporated
herein by reference to page 63 of Medtronic's 1996 Annual Shareholders
Report)
Statement of Consolidated Cash Flows -- years ended April 30, 1996, 1995,
and 1994 (incorporated herein by reference to page 64 of Medtronic's 1996
Annual Shareholders Report)
Notes to Consolidated Financial Statements (incorporated herein by
reference to pages 65 through 72 of Medtronic's 1996 Annual Shareholders
Report)
2. FINANCIAL STATEMENT SCHEDULES
II Valuation and Qualifying Accounts -- years ended April 30, 1996, 1995,
and 1994
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes
thereto.
3. EXHIBITS
3.1 Medtronic Restated Articles of Incorporation, as amended to date
(Exhibit 3.1).(a)
3.2 Medtronic Bylaws, as amended to date.
4 Form of Rights Agreement dated as of June 27, 1991 between Medtronic
and Norwest Bank Minnesota, National Association, including as Exhibit
A thereto the form of Preferred Stock Purchase Right Certificate
(Exhibit 1).(b)
*10.1 1994 Stock Award Plan (Appendix A).(c)
*10.2 Management Incentive Plan (Appendix B).(c)
*10.3 1979 Restricted Stock and Performance Share Award Plan, as amended to
date (Exhibit 10.1).(d)
*10.4 1979 Nonqualified Stock Option Plan, as amended.
*10.5 Form of Employment Agreement for Medtronic executive officers (Exhibit
10.5).(e)
*10.6 1991 Restricted Stock Plan for Non-Employee Directors.
*10.7 Capital Accumulation Plan Deferral Program.
*10.8 Postretirement Survivor Benefit Plan (Exhibit 10.7).(d)
*10.9 Amendment effective October 1, 1993 to the Directors' Retirement Plan
(Exhibit 10.9).(f)
*10.10 Executive Nonqualified Supplemental Benefit Plan.
*10.11 Management Incentive Plan Stock Option Replacement Program (Exhibit
10.11).(e)
11 Computation of Earnings Per Share.
13 Those portions of Medtronic's 1996 Annual Shareholders Report expressly
incorporated by reference herein, which shall be deemed filed with the
Commission.
21 List of Subsidiaries.
23 Consent and Report of Price Waterhouse LLP (set forth on page 12 of
this report).
24 Powers of Attorney.
27 Financial Data Schedule.
(a) Incorporated herein by reference to the cited exhibit in Medtronic's
Quarterly Report on Form 10-Q for the quarter ended July 28, 1995, filed
with the Commission on September 8, 1995.
(b) Incorporated herein by reference to the cited exhibit in Medtronic's Form
8-A Registration Statement dated June 27, 1991, filed with the Commission on
June 28, 1991.
(c) Incorporated herein by reference to the cited appendix in Medtronic's Proxy
Statement for its 1994 Annual Meeting of Shareholders, filed with the
Commission on July 27, 1994.
(d) Incorporated herein by reference to the cited exhibit in Medtronic's Annual
Report on Form 10-K for the year ended April 30, 1992, filed with the
Commission under cover of Form SE dated July 24, 1992.
(e) Incorporated herein by reference to the cited exhibit in Medtronic's Annual
Report on Form 10-K for the year ended April 30, 1995, filed with the
Commission on July 25, 1995.
(f) Incorporated herein by reference to the cited exhibit in Medtronic's Annual
Report on Form 10-K for the year ended April 30, 1994, filed with the
Commission on July 27, 1994.
*Items that are management contracts or compensatory plans or arrangements
required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K.
(b) REPORTS ON FORM 8-K
For the purpose of updating the company's outstanding Registration Statements on
Form S-3, the company filed (i) a Report on Form 8-K dated February 13, 1996
incorporating by reference in Item 5 thereof the press release publishing at
least 30 days of post-combination results in connection with certain
acquisitions by the company in November 1995 and (ii) a Report on Form 8-K dated
March 25, 1996 reporting under Item 5 the announcement of an agreement by the
company to acquire InStent Inc. Other than these, no reports on Form 8-K were
filed by the company during the quarter ended April 30, 1996. Subsequent to the
quarter ended April 30, 1996, the company filed (i) a Report on Form 8-K dated
May 23, 1996 reporting under Item 5 the announcement of financial results for
the fiscal year ended April 30, 1996 and (ii) a Report on Form 8-K dated June
28, 1996 reporting under Item 2 the completion of the previously announced
transaction with InStent Inc.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
MEDTRONIC, INC.
Dated: July 23, 1996
BY: /s/ WILLIAM W. GEORGE
WILLIAM W. GEORGE
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Exchange Act of 1934, the report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Dated: July 23, 1996
BY: /s/ WILLIAM W. GEORGE
WILLIAM W. GEORGE
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
Dated: July 23, 1996
BY: /s/ ROBERT L. RYAN
ROBERT L. RYAN
SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL AND ACCOUNTING
OFFICER)
F. CALEB BLODGETT
ARTHUR D. COLLINS, JR.
WILLIAM W. GEORGE
ANTONIO M. GOTTO, JR., M.D.
BERNADINE P. HEALY, M.D.
VERNON H. HEATH
THOMAS E. HOLLORAN DIRECTORS
GLEN D. NELSON, M.D.
RICHARD L. SCHALL
JACK W. SCHULER
GERALD W. SIMONSON
GORDON M. SPRENGER
RICHARD W. SWALIN, PH.D.
WINSTON R. WALLIN
Ronald E. Lund, by signing his name hereto, does hereby sign this document on
behalf of each of the above named directors of the registrant pursuant to powers
of attorney duly executed by such persons.
Dated: July 23, 1996
BY: /S/ RONALD E. LUND
RONALD E. LUND
ATTORNEY-IN-FACT
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of Medtronic, Inc.
Our audits of the consolidated financial statements referred to in our report
dated May 22, 1996 appearing on page 61 of the 1996 Annual Shareholders Report
of Medtronic, Inc. (which report and consolidated financial statements are
incorporated by reference in this Annual Report on Form 10-K) also included an
audit of the Financial Statement Schedule listed in Item 14(a) of this Form
10-K. In our opinion, this Financial Statement Schedule presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.
PRICE WATERHOUSE LLP
Minneapolis, Minnesota
May 22, 1996
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in each Registration
Statement on Form S-8 (Registration Nos. 2-65157, 2-68408, 33-169, 33-36552,
2-65156, 33-24212, 33-37529, 33-44230, 33-55329, 33-63805, 33-64585, 333-04099
and 333-07385) and in each Prospectus constituting part of the Registration
Statements on Form S-3 (Registration Nos. 33-64455, 33-64521, 333-01585 and
333-04101) and Form S-4 (Registration Nos. 33-52751 and 333-04591) of Medtronic,
Inc. of our report dated May 22, 1996 appearing on page 61 of the 1996 Annual
Shareholders Report which is incorporated by reference in this Annual Report on
Form 10-K. We also consent to the incorporation by reference of our report on
the Financial Statement Schedule as shown above.
PRICE WATERHOUSE LLP
Minneapolis, Minnesota
July 22, 1996
MEDTRONIC, INC. AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS OF DOLLARS)
OTHER
BALANCE AT CHARGES/ CHANGES BALANCE
BEGINNING (CREDITS) TO (DEBIT) AT END OF
OF PERIOD EARNINGS CREDIT PERIOD
Allowance for doubtful accounts:
Year ended 4/30/96 $22,416 $ (189) $(1,371)(a) $18,094
(857)(b)
(1,905)(c)
Year ended 4/30/95 20,123 2,501 (1,464)(a) 22,416
1,256 (b)
Year ended 4/30/94 9,456 13,185 (2,902)(a) 20,123
384 (b)
(a) Uncollectible accounts written off, less recoveries.
(b) Reflects primarily the effects of foreign currency fluctuations.
(c) Uncollectible accounts written off related to 1993 divestiture.
Commission File Number 1-7707
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
EXHIBITS
TO
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13
OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED APRIL 30, 1996
---------------
MEDTRONIC LOGO [GRAPHIC OMITTED]
Medtronic, Inc.
7000 Central Avenue N.E.
Minneapolis, Minnesota 55432
Telephone: 612/574-4000
Paper(P) or
EXHIBIT INDEX Electronic(E)
3.1 Medtronic Restated Articles of Incorporation, as amended to --
date (Exhibit 3.1).(a)
3.2 Medtronic Bylaws, as amended to date. E
4 Form of Rights Agreement dated as of June 27, 1991 between --
Medtronic and Norwest Bank Minnesota, National Association,
including as Exhibit A thereto the form of Preferred Stock
Purchase Right Certificate (Exhibit 1).(b)
10.1 1994 Stock Award Plan (Appendix A).(c) --
10.2 Management Incentive Plan (Appendix B).(c) --
10.3 1979 Restricted Stock and Performance Share Award Plan, as --
amended to date (Exhibit 10.1).(d)
10.4 1979 Nonqualified Stock Option Plan, as amended. E
10.5 Form of Employment Agreement for Medtronic executive officers --
(Exhibit 10.5).(e)
10.6 1991 Restricted Stock Plan for Non-Employee Directors. E
10.7 Capital Accumulation Plan Deferral Program. E
10.8 Postretirement Survivor Benefit Plan (Exhibit 10.7).(d) --
10.9 Amendment effective October 1, 1993 to the Directors' --
Retirement Plan (Exhibit 10.9).(f)
10.10 Executive Nonqualified Supplemental Benefit Plan. E
10.11 Management Incentive Plan Stock Option Replacement Program --
(Exhibit 10.11).(e)
11 Computation of Earnings Per Share. E
13 Those portions of Medtronic's 1996 Annual Shareholders Report E
expressly incorporated by reference herein, which shall be
deemed filed with the Commission.
21 List of Subsidiaries. E
23 Consent and Report of Price Waterhouse LLP (set forth on page --
11 of this report).
24 Powers of Attorney. E
27 Financial Data Schedule. E
(a) Incorporated herein by reference to the cited exhibit in
Medtronic's Quarterly Report on Form 10-Q for the quarter ended July 28, 1995,
filed with the Commission on September 8, 1995.
(b) Incorporated herein by reference to the cited exhibit in
Medtronic's Form 8-A Registration Statement dated June 27, 1991, filed with the
Commission on June 28, 1991.
(c) Incorporated herein by reference to the cited appendix in
Medtronic's Proxy Statement for its 1994 Annual Meeting of Shareholders, filed
with the Commission on July 27, 1994.
(d) Incorporated herein by reference to the cited exhibit in
Medtronic's Annual Report on Form 10-K for the year ended April 30, 1992, filed
with the Commission under cover Form SE dated July 24, 1992.
(e) Incorporated herein by reference to the cited exhibit in
Medtronic's Annual Report on Form 10-K for the year ended April 30, 1995, filed
with the Commission on July 25, 1995.
(f) Incorporated herein by reference to the cited exhibit in
Medtronic's Annual Report on Form 10-K for the year ended April 30, 1994, filed
with the Commission on July 27, 1994.