Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - MEDTRONIC INC | d304856d8k.htm |
Exhibit 99.1
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|
NEWS RELEASE |
| Contacts: | ||||||
| Amy von Walter | Jeff Warren | |||||
| Public Relations | Investor Relations | |||||
| 763-505-3780 | 763-505-2696 | |||||
FOR IMMEDIATE RELEASE
MEDTRONIC REPORTS THIRD QUARTER EARNINGS
| • | Revenue of $3.9 Billion Driven by International Revenue Growth of 6% on a Constant Currency Basis, 7% as Reported |
| • | Non-GAAP Diluted EPS of $0.84, GAAP Diluted EPS of $0.88 |
| • | Free Cash Flow Exceeds $1.0 Billion, GAAP Cash Flow from Operations of $1.2 Billion |
| • | Reiterates Revenue Outlook and Tightens Diluted EPS Guidance |
MINNEAPOLIS – Feb. 21, 2012 – Medtronic, Inc. (NYSE: MDT) today announced financial results for its third quarter of fiscal year 2012, which ended January 27, 2012.
The company reported worldwide third quarter revenue of $3.918 billion, compared to the $3.857 billion reported in the third quarter of fiscal year 2011, an increase of 2 percent as reported or 1 percent on a constant currency basis after adjusting for a $13 million favorable foreign currency impact. Including revenue from the Physio-Control business, which is treated as discontinued operations, total company sales would have been $4.029 billion. As reported, third quarter net earnings were $935 million, or $0.88 per diluted share, an increase of 1 percent and 2 percent, respectively, over the same period in the prior year. As detailed in the attached table, third quarter net earnings and diluted earnings per share on a non-GAAP basis were $888 million and $0.84, a decrease of 4 percent and 2 percent, respectively, over the same period in the prior year. After adjusting for one-time tax benefits in the third quarter of fiscal year 2011, non-GAAP earnings and diluted earnings per share increased 8 percent and 9 percent, respectively.
International revenue of $1.773 billion increased 7 percent as reported or 6 percent on a constant currency basis. International sales accounted for 45 percent of Medtronic’s worldwide revenue in the quarter. Emerging market revenue of $395 million increased 15 percent as reported or 16 percent on a constant currency basis.
“I am pleased that a majority of our business mix continued to report strong, consistent revenue growth in the upper single digits. However, this was masked by continued challenges in our U.S. ICD and Spine performance,” said Omar Ishrak, Medtronic chairman and chief executive officer. “Stabilizing these businesses along with delivering on our key strategic imperatives of improving execution, optimizing innovation, and accelerating globalization should position us well to deliver long-term sustainable growth.”
Cardiac and Vascular Group
The Cardiac and Vascular Group at Medtronic is comprised of Cardiac Rhythm Disease Management (CRDM) and CardioVascular. The group had worldwide sales in the quarter of $2.029 billion, representing an increase of 2 percent as reported or 1 percent on a constant currency basis. Cardiac and Vascular Group international sales of $1.152 billion increased 5 percent as reported and on a constant currency basis. Group revenue performance was driven by Endovascular and Peripheral, Structural Heart, AF Solutions, Renal Denervation, Pacing, and Coronary sales offset by declines in implantable cardioverter defibrillators (ICDs).
CRDM third quarter revenue of $1.192 billion decreased 2 percent as reported or 3 percent on a constant currency basis. Third quarter revenue from ICDs was $674 million, down 9 percent on a constant currency basis, while pacing revenue was $467 million, an increase of 3 percent on a constant currency basis. Weaker ICD sales, primarily due to declining procedure volumes in the U.S. market versus the prior year, were partially offset by continued growth of the AF Solutions and Pacing businesses.
CardioVascular revenue of $837 million grew 8 percent as reported and on a constant currency basis. The Coronary, Structural Heart, and Endovascular and Peripheral businesses grew worldwide revenue 3 percent, 10 percent, and 17 percent, respectively, on a constant currency basis. In Structural Heart, transcatheter valves continued to drive growth. Endovascular and Peripheral revenue growth was driven by the continued success of the Endurant® stent graft for the treatment of abdominal aortic aneurysms.
Restorative Therapies Group
The Restorative Therapies Group at Medtronic is comprised of Spine, Neuromodulation, Diabetes, and Surgical Technologies. The group had worldwide sales in the quarter of $1.889 billion, representing an increase of 1 percent as reported and on a constant currency basis. Restorative Therapies Group international sales of $621 million increased 11 percent as reported or 10 percent on a constant currency basis. Group revenue was driven by solid performances in Surgical Technologies, Diabetes and Neuromodulation, offset by continued challenges in U.S. Spine.
Spine revenue of $784 million declined 9 percent as reported or 10 percent on a constant currency basis. International sales for the Spine business increased 7 percent as reported or 4 percent on a constant currency basis. Core Spine revenue of $596 million, which
includes core metal constructs, interspinous process decompression devices, and balloon kyphoplasty products, declined 6 percent on a constant currency basis. Biologics revenue of $188 million declined 20 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 $419 million increased 4 percent as reported and on a constant currency basis. Growth continues to be driven by strong sales of InterStim® Therapy. The RestoreSensor™ spinal cord stimulator with its proprietary AdaptiveStim™ technology continues to perform well in Europe, and was approved in the U.S. and Japan in the third quarter. The U.S. launch of this product was delayed for most of the quarter due to a supply disruption resulting from the flooding in Thailand, which has subsequently been resolved.
Diabetes revenue of $367 million grew 8 percent as reported and on a constant currency basis. Growth in the quarter was driven by strong sales of continuous glucose monitoring (CGM) products and consumables. The Enlite™ CGM sensor had strong 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 $319 million grew 23 percent as reported or 22 percent on a constant currency basis. Excluding revenue from the Advanced Energy business, consisting of our Salient Surgical Technologies and PEAK Surgical acquisitions, Surgical Technologies revenue grew 10 percent on a constant currency basis. Revenue growth was well-balanced across the businesses’ core platforms including Power, Navigation, Monitoring, Imaging, and Hydrocephalus Management.
Revenue Outlook and Earnings Per Share Guidance
The Company today reiterated its revenue outlook and tightened its fiscal year 2012 diluted earnings per share guidance range to $3.44 to $3.47, which includes approximately $0.04 to $0.06 of dilution from the Ardian acquisition. After adjusting for Ardian dilution and 10 cents of one-time tax benefits received in fiscal year 2011, fiscal year 2012 diluted EPS growth is expected to be in the range of 7 to 8 percent.
EPS 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.
“While this was a challenging quarter from a revenue perspective, I was encouraged by the management team’s ability to execute on delivering the bottom line. In addition, we have recently launched several new products including RestoreSensor™, Solera™ 5.5 and 6.0 Spinal Systems, and now Resolute Integrity™ which should contribute to improved revenue performance,” said Ishrak. “We remain optimistic that long-term growth should improve as we dramatically expand our global footprint and focus on delivering economic value as well as clinical value to our customers.”
Webcast Information
Medtronic will host a webcast today, February 21, at 8 a.m. EST (7 a.m. CST), 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., headquartered in Minneapolis, is the world’s leading medical technology company — alleviating pain, restoring health, and extending life for people with chronic disease. Its Internet address is www.medtronic.com.
This press release contains forward-looking statements related to expected product introductions and regulatory approvals, the impact of business divestitures, anticipated benefits for recent acquisitions, product growth drivers, strategies for growth, 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 third quarter of fiscal year 2011.
-end-
MEDTRONIC, INC.
WORLD WIDE REVENUE
(Unaudited)
| ($ millions) |
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| 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 : |
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| CARDIAC RHYTHM DISEASE MANAGEMENT |
$ | 1,226 | $ | 1,248 | $ | 1,221 | $ | 1,315 | $ | 5,010 | $ | 1,253 | $ | 1,268 | $ | 1,192 | $ | — | $ | 3,712 | ||||||||||||||||||||
| Pacing Systems |
473 | 472 | 450 | 506 | 1,901 | 508 | 511 | 467 | — | 1,485 | ||||||||||||||||||||||||||||||
| Defibrillation Systems |
722 | 745 | 735 | 760 | 2,962 | 697 | 708 | 674 | — | 2,078 | ||||||||||||||||||||||||||||||
| AF & Other |
31 | 31 | 36 | 49 | 147 | 48 | 49 | 51 | — | 149 | ||||||||||||||||||||||||||||||
| CARDIOVASCULAR |
$ | 717 | $ | 738 | $ | 774 | $ | 879 | $ | 3,109 | $ | 850 | $ | 830 | $ | 837 | $ | — | $ | 2,518 | ||||||||||||||||||||
| Coronary |
342 | 350 | 370 | 404 | 1,466 | 389 | 376 | 382 | — | 1,148 | ||||||||||||||||||||||||||||||
| Structural Heart |
224 | 237 | 241 | 274 | 977 | 275 | 266 | 265 | — | 806 | ||||||||||||||||||||||||||||||
| Endovascular & Peripheral |
151 | 151 | 163 | 201 | 666 | 186 | 188 | 190 | — | 564 | ||||||||||||||||||||||||||||||
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| CARDIAC & VASCULAR GROUP |
$ | 1,943 | $ | 1,986 | $ | 1,995 | $ | 2,194 | $ | 8,119 | $ | 2,103 | $ | 2,098 | $ | 2,029 | $ | — | $ | 6,230 | ||||||||||||||||||||
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| SPINAL |
$ | 829 | $ | 850 | $ | 861 | $ | 875 | $ | 3,414 | $ | 825 | $ | 839 | $ | 784 | $ | — | $ | 2,448 | ||||||||||||||||||||
| Core Spinal |
622 | 634 | 626 | 648 | 2,530 | 610 | 631 | 596 | — | 1,837 | ||||||||||||||||||||||||||||||
| Biologics |
207 | 216 | 235 | 227 | 884 | 215 | 208 | 188 | — | 611 | ||||||||||||||||||||||||||||||
| NEUROMODULATION |
$ | 370 | $ | 388 | $ | 401 | $ | 432 | $ | 1,592 | $ | 397 | $ | 421 | $ | 419 | $ | — | $ | 1,237 | ||||||||||||||||||||
| DIABETES |
$ | 312 | $ | 326 | $ | 341 | $ | 368 | $ | 1,347 | $ | 355 | $ | 367 | $ | 367 | $ | — | $ | 1,089 | ||||||||||||||||||||
| SURGICAL TECHNOLOGIES |
$ | 235 | $ | 244 | $ | 259 | $ | 298 | $ | 1,036 | $ | 266 | $ | 298 | $ | 319 | $ | — | $ | 883 | ||||||||||||||||||||
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| RESTORATIVE THERAPIES GROUP |
$ | 1,746 | $ | 1,808 | $ | 1,862 | $ | 1,973 | $ | 7,389 | $ | 1,843 | $ | 1,925 | $ | 1,889 | $ | — | $ | 5,657 | ||||||||||||||||||||
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| TOTAL CONTINUING OPERATIONS |
$ | 3,689 | $ | 3,794 | $ | 3,857 | $ | 4,167 | $ | 15,508 | $ | 3,946 | $ | 4,023 | $ | 3,918 | $ | — | $ | 11,887 | ||||||||||||||||||||
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| ADJUSTMENTS : |
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| CURRENCY IMPACT (1) |
$ | 181 | $ | 120 | $ | 13 | $ | — | $ | 313 | ||||||||||||||||||||||||||||||
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| COMPARABLE OPERATIONS (1) |
$ | 3,689 | $ | 3,794 | $ | 3,857 | $ | 4,167 | $ | 15,508 | $ | 3,765 | $ | 3,903 | $ | 3,905 | $ | — | $ | 11,574 | ||||||||||||||||||||
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| (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. |
| (2) | Physio Control has been excluded from the revenue summary above. FY12 Qtr3 revenue is $112M world wide. |
Note: The data in this schedule has been intentionally rounded to the nearest million and therefore the quarterly revenue may not sum to the fiscal year to date revenue.
MEDTRONIC, INC.
U.S. REVENUE
(Unaudited)
| ($ millions) |
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| FY11 QTR 1 |
FY11 QTR 2 |
FY11 QTR 3 |
FY11 QTR 4 |
FY11 Total |
FY12 QTR 1 |
FY12 QTR 2 |
FY12 QTR 3 |
FY12 QTR 4 |
FY12 Total |
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| REPORTED REVENUE : |
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| CARDIAC RHYTHM DISEASE MANAGEMENT |
$ | 691 | $ | 699 | $ | 651 | $ | 650 | $ | 2,690 | $ | 649 | $ | 667 | $ | 619 | $ | — | $ | 1,934 | ||||||||||||||||||||
| Pacing Systems |
214 | 210 | 182 | 207 | 812 | 217 | 220 | 197 | — | 633 | ||||||||||||||||||||||||||||||
| Defibrillation Systems |
467 | 481 | 458 | 425 | 1,831 | 411 | 423 | 396 | — | 1,230 | ||||||||||||||||||||||||||||||
| AF & Other |
10 | 8 | 11 | 18 | 47 | 21 | 24 | 26 | — | 71 | ||||||||||||||||||||||||||||||
| CARDIOVASCULAR |
$ | 241 | $ | 248 | $ | 249 | $ | 289 | $ | 1,026 | $ | 266 | $ | 264 | $ | 258 | $ | — | $ | 788 | ||||||||||||||||||||
| Coronary |
92 | 96 | 94 | 101 | 382 | 90 | 85 | 82 | — | 258 | ||||||||||||||||||||||||||||||
| Structural Heart |
89 | 91 | 92 | 101 | 373 | 100 | 98 | 97 | — | 295 | ||||||||||||||||||||||||||||||
| Endovascular & Peripheral |
60 | 61 | 63 | 87 | 271 | 76 | 81 | 79 | — | 235 | ||||||||||||||||||||||||||||||
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| CARDIAC & VASCULAR GROUP |
$ | 932 | $ | 947 | $ | 900 | $ | 939 | $ | 3,716 | $ | 915 | $ | 931 | $ | 877 | $ | — | $ | 2,722 | ||||||||||||||||||||
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| SPINAL |
$ | 631 | $ | 645 | $ | 646 | $ | 631 | $ | 2,553 | $ | 589 | $ | 599 | $ | 555 | $ | — | $ | 1,744 | ||||||||||||||||||||
| Core Spinal |
439 | 445 | 431 | 429 | 1,744 | 398 | 414 | 390 | — | 1,203 | ||||||||||||||||||||||||||||||
| Biologics |
192 | 200 | 215 | 202 | 809 | 191 | 185 | 165 | — | 541 | ||||||||||||||||||||||||||||||
| NEUROMODULATION |
$ | 261 | $ | 278 | $ | 282 | $ | 286 | $ | 1,108 | $ | 272 | $ | 295 | $ | 287 | $ | — | $ | 855 | ||||||||||||||||||||
| DIABETES |
$ | 203 | $ | 213 | $ | 219 | $ | 228 | $ | 863 | $ | 214 | $ | 228 | $ | 226 | $ | — | $ | 668 | ||||||||||||||||||||
| SURGICAL TECHNOLOGIES |
$ | 149 | $ | 148 | $ | 156 | $ | 179 | $ | 632 | $ | 156 | $ | 184 | $ | 200 | $ | — | $ | 541 | ||||||||||||||||||||
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| RESTORATIVE THERAPIES GROUP |
$ | 1,244 | $ | 1,284 | $ | 1,303 | $ | 1,324 | $ | 5,156 | $ | 1,231 | $ | 1,306 | $ | 1,268 | $ | — | $ | 3,808 | ||||||||||||||||||||
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| TOTAL CONTINUING OPERATIONS |
$ | 2,176 | $ | 2,231 | $ | 2,203 | $ | 2,263 | $ | 8,872 | $ | 2,146 | $ | 2,237 | $ | 2,145 | $ | — | $ | 6,530 | ||||||||||||||||||||
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| ADJUSTMENTS : |
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| CURRENCY IMPACT |
$ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||||||||||||
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| COMPARABLE OPERATIONS |
$ | 2,176 | $ | 2,231 | $ | 2,203 | $ | 2,263 | $ | 8,872 | $ | 2,146 | $ | 2,237 | $ | 2,145 | $ | — | $ | 6,530 | ||||||||||||||||||||
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| (1) | Physio Control has been excluded from the revenue summary above. FY12 Qtr3 U.S. revenue is $58M. |
Note: The data in this schedule has been intentionally rounded to the nearest million and therefore the quarterly revenues may not sum to the fiscal year to date revenue.
MEDTRONIC, INC.
INTERNATIONAL REVENUE
(Unaudited)
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| 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 : |
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| CARDIAC RHYTHM DISEASE MANAGEMENT |
$ | 535 | $ | 549 | $ | 570 | $ | 665 | $ | 2,320 | $ | 604 | $ | 601 | $ | 573 | $ | — | $ | 1,778 | ||||||||||||||||||||
| Pacing Systems |
259 | 262 | 268 | 299 | 1,089 | 291 | 291 | 270 | — | 852 | ||||||||||||||||||||||||||||||
| Defibrillation Systems |
255 | 264 | 277 | 335 | 1,131 | 286 | 285 | 278 | — | 848 | ||||||||||||||||||||||||||||||
| AF & Other |
21 | 23 | 25 | 31 | 100 | 27 | 25 | 25 | — | 78 | ||||||||||||||||||||||||||||||
| CARDIOVASCULAR |
$ | 476 | $ | 490 | $ | 525 | $ | 590 | $ | 2,083 | $ | 584 | $ | 566 | $ | 579 | $ | — | $ | 1,730 | ||||||||||||||||||||
| Coronary |
250 | 254 | 276 | 303 | 1,084 | 299 | 291 | 300 | — | 890 | ||||||||||||||||||||||||||||||
| Structural Heart |
135 | 146 | 149 | 173 | 604 | 175 | 168 | 168 | — | 511 | ||||||||||||||||||||||||||||||
| Endovascular & Peripheral |
91 | 90 | 100 | 114 | 395 | 110 | 107 | 111 | — | 329 | ||||||||||||||||||||||||||||||
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| CARDIAC & VASCULAR GROUP |
$ | 1,011 | $ | 1,039 | $ | 1,095 | $ | 1,255 | $ | 4,403 | $ | 1,188 | $ | 1,167 | $ | 1,152 | $ | — | $ | 3,508 | ||||||||||||||||||||
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| SPINAL |
$ | 198 | $ | 205 | $ | 215 | $ | 244 | $ | 861 | $ | 236 | $ | 240 | $ | 229 | $ | — | $ | 704 | ||||||||||||||||||||
| Core Spinal |
183 | 189 | 195 | 219 | 786 | 212 | 217 | 206 | — | 634 | ||||||||||||||||||||||||||||||
| Biologics |
15 | 16 | 20 | 25 | 75 | 24 | 23 | 23 | — | 70 | ||||||||||||||||||||||||||||||
| NEUROMODULATION |
$ | 109 | $ | 110 | $ | 119 | $ | 146 | $ | 484 | $ | 125 | $ | 126 | $ | 132 | $ | — | $ | 382 | ||||||||||||||||||||
| DIABETES |
$ | 109 | $ | 113 | $ | 122 | $ | 140 | $ | 484 | $ | 141 | $ | 139 | $ | 141 | $ | — | $ | 421 | ||||||||||||||||||||
| SURGICAL TECHNOLOGIES |
$ | 86 | $ | 96 | $ | 103 | $ | 119 | $ | 404 | $ | 110 | $ | 114 | $ | 119 | $ | — | $ | 342 | ||||||||||||||||||||
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| RESTORATIVE THERAPIES GROUP |
$ | 502 | $ | 524 | $ | 559 | $ | 649 | $ | 2,233 | $ | 612 | $ | 619 | $ | 621 | $ | — | $ | 1,849 | ||||||||||||||||||||
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| TOTAL CONTINUING OPERATIONS |
$ | 1,513 | $ | 1,563 | $ | 1,654 | $ | 1,904 | $ | 6,636 | $ | 1,800 | $ | 1,786 | $ | 1,773 | $ | — | $ | 5,357 | ||||||||||||||||||||
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| ADJUSTMENTS : |
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| CURRENCY IMPACT (1) |
$ | 181 | $ | 120 | $ | 13 | $ | — | $ | 313 | ||||||||||||||||||||||||||||||
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| COMPARABLE OPERATIONS (1) |
$ | 1,513 | $ | 1,563 | $ | 1,654 | $ | 1,904 | $ | 6,636 | $ | 1,619 | $ | 1,666 | $ | 1,760 | $ | — | $ | 5,044 | ||||||||||||||||||||
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| (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. |
| (2) | Physio Control has been excluded from the revenue summary above. FY12 Qtr3 International revenue is $54M. |
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.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
| Three months ended | Nine months ended | |||||||||||||||
| January 27, | January 28, | January 27, | January 28, | |||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| (in millions, except per share data) | ||||||||||||||||
| Net sales |
$ | 3,918 | $ | 3,857 | $ | 11,887 | $ | 11,341 | ||||||||
| Costs and expenses: |
||||||||||||||||
| Cost of products sold |
931 | 934 | 2,842 | 2,693 | ||||||||||||
| Research and development expense |
364 | 362 | 1,097 | 1,087 | ||||||||||||
| Selling, general, and administrative expense |
1,371 | 1,367 | 4,161 | 4,023 | ||||||||||||
| Certain litigation charges, net |
— | 13 | — | 292 | ||||||||||||
| Acquisition-related items |
15 | (39 | ) | (1 | ) | — | ||||||||||
| Amortization of intangible assets |
84 | 86 | 255 | 252 | ||||||||||||
| Other expense |
67 | 67 | 316 | 18 | ||||||||||||
| Interest expense, net |
33 | 70 | 103 | 210 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total costs and expenses |
2,865 | 2,860 | 8,773 | 8,575 | ||||||||||||
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|
|
|
|
|
|||||||||
| Earnings from continuing operations before income taxes |
1,053 | 997 | 3,114 | 2,766 | ||||||||||||
| Provision for income taxes |
208 | 84 | 587 | 472 | ||||||||||||
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|
|
|
|
|
|
|
|||||||||
| Earnings from continuing operations |
845 | 913 | 2,527 | 2,294 | ||||||||||||
| Discontinued operations, net of tax: |
||||||||||||||||
| Earnings from operations of Physio-Control |
15 | 11 | 32 | 26 | ||||||||||||
| Physio-Control divestiture-related costs |
(9 | ) | — | (17 | ) | — | ||||||||||
| Deferred income tax benefit on sale |
84 | — | 84 | — | ||||||||||||
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|
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| Earnings from discontinued operations |
90 | 11 | 99 | 26 | ||||||||||||
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|
|
|
|||||||||
| Net earnings |
$ | 935 | $ | 924 | $ | 2,626 | $ | 2,320 | ||||||||
|
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|
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|
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| Basic earnings per share |
||||||||||||||||
| Earnings from continuing operations |
$ | 0.80 | $ | 0.85 | $ | 2.39 | $ | 2.12 | ||||||||
|
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|
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|
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| Net earnings |
$ | 0.89 | $ | 0.86 | $ | 2.48 | $ | 2.15 | ||||||||
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| Diluted earnings per share |
||||||||||||||||
| Earnings from continuing operations |
$ | 0.80 | $ | 0.85 | $ | 2.37 | $ | 2.12 | ||||||||
|
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|
|
|
|
|
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|
|||||||||
| Net earnings |
$ | 0.88 | $ | 0.86 | $ | 2.47 | $ | 2.14 | ||||||||
|
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| Basic weighted average shares outstanding |
1,054.4 | 1,073.9 | 1,058.5 | 1,079.8 | ||||||||||||
| Diluted weighted average shares outstanding |
1,060.2 | 1,077.9 | 1,064.1 | 1,083.5 | ||||||||||||
| Cash dividends declared per common share |
$ | 0.2425 | $ | 0.2250 | $ | 0.7275 | $ | 0.6750 | ||||||||
MEDTRONIC, INC.
RECONCILIATION OF CONSOLIDATED GAAP NET EARNINGS
TO CONSOLIDATED NON-GAAP NET EARNINGS
(Unaudited)
(in millions, except per share data)
| Three months ended | Percentage Change |
|||||||||||
| January 27, 2012 |
January 28, 2011 |
|||||||||||
| Net earnings, as reported |
$ | 935 | $ | 924 | 1 | % | ||||||
| Certain litigation charges, net |
— | 12 | (e) | |||||||||
| Certain acquisition-related items |
15 | (a) | (50 | )(f) | ||||||||
| Physio-Control divestiture-related items |
(75 | )(b) | — | |||||||||
| Impact of authoritative convertible debt guidance on interest expense, net |
13 | (c) | 27 | (c) | ||||||||
| Executive separation costs |
— | 9 | (g) | |||||||||
|
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|
|
|
|||||||||
| Non-GAAP net earnings |
$ | 888 | (d) | $ | 922 | (d) | -4 | % | ||||
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|
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MEDTRONIC, INC.
RECONCILIATION OF CONSOLIDATED GAAP DILUTED EPS
TO CONSOLIDATED NON-GAAP DILUTED EPS
(Unaudited)
| Three months ended | Percentage Change |
|||||||||||
| January 27, 2012 |
January 28, 2011 |
|||||||||||
| Diluted EPS, as reported |
$ | 0.88 | $ | 0.86 | 2 | % | ||||||
| Certain litigation charges, net |
— | 0.01 | (e) | |||||||||
| Certain acquisition-related items |
0.01 | (a) | (0.05 | )(f) | ||||||||
| Physio-Control divestiture-related items |
(0.07 | )(b) | — | |||||||||
| Impact of authoritative convertible debt guidance on interest expense, net |
0.01 | (c) | 0.03 | (c) | ||||||||
| Executive separation costs |
— | 0.01 | (g) | |||||||||
|
|
|
|
|
|||||||||
| Non-GAAP diluted EPS |
$ | 0.84 | (1)(d) | $ | 0.86 | (d) | -2 | % | ||||
|
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|
|
|||||||||
| (1) | The data in this schedule has been intentionally rounded to the nearest $0.01, and therefore, may not sum. |
| (a) | The $15 million ($0.01per share) after-tax ($15 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 certain acquisition-related items 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 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. |
| (b) | The $75 million ($0.07 per share) after-tax ($12 million pre-tax expense) net benefit from Physio-Control divestiture-related items include an $84 million deferred income tax benefit partially offset by $9 million after-tax ($12 million pre-tax) transaction costs. The deferred income tax benefit is recorded in accordance with U.S. GAAP as the Company is 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 records the Physio-Control disposition, the Company will be required to write-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. |
| (c) | The Financial Accounting Standards Board (FASB) authoritative guidance for convertible debt accounting has resulted in an after-tax impact to net earnings of $13 million ($0.01 per share) and $27 million ($0.03 per share) for the three months ended January 27, 2012 and January 28, 2011, respectively. The pre-tax impact to interest expense, net was $21 million and $44 million for the three months ended January 27, 2012 and January 28, 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 as similar measures presented by other companies. |
| (d) | Included in our non-GAAP net earnings is $15 million ($0.01 per share and $23 million pre-tax) and $11 million ($0.01 per share and $16 million pre-tax) after-tax income from the operations of the Physio-Control business for the three months ended January 27, 2012 and January 28, 2011, respectively, which are included in earnings from discontinued operations on our condensed consolidated statements of earnings. The Company has included this income in its non-GAAP net earnings as the disposition did not occur until after the end of the third 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. |
| (e) | The $12 million ($0.01 per share) after-tax ($13 million pre-tax) certain litigation charges, net relate primarily to an accounting charge for Other Matters litigation. In addition to disclosing certain litigation charges, net that are determined in accordance with U.S. GAAP, Medtronic management believes that in order to properly understand its short-term and long-term financial trends, investors may find it useful to consider the impact of excluding these certain litigation charges. Management believes that the resulting non-GAAP financial measure provides useful information to investors regarding the underlying business trends and performance of the Company’s ongoing operations and is useful for period over period comparisons of such operations. Medtronic management eliminates these certain litigation charges when evaluating the operating performance of the Company. Investors should consider this non-GAAP measure in addition to, and not as a substitute for, financial performance measures prepared in accordance with U.S. GAAP. In addition, this non-GAAP financial measure may not be the same as similar measures presented by other companies. |
| (f) | The $50 million ($0.05 per share) after-tax ($39 million pre-tax) certain acquisition-related items, net gain includes an $85 million after-tax ($85 million pre-tax) gain resulting from the acquisition of Ardian, Inc. (Ardian) partially offset by $23 million after-tax ($31 million pre-tax) of certain acquisition-related costs and $12 million after-tax ($15 million pre-tax) of IPR&D charges related to asset purchases in the CardioVascular and Surgical Technologies businesses. As a result of the Ardian acquisition, in accordance with the FASB authoritative guidance on business combinations, Medtronic recognized an $85 million gain related to its previously held 11.3 percent ownership position. The acquisition-related costs include legal fees, severance costs, change in control costs, banker fees, other professional service fees, and contract termination costs related to the acquisitions of Osteotech, Inc. and Ardian that were expensed in the period. 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. |
| (g) | 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 condensed 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 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 CONSOLIDATED GAAP NET EARNINGS
TO CONSOLIDATED NON-GAAP NET EARNINGS
(Unaudited)
(in millions, except per share data)
| Nine months ended | Percentage Change |
|||||||||||
| January 27, 2012 |
January 28, 2011 |
|||||||||||
| Net earnings, as reported |
$ | 2,626 | $ | 2,320 | 13 | % | ||||||
| Certain litigation charges, net |
— | 290 | (e) | |||||||||
| Certain acquisition-related items |
32 | (a) | (23 | )(f) | ||||||||
| Physio-Control divestiture-related items |
(67 | )(b) | — | |||||||||
| Impact of authoritative convertible debt guidance on interest expense, net |
39 | (c) | 81 | (c) | ||||||||
| Executive separation costs |
— | 9 | (g) | |||||||||
|
|
|
|
|
|||||||||
| Non-GAAP net earnings |
$ | 2,630 | (d) | $ | 2,677 | (d) | -2 | % | ||||
|
|
|
|
|
|||||||||
MEDTRONIC, INC.
RECONCILIATION OF CONSOLIDATED GAAP DILUTED EPS
TO CONSOLIDATED NON-GAAP DILUTED EPS
(Unaudited)
| Nine months ended | Percentage Change |
|||||||||||
| January 27, 2012 |
January 28, 2011 |
|||||||||||
| Diluted EPS, as reported |
$ | 2.47 | $ | 2.14 | 15 | % | ||||||
| Certain litigation charges, net |
— | 0.27 | (e) | |||||||||
| Certain acquisition-related items |
0.03 | (a) | (0.02 | )(f) | ||||||||
| Physio-Control divestiture-related items |
(0.06 | )(b) | — | |||||||||
| Impact of authoritative convertible debt guidance on interest expense, net |
0.04 | (c) | 0.07 | (c) | ||||||||
| Executive separation costs |
— | 0.01 | (g) | |||||||||
|
|
|
|
|
|||||||||
| Non-GAAP diluted EPS |
$ | 2.47 | (1)(d) | $ | 2.47 | (d) | — | |||||
|
|
|
|
|
|||||||||
| (1) | The data in this schedule has been intentionally rounded to the nearest $0.01, and therefore, may not sum. |
Note: The data in this schedule has been intentionally rounded and therefore the first, second, and third quarter data may not sum to the fiscal year to date totals.
| (a) | The $32 million ($0.03 per share) after-tax ($32 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 certain acquisition-related items 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 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. |
| (b) | The $67 million ($0.06 per share) after-tax ($24 million pre-tax expense) net benefit from Physio-Control divestiture-related items include an $84 million deferred income tax benefit partially offset by $17 million after-tax ($24 million pre-tax) transaction costs. The deferred income tax benefit is recorded in accordance with U.S. GAAP as the Company is 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 records the Physio-Control disposition, the Company will be required to write-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 certain 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. |
| (c) | The Financial Accounting Standards Board (FASB) authoritative guidance for convertible debt accounting has resulted in an after-tax impact to net earnings of $39 million ($0.04 per share) and $81 million ($0.07 per share) for the nine months ended January 27, 2012 and January 28, 2011, respectively. The pre-tax impact to interest expense, net was $63 million and $130 million for the nine months ended January 27, 2012 and January 28, 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 as similar measures presented by other companies. |
| (d) | Included in our non-GAAP net earnings is $32 million ($0.03 per share and $48 million pre-tax) and $26 million ($0.02 per share and $39 million pre-tax) after-tax income from the operations of the Physio-Control business for the nine months ended January 27, 2012 and January 28, 2011, respectively, which are included in earnings from discontinued operations on our condensed consolidated statements of earnings. The Company has included this income in its non-GAAP net earnings as the disposition did not occur until after the end of the third 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 nine months ended January 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 condensed consolidated statements of earnings. The Company has included these items in its non-GAAP net earnings as it expects the overall impact from Salient and PEAK to be neutral to its fiscal year 2012 net earnings after accounting for the expected dilution in the second half of this fiscal year. 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. |
| (e) | The $290 million ($0.27 per share) after-tax ($292 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 as similar measures presented by other companies. |
| (f) | The $23 million ($0.02 per share) after-tax ($0 pre-tax) certain acquisition-related items, net gain includes 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. cross-licensing agreement and $12 million after-tax ($15 million pre-tax) of IPR&D charges related to asset purchases in the CardioVascular and Surgical Technologies businesses. 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 include acquisition-related legal fees, severance costs, change in control costs, banker fees, other professional service 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. |
| (g) | 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 condensed 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 as similar measures presented by other companies. |
MEDTRONIC, INC.
RECONCILIATION OF WORLDWIDE REVENUE GROWTH TO CONSTANT CURRENCY GROWTH
(Unaudited)
(in millions)
| Three months ended | Currency Impact | Constant | ||||||||||||||||||||||
| January 27, | January 28, | Reported | on Growth (a) | Currency | ||||||||||||||||||||
| 2012 | 2011 | Growth | Dollar Percentage | Growth (a) | ||||||||||||||||||||
| Reported Revenue: |
||||||||||||||||||||||||
| Pacing Systems |
$ | 467 | $ | 450 | 4 | % | $ | 3 | 1 | % | 3 | % | ||||||||||||
| Defibrillation Systems |
674 | 735 | (8 | ) | 3 | 1 | (9 | ) | ||||||||||||||||
| AF & Other |
51 | 36 | 42 | — | — | 42 | ||||||||||||||||||
|
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|
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| Cardiac Rhythm Disease Management |
1,192 | 1,221 | (2 | ) | 6 | 1 | (3 | ) | ||||||||||||||||
| Coronary |
382 | 370 | 3 | 1 | — | 3 | ||||||||||||||||||
| Structural Heart |
265 | 241 | 10 | — | — | 10 | ||||||||||||||||||
| Endovascular & Peripheral |
190 | 163 | 17 | (1 | ) | — | 17 | |||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||
| CardioVascular |
837 | 774 | 8 | — | — | 8 | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||
| Cardiac & Vascular Group |
2,029 | 1,995 | 2 | 6 | 1 | 1 | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||
| Core Spinal |
596 | 626 | (5 | ) | 5 | 1 | (6 | ) | ||||||||||||||||
| Biologics |
188 | 235 | (20 | ) | — | — | (20 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||
| Spinal |
784 | 861 | (9 | ) | 5 | 1 | (10 | ) | ||||||||||||||||
| Neuromodulation |
419 | 401 | 4 | 1 | — | 4 | ||||||||||||||||||
| Diabetes |
367 | 341 | 8 | (1 | ) | — | 8 | |||||||||||||||||
| Surgical Technologies |
319 | 259 | 23 | 2 | 1 | 22 | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||
| Restorative Therapies Group |
1,889 | 1,862 | 1 | 7 | — | 1 | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||
| Total |
$ | 3,918 | $ | 3,857 | 2 | % | $ | 13 | 1 | % | 1 | % | ||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||
| (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 | ||||||||||||||||||||||
| January 27, | January 28, | Reported | on Growth (a) | Currency | ||||||||||||||||||||
| 2012 | 2011 | Growth | Dollar Percentage | Growth (a) | ||||||||||||||||||||
| Reported Revenue: |
||||||||||||||||||||||||
| Pacing Systems |
$ | 270 | $ | 268 | 1 | % | $ | 3 | 1 | % | — | % | ||||||||||||
| Defibrillation Systems |
278 | 277 | — | 3 | 1 | (1 | ) | |||||||||||||||||
| AF & Other |
25 | 25 | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||
| Cardiac Rhythm Disease Management |
573 | 570 | 1 | 6 | 2 | (1 | ) | |||||||||||||||||
| Coronary |
300 | 276 | 9 | 1 | 1 | 8 | ||||||||||||||||||
| Structural Heart |
168 | 149 | 13 | — | — | 13 | ||||||||||||||||||
| Endovascular & Peripheral |
111 | 100 | 11 | (1 | ) | (1 | ) | 12 | ||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||
| CardioVascular |
579 | 525 | 10 | — | — | 10 | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||
| Cardiac & Vascular Group |
1,152 | 1,095 | 5 | 6 | — | 5 | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||
| Core Spinal |
206 | 195 | 6 | 5 | 3 | 3 | ||||||||||||||||||
| Biologics |
23 | 20 | 15 | — | — | 15 | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||
| Spinal |
229 | 215 | 7 | 5 | 3 | 4 | ||||||||||||||||||
| Neuromodulation |
132 | 119 | 11 | 1 | 1 | 10 | ||||||||||||||||||
| Diabetes |
141 | 122 | 16 | (1 | ) | — | 16 | |||||||||||||||||
| Surgical Technologies |
119 | 103 | 16 | 2 | 2 | 14 | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||
| Restorative Therapies Group |
621 | 559 | 11 | 7 | 1 | 10 | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||
| Total |
$ | 1,773 | $ | 1,654 | 7 | % | $ | 13 | 1 | % | 6 | % | ||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||
| (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 OPERATING CASH FLOW TO FREE CASH FLOW
(Unaudited)
(in millions)
| Nine months ended January 27, 2012 |
Six months ended October 28, 2011 |
Three months ended January 27, 2012 |
||||||||||
| Net cash provided by operating activities |
$ | 3,393 | $ | 2,238 | $ | 1,155 | ||||||
| Additions to property, plant, and equipment |
(403 | ) | (282 | ) | (121 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Free cash flow (a) |
$ | 2,990 | $ | 1,956 | $ | 1,034 | ||||||
|
|
|
|
|
|
|
|||||||
| (a) | Medtronic management believes that in order to properly understand Medtronic’s short-term and long-term financial trends, investors may wish to consider free cash flow. In addition, Medtronic management uses free cash flow to evaluate 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 calculates free cash flow by subtracting additions to property, plant and equipment from operating cash flows. |
MEDTRONIC, INC.
RECONCILIATION OF NET SALES FROM CONTINUING OPERATIONS TO
TOTAL COMPANY NET SALES INCLUDING PHYSIO-CONTROL
(Unaudited)
(in millions)
| Three months ended | Currency Impact |
Constant | ||||||||||||||||||||||
| January 27, | January 28, | Reported | on Growth (a) | Currency | ||||||||||||||||||||
| 2012 | 2011 | Growth | Dollar | Percentage | Growth (a) | |||||||||||||||||||
| Net sales from continuing operations |
$ | 3,918 | $ | 3,857 | 2 | % | $ | 13 | 1 | % | 1 | % | ||||||||||||
| Physio-Control net sales |
112 | 104 | 8 | — | — | 8 | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||
| Total company net sales |
$ | 4,029 | (1) | $ | 3,961 | 2 | % | $ | 13 | 1 | % | 1 | % | |||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||
| (1) | The data in this schedule has been intentionally rounded to the nearest million, and therefore, may not sum on this schedule. |
| (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 Physio-Control net sales on total company net sales. 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. |
MEDTRONIC, INC.
RECONCILIATION OF CONSOLIDATED GAAP NET EARNINGS
TO CONSOLIDATED ADJUSTED NON-GAAP NET EARNINGS
(Unaudited)
(in millions, except per share data)
| Three months ended | ||||||||||||
| January 27, 2012 |
January 28, 2011 |
Percentage Change |
||||||||||
| Net earnings, as reported |
$ | 935 | $ | 924 | 1 | % | ||||||
| Certain litigation charges, net |
— | 12 | ||||||||||
| Certain acquisition-related items |
15 | (50 | ) | |||||||||
| Physio-Control divestiture-related items |
(75 | ) | - | |||||||||
| Impact of authoritative convertible debt guidance on interest expense, net |
13 | 27 | ||||||||||
| Executive separation costs |
— | 9 | ||||||||||
|
|
|
|
|
|||||||||
| Non-GAAP net earnings |
$ | 888 | $ | 922 | -4 | % | ||||||
|
|
|
|
|
|||||||||
| Less Q3 FY11 one-time tax benefits |
— | (96 | ) | |||||||||
|
|
|
|
|
|||||||||
| Adjusted Non-GAAP net earnings (a) |
$ | 888 | $ | 826 | 8 | % | ||||||
|
|
|
|
|
|||||||||
MEDTRONIC, INC.
RECONCILIATION OF CONSOLIDATED GAAP DILUTED EPS
TO CONSOLIDATED ADJUSTED NON-GAAP NET EARNINGS
(Unaudited)
| Three months ended | ||||||||||||
| January 27, 2012 |
January 28, 2011 |
Percentage Change |
||||||||||
| Diluted EPS, as reported |
$ | 0.88 | $ | 0.86 | 2 | % | ||||||
| Certain litigation charges, net |
— | 0.01 | ||||||||||
| Certain acquisition-related items |
0.01 | (0.05 | ) | |||||||||
| Physio-Control divestiture-related items |
(0.07 | ) | — | |||||||||
| Impact of authoritative convertible debt guidance on interest expense, net |
0.01 | 0.03 | ||||||||||
| Executive separation costs |
— | 0.01 | ||||||||||
|
|
|
|
|
|||||||||
| Non-GAAP diluted EPS |
$ | 0.84 | (1) | $ | 0.86 | -2 | % | |||||
|
|
|
|
|
|||||||||
| Less Q3 FY11 one-time tax benefits |
— | (0.09 | ) | |||||||||
|
|
|
|
|
|||||||||
| Adjusted Non-GAAP diluted EPS (a) |
$ | 0.84 | $ | 0.77 | 9 | % | ||||||
|
|
|
|
|
|||||||||
| (1) | The data in this schedule has been intentionally rounded to the nearest $0.01 and therefore may not sum. |
| (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 one-time tax benefits. 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 | ||||||||||||||||||||||
| January 27, | January 28, | Reported | on Growth (a) | Currency | ||||||||||||||||||||
| 2012 | 2011 | Growth | Dollar | Percentage | Growth (a) | |||||||||||||||||||
| Emerging Market Revenue (b) |
$ | 395 | $ | 344 | 15 | % | $ | (5 | ) | -1 | % | 16 | % | |||||||||||
| (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 revenues 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 NEW ADVANCED ENERGY BUSINESS
(Unaudited)
(in millions)
| Three months ended January 27, 2012 |
Three months ended January 28, 2011 |
Percentage Change |
||||||||||
| Surgical Technologies revenue, as reported |
$ | 319 | $ | 259 | 23 | % | ||||||
| Foreign currency impact |
(2 | ) | — | |||||||||
| Advanced Energy business revenue |
(31 | ) | — | |||||||||
|
|
|
|
|
|||||||||
| Surgical Technologies revenue, adjusted |
$ | 286 | (a) | $ | 259 | 10 | % | |||||
|
|
|
|
|
|||||||||
| (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 new Advanced Energy business on Surgical Technologies’ revenue growth. In addition, Medtronic management uses Surgical Technologies revenue adjusted for foreign currency translation and the new 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.
CONDENSED CONSOLIDATED EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
(Unaudited)
(in millions)
| Three Months Ended | Year Ended April 29, 2011 |
Three Months Ended | Nine Months Ended January 27, 2012 |
|||||||||||||||||||||||||||||||||
| July 30, 2010 |
October 29, 2010 |
January 28, 2011 |
April 29, 2011 |
July 29, 2011 |
October 28, 2011 |
January 27, 2012 |
||||||||||||||||||||||||||||||
| Net sales |
$ | 3,690 | $ | 3,794 | $ | 3,857 | $ | 4,167 | $ | 15,508 | $ | 3,946 | $ | 4,023 | $ | 3,918 | $ | 11,887 | ||||||||||||||||||
| Costs and expenses: |
||||||||||||||||||||||||||||||||||||
| Cost of products sold |
850 | 909 | 934 | 1,007 | 3,700 | 951 | 960 | 931 | 2,842 | |||||||||||||||||||||||||||
| Research and development expense |
361 | 364 | 362 | 385 | 1,472 | 362 | 371 | 364 | 1,097 | |||||||||||||||||||||||||||
| Selling, general, and administrative expense |
1,310 | 1,346 | 1,367 | 1,404 | 5,427 | 1,380 | 1,410 | 1,371 | 4,161 | |||||||||||||||||||||||||||
| Restructuring charges |
— | — | — | 259 | 259 | — | — | — | — | |||||||||||||||||||||||||||
| Certain litigation charges, net |
— | 279 | 13 | (47 | ) | 245 | — | — | — | — | ||||||||||||||||||||||||||
| Acquisition-related items |
15 | 24 | (39 | ) | 14 | 14 | 8 | (24 | ) | 15 | (1 | ) | ||||||||||||||||||||||||
| Amortization of intangible assets |
82 | 84 | 86 | 87 | 339 | 86 | 85 | 84 | 255 | |||||||||||||||||||||||||||
| Other expense (income) |
(38 | ) | (11 | ) | 67 | 92 | 110 | 109 | 140 | 67 | 316 | |||||||||||||||||||||||||
| Interest expense, net |
73 | 67 | 70 | 68 | 278 | 32 | 38 | 33 | 103 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Total costs and expenses |
2,653 | 3,062 | 2,860 | 3,269 | 11,844 | 2,928 | 2,980 | 2,865 | 8,773 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Earnings from continuing operations before income taxes |
$ | 1,037 | $ | 732 | $ | 997 | $ | 898 | $ | 3,664 | $ | 1,018 | $ | 1,043 | $ | 1,053 | $ | 3,114 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Note: This schedule provides the presentation of unaudited condensed consolidated earnings from continuing operations before income taxes for the first quarter of fiscal year 2011 through the third quarter of fiscal year 2012 as adjusted to exclude operations of Physio-Control.
MEDTRONIC, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| January 27, 2012 |
April 29, 2011 |
|||||||
| (in millions, except per share data) | ||||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 1,190 | $ | 1,382 | ||||
| Short-term investments |
1,155 | 1,046 | ||||||
| Accounts receivable, less allowances of $102 and $96, respectively |
3,665 | 3,761 | ||||||
| Inventories |
1,819 | 1,619 | ||||||
| Deferred tax assets, net |
605 | 586 | ||||||
| Prepaid expenses and other current assets |
624 | 561 | ||||||
| Assets held for sale |
250 | 258 | ||||||
|
|
|
|
|
|||||
| Total current assets |
9,308 | 9,213 | ||||||
| Property, plant, and equipment |
5,757 | 5,732 | ||||||
| Accumulated depreciation |
(3,277 | ) | (3,244 | ) | ||||
|
|
|
|
|
|||||
| Property, plant, and equipment, net |
2,480 | 2,488 | ||||||
| Goodwill |
9,915 | 9,520 | ||||||
| Other intangible assets, net |
2,713 | 2,725 | ||||||
| Long-term investments |
7,096 | 6,116 | ||||||
| Other assets |
399 | 362 | ||||||
|
|
|
|
|
|||||
| Total assets |
$ | 31,911 | $ | 30,424 | ||||
|
|
|
|
|
|||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Short-term borrowings |
$ | 1,972 | $ | 1,723 | ||||
| Accounts payable |
491 | 495 | ||||||
| Accrued compensation |
796 | 874 | ||||||
| Accrued income taxes |
266 | 50 | ||||||
| Other accrued expenses |
948 | 1,489 | ||||||
| Liabilities held for sale |
89 | 88 | ||||||
|
|
|
|
|
|||||
| Total current liabilities |
4,562 | 4,719 | ||||||
| Long-term debt |
8,248 | 8,112 | ||||||
| Long-term accrued compensation and retirement benefits |
513 | 480 | ||||||
| Long-term accrued income taxes |
846 | 496 | ||||||
| Long-term deferred tax liabilities, net |
143 | 217 | ||||||
| Other long-term liabilities |
430 | 432 | ||||||
|
|
|
|
|
|||||
| Total liabilities |
14,742 | 14,456 | ||||||
| Commitments and contingencies |
||||||||
| Shareholders’ equity: |
||||||||
| Preferred stock—par value $1.00 |
— | — | ||||||
| Common stock—par value $0.10 |
105 | 107 | ||||||
| Retained earnings |
17,340 | 16,085 | ||||||
| Accumulated other comprehensive loss |
(276 | ) | (224 | ) | ||||
|
|
|
|
|
|||||
| Total shareholders’ equity |
17,169 | 15,968 | ||||||
|
|
|
|
|
|||||
| Total liabilities and shareholders’ equity |
$ | 31,911 | $ | 30,424 | ||||
|
|
|
|
|
|||||
MEDTRONIC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Nine months ended | ||||||||
| January 27, 2012 |
January 28, 2011 |
|||||||
| (in millions) | ||||||||
| Operating Activities: |
||||||||
| Net earnings |
$ | 2,626 | $ | 2,320 | ||||
| Adjustments to reconcile net earnings to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
662 | 591 | ||||||
| Amortization of discount on senior convertible notes |
63 | 130 | ||||||
| Acquisition-related items |
32 | 30 | ||||||
| Provision for doubtful accounts |
49 | 24 | ||||||
| Deferred income taxes |
(181 | ) | (153 | ) | ||||
| Stock-based compensation |
124 | 156 | ||||||
| Change in operating assets and liabilities, net of effect of acquisitions: |
||||||||
| Accounts receivable, net |
(124 | ) | (79 | ) | ||||
| Inventories |
(202 | ) | (113 | ) | ||||
| Accounts payable and accrued liabilities |
12 | (170 | ) | |||||
| Other operating assets and liabilities |
571 | (75 | ) | |||||
| Certain litigation charges, net |
— | 292 | ||||||
| Certain litigation payments |
(239 | ) | (5 | ) | ||||
|
|
|
|
|
|||||
| Net cash provided by operating activities |
3,393 | 2,948 | ||||||
| Investing Activities: |
||||||||
| Acquisitions, net of cash acquired |
(617 | ) | (1,268 | ) | ||||
| Purchase of intellectual property |
(9 | ) | (48 | ) | ||||
| Additions to property, plant, and equipment |
(403 | ) | (385 | ) | ||||
| Purchases of marketable securities |
(5,714 | ) | (4,518 | ) | ||||
| Sales and maturities of marketable securities |
4,495 | 4,090 | ||||||
| Other investing activities, net |
38 | (125 | ) | |||||
|
|
|
|
|
|||||
| Net cash used in investing activities |
(2,210 | ) | (2,254 | ) | ||||
| Financing Activities: |
||||||||
| Change in short-term borrowings, net |
222 | 1,395 | ||||||
| Payments on long-term debt |
(24 | ) | (402 | ) | ||||
| Dividends to shareholders |
(769 | ) | (728 | ) | ||||
| Issuance of common stock |
67 | 54 | ||||||
| Repurchase of common stock |
(780 | ) | (1,140 | ) | ||||
|
|
|
|
|
|||||
| Net cash used in financing activities |
(1,284 | ) | (821 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents |
(91 | ) | 10 | |||||
|
|
|
|
|
|||||
| Net change in cash and cash equivalents |
(192 | ) | (117 | ) | ||||
| Cash and cash equivalents at beginning of period |
1,382 | 1,400 | ||||||
|
|
|
|
|
|||||
| Cash and cash equivalents at end of period |
$ | 1,190 | $ | 1,283 | ||||
|
|
|
|
|
|||||
| Supplemental Cash Flow Information |
||||||||
| Cash paid for: |
||||||||
| Income taxes |
$ | 226 | $ | 731 | ||||
| Interest |
197 | 290 | ||||||