Diversified Business Portfolio Helps Medtronic Report Strong First Quarter Earnings Per Share.MINNEAPOLIS -- Medtronic, Inc. (NYSE NYSE See: New York Stock Exchange :MDT MDT abbr. Mountain Daylight Time MDT (in the US and Canada) Mountain Daylight Time MDT n abbr (US) (= mountain daylight time) → ): --Reported earnings of $599 million and diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. of $0.51 grew 87% and 96%, respectively over the prior year's quarter. --Diluted EPS of $0.55 grew 15% after adjusting for certain charges and including stock option expense in both years. --Revenue of $2.897 billion grew 8%. --Double digit revenue growth in the Spinal, Vascular, Neurological neurological, neurologic pertaining to or emanating from the nervous system or from neurology. neurological assessment evaluation of the health status of a patient with a nervous system disorder or dysfunction. and Diabetes businesses helped offset weakness in the U.S. implantable cardioverter defibrillator defibrillator, device that delivers an electrical shock to the heart in order to stop certain forms of rapid heart rhythm disturbances (arrhythmias). The shock changes a fibrillation to an organized rhythm or changes a very rapid and ineffective cardiac rhythm to a (ICD ICD International Classification of Diseases (of the World Health Organization); intrauterine contraceptive device. ICD abbr. ) market. Medtronic, Inc. (NYSE:MDT) today announced financial results for its first quarter of fiscal year 2007 ended July 28, 2006. Medtronic recorded first quarter fiscal year 2007 revenue of $2.897 billion, an 8 percent increase over the $2.690 billion in the first quarter of fiscal year 2006. Foreign currency translation had a positive impact of $6 million this quarter. As reported, first quarter fiscal year 2007 net earnings were $599 million, or $0.51 per diluted share, as compared to net earnings of $321 million, or $0.26 per diluted share for the same period last year, representing growth of 87 percent and 96 percent, respectively. Adjusted first quarter 2007 net earnings were $639 million, or $0.55 per diluted share, as compared to adjusted net earnings of $584 million, or $0.48 per diluted share for the same period last year, representing an increase of 9 percent and 15 percent, respectively. As detailed in the attached table, adjusted net earnings for these periods (1) excludes the impact of a certain litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. charge of $40 million in first quarter 2007, (2) excludes the impact of purchased in-process research and development (IPR&D) charges of $295 million in the first quarter 2006 and (3) includes incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System No. 123(R) stock-based compensation expense of $32 million in first quarter 2006. "Strong performances in Medtronic's Spinal, Vascular, Neurological and Diabetes businesses helped offset weakness in the U.S. implantable defibrillator market during the quarter," said Art Collins, Medtronic chairman and chief executive officer. "We are encouraged by the strength of our new product pipeline, and we continue to make investments in R&D, market development and operating infrastructure to support future growth." Cardiac Rhythm Noun 1. cardiac rhythm - the rhythm of a beating heart heart rhythm regular recurrence, rhythm - recurring at regular intervals atrioventricular nodal rhythm, nodal rhythm - the normal cardiac rhythm when the heart is controlled by the Disease Management Business Cardiac Rhythm Disease Management (CRDM CRDM Control Rod Drive Mechanism CRDM Centre for Rapid Design and Manufacture (Buckinghamshire Chilterns University) CRDM Cumann Rince Dea Mheasa (Irish dancing organisation) ) reported first quarter revenue of $1.250 billion, representing a decrease of 1 percent over the same period last fiscal year. ICD revenue of $673 million was down 6 percent, driven principally by a decline in the growth of the U.S. ICD market. The Company believes the ICD market remains significantly under penetrated and that several factors contributed to last quarter's unanticipated decline. Medtronic expects the ICD market to reaccelerate as a result of a number of initiatives it is undertaking to both increase market share and spur market growth in the U.S. ICD market. ICD revenue outside the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. was strong, growing 21 percent over the prior year quarter and Medtronic's worldwide market share for ICDs was flat over the same period last fiscal year. Worldwide pacing revenue of $460 million grew 3 percent. Worldwide market share for pacemakers Pacemakers Definition A pacemaker is a surgically-implanted electronic device that regulates a slow or erratic heartbeat. Purpose Pacemakers are implanted to regulate irregular contractions of the heart (arrhythmia). was up over 2 percentage points. Medtronic's Emergency Response Systems business reported revenue of $101 million, a 16 percent revenue increase over the same period last fiscal year. CRDM quarterly highlights include: --The Concerto concerto (kənchâr`tō), musical composition usually for an orchestra and a soloist or a group of soloists. In the 16th cent. concertare and concertato implied an ensemble, either vocal or instrumental. (TM) and Virtuoso(TM) line of ICDs were commercially launched in Europe and in the U.S. These are Medtronic's first devices with wireless telemetry telemetry Highly automated communications process by which data are collected from instruments located at remote or inaccessible points and transmitted to receiving equipment for measurement, monitoring, display, and recording. , enabling remote communication between the implanted im·plant v. im·plant·ed, im·plant·ing, im·plants v.tr. 1. To set in firmly, as into the ground: implant fence posts. 2. device and programmers This is a list of programmers notable for their contributions to software, either as original author or architect, or for later additions. See also: Game programmer, List of computer scientists in a clinician's office and at implant implant /im·plant/ (im-plant´) to insert or to graft (tissue, or inert or radioactive material) into intact tissues or a body cavity. , or between the device and a patient home monitor. --The company launched a multi-center clinical trial to determine the safety, efficacy and functionality of the Chronicle(R) ICD when used in heart failure patients indicated for ICD therapy. The trial involves approximately 850 patients with mild-to-moderate heart failure at up to 75 sites in the U.S. --The Medtronic Carelink(R) Network, available on both pacing and ICD platforms, continued to expand to nearly 1,000 clinics monitoring over 80,000 patients in the U.S. --Adapta(TM), Versa Versa Versatile System Architecture (Genrad) (TM) and Sensia(TM) pacemakers all received FDA FDA abbr. Food and Drug Administration FDA, n.pr See Food and Drug Administration. FDA, n.pr the abbreviation for the Food and Drug Administration. approval this fiscal quarter and were launched in August. These pacemakers provide physiologic pacing physiologic pacing Cardiac pacing Artificial pacing that maintains the heart's normal contraction sequence–ie, A-V synchrony, with resulting hemodynamic benefits adapted to the needs of individual patients and include an exclusive Managed Ventricular ven·tric·u·lar adj. Of or relating to a ventricle or ventriculus. ventricular pertaining to a ventricle. ventricular assist device Pacing (MVP (Multimedia Video Processor) A high-speed DSP chip from Texas Instruments, introduced in 1994. Officially introduced as the TMS320C80, it combines RISC technology with the functionality of four DSPs on one chip. ) mode. MVP enables the device to be programmed to deliver pacing pulses to the heart's lower right chamber only when necessary, which recent studies indicate may reduce a patient's risk of developing heart failure and atrial fibrillation atrial fibrillation Irregular rhythm (arrhythmia) of contraction of the atria (upper heart chambers). The most common major arrhythmia, it may result as a consequence of increased fibrous tissue in the aging heart, of heart disease, or in association with severe infection. . --The LIFEPAK(R) 1000 external defibrillator launched last quarter, received strong market acceptance this quarter as it was introduced into accounts in the U.S. The LIFEPAK 1000 is designed for professional emergency responders and includes novel technology to improve response times in treating Sudden Cardiac Arrest cardiac arrest n. Abbr. CA A sudden cessation of cardiac function, resulting in loss of effective circulation. Cardiac arrest A condition in which the heart stops functioning. . Spinal and Navigation Business Spinal and Navigation reported first quarter revenue of $599 million, representing 14 percent growth over the same period last fiscal year. Spinal and Navigation quarterly highlights include: --The launch of the CD HORIZON(R) SEXTANT sextant, instrument for measuring the altitude of the sun or another celestial body; such measurements can then be used to determine the observer's geographical position or for other navigational, surveying, or astronomical applications. (R) II system has been a major factor as more surgeons adopt this revolutionary method of minimally invasive invasive /in·va·sive/ (-siv) 1. having the quality of invasiveness. 2. involving puncture of the skin or insertion of an instrument or foreign material into the body; said of diagnostic techniques. pedicle pedicle /ped·i·cle/ (ped´i-k'l) a footlike, stemlike, or narrow basal part or structure. ped·i·cle n. 1. A constricted portion or stalk. 2. screw implantation implantation /im·plan·ta·tion/ (im?plan-ta´shun) 1. attachment of the blastocyst to the epithelial lining of the uterus, its penetration through the epithelium, and, in humans, its embedding in the stratum compactum of the . --INFUSE(R) Bone Graft bone graft Orthopedic surgery Sterilized bony tissue, often of cadaveric origin, used to fill and/or 'sculpt' bone defects Indications Spinal fusion, revision of failed articular prostheses, filling traumatic or malignant bone defects, or periodontal defects. , a recombinant recombinant /re·com·bi·nant/ (re-kom´bi-nant) 1. the new entity (e.g., gene, protein, cell, individual) that results from genetic recombination. 2. pertaining or relating to such an entity. See also under DNA. version of a naturally occurring protein capable of stimulating bone growth for both spinal and acute tibial tibial pertaining to the tibia. tibial crest a longitudinal prominence on the cranial border of the proximal tibia. Its proximal end (tibial tubercle) has a growth plate separate from the proximal tibia; hyperflexion injuries to fracture fracture, breaking of a bone. A simple fracture is one in which there is no contact of the broken bone with the outer air, i.e., the overlying tissues are intact. In a comminuted fracture the bone is splintered. indications, had revenue growth of more than 25 percent over the same period last year. --The DIAM(TM) Spinal Stabilization Stabilization The action undertakes a country when it buys and sells its own currency to protect its exchange value. Actions registered competitive traders undertake by on the NYSE to meet the exchange requirement that 75% of their traded be stabilizing, meaning that sell orders System received FDA approval for an investigational device exemption An Investigational Device Exemption (IDE) allows the investigational device to be used in a clinical study in order to collect safety and effectiveness data required to support a Premarket Approval (PMA) application or a Premarket Notification [510(k)] submission to Food and for use in a clinical study, allowing the first of three planned clinical trials in the U.S. to begin. The study will compare the DIAM implant to a traditional posterior posterior /pos·ter·i·or/ (pos-ter´e-er) directed toward or situated at the back; opposite of anterior. pos·te·ri·or adj. 1. Located behind a part or toward the rear of a structure. fusion system and approach. The DIAM System is designed to alleviate Alleviate To make something easier to be endured. Mentioned in: Kinesiology, Applied pain in degenerative de·gen·er·a·tive adj. Of, relating to, causing, or characterized by degeneration. Degenerative Degenerative disorders involve progressive impairment of both the structure and function of part of the body. stenosis stenosis /ste·no·sis/ (ste-no´sis) pl. steno´ses [Gr.] stricture; an abnormal narrowing or contraction of a duct or canal. patients who suffer predominantly pre·dom·i·nant adj. 1. Having greatest ascendancy, importance, influence, authority, or force. See Synonyms at dominant. 2. from radiating ra·di·ate v. ra·di·at·ed, ra·di·at·ing, ra·di·ates v.intr. 1. To send out rays or waves. 2. To issue or emerge in rays or waves: Heat radiated from the stove. leg discomfort and moderate low back pain. --Medtronic artificial discs continue to gain momentum outside the U.S., led by particularly strong performance of the MAVERICK Maverick family name of two brothers, Bret and Bait; self-centered and untrustworthy gentlemen gamblers. [TV: Terrace, II, 80] See : Gambling (TM) Artificial Lumbar lumbar /lum·bar/ (lum´bar) pertaining to the loins. lum·bar adj. Of, near, or situated in the part of the back and sides between the lowest ribs and the pelvis. Disc family and the PRESTIGE(R) LP Cervical cervical /cer·vi·cal/ (ser´vi-k'l) 1. pertaining to the neck. 2. pertaining to the neck or cervix of any organ or structure. cer·vi·cal adj. Disc. Vascular Business Vascular reported first quarter revenue of $280 million, representing 37 percent growth over the same period of the last fiscal year. Vascular experienced solid growth across all of its major businesses and geographies. Vascular quarterly highlights include: --The Endeavor(R) drug-eluting coronary stent coronary stent Intracoronary stent Cardiology An expandable tubular device which can be inserted percutaneously, and left within a coronary artery lumen to maintain its patency Pros Clinical and angiographic outcomes are better with intracoronary artery stent is now commercially available in over 100 countries outside the U.S. Medtronic received Endeavor regulatory approval in China and reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. approval in France. Endeavor drug-eluting stent In cardiology, a drug-eluting stent is a stent (a scaffold) placed into narrowed, diseased coronary arteries that slowly releases a drug to block cell proliferation. This prevents scar-tissue–like growth that, together with clots (thrombus), could otherwise block the stented market share exceeds 20 percent in markets with full commercial release. --Long-term clinical results from ENDEAVOR I and ENDEAVOR II trials were presented at the Paris Course on Revascularization meeting in May. This data demonstrated Endeavor's significant and sustained efficacy and safety performance over time, with low rates of repeat procedures and no observations of late stent thrombosis late stent thrombosis Cardiology The scar-induced closure of a previously stenosed coronary artery, a complication in ±20% of Pts who have undergone stenting for CAD. See Stent. Cf In-stent restenosis. . Enrollment was completed in the ENDEAVOR IV Clinical Trial in the U.S., and the launch of Endeavor in the U.S. is still anticipated in calendar year 2007. --The Micro-Driver coronary stent, a bare metal 1. bare metal - New computer hardware, unadorned with such snares and delusions as an operating system, an HLL, or even assembler. Commonly used in the phrase "programming on the bare metal", which refers to the arduous work of bit bashing needed to create these basic tools system designed specifically to perform in small vessels, received FDA approval and has been positively accepted in the U.S. market. Neurological Business Neurological reported first quarter revenue of $276 million, representing 17 percent growth over the same quarter one year ago. Growth was driven by new products and strong performance across all therapies, in particular, neurostimulation for chronic pain, movement disorders Movement Disorders Definition Movement disorders are a group of diseases and syndromes affecting the ability to produce and control movement. Description and overactive bladder Overactive Bladder Definition Overactive bladder is the leakage of large amounts of urine at unexpected times, including during sleep. Description . Neurological quarterly highlights include: --RestorePRIME(TM), a non-rechargeable neurostimulator for the treatment of chronic pain which affects an estimated 75 million people in the U.S., was launched in several countries, including the U.S. RestorePRIME offers the broadest number of programming options and the largest stimulation coverage area of any non-rechargeable neurostimulator. --InterStim(R) II neurostimulation system for the treatment of overactive bladder and urinary retention Urinary retention The result of progressive obstruction of the urethra by an enlarging prostate, causing urine to remain in the bladder even after urination. was launched worldwide. The InterStim therapy uses sacral nerve sacral nerve n. Any of five nerves emerging from the sacral foramina: the first three enter into the formation of the sacral plexus, and the second two into the coccygeal plexus. stimulation to improve bladder function. InterStim II's enhancements include greater flexibility to accommodate more patients, a streamlined implant procedure and simplified programming. The improved patient programmer (1) A hardware device used to customize a programmable logic chip such as a PAL, GAL, EPROM, etc. See PROM programmer. (2) A person who designs the logic for and writes the lines of codes of a computer program. also provides patients more control of their therapy. --Prostiva(TM) RF (radio-frequency) therapy for the treatment of symptomatic symptomatic /symp·to·mat·ic/ (simp?to-mat´ik) 1. pertaining to or of the nature of a symptom. 2. indicative (of a particular disease or disorder). 3. benign prostatic hyperplasia benign prostatic hyperplasia n. Abbr. BPH A nonmalignant enlargement of the prostate gland commonly occurring in men after the age of 50, and sometimes leading to compression of the urethra and obstruction of the flow of urine. (BPH BPH abbr. benign prostatic hyperplasia BPH Benign prostatic hypertrophy, a very common noncancerous cause of prostatic enlargement in older men. ), or enlarged prostate Enlarged Prostate Definition A non-cancerous condition that affects many men past 50 years of age, enlarged prostate makes urinating more difficult by narrowing the urethra, a tube running from the bladder through the prostate gland. , was launched in the U.S. Prostiva RF therapy delivers low-level radio frequency energy to a precisely targeted area of an enlarged prostate. Diabetes Business Diabetes reported first quarter revenue of $196 million, representing 13 percent growth over the same period last fiscal year, supported by worldwide insulin pump insulin pump n. A portable device for people with diabetes that injects insulin at programmed intervals in order to regulate blood sugar levels. growth of more than 20 percent. Diabetes quarterly highlights include: --The Guardian(R) Real-Time Continuous Glucose Monitoring glucose monitoring Lab medicine The periodic evaluation of any analyte abnormal in Pts with DM, to assess short and long-term control with antiglycemic agents. See Glucose, Glycated hemoglobin. System received FDA approval and is expected to be available nationwide by the end of the calendar year. This stand-alone glucose monitoring system provides patients with real-time glucose trend graphs and predictive alarms informing them when their glucose levels become too high or too low, enabling better management of diabetes. --The three-phase STAR clinical trial program comparing outcomes on continuous glucose monitoring and insulin pump therapy to multiple daily injections continues. The STAR I trial enrollment is complete and results are expected in the fall. Focus groups with STAR II participants are underway and STAR III is scheduled to begin enrollment in the fall. --The results of a series of clinical trials demonstrating the benefit of Guardian Real-Time Continuous Glucose Monitoring System compared to traditional blood glucose blood glucose Diabetology The principal sugar produced by the body from food–especially carbohydrates, but also from proteins and fats; glucose is the body's major source of energy, is transported to cells via the circulation and used by cells in the presence meters will be published later this year, and are expected to provide further clinical support for reimbursement of continuous glucose monitoring products. Cardiac Surgery Cardiac surgery is surgery on the heart and/or great vessels performed by a cardiac surgeon. Frequently, it is done to treat complications of ischemic heart disease (for example, coronary artery bypass grafting), correct congenital heart disease, or treat valvular heart disease Business Cardiac Surgery reported first quarter revenue of $168 million, representing 2 percent growth over the same period last year. Cardiac Surgery quarterly highlights include: --The Octopus(R) Evolution Tissue Stabilizer stabilizer: see airplane. was launched in the U.S. Used in beating heart surgery beating heart surgery Cardiology Any cardiovascular procedure, often performed endoscopically, in which the heart is not stopped. See CABG. to hold cardiac tissue in place while the surgeon repairs the heart, the Octopus helps speed procedure times and provides improved stability and targeting for the surgeon. --The EDGE Physician Training Program continues to be expanded to cardiac surgeons A cardiac surgeon is a surgeon who performs cardiac surgery - operative procedures on the heart and great vessels. Training In the United States and Canada, a cardiac surgery residency typically comprises anywhere from six to nine years (or longer) of training to become in an effort to provide leading-edge training on new vascular and cardiac-related techniques and therapies. Ear Nose and Throat Business Ear, Nose and Throat (ENT ENT ears, nose, and throat (otorhinolaryngology). ENT abbr. ear, nose, and throat ENT ear, nose and throat. ENT Ears, nose & throat; formally, otorhinolaryngology ), which also includes neurologic neurologic /neu·ro·log·ic/ (-loj´ik) pertaining to neurology or to the nervous system. Neurologic Having to do with the nervous system. technology products, reported first quarter revenue of $128 million, representing 7 percent growth over the same period last year. ENT quarterly highlights include: --Powered drills and endoscopic en·do·scope n. An instrument for examining visually the interior of a bodily canal or a hollow organ such as the colon, bladder, or stomach. en shavers revenue grew 15 percent with sinus and otologic systems growing at twice the estimated market growth rate. Nerve integrity monitors grew over 20 percent in the quarter. --Revenue for the Strata stra·ta n. A plural of stratum. strata Noun the plural of stratum USAGE: Strata is sometimes wrongly used as a singular noun: this stratum (not strata) (TM) valve, a programmable device for the treatment of hydrocephalus hydrocephalus (hī'drəsĕf`ələs), also known as water on the brain, developmental (congenital) or acquired condition in which there is an abnormal accumulation of body fluids within the skull. , grew over 50 percent over the same period last year. In reviewing the quarter, Collins concluded, "While this past quarter presented some challenging market dynamics, we remain optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op about the underlying strength of our diversified diversified (di·verˑ·s business base and our future growth prospects." Webcast Information Medtronic will host a webcast today, Aug. 22 at 4:30 pm EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT (3:30 CDT CDT abbr. Central Daylight Time CDT Central Daylight Time CDT n abbr (US) (= Central Daylight Time) → hora de verano del centro; (BRIT ), to provide information about its businesses for the public, analyst and news media. This quarterly webcast can be accessed by clicking on the Investor Relations Investor relations The process by which the corporation communicates with its 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 A generic term for any kind of copy, particularly an official or certified representation of the record of what took place in a court during a trial or other legal proceeding. A transcript of record of the company's prepared remarks will be available in the "Presentations & Transcripts" section of the Investor Relations homepage. 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 There are two kinds of addresses that are widely used on the Internet. One is a person's e-mail address, and the other is the address of a Web site, which is known as a URL. Following is an explanation of Internet e-mail addresses only. For more on URLs, see URL and Internet domain name. is www.medtronic.com. This press release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. , including statements regarding clinical trials, new products, market growth and market acceptance and other developments, 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, general economic conditions and other risk and uncertainties described in Medtronic's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended April 28, 2006. Actual results may differ materially from anticipated results. Medtronic does not undertake to update its forward-looking statements.
MEDTRONIC, INC.
REVENUE BY OPERATING SEGMENT
(Unaudited)
($ millions)
----------------------------------------------------------------------
FY 06 FY 06 FY 06 FY 06 FY 06
QTR 1 QTR 2 QTR 3 QTR 4 TOTAL
----------------------------------------------------------------------
REPORTED REVENUE :
CARDIAC RHYTHM DISEASE
MANAGEMENT $1,268 $1,289 $1,263 $1,385 $5,206
Low Power Pacing 446 459 426 464 1,795
High Power Defibrillation 718 733 723 758 2,932
Emergency Response
Systems 87 81 99 144 412
Other 17 16 15 19 67
SPINAL & NAVIGATION $524 $539 $563 $619 $2,244
Spinal Instrumentation 376 382 387 420 1,566
Spinal Biologics 128 134 147 163 570
Navigation 20 23 29 36 108
NEUROLOGICAL $235 $252 $247 $283 $1,016
Neuro Implantables 186 204 202 241 833
Gastroenterology &
Urology 49 48 45 42 183
VASCULAR $205 $225 $236 $274 $940
Stents 65 90 96 114 366
Other Coronary 81 78 83 92 334
Endovascular/Peripheral 59 57 57 68 240
DIABETES $173 $178 $182 $188 $722
CARDIAC SURGERY $165 $161 $154 $183 $663
Valves 58 56 52 63 229
Perfusion 79 78 75 89 321
Cardiac Surgery
Technologies 28 27 27 31 113
Ear, Nose & Throat (ENT) $120 $121 $125 $135 $501
ENT 65 64 65 72 266
Neurologic Technologies 55 57 60 63 235
TOTAL $2,690 $2,765 $2,770 $3,067 $11,292
========================================
ADJUSTMENTS :
CURRENCY (1) $26 $(3) $(72) $(69) $(118)
COMPARABLE OPERATIONS (1) $2,664 $2,768 $2,842 $3,136 $11,410
========================================
----------------------------------------------------------------------
($ millions)
----------------------------------------------------------------------
FY 07 FY 07 FY 07 FY 07 FY 07
QTR 1 QTR 2 QTR 3 QTR 4 TOTAL
----------------------------------------------------------------------
REPORTED REVENUE :
CARDIAC RHYTHM DISEASE
MANAGEMENT $1,250 $- $- $- $1,250
Low Power Pacing 460 - - - 460
High Power Defibrillation 673 - - - 673
Emergency Response
Systems 101 - - - 101
Other 16 - - - 16
SPINAL & NAVIGATION $599 $- $- $- $599
Spinal Instrumentation 412 - - - 412
Spinal Biologics 163 - - - 163
Navigation 24 - - - 24
NEUROLOGICAL $276 $- $- $- $276
Neuro Implantables 226 - - - 226
Gastroenterology &
Urology 50 - - - 50
VASCULAR $280 $- $- $- $280
Stents 120 - - - 120
Other Coronary 92 - - - 92
Endovascular/Peripheral 68 - - - 68
DIABETES $196 $- $- $- $196
CARDIAC SURGERY $168 $- $- $- $168
Valves 59 - - - 59
Perfusion 80 - - - 80
Cardiac Surgery
Technologies 29 - - - 29
Ear, Nose & Throat (ENT) $128 $- $- $- $128
ENT 65 - - - 65
Neurologic Technologies 63 - - - 63
TOTAL $2,897 $- $- $- $2,897
========================================
ADJUSTMENTS :
CURRENCY (1) $6 $6
COMPARABLE OPERATIONS (1) $2,891 $(0) $- $- $2,891
========================================
----------------------------------------------------------------------
(1) - Medtronic management believes that in order to properly
understand Medtronic's short-term and long-term financial trends,
investors may wish to consider the impact of foreign currency
translation on revenue. In addition, Medtronic management uses results
of operations before currency translation to evaluate the operational
performance of the Company and as a basis for strategic planning.
Investors should consider these non-GAAP measures in addition to, and
not as a substitute for, financial performance measures prepared in
accordance with GAAP.
Note: The data in this schedule has been intentionally rounded to the
nearest million and therefore the quarterly revenues may not sum to
the fiscal year to date revenues.
MEDTRONIC, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(in millions, except per share data)
Three months ended
---------------------------
July 28, 2006 July 29, 2005
------------- -------------
Net sales $2,897 $2,690
Costs and expenses:
Cost of products sold 732 654
Research and development expense 299 263
Selling, general, and administrative
expense 984 882
Certain litigation charges 40 -
Purchased in-process research and
development (IPR&D) - 364
Other expense, net 66 51
Interest income (39) (16)
------------- -------------
Total costs and expenses 2,082 2,198
------------- -------------
Earnings before income taxes 815 492
Provision for income taxes 216 171
------------- -------------
Net earnings $599 $321
============= =============
Earnings per share:
Basic $0.52 $0.26
============= =============
Diluted $0.51 $0.26
============= =============
Weighted average shares outstanding:
Basic 1,153.8 1,210.5
Diluted 1,164.8 1,222.6
MEDTRONIC, INC.
RECONCILIATION OF CONSOLIDATED GAAP NET EARNINGS
TO CONSOLIDATED ADJUSTED NET EARNINGS
(Unaudited)
(in millions, except per share data)
Three months ended Three months ended
July 28, 2006 July 29, 2005
------------------ ------------------
Net earnings, as reported $599 $321
Certain litigation charges 40 (a) -
IPR&D charges - 295 (b)
Pro forma stock-based
compensation - (32)(c)
------------------ ------------------
Adjusted net earnings $639 $584
================== ==================
MEDTRONIC, INC.
RECONCILIATION OF CONSOLIDATED GAAP DILUTED EPS
TO CONSOLIDATED ADJUSTED DILUTED EPS
(Unaudited)
Three months ended Three months ended
July 28, 2006 July 29, 2005
------------------ ------------------
Diluted EPS, as reported $0.51 $0.26
Certain litigation charges 0.04 (a) -
IPR&D charges - 0.24 (b)
Stock-Based awards - (0.02)(c)
------------------ ------------------
Adjusted diluted EPS $0.55 $0.48
================== ==================
(a) The $40 million ($0.04 per share) after-tax certain litigation
charge is related to the settlement agreement reached with the United
States (U.S.) Department of Justice which requires the government to
seek dismissal of two qui tam civil suits pending against Medtronic.
In addition to disclosing certain litigation charges that are
determined in accordance with U.S. generally accepted accounting
principles (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
litigation charges. Management believes that this 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 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 GAAP. In addition, this non-GAAP financial measure may not be the
same as similar measures presented by other companies.
(b) The $295 million ($0.24 per share) after-tax IPR&D charges ($364
million pre-tax) represents the cumulative impact of pre-tax charges
of $169 million related to a technology acquired through the purchase
of Transneuronix, Inc. that had not yet reached technological
feasibility and had no future alternative use, $175 million related to
the purchase of spinal technology based devices owned by Gary
Michelson and Karlin Technology, Inc. that had not yet reached
technological feasability and had no future alternative use, and $20
million related to a cross-licensing agreement with NeuroPace, Inc.
for patent and patent applications on products that had not yet
reached technological feasability and had no future alternative use,
collectively the IPR&D charges. In addition to disclosing IPR&D
charges that are determined in accordance with GAAP, Medtronic
management believes that in order to properly understand its
short-term and long-term financial trends, investors may find it
useful to consider the impact of excluding these IPR&D charges. These
IPR&D charges resulted from facts and circumstances that vary in
frequency and/or impact on continuing operations. Management believes
that this non-GAAP financial measure provides useful information to
investors regarding the underlying business trends and performance of
the Company's ongoing operations and is useful for period over period
comparisons of such operations. Medtronic management eliminates these
IPR&D charges when evaluating the operating performance of the
Company. Investors should consider this non-GAAP measure in addition
to, and not as a substitute for, financial performance measures
prepared in accordance with GAAP. In addition, this non-GAAP financial
measure may not be the same as similar measures presented by other
companies.
(c) The Company adopted SFAS No. 123(R) effective April 29, 2006 and
began to recognize compensation expense associated with all
stock-based awards. Prior to fiscal year 2007, the Company accounted
for stock-based awards under APB No. 25, and thus the Company only
recognized compensation expense related to restricted stock awards and
restricted stock units. Under SFAS No. 123(R) compensation expense is
recognized on all stock-based awards including stock options, employee
stock purchase plans and restricted stock awards/units. The $32
million ($0.02 per share), net of statutory tax, ($44 million
pre-statutory tax) represents the incremental expense that would have
been recorded had the Company accounted for stock-based awards in
accordance with SFAS 123(R) in fiscal year 2006. Total stock-based
compensation including stock options, restricted stock awards/units
and employee stock purchase plans was $49 million (pre-tax) in the
first quarter of fiscal year 2007 and pro-forma total stock-based
compensation including stock options, restricted stock awards/units
and employee stock purchase plans was $49 million in the first quarter
of fiscal year 2006. Below is a listing, by income statement line
item, of the pre-tax total stock-based compensation expense recognized
in first quarter fiscal 2007 and the pro forma stock-based
compensation for first quarter fiscal 2006.
Three months ended Three months ended
July 28, 2006 July 29, 2005
------------------ ------------------
Cost of products sold $6 $5
Research and development
expense 11 12
Selling, general, and
administrative expense 32 32
------------------ ------------------
$49 $49
================== ==================
Management believes that this 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 applies the provisions of SFAS 123(R) to fiscal
years 2006 and prior 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 GAAP. In addition, this non-GAAP financial
measure may not be the same as similar measures presented by other
companies.
MEDTRONIC, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
July 28, April 28,
2006 2006
------------------------ -------------------
(dollars in millions, except per share data)
ASSETS
------
Current assets:
Cash and cash
equivalents $ 1,396 $ 2,994
Short-term investments 4,549 3,107
Accounts receivable,
less allowances of
$193 and $184,
respectively 2,444 2,429
Inventories 1,280 1,177
Deferred tax assets,
net 226 197
Prepaid expenses and
other current assets 536 473
------------------------ -------------------
Total current assets 10,431 10,377
Property, plant and
equipment 3,921 3,794
Accumulated depreciation (2,017) (1,913)
------------------------ -------------------
Net property, plant
and equipment 1,904 1,881
Goodwill 4,361 4,346
Other intangible assets,
net 1,559 1,592
Long-term investments 1,394 957
Non-current deferred tax
assets, net 25 -
Other assets 507 512
------------------------ -------------------
Total assets $ 20,181 $ 19,665
======================== ===================
LIABILITIES AND
SHAREHOLDERS' EQUITY
---------------------
Current liabilities:
Short-term borrowings $ 2,427 $ 2,437
Accounts payable 341 319
Accrued compensation 513 723
Accrued income taxes 590 461
Other accrued expenses 568 466
------------------------ -------------------
Total current
liabilities 4,439 4,406
Long-term debt 5,485 5,486
Deferred tax liabilities,
net - 22
Long-term accrued
compensation 199 189
Other long-term
liabilities 162 179
------------------------ -------------------
Total liabilities 10,285 10,282
Commitments and
contingencies -- --
Shareholders' equity:
Preferred stock -- par
value $1.00 -- --
Common stock -- par
value $0.10 115 116
Retained earnings 9,600 9,112
Accumulated other non-
owner changes in
equity 181 155
------------------------ -------------------
Total shareholders'
equity 9,896 9,383
------------------------ -------------------
Total liabilities
and shareholders'
equity $ 20,181 $ 19,665
======================== ===================
MEDTRONIC, INC.
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Unaudited)
Three months ended
---------------------
July 28, July 29,
2006 2005
---------- ----------
(dollars in millions)
OPERATING ACTIVITIES:
Net earnings $ 599 $ 321
Adjustments to reconcile net earnings to net
cash (used in) provided by operating
activities:
Depreciation and amortization 140 128
Purchased in-process research and
development -- 364
Provision for doubtful accounts 10 6
Deferred income taxes (50) 167
Stock-based compensation 49 5
Excess tax benefit from exercise of stock-
based awards (7) --
Change in operating assets and
liabilities:
Accounts receivable (25) (28)
Inventories (103) (115)
Accounts payable and accrued
liabilities 25 (722)
Changes in other operating assets and
liabilities (58) (138)
---------- ----------
Net cash provided by (used in) operating
activities 580 (12)
INVESTING ACTIVITIES:
Acquisition, net of cash acquired (6) (227)
Purchases of intellectual property (8) (793)
Additions to property, plant and equipment (117) (103)
Purchases of marketable securities (4,197) (601)
Sales and maturities of marketable securities 2,315 237
Other investing activities, net (7) 9
---------- ----------
Net cash (used in) investing activities (2,020) (1,478)
FINANCING ACTIVITIES:
Increase (decrease) in short-term borrowings,
net (10) 982
Increase (decrease) in long-term debt, net (2) --
Dividends to shareholders (127) (117)
Issuance of common stock 58 123
Excess tax benefit from exercise of stock-
based awards 7 --
Repurchase of common stock (99) (229)
---------- ----------
Net cash (used in) provided by financing
activities (173) 759
Effect of exchange rate changes on cash and cash
equivalents 15 89
---------- ----------
Net change in cash and cash equivalents (1,598) (642)
Cash and cash equivalents at beginning of period 2,994 2,232
---------- ----------
Cash and cash equivalents at end of period $ 1,396 $ 1,590
========== ==========
Supplemental Cash Flow Information
Cash paid for:
Income taxes $ 162 $ 59
Interest 22 15
Supplemental Noncash Investing Activities
Deferred payments for purchases of
intellectual property $ -- $ 30
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