-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, oYVgrcykGHMNxtFWCN7LWSB0brfzXWvj6jmFOaJmwd4atycx3uJT0KtOnoEvBEyA NZT+dgrNdvHJfnsr5ASGuA== 0000897101-94-000163.txt : 19941207 0000897101-94-000163.hdr.sgml : 19941207 ACCESSION NUMBER: 0000897101-94-000163 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19941028 FILED AS OF DATE: 19941206 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEDTRONIC INC CENTRAL INDEX KEY: 0000064670 STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845] IRS NUMBER: 410793183 STATE OF INCORPORATION: MN FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07707 FILM NUMBER: 94563483 BUSINESS ADDRESS: STREET 1: 7000 CENTRAL AVE NE STREET 2: MS 316 CITY: MINNEAPOLIS STATE: MN ZIP: 55432 BUSINESS PHONE: 6125744000 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended October 28, 1994 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______ to ______ Commission File Number 1-7707 MEDTRONIC, INC. (Exact name of registrant as specified in its charter) Minnesota 41-0793183 (State of incorporation) (I.R.S. Employer Identification No.) 7000 Central Avenue N.E. Minneapolis, Minnesota 55432 (Address of principal executive offices) Telephone number: (612) 574-4000 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes _X_ No ___ Shares of common stock, $.10 par value, outstanding on December 1, 1994: 114,931,667 PART I--FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS MEDTRONIC, INC. CONSOLIDATED STATEMENT OF EARNINGS (Unaudited)
Three months ended Six months ended Oct. 28, Oct. 29, Oct. 28, Oct. 29, 1994 1993 1994 1993 (in thousands, except per share data) Net sales $ 408,151 $ 332,057 $ 811,947 $ 663,363 Costs and expenses: Cost of products sold 127,763 104,573 254,159 205,830 Research and development expense 45,002 36,649 89,135 73,978 Selling, general, and administrative expense 131,273 106,973 266,295 234,904 Interest expense 2,058 2,164 4,716 4,233 Interest income (2,791) (2,185) (5,070) (3,861) Gain on sale of subsidiary -- -- -- (13,962) Total costs and expenses 303,305 248,174 609,235 501,122 Earnings before income taxes 104,846 83,883 202,712 162,241 Provision for income taxes 35,124 27,682 67,909 53,540 Net earnings $ 69,722 $ 56,201 $ 134,803 $ 108,701 Weighted average shares outstanding 114,880 114,444 115,208 114,932 Net earnings per share $ 0.61 $ 0.49 $ 1.17 $ 0.95
See accompanying Notes to Condensed Consolidated Financial Statements. MEDTRONIC, INC. CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited) October 28, April 30, 1994 1994 ASSETS (in thousands) Current assets: Cash and cash equivalents $ 115,045 $ 108,720 Short-term investments 81,664 72,694 Accounts receivable, less allowance for doubtful accounts of $22,475 and $20,123 347,155 340,927 Inventories: Finished goods 104,062 102,163 Work in process 52,715 50,751 Raw materials 62,399 60,384 Total inventories 219,176 213,298 Prepaid expenses and other current assets 114,564 110,218 Total current assets 877,604 845,857 Property, plant, and equipment 669,422 609,945 Accumulated depreciation (359,649) (308,160) Net property, plant, and equipment 309,773 301,785 Goodwill and other intangible assets, net of accumulated amortization of $60,695 and $48,884 350,585 367,238 Other assets 117,784 108,372 Total assets $1,655,746 $1,623,252 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Short-term borrowings $ 27,939 $ 58,173 Accounts payable 89,055 140,295 Accrued liabilities 278,149 240,976 Total current liabilities 395,143 439,444 Long-term liabilities 105,189 114,401 Deferred income taxes 19,480 15,915 Shareholders' equity: Common stock--par value $.10 11,491 11,626 Retained earnings 1,146,652 1,083,868 Cumulative translation adjustment 10,091 (9,702) 1,168,234 1,085,792 Receivable from Employee Stock Ownership Plan (32,300) (32,300) Total shareholders' equity 1,135,934 1,053,492 Total liabilities and shareholders' equity $1,655,746 $1,623,252 See accompanying notes to condensed consolidated financial statements. MEDTRONIC, INC. CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS (Unaudited) Six months ended Oct. 28, Oct. 29, 1994 1993 (in thousands) OPERATING ACTIVITIES: Net earnings $134,803 $108,701 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 52,858 40,460 Gain on sale of subsidiary, net of tax -- (9,424) Change in assets and liabilities excluding effects of divestiture: Decrease in accounts receivable 7,876 18,737 Decrease in inventories 1,473 280 Increase (decrease) in accounts payable and accrued liabilities 8,017 (18,447) Changes in other operating assets and liabilities (18,909) (13,084) Net cash provided by operating activities 186,118 127,223 INVESTING ACTIVITIES: Additions to property, plant, and equipment (43,158) (26,607) Proceeds from sale of subsidiary -- 21,000 Purchases of marketable securities (55,616) (42,276) Sales of marketable securities 62,096 34,500 Other investing activities (net) 7,970 (702) Net cash used in investing activities (28,708) (14,085) FINANCING ACTIVITIES: Decrease in short-term borrowings (net) (28,421) (68,673) (Reductions) additions to long-term debt (net) (5,191) 3,786 Decrease in acquisition price payable (39,130) -- Dividends to shareholders (23,576) (19,500) Repurchase of common stock (59,079) (52,026) Issuance of common stock 3,625 4,610 Net cash used in financing activities (151,772) (131,803) Effect of exchange rate changes on cash and cash equivalents 687 (221) Net Change in Cash and Cash Equivalents 6,325 (18,886) Cash and cash equivalents at beginning of period 108,720 76,994 Cash and cash equivalents at end of period $115,045 $ 58,108 See accompanying notes to condensed consolidated financial statements. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (in thousands) Note 1 - Basis of Presentation The unaudited condensed consolidated financial statements include the accounts of Medtronic, Inc. and all of its subsidiaries, after elimination of all significant intercompany transactions and accounts. In the opinion of management, all adjustments necessary for a fair presentation of operating results have been made. All such adjustments are of a normal recurring nature. Operating results for interim periods are not necessarily indicative of results which may be expected for the year as a whole. Note 2 - Accounting Change On May 1, 1994, the company adopted Statement of Financial Accounting Standard (SFAS) 115. SFAS 115 established standards of financial accounting and reporting for investments in equity securities that have readily determinable fair values and for all investments in debt securities. Those investments are classified and accounted for in three categories. The company's securities investments that are bought and held principally for the purpose of selling them in the near term are classified as trading securities. Trading securities are recorded at fair value on the balance sheet in cash and cash equivalents or short-term investments with the change in fair value during the period included in earnings. Securities investments that the company has the positive intent and ability to hold to maturity are classified as held-to-maturity securities and recorded at amortized cost in short-term investments or other assets. Securities investments not classified as either held-to-maturity or trading securities are classified as available-for-sale securities. Available-for-sale securities are recorded at fair value in short-term investments or other assets on the balance sheet, with the change in fair value during the period excluded from earnings and recorded net of tax as a component of retained earnings. In accordance with SFAS 115, prior period financial statements have not been restated to reflect the change in accounting principle, however, the effect of this change to reflect the net unrealized holding gains related to securities classified as available-for-sale was to increase shareholders' equity at May 1, 1994 by $10,066 (net of $5,420 of deferred income taxes). Adoption of this change in accounting principle had no impact on the statement of earnings for the six month period ended October 28, 1994. There were no realized gains or losses on sales of available-for-sale securities during the six months ended October 28, 1994. At October 28, 1994, the balance of net unrealized holding gains included as a component of retained earnings was $8,003 (net of deferred income taxes of $4,309). Note 3 - Stockholders' Equity On August 31, 1994, the Board of Directors approved a two-for-one common stock split, paid September 30, 1994 in the form of a 100 percent stock dividend to shareholders of record at the close of business on September 15, 1994. The stock split resulted in the issuance of 57,450 additional shares and the reclass of $5,745 from retained earnings to common stock, representing the par value of the shares issued. All references in the financial statements to average number of shares outstanding and earnings per share amounts have been restated to reflect the split. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Net Earnings Net earnings for the second quarter ended October 28, 1994 were $69.7 million, or $0.61 per share. Earnings per share reflect an increase of 24.5 percent over the $0.49 per share reported on earnings of $56.2 million in the same quarter last year. Net earnings increased 24.0 percent to $134.8 million for the six months ended October 28, 1994, compared to $108.7 million for the same period in the prior year. Earnings per share for the six-month period ended October 28, 1994 were $1.17, an increase of 23.2 percent over the $0.95 reported last year. Sales Sales during the quarter and six month period ended October 28, 1994 increased 22.9 percent and 22.4 percent, respectively, compared to the same periods last year. Exclusive of the effects of foreign currency translation and acquisitions, sales for the quarter ended October 28, 1994 increased 14.2 percent over the comparable period last year. Sales in the six-month period ended October 28, 1994, adjusted for foreign currency, acquisitions, and a divestiture, increased 15.1 percent from the same period last year. Sales growth in the quarter and six-month period was positively impacted by $11.8 million and $17.6 million, respectively, of favorable exchange rate movements primarily caused by the weakening of the U.S. dollar versus major European currencies and the Japanese Yen. Sales of the pacing business on a comparable operations basis grew 15.2 percent and 15.9 percent in the quarter and six-month period ended October 28, 1994, respectively, compared to the same periods a year ago. This increase in sales is attributable to double-digit percentage growth in both the bradycardia and tachyarrthymia management businesses. Bradycardia unit sales continued to reflect strong growth in both the U.S. and non-U.S. markets. Growth in the U.S. and Japan was led by the Medtronic Elite II(R) dual chamber, rate responsive pacemaker. Strong sales performance in Europe continued to be led by the Thera(R) family of pacemakers which remain in clinical evaluation in the U.S. The dual-sensor Collection(TM) pacemakers developed and marketed by Vitatron, Inc., a Medtronic subsidiary, also made solid sales contributions in Europe. Unit sales of tachyarrthymia devices also showed solid gains worldwide, with the Model 7217B PCD(R) device and its Transvene(R) transvenous leads providing strong sales in the U.S. Worldwide sales were led by the new smaller Jewel(R) PCD(R) devices in Europe, Canada, and Latin America. The Jewel models of the PCD devices remain in U.S. clinical evaluation. Sales within the other cardiovascular business consisting of interventional vascular, heart valves, and cardiopulmonary, increased 8.8 percent and 10.4 percent on a comparable operations basis in the quarter and six-month period ended October 28, 1994, respectively. The interventional vascular business continued its excellent growth in revenues with sales of the Panther(TM) and 14K(R) balloon catheters and the Wiktor(TM) stent. Unit sales growth of balloon catheters continued to more than offset reductions in average selling prices. Solid cardiopulmonary sales growth was led by sales of oxygenators and blood monitoring and management products. The cardiopulmonary business continued to receive solid revenue contributions from organizations acquired near the end of fiscal 1994. Sales of the heart valve business showed only modest growth in the quarter and six-month periods. On a comparable operations basis, sales of the neurological and other businesses grew 21.0 percent for the quarter and 21.6 percent for the six-month period ended October 28, 1994 compared to the same periods in the prior year, reflecting significant growth in sales of the company's implantable SynchroMed(R) drug infusion system and solid growth in sales of the Itrel(R) II implantable neurostimulation system. Costs of Products Sold Cost of products sold as a percent of sales was 31.3 percent for the quarter and the six months ended October 28, 1994 compared to 31.5 percent and 31.0 percent, respectively, for the same periods a year ago. Selling, General, and Administrative Expense (SG&A) SG&A expense for the quarter ended October 28, 1994, was $131.3 million compared to $107.0 million for the comparable period last year. SG&A as a percent of sales was 32.2 percent in both the current quarter and the same quarter last year. SG&A in the current quarter was affected by increased currency expense offset by accelerated recognition of deferred royalty income. The accelerated recognition of deferred royalty income was caused by the acquisition of Siemens A.G.'s cardiac rhythm management unit by St. Jude Medical, Inc. St. Jude will pay royalties to Medtronic in the future under the terms of the royalty agreement between Medtronic and Siemens. SG&A as a percent of sales for the six-month period ended October 28, 1994 was 32.8 percent compared to 33.2 percent last year after adjusting the prior period expense for $14.3 million of non-recurring charges primarily related to adoption of a new accounting principle and a provision for potentially uncollectible trade and other receivables. In addition to increased currency expense, SG&A as a percentage of sales in the six month period was affected by spending associated with newly acquired organizations, strong sales growth, and increased royalty income. Income Taxes Federal tax legislation was passed in August 1993 which increases the U.S. corporate income tax rate, retroactively reinstates the research tax credit, and beginning in 1995, limits U.S. tax benefits from operations in Puerto Rico. The increase in the federal tax rate and Puerto Rico benefit limitations will put upward pressure on the company's effective tax rate. Accordingly, the estimated effective tax rate for the company's current fiscal year is 33.5 percent compared to an effective rate of 33.0 percent for the fiscal year ended April 30, 1994. However, the impact of the federal tax legislation on the effective tax rate in future years will be primarily dependent upon the level of operating activity in Puerto Rico and the level of research activities. Accordingly, the company cannot determine the impact the tax legislation will have on future operating results. Liquidity and Capital Resources Operating activities provided $186.1 million of cash and cash equivalents for the six months ended October 28, 1994 compared to $127.2 million in the same period a year ago. Working capital was $482.5 million at October 28, 1994, an increase of $76.1 million over the $406.4 million at April 30, 1994. The current ratio increased to 2.2:1 at October 28, 1994, compared to 1.9:1 at April 30, 1994. Cash and cash equivalents increased $6.3 million during the six months ended October 28, 1994, compared with a decrease of $18.9 million during the same period last year. The increase in the current ratio is the result of increased operating cash inflows which have been partially utilized to pay down short term borrowings and accounts payable, including $39.1 million acquisition price payable at April 30, 1994. PART II -- OTHER INFORMATION Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 11 - Statement on computation of per share earnings 27 - Financial Data Schedule (For SEC use only) (b) Reports on Form 8-K No report on Form 8-K was filed by the company during the quarter ended October 28, 1994. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Medtronic, Inc. (Registrant) Date: December 6, 1994 /s/ WILLIAM W. GEORGE William W. George President and Chief Executive Officer Date: December 6, 1994 /s/ ROBERT L. RYAN Robert L. Ryan Senior Vice President and Chief Financial Officer EX-11 2 EXHIBIT 11 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS MEDTRONIC, INC. (Unaudited) (in thousands) Three months ended Six months ended Oct. 28, Oct. 29, Oct. 28, Oct. 29, 1994 1993 1994 1993 PRIMARY Shares outstanding: Weighted average outstanding 114,880 114,444 115,208 114,932 Share equivalents (1)(2) 1,504 962 1,306 963 Adjusted shares outstanding (2) 116,384 115,406 116,514 115,895 FULLY DILUTED Shares outstanding: Weighted average outstanding 114,880 114,444 115,208 114,932 Share equivalents (1)(2) 1,785 1,320 1,785 1,320 Adjusted shares outstanding (2) 116,665 115,764 116,992 116,252 (1) Share equivalents consist primarily of nonqualified stock options. (2) This calculation is submitted in accordance with Regulation S-K item 601(b)(11) although not required by footnote 2 to paragraph 14 of APB Opinion No. 15 because it results in dilution of less than 3 %. EX-27 3
5 MEDTRONIC, INC. FINANCIAL DATA SCHEDULE October 28, 1994 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED STATEMENT OF EARNINGS AND CONDENSED CONSOLIDATED BALANCE SHEET FOR THE QUARTERLY PERIOD ENDED OCTOBER 38, 1994 FILED WITH THE SEC ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS APR-30-1995 MAY-01-1994 OCT-28-1994 115,045 81,664 369,630 (22,475) 219,176 877,604 669,422 (359,649) 1,655,746 395,143 0 11,491 0 0 1,124,443 1,655,746 811,947 811,947 254,159 254,159 350,360 0 4,716 202,712 67,909 134,803 0 0 0 134,803 1.17 1.15
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