Exhibit 99.1

NEWS RELEASE                                        

Contacts:
Martha Goldberg Aronson	Marybeth Thorsgaard
Investor Relations	Public Relations
763-505-2694	763-505-2644

FOR IMMEDIATE RELEASE

MEDTRONIC THIRD QUARTER EPS UP 11 PERCENT ON REVENUE
GROWTH OF 10 PERCENT

Growth Driven by Diversified Portfolio as Operating Leverage Improves

• Diluted EPS of $0.61 grew 11% compared to prior year’s quarter; up 17% after reflecting stock option expense in both periods (non-GAAP for prior year)

• Revenue of $3.048 billion grew 10% over the prior year’s quarter

• Revenue outside the U.S. grew 25% over the prior year’s quarter, led by strong ICD growth

• Five of seven business segments reported double digit revenue growth

MINNEAPOLIS — February 20, 2007 — Medtronic, Inc. (NYSE:MDT) today announced financial results for its third quarter of fiscal year 2007, which ended January 26, 2007.

Medtronic recorded third quarter revenue of $3.048 billion, a 10 percent increase over the $2.770 billion reported in the third quarter of the prior fiscal year. Currency translation had a positive impact of $55 million in the quarter. As reported, third quarter fiscal year 2007 net earnings were $710 million, or $0.61 per diluted share, representing an increase of 11 percent over the same quarter last year. However, EPS grew 17 percent after reflecting stock option expense in both periods, applying a non-GAAP measure for 2006 that makes the figures more comparable.

“Third quarter financial results reflect the strength of Medtronic’s business portfolio, which is diversified by product line and geography, as well as improved operating leverage,” said Art Collins, Medtronic chairman and chief executive officer.

Non-U.S. revenue of $1.091 billion grew 25 percent driven by double digit revenue growth in all major geographic areas. For the quarter, 36 percent of Medtronic’s revenue was from outside the U.S.

Unless otherwise noted, all comparisons made in this news release are on an “as reported basis,” not on a constant currency basis, and references to quarterly figures increasing or decreasing are in comparison to the third quarter of fiscal year 2006.

Cardiac Rhythm Disease Management
Cardiac Rhythm Disease Management (CRDM) revenue of $1.291 billion grew 2 percent. Revenue from implantable cardiac defibrillators (ICDs) was $711 million, down 2 percent from the same quarter last year. Worldwide pacing revenue of $458 million in the quarter increased 8 percent. Outside the U.S., CRDM revenue continued to grow at a double digit rate, driven by the success of the ICD and CRT-D product lines. Increased market development efforts are underway in the U.S., including the Sudden Cardiac Arrest awareness campaign and Partners Prevention Program, as well as the IMPROVE-HF clinical study. Physio-Control third quarter revenue of $105 million increased by 6 percent.

Spinal and Navigation
Spinal and Navigation revenue of $629 million grew 12 percent. Spinal revenue increased 12 percent and Navigation revenue increased 7 percent. Worldwide Spinal revenue was driven by the Biologics product line and the CD HORIZON^® LEGACY™ family of products, which includes the new PEEK ROD. The CRESCENT™ Vertebral Body Spacer and the VENTURE™ Cervical System were also strong contributors to the growth.

Vascular
Vascular revenue of $304 million grew 29 percent. Coronary Vascular revenue grew 31 percent to $235 million, and Endovascular and Peripheral Vascular revenue grew 21 percent. Growth was driven by increased utilization of the Endeavor^® drug-eluting stent, the Driver^® and Micro-

Driver^® bare metal stents and the Valiant™ Thoracic and AneuRx AAAdvantage™ Abdominal stent graft systems.

Neurological
Neurological revenue of $290 million grew 17 percent. The segment’s largest business, which includes implantable neurostimulation and drug-delivery systems used in the treatment of chronic pain, movement disorders and spasticity, generated third quarter revenue of $233 million, increasing 15 percent. Revenue in the gastroenterology and urology business grew 27 percent, driven by the strong market acceptance of the InterStim^® II neurostimulator for the treatment of overactive bladder.

Diabetes
Diabetes revenue of $226 million grew 24 percent. Third quarter results were driven by strong sales of insulin pumps, with solid double digit growth reported in all geographies.

Cardiac Surgery
Cardiac Surgery revenue of $174 million grew 13 percent with solid performance in its heart valve business.

Ear, Nose and Throat (ENT)
ENT revenue of $134 million grew 7 percent. Growth was driven by increasing physician adoption of power systems, including powered drills and endoscopic shavers, and by further global penetration of the Nerve Integrity Monitor.

Outlook
“As we move through the remainder of this fiscal year and enter fiscal year 2008, we expect to see good operating momentum and positive contributions from a number of new product launches inside and outside the United States,” said Collins. “I also expect to see continued progress on market development activities and tangible benefits from a broad range of productivity and supply chain management initiatives.”

Webcast Information
Medtronic will host a webcast today, Feb. 20 at 4:30 p.m. EST (3:30 CST), 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 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 “Presentations & Transcripts” section of the Investor Relations homepage.

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.

-end-

This press release contains forward-looking statements regarding our operating momentum, new products 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 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 — WORLD WIDE
(Unaudited)

($ millions)

	FY 06		FY 06			FY 06			FY 06			FY 06			FY 07		FY 07		FY 07		FY 07		FY 07
	QTR 1		QTR 2			QTR 3			QTR 4			TOTAL			QTR 1		QTR 2		QTR 3		QTR 4		TOTAL
REPORTED REVENUE :
CARDIAC RHYTHM DISEASE MANAGEMENT	$	1,268	$	1,289		$	1,263		$	1,385		$	5,206	$	1,250	$	1,363	$	1,291	$	—	$	3,904
Low Power Pacing		446		459			426			464			1,795		460		473		458		—		1,391
High Power Defibrillation		718		733			723			758			2,932		673		764		711		—		2,147
Physio-Control		87		81			99			144			412		101		111		105		—		317
Other		17		16			15			19			67		16		15		17		—		49
SPINAL & NAVIGATION	$	524	$	539		$	563		$	619		$	2,244	$	599	$	625	$	629	$	—	$	1,854
Spinal Instrumentation		376		382			387			420			1,566		412		421		429		—		1,265
Spinal Biologics		128		134			147			163			570		163		178		169		—		509
Navigation		20		23			29			36			108		24		26		31		—		80
Neurological	$	235	$	252		$	247		$	283		$	1,016	$	276	$	291	$	290	$	—	$	857
Neuro Implantables		186		204			202			241			833		226		238		233		—		697
Gastroenterology & Urology		49		48			45			42			183		50		53		57		—		160
VASCULAR	$	205	$	225		$	236		$	274		$	940	$	280	$	287	$	304	$	—	$	871
Stents		65		90			96			114			366		120		132		148		—		399
Other Coronary		81		78			83			92			334		92		85		87		—		265
Endovascular/Peripheral		59		57			57			68			240		68		70		69		—		207
DIABETES	$	173	$	178		$	182		$	188		$	722	$	196	$	212	$	226	$	—	$	633
CARDIAC SURGERY	$	165	$	161		$	154		$	183		$	663	$	168	$	168	$	174	$	—	$	509
Valves		58		56			52			63			229		59		59		62		—		180
Perfusion		79		78			75			89			321		80		81		82		—		242
Cardiac Surgery Technologies		28		27			27			31			113		29		28		30		—		87
Ear, Nose & Throat (ENT)	$	120	$	121		$	125		$	135		$	501	$	128	$	129	$	134	$	—	$	391
ENT		65		64			65			72			266		65		65		69		—		200
Neurologic Technologies		55		57			60			63			235		63		64		65		—		191
TOTAL	$	2,690	$	2,765		$	2,770		$	3,067		$	11,292	$	2,897	$	3,075	$	3,048	$	—	$	9,019
ADJUSTMENTS :
CURRENCY (1)	$	26	$	(3	)	$	(72	)	$	(69	)	$	(118)	$	6	$	32	$	55	$	—	$	94
COMPARABLE OPERATIONS (1)	$	2,664	$	2,768		$	2,842		$	3,136		$	11,410	$	2,891	$	3,043	$	2,993	$	—	$	8,925

(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.
REVENUE BY OPERATING SEGMENT — US
(Unaudited)

($ millions)

	FY 06		FY 06		FY 06		FY 06		FY 06			FY 07		FY 07		FY 07		FY 07		FY 07
	QTR 1		QTR 2		QTR 3		QTR 4		TOTAL			QTR 1		QTR 2		QTR 3		QTR 4		TOTAL
REPORTED REVENUE :
CARDIAC RHYTHM DISEASE MANAGEMENT	$	857	$	879	$	862	$	899	$	3,496	$	793	$	880	$	799	$	—	$	2,470
Low Power Pacing		218		235		223		227		902		228		244		220		—		691
High Power Defibrillation		571		579		565		569		2,283		495		554		507		—		1,556
Physio-Control		59		54		65		94		273		60		73		62		—		195
Other		9		11		9		9		38		10		9		10		—		28
SPINAL & NAVIGATION	$	437	$	454	$	477	$	511	$	1,881	$	497	$	522	$	523	$	—	$	1,543
Spinal Instrumentation		300		308		315		328		1,252		322		333		338		—		994
Spinal Biologics		124		131		143		158		557		158		172		164		—		493
Navigation		13		15		19		25		72		17		17		21		—		56
Neurological	$	162	$	185	$	182	$	197	$	726	$	196	$	215	$	207	$	—	$	618
Neuro Implantables		126		148		149		169		592		157		173		164		—		494
Gastroenterology & Urology		36		37		33		28		134		39		42		43		—		124
VASCULAR	$	66	$	66	$	67	$	76	$	275	$	79	$	83	$	80	$	—	$	242
Stents		6		6		6		6		24		9		12		17		—		39
Other Coronary		26		26		27		32		111		31		30		26		—		87
Endovascular/Peripheral		34		34		34		38		140		39		41		37		—		116
DIABETES	$	130	$	134	$	136	$	134	$	534	$	140	$	154	$	164	$	—	$	458
CARDIAC SURGERY	$	92	$	90	$	84	$	100	$	366	$	91	$	91	$	93	$	—	$	276
Valves		35		33		31		38		138		35		35		36		—		106
Perfusion		41		41		38		44		163		40		40		40		—		121
Cardiac Surgery Technologies		16		16		15		18		65		16		16		17		—		49
Ear, Nose & Throat (ENT)	$	84	$	85	$	88	$	92	$	348	$	87	$	88	$	91	$	—	$	266
ENT		46		45		46		49		184		43		44		47		—		134
Neurologic Technologies		38		40		42		43		164		44		44		44		—		132
TOTAL	$	1,828	$	1,893	$	1,896	$	2,009	$	7,626	$	1,883	$	2,033	$	1,957	$	—	$	5,873
ADJUSTMENTS :
CURRENCY	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
COMPARABLE OPERATIONS	$	1,828	$	1,893	$	1,896	$	2,009	$	7,626	$	1,883	$	2,033	$	1,957	$	—	$	5,873

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 dated revenue.

MEDTRONIC, INC.
REVENUE BY OPERATING SEGMENT — INTERNATIONAL
(Unaudited)

($ millions)

	FY 06		FY 06			FY 06			FY 06			FY 06				FY 07		FY 07		FY 07		FY 07		FY 07
	QTR 1		QTR 2			QTR 3			QTR 4			TOTAL				QTR 1		QTR 2		QTR 3		QTR 4		TOTAL
REPORTED REVENUE :
CARDIAC RHYTHM DISEASE MANAGEMENT	$	411	$	410		$	401		$	486		$	1,710		$	457	$	483	$	492	$	—	$	1,434
Low Power Pacing		228		224			203			237			893			232		229		238		—		700
High Power Defibrillation		147		154			158			189			649			178		210		204		—		591
Physio-Control		28		27			34			50			139			41		38		43		—		122
Other		8		5			6			10			29			6		6		7		—		21
SPINAL & NAVIGATION	$	87	$	85		$	86		$	108		$	363		$	102	$	103	$	106	$	—	$	311
Spinal Instrumentation		76		74			72			92			314			90		88		91		—		271
Spinal Biologics		4		3			4			5			13			5		6		5		—		16
Navigation		7		8			10			11			36			7		9		10		—		24
Neurological	$	73	$	67		$	65		$	86		$	290		$	80	$	76	$	83	$	—	$	239
Neuro Implantables		60		56			53			72			241			69		65		69		—		203
Gastroenterology & Urology		13		11			12			14			49			11		11		14		—		36
VASCULAR	$	139	$	159		$	169		$	198		$	665		$	201	$	204	$	224	$	—	$	629
Stents		59		84			90			108			342			111		120		131		—		360
Other Coronary		55		52			56			60			223			61		55		61		—		178
Endovascular/Peripheral		25		23			23			30			100			29		29		32		—		91
DIABETES	$	43	$	44		$	46		$	54		$	188		$	56	$	58	$	62	$	—	$	175
CARDIAC SURGERY	$	73	$	71		$	70		$	83		$	297		$	77	$	77	$	81	$	—	$	233
Valves		23		23			21			25			91			24		24		26		—		74
Perfusion		38		37			37			45			158			40		41		42		—		121
Cardiac Surgery Technologies		12		11			12			13			48			13		12		13		—		38
Ear, Nose & Throat (ENT)	$	36	$	36		$	37		$	43		$	153		$	41	$	41	$	43	$	—	$	125
ENT		19		19			19			23			82			22		21		22		—		66
Neurologic Technologies		17		17			18			20			71			19		20		21		—		59
TOTAL	$	862	$	872		$	874		$	1,058		$	3,666		$	1,014	$	1,042	$	1,091	$	—	$	3,146
ADJUSTMENTS :
CURRENCY (1)	$	26	$	(3	)	$	(72	)	$	(69	)	$	(118	)	$	6	$	32	$	55	$	—	$	94
COMPARABLE OPERATIONS (1)	$	836	$	875		$	946		$	1,127		$	3,784		$	1,008	$	1,010	$	1,036	$	—	$	3,052

(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						Nine months ended
	January 26, 2007			January 27, 2006			January 26, 2007			January 27, 2006
Net sales	$	3,048		$	2,770		$	9,019		$	8,225
Costs and expenses:
Cost of products sold		775			699			2,302			2,047
Research and development expense		293			280			912			819
Selling, general, and administrative expense		1,038			900			3,058			2,685
Special charges		—			—			—			100
Certain litigation charges		—			—			40			—
Purchased in-process research and development (IPR&D)		—			—			—			364
Other expense, net		44			10			160			101
Interest income, net		(36	)		(24	)		(113	)		(52	)
Total costs and expenses		2,114			1,865			6,359			6,064
Earnings before income taxes		934			905			2,660			2,161
Provision for income taxes		224			235			670			354
Net earnings	$	710		$	670		$	1,990		$	1,807
Earnings per share:
Basic	$	0.62		$	0.55		$	1.73		$	1.49
Diluted	$	0.61		$	0.55		$	1.71		$	1.48
Weighted average shares outstanding:
Basic		1,149.0			1,208.5			1,150.8			1,209.4
Diluted		1,163.7			1,222.8			1,162.8			1,222.6

MEDTRONIC, INC.
RECONCILIATION OF CONSOLIDATED GAAP NET EARNINGS
TO CONSOLIDATED NON-GAAP NET EARNINGS
(Unaudited)
(in millions, except per share data)

	Three months ended		Three months ended
	January 26, 2007		January 27, 2006
Net earnings, as reported	$	710	$	670
Stock-based awards		—		(37	)(a)
Non-GAAP net earnings	$	710	$	633

MEDTRONIC, INC.
RECONCILIATION OF CONSOLIDATED GAAP DILUTED EPS
TO CONSOLIDATED NON-GAAP DILUTED EPS
(Unaudited)

	Three months ended		Three months ended
	January 26, 2007		January 27, 2006
Diluted EPS, as reported	$	0.61	$	0.55
Stock-based awards		—		(0.03	)(a)
Non-GAAP diluted EPS	$	0.61	$	0.52

(a) 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 plan purchases and restricted stock awards/units. The $37 million ($0.03 per share), net of statutory tax ($48 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 No. 123(R) in fiscal year 2006. Total stock-based compensation including stock options, restricted stock awards/units and employee stock purchase plan purchases was $45 million (pre-statutory tax) in the third quarter of fiscal year 2007 and pro-forma total stock-based compensation including stock options, restricted stock awards/units and employee stock purchase plan was $53 million (pre-statutory tax) in the third quarter of fiscal year 2006. Below is a listing, by income statement line item, of the pre-statutory tax total stock-based compensation expense recognized in third quarter of fiscal year 2007 and the pro forma stock-based compensation expense for third quarter of fiscal year 2006.

	Three months ended		Three months ended
	January 26, 2007		January 27, 2006
Cost of products sold	$	5	$	6
Research and development expense		7		13
Selling, general, and administrative expense		33		34
	$	45	$	53

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 applies the provisions of SFAS No. 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.
RECONCILIATION OF CONSOLIDATED GAAP NET EARNINGS
TO CONSOLIDATED NON-GAAP NET EARNINGS
(Unaudited)
(in millions, except per share data)

	Nine months ended			Nine months ended
	January 26, 2007			January 27, 2006
Net earnings, as reported	$	1,990		$	1,807
Special charges		—			66	(b)
Certain litigation charges		40	(a)		—
IPR&D charges		—			295	(c)
Income tax adjustments		—			(225	)(d)
Stock-based awards		—			(94	)(e)
Non-GAAP net earnings	$	2,030		$	1,849

MEDTRONIC, INC.
RECONCILIATION OF CONSOLIDATED GAAP DILUTED EPS
TO CONSOLIDATED NON-GAAP DILUTED EPS
(Unaudited)

	Nine months ended			Nine months ended
	January 26, 2007			January 27, 2006
Diluted EPS, as reported	$	1.71		$	1.48
Special charges		—			0.05	(b)
Certain litigation charges		0.04	(a)		—
IPR&D charges		—			0.24	(c)
Income tax adjustments		—			(0.18	)(d)
Stock-based awards		—			(0.08	)(e)
Non-GAAP diluted EPS	$	1.75		$	1.51

(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 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 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 $66 million ($0.05 per share) special charge represents an after-tax charitable donation ($100 million pre-tax) made to The Medtronic Foundation. In addition to disclosing special 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 this donation. The Company has not made a similar donation to The Medtronic Foundation since fiscal year 2002. 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 this donation 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 $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 feasibility 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 feasibility 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 managment 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 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 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.

(d)

The $225 million ($0.18 per share) tax adjustment represents a $225 million tax benefit associated with the reversal of reserves resulting from favorable agreements reached with the U.S. Internal Revenue Service involving the review of fiscal years 1997 through 2002 domestic income tax returns. In addition to disclosing the provision for income taxes that is 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 this tax adjustment. 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, specifically the effective tax rate. Medtronic management eliminates this tax adjustment 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.

(e)

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 $94 million ($0.08 per share), net of statutory tax ($126 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 No. 123(R) in fiscal year 2006. Total stock-based compensation including stock options, restricted stock awards/units and employee stock purchase plan purchases was $139 million (pre-statutory tax) for the nine months ended January 26, 2007 and pro-forma total stock-based compensation including stock options, restricted stock awards/units and employee stock purchase plan purchases was $143 million (pre-statutory tax) for the nine months ended January 27, 2006. Below is a listing, by income statement line item, of the pre-statutory tax total stock-based compensation expense recognized in the nine months ended January 26, 2007 and the pro forma stock-based compensation expense for the nine months ended January 27, 2006.

	Nine months ended		Nine months ended
	January 26, 2007		January 27, 2006
Cost of products sold	$	15	$	15
Research and development expense		29		35
Selling, general, and administrative expense		95		93
	$	139	$	143

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 applies the provisions of SFAS No. 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)

	January 26,			April 28,
	2007			2006
	(in millions, except per share data)
ASSETS
Current assets:
Cash and cash equivalents	$	2,087		$	2,994
Short-term investments		1,234			3,107
Accounts receivable, less allowances of $192 and $184, respectively		2,626			2,429
Inventories		1,319			1,177
Deferred tax assets, net		445			197
Prepaid expenses and other current assets		499			473
Total current assets		8,210			10,377
Property, plant and equipment		4,135			3,794
Accumulated depreciation		(2,146	)		(1,913	)
Net property, plant and equipment		1,989			1,881
Goodwill		4,363			4,346
Other intangible assets, net		1,555			1,592
Long-term investments		2,970			957
Long-term deferred tax assets, net		8			—
Other long-term assets		477			512
Total assets	$	19,572		$	19,665
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings	$	551		$	2,437
Accounts payable		345			319
Accrued compensation		629			723
Accrued income taxes		515			461
Other accrued expenses		663			466
Total current liabilities		2,703			4,406
Long-term debt		5,577			5,486
Long-term deferred tax liabilities, net		—			22
Long-term accrued compensation		197			189
Other long-term liabilities		111			179
Total liabilities		8,588			10,282
Commitments and contingencies		—			—
Shareholders’ equity:
Preferred stock— par value $1.00		—			—
Common stock— par value $0.10		115			116
Retained earnings		10,683			9,112
Accumulated other non-owner changes in equity		186			155
Total shareholders’ equity		10,984			9,383
Total liabilities and shareholders’ equity	$	19,572		$	19,665

MEDTRONIC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

	Nine months ended
	January 26,			January 27,
	2007			2006
	(dollars in millions)
OPERATING ACTIVITIES:
Net earnings	$	1,990		$	1,807
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		415			406
Purchased in-process research and development		—			364
Provision for doubtful accounts		(31	)		8
Deferred income taxes		(276	)		183
Stock-based compensation		139			17
Excess tax benefit from exercise of stock-based awards		(24	)		77
Change in operating assets and liabilities:
Accounts receivable		(161	)		(123	)
Inventories		(141	)		(274	)
Accounts payable and accrued liabilities		150			(1,056	)
Other operating assets and liabilities		(7	)		103
Net cash provided by operating activities		2,054			1,512
INVESTING ACTIVITIES:
Acquisitions, net of cash acquired		(8	)		(285	)
Purchase of intellectual property		(96	)		(831	)
Additions to property, plant and equipment		(383	)		(305	)
Purchases of marketable securities		(9,888	)		(4,863	)
Sales and maturities of marketable securities		9,786			2,849
Other investing activities, net		(40	)		1
Net cash used in investing activities		(629	)		(3,434	)
FINANCING ACTIVITIES:
Change in short-term borrowings, net		86			574
Change in long-term debt, net		(4	)		994
Payments on long-term debt		(1,877	)		—
Dividends to shareholders		(380	)		(350	)
Issuance of common stock		235			437
Excess tax benefit from exercise of stock-based awards		24			—
Repurchase of common stock		(438	)		(709	)
Net cash (used in) provided by financing activities		(2,354	)		946
Effect of exchange rate changes on cash and cash equivalents		22			112
Net change in cash and cash equivalents		(907	)		(864	)
Cash and cash equivalents at beginning of period		2,994			2,232
Cash and cash equivalents at end of period	$	2,087		$	1,368
Cash Paid For:
Income taxes	$	873		$	580
Interest		135			60
Deferred payments for purchases of intellectual property	$	—		$	30
Reclassification of debentures from long-term to short-term debt		—			1,971
Reclassification of debentures from short-term to long-term debt		94			—