8-K

UNITES STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 17, 2009

Medtronic, Inc.

(Exact name of Registrant as Specified in its Charter)  

Minnesota	1-7707	41-0793183
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

710 Medtronic Parkway Minneapolis, Minnesota	55432
(Address of principal executive offices)	(Zip Code)

(Registrant’s telephone number, including area code): (763) 514-4000

Not Applicable
(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition  

                     On February 17, 2009, Medtronic, Inc. issued a press release announcing its third quarter 2009 financial results. A copy of the press release is furnished as Exhibit 99.1 to this report.

Item 9.01.      Exhibits.   

   (d) Exhibit 99.1         Press release of Medtronic, Inc. dated February 17, 2009.

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 hereunto duly authorized.

		MEDTRONIC, INC.
	By	/s/ Gary L. Ellis
Date: February 17, 2009		Gary L. Ellis
		Senior Vice President and Chief Financial Officer

 

EXHIBIT INDEX

Medtronic, Inc.
Form 8-K Current Report
 

Exhibit Number		Description
	99.1	Press release dated February 17, 2009

EX-99.1

Exhibit 99.1

NEWS RELEASE

Contacts:
Jeff Warren	Chuck Grothaus
Investor Relations	Public Relations
763-505-2696	763-505-2614

FOR IMMEDIATE RELEASE

MEDTRONIC REPORTS THIRD QUARTER REVENUE OF $3.5 BILLION

• Non-GAAP EPS growth of 13%; GAAP EPS growth of 829%

• Double digit constant currency revenue growth in four out of seven business segments

• GAAP cash flow from operations of $1.135 billion; free cash flow exceeds $1 billion

MINNEAPOLIS — Feb. 17, 2009 — Medtronic, Inc. (NYSE:MDT) today announced financial results for its third quarter of fiscal year 2009, which ended Jan. 23, 2009.

The company reported third quarter revenue of $3.494 billion, a three percent increase over third quarter revenue reported in fiscal year 2008 or a six percent increase after adjusting for an unfavorable $110 million foreign exchange impact. Revenue outside the United States grew to $1.318 billion (38 percent of total revenue for the quarter), a one percent increase or a nine percent increase after adjusting for the impact of foreign currency.

Net earnings in the third quarter were $723 million, or $0.65 per diluted share, an increase of 839 percent and 829 percent, respectively. After adjusting for in-process research and development charges of $72 million, or $0.06 per share, non-GAAP net earnings and diluted earnings per share in the period were $795 million, or $0.71 per diluted share, an increase of 12 percent and 13 percent, respectively.

“Despite global macroeconomic uncertainties and an unfavorable impact from foreign currency on our business units this quarter, Medtronic continues to deliver growth in a challenging environment,” said Bill Hawkins, Medtronic chairman and CEO. “Excluding the impact of foreign currency, four of our seven business units reported double digit revenue growth in the quarter and we continue to focus on delivering meaningful operating leverage.”

Cardiac Rhythm Disease Management

Cardiac Rhythm Disease Management (CRDM) revenue of $1.169 billion decreased four percent in the quarter or one percent after adjusting for an unfavorable $38 million foreign exchange impact. Worldwide implantable cardioverter defibrillator revenue was $694 million. Worldwide pacing revenue was $457 million. In February, the CRDM business announced the acquisition of Ablation Frontiers, which when combined with the previously announced acquisition of CryoCath Technologies, positions CRDM as a leader in the atrial fibrillation market.

Spinal

Spinal revenue of $832 million grew three percent or four percent after adjusting for an unfavorable $11 million foreign exchange impact. In the quarter, the core spinal business grew five percent on further adoption of its Legacy, Atlantis and MAST product portfolios. The Biologics business also stabilized in the quarter.

CardioVascular

Revenue in the CardioVascular business grew to $565 million, an increase of 10 percent or 16 percent with an unfavorable $27 million foreign exchange impact. Coronary stent revenue grew 25 percent and Endovascular revenue grew 49 percent on a constant

currency basis. The commercial launch and availability of five new angioplasty products on a rapid exchange delivery system in the U.S. fueled growth in the CardioVascular business.

Neuromodulation

Neuromodulation revenue of $354 million grew 11 percent or 13 percent after adjusting for an unfavorable $9 million foreign exchange impact. Growth in pain management, gastro/urology and movement disorder product lines continue to drive this business.

Diabetes

Diabetes revenue of $277 million grew seven percent or 12 percent after adjusting for an unfavorable $12 million foreign exchange impact. Diabetes revenue grew on strong sales of durable pump and continuous glucose monitoring systems as well as solid performance in markets outside of the United States.

Surgical Technologies

Surgical Technologies revenue of $207 million grew six percent or 10 percent after adjusting for an unfavorable $8 million foreign exchange impact. Sales of Navigation equipment including the Fusion Image Guidance Surgery System and O-Arm^® Imaging System continue to be strong in addition to positive growth in service revenue associated with the equipment.

Physio-Control

Physio-Control reported $90 million in revenue, a decrease of four percent or an increase of one percent after adjusting for an unfavorable $5 million foreign exchange impact.

Webcast Information

Medtronic will host a webcast today, Feb. 17 at 8 a.m. Eastern Time (7 a.m. Central Time), to provide information about its businesses for the public, analysts 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.

This press release contains forward-looking statements regarding changes to our operating leverage, new acquisitions, new products, continued product acceptance, non-domestic and domestic growth and expected results in the fiscal fourth quarter, which are subject to risks and uncertainties, such as competitive factors, difficulties and delays inherent in the development, manufacturing, marketing and sale of medical products, government regulation and general economic conditions and other risk and uncertainties described in Medtronic’s Annual Report on Form 10-K for the year ended April 25, 2008. Actual results may differ materially from anticipated results. Medtronic does not undertake to update its forward-looking statements. Unless otherwise noted, all comparisons made in this news release are on an “as reported basis,” not on a constant currency basis, and references to quarterly figures increasing or decreasing are in comparison to the third quarter of fiscal year 2008.

-end-

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

($ millions)

	FY 08		FY 08		FY 08		FY 08		FY 08		FY 09		FY 09		FY 09			FY 09		FY 09
	QTR 1		QTR 2		QTR 3		QTR 4		Total		QTR 1		QTR 2		QTR 3			QTR 4		Total
REPORTED REVENUE :
CARDIAC RHYTHM DISEASE MANAGEMENT	$	1,235	$	1,148	$	1,218	$	1,363	$	4,963	$	1,303	$	1,242	$	1,169		$	—	$	3,714
Pacing Systems		494		495		478		540		2,008		526		506		457			—		1,490
Defibrillation Systems		726		639		726		806		2,897		764		724		694			—		2,182
Other		15		14		14		17		58		13		12		18			—		42
SPINAL	$	644	$	660	$	808	$	869	$	2,982	$	859	$	829	$	832		$	—	$	2,520
Core Spinal		454		462		455		498		1,869		477		485		479			—		1,441
Biologics		190		198		206		221		815		221		198		205			—		624
Kyphon Business		—		—		147		150		298		161		146		148			—		455
CARDIOVASCULAR	$	486	$	490	$	512	$	643	$	2,131	$	631	$	596	$	565		$	—	$	1,792
Coronary Stents		152		149		157		251		710		236		208		186			—		630
Other Coronary/Peripheral		95		96		103		116		408		113		107		110			—		330
Endovascular		69		70		70		76		285		87		95		99			—		281
Revasc & Surgical Therapies		102		105		109		115		431		117		112		103			—		332
Structural Heart Disease		68		70		73		85		297		78		74		67			—		219
NEUROMODULATION	$	289	$	321	$	320	$	381	$	1,311	$	348	$	343	$	354		$	—	$	1,045
Neuro Implantables		237		264		260		308		1,069		284		271		283			—		837
Gastroenterology & Urology		52		57		60		73		242		64		72		71			—		208
DIABETES	$	241	$	246	$	258	$	275	$	1,019	$	269	$	272	$	277		$	—	$	818
SURGICAL TECHNOLOGIES	$	172	$	185	$	195	$	228	$	780	$	202	$	213	$	207		$	—	$	622
Core Ear, Nose and Throat (ENT)		75		75		81		92		323		87		86		83			—		255
Neurologic Technologies		69		74		73		82		298		79		80		78			—		238
Navigation		28		36		41		54		159		36		47		46			—		129
PHYSIO-CONTROL	$	60	$	74	$	94	$	101	$	329	$	94	$	75	$	90		$	—	$	259
TOTAL	$	3,127	$	3,124	$	3,405	$	3,860	$	13,515	$	3,706	$	3,570	$	3,494		$	—	$	10,770
ADJUSTMENTS :
CURRENCY IMPACT (1)	$	—	$	—	$	—	$	—	$	—	$	157	$	65	$	(110	)			$	111
COMPARABLE OPERATIONS (1)	$	3,127	$	3,124	$	3,405	$	3,860	$	13,515	$	3,549	$	3,505	$	3,604		$	—	$	10,659

(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 revenue may not sum to the fiscal year to date revenue.

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

($ millions)

	FY 08		FY 08		FY 08		FY 08		FY 08		FY 09		FY 09		FY 09		FY 09		FY 09
	QTR 1		QTR 2		QTR 3		QTR 4		Total		QTR 1		QTR 2		QTR 3		QTR 4		Total
REPORTED REVENUE :
CARDIAC RHYTHM DISEASE MANAGEMENT	$	754	$	679	$	726	$	765	$	2,922	$	731	$	702	$	670	$	—	$	2,104
Pacing Systems		244		237		218		242		940		233		228		206		—		668
Defibrillation Systems		504		434		502		515		1,955		492		472		454		—		1,417
Other		6		8		6		8		27		6		2		10		—		19
SPINAL	$	530	$	540	$	642	$	683	$	2,395	$	682	$	647	$	658	$	—	$	1,987
Core Spinal		349		352		341		363		1,405		358		358		352		—		1,067
Biologics		181		188		195		208		772		208		184		194		—		586
Kyphon Business		—		—		106		112		218		116		105		112		—		334
CARDIOVASCULAR	$	167	$	173	$	165	$	256	$	761	$	253	$	235	$	224	$	—	$	711
Coronary Stents		20		21		20		98		158		92		68		59		—		219
Other Coronary/Peripheral		24		24		26		28		104		28		26		29		—		80
Endovascular		35		37		31		35		138		41		51		51		—		144
Revasc & Surgical Therapies		49		52		49		51		200		52		51		49		—		152
Structural Heart Disease		39		39		39		44		161		40		39		36		—		116
NEUROMODULATION	$	201	$	239	$	227	$	262	$	929	$	238	$	249	$	254	$	—	$	741
Neuro Implantables		160		192		180		207		738		189		192		199		—		579
Gastroenterology & Urology		41		47		47		55		191		49		57		55		—		162
DIABETES	$	163	$	170	$	170	$	176	$	681	$	167	$	180	$	188	$	—	$	535
SURGICAL TECHNOLOGIES	$	112	$	120	$	124	$	141	$	497	$	127	$	136	$	132	$	—	$	396
Core Ear, Nose and Throat (ENT)		48		47		51		56		201		53		54		54		—		160
Neurologic Technologies		45		50		48		52		195		51		53		51		—		156
Navigation		19		23		25		33		101		23		29		27		—		80
PHYSIO-CONTROL	$	21	$	37	$	44	$	49	$	151	$	51	$	47	$	50	$	—	$	147
TOTAL	$	1,948	$	1,958	$	2,098	$	2,332	$	8,336	$	2,249	$	2,196	$	2,176	$	—	$	6,621
ADJUSTMENTS :
CURRENCY IMPACT	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
COMPARABLE OPERATIONS	$	1,948	$	1,958	$	2,098	$	2,332	$	8,336	$	2,249	$	2,196	$	2,176	$	—	$	6,621

Note: The data in this schedule has been intentionally rounded to the nearest million and therefore the quarterly revenues may not sum to the fiscal year to date revenue.

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

($ millions)

	FY 08		FY 08		FY 08		FY 08		FY 08		FY 09		FY 09		FY 09			FY 09		FY 09
	QTR 1		QTR 2		QTR 3		QTR 4		Total		QTR 1		QTR 2		QTR 3			QTR 4		Total
REPORTED REVENUE :
CARDIAC RHYTHM DISEASE MANAGEMENT	$	481	$	469	$	492	$	598	$	2,041	$	572	$	540	$	499		$	—	$	1,610
Pacing Systems		250		258		260		298		1,068		293		278		251			—		822
Defibrillation Systems		222		205		224		291		942		272		252		240			—		765
Other		9		6		8		9		31		7		10		8			—		23
SPINAL	$	114	$	120	$	166	$	186	$	587	$	177	$	182	$	174		$	—	$	533
Core Spinal		105		110		114		135		464		119		127		127			—		374
Biologics		9		10		11		13		43		13		14		11			—		38
Kyphon Business		—		—		41		38		80		45		41		36			—		121
CARDIOVASCULAR	$	319	$	317	$	347	$	387	$	1,370	$	378	$	361	$	341		$	—	$	1,081
Coronary Stents		132		128		137		153		552		144		140		127			—		411
Other Coronary/Peripheral		71		72		77		88		304		85		81		81			—		250
Endovascular		34		33		39		41		147		46		44		48			—		137
Revasc & Surgical Therapies		53		53		60		64		231		65		61		54			—		180
Structural Heart Disease		29		31		34		41		136		38		35		31			—		103
NEUROMODULATION	$	88	$	82	$	93	$	119	$	382	$	110	$	94	$	100		$	—	$	304
Neuro Implantables		77		72		80		101		331		95		79		84			—		258
Gastroenterology & Urology		11		10		13		18		51		15		15		16			—		46
DIABETES	$	78	$	76	$	88	$	99	$	338	$	102	$	92	$	89		$	—	$	283
SURGICAL TECHNOLOGIES	$	60	$	65	$	71	$	87	$	283	$	75	$	77	$	75		$	—	$	226
Core Ear, Nose and Throat (ENT)		27		28		30		36		122		34		32		29			—		95
Neurologic Technologies		24		24		25		30		103		28		27		27			—		82
Navigation		9		13		16		21		58		13		18		19			—		49
PHYSIO-CONTROL	$	39	$	37	$	50	$	52	$	178	$	43	$	28	$	40		$	—	$	112
TOTAL	$	1,179	$	1,166	$	1,307	$	1,528	$	5,179	$	1,457	$	1,374	$	1,318		$	—	$	4,149
ADJUSTMENTS :
CURRENCY IMPACT (1)	$	—	$	—	$	—	$	—	$	—	$	157	$	65	$	(110	)	$	—	$	111
COMPARABLE OPERATIONS (1)	$	1,179	$	1,166	$	1,307	$	1,528	$	5,179	$	1,300	$	1,309	$	1,428		$	—	$	4,038

(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 revenue may not sum to the fiscal year to date revenue.

MEDTRONIC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)

	Three months ended						Nine months ended
	January 23,			January 25,			January 23,		January 25,
	2009			2008			2009		2008
	(in millions, except per share data)
Net sales	$	3,494		$	3,405		$	10,770	$	9,655
Costs and expenses:
Cost of products sold		848			870			2,586		2,502
Research and development expense		337			329			987		927
Selling, general and administrative expense		1,257			1,207			3,838		3,410
Special charges		—			78			—		78
Restructuring charges		—			—			96		14
Certain litigation charges		—			366			266		366
Purchased in-process research and development (IPR&D) charges		72			310			90		343
Other expense, net		50			119			344		248
Interest (income)/expense, net		(2	)		(9	)		17		(114	)
Total costs and expenses		2,562			3,270			8,224		7,774
Earnings before income taxes		932			135			2,546		1,881
Provision for income taxes		209			58			505		463
Net earnings	$	723		$	77		$	2,041	$	1,418
Earnings per share:
Basic	$	0.65		$	0.07		$	1.82	$	1.25
Diluted	$	0.65		$	0.07		$	1.81	$	1.24
Weighted average shares outstanding:
Basic		1,115.0			1,126.9			1,118.7		1,132.9
Diluted		1,119.5			1,135.0			1,125.6		1,145.3
Cash dividends declared per common share	$	0.188		$	0.125		$	0.563	$	0.375

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

	Three months ended
	January 23,			January 25,			Percentage
	2009			2008			Change
Net earnings, as reported	$	723		$	77			839	%
Special charges		—			47	(b)
Certain litigation charges		—			275	(c)
IPR&D charges		72	(a)		314	(d)
Non-GAAP net earnings	$	795		$	713			12	%

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

	Three months ended
	January 23,			January 25,			Percentage
	2009			2008			Change
Diluted EPS, as reported	$	0.65		$	0.07			829	%
Special charges		—			0.04	(b)
Certain litigation charges		—			0.24	(c)
IPR&D charges		0.06	(a)		0.28	(d)
Non-GAAP diluted EPS	$	0.71		$	0.63			13	%

(a)	The $72 million ($ 0.06 per share) after-tax IPR&D charge is related to technology acquired through the purchase of CryoCath Technologies Inc. that had not yet reached technological feasibility and had no future alternative use. In addition to disclosing IPR&D 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 IPR&D 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 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 U.S. GAAP. In addition, this non-GAAP financial measure may not be the same as similar measures presented by other companies.
(b)	The $47 million ($0.04 per share) after-tax ($78 million pre-tax) special charge is related to impairment charges recognized on intangible assets associated with our benign prostatic hyperplasia product line acquired in fiscal year 2002. In the third quarter of fiscal year 2008, after carefully evaluating the development of the market relative to our original assumptions and analyzing our estimated future cash flows utilizing this technology, we determined that the carrying value of these intangible assets was impaired and a write-down was necessary. In addition to disclosing special charges that are determined in accordance with U.S. GAAP, Medtronic management believes that in order to properly understand its short-term and long-term financial trends, investors may find it useful to consider the impact of excluding these special 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 special 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 $275 million ($0.24 per share) after-tax certain litigation charges are related to a $123 million ($121 million after-tax) settlement of certain lawsuits relating to the Marquis line of implantable cardioverter defibrillators that were subject to a field action announced on February 11, 2005 and a $243 million ($154 million after-tax) reserve

associated with litigation with Cordis Corporation, a subsidiary of Johnson & Johnson, that originated in October 1997. In addition to disclosing certain litigation 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 certain litigation charges. Management believes that the resulting non-GAAP financial measure provides useful information to investors regarding the underlying business trends and performance of the Company’s ongoing operations and is useful for period over period comparisons of such operations. Medtronic management eliminates these certain litigation charges when evaluating the operating performance of the Company. Investors should consider this non-GAAP measure in addition to, and not as a substitute for, financial performance measures prepared in accordance with GAAP. In addition, this non-GAAP financial measure may not be the same as similar measures presented by other companies.

(d)

The $314 million ($0.28 per share) after-tax IPR&D charges represent the cumulative impact of pre-tax charges of $290 million ($290 million after tax) related to a technology acquired through the purchase of Kyphon Inc. that had not yet reached technological feasibility and had no future alternative use and $20 million ($24 million after tax) related to the purchase of intellectual property from Setagon, Inc. that had not yet reached technological feasibility and had no future alternative use. 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. 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.

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

	Nine months ended
	January 23,			January 25,			Percentage
	2009			2008			Change
Net earnings, as reported	$	2,041		$	1,418			44	%
Special charges		—			47	(d)
Restructuring charges		66	(a)		11	(e)
Certain litigation charges		176	(b)		275	(f)
IPR&D charges		83	(c)		339	(g)
Non-GAAP net earnings	$	2,366		$	2,090			13	%

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

	Nine months ended
	January 23,			January 25,			Percentage
	2009			2008			Change
Diluted EPS, as reported	$	1.81		$	1.24			46	%
Special charges		—			0.04	(d)
Restructuring charges		0.06	(a)		0.01	(e)
Certain litigation charges		0.16	(b)		0.24	(f)
IPR&D charges		0.07	(c)		0.29	(g)
Non-GAAP diluted EPS	$	2.10		$	1.82			15	%

(a)

The $66 million ($0.06 per share) after-tax restructuring charge is related to a global realignment initiative that the Company began in the fourth quarter of fiscal year 2008. This initiative focuses on shifting resources to those areas where the Company has the greatest opportunities for growth and streamlining operations to drive operating leverage. The global realignment initiative impacts most businesses and certain corporate functions. The majority of the expense recognized in the first quarter of fiscal year 2009 is related to the execution of our global realignment initiative outside the United States. This includes the realignment of personnel throughout Europe and the Emerging Markets and the closure of an existing facility in the Netherlands that will be integrated into the U.S. operations. The remainder of the expense is associated with compensation provided to employees identified in the fourth quarter of fiscal year 2008 whose employment terminated with the Company in the first quarter of fiscal year 2009. These incremental costs were not accrued in the fourth quarter of fiscal year 2008 because these benefits had not yet been communicated to the impacted employees. In addition to disclosing restructuring 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 restructuring 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 restructuring charges when evaluating the operating performance of the Company. Investors should consider this non-GAAP measure in addition to, and not as a substitute for, financial performance measures prepared in accordance with U.S. GAAP. In addition, this non-GAAP financial measure may not be the same as similar measures presented by other companies.

(b)

The $176 million ($0.16 per share) after-tax certain litigation charge is related to a $229 million ($152 million after-tax) charge related to the final judgment in litigation with the Cordis Corporation (a subsidiary of Johnson & Johnson) that originated in October 1997 and a $37 million ($24 million after-tax) charge related to the settlement of litigation with Fastenetix LLC that originated in May 2006. The charge related to litigation with the Cordis Corporation was in addition to a $243 million reserve recorded in the third quarter of fiscal year 2008. In addition to disclosing certain litigation charges that are determined in accordance with U.S. GAAP, Medtronic management believes that in order to properly understand its short-term and long-term financial trends, investors may find it useful to consider the impact of excluding these certain

	litigation charges. Management believes that the resulting non-GAAP financial measure provides useful information to investors regarding the underlying business trends and performance of the Company’s ongoing operations and is useful for period over period comparisons of such operations. Medtronic management eliminates these certain litigation charges when evaluating the operating performance of the Company. Investors should consider this non-GAAP measure in addition to, and not as a substitute for, financial performance measures prepared in accordance with U.S. GAAP. In addition, this non-GAAP financial measure may not be the same as similar measures presented by other companies.
(c)	The $83 million ($0.07 per share) after-tax IPR&D charge represents the cumulative impact of pre-tax charges of $72 million ($72 million after tax) related to a technology acquired through the purchase of CryoCath Technologies, Inc. that had not yet reached technological feasibility and had no future alternative use and $18 million ($11 million after tax) related the purchase of certain intellectual property for use in the Spine business that was expensed as IPR&D since technological feasibility of the underlying product had not yet been reached and such technology has no future alternative use. In addition to disclosing IPR&D charges that are determined in accordance with U.S. GAAP, Medtronic management believes that in order to properly understand its short-term and long-term financial trends, investors may find it useful to consider the impact of excluding these IPR&D 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 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 U.S. GAAP. In addition, this non-GAAP financial measure may not be the same as similar measures presented by other companies.
(d)	The $47 million ($0.04 per share) after-tax ($78 million pre-tax) special charge is related to impairment charges recognized on intangible assets associated with our benign prostatic hyperplasia product line acquired in fiscal year 2002. In the third quarter of fiscal year 2008, after carefully evaluating the development of the market relative to our original assumptions and analyzing our estimated future cash flows utilizing this technology, we determined that the carrying value of these intangible assets was impaired and a write-down was necessary. In addition to disclosing special 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 special 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 special 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.
(e)	The $11 million ($0.01 per share) after-tax restructuring charge is related to restructuring initiatives that the Company began in the fourth quarter of fiscal year 2007. These initiatives were designed to drive manufacturing efficiencies in our CardioVascular business, downsize our Physio-Control business due to our voluntary suspension of U.S. shipments, and rebalance resources within our Cardiac Rhythm Disease Management (CRDM) business to reflect the market dynamics. In the first quarter of fiscal year 2008, the Company recognized expense associated with compensation and early retirement benefits provided to employees whose employment terminated with the Company in the first quarter of fiscal year 2008 which could not be accrued in the fourth quarter of fiscal year 2007. In addition to disclosing restructuring charges that are determined in accordance with U.S. GAAP, Medtronic management believes that in order to properly understand its short-term and long-term financial trends, investors may find it useful to consider the impact of excluding these restructuring 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 restructuring charges when evaluating the operating performance of the Company. Investors should consider this non-GAAP measure in addition to, and not as a substitute for, financial performance measures prepared in accordance with U.S. GAAP. In addition, this non-GAAP financial measure may not be the same as similar measures presented by other companies.
(f)	The $275 million ($0.24 per share) after-tax certain litigation charges are related to a $123 million ($121 million after-tax) settlement of certain lawsuits relating to the Marquis line of implantable cardioverter defibrillators that were subject to a field action announced on February 11, 2005 and a $243 million ($154 million after-tax) reserve associated with litigation with Cordis Corporation, a subsidiary of Johnson & Johnson, that originated in October 1997. In addition to disclosing certain litigation 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 certain litigation charges. Management believes that the resulting non-GAAP financial measure provides useful information to investors regarding the underlying business trends and performance of the Company’s ongoing operations and is useful for period over period comparisons of such operations. Medtronic management eliminates these certain litigation charges when evaluating the operating performance of the Company. Investors should consider this non-GAAP measure in addition to, and not as a substitute for, financial performance measures prepared in accordance with GAAP. In addition, this non-GAAP financial measure may not be the same as similar measures presented by other companies.
(g)	The $339 million ($0.29 per share) after-tax IPR&D charges represent the cumulative impact of pre-tax charges of $290 million ($290 million after tax) related to a technology acquired through the purchase of Kyphon Inc. that had not yet reached technological feasibility and had no future alternative use, $20 million ($24 million after tax) related to the purchase of intellectual property from Setagon, Inc. that had not yet reached technological feasibility and had no future alternative use, and $25 million ($18 million after-tax) milestone payment related to a royalty bearing, non-exclusive patent cross-licensing agreement with NeuroPace, Inc. that the Company entered into in the first quarter of fiscal year 2006. This payment was expensed as IPR&D since technological feasibility of the project has not yet been reached and such technology has no future alternative use. The additional $8 million ($7 million after-tax) charge is related to a group of payments made for which the underlying assets acquired have no technological feasibility or alternative use. 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. 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.

MEDTRONIC, INC.
RECONCILIATION OF OUS REVENUE GROWTH AT CONSTANT CURRENCY
(Unaudited)

	Three months ended					Percentage
	January 23, 2009			January 25, 2008		Change
OUS Revenue, as reported	$	1,318		$	1,307		1	%
Currency Impact		110	(a)		—
OUS Revenue, comparable currency rates	$	1,428		$	1,307		9	%

MEDTRONIC, INC.
RECONCILIATION OF OPERATING CASH FLOW TO FREE CASH FLOW
(Unaudited)

	Nine months ended			Six months ended			Three months ended
	January 23, 2009			October 24, 2008			January 23, 2009
Net cash provided by operating activities	$	2,755		$	1,620		$	1,135
Additions to property, plant, and equipment		(378	)		(263	)		(115	)
Free cash flow	$	2,377	(b)	$	1,357	(b)	$	1,020	(b)

(a)

Medtronic management believes that in order to properly understand Medtronic’s short-term and long-term financial trends, investors may wish to consider the impact of foreign currency translation on revenue. In addition, Medtronic management uses results of operations before currency translation to evaluate the operational performance of the Company and as a basis for strategic planning. Investors should consider these non-GAAP measures in addition to, and not as a substitute for, financial performance measures prepared in accordance with U.S. GAAP.

(b)

Medtronic calculates free cash flow by subtracting additions to property, plant and equipment from operating cash flows.

MEDTRONIC, INC.
CONSTANT CURRENCY GROWTH BY OPERATING SEGMENT — WORLD WIDE
(Unaudited)

($ millions)

								Currency			Constant
	FY 09		FY 08					Impact			Currency
	QTR 3		QTR 3		Growth			On Growth (a)			Growth (a)
REPORTED REVENUE :
CARDIAC RHYTHM DISEASE MANAGEMENT	$	1,169	$	1,218		-4	%		-3	%		-1	%
Pacing Systems		457		478		-4	%		-3	%		-1	%
Defibrillation Systems		694		726		-4	%		-3	%		-1	%
Other		18		14		29	%		-14	%		43	%
SPINAL	$	832	$	808		3	%		-1	%		4	%
Core Spinal		479		455		5	%		-1	%		6	%
Biologics		205		206		0	%		-1	%		1	%
Kyphon Business		148		147		1	%		-2	%		3	%
CARDIOVASCULAR	$	565	$	512		10	%		-6	%		16	%
Coronary Stents		186		157		18	%		-7	%		25	%
Other Coronary/Peripheral		110		103		7	%		-5	%		12	%
Endovascular		99		70		41	%		-8	%		49	%
Revasc & Surgical Therapies		103		109		-6	%		-5	%		-1	%
Structural Heart Disease		67		73		-8	%		-3	%		-5	%
NEUROMODULATION	$	354	$	320		11	%		-2	%		13	%
Neuro Implantables		283		260		9	%		-3	%		12	%
Gastroenterology & Urology		71		60		18	%		-4	%		22	%
DIABETES	$	277	$	258		7	%		-5	%		12	%
SURGICAL TECHNOLOGIES	$	207	$	195		6	%		-4	%		10	%
Core Ear, Nose and Throat (ENT)		83		81		2	%		-5	%		7	%
Neurologic Technologies		78		73		7	%		-3	%		10	%
Navigation		46		41		12	%		-5	%		17	%
PHYSIO-CONTROL	$	90	$	94		-4	%		-5	%		1	%
TOTAL	$	3,494	$	3,405		3	%		-3	%		6	%

(a) Medtronic 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, an not as a substitute for, financial performance measures prepared in accordance with U.S. GAAP.

MEDTRONIC, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

	January 23,			April 25,
	2009			2008
	(in millions, except per share data)
ASSETS
Current assets:
Cash and cash equivalents	$	1,283		$	1,060
Short-term investments		460			553
Accounts receivable, less allowances of $60 and $99, respectively		2,954			3,287
Income tax receivable		50			73
Inventories		1,429			1,280
Deferred tax assets, net		368			600
Prepaid expenses and other current assets		662			469
Total current assets		7,206			7,322
Property, plant and equipment		4,804			4,743
Accumulated depreciation		(2,548	)		(2,522	)
Property, plant and equipment, net		2,256			2,221
Goodwill		7,744			7,519
Other intangible assets, net		2,186			2,193
Long-term investments		2,641			2,322
Long-term deferred tax assets, net		54			103
Other assets		677			518
Total assets	$	22,764		$	22,198
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings	$	1,184		$	1,154
Accounts payable		363			383
Accrued compensation		745			789
Other accrued expenses		876			1,209
Total current liabilities		3,168			3,535
Long-term debt		5,525			5,802
Long-term accrued compensation and retirement benefits		303			304
Long-term accrued income taxes		571			519
Other long-term liabilities		133			502
Total liabilities		9,700			10,662
Commitments and contingencies		—			—
Shareholders’ equity:
Preferred stock— par value $1.00		—			—
Common stock— par value $0.10		112			112
Retained earnings		12,987			11,710
Accumulated other comprehensive loss		(35	)		(286	)
Total shareholders’ equity		13,064			11,536
Total liabilities and shareholders’ equity	$	22,764		$	22,198

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

	Nine months ended
	January 23,			January 25,
	2009			2008
	(in millions)
Operating Activities:
Net earnings	$	2,041		$	1,418
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		522			457
Special charges		—			78
IPR&D charges		90			343
Provision for doubtful accounts		31			23
Deferred income taxes		103			(144	)
Stock-based compensation		178			163
Excess tax benefit from exercise of stock-based awards		(23	)		(32	)
Change in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable		252			(159	)
Inventories		(230	)		(17	)
Accounts payable and accrued liabilities		(51	)		320
Other operating assets and liabilities		(158	)		450
Net cash provided by operating activities		2,755			2,900
Investing Activities:
Acquisitions, net of cash acquired		(381	)		(4,179	)
Purchase of intellectual property		(152	)		(88	)
Additions to property, plant and equipment		(378	)		(423	)
Purchases of marketable securities		(2,246	)		(5,759	)
Sales and maturities of marketable securities		2,182			7,991
Other investing activities, net		(270	)		(228	)
Net cash used in investing activities		(1,245	)		(2,686	)
Financing Activities:
Change in short-term borrowings, net		41			707
Issuance of long-term debt		—			300
Payments on long-term debt		(316	)		(172	)
Dividends to shareholders		(632	)		(425	)
Issuance of common stock		393			326
Excess tax benefit from exercise of stock-based awards		23			32
Repurchase of common stock		(726	)		(1,464	)
Net cash used in financing activities		(1,217	)		(696	)
Effect of exchange rate changes on cash and cash equivalents		(70	)		(45	)
Net change in cash and cash equivalents		223			(527	)
Cash and cash equivalents at beginning of period		1,060			1,256
Cash and cash equivalents at end of period	$	1,283		$	729