Press Release of Medtronic, Inc.

EX-99.1 2 d259549dex991.htm PRESS RELEASE OF MEDTRONIC, INC. Press Release of Medtronic, Inc.

Exhibit 99.1


		NEWS RELEASE


		Contacts:
		Amy von Walter		Jeff Warren
		Public Relations		Investor Relations
		763-505-3780		763-505-2696

FOR IMMEDIATE RELEASE

MEDTRONIC REPORTS SECOND QUARTER EARNINGS

•

Revenue of $4.1 Billion Grew 3% on a Constant Currency Basis, 6% as Reported

•

International Revenue Grew 6% on a Constant Currency Basis, 14% as Reported

•

Emerging Market Revenue Grew 19% on a Constant Currency Basis, 21% as Reported

•

Non-GAAP Diluted EPS of $0.84 Grew 2%; GAAP Diluted EPS of $0.82 Grew 58%

MINNEAPOLIS — Nov. 22, 2011 — Medtronic, Inc. (NYSE: MDT) today announced financial results for its second quarter of fiscal year 2012, which ended October 28, 2011.

The company reported worldwide second quarter revenue of $4.132 billion, compared to the $3.903 billion reported in the second quarter of fiscal year 2011, an increase of 6 percent as reported or 3 percent after adjusting for a $123 million favorable foreign currency impact. As reported, second quarter net earnings were $871 million, or $0.82 per diluted share, an increase of 54 percent and 58 percent, respectively, over the same period in the prior year. As detailed in the attached table, second quarter net earnings and diluted earnings per share on a non-GAAP basis were $898 million and $0.84, an increase of 1 percent and 2 percent, respectively, over the same period in the prior year.

International revenue of $1.832 billion increased 14 percent as reported, or 6 percent on a constant currency basis. International sales accounted for 44 percent of Medtronic’s worldwide revenue in the quarter. Emerging market revenue of $414 million increased 21 percent as reported, or 19 percent on a constant currency basis.

“I’m pleased we delivered another quarter of consistent growth in a difficult environment,” said Omar Ishrak, Medtronic chairman and chief executive officer. “A majority of our businesses, and nearly all of our geographies, contributed to this growth. As we continue to focus on innovation, globalization, and execution, I see tremendous opportunities for growth in the future.”

Cardiac and Vascular Group

The Cardiac and Vascular Group at Medtronic is comprised of Cardiac Rhythm Disease Management (CRDM), CardioVascular, and Physio-Control. The group had worldwide sales in the quarter of $2.207 billion, representing an increase of 5 percent as reported or 1 percent on a constant currency basis. Cardiac and Vascular Group International sales of $1.213 billion increased 12 percent as reported or 4 percent on a constant currency basis. Group revenue performance was driven by Pacing, AF Solutions, Coronary, Structural Heart, Endovascular and Peripheral sales offset by weaker sales in implantable cardioverter defibrillators (ICDs) and Physio-Control.

CRDM second quarter revenue of $1.268 billion increased 2 percent as reported or declined 2 percent on a constant currency basis. Second quarter revenue from ICDs was $708 million, down 8 percent on a constant currency basis, while pacing revenue was $511 million, an increase of 4 percent on a constant currency basis. Lower ICD sales due

to declining procedure volumes were partially offset by continued growth of the AF Solutions and Pacing businesses.

CardioVascular revenue of $830 million grew 12 percent as reported or 8 percent on a constant currency basis. Revenue growth was driven by solid performance in Structural Heart and Endovascular. The Coronary, Structural Heart, Endovascular and Peripheral businesses grew worldwide revenue 3 percent, 8 percent, and 20 percent, respectively, on a constant currency basis. In Structural Heart, transcatheter valves continued to show strong growth. Endovascular revenue was driven by continued growth from the U.S. launch of the Endurant^® stent graft for the treatment of abdominal aortic aneurysms (AAA) and growth in Peripheral, including drug-eluting balloons in international markets.

Physio-Control revenue of $109 million was flat as reported or down 3 percent on a constant currency basis. On November 17, 2011, the company entered into a definitive agreement under which affiliates of Bain Capital will acquire Physio-Control and related entities for cash in a transaction value estimated at $487 million. The transaction is expected to close in the first calendar quarter of 2012.

Restorative Therapies Group

The Restorative Therapies Group at Medtronic is comprised of Spinal, Neuromodulation, Diabetes, and Surgical Technologies. The group had worldwide sales in the quarter of $1.925 billion, representing an increase of 6 percent as reported or 4 percent on a constant currency basis. Restorative Therapies Group International sales of $619 million increased 18 percent as reported or 10 percent on a constant currency basis. Group revenue was led by solid performances in Diabetes and Surgical

Technologies, as well as improved growth in Neuromodulation, offset by continued challenges in Spinal.

Spinal revenue of $839 million declined 1 percent as reported or 3 percent on a constant currency basis. International sales for the Spinal business increased 17 percent as reported or 8 percent on a constant currency basis. Core Spinal revenue of $631 million, which includes core metal constructs, interspinous process decompression devices (IPDs), and balloon kyphoplasty (BKP) products, declined 3 percent on a constant currency basis. Biologics revenue of $208 million declined 4 percent on a constant currency basis, driven by declines in the sales of INFUSE^®, partially offset by revenue growth from Other Biologics products.

Neuromodulation revenue of $421 million increased 9 percent as reported or 6 percent on a constant currency basis. Growth continues to be driven by strong sales of InterStim^® Therapy, and Activa^® PC and RC Deep Brain Stimulation (DBS) systems for movement disorders. The RestoreSensor^™ spinal cord stimulator with its proprietary AdaptiveStim^™ technology continues to perform well in Europe, and will be launching in the U.S. and Japan in the third quarter.

Diabetes revenue of $367 million grew 13 percent as reported or 10 percent on a constant currency basis. Growth in the quarter was driven by strong sales of durable pumps and continuous glucose monitoring (CGM) products. The Enlite^™ CGM sensor is performing well in Europe, and the company recently announced the start of its U.S. IDE study for approval of this next generation sensor.

Surgical Technologies revenue of $298 million grew 22 percent as reported or 20 percent on a constant currency basis. Excluding its new Advanced Energy business, Surgical

Technologies revenue grew 11 percent on a constant currency basis. Revenue growth was well balanced across the businesses’ core platforms of Power, Navigation, Monitoring, Imaging, and Hydrocephalus Management. In August, Medtronic completed the acquisitions of Salient Surgical Technologies, Inc. and PEAK Surgical, Inc., which will further leverage Medtronic’s strength in Surgical Technologies and drive growth in this business.

Revenue Outlook and Earnings Per Share Guidance

The Company today updated its revenue outlook and reiterated its diluted earnings per share (EPS) guidance for fiscal year 2012.

For the second half of fiscal year 2012, the Company expects revenue growth from continuing operations to remain in the range of 1 to 3 percent on a constant currency basis.

For fiscal year 2012, the Company continues to expect diluted EPS in the range of $3.43 to $3.50, which includes approximately $0.04 to $0.06 of dilution from the Ardian acquisition. After adjusting for Ardian dilution and 10 cents of one-time tax benefits received in fiscal year 2011, fiscal year 2012 diluted EPS growth is expected to be in the range of 6 percent to 9 percent.

EPS guidance excludes any unusual charges or gains that might occur during the fiscal year and the impact of the non-cash charge for convertible debt interest expense. The guidance provided only reflects information available to Medtronic at this time.

“We’ve aligned our organization to drive market leading execution and we continue to focus on extending our mission globally to expand growth,” said Ishrak. “Our

commitment to developing innovative medical devices that add clinical value for our patients and economic value for our customers will continue to drive all that we do.”

Webcast Information

Medtronic will host a webcast today, November 22, at 8 a.m. EST (7 a.m. CST), to provide information about its businesses for the public, analysts, and news media. This quarterly webcast can be accessed by clicking on the Investors link on the Medtronic home page at www.medtronic.com and this earnings release will be archived at www.medtronic.com/newsroom. Within 24 hours, a replay of the webcast and a transcript of the company’s prepared remarks will be available in the “Events & Presentations” section of the Investors portion of the Medtronic website.

About Medtronic

Medtronic, Inc., headquartered in Minneapolis, is the world’s leading medical technology company — alleviating pain, restoring health, and extending life for people with chronic disease. Its Internet address is www.medtronic.com.

This press release contains forward-looking statements related to expected product introductions, the timing and impact of business divestitures, closing timelines for pending acquisitions, anticipated benefits for recent acquisitions, product growth drivers, strategies for growth, and Medtronic’s future results of operations, which are subject to risks and uncertainties, such as competitive factors, difficulties and delays inherent in the development, manufacturing, marketing and sale of medical products, government regulation and general economic conditions and other risks and uncertainties described in Medtronic’s periodic reports on file with the Securities and Exchange Commission. Actual results may differ materially from anticipated results. Medtronic does not undertake to update its forward-looking statements.

Unless otherwise noted, all comparisons made in this news release are on an “as reported basis,” and not on a constant currency basis; references to quarterly figures increasing or decreasing are in comparison to the second quarter of fiscal year 2011.

-end-

MEDTRONIC, INC.

WORLD WIDE REVENUE

(Unaudited)


	FY11		FY11		FY11		FY11		FY11		FY12		FY12		FY12		FY12		FY12
($ millions)	QTR 1		QTR 2		QTR 3		QTR 4		Total		QTR 1		QTR 2		QTR 3		QTR 4		Total
REPORTED REVENUE :

CARDIAC RHYTHM DISEASE MANAGEMENT	$	1,226	$	1,248	$	1,221	$	1,315	$	5,010	$	1,253	$	1,268	$	—	$	—	$	2,521
Pacing Systems		473		472		450		506		1,901		508		511		—		—		1,019
Defibrillation Systems		722		745		735		760		2,962		697		708		—		—		1,405
AF & Other		31		31		36		49		147		48		49		—		—		97

CARDIOVASCULAR	$	717	$	738	$	774	$	879	$	3,109	$	850	$	830	$	—	$	—	$	1,681
Coronary		342		350		370		404		1,466		389		376		—		—		766
Structural Heart		224		237		241		274		977		275		266		—		—		541
Endovascular & Peripheral		151		151		163		201		666		186		188		—		—		374

PHYSIO-CONTROL	$	84	$	109	$	104	$	128	$	425	$	103	$	109	$	—	$	—	$	211

CARDIAC & VASCULAR GROUP	$	2,027	$	2,095	$	2,099	$	2,322	$	8,544	$	2,206	$	2,207	$	—	$	—	$	4,413

SPINAL	$	829	$	850	$	861	$	875	$	3,414	$	825	$	839	$	—	$	—	$	1,663
Core Spinal		622		634		626		648		2,530		610		631		—		—		1,240
Biologics		207		216		235		227		884		215		208		—		—		423

NEUROMODULATION	$	370	$	388	$	401	$	432	$	1,592	$	397	$	421	$	—	$	—	$	818

DIABETES	$	312	$	326	$	341	$	368	$	1,347	$	355	$	367	$	—	$	—	$	722

SURGICAL TECHNOLOGIES	$	235	$	244	$	259	$	298	$	1,036	$	266	$	298	$	—	$	—	$	565

RESTORATIVE THERAPIES GROUP	$	1,746	$	1,808	$	1,862	$	1,973	$	7,389	$	1,843	$	1,925	$	—	$	—	$	3,768

TOTAL	$	3,773	$	3,903	$	3,961	$	4,295	$	15,933	$	4,049	$	4,132	$	—	$	—	$	8,181

ADJUSTMENTS :

CURRENCY IMPACT (1)											$	186	$	123					$	309

COMPARABLE OPERATIONS (1)	$	3,773	$	3,903	$	3,961	$	4,295	$	15,933	$	3,863	$	4,009	$	—	$	—	$	7,872

(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.

U.S. REVENUE

(Unaudited)


	FY11		FY11		FY11		FY11		FY11		FY12		FY12		FY12		FY12		FY12
($ millions)	QTR 1		QTR 2		QTR 3		QTR 4		Total		QTR 1		QTR 2		QTR 3		QTR 4		Total
REPORTED REVENUE :

CARDIAC RHYTHM DISEASE MANAGEMENT	$	691	$	699	$	651	$	650	$	2,690	$	649	$	667	$	—	$	—	$	1,315
Pacing Systems		214		210		182		207		812		217		220		—		—		436
Defibrillation Systems		467		481		458		425		1,831		411		423		—		—		834
AF & Other		10		8		11		18		47		21		24		—		—		45

CARDIOVASCULAR	$	241	$	248	$	249	$	289	$	1,026	$	266	$	264	$	—	$	—	$	530
Coronary		92		96		94		101		382		90		85		—		—		175
Structural Heart		89		91		92		101		373		100		98		—		—		198
Endovascular & Peripheral		60		61		63		87		271		76		81		—		—		157

PHYSIO-CONTROL	$	53	$	64	$	56	$	74	$	248	$	60	$	63	$	—	$	—	$	123

CARDIAC & VASCULAR GROUP	$	985	$	1,011	$	956	$	1,013	$	3,964	$	975	$	994	$	—	$	—	$	1,968

SPINAL	$	631	$	645	$	646	$	631	$	2,553	$	589	$	599	$	—	$	—	$	1,188
Core Spinal		439		445		431		429		1,744		398		414		—		—		811
Biologics		192		200		215		202		809		191		185		—		—		377

NEUROMODULATION	$	261	$	278	$	282	$	286	$	1,108	$	272	$	295	$	—	$	—	$	567

DIABETES	$	203	$	213	$	219	$	228	$	863	$	214	$	228	$	—	$	—	$	442

SURGICAL TECHNOLOGIES	$	149	$	148	$	156	$	179	$	632	$	156	$	184	$	—	$	—	$	341

RESTORATIVE THERAPIES GROUP	$	1,244	$	1,284	$	1,303	$	1,324	$	5,156	$	1,231	$	1,306	$	—	$	—	$	2,538

TOTAL	$	2,229	$	2,295	$	2,259	$	2,337	$	9,120	$	2,206	$	2,300	$	—	$	—	$	4,506

ADJUSTMENTS :

CURRENCY IMPACT											$	—	$	—					$	—

COMPARABLE OPERATIONS	$	2,229	$	2,295	$	2,259	$	2,337	$	9,120	$	2,206	$	2,300	$	—	$	—	$	4,506

Note:

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

MEDTRONIC, INC.

INTERNATIONAL REVENUE

(Unaudited)


	FY11		FY11		FY11		FY11		FY11		FY12		FY12		FY12		FY12		FY12
($ millions)	QTR 1		QTR 2		QTR 3		QTR 4		Total		QTR 1		QTR 2		QTR 3		QTR 4		Total
REPORTED REVENUE :

CARDIAC RHYTHM DISEASE MANAGEMENT	$	535	$	549	$	570	$	665	$	2,320	$	604	$	601	$	—	$	—	$	1,206
Pacing Systems		259		262		268		299		1,089		291		291		—		—		583
Defibrillation Systems		255		264		277		335		1,131		286		285		—		—		571
AF & Other		21		23		25		31		100		27		25		—		—		52

CARDIOVASCULAR	$	476	$	490	$	525	$	590	$	2,083	$	584	$	566	$	—	$	—	$	1,151
Coronary		250		254		276		303		1,084		299		291		—		—		591
Structural Heart		135		146		149		173		604		175		168		—		—		343
Endovascular & Peripheral		91		90		100		114		395		110		107		—		—		217

PHYSIO-CONTROL	$	31	$	45	$	48	$	54	$	177	$	43	$	46	$	—	$	—	$	88

CARDIAC & VASCULAR GROUP	$	1,042	$	1,084	$	1,143	$	1,309	$	4,580	$	1,231	$	1,213	$	—	$	—	$	2,445

SPINAL	$	198	$	205	$	215	$	244	$	861	$	236	$	240	$	—	$	—	$	475
Core Spinal		183		189		195		219		786		212		217		—		—		429
Biologics		15		16		20		25		75		24		23		—		—		46

NEUROMODULATION	$	109	$	110	$	119	$	146	$	484	$	125	$	126	$	—	$	—	$	251

DIABETES	$	109	$	113	$	122	$	140	$	484	$	141	$	139	$	—	$	—	$	280

SURGICAL TECHNOLOGIES	$	86	$	96	$	103	$	119	$	404	$	110	$	114	$	—	$	—	$	224

RESTORATIVE THERAPIES GROUP	$	502	$	524	$	559	$	649	$	2,233	$	612	$	619	$	—	$	—	$	1,230

TOTAL	$	1,544	$	1,608	$	1,702	$	1,958	$	6,813	$	1,843	$	1,832	$	—	$	—	$	3,675

ADJUSTMENTS :

CURRENCY IMPACT (1)											$	186	$	123	$	—	$	—	$	309

COMPARABLE OPERATIONS (1)	$	1,544	$	1,608	$	1,702	$	1,958	$	6,813	$	1,657	$	1,709	$	—	$	—	$	3,366

(1)

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						Six months ended
	October 28, 2011			October 29, 2010			October 28, 2011			October 29, 2010
	(in millions, except per share data)
Net sales	$	4,132		$	3,903		$	8,181		$	7,677

Costs and expenses:
Cost of products sold		1,014			961			2,020			1,855
Research and development expense		379			373			750			743
Selling, general, and administrative expense		1,437			1,371			2,845			2,705
Certain litigation charges, net		—			279			—			279
Acquisition-related items		(17	)		24			(4	)		39
Amortization of intangible assets		86			85			174			167
Other expense (income)		142			(9	)		251			(44	)
Interest expense, net		38			67			70			141

Total costs and expenses		3,079			3,151			6,106			5,885

Earnings before income taxes		1,053			752			2,075			1,792

Provision for income taxes		182			186			383			396

Net earnings	$	871		$	566		$	1,692		$	1,396

Basic earnings per share	$	0.82		$	0.52		$	1.60		$	1.29

Diluted earnings per share	$	0.82		$	0.52		$	1.59		$	1.28

Basic weighted average shares outstanding		1,058.1			1,080.1			1,060.6			1,083.1
Diluted weighted average shares outstanding		1,063.1			1,083.7			1,066.2			1,086.7

Cash dividends declared per common share	$	0.2425		$	0.2250		$	0.4850		$	0.4500

MEDTRONIC, INC.

RECONCILIATION OF CONSOLIDATED GAAP NET EARNINGS

TO CONSOLIDATED NON-GAAP NET EARNINGS

(Unaudited)

(in millions, except per share data)


	Three months ended
	October 28, 2011			October 29, 2010			Percentage Change
Net earnings, as reported	$	871		$	566			54	%
Certain litigation charges, net		—			278	(d)
Certain acquisition-related items		14	(a)		16	(e)
Impact of authoritative convertible debt guidance on interest expense, net		13	(b)		27	(b)

Non-GAAP net earnings	$	898	(c)	$	887			1	%

MEDTRONIC, INC.

RECONCILIATION OF CONSOLIDATED GAAP DILUTED EPS

TO CONSOLIDATED NON-GAAP DILUTED EPS

(Unaudited)


	Three months ended
	October 28, 2011			October 29, 2010			Percentage Change
Diluted EPS, as reported	$	0.82		$	0.52			58	%
Certain litigation charges, net		—			0.26	(d)
Certain acquisition-related items		0.01	(a)		0.01	(e)
Impact of authoritative convertible debt guidance on interest expense, net		0.01	(b)		0.02	(b)

Non-GAAP diluted EPS	$	0.84	(c)	$	0.82	(1)		2	%

(1)	The data in this schedule has been intentionally rounded to the nearest $0.01 and therefore may not sum.

(a)

The $14 million ($0.01 per share) after-tax ($16 million pre-tax) certain acquisition-related items includes a $5 million after-tax ($7 million pre-tax) charge for transaction costs related to the divestiture of our Physio-Control business, and a $9 million after-tax ($9 million pre-tax) charge related to the change in fair value of contingent milestone payments associated with acquisitions subsequent to April 29, 2009. In addition to disclosing certain acquisition-related items that are determined in accordance with U.S. generally accepted accounting principles (U.S. GAAP), Medtronic management believes that in order to properly understand its short-term and long-term financial trends, investors may find it useful to consider the impact of excluding certain acquisition-related items. Management believes that the resulting non-GAAP financial measure provides useful information to investors regarding the underlying business trends and performance of the Company’s ongoing operations and is useful for period over period comparisons of such operations. Medtronic management eliminates certain acquisition-related items when evaluating the operating performance of the Company. Investors should consider this non-GAAP measure in addition to, and not as a substitute for, financial performance measures prepared in accordance with U.S. GAAP. In addition, this non-GAAP financial measure may not be the same or similar to measures presented by other companies.

(b)

The Financial Accounting Standards Board (FASB) authoritative guidance for convertible debt accounting has resulted in an after-tax impact to net earnings of $13 million ($0.01 per share) and $27 million ($0.02 per share) for the three months ended October 28, 2011 and October 29, 2010, respectively. The pre-tax impact to interest expense, net was $21 million and $43 million for the three months ended October 28, 2011 and October 29, 2010, respectively. In addition to disclosing the financial statement impact of this authoritative guidance that is determined in accordance with U.S. GAAP, Medtronic management believes that in order to properly understand its short-term and long-term financial trends, investors may find it useful to consider the impact of excluding the impact of this authoritative guidance. Management believes that the resulting non-GAAP financial measure provides useful information to investors regarding the underlying business trends and performance of the Company’s ongoing operations and is useful for period over period comparisons of such operations. Medtronic management eliminates the impact of this authoritative guidance when evaluating the operating performance of the Company. Investors should consider this non-GAAP measure in addition to, and not as a substitute for, financial performance measures prepared in accordance with U.S. GAAP. In addition, this non-GAAP financial measure may not be the same as similar measures presented by other companies.

(c)

Included in our non-GAAP net earnings is a $5 million after-tax ($5 million pre-tax) charge for transaction costs incurred related to the acquisitions of Salient Surgical Technologies, Inc. (Salient) and PEAK Surgical, Inc. (PEAK), and a non-cash gain of $38 million after-tax ($38 million pre-tax) related to previously held investments in Salient and PEAK, which are included in acquisition-related items on our condensed consolidated statement of earnings. The Company has included these items in its non-GAAP net earnings as it expects the overall impact from Salient and PEAK to be neutral to its fiscal year 2012 net earnings after accounting for the expected dilution in the second half of this fiscal year. Medtronic management believes that in order to properly understand its short-term and long-term financial trends, investors may find it useful to consider the net impact of the Salient and PEAK acquisitions. Management believes that the resulting non-GAAP financial measure provides useful information to investors regarding the underlying business trends and performance of the Company’s ongoing operations and is useful for period over period comparisons of such operations. Investors should consider this non-GAAP measure in addition to, and not as a substitute for, financial performance measures prepared in accordance with U.S. GAAP. In addition, this non-GAAP financial measure may not be the same or similar to measures presented by other companies.

(d)

The $278 million ($0.26 per share) after-tax ($279 million pre-tax) certain litigation charges, net relate primarily to a settlement involving the Sprint Fidelis family of defibrillation leads and an accounting charge for Other Matters litigation. The Sprint Fidelis settlement relates to the resolution of certain outstanding product litigation related to the Sprint Fidelis family of defibrillation leads that were subject to a field action announced October 15, 2007. The terms of the agreement stipulate Medtronic will, if it elects not to cancel the agreement, pay plaintiffs to settle substantially all pending U.S. lawsuits and claims, subject to certain conditions. In addition to disclosing certain litigation charges, net that are determined in accordance with U.S. generally accepted accounting principles, 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.

(e)

The $16 million ($0.01 per share) after-tax ($24 million pre-tax) certain acquisition-related items include acquisition-related legal fees, severance costs, change in control costs, and contract termination costs related to the acquisition of ATS Medical, Inc. (ATS Medical) that were expensed in the period. In addition to disclosing certain acquisition-related items that are determined in accordance with U.S. GAAP, Medtronic management believes that in order to properly understand its short-term and long-term financial trends, investors may find it useful to consider the impact of excluding certain acquisition-related costs. Management believes that the resulting non-GAAP financial measure provides useful information to investors regarding the underlying business trends and performance of the Company’s ongoing operations and is useful for period over period comparisons of such operations. Medtronic management eliminates certain acquisition-related costs when evaluating the operating performance of the Company. Investors should consider this non-GAAP measure in addition to, and not as a substitute for, financial performance measures prepared in accordance with U.S. GAAP. In addition, this non-GAAP financial measure may not be the same or similar to measures presented by other companies.

MEDTRONIC, INC.

RECONCILIATION OF CONSOLIDATED GAAP NET EARNINGS

TO CONSOLIDATED NON-GAAP NET EARNINGS

(Unaudited)

(in millions, except per share data)


	Six months ended
	October 28,			October 29,			Percentage
	2011			2010			Change
Net earnings, as reported	$	1,692		$	1,396			21	%
Certain litigation charges, net		—			278	(d)
Certain acquisition-related items		25	(a)		27	(e)
Impact of authoritative convertible debt guidance on interest expense, net		26	(b)		54	(b)

Non-GAAP net earnings	$	1,743	(c)	$	1,755			-1	%

MEDTRONIC, INC.

RECONCILIATION OF CONSOLIDATED GAAP DILUTED EPS

TO CONSOLIDATED NON-GAAP DILUTED EPS

(Unaudited)


	Six months ended
	October 28,			October 29,			Percentage
	2011			2010			Change
Diluted EPS, as reported	$	1.59		$	1.28			24	%
Certain litigation charges, net		—			0.26	(d)
Certain acquisition-related items		0.02	(a)		0.02	(e)
Impact of authoritative convertible debt guidance on interest expense, net		0.02	(b)		0.05	(b)

Non-GAAP diluted EPS	$	1.63	(c)	$	1.61			1	%

Note:

The data in this schedule has been intentionally rounded and therefore the first quarter and second quarter data may not sum to the fiscal year to date totals.

(a)

The $25 million ($0.02 per share) after-tax ($29 million pre-tax) certain acquisition-related items includes an $8 million after-tax ($12 million pre-tax) charge for transaction costs related to the divestiture of our Physio-Control business, and a $17 million after-tax ($17 million pre-tax) charge related to the change in fair value of contingent milestone payments associated with acquisitions subsequent to April 29, 2009. In addition to disclosing certain acquisition-related items that are determined in accordance with U.S. generally accepted accounting principles (U.S. GAAP), Medtronic management believes that in order to properly understand its short-term and long-term financial trends, investors may find it useful to consider the impact of excluding certain acquisition-related items. Management believes that the resulting non-GAAP financial measure provides useful information to investors regarding the underlying business trends and performance of the Company’s ongoing operations and is useful for period over period comparisons of such operations. Medtronic management eliminates certain acquisition-related items when evaluating the operating performance of the Company. Investors should consider this non-GAAP measure in addition to, and not as a substitute for, financial performance measures prepared in accordance with U.S. GAAP. In addition, this non-GAAP financial measure may not be the same or similar to measures presented by other companies.

(b)

The FASB authoritative guidance for convertible debt accounting has resulted in an after-tax impact to net earnings of $26 million ($0.02 per share) and $54 million ($0.05 per share) for the six months ended October 28, 2011 and October 29, 2010, respectively. The pre-tax impact to interest expense, net was $42 million and $86 million for the six months ended October 28, 2011 and October 29, 2010, respectively. In addition to disclosing the financial statement impact of this authoritative guidance that is determined in accordance with U.S. GAAP, Medtronic management believes that in order to properly understand its short-term and long-term financial trends,

investors may find it useful to consider the impact of excluding the impact of this authoritative guidance. Management believes that the resulting non-GAAP financial measure provides useful information to investors regarding the underlying business trends and performance of the Company’s ongoing operations and is useful for period over period comparisons of such operations. Medtronic management eliminates the impact of this authoritative guidance when evaluating the operating performance of the Company. Investors should consider this non-GAAP measure in addition to, and not as a substitute for, financial performance measures prepared in accordance with U.S. GAAP. In addition, this non-GAAP financial measure may not be the same as similar measures presented by other companies.

(c)

(d)

(e)

The $27 million ($0.02 per share) after-tax ($39 million pre-tax) certain acquisition-related items represent an $11 million after-tax ($15 million pre-tax) IPR&D charge related to the NeuroPace, Inc. cross-licensing agreement and $16 million after-tax ($24 million pre-tax) expenses related to the acquisition of ATS Medical, Inc. (ATS Medical). The IPR&D charge related to a milestone payment under existing terms of 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 charged to certain acquisition-related items as technological feasibility had not yet been reached and such technology had no future alternative use. The certain acquisition-related items include acquisition-related legal fees and severance costs, change in control costs, and contract termination costs related to the acquisition of ATS Medical that were expensed in the period. In addition to disclosing certain acquisition-related items that are determined in accordance with U.S. GAAP, Medtronic management believes that in order to properly understand its short-term and long-term financial trends, investors may find it useful to consider the impact of excluding certain acquisition-related items. Management believes that the resulting non-GAAP financial measure provides useful information to investors regarding the underlying business trends and performance of the Company’s ongoing operations and is useful for period over period comparisons of such operations. Medtronic management eliminates certain acquisition-related items when evaluating the operating performance of the Company. Investors should consider this non-GAAP measure in addition to, and not as a substitute for, financial performance measures prepared in accordance with U.S. GAAP. In addition, this non-GAAP financial measure may not be the same or similar to measures presented by other companies.

MEDTRONIC, INC.

RECONCILIATION OF WORLDWIDE REVENUE GROWTH TO CONSTANT CURRENCY GROWTH

(Unaudited)

(in millions)


	Three months ended							Currency Impact					Constant
	October 28,		October 29,		Reported			on Growth (a)					Currency
	2011		2010		Growth			Dollar		Percentage			Growth (a)
Reported Revenue:
Pacing Systems	$	511	$	472		8	%	$	22		4	%		4	%
Defibrillation Systems		708		745		(5	)		21		3			(8	)
AF & Other		49		31		58			1		3			55

Cardiac Rhythm Disease Management		1,268		1,248		2			44		4			(2	)
Coronary		376		350		7			17		4			3
Structural Heart		266		237		12			10		4			8
Endovascular & Peripheral		188		151		25			7		5			20

CardioVascular		830		738		12			34		4			8
Physio-Control		109		109		—			3		3			(3	)

Cardiac & Vascular Group		2,207		2,095		5			81		4			1

Core Spinal		631		634		—			17		3			(3	)
Biologics		208		216		(4	)		1		—			(4	)

Spinal		839		850		(1	)		18		2			(3	)
Neuromodulation		421		388		9			10		3			6
Diabetes		367		326		13			9		3			10
Surgical Technologies		298		244		22			5		2			20

Restorative Therapies Group		1,925		1,808		6			42		2			4

Total	$	4,132	$	3,903		6	%	$	123		3	%		3	%

(a)

MEDTRONIC, INC.

RECONCILIATION OF INTERNATIONAL REVENUE GROWTH TO CONSTANT CURRENCY GROWTH

(Unaudited)

(in millions)


	Three months ended							Currency Impact					Constant
	October 28,		October 29,		Reported			on Growth (a)					Currency
	2011		2010		Growth			Dollar		Percentage			Growth (a)
Reported Revenue:
Pacing Systems	$	291	$	262		11	%	$	22		8	%		3	%
Defibrillation Systems		285		264		8			21		8			—
AF & Other		25		23		9			1		5			4

Cardiac Rhythm Disease Management		601		549		9			44		8			1
Coronary		291		254		15			17		7			8
Structural Heart		168		146		15			10		7			8
Endovascular & Peripheral		107		90		19			7		8			11

CardioVascular		566		490		16			34		7			9
Physio-Control		46		45		2			3		6			(4	)

Cardiac & Vascular Group		1,213		1,084		12			81		8			4

Core Spinal		217		189		15			17		9			6
Biologics		23		16		44			1		6			38

Spinal		240		205		17			18		9			8
Neuromodulation		126		110		15			10		10			5
Diabetes		139		113		23			9		8			15
Surgical Technologies		114		96		19			5		5			14

Restorative Therapies Group		619		524		18			42		8			10

Total	$	1,832	$	1,608		14	%	$	123		8	%		6	%

(a)

MEDTRONIC, INC.

RECONCILIATION OF EMERGING MARKET REVENUE GROWTH TO CONSTANT CURRENCY GROWTH

(Unaudited)

(in millions)


	Three months ended							Currency Impact					Constant
	October 28,		October 29,		Reported			on Growth (a)					Currency
	2011		2010		Growth			Dollar		Percentage			Growth (a)
Emerging Market Revenue (b)	$	414	$	342		21	%	$	8		2	%		19	%

(a)

(b)	Emerging Market Revenue includes revenues from certain countries located in Central and Eastern Europe, Middle East, Africa, Latin America, and Asia.

MEDTRONIC, INC.

RECONCILIATION OF SURGICAL TECHNOLOGIES REVENUE GROWTH TO CONSTANT CURRENCY

REVENUE GROWTH ADJUSTED FOR REVENUE FROM NEW ADVANCED ENERGY BUSINESS

(Unaudited)

(in millions)


	Three months ended October 28, 2011			Three months ended October 29, 2010		Percentage Change
Surgical Technologies revenue, as reported	$	298		$	244		22	%
Foreign currency impact		(5	)		—
Advanced Energy business revenue		(21	)		—

Surgical Technologies revenue, adjusted	$	272	(a)	$	244		11	%

(a)

Medtronic management believes that in order to properly understand Medtronic’s short-term and long-term financial trends, investors may wish to consider the impact of foreign currency translation and the new Advanced Energy business on Surgical Technologies’ revenue growth. In addition, Medtronic management uses Surgical Technologies revenue adjusted for foreign currency translation and the new Advanced Energy business to evaluate operational performance of the Company. Investors should consider these non-GAAP measures in addition to, and not as a substitute for, financial performance measures prepared in accordance with U.S. GAAP.

MEDTRONIC, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	October 28,			April 29,
	2011			2011
	(in millions, except per share data)
ASSETS
Current assets:
Cash and cash equivalents	$	1,048		$	1,382
Short-term investments		1,118			1,046
Accounts receivable, less allowances of $105 and $97, respectively		3,837			3,822
Inventories		1,840			1,695
Deferred tax assets, net		587			605
Prepaid expenses and other current assets		584			567

Total current assets		9,014			9,117
Property, plant, and equipment		6,065			5,817
Accumulated depreciation		(3,530	)		(3,306	)

Property, plant, and equipment, net		2,535			2,511

Goodwill		9,944			9,537
Other intangible assets, net		2,875			2,777
Long-term investments		7,013			6,120
Other assets		372			362

Total assets	$	31,753		$	30,424

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:
Short-term borrowings	$	2,050		$	1,723
Accounts payable		543			511
Accrued compensation		765			896
Accrued income taxes		83			50
Other accrued expenses		1,293			1,534

Total current liabilities		4,734			4,714

Long-term debt		8,222			8,112
Long-term accrued compensation and retirement benefits		505			480
Long-term accrued income taxes		841			496
Long-term deferred tax liabilities, net		293			220
Other long-term liabilities		419			434

Total liabilities		15,014			14,456

Commitments and contingencies

Shareholders’ equity:
Preferred stock— par value $1.00		—			—
Common stock— par value $0.10		106			107
Retained earnings		16,790			16,085
Accumulated other comprehensive loss		(157	)		(224	)

Total shareholders’ equity		16,739			15,968

Total liabilities and shareholders’ equity	$	31,753		$	30,424

MEDTRONIC, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six months ended
	October 28, 2011			October 29, 2010
	(in millions)
Operating Activities:
Net earnings	$	1,692		$	1,396
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		437			402
Amortization of discount on senior convertible notes		42			86
Acquisition-related items		17			15
Provision for doubtful accounts		32			18
Deferred income taxes		(58	)		(77	)
Stock-based compensation		90			104
Change in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable, net		(119	)		(72	)
Inventories		(147	)		(108	)
Accounts payable and accrued liabilities		(354	)		(429	)
Other operating assets and liabilities		606			94
Certain litigation charges, net		—			279
Certain litigation payments		—			(5	)

Net cash provided by operating activities		2,238			1,703

Investing Activities:
Acquisitions, net of cash acquired		(617	)		(452	)
Purchase of intellectual property		(8	)		(17	)
Additions to property, plant, and equipment		(282	)		(258	)
Purchases of marketable securities		(3,866	)		(3,425	)
Sales and maturities of marketable securities		3,008			2,793
Other investing activities, net		9			(80	)

Net cash used in investing activities		(1,756	)		(1,439	)

Financing Activities:
Change in short-term borrowings, net		302			1,181
Payments on long-term debt		(15	)		(402	)
Dividends to shareholders		(514	)		(488	)
Issuance of common stock		45			42
Repurchase of common stock		(600	)		(760	)

Net cash used in financing activities		(782	)		(427	)
Effect of exchange rate changes on cash and cash equivalents		(34	)		19

Net change in cash and cash equivalents		(334	)		(144	)
Cash and cash equivalents at beginning of period		1,382			1,400

Cash and cash equivalents at end of period	$	1,048		$	1,256


Supplemental Cash Flow Information
Cash paid for:
Income taxes	$	99		$	552
Interest		161			219