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 21, 2012

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:

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

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

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

¨ 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 21, 2012, Medtronic, Inc. issued a press release announcing its third quarter 2012 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 21, 2012.

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 21, 2012		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 21, 2012

EX-99.1

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 THIRD QUARTER EARNINGS

• Revenue of $3.9 Billion Driven by International Revenue Growth of 6% on a Constant Currency Basis, 7% as Reported

• Non-GAAP Diluted EPS of $0.84, GAAP Diluted EPS of $0.88

• Free Cash Flow Exceeds $1.0 Billion, GAAP Cash Flow from Operations of $1.2 Billion

• Reiterates Revenue Outlook and Tightens Diluted EPS Guidance

MINNEAPOLIS – Feb. 21, 2012 – Medtronic, Inc. (NYSE: MDT) today announced financial results for its third quarter of fiscal year 2012, which ended January 27, 2012.

The company reported worldwide third quarter revenue of $3.918 billion, compared to the $3.857 billion reported in the third quarter of fiscal year 2011, an increase of 2 percent as reported or 1 percent on a constant currency basis after adjusting for a $13 million favorable foreign currency impact. Including revenue from the Physio-Control business, which is treated as discontinued operations, total company sales would have been $4.029 billion. As reported, third quarter net earnings were $935 million, or $0.88 per diluted share, an increase of 1 percent and 2 percent, respectively, over the same period in the prior year. As detailed in the attached table, third quarter net earnings and diluted earnings per share on a non-GAAP basis were $888 million and $0.84, a decrease of 4 percent and 2 percent, respectively, over the same period in the prior year. After adjusting for one-time tax benefits in the third quarter of fiscal year 2011, non-GAAP earnings and diluted earnings per share increased 8 percent and 9 percent, respectively.

International revenue of $1.773 billion increased 7 percent as reported or 6 percent on a constant currency basis. International sales accounted for 45 percent of Medtronic’s worldwide revenue in the quarter. Emerging market revenue of $395 million increased 15 percent as reported or 16 percent on a constant currency basis.

“I am pleased that a majority of our business mix continued to report strong, consistent revenue growth in the upper single digits. However, this was masked by continued challenges in our U.S. ICD and Spine performance,” said Omar Ishrak, Medtronic chairman and chief executive officer. “Stabilizing these businesses along with delivering on our key strategic imperatives of improving execution, optimizing innovation, and accelerating globalization should position us well to deliver long-term sustainable growth.”

Cardiac and Vascular Group

The Cardiac and Vascular Group at Medtronic is comprised of Cardiac Rhythm Disease Management (CRDM) and CardioVascular. The group had worldwide sales in the quarter of $2.029 billion, representing an increase of 2 percent as reported or 1 percent on a constant currency basis. Cardiac and Vascular Group international sales of $1.152 billion increased 5 percent as reported and on a constant currency basis. Group revenue performance was driven by Endovascular and Peripheral, Structural Heart, AF Solutions, Renal Denervation, Pacing, and Coronary sales offset by declines in implantable cardioverter defibrillators (ICDs).

CRDM third quarter revenue of $1.192 billion decreased 2 percent as reported or 3 percent on a constant currency basis. Third quarter revenue from ICDs was $674 million, down 9 percent on a constant currency basis, while pacing revenue was $467 million, an increase of 3 percent on a constant currency basis. Weaker ICD sales, primarily due to declining procedure volumes in the U.S. market versus the prior year, were partially offset by continued growth of the AF Solutions and Pacing businesses.

CardioVascular revenue of $837 million grew 8 percent as reported and on a constant currency basis. The Coronary, Structural Heart, and Endovascular and Peripheral businesses grew worldwide revenue 3 percent, 10 percent, and 17 percent, respectively, on a constant currency basis. In Structural Heart, transcatheter valves continued to drive growth. Endovascular and Peripheral revenue growth was driven by the continued success of the Endurant^® stent graft for the treatment of abdominal aortic aneurysms.

Restorative Therapies Group

The Restorative Therapies Group at Medtronic is comprised of Spine, Neuromodulation, Diabetes, and Surgical Technologies. The group had worldwide sales in the quarter of $1.889 billion, representing an increase of 1 percent as reported and on a constant currency basis. Restorative Therapies Group international sales of $621 million increased 11 percent as reported or 10 percent on a constant currency basis. Group revenue was driven by solid performances in Surgical Technologies, Diabetes and Neuromodulation, offset by continued challenges in U.S. Spine.

Spine revenue of $784 million declined 9 percent as reported or 10 percent on a constant currency basis. International sales for the Spine business increased 7 percent as reported or 4 percent on a constant currency basis. Core Spine revenue of $596 million, which

includes core metal constructs, interspinous process decompression devices, and balloon kyphoplasty products, declined 6 percent on a constant currency basis. Biologics revenue of $188 million declined 20 percent on a constant currency basis, driven by declines in U.S. sales of INFUSE^®, partially offset by revenue growth in Other Biologics.

Neuromodulation revenue of $419 million increased 4 percent as reported and on a constant currency basis. Growth continues to be driven by strong sales of InterStim^® Therapy. The RestoreSensor™ spinal cord stimulator with its proprietary AdaptiveStim™ technology continues to perform well in Europe, and was approved in the U.S. and Japan in the third quarter. The U.S. launch of this product was delayed for most of the quarter due to a supply disruption resulting from the flooding in Thailand, which has subsequently been resolved.

Diabetes revenue of $367 million grew 8 percent as reported and on a constant currency basis. Growth in the quarter was driven by strong sales of continuous glucose monitoring (CGM) products and consumables. The Enlite™ CGM sensor had strong growth in Europe, and the company continues to make progress on its IDE study for U.S. approval of this next generation sensor.

Surgical Technologies revenue of $319 million grew 23 percent as reported or 22 percent on a constant currency basis. Excluding revenue from the Advanced Energy business, consisting of our Salient Surgical Technologies and PEAK Surgical acquisitions, Surgical Technologies revenue grew 10 percent on a constant currency basis. Revenue growth was well-balanced across the businesses’ core platforms including Power, Navigation, Monitoring, Imaging, and Hydrocephalus Management.

Revenue Outlook and Earnings Per Share Guidance

The Company today reiterated its revenue outlook and tightened its fiscal year 2012 diluted earnings per share guidance range to $3.44 to $3.47, 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 7 to 8 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.

“While this was a challenging quarter from a revenue perspective, I was encouraged by the management team’s ability to execute on delivering the bottom line. In addition, we have recently launched several new products including RestoreSensor™, Solera™ 5.5 and 6.0 Spinal Systems, and now Resolute Integrity™ which should contribute to improved revenue performance,” said Ishrak. “We remain optimistic that long-term growth should improve as we dramatically expand our global footprint and focus on delivering economic value as well as clinical value to our customers.”

Webcast Information

Medtronic will host a webcast today, February 21, 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 and regulatory approvals, the impact of business divestitures, 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 third quarter of fiscal year 2011.

-end-

MEDTRONIC, INC.

WORLD WIDE REVENUE

(Unaudited)

($ millions)
	FY11		FY11		FY11		FY11		FY11		FY12		FY12		FY12		FY12		FY12
	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	$	1,192	$	—	$	3,712
Pacing Systems		473		472		450		506		1,901		508		511		467		—		1,485
Defibrillation Systems		722		745		735		760		2,962		697		708		674		—		2,078
AF & Other		31		31		36		49		147		48		49		51		—		149
CARDIOVASCULAR	$	717	$	738	$	774	$	879	$	3,109	$	850	$	830	$	837	$	—	$	2,518
Coronary		342		350		370		404		1,466		389		376		382		—		1,148
Structural Heart		224		237		241		274		977		275		266		265		—		806
Endovascular & Peripheral		151		151		163		201		666		186		188		190		—		564
CARDIAC & VASCULAR GROUP	$	1,943	$	1,986	$	1,995	$	2,194	$	8,119	$	2,103	$	2,098	$	2,029	$	—	$	6,230
SPINAL	$	829	$	850	$	861	$	875	$	3,414	$	825	$	839	$	784	$	—	$	2,448
Core Spinal		622		634		626		648		2,530		610		631		596		—		1,837
Biologics		207		216		235		227		884		215		208		188		—		611
NEUROMODULATION	$	370	$	388	$	401	$	432	$	1,592	$	397	$	421	$	419	$	—	$	1,237
DIABETES	$	312	$	326	$	341	$	368	$	1,347	$	355	$	367	$	367	$	—	$	1,089
SURGICAL TECHNOLOGIES	$	235	$	244	$	259	$	298	$	1,036	$	266	$	298	$	319	$	—	$	883
RESTORATIVE THERAPIES GROUP	$	1,746	$	1,808	$	1,862	$	1,973	$	7,389	$	1,843	$	1,925	$	1,889	$	—	$	5,657
TOTAL CONTINUING OPERATIONS	$	3,689	$	3,794	$	3,857	$	4,167	$	15,508	$	3,946	$	4,023	$	3,918	$	—	$	11,887
ADJUSTMENTS :
CURRENCY IMPACT (1)											$	181	$	120	$	13	$	—	$	313
COMPARABLE OPERATIONS (1)	$	3,689	$	3,794	$	3,857	$	4,167	$	15,508	$	3,765	$	3,903	$	3,905	$	—	$	11,574

(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.

(2) Physio Control has been excluded from the revenue summary above. FY12 Qtr3 revenue is $112M world wide.

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)

($ millions)
	FY11 QTR 1		FY11 QTR 2		FY11 QTR 3		FY11 QTR 4		FY11 Total		FY12 QTR 1		FY12 QTR 2		FY12 QTR 3		FY12 QTR 4		FY12 Total
REPORTED REVENUE :
CARDIAC RHYTHM DISEASE MANAGEMENT	$	691	$	699	$	651	$	650	$	2,690	$	649	$	667	$	619	$	—	$	1,934
Pacing Systems		214		210		182		207		812		217		220		197		—		633
Defibrillation Systems		467		481		458		425		1,831		411		423		396		—		1,230
AF & Other		10		8		11		18		47		21		24		26		—		71
CARDIOVASCULAR	$	241	$	248	$	249	$	289	$	1,026	$	266	$	264	$	258	$	—	$	788
Coronary		92		96		94		101		382		90		85		82		—		258
Structural Heart		89		91		92		101		373		100		98		97		—		295
Endovascular & Peripheral		60		61		63		87		271		76		81		79		—		235
CARDIAC & VASCULAR GROUP	$	932	$	947	$	900	$	939	$	3,716	$	915	$	931	$	877	$	—	$	2,722
SPINAL	$	631	$	645	$	646	$	631	$	2,553	$	589	$	599	$	555	$	—	$	1,744
Core Spinal		439		445		431		429		1,744		398		414		390		—		1,203
Biologics		192		200		215		202		809		191		185		165		—		541
NEUROMODULATION	$	261	$	278	$	282	$	286	$	1,108	$	272	$	295	$	287	$	—	$	855
DIABETES	$	203	$	213	$	219	$	228	$	863	$	214	$	228	$	226	$	—	$	668
SURGICAL TECHNOLOGIES	$	149	$	148	$	156	$	179	$	632	$	156	$	184	$	200	$	—	$	541
RESTORATIVE THERAPIES GROUP	$	1,244	$	1,284	$	1,303	$	1,324	$	5,156	$	1,231	$	1,306	$	1,268	$	—	$	3,808
TOTAL CONTINUING OPERATIONS	$	2,176	$	2,231	$	2,203	$	2,263	$	8,872	$	2,146	$	2,237	$	2,145	$	—	$	6,530
ADJUSTMENTS :
CURRENCY IMPACT											$	—	$	—	$	—			$	—
COMPARABLE OPERATIONS	$	2,176	$	2,231	$	2,203	$	2,263	$	8,872	$	2,146	$	2,237	$	2,145	$	—	$	6,530

(1) Physio Control has been excluded from the revenue summary above. FY12 Qtr3 U.S. revenue is $58M.

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)

($ millions)
	FY11		FY11		FY11		FY11		FY11		FY12		FY12		FY12		FY12		FY12
	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	$	573	$	—	$	1,778
Pacing Systems		259		262		268		299		1,089		291		291		270		—		852
Defibrillation Systems		255		264		277		335		1,131		286		285		278		—		848
AF & Other		21		23		25		31		100		27		25		25		—		78
CARDIOVASCULAR	$	476	$	490	$	525	$	590	$	2,083	$	584	$	566	$	579	$	—	$	1,730
Coronary		250		254		276		303		1,084		299		291		300		—		890
Structural Heart		135		146		149		173		604		175		168		168		—		511
Endovascular & Peripheral		91		90		100		114		395		110		107		111		—		329
CARDIAC & VASCULAR GROUP	$	1,011	$	1,039	$	1,095	$	1,255	$	4,403	$	1,188	$	1,167	$	1,152	$	—	$	3,508
SPINAL	$	198	$	205	$	215	$	244	$	861	$	236	$	240	$	229	$	—	$	704
Core Spinal		183		189		195		219		786		212		217		206		—		634
Biologics		15		16		20		25		75		24		23		23		—		70
NEUROMODULATION	$	109	$	110	$	119	$	146	$	484	$	125	$	126	$	132	$	—	$	382
DIABETES	$	109	$	113	$	122	$	140	$	484	$	141	$	139	$	141	$	—	$	421
SURGICAL TECHNOLOGIES	$	86	$	96	$	103	$	119	$	404	$	110	$	114	$	119	$	—	$	342
RESTORATIVE THERAPIES GROUP	$	502	$	524	$	559	$	649	$	2,233	$	612	$	619	$	621	$	—	$	1,849
TOTAL CONTINUING OPERATIONS	$	1,513	$	1,563	$	1,654	$	1,904	$	6,636	$	1,800	$	1,786	$	1,773	$	—	$	5,357
ADJUSTMENTS :
CURRENCY IMPACT (1)											$	181	$	120	$	13	$	—	$	313
COMPARABLE OPERATIONS (1)	$	1,513	$	1,563	$	1,654	$	1,904	$	6,636	$	1,619	$	1,666	$	1,760	$	—	$	5,044

(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.

(2) Physio Control has been excluded from the revenue summary above. FY12 Qtr3 International revenue is $54M.

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 27,			January 28,			January 27,			January 28,
	2012			2011			2012			2011
	(in millions, except per share data)
Net sales	$	3,918		$	3,857		$	11,887		$	11,341
Costs and expenses:
Cost of products sold		931			934			2,842			2,693
Research and development expense		364			362			1,097			1,087
Selling, general, and administrative expense		1,371			1,367			4,161			4,023
Certain litigation charges, net		—			13			—			292
Acquisition-related items		15			(39	)		(1	)		—
Amortization of intangible assets		84			86			255			252
Other expense		67			67			316			18
Interest expense, net		33			70			103			210
Total costs and expenses		2,865			2,860			8,773			8,575
Earnings from continuing operations before income taxes		1,053			997			3,114			2,766
Provision for income taxes		208			84			587			472
Earnings from continuing operations		845			913			2,527			2,294
Discontinued operations, net of tax:
Earnings from operations of Physio-Control		15			11			32			26
Physio-Control divestiture-related costs		(9	)		—			(17	)		—
Deferred income tax benefit on sale		84			—			84			—
Earnings from discontinued operations		90			11			99			26
Net earnings	$	935		$	924		$	2,626		$	2,320
Basic earnings per share
Earnings from continuing operations	$	0.80		$	0.85		$	2.39		$	2.12
Net earnings	$	0.89		$	0.86		$	2.48		$	2.15
Diluted earnings per share
Earnings from continuing operations	$	0.80		$	0.85		$	2.37		$	2.12
Net earnings	$	0.88		$	0.86		$	2.47		$	2.14
Basic weighted average shares outstanding		1,054.4			1,073.9			1,058.5			1,079.8
Diluted weighted average shares outstanding		1,060.2			1,077.9			1,064.1			1,083.5
Cash dividends declared per common share	$	0.2425		$	0.2250		$	0.7275		$	0.6750

MEDTRONIC, INC.

RECONCILIATION OF CONSOLIDATED GAAP NET EARNINGS

TO CONSOLIDATED NON-GAAP NET EARNINGS

(Unaudited)

(in millions, except per share data)

	Three months ended						Percentage Change
	January 27, 2012			January 28, 2011
Net earnings, as reported	$	935		$	924			1	%
Certain litigation charges, net		—			12	(e)
Certain acquisition-related items		15	(a)		(50	)(f)
Physio-Control divestiture-related items		(75	)(b)		—
Impact of authoritative convertible debt guidance on interest expense, net		13	(c)		27	(c)
Executive separation costs		—			9	(g)
Non-GAAP net earnings	$	888	(d)	$	922	(d)		-4	%

MEDTRONIC, INC.

RECONCILIATION OF CONSOLIDATED GAAP DILUTED EPS

TO CONSOLIDATED NON-GAAP DILUTED EPS

(Unaudited)

	Three months ended						Percentage Change
	January 27, 2012			January 28, 2011
Diluted EPS, as reported	$	0.88		$	0.86			2	%
Certain litigation charges, net		—			0.01	(e)
Certain acquisition-related items		0.01	(a)		(0.05	)(f)
Physio-Control divestiture-related items		(0.07	)(b)		—
Impact of authoritative convertible debt guidance on interest expense, net		0.01	(c)		0.03	(c)
Executive separation costs		—			0.01	(g)
Non-GAAP diluted EPS	$	0.84	(1)(d)	$	0.86	(d)		-2	%

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

(a) The $15 million ($0.01per share) after-tax ($15 million pre-tax) certain acquisition-related items include charges 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 $75 million ($0.07 per share) after-tax ($12 million pre-tax expense) net benefit from Physio-Control divestiture-related items include an $84 million deferred income tax benefit partially offset by $9 million after-tax ($12 million pre-tax) transaction costs. The deferred income tax benefit is recorded in accordance with U.S. GAAP as the Company is required to establish a deferred tax asset on the difference between its tax and book basis in the shares of Physio-Control, up to the expected amount of gain, at the point in time the Company classified Physio-Control as held for sale in the third quarter of fiscal year 2012. In the fourth quarter of fiscal year 2012 when the Company records the Physio-Control disposition, the Company will be required to write-off the deferred tax asset with a corresponding deferred income tax expense. In addition to disclosing Physio-Control divestiture-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 Physio-Control divestiture-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 Physio-Control divestiture-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.

(c) 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 ($0.03 per share) for the three months ended January 27, 2012 and January 28, 2011, respectively. The pre-tax impact to interest expense, net was $21 million and $44 million for the three months ended January 27, 2012 and January 28, 2011, 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.

(d) Included in our non-GAAP net earnings is $15 million ($0.01 per share and $23 million pre-tax) and $11 million ($0.01 per share and $16 million pre-tax) after-tax income from the operations of the Physio-Control business for the three months ended January 27, 2012 and January 28, 2011, respectively, which are included in earnings from discontinued operations on our condensed consolidated statements of earnings. The Company has included this income in its non-GAAP net earnings as the disposition did not occur until after the end of the third quarter of fiscal year 2012 and thus the income was earned through the operations of the Company. 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 including the operating income of the Physio-Control business. 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.

(e) The $12 million ($0.01 per share) after-tax ($13 million pre-tax) certain litigation charges, net relate primarily to an accounting charge for Other Matters litigation. In addition to disclosing certain litigation charges, net 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.

(f) The $50 million ($0.05 per share) after-tax ($39 million pre-tax) certain acquisition-related items, net gain includes an $85 million after-tax ($85 million pre-tax) gain resulting from the acquisition of Ardian, Inc. (Ardian) partially offset by $23 million after-tax ($31 million pre-tax) of certain acquisition-related costs and $12 million after-tax ($15 million pre-tax) of IPR&D charges related to asset purchases in the CardioVascular and Surgical Technologies businesses. As a result of the Ardian acquisition, in accordance with the FASB authoritative guidance on business combinations, Medtronic recognized an $85 million gain related to its previously held 11.3 percent ownership position. The acquisition-related costs include legal fees, severance costs, change in control costs, banker fees, other professional service fees, and contract termination costs related to the acquisitions of Osteotech, Inc. and Ardian that were expensed in the period. In the above IPR&D charges, product commercialization had not yet been achieved. As a result, in accordance with the FASB authoritative guidance these charges were immediately expensed as IPR&D since technological feasibility had not yet been reached and such technology had no future alternative use. 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.

(g) The $9 million ($0.01 per share) after-tax ($14 million pre-tax) executive separation costs include costs associated with the transition and retirement of Chief Executive Officer, William Hawkins. These costs were included in selling, general, and administrative expense on our condensed consolidated statements of earnings. In addition to disclosing executive separation costs 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 executive separation 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 the impact of these executive separation 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)

	Nine months ended						Percentage Change
	January 27, 2012			January 28, 2011
Net earnings, as reported	$	2,626		$	2,320			13	%
Certain litigation charges, net		—			290	(e)
Certain acquisition-related items		32	(a)		(23	)(f)
Physio-Control divestiture-related items		(67	)(b)		—
Impact of authoritative convertible debt guidance on interest expense, net		39	(c)		81	(c)
Executive separation costs		—			9	(g)
Non-GAAP net earnings	$	2,630	(d)	$	2,677	(d)		-2	%

MEDTRONIC, INC.

RECONCILIATION OF CONSOLIDATED GAAP DILUTED EPS

TO CONSOLIDATED NON-GAAP DILUTED EPS

(Unaudited)

	Nine months ended						Percentage Change
	January 27, 2012			January 28, 2011
Diluted EPS, as reported	$	2.47		$	2.14			15	%
Certain litigation charges, net		—			0.27	(e)
Certain acquisition-related items		0.03	(a)		(0.02	)(f)
Physio-Control divestiture-related items		(0.06	)(b)		—
Impact of authoritative convertible debt guidance on interest expense, net		0.04	(c)		0.07	(c)
Executive separation costs		—			0.01	(g)
Non-GAAP diluted EPS	$	2.47	(1)(d)	$	2.47	(d)		—

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

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

(a) The $32 million ($0.03 per share) after-tax ($32 million pre-tax) certain acquisition-related items include charges 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 $67 million ($0.06 per share) after-tax ($24 million pre-tax expense) net benefit from Physio-Control divestiture-related items include an $84 million deferred income tax benefit partially offset by $17 million after-tax ($24 million pre-tax) transaction costs. The deferred income tax benefit is recorded in accordance with U.S. GAAP as the Company is required to establish a deferred tax asset on the difference between its tax and book basis in the shares of Physio-Control, up to the expected amount of gain, at the point in time the Company classified Physio-Control as held for sale in the third quarter of fiscal year 2012. In the fourth quarter of fiscal year 2012 when the Company records the Physio-Control disposition, the Company will be required to write-off the deferred tax asset with a corresponding deferred income tax expense. In addition to disclosing Physio-Control divestiture-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 Physio-Control divestiture-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 Physio-Control divestiture-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.

(c) The Financial Accounting Standards Board (FASB) authoritative guidance for convertible debt accounting has resulted in an after-tax impact to net earnings of $39 million ($0.04 per share) and $81 million ($0.07 per share) for the nine months ended January 27, 2012 and January 28, 2011, respectively. The pre-tax impact to interest expense, net was $63 million and $130 million for the nine months ended January 27, 2012 and January 28, 2011, 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.

(d) Included in our non-GAAP net earnings is $32 million ($0.03 per share and $48 million pre-tax) and $26 million ($0.02 per share and $39 million pre-tax) after-tax income from the operations of the Physio-Control business for the nine months ended January 27, 2012 and January 28, 2011, respectively, which are included in earnings from discontinued operations on our condensed consolidated statements of earnings. The Company has included this income in its non-GAAP net earnings as the disposition did not occur until after the end of the third quarter of fiscal year 2012 and thus the income was earned through the operations of the Company. Additionally, included in our non-GAAP net earnings for the nine months ended January 27, 2012 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 statements 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 income from the operations of the Physio-Control business and 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.

(e) The $290 million ($0.27 per share) after-tax ($292 million pre-tax) certain litigation charges, net relate primarily to a settlement involving the Sprint Fidelis family of defibrillation leads and accounting charges 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 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. 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.

(f) The $23 million ($0.02 per share) after-tax ($0 pre-tax) certain acquisition-related items, net gain includes an $85 million after-tax ($85 million pre-tax) gain resulting from the acquisition of Ardian, Inc. (Ardian) partially offset by $39 million after-tax ($55 million pre-tax) of certain acquisition-related costs, $11 million after-tax ($15 million pre-tax) IPR&D charge related to the NeuroPace, Inc. cross-licensing agreement and $12 million after-tax ($15 million pre-tax) of IPR&D charges related to asset purchases in the CardioVascular and Surgical Technologies businesses. As a result of the Ardian acquisition, in accordance with the FASB authoritative guidance on business combinations, Medtronic recognized an $85 million gain resulting from its previously held 11.3 percent ownership position. The certain acquisition-related costs include acquisition-related legal fees, severance costs, change in control costs, banker fees, other professional service fees, and contract termination costs of $16 million after-tax ($24 million pre-tax) related to the acquisition of ATS Medical Inc. and $23 million after-tax ($31 million pre-tax) related to the acquisitions of Osteotech, Inc. and Ardian that were expensed in the period. The NeuroPace IPR&D charge related to a milestone payment under existing terms of a royalty bearing, non-exclusive patent cross-licensing agreement with NeuroPace that the Company entered into in the first quarter of fiscal year 2006. In the above IPR&D charges, product commercialization had not yet been achieved. As a result, in accordance with the FASB authoritative guidance these charges were immediately expensed as IPR&D since technological feasibility had not yet been reached and such technology had no future alternative use. 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.

(g) The $9 million ($0.01 per share) after-tax ($14 million pre-tax) executive separation costs include costs associated with the transition and retirement of Chief Executive Officer, William Hawkins. These costs were included in selling, general, and administrative expense on our condensed consolidated statements of earnings. In addition to disclosing executive separation costs 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 executive separation 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 the impact of these executive separation 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 as similar 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
	January 27,		January 28,		Reported			on Growth (a)					Currency
	2012		2011		Growth			Dollar         Percentage					Growth (a)
Reported Revenue:
Pacing Systems	$	467	$	450		4	%	$	3		1	%		3	%
Defibrillation Systems		674		735		(8	)		3		1			(9	)
AF & Other		51		36		42			—		—			42
Cardiac Rhythm Disease Management		1,192		1,221		(2	)		6		1			(3	)
Coronary		382		370		3			1		—			3
Structural Heart		265		241		10			—		—			10
Endovascular & Peripheral		190		163		17			(1	)	—			17
CardioVascular		837		774		8			—		—			8
Cardiac & Vascular Group		2,029		1,995		2			6		1			1
Core Spinal		596		626		(5	)		5		1			(6	)
Biologics		188		235		(20	)		—		—			(20	)
Spinal		784		861		(9	)		5		1			(10	)
Neuromodulation		419		401		4			1		—			4
Diabetes		367		341		8			(1	)	—			8
Surgical Technologies		319		259		23			2		1			22
Restorative Therapies Group		1,889		1,862		1			7		—			1
Total	$	3,918	$	3,857		2	%	$	13		1	%		1	%

(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.

MEDTRONIC, INC.

RECONCILIATION OF INTERNATIONAL REVENUE GROWTH TO CONSTANT CURRENCY GROWTH

(Unaudited)

(in millions)

	Three months ended							Currency Impact					Constant
	January 27,		January 28,		Reported			on Growth (a)					Currency
	2012		2011		Growth			Dollar        Percentage					Growth (a)
Reported Revenue:
Pacing Systems	$	270	$	268		1	%	$	3		1	%		—	%
Defibrillation Systems		278		277		—			3		1			(1	)
AF & Other		25		25		—			—		—			—
Cardiac Rhythm Disease Management		573		570		1			6		2			(1	)
Coronary		300		276		9			1		1			8
Structural Heart		168		149		13			—		—			13
Endovascular & Peripheral		111		100		11			(1	)	(1	)		12
CardioVascular		579		525		10			—		—			10
Cardiac & Vascular Group		1,152		1,095		5			6		—			5
Core Spinal		206		195		6			5		3			3
Biologics		23		20		15			—		—			15
Spinal		229		215		7			5		3			4
Neuromodulation		132		119		11			1		1			10
Diabetes		141		122		16			(1	)	—			16
Surgical Technologies		119		103		16			2		2			14
Restorative Therapies Group		621		559		11			7		1			10
Total	$	1,773	$	1,654		7	%	$	13		1	%		6	%

(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.

MEDTRONIC, INC.

RECONCILIATION OF OPERATING CASH FLOW TO FREE CASH FLOW

(Unaudited)

(in millions)

	Nine months ended January 27, 2012			Six months ended October 28, 2011			Three months ended January 27, 2012
Net cash provided by operating activities	$	3,393		$	2,238		$	1,155
Additions to property, plant, and equipment		(403	)		(282	)		(121	)
Free cash flow (a)	$	2,990		$	1,956		$	1,034

(a) Medtronic management believes that in order to properly understand Medtronic’s short-term and long-term financial trends, investors may wish to consider free cash flow. In addition, Medtronic management uses free cash flow to evaluate 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. Medtronic calculates free cash flow by subtracting additions to property, plant and equipment from operating cash flows.

MEDTRONIC, INC.

RECONCILIATION OF NET SALES FROM CONTINUING OPERATIONS TO

TOTAL COMPANY NET SALES INCLUDING PHYSIO-CONTROL

(Unaudited)

(in millions)

	Three months ended								Currency Impact					Constant
	January 27,			January 28,		Reported			on Growth (a)					Currency
	2012			2011		Growth			Dollar		Percentage			Growth (a)
Net sales from continuing operations	$	3,918		$	3,857		2	%	$	13		1	%		1	%
Physio-Control net sales		112			104		8			—		—			8
Total company net sales	$	4,029	(1)	$	3,961		2	%	$	13		1	%		1	%

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

(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 Physio-Control net sales on total company net sales. 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.

MEDTRONIC, INC.

RECONCILIATION OF CONSOLIDATED GAAP NET EARNINGS

TO CONSOLIDATED ADJUSTED NON-GAAP NET EARNINGS

(Unaudited)

(in millions, except per share data)

	Three months ended
	January 27, 2012			January 28, 2011			Percentage Change
Net earnings, as reported	$	935		$	924			1	%
Certain litigation charges, net		—			12
Certain acquisition-related items		15			(50	)
Physio-Control divestiture-related items		(75	)		-
Impact of authoritative convertible debt guidance on interest expense, net		13			27
Executive separation costs		—			9
Non-GAAP net earnings	$	888		$	922			-4	%
Less Q3 FY11 one-time tax benefits		—			(96	)
Adjusted Non-GAAP net earnings (a)	$	888		$	826			8	%

MEDTRONIC, INC.

RECONCILIATION OF CONSOLIDATED GAAP DILUTED EPS

TO CONSOLIDATED ADJUSTED NON-GAAP NET EARNINGS

(Unaudited)

	Three months ended
	January 27, 2012			January 28, 2011			Percentage Change
Diluted EPS, as reported	$	0.88		$	0.86			2	%
Certain litigation charges, net		—			0.01
Certain acquisition-related items		0.01			(0.05	)
Physio-Control divestiture-related items		(0.07	)		—
Impact of authoritative convertible debt guidance on interest expense, net		0.01			0.03
Executive separation costs		—			0.01
Non-GAAP diluted EPS	$	0.84	(1)	$	0.86			-2	%
Less Q3 FY11 one-time tax benefits		—			(0.09	)
Adjusted Non-GAAP diluted EPS (a)	$	0.84		$	0.77			9	%

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

(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 one-time tax benefits. 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.

RECONCILIATION OF EMERGING MARKET REVENUE GROWTH TO CONSTANT CURRENCY GROWTH

(Unaudited)

(in millions)

	Three months ended							Currency Impact						Constant
	January 27,		January 28,		Reported			on Growth (a)						Currency
	2012		2011		Growth			Dollar			Percentage			Growth (a)
Emerging Market Revenue (b)	$	395	$	344		15	%	$	(5	)		-1	%		16	%

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

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 January 27, 2012			Three months ended January 28, 2011		Percentage Change
Surgical Technologies revenue, as reported	$	319		$	259		23	%
Foreign currency impact		(2	)		—
Advanced Energy business revenue		(31	)		—
Surgical Technologies revenue, adjusted	$	286	(a)	$	259		10	%

(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 EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES

(Unaudited)

(in millions)

	Three Months Ended												Year Ended April 29, 2011		Three Months Ended							Nine Months Ended January 27, 2012
	July 30, 2010			October 29, 2010			January 28, 2011			April 29, 2011					July 29, 2011		October 28, 2011			January 27, 2012
Net sales	$	3,690		$	3,794		$	3,857		$	4,167		$	15,508	$	3,946	$	4,023		$	3,918	$	11,887
Costs and expenses:
Cost of products sold		850			909			934			1,007			3,700		951		960			931		2,842
Research and development expense		361			364			362			385			1,472		362		371			364		1,097
Selling, general, and administrative expense		1,310			1,346			1,367			1,404			5,427		1,380		1,410			1,371		4,161
Restructuring charges		—			—			—			259			259		—		—			—		—
Certain litigation charges, net		—			279			13			(47	)		245		—		—			—		—
Acquisition-related items		15			24			(39	)		14			14		8		(24	)		15		(1	)
Amortization of intangible assets		82			84			86			87			339		86		85			84		255
Other expense (income)		(38	)		(11	)		67			92			110		109		140			67		316
Interest expense, net		73			67			70			68			278		32		38			33		103
Total costs and expenses		2,653			3,062			2,860			3,269			11,844		2,928		2,980			2,865		8,773
Earnings from continuing operations before income taxes	$	1,037		$	732		$	997		$	898		$	3,664	$	1,018	$	1,043		$	1,053	$	3,114

Note: This schedule provides the presentation of unaudited condensed consolidated earnings from continuing operations before income taxes for the first quarter of fiscal year 2011 through the third quarter of fiscal year 2012 as adjusted to exclude operations of Physio-Control.

MEDTRONIC, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	January 27, 2012			April 29, 2011
	(in millions, except per share data)
ASSETS
Current assets:
Cash and cash equivalents	$	1,190		$	1,382
Short-term investments		1,155			1,046
Accounts receivable, less allowances of $102 and $96, respectively		3,665			3,761
Inventories		1,819			1,619
Deferred tax assets, net		605			586
Prepaid expenses and other current assets		624			561
Assets held for sale		250			258
Total current assets		9,308			9,213
Property, plant, and equipment		5,757			5,732
Accumulated depreciation		(3,277	)		(3,244	)
Property, plant, and equipment, net		2,480			2,488
Goodwill		9,915			9,520
Other intangible assets, net		2,713			2,725
Long-term investments		7,096			6,116
Other assets		399			362
Total assets	$	31,911		$	30,424
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings	$	1,972		$	1,723
Accounts payable		491			495
Accrued compensation		796			874
Accrued income taxes		266			50
Other accrued expenses		948			1,489
Liabilities held for sale		89			88
Total current liabilities		4,562			4,719
Long-term debt		8,248			8,112
Long-term accrued compensation and retirement benefits		513			480
Long-term accrued income taxes		846			496
Long-term deferred tax liabilities, net		143			217
Other long-term liabilities		430			432
Total liabilities		14,742			14,456
Commitments and contingencies
Shareholders’ equity:
Preferred stock—par value $1.00		—			—
Common stock—par value $0.10		105			107
Retained earnings		17,340			16,085
Accumulated other comprehensive loss		(276	)		(224	)
Total shareholders’ equity		17,169			15,968
Total liabilities and shareholders’ equity	$	31,911		$	30,424

MEDTRONIC, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine months ended
	January 27, 2012			January 28, 2011
	(in millions)
Operating Activities:
Net earnings	$	2,626		$	2,320
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		662			591
Amortization of discount on senior convertible notes		63			130
Acquisition-related items		32			30
Provision for doubtful accounts		49			24
Deferred income taxes		(181	)		(153	)
Stock-based compensation		124			156
Change in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable, net		(124	)		(79	)
Inventories		(202	)		(113	)
Accounts payable and accrued liabilities		12			(170	)
Other operating assets and liabilities		571			(75	)
Certain litigation charges, net		—			292
Certain litigation payments		(239	)		(5	)
Net cash provided by operating activities		3,393			2,948
Investing Activities:
Acquisitions, net of cash acquired		(617	)		(1,268	)
Purchase of intellectual property		(9	)		(48	)
Additions to property, plant, and equipment		(403	)		(385	)
Purchases of marketable securities		(5,714	)		(4,518	)
Sales and maturities of marketable securities		4,495			4,090
Other investing activities, net		38			(125	)
Net cash used in investing activities		(2,210	)		(2,254	)
Financing Activities:
Change in short-term borrowings, net		222			1,395
Payments on long-term debt		(24	)		(402	)
Dividends to shareholders		(769	)		(728	)
Issuance of common stock		67			54
Repurchase of common stock		(780	)		(1,140	)
Net cash used in financing activities		(1,284	)		(821	)
Effect of exchange rate changes on cash and cash equivalents		(91	)		10
Net change in cash and cash equivalents		(192	)		(117	)
Cash and cash equivalents at beginning of period		1,382			1,400
Cash and cash equivalents at end of period	$	1,190		$	1,283
Supplemental Cash Flow Information
Cash paid for:
Income taxes	$	226		$	731
Interest		197			290