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February 17, 2015 7:19 AM EST


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
_____________________________ 
FORM 8-K
 _____________________________ 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 17, 2015
 _____________________________ 
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 17, 2015, Medtronic plc issued a press release announcing Medtronic, Inc.'s third quarter 2015 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 plc dated February 17, 2015.






SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
MEDTRONIC, INC.
 
 
 
 
 
 
 
 
By
 
/s/ Gary L. Ellis
Date: February 17, 2015
 
 
 
 
 
Gary L. Ellis
 
 
 
 
 
 
Executive Vice President and Chief Financial Officer








EXHIBIT INDEX
Medtronic, Inc.
Form 8-K Current Report
 
Exhibit Number
  
Description
 
 
99.1
  
Press release dated February 17, 2015




Exhibit 99.1
 
 
 
  
NEWS RELEASE
 
 
 
 
 
 
 
 
Contacts:
  
 
 
 
 
 
 
Cindy Resman
  
Jeff Warren
 
 
Public Relations
  
Investor Relations
 
 
+1-763-505-0291
  
+1-763-505-2696

MEDTRONIC REPORTS THIRD QUARTER EARNINGS

•
Revenue of $4.3 Billion Grew 8% at Constant Currency, 4% as Reported
•
Non-GAAP Diluted EPS of $1.01 Grew 11%; GAAP Diluted EPS of $0.98 Grew 31%
•
U.S. Revenue Grew 8% on Strength of New Products
•
Free Cash Flow of $1.7 Billion; GAAP Cash Flow from Operations of $1.8 Billion
•
Company Completes Acquisition of Covidien at Beginning of Fourth Quarter; Integration Activities Underway

DUBLIN - Feb. 17, 2015 - Medtronic plc (NYSE: MDT) today announced financial results for Medtronic, Inc.’s third quarter of fiscal year 2015, which ended January 23, 2015. The company announced on January 26, 2015, that it had completed its acquisition of Covidien, which did not affect the operational results of the company’s fiscal third quarter.

The company reported worldwide third quarter revenue of $4.318 billion, compared to the $4.163 billion reported in the third quarter of fiscal year 2014, an increase of 8 percent on a constant currency basis after adjusting for a $158 million negative foreign currency impact, or 4 percent as reported. As reported, third quarter net earnings were $977 million, or $0.98 per diluted share, an increase of 28 percent and 31 percent, respectively, over the same period in the prior year. Third quarter net earnings and diluted earnings per share on a non-GAAP basis were $1.005 billion and $1.01, an increase of 10 percent and 11 percent, respectively, over the same period in the prior year.

U.S. revenue of $2.459 billion increased 8 percent. International revenue of $1.859 billion increased 7 percent on a constant currency basis or declined 2 percent as reported. International sales accounted for 43 percent of Medtronic’s worldwide revenue in the quarter. Emerging market revenue of $542 million increased 12 percent on a constant currency basis or 6 percent as reported and represents 13 percent of company revenue.

“Q3 was a strong quarter, with revenue growth well above our outlook range for the fiscal year and exceeding our mid-single digit baseline goal. All three legacy Medtronic groups contributed to our robust performance,” said Omar Ishrak, Medtronic plc chairman and chief executive officer. “Our teams are executing on meaningful product launches around the world, and our customers are responding to our differentiated healthcare solutions that seek to demonstrate both clinical and economic value.”

Cardiac and Vascular Group
The Cardiac and Vascular Group includes the Cardiac Rhythm & Heart Failure, Coronary & Structural Heart, and Aortic & Peripheral Vascular divisions. The Group had worldwide sales in the quarter of $2.224 billion, representing an increase of 10 percent on a constant currency basis or 5 percent as reported. Group revenue performance on a constant currency basis was driven by strong, double-digit growth in Low Power, Structural Heart, and AF & Other, along with mid-single digit growth in High Power and Aortic & Peripheral Vascular, partially offset by a modest decline in Coronary. Group international sales of $1.177 billion grew 6 percent on a constant currency basis and declined 2 percent as reported.

Cardiac Rhythm & Heart Failure revenue of $1.269 billion grew 12 percent on a constant currency basis or 7 percent as reported. High Power revenue was $650 million, an increase of 4 percent on a constant currency basis. The Viva™ XT CRT-D, with its AdaptivCRT™ algorithm and Attain® Performa™ quadripolar lead, continues to show strong market acceptance and gain share. Low Power revenue was $489 million, an increase of 17 percent on a constant currency basis. Results continue to be driven




by the strong ongoing global launch of the Reveal LINQ™ insertable cardiac monitor. AF Solutions grew over 30 percent globally driven by continued robust growth of our Arctic Front Advance® CryoAblation System.
 
Coronary & Structural Heart revenue of $737 million grew 8 percent on a constant currency basis or 3 percent as reported. Coronary revenue of $407 million declined 2 percent on a constant currency basis. The company launched the Resolute Onyx™ drug-eluting stent in international markets late in the quarter. Structural Heart revenue of $330 million grew 22 percent on a constant currency basis. Third quarter results were driven by strong performance in the U.S. of the CoreValve® transcatheter aortic heart valve.

Aortic & Peripheral Vascular revenue of $218 million grew 5 percent on a constant currency basis or was flat as reported. In the Aortic business, growth was driven by strong sales in Thoracic and the launch of the Endurant® 2S AAA stent graft. In the Peripheral business, the IN.PACT® Admiral® and Pacific® drug-coated balloons for the SFA continued to deliver growth in international markets, and the business is now commercially launching the IN.PACT® Admiral® in the U.S.

Restorative Therapies Group
The Restorative Therapies Group includes the Spine, Neuromodulation, and Surgical Technologies divisions. The Group had worldwide sales in the quarter of $1.645 billion, representing an increase of 5 percent on a constant currency basis or 2 percent as reported. Group revenue performance on a constant currency basis was driven by double-digit growth in Surgical Technologies, mid-single digit growth in Neuromodulation, and low-single digit growth in Spine. Group international sales of $512 million increased 7 percent on a constant currency basis or declined 1 percent as reported.

Spine revenue of $740 million increased 2 percent on a constant currency basis or declined 1 percent on a reported basis. Core Spine revenue of $543 million increased 1 percent on a constant currency basis. The Core Spine business continues to differentiate itself from the competition through its leading technology and procedural innovation, enhanced by its Surgical Synergy™ program of enabling technologies, including imaging, navigation, and powered surgical instruments. Interventional Spine revenue of $75 million remained flat on a constant currency basis. BMP revenue of $122 million increased 9 percent on a constant currency basis.

Neuromodulation revenue of $487 million increased 5 percent on a constant currency basis or 2 percent as reported, driven by solid growth in Gastro/Uro and DBS. Gastro/Uro had a strong quarter of InterStim® sales in Q3. In DBS, the business’s global focus on neurologist referral programs, and the strength of the EARLYSTIM data in international markets, continues to drive solid growth. In Pain Stim, the business gained U.S. market share and maintained global share on the strength of its RestoreSensor® SureScan® MRI spinal cord stimulation system, with its proprietary AdaptiveStim® automatic stimulation adjustment feature and access to MRI scans anywhere in the body.
 
Surgical Technologies revenue of $418 million grew 11 percent on a constant currency basis or 8 percent as reported with solid, balanced growth across all three businesses: Neurosurgery, ENT, and Advanced Energy. Several product lines helped to drive growth: Midas Rex® power equipment, O-arm® Surgical Imaging System, StraightShot® M5 Microdebrider, NuVent™ sinus balloon, Aquamantys® tissue sealing, and PEAK PlasmaBlade® technologies.
 
Diabetes Group
The Diabetes Group includes the Intensive Insulin Management, Non-Intensive Diabetes Therapies, and Diabetes Services & Solutions divisions. Diabetes Group revenue of $449 million grew 6 percent on a constant currency basis or 3 percent as reported. Growth in the quarter continued to be driven by strong adoption in the U.S. of the MiniMed® 530G System with Enlite® CGM sensor and its proprietary threshold suspend technology. In international markets, the group had a strong quarter, growing 12 percent on a constant currency basis or 3 percent as reported. In select international markets, the business began the limited launch of its next-generation MiniMed® 640G System with the Enhanced Enlite® CGM sensor. In addition to incorporating a new insulin pump design and user interface, the MiniMed® 640G System features SmartGuard™ technology, which automatically suspends insulin delivery when sensor glucose levels are predicted to approach a low limit and then resumes insulin delivery once glucose levels recover.

Revenue Outlook
The company today provided its revenue outlook for Medtronic plc, which includes both the legacy Medtronic and Covidien businesses, for the remainder of fiscal year 2015. In the fourth quarter of fiscal year 2015, the company expects constant currency revenue growth in the range of 4 to 6 percent on a combined pro forma basis.

"The close of our acquisition of Covidien was a significant milestone for our industry and uniquely positions Medtronic to help lead the transformation of healthcare systems around the world,” said Ishrak. “Our combination of extensive and innovative




capabilities truly makes us a partner of choice to hospitals, payers and governments as we focus on a shared commitment to address universal healthcare needs - improving clinical outcomes, expanding access, and optimizing cost and efficiency.”

Webcast Information
Medtronic will host a webcast today, Feb. 17, 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.

Financial Schedules
To view the third quarter financial schedules, click here or visit www.medtronic.com/newsroom. For updated information on anticipated Medtronic plc revenue reporting changes and combined historical financials, including third quarter of fiscal year 2015, click here.

About Medtronic
Medtronic plc, headquartered in Dublin, Ireland, is the global leader in medical technology - alleviating pain, restoring health, and extending life for millions of people around the world.
This press release contains forward-looking statements related to product growth drivers, market position, 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 2014.
NON-GAAP FINANCIAL MEASURES
This press release contains financial measures, including constant currency growth, adjusted earnings, adjusted earnings per diluted share and free cash flow, which are considered “non-GAAP” financial measures under applicable U.S. Securities and Exchange Commission rules and regulations.
These non-GAAP financial measures should be considered supplemental to and not a substitute for financial information prepared in accordance with generally accepted accounting principles (GAAP). The company’s definition of these non-GAAP measures may not be the same or similar to measures presented by other companies.
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 specified items that can be highly variable or difficult to predict. The company generally uses these non-GAAP financial measures to facilitate management’s review of the operational performance of the company and as a basis for strategic planning. 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. These non-GAAP financial measures reflect an additional way of viewing aspects of the company’s operations that, when viewed with GAAP results and the reconciliations to corresponding GAAP financial measures, may provide a more complete understanding of factors and trends affecting Medtronic’s business.
Because non-GAAP financial measures exclude the effect of items that will increase or decrease the company’s reported results of operations, management strongly encourages investors to review the company’s consolidated financial statements and publicly filed reports in their entirety. Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the financial schedules accompanying this release.

View FY15 Third Quarter Financial Schedules
View Updated Medtronic plc Revenue Reporting Changes and Historical Financials








 
MEDTRONIC, INC.
WORLD WIDE REVENUE
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Q3 FY15
 
 
 
Q3 FY15
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year over Year
 
Currency
 
Year over Year
 
 
FY14
 
FY14
 
FY14
 
FY14
 
FY14
 
FY15
 
FY15
 
FY15
 
FY15
 
FY15
 
Reported
 
Impact
 
Constant Currency
($ millions)
 
QTR 1
 
QTR 2
 
QTR 3
 
QTR 4
 
YTD
 
QTR 1
 
QTR 2
 
QTR 3
 
QTR 4
 
YTD
 
Growth
 
on Growth
 
Growth (a)
REPORTED REVENUE :
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
High Power
 
$
655

 
$
713

 
$
655

 
$
734

 
$
2,757

 
$
627

 
$
670

 
$
650

 
$
—

 
$
1,949

 
(1
)%
 
$
(28
)
 
4
 %
Low Power
 
474

 
477

 
439

 
503

 
1,892

 
525

 
524

 
489

 
—

 
1,538

 
11

 
(23
)
 
17

AF & Other
 
64

 
83

 
90

 
109

 
347

 
104

 
126

 
130

 
—

 
361

 
44

 
(5
)
 
50

CARDIAC RHYTHM & HEART FAILURE
 
1,193

 
1,273

 
1,184

 
1,346

 
4,996

 
1,256

 
1,320

 
1,269

 
—

 
3,848

 
7

 
(56
)
 
12

Coronary
 
435

 
427

 
436

 
446

 
1,744

 
428

 
413

 
407

 
—

 
1,247

 
(7
)
 
(21
)
 
(2
)
Structural Heart
 
313

 
281

 
281

 
337

 
1,212

 
338

 
330

 
330

 
—

 
998

 
17

 
(14
)
 
22

CORONARY & STRUCTURAL HEART
 
748

 
708

 
717

 
783

 
2,956

 
766

 
743

 
737

 
—

 
2,245

 
3

 
(35
)
 
8

AORTIC & PERIPHERAL VASCULAR
 
219

 
218

 
218

 
240

 
895

 
232

 
223

 
218

 
—

 
672

 
—

 
(10
)
 
5

CARDIAC & VASCULAR GROUP
 
2,160

 
2,199

 
2,119

 
2,369

 
8,847

 
2,254

 
2,286

 
2,224

 
—

 
6,765

 
5

 
(101
)
 
10

Core Spine
 
563

 
556

 
554

 
579

 
2,253

 
552

 
551

 
543

 
—

 
1,647

 
(2
)
 
(16
)
 
1

Interventional Spine
 
78

 
80

 
77

 
83

 
317

 
81

 
75

 
75

 
—

 
231

 
(3
)
 
(2
)
 
—

BMP
 
124

 
110

 
113

 
124

 
471

 
110

 
120

 
122

 
—

 
351

 
8

 
(1
)
 
9

SPINE
 
765

 
746

 
744

 
786

 
3,041

 
743

 
746

 
740

 
—

 
2,229

 
(1
)
 
(19
)
 
2

NEUROMODULATION
 
428

 
479

 
478

 
513

 
1,898

 
479

 
494

 
487

 
—

 
1,459

 
2

 
(13
)
 
5

SURGICAL TECHNOLOGIES
 
361

 
377

 
386

 
438

 
1,562

 
381

 
410

 
418

 
—

 
1,209

 
8

 
(11
)
 
11

RESTORATIVE THERAPIES GROUP
 
1,554

 
1,602

 
1,608

 
1,737

 
6,501

 
1,603

 
1,650

 
1,645

 
—

 
4,897

 
2

 
(43
)
 
5

DIABETES GROUP
 
369

 
393

 
436

 
460

 
1,657

 
416

 
430

 
449

 
—

 
1,295

 
3

 
(14
)
 
6

TOTAL
 
$
4,083

 
$
4,194

 
$
4,163

 
$
4,566

 
$
17,005

 
$
4,273

 
$
4,366

 
$
4,318

 
$
—

 
$
12,957

 
3.7
 %
 
$
(158
)
 
7.5
 %
 
(a)
Constant currency growth, a non-GAAP financial measure, measures the change in revenue between current and prior year periods using a constant currency, the exchange rate in effect during the applicable prior year period. See description of non-GAAP financial measures contained in this release.
Note: The data in this schedule has been intentionally rounded to the nearest million. Therefore, the quarterly revenue may not sum to the fiscal year to date revenue.







MEDTRONIC, INC.
U.S. REVENUE
(Unaudited)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Q3 FY15
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year over Year
 
 
FY14
 
FY14
 
FY14
 
FY14
 
FY14
 
FY15
 
FY15
 
FY15
 
FY15
 
FY15
 
Reported
($ millions)
 
QTR 1
 
QTR 2
 
QTR 3
 
QTR 4
 
YTD
 
QTR 1
 
QTR 2
 
QTR 3
 
QTR 4
 
YTD
 
Growth
REPORTED REVENUE :
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
High Power
 
$
386

 
$
429

 
$
375

 
$
395

 
$
1,585

 
$
354

 
$
390

 
$
380

 
$
—

 
$
1,123

 
1
 %
Low Power
 
187

 
202

 
172

 
212

 
773

 
241

 
247

 
242

 
—

 
730

 
41

AF & Other
 
34

 
49

 
51

 
59

 
194

 
59

 
63

 
64

 
—

 
185

 
25

CARDIAC RHYTHM & HEART FAILURE
 
607

 
680

 
598

 
666

 
2,552

 
654

 
700

 
686

 
—

 
2,038

 
15

Coronary
 
142

 
140

 
132

 
134

 
549

 
134

 
133

 
128

 
—

 
395

 
(3
)
Structural Heart
 
103

 
107

 
102

 
133

 
444

 
147

 
152

 
151

 
—

 
451

 
48

CORONARY & STRUCTURAL HEART
 
245

 
247

 
234

 
267

 
993

 
281

 
285

 
279

 
—

 
846

 
19

AORTIC & PERIPHERAL VASCULAR
 
81

 
84

 
81

 
87

 
332

 
84

 
84

 
82

 
—

 
250

 
1

CARDIAC & VASCULAR GROUP
 
933

 
1,011

 
913

 
1,020

 
3,877

 
1,019

 
1,069

 
1,047

 
—

 
3,134

 
15

Core Spine
 
369

 
365

 
364

 
369

 
1,468

 
352

 
358

 
359

 
—

 
1,068

 
(1
)
Interventional Spine
 
57

 
57

 
55

 
60

 
229

 
58

 
55

 
56

 
—

 
170

 
2

BMP
 
110

 
96

 
98

 
106

 
409

 
96

 
104

 
107

 
—

 
307

 
9

SPINE
 
536

 
518

 
517

 
535

 
2,106

 
506

 
517

 
522

 
—

 
1,545

 
1

NEUROMODULATION
 
294

 
338

 
330

 
343

 
1,304

 
322

 
349

 
340

 
—

 
1,011

 
3

SURGICAL TECHNOLOGIES
 
234

 
241

 
242

 
261

 
979

 
244

 
264

 
271

 
—

 
780

 
12

RESTORATIVE THERAPIES GROUP
 
1,064

 
1,097

 
1,089

 
1,139

 
4,389

 
1,072

 
1,130

 
1,133

 
—

 
3,336

 
4

DIABETES GROUP
 
209

 
230

 
271

 
271

 
981

 
242

 
257

 
279

 
—

 
778

 
3

TOTAL
 
$
2,206

 
$
2,338

 
$
2,273

 
$
2,430

 
$
9,247

 
$
2,333

 
$
2,456

 
$
2,459

 
$
—

 
$
7,248

 
8
 %

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







MEDTRONIC, INC.
INTERNATIONAL REVENUE
(Unaudited)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Q3 FY15
 
 
 
Q3 FY15
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year over Year
 
Currency
 
Year over Year
 
 
FY14
 
FY14
 
FY14
 
FY14
 
FY14
 
FY15
 
FY15
 
FY15
 
FY15
 
FY15
 
Reported
 
Impact
 
Constant Currency
($ millions)
 
QTR 1
 
QTR 2
 
QTR 3
 
QTR 4
 
YTD
 
QTR 1
 
QTR 2
 
QTR 3
 
QTR 4
 
YTD
 
Growth
 
on Growth
 
Growth (a)
REPORTED REVENUE :
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
High Power
 
$
269

 
$
284

 
$
280

 
$
339

 
$
1,172

 
$
273

 
$
280

 
$
270

 
$
—

 
$
826

 
(4
)%
 
$
(28
)
 
6
 %
Low Power
 
287

 
275

 
267

 
291

 
1,119

 
284

 
277

 
247

 
—

 
808

 
(7
)
 
(23
)
 
1

AF & Other
 
30

 
34

 
39

 
50

 
153

 
45

 
63

 
66

 
—

 
176

 
69

 
(5
)
 
82

CARDIAC RHYTHM & HEART FAILURE
 
586

 
593

 
586

 
680

 
2,444

 
602

 
620

 
583

 
—

 
1,810

 
(1
)
 
(56
)
 
9

Coronary
 
293

 
287

 
304

 
312

 
1,195

 
294

 
280

 
279

 
—

 
852

 
(8
)
 
(21
)
 
(1
)
Structural Heart
 
210

 
174

 
179

 
204

 
768

 
191

 
178

 
179

 
—

 
547

 
—

 
(14
)
 
8

CORONARY & STRUCTURAL HEART
 
503

 
461

 
483

 
516

 
1,963

 
485

 
458

 
458

 
—

 
1,399

 
(5
)
 
(35
)
 
2

AORTIC & PERIPHERAL VASCULAR
 
138

 
134

 
137

 
153

 
563

 
148

 
139

 
136

 
—

 
422

 
(1
)
 
(10
)
 
7

CARDIAC & VASCULAR GROUP
 
1,227

 
1,188

 
1,206

 
1,349

 
4,970

 
1,235

 
1,217

 
1,177

 
—

 
3,631

 
(2
)
 
(101
)
 
6

Core Spine
 
194

 
191

 
190

 
210

 
785

 
200

 
193

 
184

 
—

 
579

 
(3
)
 
(16
)
 
5

Interventional Spine
 
21

 
23

 
22

 
23

 
88

 
23

 
20

 
19

 
—

 
61

 
(14
)
 
(2
)
 
(5
)
BMP
 
14

 
14

 
15

 
18

 
62

 
14

 
16

 
15

 
—

 
44

 
—

 
(1
)
 
7

SPINE
 
229

 
228

 
227

 
251

 
935

 
237

 
229

 
218

 
—

 
684

 
(4
)
 
(19
)
 
4

NEUROMODULATION
 
134

 
141

 
148

 
170

 
594

 
157

 
145

 
147

 
—

 
448

 
(1
)
 
(13
)
 
8

SURGICAL TECHNOLOGIES
 
127

 
136

 
144

 
177

 
583

 
137

 
146

 
147

 
—

 
429

 
2

 
(11
)
 
10

RESTORATIVE THERAPIES GROUP
 
490

 
505

 
519

 
598

 
2,112

 
531

 
520

 
512

 
—

 
1,561

 
(1
)
 
(43
)
 
7

DIABETES GROUP
 
160

 
163

 
165

 
189

 
676

 
174

 
173

 
170

 
—

 
517

 
3

 
(14
)
 
12

TOTAL
 
$
1,877

 
$
1,856

 
$
1,890

 
$
2,136

 
$
7,758

 
$
1,940

 
$
1,910

 
$
1,859

 
$
—

 
$
5,709

 
(2
)%
 
$
(158
)
 
7
 %

(a)
Constant currency growth, a non-GAAP financial measure, measures the change in revenue between current and prior year periods using a constant currency, the exchange rate in effect during the applicable prior year period. See description of non-GAAP financial measures contained in this release.
Note: The data in this schedule has been intentionally rounded to the nearest million. Therefore, the quarterly revenue may not sum to the fiscal year to date revenue.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 







MEDTRONIC, INC.
RECONCILIATION OF EMERGING MARKET REVENUE GROWTH TO CONSTANT CURRENCY GROWTH
(Unaudited)
(in millions)
 
 
 
Three months ended
 
 
 
Currency Impact
 
Constant
 
 
January 23,
 
January 24,
 
Reported
 
on Growth
 
Currency
 
 
2015
 
2014
 
Growth
 
Dollar
 
Percentage
 
Growth (a)
Emerging Market Revenue (b)
 
$
542

 
$
513

 
6
%
 
$
(32
)
 
(6
)%
 
12
%
 
(a)
Constant currency growth, a non-GAAP financial measure, measures the change in revenue between current and prior year periods using a constant currency, the exchange rate in effect during the applicable prior year period. See description of non-GAAP financial measures contained in this release.
(b)
Emerging Market Revenue includes revenues from Asia Pacific (except Australia, Japan, Korea, and New Zealand), Central and Eastern Europe, Greater China, Latin America, the Middle East and Africa, and South Asia.



 
 
 
 
 
 
 
 
 
 
 
 
 





MEDTRONIC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
 
 
 
Three months ended
 
Nine months ended
 
 
January 23, 2015
 
January 24, 2014
 
January 23, 2015
 
January 24, 2014
 
 
(in millions, except per share data)
Net sales
 
$
4,318

 
$
4,163

 
$
12,957

 
$
12,440

 
 
 
 
 
 
 
 
 
Costs and expenses:
 
 
 
 
 
 
 
 
Cost of products sold
 
1,128

 
1,050

 
3,375

 
3,162

Research and development expense
 
373

 
360

 
1,112

 
1,092

Selling, general, and administrative expense
 
1,487

 
1,454

 
4,500

 
4,308

Special (gains) charges, net
 
(138
)
 
—

 
(38
)
 
40

Restructuring (credits) charges, net
 
—

 
(15
)
 
30

 
3

Certain litigation charges, net
 
—

 
—

 
—

 
24

Acquisition-related items
 
80

 
200

 
182

 
104

Amortization of intangible assets
 
89

 
89

 
265

 
263

Other expense, net
 
24

 
45

 
138

 
122

Interest expense, net
 
81

 
25

 
94

 
98

Total costs and expenses
 
3,124

 
3,208

 
9,658

 
9,216

 
 
 
 
 
 
 
 
 
Earnings before income taxes
 
1,194

 
955

 
3,299

 
3,224

 
 
 
 
 
 
 
 
 
Provision for income taxes
 
217

 
193

 
623

 
607

 
 
 
 
 
 
 
 
 
Net earnings
 
$
977

 
$
762

 
$
2,676

 
$
2,617

 
 
 
 
 
 
 
 
 
Basic earnings per share
 
$
0.99

 
$
0.76

 
$
2.71

 
$
2.61

 
 
 
 
 
 
 
 
 
Diluted earnings per share
 
$
0.98

 
$
0.75

 
$
2.68

 
$
2.58

 
 
 
 
 
 
 
 
 
Basic weighted average shares outstanding
 
983.8

 
998.3

 
986.6

 
1,002.7

Diluted weighted average shares outstanding
 
995.8

 
1,010.0

 
998.5

 
1,014.0

 
 
 
 
 
 
 
 
 
Cash dividends declared per common share
 
$
0.305

 
$
0.280

 
$
0.915

 
$
0.840






MEDTRONIC, INC.
NET EARNINGS AND DILUTED EPS GAAP TO NON-GAAP RECONCILIATION
(Unaudited)
(in millions, except per share data)
 
 
Three months ended January 23, 2015
 
Earnings Before Income Taxes
 
Net Earnings
 
Diluted EPS
GAAP
$
1,194

 
$
977

 
$
0.98

Adjustments:
 
 
 
 
 
Special gains (a)
(138
)
 
(87
)
 
(0.09
)
Acquisition-related items (b)
80

 
66

 
0.07

Impact of acquisition on interest expense (c)
77

 
49

 
0.05

As adjusted
$
1,213

 
$
1,005

 
$
1.01

 
 
 
 
 
 
 
Three months ended January 24, 2014
 
Earnings Before Income Taxes
 
Net Earnings
 
Diluted EPS
GAAP
$
955

 
$
762

 
$
0.75

Adjustments:
 
 
 
 
 
Restructuring credits (d)
(15
)
 
(13
)
 
(0.01
)
Acquisition-related items (e)
200

 
167

 
0.17

As adjusted
$
1,140

 
$
916

 
$
0.91

 
 
 
 
 
 
 
 
 
Net Earnings
 
Diluted EPS
Year over year percent change:
 
 
 
 
 
GAAP
 
 
28%
 
31%
As adjusted
 
 
10%
 
11%
See description of non-GAAP financial measures contained in this release.

(a)
The $(87) million ($(0.09) per share) after-tax ($(138) million pre-tax) special (gains) charges includes $(25) million after-tax ($(41) million pre-tax) gain on divestiture recognized in connection with the sale of a product line in the Surgical Technologies division and $(62) million after-tax ($(97) million pre-tax) net gain recognized in connection with the sale of a certain equity method investment.

(b)
The $66 million ($0.07 per share) after-tax ($80 million pre-tax) acquisition-related items primarily includes costs incurred in connection with the Covidien acquisition (bridge financing fees, legal fees, and other transaction- related costs).

(c)
The $49 million ($0.05 per share) after-tax ($77 million pre-tax) impact of acquisition on interest expense represents the incremental interest expense incurred to hold $17 billion of debt from December 10, 2014 through the end of the third quarter of fiscal year 2015. On December 10, 2014, Medtronic issued $17 billion of debt to finance, in part, the cash component of the Covidien acquisition consideration including the payment of certain transaction and financing expenses and for working capital and general corporate purposes, which may include repayment of indebtedness. The Covidien acquisition closed on January 26, 2015.

(d)
The $(13) million ($(0.01) per share) after-tax ($(15) million pre-tax) restructuring credits are a reversal of excess restructuring reserves related to the fiscal year 2013 restructuring initiative. This reversal was primarily a result of revisions to particular strategies and employees identified for elimination finding other positions within the Company.

(e)
The $167 million ($0.17 per share) after-tax ($200 million pre-tax) acquisition-related items primarily includes $204 million after-tax ($236 million pre-tax) impairment of long-lived assets related to the Ardian, Inc. (Ardian) acquisition and $39 million after-tax ($39 million pre-tax) net income related to the change in fair value of contingent consideration payments associated with acquisitions subsequent to April 29, 2009. In the third quarter of fiscal year 2014, the U.S. pivotal trial in renal denervation for treatment-resistant hypertension, Symplicity HTN-3, failed to meet its primary




efficacy endpoint. Therefore, the Company assessed the Ardian IPR&D and long-lived asset group for impairment. As a result, in the third quarter of fiscal year 2014, the Company recorded impairment charges of $166 million after-tax ($192 million pre-tax) related to IPR&D and $38 million after-tax ($44 million pre-tax) related to other long-lived assets. The change in fair value of contingent consideration payments is primarily related to adjustments in Ardian contingent consideration.

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

 
Nine months ended January 23, 2015
 
 
 
Earnings Before Income Taxes
 
Net Earnings
 
Diluted EPS
 
GAAP
 
$
3,299

 
$
2,676

 
$
2.68

 
Adjustments:
 
 
 
 
 
 
 
Special (gains) charges, net (a)
 
(38
)
 
(23
)
 
(0.02
)
 
Restructuring charges, net (b)
 
30

 
22

 
0.02

 
Acquisition-related items (c)
 
182

 
166

 
0.17

 
Impact of acquisition on interest expense (d)
 
77

 
49

 
0.05

 
As adjusted
 
$
3,550

 
$
2,890

 
$
2.89

(1)
 
 
 
 
 
 
 
 
 
Nine months ended January 24, 2014
 
 
 
Earnings Before Income Taxes
 
Net Earnings
 
Diluted EPS
 
GAAP
 
$
3,224

 
$
2,617

 
$
2.58

 
Adjustments:
 
 
 
 
 
 
 
Special charges (e)
 
40

 
26

 
0.03

 
Restructuring charges, net (f)
 
3

 
2

 
—

 
Certain litigation charges, net (g)
 
24

 
17

 
0.02

 
Acquisition-related items (h)
 
104

 
71

 
0.07

 
As adjusted
 
$
3,395

 
$
2,733

 
$
2.70

 
 
 
 
 
 
 
 
 
Year over year percent change
 
 
 
 
 
 
 
GAAP
 
 
 
2%
 
4%
 
As adjusted
 
 
 
6%
 
7%
 
 
 
 
 
 
 
 
 
See description of non-GAAP financial measures contained in this release.

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

(a)
The $(23) million ($(0.02) per share) after-tax ($(38) million pre-tax) special (gains) charges includes $64 million after-tax ($100 million pre-tax) charitable contribution made to the Medtronic Foundation, $(25) million after-tax ($(41) million pre-tax) gain on divestiture recognized in connection with the sale of a product line in the Surgical Technologies division and $(62) million after-tax ($(97) million pre-tax) net gain recognized in connection with the sale of a certain equity method investment.

(b)
The $22 million ($0.02 per share) after-tax ($30 million pre-tax) restructuring charges, net includes a $28 million after-tax ($38 million pre-tax) charge related to a continuation of our fourth quarter fiscal year 2014 restructuring initiative, partially offset by a $6 million after-tax ($8 million pre-tax) reversal of excess restructuring reserves related to the fiscal year 2014 restructuring initiative. The first quarter fiscal year 2015 restructuring charge for the fiscal year 2014 initiative consists primarily of contract termination and other related costs. The reversal was primarily a result of certain employees identified for elimination finding other positions within the Company and revisions to particular strategies.





(c)
The $166 million ($0.17 per share) after-tax ($182 million pre-tax) acquisition-related items primarily includes costs incurred in connection with the Covidien acquisition (bridge financing fees, legal fees, and other transaction- related costs).

(d)
The $49 million ($0.05 per share) after-tax ($77 million pre-tax) impact of acquisition on interest expense represents the incremental interest expense incurred to hold $17 billion of debt from December 10, 2014 through the end of the third quarter of fiscal year 2015. On December 10, 2014, Medtronic issued $17 billion of debt to finance, in part, the cash component of the Covidien acquisition consideration including the payment of certain transaction and financing expenses and for working capital and general corporate purposes, which may include repayment of indebtedness. The Covidien acquisition closed on January 26, 2015.

(e)
The $26 million ($0.03 per share) special charge represents an after-tax charitable cash donation ($40 million pre-tax) made to the Medtronic Foundation.

(f)
The $2 million (less than $0.01 per share) after-tax ($3 million pre-tax) restructuring charges, net is the net impact of a $15 million after-tax ($18 million pre-tax) charge related to a continuation of our fourth quarter fiscal year 2013 restructuring initiative, partially offset by a $13 million after-tax ($15 million pre-tax) reversal of excess restructuring reserves related to the fiscal year 2013 restructuring initiative. The restructuring charge consisted primarily of contract termination fees. The reversal was primarily a result of revisions to particular strategies and employees identified for elimination finding other positions within the Company.

(g)
The $17 million ($0.02 per share) after-tax ($24 million pre-tax) certain litigation charges, net relates to accounting charges for patent and Other Matters litigation.

(h)
The $71 million ($0.07 per share) after-tax ($104 million pre-tax) acquisition-related items includes $204 million after-tax ($236 million pre-tax) impairment of long-lived assets related to the Ardian acquisition and $135 million after-tax ($135 million pre-tax) net income related to the change in fair value of contingent consideration payments associated with acquisitions subsequent to April 29, 2009. In the third quarter of fiscal year 2014, the U.S. pivotal trial in renal denervation for treatment-resistant hypertension, Symplicity HTN-3, failed to meet its primary efficacy endpoint. Therefore, the Company assessed the Ardian IPR&D and long-lived asset group for impairment. As a result, in the third quarter of fiscal year 2014, the Company recorded impairment charges of $166 million after-tax ($192 million pre-tax) related to IPR&D and $38 million after-tax ($44 million pre-tax) related to other long-lived assets. The change in fair value of contingent consideration payments primarily related to adjustments in Ardian contingent consideration. In the first quarter of fiscal year 2014, the Company recorded after-tax net income of $96 million ($96 million pre-tax) related to the change in fair value of contingent consideration payments. In the third quarter of fiscal year 2014, the Company recorded after-tax net income of $39 million ($39 million pre-tax) related to the change in fair value of contingent consideration payments.





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

 
 
Nine months ended
 
Six months ended
 
Three months ended
 
 
January 23,
 
October 24,
 
January 23,
 
 
2015
 
2014
 
2015
Net cash provided by operating activities
 
$
2,990

 
$
1,223

 
$
1,767

Additions to property, plant, and equipment
 
(316
)
 
(210
)
 
(106
)
Free cash flow (a)
 
$
2,674

 
$
1,013

 
$
1,661

 
 
 
 
 
 
 
(a)
Free cash flow, a non-GAAP financial measure, is calculated by subtracting property, plant, and equipment additions from operating cash flows. See description of non-GAAP financial measures contained in this release.





MEDTRONIC, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
 
 
January 23, 2015
 
April 25, 2014
 
 
(in millions, except per share data)
ASSETS
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
17,231

 
$
1,403

Investments
 
13,917

 
12,838

Accounts receivable, less allowances of $108 and $115, respectively
 
3,568

 
3,811

Inventories
 
1,875

 
1,725

Tax assets
 
618

 
736

Prepaid expenses and other current assets
 
952

 
697

 
 
 
 
 
Total current assets
 
38,161

 
21,210

 
 
 
 
 
Property, plant, and equipment
 
6,343

 
6,439

Accumulated depreciation
 
(4,017
)
 
(4,047
)
Property, plant, and equipment, net
 
2,326

 
2,392

 
 
 
 
 
Goodwill
 
10,950

 
10,593

Other intangible assets, net
 
2,339

 
2,286

Long-term tax assets
 
207

 
300

Other assets
 
1,250

 
1,162

 
 
 
 
 
Total assets
 
$
55,233

 
$
37,943

 
 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
Short-term borrowings
 
$
2,185

 
$
1,613

Accounts payable
 
635

 
742

Accrued compensation
 
1,005

 
1,015

Accrued income taxes
 
173

 
164

Deferred tax liabilities
 
17

 
19

Other accrued expenses
 
1,598

 
2,006

 
 
 
 
 
Total current liabilities
 
5,613

 
5,559

 
 
 
 
 
Long-term debt
 
26,641

 
10,315

Long-term accrued compensation and retirement benefits
 
671

 
662

Long-term accrued income taxes
 
1,405

 
1,343

Long-term deferred tax liabilities
 
415

 
386

Other long-term liabilities
 
315

 
235

 
 
 
 
 
Total liabilities
 
35,060

 
18,500

 
 
 
 
 
Commitments and contingencies
 
 
 
 
 
 
 
 
 
Shareholders’ equity:
 
 
 
 
 
 
 
 
 
Preferred stock— par value $1.00
 
—

 
—

Common stock— par value $0.10
 
99

 
100

Retained earnings
 
20,735

 
19,940

Accumulated other comprehensive loss
 
(661
)
 
(597
)
 
 
 
 
 
Total shareholders’ equity
 
20,173

 
19,443

 
 
 
 
 
Total liabilities and shareholders’ equity
 
$
55,233

 
$
37,943






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

 
 
Nine months ended
 
 
January 23, 2015
 
January 24, 2014
(in millions)
 
 
 
 
Operating Activities:
 
 
 
 
Net earnings
 
$
2,676

 
$
2,617

Adjustments to reconcile net earnings to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
629

 
635

Amortization of debt discount and issuance costs
 
69

 
6

Acquisition-related items
 
2

 
99

Provision for doubtful accounts
 
25

 
34

Deferred income taxes
 
(20
)
 
(61
)
Stock-based compensation
 
115

 
108

Other, net
 
(96
)
 
(17
)
Change in operating assets and liabilities, net of acquisitions:
 
 
 
 
Accounts receivable, net
 
(60
)
 
86

Inventories
 
(245
)
 
(119
)
Accounts payable and accrued liabilities
 
702

 
(301
)
Other operating assets and liabilities
 
(1
)
 
523

Certain litigation charges, net
 
—

 
24

Certain litigation payments
 
(806
)
 
(3
)
Net cash provided by operating activities
 
2,990

 
3,631

Investing Activities:
 
 
 
 
Acquisitions, net of cash acquired
 
(611
)
 
(369
)
Additions to property, plant, and equipment
 
(316
)
 
(291
)
Purchases of investments
 
(5,327
)
 
(7,992
)
Sales and maturities of investments
 
4,351

 
5,606

Other investing activities, net
 
60

 
(23
)
Net cash used in investing activities
 
(1,843
)
 
(3,069
)
Financing Activities:
 
 
 
 
Acquisition-related contingent consideration
 
(5
)
 
(1
)
Change in short-term borrowings, net
 
7

 
935

Repayment of short-term borrowings (maturities greater than 90 days)
 
(150
)
 
(385
)
Proceeds from short-term borrowings (maturities greater than 90 days)
 
150

 
1,176

Issuance of long-term debt
 
16,918

 
—

Payments on long-term debt
 
(13
)
 
(10
)
Dividends to shareholders
 
(902
)
 
(839
)
Issuance of common stock
 
477

 
1,056

Repurchase of common stock
 
(1,620
)
 
(2,153
)
Other financing activities
 
(64
)
 
20

Net cash provided by (used in) financing activities
 
14,798

 
(201
)
Effect of exchange rate changes on cash and cash equivalents
 
(117
)
 
24

Net change in cash and cash equivalents
 
15,828

 
385

Cash and cash equivalents at beginning of period
 
1,403

 
919

Cash and cash equivalents at end of period
 
$
17,231

 
$
1,304

Supplemental Cash Flow Information
 
 
 
 
Cash paid for:
 
 
 
 
Income taxes
 
$
446

 
$
382

Interest
 
221

 
226





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