Medtronic 2009 Annual Report Download - page 22

18 Medtronic, Inc.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
Understanding Our Financial Information
The following discussion and analysis provides information
management believes to be relevant to understanding the
financial condition and results of operations of Medtronic, Inc.
(Medtronic or the Company). You should read this discussion and
analysis along with our consolidated financial statements and
related Notes thereto as of April 24, 2009 and April 25, 2008 and
for each of the three fiscal years ended April 24, 2009, April 25,
2008 and April 27, 2007.
Organization of Financial Information Management’s discussion
and analysis, presented on pages 18 to 46 of this report, provides
material historical and prospective disclosures designed to enable
investors and other users to assess our financial condition and
results of operations.
The consolidated financial statements are presented on pages
49 to 97 of this report, and include the consolidated statements
of earnings, consolidated balance sheets, consolidated statements
of shareholders’ equity, consolidated statements of cash flows
and the related Notes, which are an integral part of the
consolidated financial statements.
Financial Trends Throughout this financial information, you will
read about transactions or events that materially contribute to
or reduce earnings and materially affect financial trends. We refer
to these transactions and events as either special (such as asset
impairment or contributions to The Medtronic Foundation),
restructuring, certain litigation and purchased in-process research
and development (IPR&D) charges, or certain tax adjustments.
These charges, or benefits, result from facts and circumstances
that vary in frequency and/or impact to operations. While
understanding these charges or benefits is important to
understanding and evaluating financial trends, other transactions
or events may also have a material impact on financial trends.
A complete understanding of the special, restructuring, certain
litigation and IPR&D charges and certain tax adjustments is
necessary in order to estimate the likelihood that financial trends
will continue.
Our fiscal year-end is the last Friday in April, and, therefore, the
total weeks in a fiscal year can fluctuate between fifty-two and
fifty-three weeks. Fiscal years 2009, 2008 and 2007 consisted of
fifty-two weeks. Fiscal year 2010 will be a fifty-three week year.
Executive Level Overview
We are the global leader in medical technology—alleviating pain,
restoring health and extending life for millions of people around
the world. We function in seven operating segments, consisting
of Cardiac Rhythm Disease Management (CRDM), Spinal,
CardioVascular, Neuromodulation, Diabetes, Surgical Technologies
and Physio-Control.
Through these seven operating segments, we develop,
manufacture, and market our medical devices in more than 120
countries. Our primary products include those for cardiac rhythm
disorders, cardiovascular disease, neurological disorders, spinal
conditions and musculoskeletal trauma, urological and digestive
disorders, diabetes, and ear, nose, and throat conditions.
Net earnings for the fiscal year ended April 24, 2009 were $2.169
billion, a 3 percent decrease from net earnings of $2.231 billion
for the fiscal year ended April 25, 2008. Diluted earnings per share
were $1.93 and $1.95 for the fiscal years ended April 24, 2009
and April 25, 2008, respectively. Fiscal year 2009 net earnings
included after-tax special, restructuring, certain litigation and
IPR&D charges and certain tax adjustments that decreased net
earnings by $1.114 billion and had a $0.99 impact on diluted
earnings per share. Fiscal year 2008 net earnings included after-
tax special, restructuring, certain litigation and IPR&D charges that
decreased net earnings by $742 million and had a $0.65 impact
on diluted earnings per share. See further discussion of these
charges/benefits in the “Special, Restructuring, Certain Litigation
and IPR&D Charges and Certain Tax Adjustments” section of this
management’s discussion and analysis.
Net Sales
Fiscal Year
(dollars in millions) 2009 2008 % Change
Cardiac Rhythm Disease Management $ 5,014 $ 4,963 1%
Spinal 3,400 2,982 14
CardioVascular 2,437 2,131 14
Neuromodulation 1,434 1,311 9
Diabetes 1,114 1,019 9
Surgical Technologies 857 780 10
Physio-Control 343 329 4
Total Net Sales $14,599 $13,515 8%
Net sales in fiscal year 2009 were $14.599 billion, an increase of
8 percent from the prior fiscal year. Foreign currency translation
had an unfavorable impact of $100 million on net sales when
compared to the prior fiscal year. The net sales increase in the
current fiscal year was driven by the addition of Kyphon to our
Spinal business in the third quarter of fiscal year 2008 and double
digit sales growth in the CardioVascular and Surgical Technologies
businesses. Sales outside the United States (U.S.) were $5.602
billion compared to $5.179 billion for the prior fiscal year. Growth
outside the U.S. continued to be positive, where three of our
operating segments had strong double digit growth rates. See
our discussion in the “Net Sales” section of this management’s