Medtronic 2010 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 30, 2010 and April 24, 2009 and
for each of the three fiscal years ended April 30, 2010, April 24,
2009 and April 25, 2008.
Organization of Financial Information Management’s discussion
and analysis, presented on pages 1 to 45 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
48 to 101 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 management’s discussion and
analysis, 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
charges (such as asset impairments or contributions to The
Medtronic Foundation), restructuring charges, certain litigation
charges, net, purchased in-process research and development
(IPR&D) and certain acquisition-related costs, 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 charges, restructuring
charges, certain litigation charges, net, IPR&D and certain
acquisition-related costs and certain tax adjustments is necessary
in order to estimate the likelihood that financial trends may
continue.
Our fiscal year-end is the last Friday in April, and, therefore, the
total weeks in a fiscal year can fluctuate between 52 and 53
weeks. Fiscal years 2009 and 2008 consisted of 52 weeks. Fiscal
year 2010 was a 53-week year, resulting in a favorable impact on
our net sales compared to the prior fiscal 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 30, 2010 were
$3.099 billion, a 50 percent increase from net earnings of $2.070
billion for the fiscal year ended April 24, 2009. Diluted earnings
per share were $2.79 and $1.84 for the fiscal years ended April 30,
2010 and April 24, 2009, respectively. Fiscal year 2010 net earnings
included after-tax restructuring charges, certain litigation charges,
net, and IPR&D and certain acquisition-related costs that decreased
net earnings by $374 million and had a $0.34 impact on diluted
earnings per share. Fiscal year 2009 net earnings included after-tax
special charges, restructuring charges, certain litigation charges,
net, IPR&D and certain acquisition-related costs and certain tax
adjustments that decreased net earnings by $1.114 billion and had
a $0.99 impact on diluted earnings per share. See further
discussion of these charges/benefits in the “Special Charges,
Restructuring Charges, Certain Litigation Charges, Net, IPR&D and
Certain Acquisition-Related Costs and Certain Tax Adjustments”
section of this management’s discussion and analysis.
Net Sales
Fiscal Year
(dollars in millions) 2010 2009 % Change
Cardiac Rhythm Disease Management $ 5,268 $ 5,014 5%
Spinal 3,500 3,400 3
CardioVascular 2,864 2,437 18
Neuromodulation 1,560 1,434 9
Diabetes 1,237 1,114 11
Surgical Technologies 963 857 12
Physio-Control 425 343 24
Total Net Sales $15,817 $14,599 8%
Net sales in fiscal year 2010 were $15.817 billion, an increase of
8 percent from the prior fiscal year. Foreign currency translation
had a favorable impact of $113 million on net sales when compared
to the prior fiscal year. The net sales increase in the current fiscal
year was driven by double digit sales growth in four of our