Medtronic 2012 Annual Report Download - page 57

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rechargeable DBS device. Additionally, Activa SC, a single-channel primary cell device, was
approved in the U.S. and Europe in fiscal year 2011 and launched in Japan during the fourth
quarter of fiscal year 2012.
• Continued acceptance of InterStim Therapy for the treatment of the symptoms of overactive
bladder, urinary retention, and bowel control. InterStim Therapy for Bowel Control was previously
launched in certain international markets, including Europe, and launched in the U.S. during the
first quarter of fiscal year 2012.
• Continued acceptance from both physicians and patients of insulin-pump therapy and CGM
therapy and continued acceptance and improved reimbursement of CGM technologies. The Veo
insulin pump is available in certain international markets and offers low-glucose suspend, which
assists in protecting against the risk of hypoglycemia by automatically suspending insulin delivery
when glucose falls below a specified threshold set by the user. In addition, the Revel insulin pump
is available in the U.S., extending our line of sensor-augmented therapy options available on the
market. Additionally, the Enlite sensor was launched in certain international markets in the fourth
quarter of fiscal year 2011 and we are actively pursuing regulatory approval for the U.S.
• Given the elective nature of an insulin pump and CGM for the management of diabetes and the
possible high out-of-pocket costs to the customer, macroeconomic pressures could negatively
impact the near-term sales growth within the Diabetes business.
• Continued integration of Salient into our Surgical Technologies business. Salient was acquired on
August 31, 2011. Salient develops and markets devices for haemostatic sealing of soft tissue and
bone incorporating advanced energy technology. Salient’s devices are used in a variety of surgical
procedures including orthopedic surgery, spine, open abdominal, and thoracic procedures. We
believe this acquisition should increase our competitive position in this market.
• Continued integration of PEAK into our Surgical Technologies business. PEAK was acquired on
August 31, 2011. PEAK develops and markets tissue dissection devices incorporating advanced
energy technology. PEAK’s PlasmaBlade tissue dissection device is based on proprietary
technology that represents an important advance in radiofrequency surgical technologies. We
believe this acquisition should increase our competitive position in this market.
• Continued acceptance of the Surgical Technologies StealthStation S7 and O-Arm Imaging Systems,
especially with Synergy Spine 2.0 and the O-Arm 3.1.4.
• Continued acceptance of the Surgical Technologies NIM 3.0 Nerve Monitoring System.
Costs and Expenses
The following is a summary of major costs and expenses as a percent of net sales:
Fiscal Year
__________________________________________
2012 2011 2010
________ ________ ________
Cost of products sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.0% 23.9% 23.3%
Research and development . . . . . . . . . . . . . . . . . . . . . . . . 9.2 9.5 9.3
Selling, general, and administrative . . . . . . . . . . . . . . . . . 34.7 35.0 34.3
Restructuring charges, net . . . . . . . . . . . . . . . . . . . . . . . . . 0.5 1.7 0.3
Certain litigation charges, net . . . . . . . . . . . . . . . . . . . . . . 0.6 1.6 2.4
Acquisition-related items . . . . . . . . . . . . . . . . . . . . . . . . . . 0.1 0.1 0.1
Amortization of intangible assets . . . . . . . . . . . . . . . . . . . 2.1 2.2 2.1
Other expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2 0.7 1.0
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.9 1.8 1.6
Cost of Products Sold Cost of products sold was $3.889 billion in fiscal year 2012, representing
24.0 percent of net sales, reflecting an increase of 0.1 of a percentage point from fiscal year 2011. Cost of
products sold as a percent of net sales was negatively impacted by 0.4 of a percentage point of unfavorable
manufacturing spending impact primarily driven by unfavorable manufacturing variances, manufacturing
support, and freight, partially offset by 0.3 of a percentage point of favorable foreign currency translation.
In fiscal year 2012, we completed our initial $1 billion cost of products sold reduction program. We are
starting a new product cost reduction program in fiscal year 2013 with the goal of reducing cost of products
sold by more than $1 billion over the next five years.
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