Medtronic 2013 Annual Report Download - page 48

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Table of Contents
The table below illustrates net sales by operating segments for fiscal years 2013 and 2012:
Net Sales
Fiscal Year
(dollars in millions) 2013 2012 % Change
Cardiac and Vascular Group $ 8,695 $ 8,482 3%
Restorative Therapies Group 7,895 7,702 3
Total Net Sales $ 16,590 $ 16,184 3
Net sales in fiscal year 2013 were $16.590 billion, an increase of 3 percent from the prior fiscal year. Foreign currency translation
had an unfavorable impact of $328 million on net sales when compared to the prior fiscal year. Net sales growth for fiscal year
2013 was driven by a 3 percent increase in both the Cardiac and Vascular Group and Restorative Therapies Group when compared
to the prior fiscal year. The Cardiac and Vascular Group’s performance was primarily a result of strong net sales in Coronary,
Endovascular, AF Solutions, and solid growth in Structural Heart, partially offset by declines in CRDM defibrillation and pacing
systems. The Cardiac and Vascular Group’s performance was favorably affected by new products, partially offset by competitive
pricing pressures and negative growth of certain markets, particularly defibrillation and pacing systems. However, during fiscal
year 2013, the U.S. defibrillation systems market showed signs of stabilization. Our Restorative Therapies Group’s performance
was a result of strong net sales in Surgical Technologies, as well as solid growth in Neuromodulation and Diabetes, partially offset
by declines in Spine, primarily driven by bone morphogenetic protein (BMP) and balloon kyphoplasty (BKP). The Restorative
Therapies Group’s performance was favorably affected by the recent launches and continued adoption of new products, strong
sales of capital equipment, the acquisitions of Salient and PEAK in the second quarter of fiscal year 2012, and continued signs of
stabilization in the U.S. Core Spine market, and negatively affected by continued pricing and competitive pressures. See our
discussion in the “Net Sales” section of this management’s discussion and analysis for more information on the results of our
operating segments.
We remain committed to our Mission of developing lifesaving and life-enhancing therapies to alleviate pain, restore health, and
extend life.
Critical Accounting Estimates
We have adopted various accounting policies to prepare the consolidated financial statements in accordance with accounting
principles generally accepted in the U.S. (U.S. GAAP). Our most significant accounting policies are disclosed in Note 1 to the
consolidated financial statements in “Item 8. Financial Statements and Supplementary Data” in this Annual Report on Form
The preparation of the consolidated financial statements, in conformity with U.S. GAAP, requires us to make estimates and
assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Our estimates and
assumptions, including those related to bad debts, inventories, intangible assets, asset impairment, legal proceedings, in-process
research and development (IPR&D), contingent consideration, warranty obligations, product liability, self-insurance, pension and
post-retirement obligations, sales returns and discounts, stock-based compensation, valuation of equity and debt securities, and
income tax reserves are updated as appropriate, which in most cases is quarterly. We base our estimates on historical experience,
actuarial valuations, or various assumptions that are believed to be reasonable under the circumstances.
Estimates are considered to be critical if they meet both of the following criteria: (1) the estimate requires assumptions about
material matters that are uncertain at the time the accounting estimates are made, and (2) material changes in the estimates are
reasonably likely to occur from period to period. Our critical accounting estimates include the following:
Legal Proceedings We are involved in a number of legal actions involving product liability, intellectual property disputes,
shareholder derivative actions, securities class actions, and other class actions. The outcomes of these legal actions are not within
our complete control and may not be known for prolonged periods of time. In some actions, the claimants seek damages, as well
as other relief (including injunctions barring the sale of products that are the subject of the lawsuit), that could require significant
expenditures or result in lost revenues. In accordance with U.S. GAAP, we record a liability in our consolidated financial statements
for loss contingencies when a loss is known or considered probable and the amount can be reasonably estimated. If the reasonable
estimate of a known or probable loss is a range, and no amount within the range is a better estimate than any other, the minimum
amount of the range is accrued. If a loss is reasonably possible but not known or probable, and can be reasonably estimated, the
estimated loss or range of loss is disclosed in the notes to the consolidated financial statements. When determining the estimated
loss or range of loss, significant judgment is required to estimate the amount and timing of a loss to be recorded. Estimates of
probable losses resulting from litigation and governmental proceedings involving the Company are inherently difficult to predict,
particularly when the matters are in early procedural stages, with incomplete scientific facts or legal discovery; involve
unsubstantiated or indeterminate claims for damages; potentially involve penalties, fines, or punitive damages; or could result in
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