Medtronic 2014 Annual Report Download - page 44

Net earnings for the fiscal year ended April 25, 2014 were $3.065 billion, or $3.02 per diluted share, as compared to net
earnings of $3.467 billion, or $3.37 per diluted share for the fiscal year ended April 26, 2013, representing a decrease of
12 percent and 10 percent, respectively. Fiscal year 2014 net earnings included after-tax special charges, restructuring charges,
net, certain litigation charges, net, acquisition-related items, and certain tax adjustments that decreased net earnings by an
aggregate of $803 million ($1.015 billion pre-tax). Fiscal year 2013 net earnings included after-tax restructuring charges, net,
certain litigation charges, net, and acquisition-related items that decreased net earnings by an aggregate of $331 million ($378
million pre-tax). See further discussion of these items in the “Special Charges, Restructuring Charges, Net, Certain Litigation
Charges, Net, Acquisition-Related Items, and Certain Tax Adjustments” section of this management’s discussion and analysis.
The table below illustrates net sales by operating segments for fiscal years 2014 and 2013:
Net Sales
Fiscal Year
(dollars in millions) 2014 2013 % Change
Cardiac and Vascular Group $ 8,847 $ 8,695 2%
Restorative Therapies Group 6,501 6,369 2
Diabetes Group 1,657 1,526 9
Total Net Sales $ 17,005 $ 16,590 3%
Net sales in fiscal year 2014 were $17.005 billion, an increase of 3 percent from the prior fiscal year. Foreign currency
translation had an unfavorable impact of $175 million on net sales compared to the prior fiscal year. Net sales growth for fiscal
year 2014 was driven by 2 percent growth in our Cardiac and Vascular Group, 2 percent growth in our Restorative Therapies
Group, and 9 percent growth in our Diabetes Group compared to the prior fiscal year. The Cardiac and Vascular Group’s
performance was primarily a result of strong net sales in AF and Other, and solid growth in Structural Heart and Endovascular,
partially offset by slight declines in Coronary and CRDM defibrillation and pacing systems which is primarily due to pricing
pressures. Additionally, the Cardiac and Vascular Group’s performance was favorably affected by new products and the August
2013 acquisition of Cardiocom and January 2014 acquisition of TYRX. The Restorative Therapies Group’s performance was a
result of strong net sales in Surgical Technologies and growth in Neuromodulation, partially offset by declines in Spine,
primarily driven by BMP (composed of INFUSE bone graft (InductOs in the EU)) and balloon kyphoplasty (BKP). The
Diabetes Group’s performance was due to strong net sales in the U.S. driven by the launch of the MiniMed 530G System with
Enlite Sensor as well as strong net sales in international markets driven by the continued adoption and use of the Veo insulin
pump with low-glucose suspend and Enlite CGM sensor. 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.
Pending Acquisition of Covidien plc On June 15, 2014, Medtronic entered into a Transaction Agreement (the Transaction
Agreement) by and among Medtronic, Covidien public limited company, an Irish public limited company (Covidien), Kalani I
Limited, a private limited company organized under the laws of Ireland (New Medtronic), Makani II Limited, a private limited
company organized under the laws of Ireland and a wholly-owned subsidiary of New Medtronic (IrSub), Aviation Acquisition
Co., Inc., a Minnesota corporation (U.S. AcquisitionCo), and Aviation Merger Sub, LLC, a Minnesota limited liability company
and a wholly-owned subsidiary of U.S. AcquisitionCo (MergerSub). Under the terms of the Transaction Agreement,
(i) New Medtronic and IrSub will acquire Covidien (the Acquisition) pursuant to the Irish Scheme of Arrangement under
Section 201, and a capital reduction under Sections 72 and 74, of the Irish Companies Act of 1963 (the Arrangement) and
(ii) MergerSub will merge with and into Medtronic, with Medtronic as the surviving corporation in the merger (such merger, the
Merger, and the Merger together with the Acquisition, the Pending Acquisition). As a result of the Pending Acquisition, both
Medtronic and Covidien will become wholly-owned direct or indirect subsidiaries of New Medtronic.
At the effective time of the Arrangement, (a) Covidien shareholders will be entitled to receive $35.19 in cash and 0.956 of a
newly issued New Medtronic share (the Arrangement Consideration) in exchange for each Covidien share held by such
shareholders, and (b) each share of Medtronic common stock will be converted into the right to receive one New Medtronic
share. The total cash and stock value of the Pending Acquisition is approximately $42.9 billion based on Medtronic’s closing
share price of $60.70 on June 13, 2014. It is expected that immediately after the closing of the Pending Acquisition, Covidien
shareholders will own approximately 30 percent of New Medtronic on a fully diluted basis. Shares of New Medtronic are
expected to trade on the New York Stock Exchange.
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