FORM 10-K/A (AMENDMENT NO. 2)
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934. FOR THE FISCAL YEAR ENDED APRIL 30, 1995
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934. FOR THE TRANSITION PERIOD FROM ________ TO _________
COMMISSION FILE NO. 1-7707
[LOGO]
MEDTRONIC, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
MINNESOTA 41-0793183
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
7000 CENTRAL AVENUE N.E.
MINNEAPOLIS, MINNESOTA 55432
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
TELEPHONE NUMBER: (612) 574-4000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
COMMON STOCK, PAR VALUE $.10 PER SHARE NEW YORK STOCK EXCHANGE, INC.
PREFERRED STOCK PURCHASE RIGHTS NEW YORK STOCK EXCHANGE, INC.
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO
SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES _X_ NO ___
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405
OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF THE REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY
AMENDMENT TO THIS FORM 10-K. ( )
AGGREGATE MARKET VALUE OF VOTING STOCK OF MEDTRONIC, INC. HELD BY NONAFFILIATES
OF THE REGISTRANT AS OF JULY 7, 1995, BASED ON THE CLOSING PRICE OF $77.00 AS
REPORTED ON THE NEW YORK STOCK EXCHANGE: $8.76 BILLION.
SHARES OF COMMON STOCK OUTSTANDING ON JULY 7, 1995: 115,513,007
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF REGISTRANT'S 1995 ANNUAL SHAREHOLDER REPORT ARE INCORPORATED BY
REFERENCE INTO PARTS I, II AND IV; PORTIONS OF REGISTRANT'S PROXY STATEMENT FOR
ITS 1995 ANNUAL MEETING ARE INCORPORATED BY REFERENCE INTO PART III.
This Form 10-K/A amends portions of Exhibit 13 to the Form 10-K.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Dated: May 24, 1996 MEDTRONIC, INC.
By: /s/ William W. George
William W. George
President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, the report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Dated: May 24, 1996
By: /s/ William W. George
William W. George
President and
Chief Executive Officer
Dated: May 24, 1996
By: /s/ Robert L. Ryan
Robert L. Ryan
Senior Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
F. CALEB BLODGETT
ARTHUR D. COLLINS, JR.
WILLIAM W. GEORGE
ANTONIO M. GOTTO, JR., M.D.
BERNADINE P. HEALY, M.D.
VERNON H. HEATH
THOMAS E. HOLLORAN DIRECTORS
GLEN D. NELSON, M.D.
RICHARD L. SCHALL
JACK W. SCHULER
GERALD W. SIMONSON
GORDON M. SPRENGER
RICHARD W. SWALIN, PH.D.
WINSTON R. WALLIN
Ronald E. Lund, by signing his name hereto, does hereby sign this document on
behalf of each of the above named directors of the registrant pursuant to
powers of attorney duly executed by such persons.
Dated: May 24, 1996 By: /s/ Ronald E. Lund
Ronald E. Lund
Attorney-in-Fact
NOTE: Throughout this Annual Report, references to years, when used alone, refer
to fiscal years ended April 30.
MANAGEMENT'S DISCUSSION AND ANALYSIS
SUMMARY
Medtronic is the world's leading therapeutic medical technology company,
developing, manufacturing, and marketing therapies for improving cardiovascular
and neurological health. Primary products include implantable pacemaker systems
used for the treatment of bradycardia, implantable tachyarrhythmia management
systems, mechanical and tissue heart valves, balloon and guiding catheters and
stents used in angioplasty, implantable neuro stimulation and drug delivery
systems, and perfusion systems including blood oxygenators, centrifugal blood
pumps, cannula products, and autotransfusion and blood monitoring systems. The
company reports on three business units--Pacing, Other Cardiovascular, and
Neurological and Other--and three geographic areas--the Americas, Europe/Middle
East/Africa, and Asia/Pacific.
Fiscal 1995 was another record year for the company, evidenced by the doubling
of the stock price from April 1994 to April 1995 (after adjusting for the
September 1994 stock split paid in the form of a 100% stock dividend). Net sales
of $1.7 billion represent a 25.3% increase over 1994. Net sales on a comparable
operations basis (i.e., after adjusting for the effects of prior year
acquisitions and a divestiture and foreign currency translations), increased
16.5% compared to increases of 11.3% in 1994 and 13.0% in 1993. Net earnings and
earnings per share increased 26.5% and 26.2% to $294.0 million and $2.55,
respectively. The growth during 1995 was the result of solid contributions from
each of the businesses and geographic areas and was accelerated by significant
new product and therapy introductions. These product introductions included the
Thera family of six new bradycardia pacing pulse generators, the Jewel family of
tachyarrhythmia devices, and the Evergreen balloon catheter. Other product
introductions which occurred late in the year included the Falcon rapid-exchange
catheter and the Atakr cardiac ablation system.
Worldwide health care markets continue to change. Developed world markets,
including the United States and Europe, continue to focus on cost controls and
cost-effective therapies. The developing markets in China and Latin America are
increasing their focus on the health and well-being of their citizens.
Management believes that the company's broad base of proven, cost-effective
products coupled with the strength of its worldwide manufacturing, marketing,
and distribution capabilities will enable the company to continue to meet the
needs of these changing markets and gain market share. In addition, the company
is committed to continuing development of technologically advanced, more
cost-effective products and therapies.
NET SALES
The increase in net sales from 1994 to 1995 on a comparable operations basis was
primarily the result of increases in unit volume. Selling prices for the
company's products overall remained relatively stable despite the market's focus
on cost controls and competitive pricing, an indication of the cost
effectiveness of the company's products. Sales in the United States in 1995
increased 15.2% on a comparable operations basis over the prior year, compared
to 10.9% in 1994. Sales outside the United States increased 18.2% on a
comparable operations basis compared to 11.9% in 1994. Sales in non-U.S. markets
accounted for 43.8% of worldwide net sales, compared with 42.5% in 1994 and
42.0% in 1993. However, foreign exchange rate movements had a favorable
year-to-year impact of $59.1 million and $22.0 million on international net
sales in 1995 and 1993, respectively and an unfavorable impact of $30.8 million
in 1994. Exclusive of the effects of foreign currency, non-U.S. net sales as a
percentage of total net sales increased in each of the three years. The impact
of foreign currency fluctuations on net sales is not necessarily indicative of
the impact on net earnings due to the offsetting foreign currency impact on
costs and expenses and the company's hedging activities (see Note 3 to the
consolidated financial statements for further details on foreign currency
instruments and the company's risk management strategies with respect thereto).
As reflected in such Note 3, realized losses on the company's hedging activities
were offset by the transactions being hedged and therefore are consistent with
the company's risk management strategies.
The following is a summary of sales by business unit as a percentage of total
net sales:
Year ended April 30, 1995 1994 1993
Pacing 65.5% 67.2% 65.7%
Other Cardiovascular 26.1 23.6 22.9
Neurological & Other 8.4 9.2 11.4
<PAGE> 33
MANAGEMENT'S DISCUSSION AND ANALYSIS
Net sales of the Pacing business, consisting mainly of Bradycardia Pacing and
Tachyarrhythmia Management, increased 17.6% over the prior year on a comparable
operations basis versus growth of 12.0% in 1994. The increase in the growth rate
from 1994 to 1995 was attributable to worldwide contributions from both
bradycardia and tachyarrhythmia management devices. Bradycardia unit sales of
implantable pulse generators (IPGs) achieved mid-teens percentage growth led by
the Thera family of pacemakers. The Thera family, which consists of IPGs, a
specialized pacemaker lead, and a new model 9790 programmer, was commercially
released in Europe in March 1994 and was cleared by the Food and Drug
Administration (FDA) for commercial sale in the United States in January 1995.
Significant sales growth within the Tachyarrhythmia Management business was
primarily attributable to the Jewel family of implantable
cardioverter-defibrillators (ICDs). The first Jewel devices were introduced
outside the United States in December 1993. In November 1994, two additional
technologically advanced models of the Jewel were introduced outside the United
States, and in March 1995, the FDA cleared five Jewel models for commercial sale
in the United States. All of the Jewel devices are programmable using the 9790
programmer.
The Thera and Jewel product lines contributed significantly to the overall sales
growth of the company in 1995 and are expected to continue to perform well in
the future. Management believes the Pacing business is well positioned for
continued growth based on the proven cost effectiveness of the products and the
company's commitment to continue to develop technologically advanced products.
The next generation of products for both bradycardia and tachyarrhythmia
management, Thera i series and Jewel Plus, respectively, are currently in
clinical evaluation.
The Other Cardiovascular business unit, consisting of Interventional Vascular,
Cardiopulmonary, Blood Management, DLP and Heart Valves, accounted for an
increased proportion of total net sales. Excluding the effects of acquisitions
and foreign currency translation, net sales of the Other Cardiovascular business
unit increased 12.2% compared with 8.4% in 1994. The Interventional Vascular
business again reported strong double digit sales growth. Product introductions
significantly broadened both the balloon and guiding catheter product lines and
led to substantially increased worldwide unit sales. Balloon catheter sales
growth was led by the Panther and Evergreen over-the-wire catheters, and strong
growth in sales of guiding catheters was led by the new Ascent product line. The
overall increase in unit growth of balloon catheters continued to be partially
offset by declining average selling prices in the United States. Selling prices
have deteriorated over the past two years as a result of increased price
competition. It is unclear to what extent erosion of selling prices will
continue into 1996. Within the Cardiopulmonary and Blood Management businesses,
centrifugal blood pumps and oxygenators contributed double digit percentage
revenue growth. The growth on a comparable operation basis was augmented by
contributions from Electromedics, acquired in late 1994. In addition, DLP, also
acquired in late 1994, contributed to the overall growth of the Other
Cardiovascular business unit. Heart Valves reported moderate revenue growth. The
overall growth of the Other Cardiovascular business was boosted by significant
progress in the company's Cardiovascular Alliance program of multi-line
contracting. This program allows customers to take advantage of the company's
breadth of products by purchasing a broad variety of products under a single
contract, thereby reducing administrative and product costs.
Net sales of the Neurological and Other businesses, primarily consisting of
implantable neurostimulation devices, drug administration systems, and
components, continued to record strong growth. Net sales on a comparable
operations basis grew 19.5% over the previous year compared to growth of 14.5%
in 1994. Sales growth in 1995 was led by the implantable SynchroMed infusion
system. In March 1994 the U.S. Health Care Financing Administration authorized
Medicare reimbursement for use of the SynchroMed system with Lioresal
Intrathecal for the treatment of chronic spasticity of spinal cord origin and
morphine for malignant pain. In February 1995, the FDA granted a Treatment
Protocol for the use of Lioresal Intrathecal in the treatment of spasticity of
cerebral origin. The Itrel II implantable neurostimulation system also realized
solid double digit percentage growth in 1995. In February 1995, a new
neurostimulation therapy to control the involuntary motion and trembling
associated with Parkinson's disease or essential tremor was commercially
released outside the United States.
<PAGE> 34
COSTS AND EXPENSES
The following is a summary of major costs and expenses as a percentage of net
sales:
Year ended April 30, 1995 1994 1993
Cost of Products Sold 31.0% 31.0% 31.6%
Research & Development 11.0 11.2 10.0
Selling, General & Administrative 33.0 33.8 36.1
Cost of products sold as a percentage of net sales in 1995 remained consistent
with 1994 as cost savings from increased production levels and cost-control
efforts were offset by increased start-up costs related to new product
introductions and fluctuations in product mix. The efficiencies of higher
production levels were most evident in bradycardia and tachyarrhythmia
management devices, drug administration system devices, and interventional
vascular products. The decrease in cost of sales as a percent of sales from 1993
to 1994 was primarily the result of the divestitures of lower margin product
lines, productivity increases, and effective cost controls. Gross margins will
continue to be impacted by regulatory and competitive pricing pressures, new
product introductions, the mix of products both within and between businesses,
productivity fluctuations, and the effects of foreign currency fluctuations.
The company continued its commitment and strategy of achieving long-term growth,
in part, by investing in research and development (R&D). R&D expense increased
22.4% to $191.4 million in 1995 from $156.3 million in 1994. Investing
significant resources in R&D is intended to result in future revenue growth and
market share gains by developing technological enhancements and new indications
for existing products as well as developing new technologies to address unmet
patient needs. The success of this strategy is reflected in the rapid market
acceptance of new, technologically advanced products during 1995.
Selling, general, and administrative expense (SG&A) as a percent of sales
decreased slightly in 1995 primarily due to overall cost efficiencies and
accelerated revenue growth. SG&A expense also includes costs and income items
such as royalty income, litigation settlement income, costs related to market
value adjustments on hedging activity, and other items. The net effect of these
items was insignificant in 1995 and 1994 and does not have a material impact on
the year-to-year comparison. The decrease in SG&A as a percent of sales from
1993 to 1994 was the result of effective spending controls, increased royalty
income, and divestiture of businesses with higher overhead structures.
INCOME TAXES
The company's effective income tax rate in 1995 was 33.5%, up from 33.0% in 1994
and 32.5% in 1993. The increases in 1995 and 1994 were primarily the result of
the Omnibus Budget Reconciliation Act of 1993, which increased the U.S. income
tax rate and significantly reduced U.S. tax benefits resulting from the
company's operations in Puerto Rico. During 1995, the negative impact of these
changes was in part offset by increased tax credits. Although these changes in
the tax code will continue to put upward pressure on the company's effective tax
rate in the future, management believes that the adverse impact should be
minimized by other tax planning initiatives.
<PAGE> 35
MANAGEMENT'S DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
SUMMARY
The company continued to strengthen its financial position during 1995. At April
30, 1995, working capital, the excess of current assets over current
liabilities, totaled $647.8 million, an increase of 59.4% over the $406.4
million at April 30, 1994. The current ratio at April 30, 1995, was 2.4:1
compared with 1.9:1 and 2.2:1 at April 30, 1994 and 1993, respectively. The
company's net cash position, defined as the sum of cash, cash equivalents, and
short-term investments less short-term borrowings and long-term debt was $276.0
million at April 30, 1995, compared to $103.0 million at April 30, 1994, and
$53.3 million at April 30, 1993.
Because of its strong financial condition, the company is well positioned to
maintain its commitment to ongoing diversification strategies which include
research and development spending, internal ventures, and acquisitions. The
company intends to continue exploring potential mergers and acquisitions of
companies which are strategically aligned with or will complement current
businesses.
CASH FLOW
Cash provided by operating activities was $387.2 million in 1995 compared to
$356.9 million in 1994 and $291.5 million in 1993. These operating cash flows
were sufficient to fund the company's capital expenditures, acquisitions,
dividends to shareholders, and stock repurchases. Capital spending totaled
$104.0 million in 1995, an increase of 20.9% over the $86.0 million in 1994.
This increase in capital spending was primarily the result of spending
associated with the new model 9790 programmer which is utilized to program all
Medtronic pacemakers and the company's Jewel line of ICDs. This cost-effective
programmer with its advanced features and ease of use is contributing
significantly to the rapid acceptance of the Thera and Jewel product lines.
Capital spending in 1994 decreased 1.6% from 1993 while the 1993 spending
reflected an increase of 5.0%. The company expects future growth in capital
spending to support increased manufacturing capacity and operational
requirements. This spending will be financed primarily by funds from operations.
Repurchases of common stock totaled $59.1 million in 1995, compared to $53.4
million and $142.9 million in 1994 and 1993, respectively.
In addition to capital spending and stock repurchase activity, significant items
affecting cash flows during 1995 included $39.1 million paid for settlement of
payables related to 1994 acquisitions, dividends to shareholders totaling $47.2
million, and $36.2 million reduction of debt. Cash flows from increases and
decreases in operating assets and liabilities essentially offset each other.
During 1994, the cash portion of the purchase price paid for the acquisitions of
DLP, Electromedics, Inc., Carbon Implants, Inc., and CardioRhythm, was
approximately $189.4 million. For further details, see Note 2 to the
consolidated financial statements. In addition to acquisitions, capital
spending, and stock repurchases, the company's cash position was favorably
impacted by the timing of income tax payments, ongoing royalty income, and
increases in liabilities.
<PAGE> 36
DEBT AND CAPITAL
During 1995, the Board of Directors authorized the company to repurchase an
additional 6.0 million shares of its common stock. At April 30, 1995, the total
shares authorized for repurchase were approximately 7.4 million shares. During
1995, approximately 1.5 million shares were repurchased at an average cost of
$38.39 per share. During 1994, approximately 1.7 million shares were repurchased
at an average price of $31.08 per share. The company repurchased shares in 1995
and 1994 to offset dilution resulting from the issuance of stock under employee
benefit plans, shares issued in conjunction with the acquisition of
Electromedics, Inc., and to take advantage of market conditions. Future
repurchases of common stock will depend upon market conditions, the company's
cash position, and other factors.
Dividends to shareholders were $47.2 million, $39.0 million, and $33.3 million
in 1995, 1994, and 1993, respectively. Consistent with the company's financial
objectives, the company expects to continue paying dividends at a rate of
approximately 20% of the previous year's net earnings.
The company's capital structure consists of equity and interest-bearing debt.
The company minimally utilizes long-term debt. Interest-bearing debt as a
percent of total capital was 3.4% at April 30, 1995, compared with 6.9% and
10.9% at April 30, 1994, and 1993, respectively.
One of the company's key financial objectives is achieving an annual return on
equity (ROE) of at least 20%. ROE compares net earnings to average shareholders'
equity and is a key measure of management's ability to utilize the shareholders'
investment in the company effectively. In 1995, ROE was 24.6%, up one-tenth of a
percentage point over the 24.5% in 1994. This increase is significant
considering average shareholders' equity increased 26.0% during the same period.
In 1993, ROE was 24.1% and in each of the preceding five years, ROE exceeded
20%.
GOVERNMENT REGULATION AND OTHER MATTERS
Government and private sector initiatives to limit the growth of health care
costs, including price regulation and competitive pricing, are continuing in
several countries where the company does business, including the United States.
These changes are causing the marketplace to put increased emphasis on the
delivery of more cost-effective medical therapies. Although the company believes
it is well positioned to respond to changes resulting from this worldwide trend
toward cost containment, the uncertainty as to the outcome of any proposed
legislation or changes in the marketplace preclude the company from predicting
the impact these changes may have on future operating results.
The number of medical devices approved by the FDA for commercial release has
decreased significantly in recent years due to more rigorous clinical evaluation
requirements, increased enforcement actions, and more stringent product
regulation by the FDA. Rigorous regulatory action may be taken in response to
deficiencies noted in inspections or to product performance problems. The risks
in the United States of lengthened introduction times for new products and
additional expense have increased substantially. In addition, the requirements
for postmarket surveillance and device tracking under the Safe Medical Devices
Act continue to increase the expense of the regulatory process.
The U.S. Health Care Financing Agency, which determines Medicare reimbursement
policy and practice, has changed its practice of reimbursing hospitals for
procedures involving medical devices in clinical evaluation. This change in
practice is causing hospitals to treat Medicare patients only with medical
devices that have been cleared for commercial release by the FDA. This action
has further limited the scope of clinical trials in the United States, is
forcing more clinical research to non-U.S. markets, and is increasing the cost
and time required to complete clinical evaluations in the United States.
Medtronic is also subject to various environmental laws and regulations both in
the United States and abroad. The operations of the company, like those of other
medical device companies, involve the use of substances regulated under
environmental laws, primarily in manufacturing and sterilization processes.
While it is difficult to quantify the potential impact of compliance with
environmental protection laws, management believes that such compliance will not
have a material impact on the company's financial position, results of
operations or liquidity.
The company operates in an industry susceptible to significant product liability
claims. Product liability claims may be asserted against the company in the
future relative to events not known to management at the present time.
Management believes that the company's risk management practices, including
insurance coverage, are reasonably adequate to protect against potential product
liability losses.
<PAGE> 37
REPORT OF MANAGEMENT
The management of Medtronic, Inc., is responsible for the integrity of the
financial information presented in the annual report. The consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles. Where necessary, they reflect estimates based on management's
judgment.
Management relies upon established accounting procedures and related systems of
internal control for meeting its responsibilities to maintain reliable financial
records. These systems are designed to provide reasonable assurance that assets
are safeguarded and that transactions are properly recorded and executed in
accordance with management's intentions. Internal auditors periodically review
the accounting and control systems, and these systems are revised if and when
weaknesses or deficiencies are found.
The Audit Committee of the Board of Directors, composed of directors from
outside the company, meets regularly with management, the company's internal
auditors, and its independent accountants to discuss audit scope and results,
internal control evaluations, and other accounting, reporting, and financial
matters. The independent accountants and internal auditors have access to the
Audit Committee without management's presence.
/s/ William W. George
William W. George
President and Chief Executive Officer
/s/ Arthur D. Collins, Jr.
Arthur D. Collins, Jr.
Chief Operating Officer
/s/ Robert L. Ryan
Robert L. Ryan
Senior Vice President and Chief Financial Officer
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and
Board of Directors of Medtronic, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
statements of consolidated earnings and consolidated cash flows present fairly,
in all material respects, the financial position of Medtronic, Inc., and its
subsidiaries at April 30, 1995 and 1994, and the results of their operations and
their cash flows for each of the three years in the period ended April 30, 1995,
in conformity with generally accepted accounting principles. These financial
statements are the responsibility of the company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Minneapolis, Minnesota
May 22, 1995
<PAGE> 38
<TABLE>
<CAPTION>
STATEMENT OF CONSOLIDATED EARNINGS
(in thousands of dollars, except per share data) Medtronic, Inc.
Year ended April 30, 1995 1994 1993
<S> <C> <C> <C>
NET SALES $ 1,742,392 $ 1,390,922 $ 1,328,208
COSTS AND EXPENSES:
Cost of products sold 540,080 431,668 420,132
Research and development expense 191,351 156,314 132,955
Selling, general, and administrative expense 574,624 470,266 480,006
Interest expense 9,007 8,208 10,448
Interest income (14,775) (8,373) (8,791)
Gain on sale of subsidiary -- (13,962) --
Litigation settlement -- -- (50,000)
Intangible asset amortization -- -- 18,000
Foundation commitment -- -- 12,000
TOTAL COSTS AND EXPENSES 1,300,287 1,044,121 1,014,750
EARNINGS BEFORE INCOME TAXES 442,105 346,801 313,458
PROVISION FOR INCOME TAXES 148,105 114,444 101,874
NET EARNINGS BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGES 294,000 232,357 211,584
CUMULATIVE EFFECT OF ACCOUNTING CHANGES:
Postretirement benefits (net of deferred taxes of $5,674) -- -- (9,256)
Income taxes -- -- (5,100)
NET EARNINGS $ 294,000 $ 232,357 $ 197,228
WEIGHTED AVERAGE SHARES OUTSTANDING 115,240 114,808 118,832
EARNINGS PER SHARE:
Earnings before cumulative effect of accounting change $ 2.55 $ 2.02 $ 1.78
Cumulative effect of accounting changes -- -- (0.12)
NET EARNINGS PER SHARE $ 2.55 $ 2.02 $ 1.66
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 39
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
(in thousands of dollars) Medtronic, Inc.
April 30, 1995 1994
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 98,292 $ 108,720
Short-term investments 225,357 72,694
Accounts receivable, less allowance for doubtful accounts of $22,416 and $20,123 413,942 340,927
Inventories:
Finished goods 97,048 102,163
Work in process 59,311 50,751
Raw materials 65,573 60,384
Total Inventories 221,932 213,298
Prepaid income taxes 92,563 79,809
Prepaid expenses and other current assets 51,823 30,409
TOTAL CURRENT ASSETS 1,103,909 845,857
PROPERTY, PLANT, AND EQUIPMENT:
Land and land improvements 17,920 16,624
Buildings and leasehold improvements 174,592 165,822
Equipment 501,134 409,050
Construction in progress 21,830 18,449
715,476 609,945
Accumulated depreciation (384,415) (308,160)
Net Property, Plant, and Equipment 331,061 301,785
GOODWILL, net of accumulated amortization of $39,990 and $27,842 278,724 279,514
OTHER INTANGIBLE ASSETS, net of accumulated amortization of $31,482 and $21,042 84,622 87,724
OTHER ASSETS 148,416 108,372
TOTAL ASSETS $ 1,946,732 $ 1,623,252
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ 33,474 $ 58,173
Accounts payable--trade 25,369 32,673
Accounts payable--other 97,643 68,492
Acquisition price payable -- 39,130
Accrued compensation 67,193 53,537
Accrued income taxes 119,018 104,894
Other accrued expenses 113,432 82,545
TOTAL CURRENT LIABILITIES 456,129 439,444
LONG-TERM DEBT 14,200 20,232
DEFERRED INCOME TAXES 35,856 15,915
OTHER LONG-TERM LIABILITIES 105,534 94,169
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock--par value $1.00; 2,500,000 shares authorized, none
outstanding Common stock--par value $.10; 200,000,000 shares authorized,
115, 509, 425 and 116, 257, 428 shares issued and outstanding 11,551 11,626
Retained earnings 1,329,594 1,083,868
Cumulative translation adjustments 23,848 (9,702)
1,364,993 1,085,792
Receivable from Employee Stock Ownership Plan (29,980) (32,300)
TOTAL SHAREHOLDERS' EQUITY 1,335,013 1,053,492
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,946,732 $ 1,623,252
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 40
STATEMENT OF CONSOLIDATED CASH FLOWS
(in thousands of dollars)
<TABLE>
<CAPTION>
Year ended April 30, 1995 1994 1993
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 294,000 $ 232,357 $ 197,228
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 106,502 78,577 69,625
Gain on sale of subsidiary, net of tax -- (9,242) --
Deferred income taxes 692 (3,150) (11,141)
Changes in operating assets and liabilities:
Increase in accounts receivable (48,534) (8,635) (8,736)
Decrease (increase) in inventories 7,165 (8,087) (14,660)
(Increase) decrease in prepaid expenses and other assets (37,609) 8,954 (29,043)
Increase in accounts payable and accrued liabilities 62,103 18,137 30,779
Increase in accrued income taxes 7,931 37,653 3,697
(Decrease) increase in deferred income (24,775) 400 20,450
(Decrease) increase in postretirement benefit accrual (452) 2,156 16,623
Increase in other long-term liabilities 20,154 7,918 16,689
NET CASH PROVIDED BY OPERATING ACTIVITIES 387,177 356,856 291,511
INVESTING ACTIVITIES
Additions to property, plant, and equipment (96,862) (60,799) (77,077)
Acquisitions, net of cash acquired -- (189,440) (18,668)
Proceeds from sale of subsidiary -- 21,000 --
Sales of marketable securities 158,462 92,985 12,133
Purchases of marketable securities (289,235) (109,346) (72,616)
Other investing activities (12,361) (12,463) (6,558)
NET CASH USED IN INVESTING ACTIVITIES (239,996) (258,063) (162,786)
FINANCING ACTIVITIES
(Decrease) increase in short-term borrowings (29,270) (28,285) 591
(Decrease) increase in long-term debt (6,885) (8,199) 5,618
(Decrease) increase in acquisition price payable (39,130) 45,630 --
Dividends to shareholders (47,226) (38,985) (33,337)
Repurchase of common stock (59,079) (53,423) (142,919)
Issuance of common stock 21,874 16,339 17,408
NET CASH USED IN FINANCING ACTIVITIES (159,716) (66,923) (152,639)
Effect of exchange rate changes on cash and cash equivalents 2,107 (144) 92
NET CHANGE IN CASH AND CASH EQUIVALENTS (10,428) 31,726 (23,822)
Cash and cash equivalents at beginning of year 108,720 76,994 100,816
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 98,292 $ 108,720 $ 76,994
SUPPLEMENTAL CASH FLOW INFORMATION CASH PAID DURING THE YEAR FOR:
Income taxes $ 131,731 $ 73,858 $ 110,864
Interest 9,249 8,346 10,769
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of dollars, except per share data) Medtronic, Inc.
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Medtronic, Inc.,
and all of its subsidiaries. All significant intercompany transactions and
accounts have been eliminated. Certain prior period amounts have been
reclassified to conform to the 1995 presentation.
CASH EQUIVALENTS
The company considers temporary cash investments with maturities of three months
or less from the date of purchase to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost or market, with cost determined on a
first-in, first-out basis.
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment is stated at cost. Additions and improvements are
capitalized. Maintenance and repairs are expensed as incurred. Depreciation is
provided using the straight-line method over the estimated useful lives of the
various assets.
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill represents the excess of cost over net assets of businesses acquired,
while other intangible assets consist primarily of purchased technology and
patents. These assets are being amortized using the straight-line method over
their estimated useful lives, of which periods up to 25 years remain.
FOREIGN CURRENCY TRANSLATION
Essentially all assets and liabilities are translated to U.S. dollars at
year-end exchange rates, while elements of the income statement are translated
at average exchange rates in effect during the year. Adjustments arising from
the translation of most net assets located outside the United States are
recorded as a component of shareholders' equity.
ROYALTY INCOME
Income earned from royalty and license agreements is recorded as a reduction of
selling, general, and administrative expense.
EARNINGS PER SHARE
Earnings per share of common stock are computed by dividing net income by the
weighted average number of shares outstanding during the period.
NOTE 2--ACQUISITIONS AND DIVESTITURES
ACQUISITIONS
On March 17, 1994, the company acquired substantially all of the assets and
liabilities of DLP, Inc., for approximately $128.3 million in cash. DLP is the
market leader in the development, manufacture, and sale of cannula products used
in heart surgery.
On April 25, 1994, the company acquired all of the outstanding shares of
Electromedics, Inc., for approximately $95.3 million. The purchase price
consisted of approximately $39.1 million payable in cash and approximately
1,555,000 shares of the company's common stock valued at $56.2 million.
Electromedics designs, manufactures, and markets blood management and blood
conservation equipment for use in autotransfusion during major medical
procedures.
On April 29, 1994, the company acquired all of the remaining outstanding common
stock of Carbon Implants, Inc., an innovator in the design and manufacturing of
implantable prosthetic heart valves. The total purchase price was approximately
$34.6 million.
The acquisitions of DLP, Electromedics, and Carbon Implants were accounted for
as purchases. Accordingly, the results of operations of the acquired entities
have been included in the company's consolidated financial statements since the
respective dates of acquisition. Acquired goodwill, patents, trademarks, and
other intangible assets associated with these acquisitions are being amortized
using the straight-line method over periods ranging from 8 to 25 years.
In May 1992, the company acquired all of the outstanding capital stock of
CardioRhythm, a manufacturer of electrophysiological catheters used for the
diagnosis and treatment of cardiac arrhythmias. The initial price paid of $20.0
million was accounted for as a purchase and the results of operations have been
included in the company's consolidated financial statements since the date of
acquisition. In 1994, the company made additional payments of $6.5 million to
settle substantially all remaining obligations existing at the acquisition date.
These payments were recorded as additions to the initial price of the
acquisition.
DIVESTITURES
In July 1993, the company sold substantially all the assets of its Andover
Medical, Inc., subsidiary for $21.0 million, recognizing a pretax gain of $14.0
million. Andover Medical developed, manufactured, and marketed external
electrodes used primarily with electrical nerve stimulation and neuromuscular
stimulation devices. Exclusive of the gain recognized, this transaction did not
have a significant impact on the company's operating results.
In November 1992, the company sold substantially all the assets of its Nortech
business, excluding accounts receivable. Nortech developed, manufactured, and
marketed transcutaneous electrical nerve stimulation and neuromuscular
stimulation devices for pain control and muscle rehabilitation. During 1993,
intangible asset amortization of $18.0 million was recorded, a significant
portion of which related to the Nortech business.
In February 1993, the company sold all the assets of its CardioCare division.
CardioCare was in the business of telephonic pacemaker monitoring. This
transaction did not have a significant impact on the company's operating
results.
<PAGE> 42
NOTE 3--FINANCIAL INSTRUMENTS
The carrying amounts and estimated fair values of the company's significant
financial instruments were as follows:
April 30, 1995 1994
CARRYING FAIR Carrying Fair
AMOUNT VALUE Amount Value
Assets
Short-term investments $225,357 $226,031 $ 72,694 $ 72,694
Long-term investments
and notes receivable 108,404 108,404 76,280 91,746
Purchased currency
options - - 907 210
Liabilities
Short-term debt 33,474 33,474 58,173 58,173
Long-term debt 14,200 15,427 20,232 20,981
Forward exchange
contracts 29,293 29,293 12,205 12,205
The fair value of cash and cash equivalents, receivables, and short-term debt
approximate their carrying value due to their short maturities. The fair value
of certain short-term and long-term investments are based on quoted market
prices for those or similar investments. For long-term investments which have no
quoted market prices, a reasonable estimate of fair value was made using
available market and financial information. The fair value of long-term debt is
based on the current rates offered to the company for debt of similar
maturities. The estimates presented above on long-term financial instruments are
not necessarily indicative of the amounts that would be realized in a current
market exchange. The fair value of forward exchange contracts were estimated
based on quoted market prices at April 30, 1995 and 1994.
On May 1, 1994 the company adopted Statement of Financial Accounting Standard
(SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity
Securities." SFAS No. 115 requires that all investments in debt securities and
investments in equity securities that have readily determinable fair values be
classified and accounted for in one of three categories: held-to-maturity,
trading, or available-for-sale. Held-to-maturity securities are recorded at
amortized cost in short-term investments and other assets. Trading securities
are recorded at fair value in short-term investments with the change in fair
value during the period included in earnings. Available-for-sale securities are
recorded at fair value in short-term investments or other assets with the change
in fair value during the period excluded from earnings and recorded net of tax
as a component of stockholders' equity. Prior to May 1, 1994, investments were
recorded at the lower of cost or market. Adoption of this statement did not
materially impact the company's financial position and had no impact on
operating results.
At April 30, 1995, available-for-sale investments included only equity
securities with a cost of $19,469 and a fair value of $63,687. Gross unrealized
gains and losses amounted to $48,233 and $4,015, respectively. At April 30,
1995, the net unrealized gain associated with available-for-sale securities of
$28,742, net of tax of $15,476, was included in retained earnings. There were no
sales of available-for-sale securities during 1995. Held-to-maturity investments
at April 30, 1995 consisted primarily of U.S. government and corporate debt
securities, all of which mature within three years. These securities were
carried at amortized cost of $232,042 and have a fair value of $232,716.
FOREIGN CURRENCY INSTRUMENTS
A significant portion of the company's cash flows is derived from sales
denominated in foreign currencies. To the extent that the U.S. dollar value of
sales denominated in foreign currencies fluctuates as a result of a
strengthening or weakening dollar, the company's ability to fund dollar-based
strategic initiatives at a consistent level may be impaired. In order to reduce
the uncertainty of foreign exchange rate movements on sales denominated in
foreign currencies, the company enters into forward exchange and option
contracts with major international financial institutions. These forward and
option contracts, which typically expire within one year, are designed to hedge
anticipated foreign currency transactions. Such transactions, primarily export
intercompany sales, occur throughout the year and are probable but not firmly
committed.
The company had contracts to exchange foreign currencies, principally the
Japanese Yen and German Mark, for U.S. dollars in the following notional
amounts:
April 30, 1995 1994
Forward exchange contracts $431,504 $371,672
Foreign currency put options - 66,875
The company had aggregate foreign currency transaction losses, primarily related
to forward contracts, of $57,715, $10,025, and $22,240 in 1995, 1994, and 1993,
respectively. Realized losses on these contracts were offset by the assets,
liabilities, and transactions being hedged. Forward contracts in existence at
the balance sheet date are recorded at their fair value. Gains and losses on
forward contracts are recorded in selling, general, and administrative expense.
CONCENTRATIONS OF CREDIT RISK
Financial instruments, which potentially subject the company to significant
concentrations of credit risk, consist principally of cash investments, foreign
currency exchange contracts, and trade accounts receivable.
The company maintains cash and cash equivalents, investments, and certain other
financial instruments with various major financial institutions. The company
performs periodic evaluations of the relative credit standing of these financial
institutions and limits the amount of credit exposure with any institution.
Concentrations of credit risk with respect to trade accounts receivable are
limited due to the large number of customers and their dispersion across many
geographic areas. However, a significant amount of trade receivables are with
national health care systems in several countries. Although the company does not
currently foresee a credit risk associated with these receivables, repayment is
dependent upon the financial stability of those countries' national economies.
<PAGE> 43
NOTE 4--DEBT
Debt consisted of the following at April 30:
Average
Short-Term Debt Interest Rate 1995 1994
Bank borrowings 4.0% $30,819 $55,406
Current Portion of
Long-term debt 7.2% 2,655 2,767
Total Short-Term Debt $33,474 $58,173
Average Maturity
Long-Term Debt Interest Rate Date 1995 1994
Various Notes 6.4% 1995-2007 $10,207 $16,780
Capitalized lease
Obligations 9.9% 1995-2009 3,993 3,452
Total Long-Term Debt $14,200 $20,232
Short-term borrowings consisted primarily of non-U.S. bank borrowings used for
foreign exchange purposes. The company has existing lines of credit of $531
million with various banks, of which $501 million was unused at April 30, 1995.
Maturities of long-term debt for the next five years are as follows: 1996,
$2,654; 1997, $2,471; 1998, $2,606; 1999, $2,212; 2000, $1,923; thereafter,
$4,988.
NOTE 5--SHAREHOLDERS' EQUITY
Changes in shareholders' equity accounts were as follows:
<TABLE>
<CAPTION>
Cumulative Receivable
Common Retained Translation from
Stock Earnings Adjustments ESOP
<S> <C> <C> <C> <C>
Balance, April 30, 1992 $ 5,943 $ 824,172 $ 2,290 $ (35,950)
Net earnings 197,228
Dividends paid (33,337)
Issuance of common stock
under employee benefit
and incentive plans 53 17,355
Repurchase of common stock (214) (142,705)
Income tax benefit from
restricted stock and
nonstatutory stock options 7,590
Translation adjustments (3,347)
Repayment from ESOP 2,400
Balance, April 30, 1993 $ 5,782 $ 870,303 $ (1,057) $ (33,550)
Net earnings 232,357
Dividends paid (38,985)
Issuance of common stock
under employee benefit
and incentive plans 39 16,300
Issuance of common stock in
acquisition of subsidiary 78 56,099
Repurchase of common stock (86) (53,337)
Income tax benefit from
restricted stock and
nonstatutory stock options 6,944
Translation adjustments (8,645)
Repayment from ESOP 1,250
Balance, April 30, 1994 $ 5,813 $ 1,089,681 $ (9,702) $ (32,300)
Net earnings 294,000
Dividends paid (47,226)
Two-for-one stock split 5,745 (5,745)
Issuance of common stock
under employee benefit
and incentive plans 70 21,804
Repurchase of common stock (77) (59,002)
Unrealized gain on investments,
net of tax 28,742
Income tax benefit from
restricted stock and
nonstatutory stock options 7,340
Translation adjustments 33,550
Repayment from ESOP 2,320
Balance, April 30, 1995 $ 11,551 $ 1,329,594 $ 23,848 $ (29,980)
</TABLE>
At April 30, 1995, Board of Directors' authorization existed to repurchase
approximately 7.4 million shares of the company's common stock.
On August 31, 1994, the Board of Directors approved a two-for-one common stock
split, paid September 30, 1994 in the form of a 100 percent stock dividend to
shareholders of record at the close of business on September 15, 1994. The stock
split resulted in the issuance of 57,452 thousand additional shares and the
reclass of $5,745 from retained earnings to common stock, representing the par
value of the shares issued. All references in the financial statements to per
share information, number of shares, except shares authorized, and related share
prices have been restated to reflect the stock split.
A shareholder rights plan exists which provides for a dividend distribution of
one right to be attached to each share of common stock. The rights are currently
not exercisable or transferable apart from the common stock. The basic right
entitles the holder to purchase one four-hundredth of a share of a new series of
participating preferred stock, which is substantially equivalent to one share of
common stock, at an exercise price of $150 per share. These rights would become
exercisable if a person or group acquires 15% or more of the company's common
stock or announces a tender offer which would increase the person's or group's
beneficial ownership to 15% or more of the company's common stock, subject to
certain exceptions. After the rights become exercisable, each right entitles the
holder, instead, to purchase common stock having a market value of two times the
exercise price. If the company is acquired in a merger or other business
combination transaction, each exercisable right entitles the holder to purchase
common stock of the acquiring company having a market value of two times the
exercise price of the right. In certain events the Board of Directors may
exchange rights for common stock or equivalent securities having a market price
equal to the exercise price of the rights. Each right is redeemable at $.0025
any time before a person or group triggers the 15% ownership threshold. The
rights expire on July 10, 2001.
<PAGE> 44
NOTE 6--EMPLOYEE STOCK OWNERSHIP PLAN
The company has an Employee Stock Ownership Plan (ESOP) for eligible U.S.
employees. In December 1989, the ESOP borrowed $40,000 from the company and used
the proceeds to purchase 2,366,616 shares of the company's common stock. The
company makes annual contributions to the plan which are used, in part, by the
ESOP to make loan and interest payments. Expenses related to the ESOP are based
on debt service requirements less any dividends received by the ESOP on the
company's common stock. This amount is further adjusted by any additional
company contribution necessary to meet an annual targeted benefit level.
Compensation and interest expense recognized were as follows:
Year ended April 30, 1995 1994 1993
Interest expense $2,907 $3,020 $3,235
Dividends paid 992 811 667
Net interest expense 1,915 2,209 2,568
Compensation expense 2,327 3,588 4,802
Total expense $4,242 $5,797 $7,370
Shares of common stock acquired by the plan are allocated to each employee in
amounts based on company performance and the employee's annual compensation. At
April 30, 1995 and 1994, allocated shares were 702,542 and 543,126,
respectively, shares committed-to-be released were 152,710 and 124,542,
respectively, and unallocated shares were 1,717,056 and 1,841,598, respectively.
Unallocated shares are released based on the ratio of current debt service to
total remaining principle and interest. The loan from the company to the ESOP is
repayable over 20 years, ending on April 30, 2010. Interest is payable annually
at a rate of 9.0%. The receivable from the ESOP is recorded as a reduction of
the company's shareholders' equity and allocated and unallocated shares of the
ESOP are treated as outstanding common stock in the computation of earnings per
share.
NOTE 7--STOCK PURCHASE AND AWARD PLANS
1994 STOCK AWARD PLAN
Effective April 29, 1994, the Board of Directors and shareholders approved the
1994 stock award plan which replaced the stock option, stock award, and
non-employee director restricted stock plans. The 1994 stock award plan provides
for the grant of nonqualified and incentive stock options, stock appreciation
rights, performance shares, restricted stock in lieu of the annual retainer to
non-employee directors, and other stock-based awards. There were 4,916,266
shares available under this plan for future grants at April 30, 1995.
Under the provisions of the 1994 stock award plan, nonqualified stock options
and other stock awards are granted to officers and key employees at prices not
less than fair market value at the date of grant. In addition, awards granted
under the previous nonqualified stock option and stock award plans remain
outstanding though no additional awards will be made under these plans.
A summary of option transactions in 1995 follows:
Option Price
Range Per Number of Expiration
Share Shares Date
NONQUALIFIED OPTIONS
Outstanding at beginning
of year $ 3.34-$49.00 3,185,830 1995-2004
Granted 37.88- 70.00 479,675 2000-2005
Exercised 3.34- 53.00 368,421 1995-2005
Cancelled 15.06- 53.00 41,942 2000-2005
Outstanding at end of year 5.34- 70.00 3,255,142 1996-2005
- -------------------------------------------------------------------
Exercisable at April 30, 1994 3.34- 49.00 1,681,912 1995-2004
Exercisable at April 30, 1995 5.34- 53.00 1,842,079 1996-2005
- -------------------------------------------------------------------
Nonqualified options are generally exercisable beginning one year from the date
of grant in cumulative yearly amounts of 25 percent of the shares under option.
Restricted stock and performance share awards are dependent upon continued
employment and, in the case of performance shares, achievement of certain
performance objectives. In 1995, 111,514 restricted shares were issued and
37,766 performance shares were awarded. At April 30, 1995, total restricted
shares outstanding under both the 1994 stock award plan and the previous
restricted stock and performance share award plan were 621,163. Performance
share awards for up to 253,228 shares, assuming maximum performance payout, were
outstanding under the two plans at April 30, 1995. The actual number of
performance shares awarded may vary depending on the degree to which the
performance objectives are met. The cost of the restricted stock is generally
expensed over five years from the date of issuance ($3,797 in 1995, $4,205 in
1994, and $3,763 in 1993). The estimated cost of the performance shares is
expensed over three years from the date of grant ($8,840 in 1995, $3,131 in
1994, and $3,387 in 1993).
STOCK PURCHASE PLAN
The stock purchase plan enables employees to contribute up to 10% of their wages
toward purchase of the company's common stock at 85% of the market value.
Employees purchased 388,140 shares at $31.72 per share in 1995. As of April 30,
1995, plan participants have had approximately $9,228 withheld to purchase
shares at a price of $44.20 per share, or 85% of the market value of the
company's common stock at October 31, 1995, whichever is less.
Common stock to be issued under all outstanding grants pursuant to the 1994
stock award plan, the stock purchase plan, and the previous individual stock
option and award plans would not have a material dilutive effect on reported
earnings per share.
<PAGE> 45
NOTE 8--INCOME TAXES
The company accounts for income taxes in accordance with Statement of Financial
Accounting Standard (SFAS) No. 109, "Accounting for Income Taxes," which was
adopted in 1993 on a prospective basis. The asset and liability approach used in
SFAS No. 109 requires the recognition of deferred tax assets and liabilities for
the expected future tax consequences of temporary differences between the
carrying amounts and the tax bases of other assets and liabilities. Adoption of
SFAS No. 109 resulted in a one-time charge to earnings of $5,100, which
primarily represents the impact of adjusting net deferred tax assets to reflect
current tax rates as opposed to overall higher tax rates in effect when the net
deferred tax assets originated.
The provision for income taxes is based on earnings before income taxes reported
for financial statement purposes. The components of earnings before income taxes
were:
Year ended April 30, 1995 1994 1993
United States $356,758 $279,220 $275,047
Non-U.S. 85,347 67,581 38,411
Earnings before income taxes $442,105 $346,801 $313,458
The provision for income taxes consisted of:
Year ended April 30, 1995 1994 1993
Taxes currently payable:
U.S. federal $ 80,023 $ 64,840 $ 70,402
U.S. state and other 22,297 21,268 18,919
Non-U.S. 45,717 29,859 26,039
Total currently payable 148,037 115,967 115,360
Deferred tax (benefit) expense:
U.S. federal (1,955) (7,049) (17,129)
U.S. state and other 2,755 (2,459) 397
Non-U.S. (9,925) 1,539 (7,257)
Net deferred tax benefit (9,125) (7,969) (23,989)
Tax expense credited directly to
shareholders' equity 9,193 6,446 10,503
Total provision $ 148,105 $ 114,444 $ 101,874
Deferred tax assets (liabilities) were comprised of the following:
April 30, 1995 1994
Deferred tax assets:
Inventory (Intercompany profit in inventory
and excess of tax over book valuation) $ 69,836 $ 56,375
Deferred income -- 5,250
Accrued liabilities 37,526 40,133
Other 7,528 10,594
Total deferred tax assets 114,890 112,352
April 30, 1995 1994
Deferred tax liabilities:
Intangible assets (17,264) (17,823)
Undistributed earnings of subsidiaries (11,787) (8,846)
Accumulated depreciation (13,301) (14,819)
Unrealized gain on investments (15,476) --
Other (355) (6,970)
Total deferred tax liabilities (58,183) (48,458)
Net deferred tax assets $ 56,707 $ 63,894
The company's effective income tax rate varied from the U.S. federal statutory
tax rate as follows:
Year ended April 30, 1995 1994 1993
U.S. federal statutory tax rate 35.0% 35.0% 34.0%
Increase (decrease) in tax rate
resulting from:
U.S. state taxes, net of federal
tax benefit 2.2 2.5 2.7
Tax benefits from operations in
Puerto Rico (4.2) (8.2) (8.5)
Non-U.S. taxes 1.5 1.7 1.9
Other, net (1.0) 2.0 2.4
Effective tax rate 33.5% 33.0% 32.5%
Taxes are not provided on undistributed earnings of non-U.S. and Puerto Rican
subsidiaries because such earnings are either permanently reinvested or do not
exceed available foreign tax credits. Current U.S. tax regulations provide that
earnings of the company's manufacturing subsidiaries in Puerto Rico may be
repatriated tax free; however, the Commonwealth of Puerto Rico will assess a tax
of up to 10% in the event of repatriation of earnings prior to liquidation. The
company has provided for the anticipated tax attributable to earnings intended
for dividend repatriation. At April 30, 1995, earnings permanently reinvested in
subsidiaries outside the United States were $117,049. It is not practical to
estimate the amount of taxes that might be payable on these foreign earnings.
At April 30, 1995, approximately $4,267 of non-U.S. tax losses were available
for carryforward. These carryforwards are subject to adequate valuation
allowances and generally expire within a period of one to five years.
NOTE 9--RETIREMENT BENEFIT PLANS
The company has various retirement benefit plans covering substantially all U.S.
employees and many employees outside the United States. The cost of these plans
was $28,483 in 1995, $20,208 in 1994 and $17,611 in 1993.
DEFINED BENEFIT PLAN (UNITED STATES)
In the United States, the company maintains a qualified pension plan designed to
provide guaranteed minimum retirement benefits to substantially all U.S.
employees. Plan benefits are calculated using a combination of years of service,
final average earnings, primary social security benefits, and age. It is the
company's policy to fund retirement costs within the limits of allowable tax
deductions. Contributions to the plan were $13,784, $5,075 and $2,871 in 1995,
1994, and 1993, respectively. Plan assets consist of a diversified portfolio of
fixed-income
<PAGE> 46
investments, equity securities, and cash equivalents. Plan assets include
investments in the company's common stock of $11,900 and $6,020 at April 30,
1995 and 1994, respectively.
Net pension cost for the U.S. plan included the following components:
Year ended April 30, 1995 1994 1993
Service cost--benefits earned during
the year $ 6,391 $ 5,795 $ 4,370
Interest cost on projected benefit
obligation 5,680 5,222 4,013
Return on assets (9,775) (7,218) (7,556)
Net amortization and deferral 2,155 819 2,009
Net pension cost $ 4,451 $ 4,618 $ 2,836
The funded status of the U.S. plan was as follows:
April 30, 1995 1994
Actuarial present value of benefit obligation:
Vested benefits $(49,913) $(45,787)
Nonvested benefits (6,673) (5,741)
Accumulated benefit obligation (56,586) (51,528)
Excess of projected benefit obligation
over accumulated benefit obligation (25,852) (23,181)
Projected benefit obligation (82,438) (74,709)
Plan assets at fair value 95,468 73,160
Plan assets in excess (less than) of
projected benefit obligation 13,030 (1,549)
Unrecognized May 1, 1986, net asset (1,632) (2,833)
Unrecognized net actuarial loss 5,593 8,130
Unrecognized prior service cost (564) 1,615
Net prepaid pension cost $ 16,427 $ 5,363
The actuarial assumptions were as follows:
Year ended April, 30 1995 1994 1993
Discount rate 8.0% 7.5% 8.5%
Expected long-term return on assets 9.0% 9.0% 9.0%
Average increase in compensation 5.0% 5.5% 6.0%
In addition to the benefits provided under the qualified pension plan,
retirement benefits associated with wages in excess of the IRS allowable wages
are provided to certain employees under non-qualified plans. Prior to 1995, the
net periodic cost and accrued liability associated with these non-qualified
plans was not material. However, the Omnibus Budget Reconciliation Act of 1993
significantly reduced the qualified wage limit which resulted in an increase in
benefits under non-qualified plans. The net periodic cost of non-qualified
pension plans was $989 in 1995. The unfunded accrued pension cost totaled $4,045
at April 30, 1995.
DEFINED BENEFIT PLANS (NON-U.S.)
Retirement coverage for non-U.S. employees of the company is provided, to the
extent deemed appropriate, through separate plans. Funding policies are based on
local statutes. Retirement benefits are based on years of service, final average
earnings, and social security benefits.
Net pension cost for the non-U.S. plans included the following components:
Year ended April 30, 1995 1994 1993
Service cost--benefits earned
during the year $ 2,032 $ 1,374 $ 1,840
Interest cost on projected
benefit obligation 666 268 249
Return on assets (27) (26) (19)
Net amortization and deferral 135 49 (17)
Net pension cost $ 2,806 $ 1,665 $ 2,053
In certain countries, the funding of pension plans is not a common practice as
funding provides no economic benefit. Consequently, the company has pension
plans which are underfunded. The following table sets forth the funded status of
the non-U.S. plans:
April 30, 1995 1994
Actuarial present value of benefit obligation:
Vested benefits $ (7,619) $ (6,485)
Nonvested benefits (642) (581)
Accumulated benefit obligation (8,261) (7,066)
Excess of projected benefit obligation over
accumulated benefit obligation (13,943) (1,133)
Projected benefit obligation (22,204) (8,199)
Plan assets at fair value 579 555
Projected benefit obligation in excess of
plan assets (21,625) (7,644)
Unrecognized May 1, 1994 net obligation 11,647 98
Unrecognized net actuarial loss 1,386 914
Net accrued pension liability $ (8,592) $ (6,632)
The range of assumptions for the non-U.S. plans, reflecting the different
economic environments within the various countries, were as follows:
Years ended April 30, 1995 1994 1993
Discount rate 6.5%-8.5% 6.5%-8.5% 8.5%
Expected long-term return on assets 8.5% 8.5% 8.5%
Average increase in compensation 3.0%-4.5% 4.5% 5.5%
DEFINED CONTRIBUTION PLANS
The company has defined contribution savings plans that cover substantially all
U.S. employees and certain non-U.S. employees. The purpose of these plans is
generally to provide additional financial security during retirement by
providing employees with an incentive to make regular savings. Company
contributions to the plans are based on employee contributions and company
performance. Expense under the plans was $15,452 in 1995, $10,402 in 1994 and
$9,453 in 1993.
RETIREE HEALTH CARE BENEFITS
U.S. employees of the company are currently eligible to receive specified
company-paid health care and life insurance benefits during retirement based on
their age and years of service. The health care benefits include cost-sharing
features based on years of service and retirement age. The life insurance plans
require minimum retiree contributions.
<PAGE> 47
The company adopted Statement of Financial Accounting Standard (SFAS) No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions," for
U.S. plans in 1993. SFAS No. 106 requires the company to recognize expense as
employees earn postretirement benefits, rather than on the cash basis. The
company chose to immediately recognize the transition obligation, which is the
cost of postretirement benefits earned as of May 1, 1992, by employees and
retirees. This resulted in a one-time charge in 1993 of $14,930, which was
recorded net of $5,674 in deferred income taxes.
The net postretirement benefit cost of U.S. plans, exclusive of the transition
obligation in 1993, included the following components:
Year ended April 30, 1995 1994 1993
Service cost-benefits earned
during the year $ 1,446 $ 1,049 $ 785
Interest cost on accumulated
benefit obligation 1,425 1,440 1,254
Return on assets (255) -- --
Net amortization and deferral 299 (243) --
Postretirement benefit cost $ 2,915 $ 2,246 $ 2,039
The company's policy has been to fund the cost of postretirement benefits as
they are paid. In 1995, the company also began funding a trust within the limits
of allowable tax deductions for the cost of these benefits. The funded status of
the U.S. plans was as follows:
Year ended April 30, 1995 1994
Actuarial present value of postretirement benefit
obligation:
Retirees $ (6,251) $ (5,787)
Other fully eligible participants (4,341) (4,769)
Other active plan participants (14,179) (11,752)
(24,771) (22,308)
Plan assets at fair value 2,925 --
Unrecognized net loss 3,320 3,330
Net accrued postretirement benefit liability $(18,526) $(18,978)
The actuarial assumptions were as follows:
Year ended April, 30 1995 1994 1993
Discount rate 8.0% 7.5% 8.5%
Expected long-term return on assets 9.0% -- --
Health care cost trend rate 10.0% 12.0% 12.0%
The health care cost trend rate is assumed to decrease gradually to 6% by 2003.
Based on current estimates, increasing the health care cost trend rate by one
percentage point each year would increase the accumulated postretirement benefit
obligation by $2,587 and the annual postretirement benefit cost by $418.
The company must adopt SFAS No. 106 for non-U.S. plans in 1996. However,
adoption of SFAS No. 106 for these plans will not have a material impact on the
company's financial position.
NOTE 10--LEASES
The company leases offices, manufacturing and research facilities, and
warehouses, as well as transportation, data processing, and other equipment,
under capital and operating leases. A substantial number of these leases contain
options that allow the company to renew at the then fair rental value.
Future minimum payments under capitalized leases and noncancellable operating
leases at April 30, 1995, were:
Capitalized Operating
Leases Leases
1996 $ 960 $ 19,347
1997 635 14,290
1998 646 10,089
1999 517 6,655
2000 490 5,694
2001 and thereafter 3,898 9,030
Total minimum lease payments 7,146 $ 65,105
Less amounts representing interest 2,546
Present value of net minimum lease
payments $ 4,600
Rent expense for all operating leases was $22,366 in 1995, $18,510 in 1994 and
$21,555 in 1993.
NOTE 11--LITIGATION SETTLEMENT
In September 1992, the company and Siemens AG settled all ongoing patent
litigation between the companies and cross-licensed all existing patents
covering cardiac stimulation devices. Siemens made an initial payment of $50.0
million to Medtronic and made ongoing royalty payments, based on Siemens'
worldwide sales of all cardiac stimulation devices through September 1994.
Medtronic does not pay royalties for the cross-license received from Siemens. In
addition to the initial payment, which was recognized as income in 1993, Siemens
made a $25.0 million contingent prepayment against future royalties. The
prepayment was recognized as income when earned. As of April 30, 1995, the
prepayment had been fully recognized.
In September 1994, St. Jude Medical, Inc. acquired Siemens Pacesetter, the
worldwide cardiac rhythm management business of Siemens AG. Under terms of the
prior litigation settlement with Siemens AG, St. Jude will make ongoing royalty
payments for approximately 10 years based on Pacesetters' worldwide sales of all
cardiac stimulation devices.
NOTE 12--COMMITMENTS AND CONTINGENCIES
The company is involved in litigation and disputes which are normal to its
business. Management believes losses that might eventually be sustained from
such litigation and disputes would not be material to future years. Further,
product liability claims may be asserted in the future relative to events not
known to management at the present time. Management believes that the company's
risk management practices, including insurance coverage, are reasonably adequate
to protect against potential product liability losses.
<PAGE> 48
The Medtronic Foundation, funded entirely by the company, was established to
maintain good corporate citizenship in its communities. In 1993, the company
made a commitment to contribute $12,000 over a five-year period ending September
30, 1997. At April 30, 1995, the remaining balance of this commitment was
$7,465. Commitments to the Medtronic Foundation are expensed when authorized and
approved by the company's Board of Directors.
NOTE 13--QUARTERLY FINANCIAL DATA (UNAUDITED, IN MILLIONS OF DOLLARS, EXCEPT PER
SHARE DATA)
First Second Third Fourth Fiscal
Quarter Quarter Quarter Quarter Year
Net Sales
1995 $403.8 $408.2 $413.7 $516.7 $1,742.4
1994 331.3 332.1 334.6 393.02 1,390.9
Gross Profit
1995 277.4 280.4 284.5 360.0 1,202.3
1994 230.0 227.5 231.4 270.4 959.2
Net Earnings
1995 65.1 69.7 71.4 87.8 294.0
1994 52.5 56.2 56.9 66.7 232.4
Earnings per Share:
1995 .56 .61 .62 .76 2.55
1994 .45 .49 .50 .58 2.02
Quarterly and annual earnings per share are calculated independently based on
the weighted average number of shares outstanding during the period.
NOTE 14--SEGMENT REPORTING
The company operates in a single industry segment--providing medical products
and services. For management purposes, the company is segmented into three
geographic areas--the Americas, Europe/Middle East/Africa (Europe), and
Asia/Pacific markets. The geographic areas are, to a significant degree,
interdependent with respect to research, product supply, and business expertise.
Sales between geographic areas are made at prices which would approximate
transfers to unaffiliated distributors. In the presentation below, the profit
derived from such transfers is attributed to the area in which the sale to the
unaffiliated customer is eventually made. Because of the interdependence of the
geographic areas, the operating profit as presented may not be representative of
the geographic distribution which would occur if the areas were not
interdependent. In addition, comparison of operating results between geographic
areas and between years may be significantly impacted by foreign currency
fluctuations.
<TABLE>
<CAPTION>
GEOGRAPHIC AREA INFORMATION
United Asia Other Elimi- Consoli-
States Europe Pacific Americas nations dated
<S> <C> <C> <C> <C> <C> <C>
1995
Sales to unaffiliated
customers $ 976,589 $ 505,914 $ 212,725 $ 47,164 $ -- $ 1,742,392
Intergeographic
sales 132,105 52,002 -- 3,020 (187,127) --
Total sales 1,108,694 557,916 212,725 50,184 (187,127) 1,742,392
Operating profit 287,824 106,243 91,046 4,746 489,859
Nonoperating
expense (47,754)
Earnings before
income taxes 442,105
Identifiable assets 1,206,912 308,579 149,394 30,515 (123,220) 1,572,180
Corporate assets 374,552
Total assets $ 1,946,732
1994
Sales to unaffiliated
customers $ 800,391 $ 386,009 $ 161,279 $ 43,243 $ -- $ 1,390,922
Intergeographic
sales 163,905 18,710 -- 309 (182,924) --
Total sales 964,296 404,719 161,279 43,552 (182,924) 1,390,922
Operating profit 244,638 53,512 63,389 4,177 -- 365,716
Nonoperating
expense (18,915)
Earnings before
income taxes 346,801
Identifiable assets 1,103,222 276,047 103,247 25,604 (94,858) 1,413,262
Corporate assets 209,990
Total assets $ 1,623,252
1993
Sales to unaffiliated
customers $ 770,655 $ 392,894 $ 126,005 $ 38,654 -- $ 1,328,208
Intergeographic
sales 142,750 19,370 -- 147 (162,267) --
Total sales 913,405 412,264 126,005 38,801 (162,267) 1,328,208
Operating profit 258,170 62,269 45,910 769 -- 367,118
Nonoperating
expense (53,660)
Earnings before
income taxes 313,458
Identifiable assets 818,898 287,048 80,867 20,258 (82,541) 1,124,530
Corporate assets 167,950
Total assets $ 1,292,480
</TABLE>
Nonoperating expense includes interest income, interest expense, gains and
losses on hedging activities, and certain corporate general and administrative
expenses. Intergeographic sales and the intergeographic profit remaining in
ending inventories are the principal items reflected as eliminations.
<PAGE> 49
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
(in millions of dollars, except per share data) Medtronic, Inc.
1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS FOR THE YEAR:
Net sales $1,742.4 $1,390.9 $1,328.2 $1,176.9 $1,021.4 $865.9
Cost of products sold 540.1 431.7 420.1 381.8 331.7 281.7
Research and development expense 191.4 156.3 133.0 109.2 89.5 81.5
Selling, general, and administrative
expense 574.6 456.3* 460.0* 439.9 399.9* 331.3*
Interest expense 9.0 8.2 10.4 13.4 13.8 10.1
Interest income (14.8) (8.4) (8.8) (10.3) (9.7) (6.2)
Earnings from continuing operations
before income taxes 442.1 346.8 313.5 242.9 196.2 167.5
Provision for income taxes 148.1 114.4 101.9 81.4 62.9 54.6
Earnings from continuing operations 294.0 232.4 211.6 161.5 133.4 112.9
Discontinued operations and cumulative
effect of accounting changes (net) -- -- (14.4) -- -- --
Net earnings $ 294.0 $ 232.4 $ 197.2 $ 161.5 $ 133.4 $112.9
Net earnings as a percent of net sales 16.9% 16.7% 14.8% 13.7% 13.1% 13.0%
Net earnings as a percent of average
shareholders' equity 24.6% 24.5% 24.1% 21.8% 21.4% 21.3%
Per share of common stock:
Earnings from continuing operations
before cumulative effects of
accounting changes $ 2.55 $ 2.02 $ 1.78 $ 1.36 $ 1.12 $ .96
Net earnings 2.55 2.02 1.66 1.36 1.12 .96
Cash dividends declared .41 .34 .28 .24 .21 .18
Gross margin percentage 69.0% 69.0% 68.4% 67.6% 67.5% 67.5%
Financial Position at April 30:
Working capital $ 647.8 $ 406.4 $ 426.6 $ 387.3 $ 320.1 $240.4
Current ratio 2.4:1 1.9:1 2.2:1 2.3:1 2.1:1 1.9:1
Property, plant, and equipment, net 331.1 301.8 282.8 256.8 217.2 183.6
Total assets 1,946.7 1,623.3 1,292.5 1,163.5 1,024.1 885.3
Long-term debt 14.2 20.2 10.9 8.6 7.9 8.0
Long-term debt as a percent of
shareholders' equity 1.1% 1.9% 1.3% 1.1% 1.2% 1.4%
Shareholders' equity 1,335.0 1,053.5 841.5 796.5 683.2 565.2
Shareholders' equity
per common share 11.56 9.06 7.28 6.70 5.74 4.80
Additional Information:
Expenditures for property, plant, and
equipment $ 104.0 $ 86.0 $ 87.4 $ 83.2 $ 73.7 $ 59.3
Full-time employees at year-end 8,896 8,709 8,334 8,314 7,560 7,030
Full-time equivalent employees
at year-end 10,313 9,856 9,247 9,392 8,470 7,717
</TABLE>
(TABLE CONTINUED)
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
(in millions of dollars, except per share data) Medtronic, Inc.
1989 1988 1987 1986 1985
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS FOR THE YEAR:
Net sales $765.8 $669.9 $515.4 $411.5 $370.4
Cost of products sold 248.5 217.4 176.9 154.5 140.6
Research and development expense 67.7 55.1 43.6 40.1 39.5
Selling, general, and administrative
expense 291.9* 267.2 187.7 132.6* 142.6
Interest expense 8.4 5.9 4.3 4.4 3.6
Interest income (5.6) (7.1) (7.2) (12.5) (13.4)
Earnings from continuing operations
before income taxes 155.0 131.4 110.2 92.3 57.6
Provision for income taxes 54.7 44.8 34.8 24.3 5.8
Earnings from continuing operations 100.3 86.6 75.3 68.0 51.8
Discontinued operations and cumulative
effect of accounting changes (net) -- -- -- (14.0) (13.7)
Net earnings $100.3 $ 86.6 $ 75.3 $ 54.0 $ 38.1
Net earnings as a percent of net sales 13.1% 12.9% 14.6% 13.1% 10.3%
Net earnings as a percent of average
shareholders' equity 22.2% 21.2% 19.8% 15.5% 11.2%
Per share of common stock:
Earnings from continuing operations
before cumulative effects of
accounting changes $ .86 $ .73 $ .62 $ .54 $ .39
Net earnings .86 .73 .62 .43 .29
Cash dividends declared .15 .13 .11 .10 .10
Gross margin percentage 67.6% 67.5% 65.7% 62.4% 62.1%
FINANCIAL POSITION AT APRIL 30:
Working capital $206.1 $244.6 $250.2 $227.8 $221.7
Current ratio 1.9:1 2.3:1 3.0:1 2.7:1 3.3:1
Property, plant, and equipment, net 157.2 134.6 121.1 113.7 113.1
Total assets 783.0 661.3 580.0 540.9 473.2
Long-term debt 8.2 11.1 7.6 13.8 9.4
Long-term debt as a percent of
shareholders' equity 1.7% 2.7% 1.9% 3.8% 2.8%
Shareholders' equity 492.7 412.0 403.1 358.9 338.1
Shareholders' equity
per common share 4.24 3.44 3.21 2.83 2.55
ADDITIONAL INFORMATION:
Expenditures for property, plant, and
equipment $ 57.4 $ 39.1 $ 28.5 $ 17.6 $ 29.7
Full-time employees at year-end 6,529 5,939 5,156 4,964 5,046
Full-time equivalent employees
at year-end 7,152 6,471 5,587 5,329 5,362
</TABLE>
*Certain unusual costs and income separately disclosed on the statement of
consolidated earnings are included in selling, general, and administrative
expense.
<PAGE> 50
INVESTOR INFORMATION
ANNUAL MEETING
The annual meeting of Medtronic shareholders will take place on Wednesday,
August 30, 1995, beginning at 10:30 a.m. at the Corporate Center, 7000 Central
Avenue, NE, Minneapolis (Fridley), Minnesota. The Notice of Annual Meeting and
Proxy Statement are mailed to shareholders with the annual report.
INVESTOR INFORMATION
Shareholders, securities analysts, and investors seeking additional information
about the company should call Investor Relations at 612-574-3035.
The following information may be obtained upon request from the Medtronic
Investor Relations Department, 7000 Central Avenue, NE, Minneapolis, Minnesota
55432, USA:
* News releases describing significant company events and sales and earnings
results for each quarter and the fiscal year.
* Form 10-K Annual and Form 10-Q Quarterly Reports to the Securities and
Exchange Commission detailing Medtronic's business and financial condition.
You may also learn more about Medtronic via the Internet. Contact us at
http://www.medtronic.com.
As part of continuing efforts to reduce expenses and make information available
on a more timely basis, Medtronic has discontinued its practice of automatically
sending quarterly reports to shareholders. Quarterly financial results may be
obtained by requesting news releases as described above.
PRICE RANGE OF MEDTRONIC STOCK
Fiscal Qtr. 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
1995
High $44.56 $54.88 $59.50 $75.75
Low 36.13 42.69 49.00 55.75
1994
High 35.25 37.69 42.50 43.75
Low 30.00 28.81 35.81 35.25
Prices are closing quotations. On June 26, 1995, there were 21,947 holders of
record of the company's common stock. The regular quarterly cash dividend was
10.25 cents per share for 1995 and 8.5 cents per share for 1994.
STOCK TRANSFER AGENT, REGISTRAR, AND DIVIDEND REINVESTMENT AGENT
Shareholders with questions about stockholdings, dividend checks, dividend
reinvestment, transfer requirements, and address changes should contact:
Norwest Bank Minnesota, N.A.
Stock Transfer
161 North Concord Exchange
P.O. Box 738
South St. Paul, MN 55075-0738
Telephone: 1-800-468-9716 or
1-612-450-4064
DIVIDEND REINVESTMENT PLAN
The dividend reinvestment plan provides a convenient way for shareholders to
increase their holdings of Medtronic, Inc., common stock through automatic
dividend reinvestment and voluntary cash purchase. All registered holders of
Medtronic, Inc., common stock may participate. For more information, please
contact the transfer agent.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, Minneapolis
STOCK EXCHANGE LISTING
New York Stock Exchange
(symbol: MDT)
The financial text of this annual report was printed on recycled paper including
50% pre-consumer and 20% post-consumer fiber. Please recycle this book or donate
it to your local library.
<PAGE> 51
APPENDIX: Graphic and Image Material
Page
Number Description
33 Bar graph of net earnings in millions of dollars
for the last three fiscal years as follows:
1995 $294.0
1994 232.4
1993 197.2
33 Bar graph of earnings per share in dollars for the
last three fiscal years as follows:
1995 $2.55
1994 2.02
1993 1.66
34 Stacked bar graph showing net sales in millions of
dollars for U.S. and international operations for
the last three fiscal years. Data points (in
millions of dollars) are as follows:
1995 1994 1993
U.S. $ 979.7 $ 800.4 $ 770.6
International 762.7 590.5 557.6
$1,742.4 $1,390.9 $1,328.2
34 Stacked bar graph of net sales in millions of
dollars for the Pacing, Other Cardiovascular, and
Neurological and Other business units for each of
the last three fiscal years. The data points (in
millions of dollars) are as follows:
1995 1994 1993
Pacing $1,140.9 $ 934.2 $ 872.4
Other Cardiovascular 455.2 328.1 304.1
Neurological & Other 146.3 128.6 151.7
$1,742.4 $1,390.9 $1,328.2
35 Bar graph of research and development expense in
millions of dollars for the last three fiscal
years as follows:
1995 $191.4
1994 156.3
1993 133.0
36 Bar graph of net cash in millions of dollars for
the last three fiscal years as follows:
1995 $276.0
1994 103.0
1993 53.3
36 Bar graph of cash flows from operating activities
in millions of dollars for the last three fiscal
years as follows:
1995 $387.2
1994 356.9
1993 291.5
37 Stacked bar graph of equity and interest-bearing
debt in millions of dollars for the last three
fiscal years. Data points (in millions of
dollars) are as follows:
1995 1994 1993
Equity $1,335.0 $1,053.5 $841.5
Interest-Bearing Debt 47.7 78.4 102.7
$1,382.7 $1,131.9 $944.2
