SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported) January 28, 1999
Medtronic, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Minnesota
(State of Other Jurisdiction of Incorporation)
1-7707 41-0793183
(Commission File Number) (I.R.S. Employer Identification No.)
7000 Central Avenue Northeast
Minneapolis, Minnesota 55432
(Address of Principal Executive Offices) (Zip Code)
(612) 514-4000
(Registrant's Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Item 2. Acquisition or Disposition of Assets
On January 28, 1999, Medtronic, Inc. (the "Registrant") acquired all of
the outstanding stock of Arterial Vascular Engineering, Inc. ("AVE") through a
merger of a newly-created subsidiary of the Registrant into AVE. Pursuant to the
merger (which is being accounted for as a pooling of interests), the
shareholders of AVE receive 0.76726 of a share of the Registrant's Common Stock
in exchange for each of the approximately 65.9 million shares of AVE Common
Stock outstanding at the time of the merger. In addition, holders of options
outstanding at the time of the merger to purchase an aggregate of approximately
4.8 million shares of AVE Common Stock will receive, upon exercise of such
options, the same fraction of a share of the Registrant's Common Stock. A copy
of the press release announcing the closing of the merger transaction is filed
as Exhibit 99 to this Form 8-K.
AVE designs and manufactures minimally invasive solutions for the
treatment of coronary artery and peripheral vascular disease and is the global
technology leader in coronary stents. Its product offerings include coronary
stents, balloon catheters, guidewires and guiding catheters.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Businesses Acquired:
The required financial statements of AVE have been previously
filed by the Registrant in the Registrant's Registration
Statement on Form S-4 relating to the merger transaction (File
No. 333-68677), by incorporation thereof by reference to the
following AVE reports filed pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended (File No.
0-27802):
(i) The unaudited condensed consolidated balance sheet of AVE
as of September 30, 1998, and the related unaudited condensed
consolidated statements of operations, stockholders' equity
and cash flows for the three months ended September 30, 1998
and September 30, 1997, together with the accompanying notes,
as included in AVE's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998.
(ii) The consolidated balance sheets of AVE as of June 30,
1998 and 1997, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of
the years in the three years ended June 30, 1998, together
with the accompanying notes and the report of independent
auditors with respect to those financial statements, as
included in AVE's Annual Report on Form 10-K for the fiscal
year ended June 30, 1998.
<PAGE>
(b) Pro Forma Financial Information:
The following pro forma financial information is filed as part
of this report beginning on the page following signatures:
(i) The unaudited pro forma condensed combined statement of
operations of the Registrant for the years ended April 30,
1998, 1997 and 1996, giving effect to the merger transaction
under the pooling of interests method of accounting, and the
accompanying description and explanatory notes.
(ii) The unaudited pro forma condensed combined balance sheet
of the Registrant as of October 30, 1998 and the unaudited pro
forma condensed combined statement of operations of the
Registrant for the six month periods ended October 31, 1998
and 1997, giving effect to the merger transaction under the
pooling of interest method of accounting, and the accompanying
description and explanatory notes.
(c) Exhibits:
See Exhibit Index on page following pro forma financial
information.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MEDTRONIC, INC.
Date: January 28, 1999 By /s/ Robert L. Ryan
Robert L. Ryan,
Senior Vice President and Chief
Financial Officer
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma financial statements give effect to
the mergers of Medtronic, Inc. (Medtronic) with each of Arterial Vascular
Engineering, Inc. (AVE) and Sofamor Danek Group, Inc. (Sofamor Danek), each of
which will be accounted for as a pooling of interests. The unaudited pro forma
condensed combined balance sheets give effect to these transactions as if they
had occurred on October 30, 1998. The unaudited pro forma condensed combined
statements of operations give effect to these transactions as if they had
occurred as of May 1, 1995, the beginning of the earliest period presented.
The operating results for AVE have been converted as described below
from its fiscal year end (June 30) to Medtronic's fiscal year end (April 30).
The operating results for Sofamor Danek have been converted as described below
from its fiscal year end (December 31) to Medtronic's fiscal year end (April
30).
For pro forma purposes, (i) Medtronic's unaudited consolidated balance
sheet as of October 30, 1998 has been combined with AVE's and Sofamor Danek's
unaudited consolidated balance sheets as of September 30, 1998, and (ii)
Medtronic's unaudited consolidated statements of operations for the six months
ended October 30, 1998 and October 31, 1997 and audited statements of operations
for the fiscal years ended April 30, 1998, 1997 and 1996 have been combined with
AVE's and Sofamor Danek's unaudited consolidated statements of operations for
the six months ended September 30, 1998 and 1997 and 12 months ended March 31,
1998, 1997 and 1996, respectively, on a pooling of interests basis.
These pro forma financial statements are presented for illustrative
purposes only and therefore are not necessarily indicative of the operating
results or financial position that might have been achieved had the transactions
occurred as of an earlier date, nor are they necessarily indicative of operating
results or financial position that may occur in the future. These pro forma
financial statements should be read in conjunction with the historical
consolidated financial statements and notes thereto of Medtronic and AVE
incorporated by reference herein. AVE's recent purchases of the catheter lab
business of C.R. Bard, Inc. (the "Bard Cath Lab business") and World Medical
Manufacturing Corporation have not been included in the unaudited pro forma
condensed combined financial statements because they do not constitute
significant business combinations and disclosure is not deemed to be material.
Information on the impact of these transactions is included in AVE's Current
Report on Form 8-K/A that was filed with the SEC on December 14, 1998.
Additional information on AVE and Sofamor Danek may be obtained through review
of each company's public filings with the SEC.
As indicated in the footnotes to these pro forma financial statements,
certain pro forma adjustments have been made using a conversion ratio of 0.76726
of a share of Medtronic stock for each share of AVE stock outstanding at the
effective time of the AVE merger, and a conversion ratio of 1.65159 shares of
Medtronic stock for each share of Sofamor Danek stock outstanding at the
effective time of the Sofamor Danek merger (in each case, the final conversion
ratio calculated pursuant to the terms of each of the merger agreements).
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEETS
October 30, 1998
(in thousands)
<TABLE>
<CAPTION>
Pro Forma
Pro Forma Pro Forma Medtronic,
Medtronic and Medtronic Sofamor
Sofamor Pro Forma Sofamor Danek Pro Forma and AVE Danek and AVE
Medtronic Danek Adjustments Combined AVE Adjustments Combined Combined
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents 572,341 70,132 642,473 135,555 707,896 778,028
Short-term investments 244,044 9,535 253,579 96,729 340,773 350,308
Accounts receivable, net 706,531 108,027 814,558 90,456 796,987 905,014
Inventories: -
Finished goods 205,722 41,417 247,139 5,486 211,208 252,625
Work in process 88,273 4,771 93,044 2,786 91,059 95,830
Raw materials 130,596 2,704 133,300 3,272 133,868 136,572
--------------------------------------------------------------------------------------------
Total inventories 424,591 48,892 473,483 11,544 436,135 485,027
Prepaid expenses and other
current assets 324,031 67,967 391,998 23,729 347,760 415,727
--------------------------------------------------------------------------------------------
Total current assets 2,271,538 304,553 2,576,091 358,013 2,629,551 2,934,104
-
Property, plant, and equipment, net 565,107 56,449 621,556 78,573 643,680 700,129
Goodwill and other intangible
assets, net 673,357 103,803 777,160 - 673,357 777,160
Long-term investments 210,801 1,397 212,198 - 210,801 212,198
Other assets 113,772 66,014 179,786 1,341 115,113 181,127
--------------------------------------------------------------------------------------------
Total assets 3,834,575 532,216 - 4,366,791 437,927 - 4,272,502 4,804,718
============================================================================================
-
LIABILITIES AND SHAREHOLDERS' EQUITY -
Current liabilities: -
Short-term borrowings 201,320 18,085 219,405 - 201,320 219,405
Accounts payable 96,179 8,909 105,088 11,718 107,897 116,806
Accrued liabilities 476,594 85,605 562,199 87,227 563,821 649,426
--------------------------------------------------------------------------------------------
Total current liabilities 774,093 112,599 886,692 98,945 873,038 985,637
-
Long-term debt 19,534 18,067 37,601 - 19,534 37,601
Deferred tax liabilities 509 - 509 - 509 509
Other long-term liabilities 130,293 20,317 150,610 - 130,293 150,610
--------------------------------------------------------------------------------------------
Total liabilities 924,429 150,983 1,075,412 98,945 1,023,374 1,174,357
-
Shareholders' equity: -
Common stock 48,934 182,977 (178,532) (a) 53,379 64 4,876 (b) 53,874 58,319
Retained earnings 2,963,360 199,682 178,532 (a) 3,341,574 339,909 (4,876) (b) 3,298,393 3,676,607
Accumulated other non-owner
changes in equity (75,998) (1,426) (77,424) (991) (76,989) (78,415)
Receivable from Employee Stock
Ownership Plan (26,150) - (26,150) - (26,150) (26,150)
--------------------------------------------------------------------------------------------
Total shareholders' equity 2,910,146 381,233 - 3,291,379 338,982 - 3,249,128 3,630,361
--------------------------------------------------------------------------------------------
Total liabilities and
shareholders' equity 3,834,575 532,216 - 4,366,791 437,927 - 4,272,502 4,804,718
============================================================================================
</TABLE>
(a) Reflects 26,914,000 Sofamor Danek no par common shares outstanding at
September 30, 1998 exchanged for 44,450,893 Medtronic $.10 par common
shares using the 1.65159 exchange ratio.
(b) Reflects 64,386,000 AVE $.001 par common shares outstanding at
September 30, 1998 exchanged for 49,400,802 Medtronic $.01 par common
shares using the 0.76726 exchange ratio.
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
For the Six Months Ended October 30, 1998
(in thousands)
<TABLE>
<CAPTION>
Pro Forma
Pro Forma Pro Forma Medtronic,
Medtronic and Medtronic Sofamor
Sofamor Pro Forma Sofamor Danek Pro Forma and AVE Danek and AVE
Medtronic Danek Adjustments Combined AVE Adjustments Combined Combined
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 1,434,060 $ 195,230 $ 1,629,290 $ 343,145 $ 1,777,205 $1,972,435
Costs and expenses:
Cost of products sold 402,085 35,883 437,968 56,573 458,658 494,541
Research and development expense 160,048 14,850 174,898 27,535 187,583 202,433
Selling, general, and administrative
expense 413,196 89,157 502,353 78,281 491,477 580,634
Non-recurring charges 21,101 8,000 29,101 - 21,101 29,101
Interest expense 5,222 1,345 6,567 - 5,222 6,567
Interest income (17,163) - (17,163) (5,274) (22,437) (22,437)
------------------------------------------------------------------------------------------
Total costs and expenses 984,489 149,235 1,133,724 157,115 1,141,604 1,290,839
------------------------------------------------------------------------------------------
Earnings before income taxes 449,571 45,995 495,566 186,030 635,601 681,596
Provision for income taxes 150,136 14,371 164,507 73,438 223,574 237,945
------------------------------------------------------------------------------------------
Net earnings $ 299,435 $ 31,624 $ 331,059 $ 112,592 $ 412,027 $ 443,651
==========================================================================================
Weighted average shares outstanding 479,553 26,669 17,377(c) 523,599 62,853 (14,628)(d) 527,778 571,824
Basic Earnings per share $ 0.62 $ 1.19 $ 0.63 $ 1.79 $ 0.78 $ 0.78
Earnings per share assuming dilution $ 0.61 $ 1.08 $ 0.62 $ 1.71 $ 0.77 $ 0.76
Weighted average shares outstanding
assuming dilution 486,909 29,194 19,022(c) 535,125 65,964 (15,352) (d) 537,521 585,737
</TABLE>
(c) Represents 26,669,000 weighted average shares outstanding and
29,194,000 weighted average shared outstanding assuming dilution of
Sofamor Danek common stock converted to 44,046,000 weighted average
shares outstanding and 48,216,000 weighted average shares outstanding
assuming dilution of Medtronic common stock using the 1.65159 exchange
ratio.
(d) Represents 62,853,000 weighted average shares outstanding and
65,964,000 weighted average shared outstanding assuming dilution of AVE
common stock converted to 48,225,000 weighted average shares
outstanding and 50,612,000 weighted average shares outstanding assuming
dilution of Medtronic common stock using the 0.76726 exchange ratio.
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
For the Six Months Ended October 31, 1997
(in thousands)
<TABLE>
<CAPTION>
Pro Forma
Pro Forma Pro Forma Medtronic,
Medtronic and Medtronic Sofamor
Sofamor Pro Forma Sofamor Danek Pro Forma and AVE Danek and AVE
Medtronic Danek Adjustments Combined AVE Adjustments Combined Combined
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 1,377,508 $ 151,619 $ 1,529,127 $ 48,485 $ 1,425,993 $ 1,577,612
Costs and expenses:
Cost of products sold 364,127 27,291 391,418 10,466 374,593 401,884
Research and development expense 151,820 9,589 161,409 9,600 161,420 171,009
Selling, general, and administrative
expense 417,777 71,161 488,938 14,328 432,105 503,266
Non-recurring charges - - - - - -
Interest expense 4,661 3,045 7,706 - 4,661 7,706
Interest income (10,331) - (10,331) (1,996) (12,327) (12,327)
-------------------------------------------------------------------------------------------
Total costs and expenses 928,054 111,086 1,039,140 32,398 960,452 1,071,538
-------------------------------------------------------------------------------------------
Earnings before income taxes 449,454 40,533 489,987 16,087 465,541 506,074
Provision for income taxes 155,095 12,476 167,571 5,631 160,726 173,202
-------------------------------------------------------------------------------------------
Net earnings $ 294,359 $ 28,057 $ 322,416 $ 10,456 $ 304,815 $ 332,872
===========================================================================================
Weighted average shares outstanding 476,872 24,786 16,150 (e) 517,808 59,366 (13,817) (f) 522,421 563,357
Basic Earnings per share $ 0.62 $ 1.13 $ 0.62 $ 0.18 $ 0.58 $ 0.59
Earnings per share assuming dilution $ 0.61 $ 1.05 $ 0.61 $ 0.16 $ 0.57 $ 0.58
Weighted average shares outstanding
assuming dilution 484,847 26,696 17,394 (e) 528,937 64,005 (14,897) (f) 533,955 578,045
</TABLE>
(e) Represents 24,786,000 weighted average shares outstanding and
26,696,000 weighted average shared outstanding assuming dilution of
Sofamor Danek common stock converted to 40,936,000 weighted average
shares outstanding and 44,090,000 weighted average shares outstanding
assuming dilution of Medtronic common stock using the 1.65159 exchange
ratio.
(f) Represents 59,366,000 weighted average shares outstanding and
64,005,000 weighted average shared outstanding assuming dilution of AVE
common stock converted to 45,549,000 weighted average shares
outstanding and 49,108,000 weighted average shares outstanding assuming
dilution of Medtronic common stock using the 0.76726 exchange ratio.
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
For the Fiscal Year Ended April 30, 1998
(in thousands)
<TABLE>
<CAPTION>
Pro Forma
Pro Forma Pro Forma Medtronic,
Medtronic and Medtronic Sofamor
Sofamor Pro Forma Sofamor Danek Pro Forma and AVE Danek and AVE
Medtronic Danek Adjustments Combined AVE Adjustments Combined Combined
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 2,783,371 $ 331,596 $ 3,114,967 $ 227,991 $3,011,362 $3,342,958
Costs and expenses:
Cost of products sold 760,016 61,446 821,462 45,668 805,684 867,130
Research and development expense 317,957 21,251 339,208 28,732 346,689 367,940
Selling, general, and administrative
expense 809,546 155,939 965,485 61,881 871,427 1,027,366
Non-recurring charges 192,400 - 192,400 - 192,400 192,400
Interest expense 9,756 5,498 15,254 - 9,756 15,254
Interest income (22,927) - (22,927) (4,438) (27,365) (27,365)
-------------------------------------------------------------------------------------------
Total costs and expenses 2,066,748 244,134 2,310,882 131,843 2,198,591 2,442,725
-------------------------------------------------------------------------------------------
Earnings before income taxes 716,623 87,462 804,085 96,148 812,771 900,233
Provision for income taxes 249,746 26,957 276,703 35,696 285,442 312,399
-------------------------------------------------------------------------------------------
Net earnings $ 466,877 $ 60,505 $ 527,382 $ 60,452 $ 527,329 $ 587,834
===========================================================================================
Weighted average shares outstanding 477,243 25,039 16,314 (g) 518,596 61,136 (14,229)(h) 524,150 565,503
Basic Earnings per share $ 0.98 $ 2.42 $ 1.02 $ 0.99 $ 1.01 $ 1.04
Earnings per share assuming dilution $ 0.96 $ 2.22 $ 1.00 $ 0.93 $ 0.99 $ 1.02
Weighted average shares outstanding
assuming dilution 484,126 27,197 17,721 (g) 529,044 64,675 (15,052)(h) 533,749 578,667
</TABLE>
(g) Represents 25,039,000 weighted average shares outstanding and
27,197,000 weighted average shared outstanding assuming dilution of
Sofamor Danek common stock converted to 41,353,000 weighted average
shares outstanding and 44,918,000 weighted average shares outstanding
assuming dilution of Medtronic common stock using the 1.65159 exchange
ratio.
(h) Represents 61,136,000 weighted average shares outstanding and
64,675,000 weighted average shared outstanding assuming dilution of AVE
common stock converted to 46,907,000 weighted average shares
outstanding and 49,623,000 weighted average shares outstanding assuming
dilution of Medtronic common stock using the 0.76726 exchange ratio.
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
For the Fiscal Year Ended April 30, 1997
(in thousands)
<TABLE>
<CAPTION>
Pro Forma
Pro Forma Pro Forma Medtronic,
Medtronic and Medtronic Sofamor
Sofamor Pro Forma Sofamor Danek Pro Forma and AVE Danek and AVE
Medtronic Danek Adjustments Combined AVE Adjustments Combined Combined
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $2,609,361 $ 260,066 $2,869,427 $ 75,123 $2,684,484 $2,944,550
Costs and expenses:
Cost of products sold 692,964 46,759 739,723 13,991 706,955 753,714
Research and development expense 299,662 17,018 316,680 8,792 308,454 325,472
Selling, general, and administrative
expense 807,852 125,109 932,961 18,593 826,445 951,554
Non-recurring charges - 50,000 50,000 - - 50,000
Interest expense 11,254 4,143 15,397 - 11,254 15,397
Interest income (34,047) - (34,047) (4,255) (38,302) (38,302)
-------------------------------------------------------------------------------------------
Total costs and expenses 1,777,685 243,029 2,020,714 37,121 1,814,806 2,057,835
-------------------------------------------------------------------------------------------
Earnings before income taxes 831,676 17,037 848,713 38,002 869,678 886,715
Provision for income taxes 287,092 3,181 290,273 13,286 300,378 303,559
-------------------------------------------------------------------------------------------
Net earnings $ 544,584 $ 13,856 $ 558,440 $ 24,716 $ 569,300 $ 583,156
===========================================================================================
Weighted average shares outstanding 485,506 24,384 15,888 (i) 525,778 57,647 (13,417) (j) 529,736 570,008
Basic Earnings per share $ 1.12 $ 0.57 $ 1.06 $ 0.43 $ 1.07 $ 1.02
Earnings per share assuming dilution $ 1.10 $ 0.53 $ 1.04 $ 0.39 $ 1.05 $ 1.00
Weighted average shares outstanding
assuming dilution 494,019 26,137 17,031 (i) 537,187 62,905 (14,641) (j) 542,283 585,451
</TABLE>
(i) Represents 24,384,000 weighted average shares outstanding and
26,137,000 weighted average shared outstanding assuming dilution of
Sofamor Danek common stock converted to 40,272,000 weighted average
shares outstanding and 43,168,000 weighted average shares outstanding
assuming dilution of Medtronic common stock using the 1.65159 exchange
ratio.
(j) Represents 57,647,000 weighted average shares outstanding and
62,905,000 weighted average shared outstanding assuming dilution of AVE
common stock converted to 44,230,000 weighted average shares
outstanding and 48,264,000 weighted average shares outstanding assuming
dilution of Medtronic common stock using the 0.76726 exchange ratio.
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
For the Fiscal Year Ended April 30, 1996
(in thousands)
<TABLE>
<CAPTION>
Pro Forma
Pro Forma Pro Forma Medtronic,
Medtronic and Medtronic Sofamor
Sofamor Pro Forma Sofamor Danek Pro Forma and AVE Danek and AVE
Medtronic Danek Adjustments Combined AVE Adjustments Combined Combined
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 2,326,836 $ 199,077 $2,525,913 $ 44,128 $2,370,964 $2,570,041
Costs and expenses:
Cost of products sold 664,531 40,906 705,437 9,726 674,257 715,163
Research and development expense 263,933 14,264 278,197 5,379 269,312 283,576
Selling, general, and administrative
expense 747,245 93,166 840,411 6,545 753,790 846,956
Non-recurring charges - - - - - -
Interest expense 10,531 3,400 13,931 - 10,531 13,931
Interest income (31,124) - (31,124) (502) (31,626) (31,626)
-----------------------------------------------------------------------------------------
Total costs and expenses 1,655,116 151,736 1,806,852 21,148 1,676,264 1,828,000
-----------------------------------------------------------------------------------------
Earnings before income taxes 671,720 47,341 719,061 22,980 694,700 742,041
Provision for income taxes 235,582 10,677 246,259 7,762 243,344 254,021
-----------------------------------------------------------------------------------------
Net earnings $ 436,138 $ 36,664 $ 472,802 $ 15,218 $ 451,356 $ 488,020
=========================================================================================
Weighted average shares outstanding 482,923 23,934 15,595 (k) 522,452 42,184 (9,818) (l) 515,289 554,818
Basic Earnings per share $ 0.90 $ 1.53 $ 0.90 $ 0.36 $ 0.88 $ 0.88
Earnings per share assuming dilution $ 0.89 $ 1.44 $ 0.88 $ 0.28 $ 0.84 $ 0.85
Weighted average shares outstanding
assuming dilution 492,209 25,533 16,637 (k) 534,379 54,773 (12,748) (l) 534,234 576,404
</TABLE>
(k) Represents 23,934,000 weighted average shares outstanding and
25,533,000 weighted average shared outstanding assuming dilution of
Sofamor Danek common stock converted to 39,529,000 weighted average
shares outstanding and 42,170,000 weighted average shares outstanding
assuming dilution of Medtronic common stock using the 1.65159 exchange
ratio.
(l) Represents 42,184,000 weighted average shares outstanding and
54,773,000 weighted average shared outstanding assuming dilution of AVE
common stock converted to 32,366,000 weighted average shares
outstanding and 42,025,000 weighted average shares outstanding assuming
dilution of Medtronic common stock using the 0.76726 exchange ratio.
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
NOTE 1
The unaudited pro forma financial statements give effect to the mergers
of Medtronic with each of AVE and Sofamor Danek Group, Inc. (Sofamor Danek)
using the pooling of interests method of accounting. The unaudited pro forma
condensed combined balance sheets give effect to these transactions as if they
had occurred on October 30, 1998. The unaudited pro forma condensed combined
statements of operations give effect to these transactions as if they had
occurred as of May 1, 1995, the beginning of the earliest period presented.
The pro forma financial statements are presented for illustrative
purposes only and therefore are not necessarily indicative of the operating
results or financial position that might have been achieved had the transactions
occurred as of an earlier date, nor are they necessarily indicative of operating
results or financial position that may occur in the future.
These pro forma financial statements should be read in conjunction with
the historical consolidated financial statements and notes thereto of Medtronic
and AVE incorporated by reference herein. Additional information on Sofamor
Danek may be obtained through review of Sofamor Danek's public filings with the
Securities and Exchange Commission.
NOTE 2
The unaudited pro forma condensed combined balance sheets reflect
Medtronic's unaudited consolidated balance sheet as of October 30, 1998 combined
with AVE's and Sofamor Danek's unaudited consolidated balance sheets as of
September 30, 1998.
NOTE 3
The unaudited pro forma condensed combined statements of operations
reflect Medtronic's unaudited consolidated statements of operations for the six
months ended October 30, 1998 and October 31, 1997 and audited statements of
operations for the fiscal years ended years ended April 30, 1998, 1997 and 1996
combined with AVE's and Sofamor Danek's unaudited consolidated statements of
operations for the six months ended September 30, 1998 and 1997 and 12 months
ended March 31, 1998, 1997 and 1996, respectively, on a pooling of interests
basis.
NOTE 4
The unaudited pro forma condensed combined financial statements do not
give effect to AVE's acquisition of the Bard Cath Lab business which was
consummated on October 1, 1998. The Bard Cath Lab acquisition has not been
included in the unaudited pro forma condensed combined financial statements
because it does not constitute a significant business combination and disclosure
is not deemed to be material. The Bard Cath Lab business includes a broad range
of catheter-based technologies including PTCA balloon catheters, guidewires,
guide catheters, coronary diagnostic catheters and guidewires, introducers and
vessel closure devices, coronary stents, and various other components and
accessories. AVE's acquisition of the Bard Cath Lab business was accounted for
as a purchase business combination. The purchase price of $550 million (which is
subject to adjustment) was allocated to tangible net assets of $54 million, in
process research and development of $95 million, intangible assets of $73
million and goodwill of $328 million. The in-process research and development
charge of $95 million was recorded by AVE in October 1998.
<PAGE>
On December 14, 1998, AVE acquired World Medical Manufacturing
Corporation (World Medical), a manufacturer of medical devices for the treatment
of abdominal aortic aneurysms, for approximately $71 million in AVE common
stock. The World Medical acquisition has not been included in the unaudited pro
forma condensed combined financial statements because it does not constitute a
significant business combination and disclosure is not deemed to be material. In
connection with the purchase business combination, AVE recorded an in-process
research and development charge of approximately $46 million.
NOTE 5
In addition to professional fees and change-in-control payments in
connection with the AVE transaction, Medtronic expects that there will be
additional costs incurred related to closing duplicate facilities and
eliminating duplicate administrative functions.
NOTE 6
The accounting policies of the separate companies are currently being
studied from a conformity perspective. The impact of conforming accounting
principles, if any, is not expected to be material.
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
EXHIBIT INDEX
to
FORM 8-K
MEDTRONIC, INC.
Exhibit Number Exhibit Description
2 Agreement and Plan of Merger dated November 29, 1998, by and among
Medtronic, Inc., AVE Group, Inc. and MAV Merger Corp.--incorporated by
reference to Exhibit 2 to the Registrant's Registration Statement on
Form S-4, Reg. No. 333-69271.
99 Press release dated January 28, 1999.
Contacts:
Medtronic
Dale Beumer
Investor Relations
612/514-3038
Jessica Stoltenberg
Public Relations
612/514-3333
F O R I M M E D I A T E R E L E A S E
MEDTRONIC AND ARTERIAL VASCULAR ENGINEERING (AVE)
COMPLETE MERGER
MINNEAPOLIS, MN, and SANTA ROSA, CA, January 28, 1999 -- Medtronic,
Inc. (NYSE: MDT), and Arterial Vascular Engineering, Inc. (AVE), (Nasdaq
National Market: AVEI), announced today that shareholders of AVE have approved
the merger of the two companies and that the transaction closed today.
Under terms of the agreement, shareholders of AVE receive 0.76726
shares of Medtronic stock for each outstanding share of AVE common stock in a
pooling of interests transaction.
"Today marks the establishment of a powerful new organization known as
Medtronic Vascular and dedicated to providing `best-in-class' products for
physicians worldwide," said William W. George, Medtronic chairman and chief
executive officer. "We have merged three strong product lines (AVE, Medtronic
Vascular and the former USCI Division of C.R. Bard) into one, with market
leading products in every category. The combined salesforces will immediately
offer one of the broadest and most technologically advanced lines of stents,
catheters and related products in the world."
"We fully expect the result of these efforts to be a leadership
position in the interventional vascular arena. A strong vascular organization,
joined with Medtronic's established market leading positions in Cardiac Rhythm
Management and Cardiac Surgery, will make Medtronic's cardiovascular products
and services the clear choice for our customers."
George announced that Scott Solano, formerly chair and chief executive
of AVE, will become president of the new organization. Solano will report to Art
Collins, Medtronic president and chief operating officer.
AVE designs and manufactures minimally invasive solutions for the
treatment of coronary artery and peripheral vascular disease and is the global
technology leader in coronary stents. Its product offerings include coronary
stents, balloon catheters, guidewires and guiding catheters.
As previously noted, Medtronic will take one-time transaction-related
and restructuring charges in its current quarter, which ends January 29, 1999.
Medtronic, Inc., headquartered in Minneapolis, is the world's leading
medical technology company specializing in implantable and interventional
therapies. Its Internet address is www.medtronic.com.
- 0 -
Any statements made about the company's anticipated financial results and
regulatory approvals are forward-looking statements subject to risks and
uncertainties such as those described in the company's Annual Report on Form
10-K for the year ended April 30, 1998. Actual results may differ materially
from anticipated results.
