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| Medtronic 2001 10-K Report (Partial 10-K shown; subscribers can see the entire 10-K report.) |
0000897101-01-500449.hdr.sgml : 20010727
ACCESSION NUMBER: 0000897101-01-500449
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 8
CONFORMED PERIOD OF REPORT: 20010427
FILED AS OF DATE: 20010726
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: MEDTRONIC INC
CENTRAL INDEX KEY: 0000064670
STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845]
IRS NUMBER: 410793183
STATE OF INCORPORATION: MN
FISCAL YEAR END: 0430
FILING VALUES:
FORM TYPE: 10-K
SEC ACT:
SEC FILE NUMBER: 001-07707
FILM NUMBER: 1689989
BUSINESS ADDRESS:
STREET 1: 7000 CENTRAL AVE NE
STREET 2: MS 316
CITY: MINNEAPOLIS
STATE: MN
ZIP: 55432
BUSINESS PHONE: 6125744000
10-K
1
medtronic012520_10k.txt
MEDTRONIC, INC. FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934. FOR THE FISCAL YEAR ENDED APRIL 27, 2001
COMMISSION FILE NO. 1-7707
----------------------
[LOGO]
MEDTRONIC
MEDTRONIC, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
MINNESOTA 41-0793183
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
710 MEDTRONIC PARKWAY
MINNEAPOLIS, MINNESOTA 55432
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
TELEPHONE NUMBER: (763) 514-4000
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 20, 2001, BASED ON THE CLOSING PRICE OF $48.58, AS
REPORTED ON THE NEW YORK STOCK EXCHANGE: APPROXIMATELY $58.6 BILLION.
SHARES OF COMMON STOCK OUTSTANDING ON JULY 20, 2001: 1,209,923,966
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF REGISTRANT'S 2001 ANNUAL REPORT ARE INCORPORATED BY REFERENCE INTO
PARTS I, II AND IV; PORTIONS OF REGISTRANT'S PROXY STATEMENT FOR ITS 2001 ANNUAL
MEETING ARE INCORPORATED BY REFERENCE INTO PART III.
TABLE OF CONTENTS
ITEM DESCRIPTION PAGE
- ---- ----------- ----
PART I
1. Business......................................................... 1
2. Properties....................................................... 14
3. Legal Proceedings................................................ 14
4. Submission of Matters to a Vote of Security-Holders.............. 16
PART II
5. Market for Registrant's Common Equity and Related
Stockholder Matters........................................... 16
6. Selected Financial Data.......................................... 16
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................... 16
7A. Quantitative and Qualitative Disclosures About Market Risk ...... 16
8. Financial Statements and Supplementary Data...................... 16
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure...................................... 16
PART III
10. Directors and Executive Officers of the Registrant............... 16
11. Executive Compensation........................................... 16
12. Security Ownership of Certain Beneficial Owners and Management... 16
13. Certain Relationships and Related Transactions................... 16
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K...................................................... 17
TRADEMARKS AND OTHER RIGHTS
This Report contains trademarks, service marks and registered marks of
Medtronic, Inc. and its subsidiaries, and other companies, as indicated.
ANNUAL MEETING AND RECORD DATES
Medtronic's Annual Meeting of Shareholders will be held on Thursday, August 30,
2001 at 10:30 a.m., Central Daylight Time at the Company's world headquarters.
The record date for the Annual Meeting is now July 31, 2001 and all shareholders
of record at the close of business on July 31, 2001 will be entitled to vote at
the Annual Meeting.
PART I
ITEM 1. BUSINESS
OVERVIEW. Medtronic, Inc., together with its subsidiaries ("Medtronic"
or the "company"), is the world's leading medical technology company, providing
lifelong solutions for people with chronic disease. The company is committed to
offering market-leading therapies to restore patients worldwide to fuller,
healthier lives. Medtronic's primary products are used for bradycardia pacing,
tachyarrhythmia management, atrial fibrillation, heart failure, coronary and
peripheral vascular disease, minimally invasive cardiac surgery, heart valve
replacement, extracorporeal cardiac support, spinal and neurosurgery, malignant
and non-malignant pain, movement disorders, neurodegenerative disorders, and
ear, nose and throat (ENT) surgery. Medtronic's businesses operate in four
business units that comprise one reportable segment, that of manufacturing and
selling device-based medical therapies. The business units are Cardiac Rhythm
Management; Vascular; Cardiac Surgery; and Neurological, Spinal and ENT.
Medtronic was founded in 1949, incorporated in 1957 and today serves
physicians, clinicians and patients in more than 120 countries worldwide. The
company remains committed to a mission written by its founder over 40 years ago:
"to contribute to human welfare by application of biomedical engineering in the
research, design, manufacture, and sale of instruments or appliances that
alleviate pain, restore health and extend life." Beginning with the development
of the heart pacemaker in the 1950s, the company has assembled a broad portfolio
of progressive technology expertise both through internal development of core
technologies as well as acquisitions, establishing the company as a leader in
new medical technologies. Since 1998, Medtronic has accelerated its growth
through the acquisition of six major businesses and will continue to evaluate
additional acquisition opportunities. Medtronic selects its acquisition
candidates to expand its broad base of market leadership and leverage its
technology portfolio to treat an increasing number of chronic diseases.
Medtronic's success in leading global advances in medical technology is
based upon an active collaboration with customers. The company's new therapies
and products are often successful because the company works closely with
physicians and patients to identify unmet needs in clinics, hospitals and
surgical suites. This collaboration allows Medtronic to continually introduce
new products offering improved solutions for medical practitioners and the
patients they treat. These new products drive the company's financial results.
During fiscal year 2001, about two-thirds of the company's revenues were
generated from sales of products introduced within the last two years. By
staying close to its market, the company believes it can direct its substantial
technological resources to the development of solutions that hold the most
promise for serving patients and creating successful products.
In January 2000, Medtronic introduced Vision 2010, the company's
strategic initiative to provide patients and the medical community with
comprehensive, life-long solutions for the management of chronic disease. In the
next decade, the company anticipates that the internet, technology advancements
and increasing patient participation in treatment decisions will transform the
nature of healthcare services. The convergence of these factors will result in
better care at lower cost to the health care system and greater quality of life
and convenience to the patient. The company has embraced these trends by forming
innovative alliances with information industry leaders Microsoft Corporation,
International Business Machines Corporation (IBM) and Healtheon/WebMD. Through
these alliances, Medtronic intends to provide physicians better tools to collect
and monitor patient data and provide health care information to the increasing
number of patients who seek an active and informed role in their own health care
decisions.
RECENT ACQUISITIONS. The company continues to grow through a
combination of acquisitions and internally generated technological advances. In
fiscal 2001, Medtronic acquired PercuSurge, Inc. (PercuSurge"), a private
company that develops and markets interventional embolic protection devices. In
June 2001, PercuSurge commercially released in the United States its patented
system to remove embolic material dislodged during the treatment of
arteriosclerosis. This system has been commercially available in Europe since
1999 and has been used in more than 5,000 procedures. Shareholders of PercuSurge
received 3.7 million shares of Medtronic Common
1
Stock in the merger in exchange for the outstanding stock of PercuSurge. The
acquisition was accounted for as a pooling-of-interests, and Medtronic's
consolidated financial statements for fiscal 2001 and prior years have been
restated to include the results of operations, financial positions, and cash
flows of PercuSurge.
In May 2001, the company announced that it had signed an agreement to
purchase MiniMed Inc., the world leader in the design, development, manufacture
and marketing of advanced medical systems for the treatment of diabetes. MiniMed
develops and sells glucose monitoring systems, external insulin pumps and
related disposable products for use by patients with diabetes. Medtronic has
also agreed to purchase Medical Research Group, Inc., a privately held
corporation that designs and develops implantable devices used for the treatment
of diabetes. MiniMed is a shareholder of Medical Research Group, Inc. MiniMed
and Medical Research Group are currently developing an implantable insulin pump
and long-term glucose sensor. In combination, these new implantable products
would allow for more efficient regulation of blood glucose levels and may
decrease the frequency and severity of diabetic complications. The Company
expects to complete the transactions in the second quarter of fiscal 2002.
CARDIAC RHYTHM MANAGEMENT. Cardiac Rhythm Management products consist
primarily of products for bradycardia pacing, tachyarrhythmia management, atrial
fibrillation and congestive heart failure.
Bradycardia pacing systems, which treat patients with slow or irregular
heartbeats, include pacemakers, leads and accessories. The pacemakers can be
noninvasively programmed by the physician to adjust sensing, electrical pulse
intensity, rate, duration and other characteristics, and can produce impulses to
cause contractions in either the upper or lower heart chamber, or both, in
relation to heart activity. The company's Model 9790 programmer can be used
interchangeably with all of the company's bradycardia pacemakers as well as with
its tachyarrhythmia management devices. The primary physician users for
bradycardia products include electrophysiologists, implanting cardiologists and
cardiovascular surgeons.
The company's bradycardia pacemakers include the KAPPA(R), Sigma(TM),
and Vitatron(R) families of products. The KAPPA series of pacemakers includes
advanced products designed to adjust heart rates to match patient activity
without requiring a hospital or clinic visit. The KAPPA products also provide
physicians intuitive, easy-to-use diagnostic information and patient management
tools. The Medtronic Sigma pacing line competes in the standard and basic pacing
market segments by offering enhanced patient therapies and patient management
tools not typically found in those segments.
The Vitatron organization of Medtronic, located in the Netherlands,
offers a broad range of pacing therapies. During fiscal 2001, sales of Vitatron
pacing systems grew at a faster rate than any of the company's other pacemaker
brands. In March 2001, Vitatron released its new Collection(TM)3 and Vita(TM)2
pacemaker series to the United States market, joining the advanced Vitatron
Clarity(TM) line of pacemakers introduced in the United States in December 2000.
Key features of the Vitatron systems include (i) Beat-to-Beat(TM) mode switching
which prevents intermittent periods of fast heart rates in the upper chambers
from disrupting the steady heart rhythm in the lower chambers; (ii) dual sensor
rate response to enable the pacemaker to adapt its rate to meet the patient's
metabolic needs; and (iii) in the Collection 3 series, collection of data that
reports certain cardiac events and suggests solutions that the physician can use
to adjust the pacemaker to the patient's needs.
To further assist physicians, Vitatron also introduced its
user-friendly AFdiscover(TM) software tool to the United States market. The new
software is designed to be used with Vitatron's Selection(TM) AFm (Model 902)
system, the first pacing system available in the United States with new
capabilities intended to help physicians more effectively monitor atrial
fibrillation. AFdiscover software is designed for installation on a physician's
personal computer, where it can then be used to read and analyze patient data
that is obtained from the patient's pacemaker via the 9790 programmer. The
software produces the data in a user-friendly, easy-to-read, graphic format.
Medtronic also markets the CapSureZ(R), CapSureFix(R) and the
CapSure(R) Epi steroid-eluting leads, which deliver more concentrated levels of
electrical energy that extend device life. The CapSureFix NOVUS(TM), a new
pacing lead with smaller size for increased maneuverability during implant, is
in clinical investigation.
2
Tachyarrhythmia management products include implantable devices and
transvenous lead systems for treating ventricular tachyarrhythmias, which are
abnormally fast, and sometimes fatal, heart rhythms. The systems offer a tiered
therapy of pacing, cardioversion and defibrillation, and are implanted in the
upper chest using endocardial leads, which reduces patient trauma,
hospitalization time and costs. The primary physician users for tachyarrhythmia
products are electrophysiologists.
Because many patients exhibit multiple heart rhythm problems, Medtronic
has developed products with the capability of addressing sometimes complex
combinations of arrhythmias, including atrial fibrillation. In atrial
fibrillation, the heart's upper chambers beat too rapidly, elevating the risk of
stroke fivefold. Atrial fibrillation is the world's most common arrhythmia and
affects 5 million people worldwide.
Medtronic's Gem(R)family of implantable defibrillators is intended to
meet the needs of patients with multiple heart rhythm problems. In December
2000, the FDA cleared for United States commercial release the Gem
III(TM)DR(R)and the Gem III(TM)VR implantable cardioverter defibrillators (ICD),
used with Sprint(TM) defibrillation leads and the 9790 programmer. These systems
are designed to treat potentially lethal heart rhythms such as sudden cardiac
arrest. While the single-chamber Gem III VR provides pacing to the lower chamber
of the heart, the dual-chamber Gem III DR device is intended for patients with
conditions requiring that sensing take place in the upper chamber of the heart
as well as in the lower chamber to assure that the device circuitry correctly
evaluates arrhythmias to prevent inappropriate therapeutic impulses. In February
2001, the FDA cleared the Gem III AT for commercial release in the United
States. The Gem III AT ICD offers a comprehensive set of tools for managing both
atrial and ventricular arrhythmias. The Gem III DR defibrillator includes
enhanced PR (Pattern Recognition) Logic(TM)detection capability, a proprietary
algorithm designed to discriminate between, and deliver appropriate pacing for,
fast ventricular rhythms that are life threatening and fast atrial arrhythmias
that are not. Gem III defibrillators also offer increased device longevity.
In August 2000, the Company released for commercial sale in Europe and
Canada its AT500(TM)pacing system, another tool for treating patients with
multiple heart rhythm problems including atrial fibrillation. The AT500 is
designed for bradycardia patients who are also at risk for atrial
tachyarrhythmias. The Jewel AF(R)implantable cardioverter defibrillator shares
with the Gem III the ability to provide rate responsive treatment of arrhythmias
in both the atrium and the ventricle. The Jewel AF was cleared by the FDA for
commercial use in the United States in June 2000.
The Gem III AT, the AT500, and the Jewel AF each offer Medtronic's
AT(TM) trio of atrial tachyarrythmia management capabilities consisting of (i)
continuous monitoring and electrogram storage to guide atrial therapy; (ii)
pacing to prevent or suppress atrial fibrillation; and (iii) pacing to terminate
atrial tachyarrhythmias and restore a normal heartbeat.
Medtronic markets a full line of active and passive steroid-eluting
defibrillator leads. The entire line of tachyarrhythmia devices, like the
bradycardia pacemakers, are programmed with the Model 9790 programmer.
The company offers an implantable device, the Reveal(R) Plus Insertable
Loop Recorder (ILR), to diagnose complex arrhythmias or other chronic perplexing
heart problems. Once implanted, the Reveal Plus recorder continuously monitors
the heart's electrical activity and records electrocardiogram information in up
to a 42 minute loop. The monitor can be programmed to automatically capture the
ECG when a heart rhythm problem occurs. The information is stored and can be
non-invasively retrieved by the physician. The successor to the Reveal(R) ILR,
the Reveal Plus ILR, was commercially released in the United States in February
2000 and in Europe in March 2000.
Medtronic commercially markets two products that monitor and treat
congestive heart failure, a seriously debilitating condition in which the heart
does not pump enough blood to meet the body's demands. Heart failure is the
leading cause of death in the United States, afflicting more than 22 million
people worldwide with varying degrees of severity. In June 2001, Medtronic
released for commercial sale in Europe, Canada and Middle Eastern markets, the
InSync(R) III cardiac resynchronization system designed to assist heart failure
patients by improving the contraction sequence of up to three chambers of the
heart to optimize cardiac function and cardiovascular circulation. Like its
predecessors, the InSync and InSync ICD(TM) cardiac resynchronization systems,
the InSync III
3
system, uses a pacemaker-like device to stimulate both ventricles, in addition
to the upper and lower chambers of the heart, to improve cardiac pumping
capability for patients with advanced heart failure.
The InSync, InSync ICD and InSync III systems are used with Medtronic's
Attain(TM) Side-Wire lead system designed to provide lower left heart chamber
pacing in varied patient anatomies. In fiscal 2001, the company commercially
released, outside of the United States, another in its family of left-heart
leads and delivery systems designed to provide effective options for physicians
using cardiac resynchronization therapy to treat heart failure patients. The
system is designed to facilitate rapid coronary sinus cannulation and cardiac
vein selection in left-heart lead procedures. The company's InSync, InSync ICD,
InSync III, and all Attain cardiac resynchronization devices and lead systems
(except Model 4191) are currently under clinical investigation in the United
States.
In September 2000, the Company announced the first use of a new patient
management system designed to help physicians manage patients with chronic
cardiovascular disease. The system's first use is to capture critical
physiologic information from a heart failure patient's implanted medical device
from the patient's home and deliver it to the attending physician via the
Internet. The new Chronicle(R) Patient Management System for heart failure
patients employs the Medtronic Chronicle(R) device that is intended to
continuously sense and collect unique and valuable information such as
intracardiac pressures, heart rate and physical activity from a proprietary
sensor placed directly in the heart's chamber. The patient periodically
downloads this information to a home-based device that transmits this critical
physiologic data securely over the Internet to the Medtronic Patient Management
Network. Physicians can access the network via a Web site at any time and review
screens that present summary information from the latest download, trend
information and detailed records from specified times or problem episodes. The
Chronicle Patient Management System is currently undergoing investigational
trials in the United States and Europe, and is not yet approved for commercial
sale.
In fiscal 2001, the company commercially introduced in Europe, an
innovative pen-like device designed to help surgeons quickly treat one of the
world's most difficult cardiac arrhythmias at the same time they operate to
replace a heart valve or perform a coronary artery bypass procedure. The
Medtronic Cardioblate(TM) Surgical Ablation Pen, is a hand-held, single-use,
irrigated radiofrequency ablation instrument used to create spot or linear
lesions in the heart's upper chambers to block the errant electrical signals
that cause atrial fibrillation. Because it allows the surgeon to "draw" lines
that then form scar tissue - rather than the cutting and sewing of incisions
used in the complex "Maze" operation - the Cardioblate pen significantly reduces
the critical "cross-clamp" time required to complete the procedure.
Medtronic also offers an integrated line of noninvasive emergency
cardiac defibrillator and vital sign assessment devices, disposable electrodes
and data management software. Sudden cardiac arrest (SCA) is unpredictable and
can happen without warning. SCA contributes to 225,000 deaths a year in the
United States alone. Two out of three of these deaths, on average, occur outside
of the hospital. Medtronic Physio-Control's LIFEPAK(R)series of automated
external defibrillators (AED's) can be used by individuals with minimal
training, including airline and public safety personnel, in public places to
save lives that might otherwise be lost due to SCA. For the highly trained
hospital personnel and emergency responder market, the company offers the more
comprehensive LIFEPACK(R)defibrillators and vital sign assessment devices with
noninvasive pacing, shock advisory, 12 lead ECG diagnostic capability, trending
capability, pulse oximetry, end-tidal CO2, invasive and noninvasive pressure
monitoring. An increase in the adoption of the ADAPTIVE(TM) biphasic technology
resulted from the wide range of energy settings with low peak current. These
energy settings are consistent with the American Heart Association's Guidelines
2000 and easily adapt to current protocols. The CODE-STAT(TM) and CODE-STAT
suite data management systems are Windows(R)based software programs that allow
users to conduct post-event review and data analysis.
The company's Cardiac Rhythm Management products accounted for 47.9% of
Medtronic's net sales during the fiscal year ended April 27, 2001, 49.9% of
Medtronic's net sales during fiscal 2000 and 50.1% of net sales in fiscal 1999.
VASCULAR. The Vascular product line supports the interventional
treatment of diseased coronary and peripheral blood vessels. Medtronic's primary
involvement in the vascular area had historically been in coronary angioplasty.
Medtronic's acquisition of Arterial Vascular Engineering, Inc. ("AVE") in
January 1999 significantly
4
expanded the company's portfolio of coronary stent systems, balloon catheters,
guidewires and guiding catheters. Customers for products treating coronary
artery disease are primarily interventional cardiologists, while products
treating peripheral artery disease may be used by interventional radiologists,
vascular surgeons and interventional cardiologists.
Vascular products include both modular and laser-cut stent systems to
offer physicians a choice of products to suit their needs. In April 2001, the
company received approval from the FDA for commercial release of its modular S7
with Discrete Technology(TM) Coronary Stent System. Discrete Technology(TM)
refers to the precise alignment of the stent on the balloon, thereby ensuring
complete stent expansion while minimizing balloon overhang and potentially
reducing the likelihood of arterial damage. The S7 is not currently approved for
direct stenting in the United States. The company launched the S7 in Europe and
the United States during the fourth quarter of fiscal 2001.
In May 2000, Medtronic also introduced, in the United States, the S660
With Discrete Technology(TM) Coronary Stent System specifically designed for
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