Medtronic 2015 Annual Report Download - page 2

Dear Shareholder,
Of the four years that I have been fortunate enough to be CEO of Medtronic, fiscal year 2015 was by far the most significant.
We made good progress in all of our strategic objectives and continued to execute on the consistent and realistic company
strategy that we established three years ago. This strategy is aligned with the opportunities in healthcare and takes advantage of
our unique strengths. The key elements are:
•Continued operational execution
•Implement our growth strategies:
•Maintain or expand market leadership positions in all businesses through therapy innovation
•Expand access of existing therapies in emerging markets
•Lead the transformation to value-based healthcare
•Create shareholder value through best-in-class financial performance
The above serve as our strategic guideposts, against which we measure progress regularly.
FY15: AN EXCITING YEAR
We delivered solid results in FY15, ultimately reflecting the dedication and passion of more than 85,000 employees striving to
fulfill our Mission, together with healthcare partners around the world. Our overall performance was rewarded by the market, as
our stock appreciated by 33 percent over the course of the fiscal year, 20 percentage points better than the performance of the
S&P 500. I would like to highlight five key drivers of our FY15 performance.
The Covidien Acquisition
The most important event of our fiscal year was the Covidien transaction. In many ways, this acquisition has initiated a new era
for Medtronic, now known as Medtronic plc and legally domiciled in Ireland. The combination of Medtronic and Covidien
positions us as a clear industry leader and has set the stage for us to lead the transformation of healthcare. At $50 billion, it was
the largest ever medical technology acquisition and completion of the transaction less than eight months after the announcement
represented a true stand-out performance by the team. The key element in our success was consistently communicating and
demonstrating that the acquisition was aligned with our Mission, and meaningfully complemented and accelerated all three of
our growth strategies. There were eight equity investment analyst upgrades following the announcement, and by deal closure the
market capitalization of the legacy companies had increased by $32 billion from combined, pre-announcement levels.
The integration strategy follows the acquisition rationale and is clearly articulated through a simple set of four priorities:
preserve the ability of both companies to achieve their strategic plans and growth commitments, optimize our non-customer
facing functions’ cost structure, accelerate specific revenue synergy opportunities, and transform healthcare by developing new
value-based offerings and partnering with key stakeholders to drive new, transformative business models and solutions. Detailed
financial plans have been developed and built into the operating plans of our groups and regions. We have specific cost saving
plans that are expected to result in a minimum of $850 million in cost synergies by the end of FY18. These plans are now being
executed, and we are on track to produce our goal of $300 to $350 million in savings in FY16. Key employee retention has been
good; our employees are engaged and there continues to be a high degree of anticipation and excitement across all levels of the
organization.
Cardiac and Vascular Group Performance
The performance of the Cardiac and Vascular Group (CVG) was another major highlight of FY15. Revenue grew 7 percent on a
comparable, constant currency basis – the highest rate in five years – driven by the flawless execution of several new product
launches, as well as sustained performance from therapies launched in previous years.
It is particularly noteworthy that CVG’s outstanding financial results were largely a result of organic R&D. Our team was
rewarded for making the right product development choices over the years. For example, in our Cardiac Rhythm & Heart
Failure division, our Reveal LINQ®Insertable Cardiac Monitor (ICM) System, which is used to identify a diagnosis from
unexplained syncope, atrial fibrillation, and cryptogenic stroke, had robust growth.