Medtronic 2012 Annual Report Download - page 58

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Cost of products sold was $3.700 billion in fiscal year 2011, representing 23.9 percent of net sales,
reflecting an increase of 0.6 of a percentage point from fiscal year 2010. Cost of products sold as a percent
of net sales was negatively impacted by 0.3 of a percentage point due to a shift in product mix, 0.4 of a
percentage point of unfavorable manufacturing spending impact primarily driven by unfavorable
manufacturing variances and manufacturing support, and 0.1 of a percentage point due to the $11 million
cost of sales component of our fiscal year 2011 restructuring initiative, partially offset by 0.2 of a percentage
point of favorable foreign currency translation.
Research and Development Consistent with prior periods, we have continued to invest in new
technologies to drive long-term future growth by spending aggressively on R&D efforts. R&D spending
was $1.490 billion in fiscal year 2012, representing 9.2 percent of net sales, a decrease of 0.3 of a percentage
point from fiscal year 2011.
During fiscal year 2012, we have focused on optimizing innovation, including improving our R&D
productivity. As we have completed our fiscal year 2013 planning process, we have made specific efforts to
reallocate resources into driving growth in emerging markets and in evidence generation for our growth
platforms. We are assessing our programs based on their ability to deliver economic value to the customer.
R&D spending was $1.472 billion in fiscal year 2011, representing 9.5 percent of net sales, an increase
of 0.2 of a percentage point from fiscal year 2010.
We remain committed to developing technological enhancements and new indications for existing
products, and less invasive and new technologies for new and emerging markets to address unmet medical
needs. That commitment leads to our initiation and participation in many clinical trials each fiscal year as
the demand for clinical and economic evidence remains high. Furthermore, we expect our development
activities to help reduce patient care costs and the length of hospital stays in the future. In addition to our
investment in R&D, we continue to access new technologies in areas served by our existing businesses, as
well as in new areas, through acquisitions, licensing agreements, alliances, and certain strategic equity
investments.
Selling, General, and Administrative Fiscal year 2012 selling, general, and administrative expense
was $5.623 billion, which as a percent of net sales decreased by 0.3 of a percentage point from fiscal year 2011
to 34.7 percent. Selling, general, and administrative expense was positively impacted by our continued focus
on several initiatives to leverage our expenses while continuing to invest in new product launches and adding
to our sales force in faster growing businesses and geographies. The impact of these initiatives was partially
offset by incremental bad debt expense in our Diabetes business and in Italy.
Fiscal year 2011 selling, general, and administrative expense was $5.427 billion, which as a percent of
net sales increased by 0.7 percentage points from fiscal year 2010 to 35.0 percent. This increase was primarily
driven by the effects of acquisitions, executive separation costs, and incremental bad debt expense in certain
markets, including Greece.
Restructuring Charges, Net, Certain Litigation Charges, Net, and Acquisition-Related Items We
believe that in order to properly understand our short-term and long-term financial trends, investors may
find it useful to consider the impact of restructuring charges, net, certain litigation charges, net, and
acquisition-related items. Restructuring charges, net, certain litigation charges, net, and acquisition-related
items recorded during the previous three fiscal years were as follows:
Fiscal Year
____________________________________________
(in millions) 2012 2011 2010
___________ ____________ ____________ ___________
Restructuring charges, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 87 $ 270 $ 57
Certain litigation charges, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 245 374
Acquisition-related items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 14 23
____________ ____________ ___________
Total restructuring charges, net, certain litigation charges,
net, and acquisition-related items . . . . . . . . . . . . . . . . . . . . . . . . . . . 189 529 454
Net tax impact of restructuring charges, net, certain
litigation charges, net, and acquisition-related items . . . . . . . . . . . . (56) (99) (80)
____________ ____________ ___________
Total restructuring charges, net, certain litigation
charges, net, and acquisition-related items, net of tax . . . . . . . . . . . $ 133 $ 430 $ 374
____________ ____________ ___________
____________ ____________ ___________
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