Medtronic 2013 Annual Report Download - page 8

4 | 2013 Medtronic Annual Report
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Shareholder Letter
Advancing Globalization with
Key Investments in China
Medtronic has a long history in China. In FY13, we provided
lifesaving therapies to hundreds of thousands of Chinese
people and advanced our local presence through three
signicant events: the acquisition of China Kanghui Holdings,
a minority investment in LifeTech Scientic Corporation, and
the opening of the Shanghai Innovation Center.
In November 2012, Medtronic completed the acquisition of
Kanghui, advancing our globalization strategy with immediate
entry into the value segment of orthopedic products. This
signicant investment brings with it an established value
segment distribution network that goes beyond China, as well
as local R&D and manufacturing operations.
In January 2013, Medtronic made a minority investment in
LifeTech, a Chinese medical device company with a diverse
portfolio of products for structural heart defects, peripheral
and aortic vascular disease, and heart valve disease. With core
competencies in materials research and manufacturing, and a
demonstrated track record of important state research grant
awards and tenders, the relationship with LifeTech provides
an opportunity to accelerate Medtronic’s access in China.
In addition to these investments, we established our
own Shanghai Innovation Center. Overall, Medtronic
now has more than 250 engineers in China, which will
become the largest healthcare market in the world. These
investments will drive Medtronic’s ability to deliver low-cost
products in the emerging value segment for patients in
markets around the world.
In FY13, we also took meaningful steps to increase our presence
and capabilities in the emerging value market segment,
particularly in China. During the year, we purchased China Kanghui
Holdings, a leading orthopedics manufacturer in the country;
made a strategic investment in LifeTech Scientic Corporation, a
structural heart products manufacturer; and opened our Shanghai
Innovation Center. Combined, we now have more than 250
engineers in China focused on tailoring therapies for the local
market and value segments worldwide.
We are far from nished in growing our international capabilities
and footprint. We intend to make further investments, and we are
rapidly strengthening our internal global knowledge, expertise,
and competencies in market development.
Stable, Consistent Performance, and
Shareholder Returns
While delivering on our key imperatives is critical to our long-term
success, we must also execute in the near term and build a track
record of reliable growth. Our FY13 performance was an important
step in this direction. We maintained or grew our market share in
almost all of our businesses while delivering improvement in each
of our major nancial performance metrics: revenue, non-GAAP
diluted earnings per share, and free cash ow. We improved our
revenue growth for the second consecutive year by delivering
$16.6 billion in revenues or 5% growth on a constant currency
basis* (3% as reported). This translated into non-GAAP diluted
earnings per share* of $3.75, growth of 8% (GAAP diluted earnings
per share of $3.37, a decline of 1%) or 300 basis points faster than
revenue. We also generated $4.4 billion of free cash ow* ($4.9
billion cash ow from operations) in FY13, utilizing that cash to
distribute more than $1 billion in dividends and repurchase more
than $1.2 billion of our common stock. We remain committed to
returning 50% of our free cash ow to our shareholders in the form
of dividends and share repurchases.
These are impressive returns by any standard, and I am thankful
to our more than 46,000 employees around the world who are
accepting the challenges of change and disruption in our industry,
meeting those challenges head on, and executing our plans.
We are encouraged and gratied by our results in FY13, but we
also realize we must continue to produce consistent, dependable
nancial returns in our business and to our shareholders in a time
of change. We accept that challenge, and intend to do just that.
* See page 9 for reconciliation of non-GAAP nancial measures.