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News Release

Medtronic Second Quarter Revenue Increases 14 Percent to $3.570 Billion

• Revenue in U.S. Up 12%;  Revenue Outside the U.S. Up 18%
• Non-GAAP Operating Income Up 25%;  GAAP Operating Income Down 7%
• $3.6 Billion in Cash and Investments and Strong Quarterly Cash Flow

MINNEAPOLIS – Nov. 18, 2008 – Medtronic, Inc. (NYSE:MDT) today announced financial results for its second quarter of fiscal year 2009, which ended Oct. 24, 2008.

The company recorded second quarter revenue of $3.570 billion, a 14 percent increase over the $3.124 billion in the second quarter reported in fiscal year 2008. Revenue outside the United States of $1.374 billion grew 18 percent, including a $65 million positive benefit of currency translation. Revenue outside the United States represented 38 percent of revenue for the quarter.  Net earnings in the second quarter were $571 million, or $0.51 per diluted share, a decrease of 14 percent and 12 percent, respectively, over the same period a year ago.  As detailed in the attached table, after adjusting for certain litigation after-tax charges of $176 million, or $0.15 per share, and in-process research and development after-tax charges of $11 million, or $0.01 per share, non-GAAP net earnings and diluted earnings per share in the period were $758 million, or $0.67 per diluted share, an increase of 14 percent and 16 percent, respectively. Earnings in the quarter were also impacted by a $0.03 per share charge related to the write-off of inventory made obsolete by the recent launch of angioplasty products on a rapid exchange delivery system in the United States. 

“Our results in challenging economic times reflect the benefit of a globally diversified product portfolio,” said Bill Hawkins, Medtronic chairman and CEO. “During the quarter we were pleased to see strong cash flows and continued progress in our efforts to deliver operating leverage as demonstrated by the growth in operating income after adjustments.”

Cardiac Rhythm Disease Management

Cardiac Rhythm Disease Management revenue of $1.242 billion increased 8 percent in the quarter. Revenue from implantable cardioverter defibrillators (ICDs) grew 13 percent to $724 million.  Worldwide pacing revenue of $506 million increased 2 percent. During the quarter, the CRDM business advanced its portfolio of ICD leads, increased the number of patients using the Medtronic CareLink Network to nearly 300,000, and announced the acquisition of CryoCath Technologies, providing Medtronic with minimally invasive therapies designed to treat atrial fibrillation.

Spinal and Biologics

Spinal revenue of $829 million grew 26 percent, including Kyphon, which contributed $146 million. Excluding Kyphon, revenue grew 3 percent, driven by the growth of core spinal and biologic products outside the United States.

CardioVascular

CardioVascular revenue grew 22 percent, generating revenue of $596 million.  Growth in the quarter resulted from strong performances in both the Endovascular product lines, which grew 36 percent, and the Coronary and Peripheral product lines, which grew 29 percent.   The recent U.S. launch of angioplasty products on a rapid exchange delivery system is expected to contribute to growth during the remainder of this fiscal year.

Neuromodulation

Neuromodulation revenue of $343 million grew 7 percent over the same period last year. Contributors to the growth of this business include RestoreULTRA® spinal cord stimulators and Activa® deep brain stimulation therapies.

Diabetes

Diabetes revenue of $272 million grew 11 percent in the quarter.  Growth was driven by the rapid expansion of the company’s continuous glucose monitoring product line. Durable pump systems growth was highlighted by strong performance in many international markets.

Surgical Technologies

Surgical Technologies revenue grew 15 percent to $213 million driven by sales of Navigation equipment used for image-guided surgery, service revenue and strength across international markets.

Physio-Control

Physio-Control reported $75 million in revenue, based on the sale of external defibrillators and accessories. Physio-Control continues to work with the FDA to resolve outstanding quality issues in an effort to resume unrestricted product distribution.

“The strength of our globally diversified product portfolio gives us confidence that we will continue to deliver sustainable long-term growth,” said Hawkins.  “As we look to the remainder of our fiscal year, our focus will be on maximizing the potential of new product launches, leveraging growth in markets outside the United States and continuing to deliver meaningful operating leverage.”

Webcast Information

Medtronic will host a webcast today, Nov. 18, at 8 a.m. Eastern Time (7 a.m. Central Time), to provide information about its businesses for the public, analysts and news media.  This quarterly webcast can be accessed by clicking on the Investor Relations link on the Medtronic home page at www.medtronic.com and this earnings release will be archived at www.medtronic.com/newsroom. Within 24 hours, a replay of the webcast and a transcript of the company’s prepared remarks will be available in the “Presentations & Transcripts” section of the Investor Relations homepage.

About Medtronic

Medtronic, Inc., headquartered in Minneapolis, is the world’s leading medical technology company, alleviating pain, restoring health and extending life for people with chronic disease.  Its Internet address is www.medtronic.com.

This press release contains forward-looking statements regarding our operating momentum, new products, non-domestic growth and other developments, which are subject to risks and uncertainties, such as competitive factors, difficulties and delays inherent in the development, manufacturing, marketing and sale of medical products, government regulation, general economic conditions and other risk and uncertainties described in Medtronic’s Annual Report on Form 10-K for the year ended April 25, 2008.  Actual results may differ materially from anticipated results.  Medtronic does not undertake to update its forward-looking statements.Unless otherwise noted, all comparisons made in this news release are on an “as reported basis,” not on a constant currency basis, and references to quarterly figures increasing or decreasing are in comparison to the second quarter of fiscal year 2008.

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