-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PRSViF1QgdyX10tNpF5l5gJGCwPZWVDg5NYkJgYn0qHNCi1/nTKtZcXfkVAVF3y7 JBZkAj8ymhEYHlNbLC/atg== 0000897101-07-001326.txt : 20070625 0000897101-07-001326.hdr.sgml : 20070625 20070625171419 ACCESSION NUMBER: 0000897101-07-001326 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 22 CONFORMED PERIOD OF REPORT: 20070427 FILED AS OF DATE: 20070625 DATE AS OF CHANGE: 20070625 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: 1934 Act SEC FILE NUMBER: 001-07707 FILM NUMBER: 07939401 BUSINESS ADDRESS: STREET 1: 710 MEDTRONIC PKWY STREET 2: MS LC300 CITY: MINNEAPOLIS STATE: MN ZIP: 55432 BUSINESS PHONE: 7635144000 MAIL ADDRESS: STREET 1: 710 MEDTRONIC PKWY CITY: MINNEAPOLIS STATE: MN ZIP: 55432 10-K 1 medtronic072487s1_10k.htm FORM 10-K FOR FISCAL YEAR ENDED APRIL 27, 2007 Medtronic, Inc. Form 10-K for fiscal year ended April 27, 2007

Table of Contents

UNITED STATES 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, 2007.
o Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
For the transition period from __________ to __________

Commission File No. 1-7707

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, including area code: (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 $0.10 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 if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x  No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes o  No x

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 o

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.  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. 
Large accelerated filer x    Accelerated filer o    Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o  No  x

Aggregate market value of voting stock of Medtronic, Inc. held by nonaffiliates of the registrant as of October 27, 2006, based on the closing price of $48.67, as reported on the New York Stock Exchange: approximately $55.9 billion. Shares of Common Stock outstanding on June 20, 2007: 1,140,402,281

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s 2007 Annual Report filed as Exhibit 13 hereto are incorporated by reference into Parts I and II hereto and portions of Registrant’s Proxy Statement for its 2007 Annual Meeting are incorporated by reference into Part III hereto.


TABLE OF CONTENTS

Item   Description   Page
     
  PART I  
1.   Business 1
1A.   Risk Factors   30
1B.   Unresolved Staff Comments   35
2.   Properties   35
3.   Legal Proceedings   35
4.   Submission of Matters to a Vote of Security Holders   35
PART II
5.   Market for Medtronic’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities   35
6.   Selected Financial Data   36
7.   Management’s Discussion and Analysis of Financial Condition and Results of Operations   36
7A.   Quantitative and Qualitative Disclosures About Market Risk   36
8.   Financial Statements and Supplementary Data   36
9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure   36
9A.   Controls and Procedures   36
9B.   Other Information   37
PART III
10.   Directors, Executive Officers and Corporate Governance   37
11.   Executive Compensation   37
12.   Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters   37
13.   Certain Relationships, Related Transactions and Director Independence   38
14.   Principal Accounting Fees and Services   38
PART IV
15.   Exhibits, Financial Statement Schedules   38








 

Table of Contents

Annual Meeting and Record Dates

Medtronic’s Annual Meeting of Shareholders will be held on Thursday, August 23, 2007 at 10:30 a.m., Central Daylight Time at the Company’s World Headquarters, 710 Medtronic Parkway, Minneapolis (Fridley), Minnesota. The record date for the Annual Meeting is June 25, 2007 and all shareholders of record at the close of business on that day will be entitled to vote at the Annual Meeting.

Medtronic Website

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available through our website (www.medtronic.com under the “Investor Relations” caption) free of charge as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (SEC).

Information relating to corporate governance at Medtronic, including our Principles of Corporate Governance, Code of Conduct (including our Code of Ethics for Senior Financial Officers), Code of Business Conduct and Ethics for Board Members and information concerning our executive officers, directors and Board committees (including committee charters), and transactions in Medtronic securities by directors and officers, is available on or through our website at www.medtronic.com under the “Corporate Governance” and “Investor Relations” captions.

We are not including the information on our website as a part of, or incorporating it by reference into, our Form 10-K.














 

Table of Contents

PART I

Item 1.  Business

Overview

Medtronic is the global leader in medical technology, alleviating pain, restoring health, and extending life for millions of people around the world. We are committed to offering market-leading therapies to restore patients to fuller, healthier lives. With beginnings in the treatment of heart disease, we have expanded well beyond our historical core business and today provide a wide range of products and therapies that help solve many challenging, life-limiting medical conditions. We hold market-leading positions in almost all of the major markets in which we operate.

We currently function in eight operating segments that manufacture and sell device-based medical therapies. During the fourth quarter of fiscal year 2007, we revised our operating segment reporting to separate Physio-Control from our Cardiac Rhythm Disease Management operating segment. Our operating segments are:

  • Cardiac Rhythm Disease Management (CRDM)
  • Spinal and Navigation
  • Vascular
  • Neurological
  • Diabetes
  • Cardiac Surgery
  • Ear, Nose, and Throat (ENT)
  • Physio-Control



The chart above shows the net sales and percentage of total net sales contributed by each of our operating segments for the fiscal year ended April 27, 2007 (fiscal year 2007).

With innovation and market leadership, we have pioneered advances in medical technology in all of our businesses and enjoyed steady growth. Over the last five years, our net sales have nearly doubled, from $6.411 billion in fiscal year 2002 to $12.299 billion in fiscal year 2007. We attribute this growth to our commitment to develop or acquire new products to treat an expanding array of medical conditions.

Medtronic was founded in 1949, incorporated as a Minnesota corporation in 1957, and today we serve physicians, clinicians and patients in more than 120 countries worldwide. Beginning with the development of the heart pacemaker in the 1950s, we have assembled a broad and diverse portfolio of progressive technology expertise both through internal development of core technologies as well as acquisitions. We remain committed to a mission written by our founder more than 40 years ago that directs us “to contribute to human welfare by application of biomedical engineering in the research, design, manufacture and sale of products that alleviate pain, restore health and extend life.”

With approximately 38,000 dedicated employees worldwide personally invested in supporting our mission, our success in leading global advances in medical technology is the result of several key strengths:

  • Broad and deep technological knowledge of microelectronics, implantable devices and techniques, power sources, coatings, materials, programmable devices and related areas, as well as a tradition of technological pioneering and breakthrough products that not only yield better medical outcomes, but more cost-effective therapies.
  • Strong intellectual property portfolio that underlies our key products.


1

Table of Contents

  • High product quality standards, backed with stringent systems to help ensure consistent performance that meet or surpass customers’ expectations.
  • Strong professional collaboration with customers, extensive medical educational programs, and thorough clinical research.
  • Full commitment to superior patient and customer service.
  • Extensive experience with the regulatory process and sound working relationships with regulators and reimbursement agencies, including leadership roles in helping shape regulatory policy in the U.S. and abroad.
  • A proven financial record of sustained revenue and earnings growth and continual introduction of new products.

Our strategic objective is to provide patients and the medical community with comprehensive, life-long solutions for the management of chronic disease. Our key strengths parallel the following basic, but well-implemented, strategies that guide our growth and success:

  • Meet unmet medical needs by leveraging our core technologies.
  • Ensure that people who could benefit from our device therapies increasingly have access to them.
  • Increase market share in core product lines.
  • Broaden our global presence in developed and developing markets.
  • Acquire or invest in breakthrough technologies to treat an increasing number of chronic diseases.

In this decade, we anticipate that technology advancements, the Internet and increasing patient participation in treatment decisions will transform the nature of healthcare services and will result in better care that is more cost effective to the healthcare system and greater quality of life and convenience to the patient.

Our primary customers include hospitals, clinics, third party healthcare providers, and other institutions, including governmental healthcare programs and group purchasing organizations.

Cardiac Rhythm Disease Management (CRDM)

CRDM is the world’s leading supplier of medical devices for cardiac rhythm disease management. We pioneered the modern medical device industry by developing the first wearable external cardiac pacemaker in 1957, and manufactured the first reliable long-term implantable pacing system in 1960. Since then, we have been the world’s leading producer of cardiac rhythm technology, and from these beginnings, a $9 billion industry has emerged. Today, our products and technologies treat and monitor a wide variety of heart rhythm diseases and conditions.

        Conditions Treated

Natural electrical impulses stimulate atria and ventricles, the heart’s chambers, to rhythmically contract and relax with each heartbeat. Irregularities in the heart’s normal electrical signals can result in debilitating and life-threatening conditions, including heart failure and sudden cardiac arrest, one of the leading causes of death. Physicians rely on our CRDM products to correct these irregularities and restore the heart to its normal rhythm. Our CRDM products are designed to treat and monitor a broad range of heart conditions, including those described below.

  • Bradycardia — abnormally slow or unsteady heart rhythms usually less than 60 beats per minute or unsteady heart rhythms that cause symptoms such as dizziness, fainting, fatigue, and shortness of breath
  • Tachyarrhythmia — heart rates that are dangerously fast or irregular, including ventricular tachycardia and fibrillation, which occur in the lower chambers of the heart, the ventricles, and


2

Table of Contents

    can lead to sudden cardiac arrest, as well as atrial arrhythmias, or rapid and inconsistent beating of the upper chambers of the heart, the atria, which can affect blood flow to the body and increase the risk of stroke
  • Heart Failure — impaired heart function resulting in the inability to pump enough blood to meet the body’s needs, characterized by difficulty breathing, chronic fatigue and fluid retention
  • Syncope — a sudden loss of consciousness, which occurs when the blood pressure drops and not enough oxygen reaches the brain. Causes vary and include heart-related conditions, exhaustion, stress, overheating, illnesses and some medications.

The charts below set forth net sales of our CRDM products as a percentage of our total net sales for each of the last three fiscal years:

We offer the broadest array of products in the industry for the diagnosis and treatment of heart rhythm disorders and heart failure. Because many patients exhibit multiple heart rhythm problems, we have developed implantable devices that specifically address complex combinations of arrhythmias. In addition to implantable devices, we also provide leads, ablation products, electrophysiology catheters, and information systems for the management of patients with our devices. Our CRDM devices are currently implanted in more than 3 million patients worldwide.

Implantable Cardiac Rhythm Devices.    Bradycardia is a common condition, with hundreds of thousands of patients diagnosed each year, and millions of people worldwide suffering from its effects. The only known treatment for this condition is a cardiac pacemaker, a battery-powered device implanted in the chest that delivers electrical impulses to stimulate the heart to beat at an appropriate rate. In August 2006, we introduced our Adapta family of fully automatic pacemakers, which includes the Adapta, Versa, and Sensia models. This new family of pacemakers incorporates an array of automatic features to help physicians improve pacing therapy and streamline the patient follow-up process, potentially minimizing the amount of time spent in a physician’s office. An example is Atrial Capture Management, which is intended to automatically adjust impulses for optimal stimulation of the heart’s upper right chamber. Adapta offers a pacing mode called Managed Ventricular Pacing (MVP), which enables the device to be programmed to minimize unnecessary pacing pulses to the right ventricle. Clinical studies have shown that unnecessary pacing in the right ventricle can increase the risk for heart failure and atrial fibrillation. MVP has been shown to reduce the amount of right ventricular pacing to less than 5 percent, compared to 50 percent or more from devices with typical dual-chamber pacing. In a clinical study of this new mode, 78 percent of patients experienced ventricular pacing less than 1 percent of the time. For patients with little or no pacing needs, this clinical difference can be dramatic over a lifetime. The Adapta family joins our portfolio of pacemakers which also includes EnRhythm and EnPulse. In February 2007, we announced the start of an international clinical study to confirm the safety and efficacy of the EnRhythm MRI SureScan pacing system, the first-ever pacemaker system to be developed and tested specifically for safe use in Magnetic Resonance Imaging (MRI) machines under specified scanning conditions. While improvements to pacing technology have continued since its development nearly 50 years ago, this advance marks a concerted effort to pursue compatibility with MRI scans, an important healthcare diagnostic for many conditions.



3

Table of Contents

Approximately 7 million people worldwide have tachyarrhythmia. Tachyarrhythmia is a potentially fatal condition that can lead to sudden cardiac arrest, the sudden and complete cessation of heart activity. Sudden cardiac arrest is one of the leading causes of death in the United States (U.S.) responsible for more than 335,000 deaths annually, with most due to ventricular fibrillation. Implantable cardioverter defibrillators (ICDs) are stopwatch-sized devices that continually monitor the heart and deliver appropriate therapy when an abnormal heart rhythm is detected. Several large clinical trials have shown implantable defibrillators significantly improve survival as compared to commonly prescribed antiarrhythmic drugs. In 2005, the results of the Sudden Cardiac Death in Heart Failure Trial (SCD-HeFT), sponsored by the National Institutes of Health (NIH), with funding provided by Medtronic, were published in the New England Journal of Medicine. This 2,521 patient trial, the largest ICD trial ever conducted, showed ICDs reduced death by 23 percent in people with moderate heart failure compared to those who did not receive ICDs. Also in 2005, the Centers for Medicare and Medicaid Services expanded coverage of ICDs for Medicare beneficiaries who meet SCD-HeFT indications. Despite the mounting evidence demonstrated in clinical trials such as SCD-HeFT, only about 35 percent of all patients in the U.S., and significantly less than that outside the U.S., who are indicated for an ICD actually receive one, leaving hundreds of thousands of people at an increased risk for sudden cardiac death. In May 2006, we launched our Virtuoso family of dual and single chamber ICDs, which offer unique features including Anti-tachyarrhythmia Pacing (ATP) During Charging, OptiVol Fluid Status Monitoring, and our pacing mode MVP. ATP During Charging is a feature that automatically uses pacing pulses to stop fast, dangerous heartbeats, while concurrently preparing to deliver a shock, if needed, with no delay. OptiVol automatically monitors fluid status in the thoracic cavity, the chest area encompassing the lungs and heart. The accumulation of thoracic fluid is a primary indicator of worsening heart failure and will often result in patient hospitalization.

Heart failure is a large and growing health problem, afflicting nearly 5 million Americans and 22 million people worldwide. Up to 550,000 new cases are diagnosed each year, making it the most costly cardiovascular illness in the U.S., with an estimated $30 billion spent on managing heart failure patients each year. For patients suffering from heart failure, we offer devices that provide cardiac resynchronization therapy (CRT), which improves the efficiency of the heart by synchronizing the contractions of the lower chambers of the heart. The InSync III, our third generation CRT device, has advanced programming functions to help physicians better manage heart failure patients and is available in both Europe and the U.S. In March 2005, the results of the Cardiac Resynchronization in Heart Failure (CARE-HF) trial were reported at the American College of Cardiology conference and concurrently published in the New England Journal of Medicine. This 813 patient study showed that patients who received CRT showed a 37 percent reduction in combined all-cause mortality or unplanned cardiovascular hospitalization. CRT patients in the study also showed a reduction in heart failure-related hospitalizations and improved heart failure symptoms.

Medtronic continues to offer the industry’s broadest selection of devices and features for the growing number of patients with heart failure who are also considered at high risk of sudden cardiac arrest. In May 2006, we introduced the Concerto cardiac resynchronization therapy-defibrillator (CRT-D). Concerto CRT-D and Virtuoso ICD are Medtronic’s first cardiac rhythm disease management devices to utilize our proprietary Conexus wireless telemetry, enabling communication remotely between the implanted device and programmers at the time of implant, during follow-up in a clinician’s office, or remotely using a patient home monitor. The Concerto CRT-D/Virtuoso ICD family represents our next step in the delivery of premium implantable devices, which, in addition to MVP and ATP During Charging, include OptiVol Fluid Status Monitoring. Concerto CRT-D also offers Left Ventricular Capture Management (LVCM). LVCM is intended to automatically sense and adjust impulses for stimulation of the heart’s left ventricle. Concerto, along with previously released CRT-D devices (InSync Maximo and InSync Sentry), also offers sequential biventricular pacing or “V-to-V” (ventricle to ventricle) timing, a feature that allows physicians to separately adjust the timing of electrical therapy delivered to the heart failure patient’s two ventricles, which can optimize the beating of the heart and enhance the flow of blood throughout the body. These CRT-D devices represent an important clinical advance since sudden cardiac arrest occurs in heart failure patients at six to nine times the rate observed in the general population.



4

Table of Contents

In January 2007, we launched our national public awareness campaign to raise awareness of sudden cardiac arrest, its risk factors, and the role of ICD therapy in saving lives. The comprehensive campaign includes: advertising, patient and caregiver information resources, physician education programs, and ongoing clinical research on sudden cardiac arrest and the use of ICD therapy. The campaign, themed “What’s Inside,” shows the link between medical device technology and the benefits people can experience by living with ICD therapy.

In March 2007, we announced the first U.S. clinical implant of the Attain Ability over-the-wire lead, a dual-electrode left ventricular lead for use in heart failure patients with CRT devices. Placing a lead in the left ventricle is widely recognized by physicians as the most challenging aspect of implanting CRT devices. Anatomic challenges can make it difficult to work within the coronary sinus to place a lead in the desired vein of the left ventricle. The Attain Ability lead is specially designed for optimally tracking over a guidewire, which is intended to allow physicians greater ability to deliver the left heart lead in difficult to access veins.

Patient Management Tools.    We have three types of patient management tools. First, the Medtronic CareLink Network which is currently available in the U.S., Canada, and Western Europe. It was developed to allow physicians to evaluate patient information remotely via the Internet, offering the potential for more efficient chronic disease management and better patient outcomes. The Medtronic CareLink Network connects cardiac device patients and physicians for “virtual office visits,” allowing patients with our heart devices to receive medical care from the comfort of their home or even while traveling. Patients using the Medtronic CareLink Network can send data about their heart and device activity to their physician from anywhere within their country of origin. The home monitor automatically downloads the data from the device and sends it through a standard telephone connection directly to the secure Medtronic CareLink Network. Clinicians access their patients’ data by logging onto the clinician website from any Internet-connected computer, eliminating the need for an office visit. A physician can use the diagnostic and therapeutic data collected remotely by a CRDM device and then tailor treatment to meet the individual needs of the patient. Patients also can view information about their device and condition on their own personalized website, and family members or other caregivers can view this information if granted access by the patient. The Medtronic CareLink Network is currently available to nearly all patients who have a Medtronic pacemaker, ICD, or CRT device. Today, the Medtronic CareLink Network is being utilized in more than 1,400 cardiology practices and more than 120,000 patients are being monitored with the Medtronic CareLink Network.

Our second patient management tool, the CardioSight Service, is an in-clinic data access tool available to physicians treating heart failure patients who have one of several Medtronic CRT-D or ICD devices. CardioSight provides clinically valuable, device-derived information to help specialty physicians discern the status of the heart failure patient’s symptoms.

Our third patient management tool, the Paceart System, provides access to detailed patient and device data for clinicians from a myriad of sources including in-clinic device interrogations. The system is also compatible with more than 1,000 devices from the major implantable cardiac device manufacturers, as well as from remote management technologies such as the Medtronic CareLink Network and other trans-telephonic monitoring systems.

        Customers and Competitors

The primary medical specialists who use our implanted cardiac rhythm devices include electrophysiologists, implanting cardiologists, heart failure specialists, and cardiovascular surgeons. We hold the leading market position among implantable cardiac rhythm device manufacturers. Our primary competitors in the CRDM business are Boston Scientific Corporation and St. Jude Medical, Inc.

Spinal and Navigation

Our Spinal and Navigation business provides spinal products and image guided surgery systems that facilitate surgical planning and are used by surgeons during precision cranial and orthopedic surgeries. Today we offer a wide range of products and therapies to treat a variety of conditions of the cranium and spine.



5

Table of Contents

        Conditions Treated

Our Spinal business offers products for treatment of many spinal conditions, including those listed below.

  • Herniated Disc – A disc herniation occurs when the inner core of the intervertebral disc bulges out through the outer layer of ligaments that surround the disc. This tear in the outer layer of ligaments causes pain in the back at the point of herniation. If the protruding disc presses on a spinal nerve, the pain may spread to the area of the body that is served by that nerve. The terms “ruptured,” “slipped,” and “bulging” are also commonly used to describe this condition.
  • Degenerative Disc Disease – As part of the natural aging process, intervertebral discs lose their flexibility and shock absorbing characteristics. The ligaments that surround the discs become brittle and easier to tear. At the same time, the inner core of the disc starts to dry out and shrink. Over time, these changes can cause the discs to lose their normal structure and/or function.
  • Spinal Deformity – When viewed from behind, the human spine appears straight and symmetrical. When viewed from the side, however, the spine is curved. Some curvature in the neck, upper trunk, and lower trunk is normal. These curves help the upper body maintain proper balance and alignment over the pelvis. The term deformity is used to describe any variation in this natural shape. One form of spinal deformity, scoliosis, involves a lateral, or side-to-side, curvature of the spine. The vertebrae rotate along with the spine as a consequence of a scoliotic curve. Depending on the severity of the curve, a scoliotic spine may create asymmetries in the shoulders, thoracic spine, and pelvis, leading to an imbalance of the trunk and significant disfigurement.
  • Spinal Tumors – Tumors or cancers of the spine and spinal cord are relatively rare. Three types of tumors affect the spine and spinal cord: primary benign tumors, primary malignant tumors, and metastatic tumors. The term primary is used to designate a tumor originating from actual spine cells. Secondary spinal tumors, or cancers, which are more commonly called metastases, spread from other organs in the body.
  • Trauma/Fracture – Trauma to the spine refers to injury that has occurred to bony elements, soft tissues, and/or neurological structures. Stability to the spinal column can be compromised when bony elements are injured or there is disruption to soft tissues such as ligaments. Instability causes the back to become unable to successfully carry normal loads, which can lead to permanent deformity, severe pain, and, in some cases, catastrophic neurological injuries. Most often the instability comes from a fracture in one of the bony parts of the vertebra. Osteoporosis, a condition characterized by loss of bone mass and structural deterioration of bone tissue, can lead to bone fragility and an increased susceptibility to fracture.
  • Stenosis – A condition caused by a gradual narrowing of the spinal canal, stenosis results from degeneration of both the facet joints and the intervertebral discs. Bone spurs, called osteophytes, which develop because of the excessive load on the intervertebral disc, grow into the spinal canal. The facet joints also enlarge as they become arthritic, which contributes to a decrease in the space available for the nerve roots.


6

Table of Contents

The charts below set forth net sales of our Spinal and Navigation products as a percentage of our total net sales for each of the last three fiscal years:

Our Spinal and Navigation products, used in surgical procedures predominantly of the cranium and spine, include thoracolumbar, cervical and interbody devices, bone growth substitutes, and surgical navigation tools.

Spinal.    Each year approximately 25 million Americans experience back pain that is severe enough to visit a healthcare professional. Of the approximately 25 million Americans, 13 million endure a significant impairment of activity. We are committed to providing spinal surgeons with the most advanced options for treating low back pain and other spinal conditions.

Today we offer one of the industry’s broadest lines of devices, including a wide range of sophisticated internal spinal stabilization devices, instruments, computerized image guidance products and biomaterials used in the treatment of spinal conditions. Spinal fusions, which are currently one of the most common types of spine surgery, join two or more vertebrae to eliminate pain caused by movement of the unstable vertebrae. Our spinal products are used in spinal fusion of both the thoracolumbar region, referring to the mid to lower vertebrae, as well as of the cervical region, or upper spine and neck vertebrae. Products used to treat spinal conditions include rods, pedicle screws, hooks, plates, and interbody devices, such as cages, as well as biologic products, which include bone growth substitutes, dowels and wedges. INFUSE Bone Graft contains a recombinant human bone morphogenetic protein, or rhBMP-2, that induces the body to grow its own bone, eliminating the need for a painful second surgery to harvest bone from elsewhere in the body. In Europe, INFUSE Bone Graft is marketed as InductOs Bone Graft for spinal fusion. In addition to spinal fusion, INFUSE Bone Graft is indicated for the treatment of certain types of acute, open fractures of the tibial shaft, a long bone in the lower leg, as well as certain oral maxillofacial indications.

In July 2006, we launched the CD HORIZON LEGACY 4.5 Spinal System with G4 Technology. The system is designed to treat smaller patients with spinal deformities using a posterior instrumentation solution. With a 4.5 mm surgical rod implant, the system combines the proper balance of flexibility, strength, and profile for smaller stature patients while the screws, available in multiple diameters and lengths, provide surgeons with a more precise fit in various anatomies. In August 2006, we launched the CD HORIZON LEGACY Vertebral Column Manipulation (VCM) Instrument Set. This set offers surgeons an advanced means of achieving controlled curvature correction, which can lead to better outcomes for scoliosis patients. The set provides surgeons the ability to correct abnormal spine curves with a derotation technique referred to as bilateral apical vertebral derotation. Features of the VCM Instrument Set are multi-point attachment to the vertebra and “interlinks” for spanning vertebral levels. VCM technology is also compatible with CD HORIZON LEGACY Multi-Axial, Uni-Axial and Fixed Angle pedicle screws, accommodating surgeon preference and integrating with existing procedures.

In early September 2006, we launched the CD HORIZON ENGAGE PLATE Spinal System for the lumbar (lower) spine. This system, designed to stabilize vertebrae, is the first extendable system offering multi-axial bolts and a built-in revision option for patients suffering from certain degenerative disorders common in the aging spine. The primary plate serves as a platform to extend the construct



7

Table of Contents

without removing the original implant, thereby reducing the time needed for revisions and/or creating better outcomes for the patient. The variety of sizes allows each construct to be tailor-made for each patient and the system can be used with multi-axial bolts that allow for easier multi-level construction and facet bone preservation.

In September 2006, we co-launched the MASTERGRAFT MATRIX and MASTERGRAFT PUTTY synthetic bone graft products, which were developed to provide surgeons with a comprehensive MASTERGRAFT ceramic option. Embedded with MASTERGRAFT GRANULES, both grafts are osteoconductive, malleable, and designed to fill gaps in the skeletal system that are not intrinsic to the stability of the bony structure. These new grafts give surgeons more handling options, while providing an osteoconductive implant that localizes biologic components – possibly aiding cellular proliferation and osteointegration during the bone healing process. MASTERGRAFT MATRIX is a compressive-resistant collagen scaffold block that may facilitate uninterrupted bone growth by preserving space by withholding compressive forces from the surrounding muscles and tissues. MASTERGRAFT PUTTY is a malleable collagen scaffold that may be used with bone marrow aspirate or sterile water. When the hydrated graft is combined with local bone, it may provide more suitable handling characteristics for the surgical procedure. In May 2007, we announced the immediate, nationwide availability of Progenix, a bone graft substitute and bone void filler used in voids or gaps of the pelvis, ilium, and extremities.

In February 2007, we launched the Direct Lateral Access Instrument Set, which may be used in lumbar direct lateral interbody fusion procedures. The instrument set, when used with the direct lateral approach, is designed to help surgeons prepare a vertebral disc space for fusion procedures in the lower spine. A direct lateral approach is used when surgery is performed on the lumbar spine by going through the trans-psoas muscles located on the side of the abdomen above a patient’s hip.

In March 2007, we received Food and Drug Administration (FDA) approval to begin marketing INFUSE Bone Graft for certain oral maxillofacial and dental regenerative bone grafting procedures. It is estimated that more than 350,000 bone grafting procedures of this type are performed in the U.S. each year. Medtronic has also submitted a pre-market approval (PMA) with the FDA for a posterolateral spinal indication for INFUSE Bone Graft.

We have developed a series of Minimal Access Spinal Technologies (MAST) that facilitate safe, reproducible access to the spine with minimal disruption of vital muscles and complementary structures. These techniques involve the use of advanced navigation and instrumentation to allow surgeons to operate with smaller incisions and less tissue damage than traditional surgeries, thus reducing pain and blood loss and improving recovery periods.

Our expanding portfolio of minimally invasive spinal technologies includes the CD HORIZON SEXTANT II System, a next-generation METRx System, to treat herniated discs and allow minimally invasive access for fusion, the MAST QUADRANT Retractor System, a retractor that allows access to complex degenerative pathology, and the CD HORIZON ECLIPSE Spinal System, to correct curvature of the spine in scoliosis patients.

We established our interventional spine (iSpine) program with the launch of the ARCUATE System and the ARCUATE XP Vertebral Augmentation System, designed to treat vertebral body compression fractures. These systems give physicians a controlled cement delivery method for orthopedic procedures that may help patients with vertebral body compression fractures. The ARCUATE XP Vertebral Augmentation System is designed to provide physicians with greater directional control over the flow and direction of medical-grade cement, enabling the physician to create a treatment plan based on a patient’s fracture pattern. The system’s proprietary ARC Osteotome creates arcs within existing bone structure, allowing a flow of cement into arcs and cancellous bone openings. The pathways created by these arcs may allow for a better distribution of cement across the vertebral body, minimizing the number of incisions and steps necessary to create a biomechanically stable support for the spine. The ARCUATE System uses needles and an injector which may be used to deliver cement to a fractured vertebra. Both systems feature instruments which may reduce procedure time and limit radiation exposure by taking surgeons’ hands out of the radiation field.

Within our line of Dynamic Stabilization products, we launched the CD HORIZON LEGACY PEEK Rod in September 2006. This pedicle-based, posterior rod is designed to provide reproducible



8

Table of Contents

semi-rigid fixation that closely replicates the natural load distribution of the lumbar spine for patients who undergo spinal fusion surgery. The CD HORIZON LEGACY PEEK Rod utilizes rods that are made of polyetheretherketone (PEEK), a semi-crystalline thermoplastic polymer that meets all biocompatibility requirements and has a long history of use in surgical implants. When combined with CD HORIZON Spinal System-based pedicle screws and minimally invasive approach options such as the MAST QUADANT Retractor System, the CD HORIZON LEGACY PEEK Rod dynamically stabilizes the affected segment while allowing for a streamlined surgical technique that preserves much of the natural anatomy. Our DIAM System is commercially available in the European Union and under Investigational Device Exemption in the U.S. The DIAM System is designed to alleviate pain in degenerative stenosis patients who suffer predominantly from radiating leg discomfort and moderate low back pain and is the only non-rigid interspinous spacer. The PRESTIGE Cervical Disc which was recommended for approval by an FDA advisory panel in September 2006, is an alternative to spinal fusion designed to allow patients to maintain motion in their necks. The patented ball-and-trough design allows for a variable center of rotation, meaning the disc is designed to better mimic the motion of a naturally functioning cervical spine. Currently, the most common form of surgery for treating cervical degenerative disc disease is an anterior cervical discectomy and fusion. The PRESTIGE Cervical Disc Clinical Study is the largest completed prospective randomized controlled study of a medical device of its kind in the cervical spine.

In addition to the PRESTIGE Cervical Disc we have three additional disc replacement programs currently under investigation in the U.S.: the BRYAN Artificial Disc for the cervical spine; the MAVERICK Artificial Disc for the lumbar spine; and the PRESTIGE LP, our next generation lower profile cervical disc.

Navigation.    We are one of the leaders in the field of computer-assisted surgery (CAS) and have installed approximately 2,000 StealthStation Treatment Guidance Systems in hospitals worldwide. In recent years, the pace of innovation in CAS has quickened considerably. We have developed and delivered new and updated hardware and software solutions to assist with varied surgeries including total joint replacements, minimally invasive spinal surgery, cranial tumor resection, biopsies, functional neurosurgery, and functional endoscopic sinus surgery. In June 2007, Medtronic acquired the O-arm Imaging System assets of Breakaway Imaging, LLC, a privately held developer of medical imaging systems for surgery. With this acquisition, Medtronic will now own, rather than license, exclusive worldwide distribution and marketing rights of the O-arm Imaging System, an intraoperative crossover technology enabling two-dimensional, multi-plane two-dimensional, and three-dimensional volumetric imaging.

In February 2007, we launched the Synergy Experience StealthStation System, a combination of Navigational Procedure Solutions and MAST techniques, which can allow less invasive procedures, smaller incisions and less radiation exposure.

        Customers and Competitors

The primary medical specialists who use our Spinal and Navigation products are spinal surgeons, orthopedic surgeons, neurosurgeons, and interventional radiologists. Our primary competitors in the Spinal business are Zimmer, Inc., Johnson & Johnson, Stryker Corporation, Synthes-Stratec, Inc., and Kyphon, Inc. The primary competitors in our Navigation business are BrainLAB, Inc. and Stryker Corporation.

Vascular

Our Vascular business offers a full line of minimally invasive products and therapies to treat coronary artery disease, aortic and thoracic aneurysms, and peripheral vascular disease.

        Conditions Treated

Our Vascular business offers minimally invasive products for the treatment of the conditions described below.



9

Table of Contents

  • Coronary artery disease — deposits of cholesterol and other fatty materials (plaque) on the walls of the heart’s arteries, causing narrowing or blockage of the vessel and reducing the blood supply to the heart
  • Peripheral vascular disease — narrowing or blockage of arteries or veins outside the heart, impeding blood supply to the brain, legs, and other vital organs
  • Abdominal and Thoracic aortic aneurysm (AAA/TAA) — weakening or ballooning of the abdominal aorta and weakening or dissection of the thoracic aorta

The charts below set forth net sales of our Vascular business as a percentage of our total net sales for each of the last three fiscal years:

Our Vascular products include coronary, endovascular, and peripheral stents and related delivery systems, stent graft systems, distal embolic protection systems and a broad line of balloon angioplasty catheters, guide catheters, guidewires, diagnostic catheters and accessories.

Coronary and Peripheral Stents.    If a blockage in a coronary artery prevents the heart from receiving sufficient oxygen, the heart cannot function properly and a heart attack or stroke may result. Coronary artery disease is commonly treated with balloon angioplasty, a procedure in which a special balloon is threaded through the coronary artery system to the site of the arterial blockage, where it is inflated, pressing the obstructive plaque against the wall of the vessel to improve blood flow.

Following balloon angioplasty, physicians often place coronary stents at the blockage site to prop open diseased arteries to maintain blood flow to the heart. Stents are cylindrical, wire-mesh devices small enough to insert into coronary arteries. Our leading Driver bare metal stent system is composed of an advanced cobalt-based alloy, which surpasses the limitations of stainless steel by creating very strong, ultra-thin struts that offer excellent flexibility and vessel support. The Driver stent is available in all major markets worldwide. The Micro-Driver coronary stent system, approved in the U.S. and Japan in 2006, is now also available in all major markets. The Micro-Driver is a bare metal stent system designed specifically to perform in small vessels and tortuous anatomies. This cobalt-alloy stent is the first bare metal stent for small vessels with an indication for new or untreated vessels (a de novo indication), addressing an important need in the treatment of coronary artery disease.

Drug Eluting Stents.    Drug eluting stents (DES) are designed to inhibit the re-narrowing or re-clogging of arteries, known as restenosis, that can occur after percutaneous coronary intervention (PCI). Our Endeavor drug-eluting coronary stent combines an innovative delivery system leveraging our discrete technology, our advanced Driver cobalt alloy stent, Zotarolimus (a sirolimus analogue), and a biomimetic polymer coating that controls the release of the drug into the vessel wall. In May 2002, we entered into a ten-year agreement with Abbott Laboratories (Abbott) granting us co-exclusive use of Abbott’s proprietary immunosuppressant drug Zotarolimus, as well as the phosphoryl choline coating Abbott has licensed from Biocompatibles International PLC for use in conjunction with Zotarolimus. Clinical and preclinical studies have shown that this proprietary biocompatible polymer, which mimics the outer membrane of a red blood cell, is safe and thrombo-resistant.

In July 2005, we received CE Mark approval for the commercial sale of the Endeavor drug-eluting coronary stent with the Rapid Exchange delivery system in European Union member countries, making



10

Table of Contents

Endeavor the first cobalt alloy platform on the DES market. Endeavor is now available in all major markets around the world except the U.S., Japan, and Canada.

Our Endeavor DES program achieved a number of significant regulatory and clinical milestones during fiscal year 2007. In November 2006, we announced the submission of the final module of our U.S. PMA application for approval of Endeavor DES. Our submission includes safety and efficacy data on approximately 4,100 patients. These patients are being monitored through a series of four different trials:

  • ENDEAVOR I – This clinical trial was a 100 patient multi-center trial conducted in Australia and New Zealand. It studied the safety and efficacy of the Endeavor DES for the treatment of de novo coronary lesions in native coronary arteries.
  • ENDEAVOR II – This pivotal clinical trial enrolled approximately 1,200 patients in January 2004. It was a randomized blind trial evaluating Endeavor DES safety and efficacy compared to Medtronic’s bare metal Driver Cobalt Alloy Coronary Stent Systems.
  • ENDEAVOR III – This is a randomized equivalency study comparing our Endeavor DES to the Johnson & Johnson Cypher (Cypher) Sirolimus-eluting stent monitoring 436 patients for five years. The primary endpoint was late stent thrombosis.
  • ENDEAVOR IV – This is a randomized, single-blind trial evaluating the safety and efficacy of the Endeavor DES compared to the Boston Scientific Corporation TAXUS Paclitaxel-Eluting Coronary Stent System in 1,548 patients. The primary endpoint is target vessel failure at nine months.

Together, these trials have proven the safety and efficacy of our Endeavor DES. The data from these trials will be used to support our PMA submission to the U.S. FDA. The U.S. FDA has indicated that it will require nine month data from the ENDEAVOR IV clinical trial and has scheduled manufacturing site audits in our facilities in the U.S. and Ireland. We expect an FDA panel meeting in September or October of 2007 and anticipate FDA approval thereafter.

The ENDEAVOR PROTECT (PROTECT) clinical study is the largest randomized trial focusing on the safety of drug eluting stents. In May 2007, Medtronic enrolled its first patient in the Protect study. The 8,800 patient trial will compare Endeavor DES to Cypher using overall stent thrombosis at three years as its primary endpoint and secondary endpoints that include death and non-fatal myocardial infarction.

Worldwide, Medtronic has approximately 11,000 Endeavor patients enrolled in its multiple clinical trials, and the growing volume of positive data and number of patients with long-term follow-up continues to reinforce the stent’s favorable safety and efficacy profile.

Reflecting our commitment to patient safety and ongoing medical research, we announced in October 2006 that we will begin a new, large-scale clinical trial focusing on the safety of DES. The PROTECT study is expected to be the largest randomized stent trial ever conducted to assess and compare key safety measures of two DES. The trial will compare the Medtronic Endeavor Zotarolimus-eluting coronary stent system and the Johnson & Johnson Cypher Sirolimus-eluting stent. The primary endpoint for the PROTECT study will be overall stent thrombosis, with secondary endpoints that include death and non-fatal MI as well as customary clinical efficacy endpoints. The study will enroll approximately 8,000 “real world” patients at 200 clinical centers in Europe and other international markets. Real world patients refer to the general population typically seen by physicians in their everyday clinical practice, including many patients with complex medical conditions.

In May 2007, we received European CE Mark approval and launched the Endeavor Sprint in Europe. This product includes the proven Endeavor stent, but provides even better delivery and trackability through enhancements and new technology we have leveraged from our successful Sprinter angioplasty balloon. Endeavor Sprint provides physicians with improved lesion access in tortuous vasculature, increased confidence in a successful outcome, greater ease-of-use, and reduced procedure time.

Lastly, in May, 2007 during the EuroPCR meeting in Barcelona, Spain, results from our RESOLUTE clinical trial, a first-in-man study evaluating the new Endeavor Resolute Zotarolimus-eluting stent



11

Table of Contents

system, were presented. Nine-month angiographic and clinical results reinforced that Zotarolimus is a very potent drug in preventing restenosis, even in challenging patient populations. Current DES do not meet all the requirements of physicians who deal with the most challenging clinical cases, such as patients with diabetes. Endeavor Resolute leverages the strengths of the Endeavor stent and introduces a proprietary, new biocompatible polymer called BioLinx. This polymer is designed to help match the duration of drug delivery with the longer healing duration often experienced by patients with complex medical conditions. BioLinx is different from other polymers in that its outer surface is hydrophilic (water friendly), which leads to high biocompatibility with the body, while the interior of the polymer is hydrophobic (water repellant), which helps to precisely control the drug release. The RESOLUTE trial enrolled 130 patients at 12 clinical centers in Australia and New Zealand, with a primary endpoint of late lumen loss (in-stent) at nine months and customary angiographic, intravascular ultrasound (IVUS) and clinical secondary endpoints. The clinical results for 130 patients showed a MACE rate of 7.0 percent, with zero TLR and no stent thrombosis. In 95 patients with nine-month angiographic follow-up, in-stent late lumen loss was 0.22 mm and in-segment late loss was 0.12 mm. In-stent restenosis was 1.0 percent and in-segment results were 2.1 percent. Stent device and lesion success was 100 percent, which means that physicians were successful in placing the assigned stents in the proper location with few complications.

Outside the U.S., we offer our Exponent RX Self-Expanding Carotid Stent used to treat patients afflicted by carotid artery disease. The Exponent is used in conjunction with our next generation filter-based embolic protection device, the Interceptor Plus. Embolic protection systems are designed to capture debris dislodged from the wall of the vessel, during balloon angioplasty or placement of a stent, that might otherwise flow downstream toward the heart and result in complications such as a heart attack or stroke. Our GuardWire Plus System is indicated for use in vein graft interventions for certain individuals who have previously undergone coronary artery bypass graft (CABG) surgery. Both products are currently under clinical investigation within the U.S. The PMA for the Exponent Carotid Stent used with the GuardWire embolic protection system will be submitted to the FDA early next fiscal year.

Endovascular Stent Grafts.    Our Vascular product line also includes a range of endovascular stent grafts including the market-leading AneuRx and Talent Thoracic Stent Grafts for minimally invasive AAA and the Valiant Thoracic Stent Grafts for TAA repair. Aneurysms are dangerous bulges or weaknesses in the aorta which, left untreated, can rupture without warning. Each year in America, thoracic aneurysms affect approximately 30,000 people, causing thousands of deaths. Medtronic now has more than 10 years of clinical experience with its endograft implants, by far the most clinical experience in the endovascular industry. In the last decade, more than 100,000 Medtronic stent grafts have been implanted worldwide for AAA or TAA lesions.

Our AneuRx Graft System is available in the U.S. and Europe, while the Talent AAA and TAA Stent Graft Systems are available in Europe and the rest of the world, excluding Japan. In July 2005, we announced the international commercial release of the Valiant Thoracic Stent Graft with the Xcelerant Delivery System, a next-generation stent graft. The Xcelerant Delivery System is designed to provide physicians with a smooth, controlled and more trackable delivery platform. In March 2006, we announced FDA approval of our AneuRx AAAdvantage stent graft with the Xcelerant delivery system. Enhancements to the new AAAdvantage system include contoured stents, broader proximal and distal sealing, and improved radiopaque markers. In March 2007, we submitted to the FDA the final module of our PMA application for approval of our Talent Thoracic Stent Graft System in the U.S. These enhancements will provide greater patient applicability, help reduce the complexity of the procedure and upgrade the durability of the stent graft.

Effective January 1, 2007, qualifying patients in the U.S. will be eligible to receive a one-time AAA ultra-sound screening as a part of the “Welcome to Medicare” physical. The covered patient population includes men age 65 and older who have been smokers, and both men and women with a family history of AAA. During the past two years, Medtronic has been one of the leading industry advocates of AAA screenings, conducting free screenings for more than 25,000 people at hundreds of locations around the country.



12

Table of Contents

        Customers and Competitors

The primary medical specialists who use our products for treating coronary artery disease are interventional cardiologists, while products treating peripheral vascular disease and aortic aneurysms may be used by interventional radiologists, vascular surgeons, cardiac surgeons and interventional cardiologists. Our primary competitors in the coronary and peripheral vascular business are Boston Scientific Corporation, Johnson & Johnson, and Abbott Laboratories, Inc. Our primary competitors in the endovascular business are Cook, Inc. and W. L. Gore & Associates, Inc.

Neurological

Our Neurological business develops, manufactures, and markets devices for the treatment of neurological, urological, and gastrointestinal disorders. We are a pioneer in the field of restorative neuroscience, using site-specific neurostimulation and drug delivery to modulate and restore nervous system function. Through collaborative efforts with our customers we have developed a unique portfolio of therapeutic technologies for the treatment of debilitating chronic diseases that represent large, unmet medical needs.

        Conditions Treated

Our Neurological business offers products for the treatment of the conditions described below.

  • Neurological disorders — including chronic pain, Parkinson’s disease, essential tremor, dystonia, and spasticity
  • Urological and gastrointestinal disorders — including overactive bladder and urinary incontinence, benign prostatic hyperplasia (enlarged prostate), and gastroparesis

The charts below set forth net sales of our Neurological products as a percentage of our total net sales for each of the last three fiscal years:

Neurological.    Neurological products consist of therapeutic and diagnostic devices, including implantable neurostimulation systems, implantable drug administration devices, urology and gastroenterology products. In October 2006, we announced the U.S. launch of the RestoreADVANCED and PrimeADVANCED neurostimulation systems for the treatment of chronic pain. Theses devices, about the size of a stopwatch, are implanted under the skin and have up to two leads with eight electrodes each that deliver electrical pulses to the spinal cord. Based on individual patient need, the positioning of the electrodes can be customized to deliver stimulation directly to the target area on the spinal cord, and in doing so, block pain signals from reaching the brain. Both “ADVANCED” devices combine the capabilities of earlier Medtronic neurostimulation devices with easier programming and automated customization of stimulation therapy.

During fiscal year 2007, we also continued to make progress in clinical trials designed to explore new applications of our neurostimulation technologies in the treatment of other neurological disorders that affect hundreds of thousands of patients. In the third quarter of fiscal year 2007, enrollment began in a Medtronic-sponsored trial, Early Stim, for our deep brain stimulation therapy for the treatment of earlier stages of Parkinson’s disease. Deep brain stimulation (DBS) is approved for the treatment of



13

Table of Contents

advanced stages of Parkinson’s disease, which affects approximately 1 million people in the United States. In the fourth quarter of fiscal year 2007, we completed enrollment in the Stimulation of the Anterior Nucleus of the Thalamus for Epilepsy (SANTE) pivotal trial, a study of our deep brain stimulation therapy for patients with medically-refractory epilepsy. Epilepsy is a condition that affects more than 2.7 million Americans; about one-third of these people do not respond to current treatment options and continue to experience seizures. Also, in the fourth quarter of fiscal year 2007, we completed enrollment in our Occipital Nerve Stimulation for the Treatment of Intractable Migraine (ONSTIM) feasibility study. An estimated 28 million Americans suffer from migraine headaches; between 375,000 and 750,000 of those suffer chronic migraine headaches that do not respond to available therapies. Additionally, we continue to explore innovative new ways to use DBS for severe and intractable psychiatric disorders such as obsessive-compulsive disorder and treatment-resistant depression. We intend to pursue a major clinical trial of the Company’s DBS technology in the treatment of severe and intractable depression, a disabling form of the psychiatric disorder affecting millions of people worldwide.

Another major initiative upon which we made significant progress in fiscal year 2007 is the establishment of higher levels of evidence for our therapies’ efficacy and cost-effectiveness. In August 2006, the New England Journal of Medicine published results from a major randomized controlled multi-center study showing that Activa DBS Therapy combined with medication is significantly more effective than medication alone in treating motor symptoms of advanced Parkinson’s disease. Conducted at 10 academic medical centers in Germany and Austria, the study included 156 patients with severe motor symptoms of Parkinson’s disease. Compared to medication alone, DBS of the subthalamic nucleus, a brain structure involved in regulating movement, caused significantly greater improvements in motor function after six months of treatment. On average, patients who received DBS plus medication showed a 41 percent improvement in motor function. In November 2006, research published in the New England Journal of Medicine showed DBS can provide significant and sustainable benefits to people with disabling forms of dystonia, a neurological movement disorder that forces parts of the body into abnormal, sometimes painful, movements or postures. Three months after randomization, patients in the neurostimulation group experienced a 39 percent improvement in the movement score of the Burke-Fahn-Marsden Dystonia Rating Scale, compared to a 5 percent improvement in the control group. Similarly, neurostimulation patients recorded a 38 percent reduction in disability scores, compared to an 8 percent reduction in the control group. Also in November 2006, the results of a study on stroke survivors was released showing that patients who received our Intrathecal Baclofen (ITB) Therapy which uses our family of SynchroMed Programmable Pumps, experienced a significant reduction in their severe spasticity, as well as significant improvements in both functional independence and quality of life after 12 months of treatment. Spasticity is a common result of stroke in which tight, stiff muscles make coordinated movement – especially of the arms and legs – difficult or uncontrollable. Importantly, the study also found that patients receiving ITB Therapy did not experience a significant reduction in the strength of the limbs unaffected by their stroke – confirming the findings of previous studies. The study, supported by Medtronic, involved 24 U.S. stroke treatment centers and enrolled 94 patients with spasticity in at least two limbs that was significant enough to interfere with activities of daily living.

Gastroenterology and Urology.    Our diagnostic and therapeutic products for gastroenterology and urology include the InterStim Therapy for the treatment of overactive bladder and urinary incontinence; Prostiva RF Therapy, which uses low-level radio frequency energy to treat benign prostatic hyperplasia, or enlarged prostate; Enterra Therapy for the treatment of gastroparesis; and the Bravo pH Monitoring System for the evaluation of gastroesophageal reflux disease. In July 2006, we announced the U.S. and European Union approval of the InterStim II system, which includes a new implantable neurostimulator, improved patient programmer and upgraded software for the clinician programmer. These advancements offer a choice of neurostimulation devices to accommodate more patients, streamline the implant procedure, and simplify programming and follow-up care. The improved patient programmer also gives patients more control of their therapy.

        Customers and Competitors

The primary medical specialists who use our neurological products are neurosurgeons, neurologists, pain management specialists, physiatrists, and orthopedic spine surgeons. The primary medical specialists



14

Table of Contents

who use our gastroenterology and urology products are urologists, urogynecologists, and gastroenterologists. Our primary competitors for neurological products are Boston Scientific Corporation and St. Jude Medical, Inc. Our primary competitors for gastroenterology and urology products are Boston Scientific Corporation, Urologix, Inc., and American Medical Systems.

Diabetes

Our Diabetes business develops, manufactures, and markets devices for the treatment of diabetes. We are a world leader in advanced, device-based medical systems for the treatment of diabetes, and we are committed to providing improved tools and technologies to help people with diabetes live longer, healthier lives.

        Conditions Treated

Our Diabetes business offers products for the treatment of diabetes, which is the inability to control blood glucose levels resulting from a failure of the pancreas to produce sufficient insulin or the body’s inability to properly use insulin. Diabetes products consist of external insulin pumps and related consumables, continuous glucose monitoring systems and subcutaneous glucose sensors.

The charts below set forth net sales of our Diabetes business as a percentage of our total net sales for each of the last three fiscal years:

Our Diabetes products are used to help diabetes patients maintain near-normal glucose control. Diabetes afflicts roughly 200 million people worldwide, and almost 21 million people in the U.S. Currently, our products serve the insulin-dependent population, which includes approximately five million people in the U.S. The key to managing diabetes is to maintain tight control of glucose levels. If not well-managed, diabetes can lead to blindness, kidney failure, amputation, impotence, and heart failure. More than $132 billion is spent annually on diabetes and its complications, including $92 billion in direct medical costs.

Our products include external insulin pumps and related consumables as well as continuous glucose monitoring (CGM) systems including glucose sensors. Our insulin pumps are primarily used by patients with type 1 diabetes, which occurs when the pancreas is unable to produce enough insulin. In order to survive, people with type 1 diabetes must administer insulin using injections or an insulin pump. Our therapies are also helpful in managing insulin dependent type 2 diabetes, which results from the body’s inability to produce enough insulin or properly use the insulin.

In March 2007, we launched our Guardian REAL-Time CGM System, which is intended to help protect diabetes patients from high and low glucose levels, and to maintain tighter glucose control. Unique features include predictive and rate-of-change alarms and expanded trend graphs. In addition to standard high and low glucose alerts, new early warning alerts warn patients before their glucose reaches preset thresholds. Concurrent with the Guardian REAL-Time CGM System, we launched the MiniLink REAL-Time Transmitter, a rechargeable, waterproof transmitter approximately one-third the size of previous transmitters. We also launched Medtronic CareLink Personal Therapy Management Software, which integrates data from the patient’s Guardian REAL-Time CGM System, logbook and blood



15

Table of Contents

glucose meter to identify patterns and trends in glucose management. Our GuardControl Trial, published in November 2006 in Diabetes Care, demonstrated that patients using the Guardian REAL-Time CGM System had better control of their blood glucose than patients using fingersticks.

Our Paradigm REAL-Time insulin pump is currently the leading choice in insulin pump therapy. Worn on a belt like a pager, the Paradigm insulin pump offers a simplified and intuitive menu system to program insulin delivery, making it easier for people with diabetes to manage their disease without daily insulin injections. Because pump therapy delivers insulin precisely to the body, it helps diabetes patients keep their glucose levels within a near-normal range, offering both short-term and long-term health benefits. With Paradigm REAL-Time, diabetes patients have a dashboard of information on an insulin pump including REAL-Time glucose readings, trend graphs, and arrows that indicate how fast and in which direction glucose is heading, adding a new layer of safety and control. This allows patients to more effectively manage diabetes.

In March 2007, we received FDA approval to market pediatric versions of our Paradigm REAL-Time and Guardian REAL-Time Systems, for children and teenagers ranging in the age of 7 through 17. Of the 30,000 new patients diagnosed with type 1 diabetes every year, almost half, or 13,000 patients, are children.

In order to drive broad acceptance of sensor-augmented technology, we are conducting the Sensor Augmented Therapy for A1C Reduction (STAR) trials which will evaluate sensor-augmented therapy versus traditional insulin pumps and multiple daily injection therapy. The strategic objective of the STAR trials is to drive acceptance and improved reimbursement for insulin pump therapy using the results anticipated from the data.

        Customers and Competitors

The primary medical specialists who use our diabetes products are endocrinologists, diabetologists, and internists. Our most significant competitors for diabetes products are Johnson & Johnson, Abbott Laboratories, Roche Ltd., Smiths Group PLC, and DexCom, Inc.

Cardiac Surgery

Cardiac Surgery has products used for revascularization, heart valve repair and replacement, blood management, and surgical ablation.

        Conditions Treated

Our Cardiac Surgery products are used in the treatment of the conditions described below.

  • Coronary artery disease — blockage in a coronary artery can prevent the heart from receiving sufficient oxygen, which prevents the heart from functioning properly, potentially resulting in a heart attack
  • Heart valve disorders — diseased or damaged heart valves can restrict blood flow or leak, which limits the heart’s ability to pump blood, causing the heart to work harder to meet the needs of the circulatory system


16

Table of Contents

The charts below set forth net sales of our Cardiac Surgery business as a percentage of our total net sales for each of the last three fiscal years:

Our Cardiac Surgery products consist of perfusion systems which oxygenate and circulate a patient’s blood during arrested heart revascularization surgery, positioning and stabilization systems for beating heart revascularization surgery, products for the repair and replacement of heart valves, surgical accessories, and surgical ablation products.

Coronary Artery Bypass Surgery.    When physicians determine that they cannot effectively treat a blockage in a coronary artery using balloon angioplasty or a stent, they typically turn to cardiac surgery to address the problem. The most common surgical procedure used to treat blockage in a coronary artery is a Coronary Artery Bypass Graft (CABG). In a CABG procedure, surgeons re-route the blood flow around the blockage by attaching a graft, usually from an artery or vein from another part of the patient’s body, as an alternative pathway to the heart. There are two primary techniques, arrested heart surgery and beating heart surgery.

Arrested Heart Surgery.    In a conventional coronary artery bypass procedure, the patient’s heart is temporarily stopped, or arrested. The patient is placed on a circulatory support system that temporarily replaces the patient’s heart and lungs and provides blood flow to the body. We offer a complete line of blood-handling products that form this circulatory support system and maintain and monitor blood circulation and coagulation status, oxygen supply, and body temperature during open heart surgery. In April 2006, we received FDA clearance for the Medtronic Performer Cardiopulmonary Bypass System, an integrated, compact console capable of providing total support of the circulatory system during a variety of cardiac surgical procedures, but occupying only a 20-inch by 22-inch space, just a third of the footprint of the time-honored “heart-lung” consoles.

Beating Heart Surgery.    As an alternative to conventional arrested heart bypass surgery, physicians are performing coronary artery bypass surgery on the beating heart to avoid the complexity and potential risks of arresting the heart. To assist physicians performing beating heart surgery, we offer positioning and stabilization technologies. These technologies include our Starfish 2 and Urchin heart positioners, which use suction technology to gently lift and position the beating heart to expose arteries on any of its surfaces. These heart positioners are designed to work in concert with our Octopus tissue stabilizer, which holds a small area of the cardiac surface tissue nearly stationary while the surgeon is suturing the bypass grafts to the arteries. In June 2006, we introduced the Octopus Evolution tissue stabilizer, the latest in a 10-year series of innovative cardiac surgery instruments. It is currently estimated that beating heart surgeries make up approximately 20 percent of the estimated 270,000 coronary artery bypass surgeries that are performed in the U.S. each year.

Surgical Ablation.    For patients undergoing cardiac surgery, who also suffer from atrial arrhythmias, our Cardioblate Ablation System is designed to allow surgeons to efficiently restore a normal heart rhythm by creating lines of ablation that guide electrical conduction within the atria. Our Cardioblate surgical ablation systems (CSAS), which includes the Cardioblate LP Surgical Ablation System and Cardioblate Navigator Tissue Dissector, offer cardiac surgeons new ease and flexibility in creating ablation lines during open heart procedures. In November 2006, we announced FDA approval to initiate



17

Table of Contents

the Feasibility of the Lone Atrial Fibrillation Clincial Trial, (FACT), to evaluate the use of the CSAS thorascopically in paroxysmal atrial fibrillation (AF) patients. In March 2007, we announced initiation of the Concomitant Utilization of RadioFrequency Energy for Atrial Fibrillation (CURE-AF) study, a U.S. pivotal trial to evaluate the CSAS to treat permanent AF. The purpose of CURE-AF is to evaluate the safety and effectiveness of our CSAS at reestablishing the normal heart rhythm in patients with permanent AF requiring concomitant open heart surgery utilizing the modified Cox Maze III procedure. This prospective, non-randomized, clinical trial will enroll 75 patients at 10 U.S. medical centers. The primary endpoints of the trial are to evaluate the freedom from permanent AF in patients off antiarrhythmic drugs at six months and the composite major adverse event rate at one month. The results of the trial will be submitted to the FDA to obtain an indication for the Medtronic CSAS in the treatment of permanent AF in patients requiring concomitant open heart surgery.

Heart Valves.    We offer a complete line of surgical valve replacement and repair products for damaged or diseased heart valves. Our replacement products include both tissue and mechanical valves. The valve market continues to shift from mechanical to tissue valves, which is beneficial to us due to our broad selection of tissue valve products. Our Mosaic bioprosthetic heart valve is a reduced-profile valve engineered from porcine tissue incorporating a proven flexible stent. The low profile and flexibility of the stent make it easier for the surgeon to implant the valve. Other tissue product offerings include the Freestyle stentless and Hancock II stented valves. Our mechanical heart valve offerings include the Medtronic Hall, the ADVANTAGE and the ADVANTAGE Supra bileaflet valves. Currently, the standard ADVANTAGE aortic bileaflet valve is under evaluation by the FDA in the U.S. Our valve repair products include the Duran Flexible and CG Future Band and CG Composite Annuloplasty Systems.

In October 2006, Medtronic’s Melody Transcatheter Pulmonary Valve and Ensemble Transcatheter Delivery System received European CE Mark making it the first transcatheter valve in the world to receive such an approval. The system is the first of its kind to treat patients with congenital structural heart disease requiring pulmonary heart valve replacement. According to the American Heart Association, congenital heart defects are the No. 1 birth defect worldwide. In the U.S. alone, more than 25,000 babies are born each year with a congenital heart defect. Approximately 22 percent of these babies have defects disrupting the blood flow from the right ventricle to the pulmonary artery.

Transcatheter valve technology represents a less invasive means to treat heart valve disease and is designed to allow physicians to deliver replacement valves via a catheter through the body’s cardiovascular system, thus eliminating the need to open the chest. Traditionally, open heart surgery has been required to correct the problem and it is not unusual for a patient to undergo multiple, open-heart surgeries during their lifetime. The Melody Valve and Ensemble System provide a non-surgical means to restore effective valve function and prolong the functional life of prosthetic conduits, thereby reducing the number of open heart surgeries for these patients throughout their lifetime.

        Customers and Competitors

The principal medical specialists who use our cardiac surgery products are cardiac surgeons. Our primary competitors in the Cardiac Surgery business are Edwards LifeSciences Corporation, Boston Scientific Corporation, Johnson & Johnson, and St. Jude Medical, Inc.

Ear, Nose and Throat (ENT)

We develop, manufacture, and market products and therapies to treat diseases and conditions of the ear, nose and throat, as well as neurological diseases. As a market leader in ENT and neurosurgery, we are changing the way ENT surgery is performed with innovative, minimally invasive products and techniques that benefit both patients and surgeons.

        Conditions Treated

Our ENT products are used in the treatment of the conditions described below.

  • ENT diseases and disorders, such as chronic sinusitis, chronic otitis media, hearing loss, Ménière’s disease, thyroid diseases, and tumors of the head and neck


18

Table of Contents

  • Neurological diseases and disorders, including both pediatric and normal pressure hydrocephalus, traumatic brain injury, and spinal conditions

The charts below set forth net sales of our ENT business as a percentage of our total net sales for each of the last three fiscal years:

Our primary ENT products include powered tissue-removal systems and other surgical instruments, implantable devices, nerve monitoring systems, disposable fluid-control products, image-guided surgery systems, and a Ménière’s disease therapy device. For neurological diseases, our main products include high-speed powered surgical drill systems to facilitate surgical access in the spine and cranium, shunts for pediatric and normal pressure hydrocephalus, drainage systems for the treatment of traumatic brain injury, neuro-endoscopes, and a full line of cranial fixation devices that include both titanium and resorbable plates and screws, and a dura substitute.

Chronic rhinosinusitis (sinus infections).    For the surgical treatment of chronic sinus infections, we offer powered and manual instruments with a variety of blade tips for removing diseased tissue and bone. Our bioresorbable nasal packing and dressings, such as MeroGel Dressing, aid in wound-healing and help reduce postoperative complications following these procedures. We also offer image-guided surgery systems to improve safety and efficacy when surgeons operate near critical structures such as the brain and eyes. The LandmarX Evolution Plus provides a robust, expandable system that may be used for virtually any ENT image guidance procedure. The LandmarX Element is a simple and convenient system ideal for functional endoscopic sinus surgery and novice image guided system users. In December of 2006, we announced that results of a study published in the September issue of the Archives of Otolaryngology–Head and Neck Surgery were favorable toward the use of Medtronic’s powered inferior turbinoplasty technique. The study demonstrates that patients with nasal obstruction and enlarged inferior turbinates (bony projections) caused by inflammation of the nasal membranes experience significantly improved quality of life and few postoperative complications after undergoing powered inferior turbinoplasty treatment.

Chronic otitis media (ear infections).    For the treatment of chronic otitis media, we provide a wide range of middle ear ventilation tubes to facilitate ventilation and prevent fluid accumulation. We also offer powered instruments and drills, such as the XPS 3000 Powered ENT System, to remove enlarged adenoid tissue, enable surgical access and remove diseased bone. Untreated chronic otitis media is the most common cause of hearing loss in children, which can impair learning and speech development. It can also spread to other areas of the head and neck and lead to serious complications.

Hearing loss.    To correct conductive hearing loss, we offer various types of implantable middle ear prostheses that replace missing bone(s) in the ear necessary to conduct sound. These products are malleable/trimmable and may be shaped by the surgeon to fit each particular patient’s anatomy.

Thyroid disease.    For surgery related to thyroid disease, we offer the NIM-Response 2.0 Nerve Integrity Monitor, NIM-Neuro 2.0 Nerve Integrity Monitor, and NIM EMG Tubes. These products assist surgeons in identifying and continuously monitoring the recurrent laryngeal or vagus nerves during complicated, high-risk thyroid surgery. Since the actual nerve damage during surgery is much higher than perceived, using our nerve monitoring products in these procedures is a benefit to both the patient and the surgeon, reducing the risk of patient injury and enabling more precise, complete dissection.



19

Table of Contents

Ménière’s disease.    To alleviate debilitating vertigo associated with the inner ear condition known as Ménière’s disease, we offer the portable, minimally invasive Meniett Low-Pressure Pulse Generator. Severe vertigo, which can cause nausea and vomiting, is considered by patients to be the most problematic and debilitating symptom of Ménière’s disease, often affecting their ability to work or participate in daily activities. Using Meniett therapy, patients can self-administer their treatment at home or work for a few minutes each day by delivering low-pressure air pulses through a tube connected to an earpiece placed in the outer ear. In December 2006, results of a two-year follow-up study published in the Archives of Otolaryngology–Head and Neck Surgery were favorable toward long-term use of Medtronic’s Meniett Low-Pressure Pulse Generator for Ménière’s disease. The study concluded that approximately two-thirds of Ménière’s disease patients who are unresponsive to traditional medical treatment experience a significant, long-term reduction in vertigo frequency with Meniett therapy.

Surgical Access and Cranial Fixation.    To facilitate surgical access in cranial, spinal and orthopedic procedures, we offer the Legend electric and pneumatic high-speed powered surgical drill systems. The Stylus system, the most recent addition to the high-speed drill line, provides significant power in a small, ergonomic design. We also offer titanium and resorbable polymer plates and screw systems designed to provide for rigid fixation of the skull. In addition to plates and screws, our Durepair dura substitute is indicated for use as both an on-lay and suturable graft for repair of the dura skin layer.

Hydrocephalus.    The Strata valve is an adjustable shunt system for the treatment of hydrocephalus, a condition characterized by an abnormal accumulation of cerebral spinal fluid in the brain. There are two primary forms of hydrocephalus; congenital or pediatric hydrocephalus, and normal pressure hydrocephalus, which afflicts the elderly. The Strata valve allows surgeons to non-invasively adjust the valve’s performance level settings with an external magnetic adjustment device. This enables the surgeon to change the valve’s performance characteristics over time without subjecting the patient to additional surgery. The shunt line also includes a wide assortment of nonadjustable valves.

Brain Injury.    We also provide a large selection of external drainage and monitoring systems such as the Becker and Exacta systems as well as catheters that are used for the treatment of traumatic brain injury. These systems are designed to remove fluid from the brain in a controlled fashion to alleviate the build-up of intracranial pressure, which can be life threatening.

        Customers and Competitors

Our primary customers for products relating to our ENT diseases and disorders are ENT surgeons and the hospitals and clinics where they perform surgery. The most significant competitors in this part of our ENT business are Gyrus Group PLC and Stryker Corporation.

The primary customers for our ENT neurosurgical products are neurosurgeons, spinal surgeons, and the hospitals and clinics where they perform surgery. Significant competitors are Johnson & Johnson, Stryker Corporation, Integra LifeSciences Holdings Corporation, and Anspach Effort, Inc.

Physio-Control

We develop, manufacture, and market external defibrillators, including automated external defibrillators (AEDs) and manual defibrillators used by hospitals and emergency response personnel. In addition to the portfolio of external defibrillation and emergency response systems, we offer related data management solutions and support services.

        Conditions Treated

Our Physio-Control products are used in the treatment of the condition described below.

  • Sudden Cardiac Arrest — is a condition in which the heartbeat stops suddenly and unexpectedly. It is caused by life-threatening arrhythmias, abnormalities in the heart’s electrical system.


20

Table of Contents

The charts below set forth net sales of our Physio-Control business as a percentage of our total net sales for each of the last three fiscal years:

External Defibrillators.    Many victims of sudden cardiac arrest could be saved if they had quicker access to automated external defibrillators (AEDs). In the U.S., the survival rate for victims of sudden cardiac arrest is only about 5 percent because the average response time to an emergency call for help is six to twelve minutes. Chances of survival are reduced significantly if the victim is not treated within five minutes. In August 2004, results from the largest-ever clinical trial studying the outcomes of public access to defibrillation were published in the New England Journal of Medicine. The data indicated that the use of portable AEDs by trained volunteers can significantly improve the probability of saving lives that otherwise might have been lost to sudden cardiac arrest. Our LIFEPAK series of external defibrillators offers a broad range of life-saving tools for multiple user needs and have been incorporated in environments ranging from hospitals to emergency medical units to public places such as airports, sports arenas, schools, and workplaces. Today there are more than 500,000 LIFEPAK devices distributed worldwide.

On December 4, 2006, we announced our intention to pursue a spin-off of Physio-Control, our wholly-owned subsidiary, into an independent, publicly traded company. The creation of this new company will enable Medtronic to more directly focus resources on high-growth therapies aimed at chronic disease management. In addition, the spin-off will provide Physio-Control access to additional operational, strategic, and financial flexibility to invest in and grow its business. On January 15, 2007, we announced our voluntary suspension of U.S. shipments of Physio-Control products manufactured at our facility in Redmond, Washington in order to address quality system issues. We have a dedicated team from across the Company working on the corrective actions necessary to address the quality system issues. The suspension of U.S. shipments in fiscal year 2007 did not have a material impact on our overall results. We expect the suspension of U.S. shipments to continue into the second half of fiscal year 2008. Following the resolution of these matters, we intend to continue to pursue the spin-off of Physio-Control.

        Customers and Competitors

The primary customers for our AED products are hospitals, schools, governments, businesses, and any other public facility. Our primary competitors in the AED business are Cardiac Science, Inc., Zoll Medical Corporation, and Royal Philips Electronics.

The primary customers for our manual defibrillators are emergency care doctors and highly-trained nurses. Our primary competitors in the manual defibrillator business are Cardiac Science, Inc., Defibtech, HeartSine, and Welch Allyn.

Research and Development

The markets in which we participate are subject to rapid technological advances. Constant improvement of products and introduction of new products is necessary to maintain market leadership. Our research and development efforts are directed toward maintaining or achieving technological leadership in each of the markets we serve in order to help ensure that patients using our devices and therapies



21

Table of Contents

receive the most advanced and effective treatment possible. We are committed to developing technological enhancements and new indications for existing products, as well as less invasive and new technologies to address unmet patient needs and to help reduce patient care costs and length of hospital stays. We have not engaged in significant customer or government-sponsored research.

During fiscal year 2007, 2006, and 2005, we spent $1.239 billion (10.1 percent of net sales), $1.113 billion (9.9 percent of net sales) and $951 million (9.5 percent of net sales) on research and development, respectively. Our research and development activities include improving existing products and therapies, expanding their indications and applications for use, and developing new products. While we continue to make substantial investments for the expansion of our existing product lines and for the search of new innovative products, we have also focused heavily on carefully planned clinical trials, which lead to market expansion and enable further penetration of our life changing devices.

Acquisitions and Investments

Our strategy to provide a broad range of therapies to restore patients to fuller, healthier lives requires a wide variety of technologies, products, and capabilities. The rapid pace of technological development in the medical industry and the specialized expertise required in different areas of medicine make it difficult for one company alone to develop a broad portfolio of technological solutions. In addition to internally generated growth through our research and development efforts, historically we have relied, and expect to continue to rely, upon acquisitions, investments, and alliances to provide access to new technologies both in areas served by our existing businesses as well as in new areas.

We expect to make future investments or acquisitions where we believe that we can stimulate the development of, or acquire, new technologies and products to further our strategic objectives and strengthen our existing businesses. Mergers and acquisitions of medical technology companies are inherently risky and no assurance can be given that any of our previous or future acquisitions will be successful or will not materially adversely affect our consolidated results of operations, financial condition, or cash flows.

On March 26, 2007, we acquired manufacturing assets, know-how, and an exclusive license to intellectual property related to the manufacture and distribution of EndoSheath products from Vision–Sciences, Inc. (VSI), which was accounted for as a purchase of assets. The license acquired from VSI will expand our existing U.S. distribution rights of EndoSheath products to worldwide distribution rights. The EndoSheath is a sterile disposable sheath that fits over a fiberoptic endoscope preventing contamination of the scope during procedures and allowing reuse of the scope without further sterilization.

On September 15, 2006, we acquired and/or licensed selected patents and patent applications owned by Dr. Eckhard Alt (Dr. Alt), or certain of his controlled companies in a series of transactions. In connection therewith, we also resolved all outstanding litigation and disputes between Dr. Alt and certain of his controlled companies. The agreements required the payment of total consideration of $75 million, $74 million of which was capitalized as technology based intangible assets that had an estimated useful life of 11 years at the time of acquisition. The acquired patents or licenses pertain to the cardiac rhythm disease management field and have both current application and potential for future patentable commercial products.

On July 25, 2006, we acquired substantially all of the assets of Odin Medical Technologies, LTD (Odin), a privately held company. Prior to the acquisition, we had an equity investment in Odin, which was accounted for under the cost method of accounting. Odin focused on the manufacture of the PoleStar intraoperative Magnetic Resonance Image (iMRI) Guidance System which was already exclusively distributed by us. This acquisition is expected to help us further drive the acceptance of iMRI guidance in neurosurgery. The consideration for Odin was approximately $21 million, which included $6 million in upfront cash and a $2 million milestone payment made in the three months ended October 27, 2006. The $8 million in net cash paid resulted from the $21 million in consideration less the value of our prior investment in Odin and Odin’s existing cash balance.



22

Table of Contents

Patents and Licenses

We rely on a combination of patents, trademarks, copyrights, trade secrets, and nondisclosure and non-competition agreements to establish and protect our proprietary technology. We have filed and obtained numerous patents in the U.S. and abroad, and regularly file patent applications worldwide in our continuing effort to establish and protect our proprietary technology. In addition, we have entered into exclusive and non-exclusive licenses relating to a wide array of third-party technologies. We have also obtained certain trademarks and trade names for our products to distinguish our genuine products from our competitors’ products, and we maintain certain details about our processes, products and strategies as trade secrets. Our efforts to protect our intellectual property and avoid disputes over proprietary rights have included ongoing review of third-party patents and patent applications. See “Item 1A. Risk Factors” and Note 15 to the consolidated financial statements set forth in Exhibit 13 hereto for additional information.

Markets and Distribution Methods

We sell most of our medical devices through direct sales representatives in the U.S. and a combination of direct sales representatives and independent distributors in international markets. The main target markets for our medical devices are the U.S., Western Europe, and Japan. Our primary customers include physicians, hospitals, other medical institutions, and group purchasing organizations.

Our marketing and sales strategy is focused on rapid, cost-effective delivery of high-quality products to a diverse group of customers worldwide. To achieve this objective, we organize our marketing and sales teams around physician specialties. This focus enables us to develop highly knowledgeable and dedicated sales representatives who are able to foster strong relationships with physicians and other customers, and enhance our ability to cross-sell complementary products. We believe that we maintain excellent working relationships with physicians and others in the medical industry that enable us to gain a detailed understanding of therapeutic and diagnostic developments, trends and emerging opportunities, and respond quickly to the changing needs of physicians and patients. We attempt to enhance our presence in the medical community through active participation in medical meetings and by conducting comprehensive training and educational activities. We believe that these activities contribute to physician expertise and loyalty to our products.

In keeping with the increased emphasis on cost-effectiveness in healthcare delivery, the current trend among hospitals and other customers of medical device manufacturers is to consolidate into larger purchasing groups to enhance purchasing power. As a result, transactions with customers have become increasingly significant, more complex, and tend to involve more long-term contracts than in the past. This enhanced purchasing power may also lead to pressure on pricing and increased use of preferred vendors. We are not dependent on any single customer for more than 10 percent of our total net sales.

Competition and Industry

We compete in both the therapeutic and diagnostic medical markets in more than 120 countries throughout the world. These markets are characterized by rapid change resulting from technological advances and scientific discoveries. In the product lines in which we compete, we face a mixture of competitors ranging from large manufacturers with multiple business lines to small manufacturers that offer a limited selection of products. In addition, we face competition from providers of alternative medical therapies such as pharmaceutical companies.

Major shifts in industry market share have occurred in connection with product problems, physician advisories and safety alerts, reflecting the importance of product quality in the medical device industry. In the current environment of managed care, economically motivated buyers, consolidation among healthcare providers, increased competition, and declining reimbursement rates, we have been increasingly required to compete on the basis of price. In order to continue to compete effectively, we must continue to create or acquire advanced technology, incorporate this technology into proprietary products, obtain regulatory approvals in a timely manner, and manufacture and successfully market these products.



23

Table of Contents

Worldwide Operations

For financial reporting purposes, net sales and long-lived assets attributable to significant geographic areas are presented in Note 17 to the consolidated financial statements and is set forth in Exhibit 13 hereto and which will be included in our fiscal year 2007 Annual Report to Shareholders (2007 Annual Report).

Impact of Business Outside of the U.S.

Our operations in countries outside the U.S. are accompanied by certain financial and other risks. Relationships with customers and effective terms of sale vary by country, often with longer-term receivables than are typical in the U.S. Inventory management is an important business concern due to the potential for obsolescence, long lead times from sole source providers and currency exposure. Currency exchange rate fluctuations can affect net sales from, and profitability of, operations outside the U.S. We attempt to hedge these exposures to reduce the effects of foreign currency fluctuations on net earnings. See the “Market Risk” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 5 to the consolidated financial statements, set forth in Exhibit 13 hereto and which will be included in our 2007 Annual Report. In addition, the repatriation of certain earnings of our foreign subsidiaries’ may result in substantial U.S. tax cost.

Production and Availability of Raw Materials

We manufacture most of our products at 22 manufacturing facilities located in various countries throughout the world. The largest of these manufacturing facilities are located in Arizona, California, Florida, Indiana, Ireland, Massachusetts, Mexico, Minnesota, Puerto Rico, Switzerland, Texas, and Washington. We purchase many of the components and raw materials used in manufacturing these products from numerous suppliers in various countries. For reasons of quality assurance, sole source availability, or cost effectiveness, certain components and raw materials are available only from a sole supplier. We work closely with our suppliers to help ensure continuity of supply while maintaining high quality and reliability. Due to the FDA’s requirements regarding manufacture of our products, we may not be able to quickly establish additional or replacement sources for certain components or materials. Generally, we have been able to obtain adequate supplies of such raw materials and components. However, the reduction or interruption in supply, and an inability to develop alternative sources for such supply, could adversely affect our operations.

Employees

On April 27, 2007, we employed approximately 38,000 employees. Our employees are vital to our success. We believe we have been successful in attracting and retaining qualified personnel in a highly competitive labor market due to our competitive compensation and benefits, and our rewarding work environment. We believe our employee relations are excellent.

Seasonality

Worldwide sales do not reflect any significant degree of seasonality.



24

Table of Contents

Government Regulation and Other Considerations

Our medical devices are subject to regulation by numerous government agencies, including the FDA and comparable foreign agencies. To varying degrees, each of these agencies requires us to comply with laws and regulations governing the development, testing, manufacturing, labeling, marketing, and distribution of our medical devices.

Authorization to commercially distribute a new medical device in the U.S. is generally received in one of two ways. The first, known as the 510(k) process, requires us to demonstrate that our new medical device is substantially equivalent to a legally marketed medical device. In this process, we must submit data that supports our equivalence claim. If human clinical data is required, it must be gathered in compliance with FDA investigational device exemption regulations. We must receive an order from the FDA finding substantial equivalence to another legally marketed medical device before we can commercially distribute the new medical device. Modifications to cleared medical devices can be made without using the 510(k) process if the changes do not significantly affect safety or effectiveness. A very small number of our devices are exempt from 510(k) clearance requirements.

The second, more rigorous process, known as PMA, requires us to independently demonstrate that the new medical device is safe and effective. We do this by collecting data, including human clinical data for the medical device. The FDA will authorize commercial release if it determines there is reasonable assurance that the medical device is safe and effective. This process is generally much more time-consuming and expensive than the 510(k) process.

Both before and after a product is commercially released, we have ongoing responsibilities under FDA regulations. The FDA reviews design and manufacturing practices, labeling and record keeping, and manufacturers’ required reports of adverse experience and other information to identify potential problems with marketed medical devices. We may be subject to periodic inspection by the FDA for compliance with the FDA’s good manufacturing practice regulations among other FDA requirements, such as restrictions on advertising and promotion. These regulations, also known as the Quality System Regulations, govern the methods used in, and the facilities and controls used for, the design, manufacture, packaging and servicing of all finished medical devices intended for human use. If the FDA were to conclude that we are not in compliance with applicable laws or regulations, or that any of our medical devices are ineffective or pose an unreasonable health risk, the FDA could ban such medical devices, detain or seize adulterated or misbranded medical devices, order a recall, repair, replacement, or refund of such devices, and require us to notify health professionals and others that the devices present unreasonable risks of substantial harm to the public health. The FDA may also impose operating restrictions, enjoin and restrain certain violations of applicable law pertaining to medical devices, and assess civil or criminal penalties against our officers, employees, or us. The FDA may also recommend prosecution to the Department of Justice.

The FDA, in cooperation with U.S. Customs and Border Protection (CBP), administers controls over the import of medical devices into the U.S. The CBP imposes its own regulatory requirements on the import of our products, including inspection and possible sanctions for noncompliance. The FDA also administers certain controls over the export of medical devices from the U.S. International sales of our medical devices that have not received FDA approval are subject to FDA export requirements. Each foreign country to which we export medical devices also subjects such medical devices to their own regulatory requirements. Frequently, we obtain regulatory approval for medical devices in foreign countries first because their regulatory approval is faster or simpler than that of the FDA. However, as a general matter, foreign regulatory requirements are becoming increasingly stringent. In the European Union, a single regulatory approval process has been created, and approval is represented by the CE Mark. To obtain a CE Mark in the European Union, defined products must meet minimum standards of safety and quality (i.e., the essential requirements) and then comply with one or more of a selection of conformity routes. A Notified Body assesses the quality management systems of the manufacturer and the product conformity to the essential and other requirements within the Medical Device Directive. Medtronic is subject to inspection by Notified Bodies for compliance.

To be sold in Japan, most medical devices must undergo thorough safety examinations and demonstrate medical efficacy before they are granted approval, or “shonin.” The Japanese government,



25

Table of Contents

through the Ministry of Health, Labour, and Welfare (MHLW), regulates medical devices under recently enacted revisions to the Pharmaceutical Affairs Law (PAL). Implementation of PAL and enforcement practices thereunder are evolving, and compliance guidance from MHLW is still in development. Consequently, companies continue to work on establishing improved systems for compliance with PAL. Penalties for a company’s noncompliance with PAL could be severe, including revocation or suspension of a company’s business license and criminal sanctions.

The process of obtaining approval to distribute medical products is costly and time-consuming in virtually all of the major markets where we sell medical devices. We cannot assure that any new medical devices we develop will be approved in a timely or cost-effective manner.

Federal and state laws protect the confidentiality of certain patient health information, including patient medical records, and restrict the use and disclosure of patient health information by healthcare providers. In particular, in April 2003, the U.S. Department of Health and Human Services (HHS) published patient privacy rules under the Health Insurance Portability and Accountability Act of 1996 (HIPAA privacy rule). The HIPAA privacy rule governs the use and disclosure of protected health information by “Covered Entities,” which are healthcare providers that submit electronic claims, health plans and healthcare clearinghouses. Other than our Diabetes operating segment and our health insurance plans, each of which is a Covered Entity, and the role representatives play in providing technical support to physicians while providing patient care, the HIPAA privacy rule affects us indirectly. The patient data that we receive and analyze may include protected health information. We are committed to maintaining patients’ privacy and working with our customers and business partners in their HIPAA compliance efforts. The ongoing costs and impacts of assuring compliance with the HIPAA privacy rules are not material to our business.

Government and private sector initiatives to limit the growth of healthcare costs, including price regulation, competitive pricing, coverage and payment policies, and managed-care arrangements, are continuing in many countries where we do business, including the U.S. These changes are causing the marketplace to put increased emphasis on the delivery of more cost-effective medical devices. Government programs, including Medicare and Medicaid, private healthcare insurance and managed-care plans have attempted to control costs by limiting the amount of reimbursement they will pay for particular procedures or treatments, and other mechanisms designed to constrain utilization and contain cost, including, for example, gainsharing, where a hospital agrees with physicians to share any realized cost savings resulting from the physicians’ collective change in practice patterns such as standardization of devices where medically appropriate. This has created an increasing level of price sensitivity among customers for our products. Some third-party payors must also approve coverage for new or innovative devices or therapies before they will reimburse healthcare providers who use the medical devices or therapies. Even though a new medical device may have been cleared for commercial distribution, we may find limited demand for the device until reimbursement approval has been obtained from governmental and private third-party payors. In addition, some private third-party payors require that certain procedures or that the use of certain products be authorized in advance as a condition of reimbursement. As a result of our manufacturing efficiencies and cost controls, we believe we are well-positioned to respond to changes resulting from the worldwide trend toward cost-containment; however, uncertainty remains as to the nature of any future legislation, making it difficult for us to predict the potential impact of cost-containment trends on future operating results.

The delivery of our devices is subject to regulation by HHS and comparable state and foreign agencies responsible for reimbursement and regulation of healthcare items and services. U.S. laws and regulations are imposed primarily in connection with the Medicare and Medicaid programs, as well as the government’s interest in regulating the quality and cost of healthcare. Foreign governments also impose regulations in connection with their healthcare reimbursement programs and the delivery of healthcare items and services.

Federal healthcare laws apply when we or customers submit claims for items or services that are reimbursed under Medicare, Medicaid or other federally-funded healthcare programs. The principal federal laws include: (1) the False Claims Act which prohibits the submission of false or otherwise improper claims for payment to a federally-funded health care program; (2) the Anti-Kickback Statute



26

Table of Contents

which prohibits offers to pay or receive remuneration of any kind for the purpose of inducing or rewarding referrals of items or services reimbursable by a Federal healthcare program; and (3) the Stark law which prohibits physicians from referring Medicare or Medicaid patients to an entity for the provision of certain designated health services if the physician (or a member of the physician’s immediate family) has a financial relationship with that entity. There are often similar state false claims, anti-kickback and anti-self referral laws that apply to claims submitted under state Medicaid or state-funded healthcare programs.

The laws applicable to us are subject to evolving interpretations. If a governmental authority were to conclude that we are not in compliance with applicable laws and regulations, Medtronic, its officers and employees, could be subject to severe criminal and civil penalties including substantial penalties, fines and damages, and exclusion from participation as a supplier of product to beneficiaries covered by Medicare or Medicaid.

We operate in an industry characterized by extensive patent litigation. Patent litigation can result in significant damage awards and injunctions that could prevent the manufacture and sale of affected products or result in significant royalty payments in order to continue selling the products. At any given time, we are generally involved as both a plaintiff and a defendant in a number of patent infringement actions. While it is not possible to predict the outcome of patent litigation incident to our business, we believe the costs associated with this type of litigation could generally have a material adverse impact on our consolidated results of operations, financial position or cash flows. See Note 15 to the consolidated financial statements set forth in Exhibit 13 hereto for additional information.

We operate in an industry susceptible to significant product liability claims. These claims may be brought by individuals seeking relief or by groups seeking to represent a class. In addition, product liability claims may be asserted against us in the future based on events we are not aware of at the present time.

We are also subject to various environmental laws and regulations both within and outside the U.S. Like other medical device companies, our operations involve the use of substances regulated under environmental laws, primarily manufacturing and sterilization processes. We do not expect that compliance with environmental protection laws will have a material impact on our consolidated results of operations, financial position or cash flows.

We have elected to self-insure most of our insurable risks. This decision was made based on conditions in the insurance marketplace that have led to increasingly higher levels of self-insurance retentions, increasing number of coverage limitations and dramatically higher insurance premium rates. We continue to monitor the insurance marketplace to evaluate the value to us of obtaining insurance coverage in the future. Based on historical loss trends, we believe that our self-insurance program accruals will be adequate to cover future losses. Historical trends, however, may not be indicative of future losses. These losses could have a material adverse impact on our consolidated results of operations, financial position or cash flows.

Executive Officers of Medtronic

Set forth below are the names and ages of current executive officers of Medtronic, Inc., as well as information regarding their positions with Medtronic, Inc., their periods of service in these capacities, and their business experiences. There are no family relationships among any of the officers named, nor is there any arrangement or understanding pursuant to which any person was selected as an officer.

Arthur D. Collins, Jr., age 59, has been Chairman of the Board and Chief Executive Officer of Medtronic since April 2002; President and Chief Executive Officer from May 2001 to April 2002; President and Chief Operating Officer from August 1996 to April 2001; Chief Operating Officer from January 1994 to August 1996; and Executive Vice President of Medtronic and President of Medtronic International from June 1992 to January 1994. He was Corporate Vice President of Abbott Laboratories from October 1989 to May 1992 and Divisional Vice President of that company from May 1984 to October 1989. He is also a director of The Boeing Company, U.S. Bancorp and Cargill, Inc., a member of the Board of Overseers of The Wharton School at the University of Pennsylvania and a member of



27

Table of Contents

the board of The Institute of Health Technology Studies. At the 2007 Annual Meeting, Mr. Collins is expected to resign as Chief Executive Officer of Medtronic and continue as Chairman of the Board of Medtronic.

Susan Alpert, Ph.D., M.D., age 61, has been Senior Vice President, Chief Quality and Regulatory Officer since November 2005. Prior to that she was Vice President, Chief Quality and Regulatory Officer from May 2004 to November 2005, and Vice President, Regulatory Affairs and Compliance from July 2003 to May 2004. Prior to that, she was Vice President of Regulatory Sciences at C.R. Bard, Inc. from October 2000 to July 2003. She held a variety of positions at the Food & Drug Administration from June 1987 to August 2000.

Jean-Luc Butel,, age 50, has been Senior Vice President and President, Asia Pacific, since September 2003. Prior to that, he was President of Independence Technology, a Johnson & Johnson company, from 1999 to 2003. From 1991 to 1999, he worked for Becton Dickinson, initially as General Manager of its Microbiology business in Japan and then as President of Nippon Becton Dickinson. His last assignment at Becton Dickinson was President, Worldwide Consumer Healthcare. From 1984 to 1991, Mr. Butel was with Johnson & Johnson and served multiple roles including General Manager of Fiji, China Project Manager and Marketing Director of the Johnson & Johnson ophthalmic business in Southeast Asia.

Terrance L. Carlson, age 54, has been Senior Vice President, General Counsel and Corporate Secretary since October 2004. Prior to that, he was Senior Vice President, Business Development, General Counsel and Secretary at PerkinElmer, Inc. from June 1999 to September 2004; Deputy General Counsel of AlliedSignal (now Honeywell International) and General Counsel of AlliedSignal Aerospace from April 1994 to June 1999; and an associate and partner of Gibson Dunn & Crutcher from November 1978 to April 1994.

H. James Dallas, age 48, has been Senior Vice President and Chief Information Officer since April 2006. Prior to that, he was Vice President and Chief Information Officer of Georgia Pacific from December 2002 to December 2005; General Manager of the Transportation Division and President of the Lumber Division from October 2001 to December 2002; and Vice President, Building Products Distribution Sales and Logistics, Georgia Pacific Corporation from October 2000 to October 2001.

Michael F. DeMane, age 51, has been Senior Vice President since May 2007, and prior to that was Senior Vice President and President of Europe, Canada, Latin America and Emerging Markets since August 2005. He served as Senior Vice President and President, Spinal, ENT and Navigation, since February 2002 and President, Spinal, since January 2000. Prior to that, he was President, Interbody Technologies, a division of Sofamor Danek, from June 1998 to December 1999. Prior to joining the Company in 1998, Mr. DeMane served as Managing Director, Australia and New Zealand, for Smith & Nephew, Pty. Ltd from April 1996 to June 1998, after a series of research and development and general management positions with Smith & Nephew Inc. At the 2007 Annual Meeting, Mr. DeMane is expected to be named Chief Operating Officer of Medtronic.

Gary L. Ellis, age 50, has been Senior Vice President and Chief Financial Officer since May 2005. Prior to that, he was Vice President, Corporate Controller and Treasurer since October 1999 and Vice President Corporate Controller from August 1994. Mr. Ellis joined Medtronic in 1989 as Assistant Corporate Controller and was promoted to Vice President of Finance for Medtronic Europe in 1992, until being named as Corporate Controller in 1994. Mr. Ellis is a member of the board of directors of The Toro Company and chairman of the American Heart Association.

William A. Hawkins, age 53, has been a Director of Medtronic since March 2007 and President and Chief Operating Officer of Medtronic since May 2004. He served as Senior Vice President and President, Medtronic Vascular, from January 2002 to May 2004. He served as President and Chief Executive Officer of Novoste Corporation from 1998 to 2002. Mr. Hawkins serves on the board of directors of Deluxe Corporation, the board of trustees for the University of Virginia Darden School of Business and the board of visitors for the Duke University School of Engineering. At the 2007 Annual Meeting, Mr. Hawkins is expected to be named President and Chief Executive Officer of Medtronic.



28

Table of Contents

Richard Kuntz, M.D., age 50, has been Senior Vice President and President, Neuromodulation since October 2005. Prior to that, he was an interventional cardiologist and Chief of the Division of Clinical Biometrics at Brigham and Women’s Hospital, Associate Professor of Medicine and Chief Scientific Office of the Harvard Clinical Research Institute.

Stephen H. Mahle, age 61, has been Executive Vice President and President, Cardiac Rhythm Disease Management, since May 2004, and prior to that was Senior Vice President and President, Cardiac Rhythm Management, since January 1998. Prior to that, he was President, Brady Pacing, from 1995 to 1997 and Vice President and General Manager, Brady Pacing, from 1990 to 1995. Mr. Mahle has been with the Company for 34 years and served in various general management positions prior to 1990. Mr. Mahle serves on the board of directors of ATMI, Inc.

Carol McCormick, age 53, has been Senior Vice President, Human Resources, since April 2007. She was Vice President, Human Resources at CRDM from May 2004 to March 2007. Prior to that she was Vice President of Human Resources for Neurological and Diabetes from August 2000 to May 2004 and Human Resources Director for Drug Delivery and Functional Diagnostics business from September 1996 to August 2000. Ms. McCormick joined the Company in 1989.

Christopher J. O’Connell, age 40, has been Senior Vice President, and President of Diabetes since October 2006 and President of Medtronic’s Emergency Response Systems division from May 2005 to October 2006. Prior to that he was Vice President of Sales and Marketing of Medtronic’s Cardiac Rhythm Disease Management division from November 2001 to May 2005 and Vice President/General Manager of the Patient Management Business from January 2000 to November 2001. Mr. O’Connell has been with the Company for 13 years and served in various management positions.

Stephen N. Oesterle, M.D., age 56, has been Senior Vice President, Medicine and Technology, since January 2002. Prior to that, he was Associate Professor of Medicine at Harvard Medical School and Director of Invasive Cardiology Services at Massachusetts General Hospital from 1998 to 2002, and was Associate Professor of Medicine at Stanford University and Director of Cardiac Catheterization and Coronary Intervention Laboratories at the Stanford University Medical Center from 1992 to 1998. Prior to that he held other academic positions and directed interventional cardiology programs at Georgetown University and in Los Angeles.

Oern R. Stuge, M.D., age 53, has been Senior Vice President and President, Medtronic Europe, Emerging Markets and Canada since May 2007. Prior to that he was Senior Vice President and President of Cardiac Surgery since March 2005, Vice President of Cardiac Rhythm Management, Western Europe from May 2002 to March 2005, Vice President of Neurological, Spinal and Diabetes for Western Europe from May 2000 to May 2002 and Vice President of Neurological for Europe, Middle East & Africa from May 1998 to May 2000. Prior to joining the Company in 1998, Mr. Stuge worked at Abbott Laboratories where he held regional director and general manager positions for the various Nordic countries and the Netherlands.

Scott R. Ward, age 47, has been Senior Vice President and President, CardioVascular since May 2007. Prior to that he was Senior Vice President and President, Vascular from May 2004 to May 2007, Senior Vice President and President, Neurological and Diabetes Business, from February 2002 to May 2004, and was President, Neurological, from January 2000 to January 2002. He was Vice President and General Manager of Medtronic’s Drug Delivery Business from 1995 to 2000. Prior to that, Mr. Ward led the Company’s Neurological Ventures in the successful development of new therapies. Mr. Ward also held various research, regulatory and business development positions since joining Medtronic in 1981.

Peter L. Wehrly, age 48, has been Senior Vice President and President, Spinal and Navigation since August 2005. Prior to that he was President and General Manager of Medtronic Sofamor Danek, Inc. from August 2004 to August 2005, President of Biologics and U.S. Sales from April 2003 to August 2004, and Division President of Interbody and Orthopedic Technologies from 2000 to April 2003. From 1983 to 2000 he was employed by Johnson and Johnson, most recently as Division President at DePuy.

Barry W. Wilson, age 63, has been Senior Vice President, International Affairs since February 2007, and was Senior Vice President, International Affairs and President, Greater China from August 2005 to



29

Table of Contents

February 2007. He served as Senior Vice President and President, Europe, Middle East, Canada and Emerging Markets since May 2004. Prior to that, Mr. Wilson was Senior Vice President and President, International, from April 2001 to April 2004, and Senior Vice President, International, since September 1997. He was President, Europe, Middle East and Africa, from April 1995 to March 2001. Prior to that, Mr. Wilson was President, International, of the Lederle Division of American Cyanamid/American Home Products from 1993 to 1995 and President, Europe, of Bristol-Myers Squibb from 1991 to 1993, where he also served internationally in various general management positions from 1980 to 1991. Mr. Wilson serves on the board of directors of Bausch & Lomb Incorporated and Rezidor Hotel Group AB.

Item 1A.  Risk Factors

Investing in Medtronic involves a variety of risks and uncertainties, known and unknown, including, among others, those discussed below.

The medical device industry is highly competitive and we may be unable to compete effectively.

We compete in both the therapeutic and diagnostic medical markets in more than 120 countries throughout the world. These markets are characterized by rapid change resulting from technological advances and scientific discoveries. In the product lines in which we compete, we face a mixture of competitors ranging from large manufacturers with multiple business lines to small manufacturers that offer a limited selection of products. Development by other companies of new or improved products, processes or technologies may make our products or proposed products less competitive. In addition, we face competition from providers of alternative medical therapies such as pharmaceutical companies. Competitive factors include:

  • product reliability,
  • product performance,
  • product technology,
  • product quality,
  • breadth of product lines,
  • product services,
  • customer support,
  • price, and
  • reimbursement approval from healthcare insurance providers.

Major shifts in industry market share have occurred in connection with product problems, physician advisories and safety alerts, reflecting the importance of product quality in the medical device industry. In the current environment of managed care, consolidation among healthcare providers, increased competition, and declining reimbursement rates, we have been increasingly required to compete on the basis of price. In order to continue to compete effectively, we must continue to create, invest in, or acquire advanced technology, incorporate this technology into our proprietary products, obtain regulatory approvals in a timely manner, and manufacture and successfully market our products. Given these factors, we cannot guarantee that we will be able to continue our level of success in the industry.

Reduction or interruption in supply and an inability to develop alternative sources for supply may adversely affect our manufacturing operations and related product sales.

We manufacture most of our products at 22 manufacturing facilities located throughout the world. We purchase many of the components and raw materials used in manufacturing these products from numerous suppliers in various countries. Generally we have been able to obtain adequate supplies of such raw materials and components. However, for reasons of quality assurance, cost effectiveness, or availability, we procure certain components and raw materials only from a sole supplier. While we work closely with our suppliers to try to ensure continuity of supply while maintaining high quality and



30

Table of Contents

reliability, we cannot guarantee that these efforts will be successful. In addition, due to the stringent regulations and requirements of the U.S. FDA regarding the manufacture of our products, we may not be able to quickly establish additional or replacement sources for certain components or materials. A reduction or interruption in supply, and an inability to develop alternative sources for such supply, could adversely affect our ability to manufacture our products in a timely or cost effective manner and to make our related product sales.

We are subject to many laws and governmental regulations and any adverse regulatory action may materially adversely affect our financial condition and business operations.

Our medical devices are subject to regulation by numerous government agencies, including the FDA and comparable foreign agencies. To varying degrees, each of these agencies requires us to comply with laws and regulations governing the development, testing, manufacturing, labeling, marketing, and distribution of our medical devices. We cannot guarantee that we will be able to obtain marketing clearance from the FDA for our new products, or enhancements or modifications to existing products, and if we do, such approval may:

  • take a significant amount of time,
  • require the expenditure of substantial resources,
  • involve stringent clinical and pre-clinical testing,
  • involve modifications, repairs or replacements of our products, and
  • result in limitations on the proposed uses of our products.

Both before and after a product is commercially released, we have ongoing responsibilities under FDA regulations. If the FDA were to conclude that we are not in compliance with applicable laws or regulations, or that any of our medical devices are ineffective or pose an unreasonable health risk, the FDA could ban such medical devices, detain or seize adulterated or misbranded medical devices, order a recall, repair, replacement, or refund of such devices, and require us to notify health professionals and others that the devices present unreasonable risks of substantial harm to the public health. The FDA may also impose operating restrictions, enjoin and restrain certain violations of applicable law pertaining to medical devices, and assess civil or criminal penalties against our officers, employees, or us. The FDA may also recommend prosecution to the Department of Justice. Any adverse regulatory action, depending on its magnitude, may restrict us from effectively marketing and selling our products.

Foreign governmental regulations have become increasingly stringent, and we may become subject to more rigorous regulation by foreign governmental authorities in the future. Penalties for a company’s noncompliance with foreign governmental regulation could be severe, including revocation or suspension of a company’s business license and criminal sanctions. Any domestic or foreign governmental law or regulation imposed in the future may have a material adverse effect on us.

We are also subject to various environmental laws and regulations both within and outside the U.S. Our operations involve the use of substances regulated under environmental laws, primarily those used in manufacturing and sterilization processes. We cannot guarantee that compliance with environmental protection laws and regulations will not have a material impact on our consolidated earnings, financial condition, or cash flows.

Our failure to comply with strictures relating to reimbursement and regulation of healthcare goods and services may subject us to penalties and adversely impact our reputation and business operations.

Our devices are subject to regulation regarding quality and cost by the United States Department of Health and Human Services, including the Centers for Medicare & Medicaid Services (CMS) as well as comparable state and foreign agencies responsible for reimbursement and regulation of healthcare goods and services. Foreign governments also impose regulations in connection with their healthcare reimbursement programs and the delivery of healthcare goods and services. U.S. federal government healthcare laws apply when we submit a claim on behalf of a U.S. federal healthcare program beneficiary, or when a customer submits a claim for an item or service that is reimbursed under a U.S. federal



31

Table of Contents

government funded healthcare program, such as Medicare or Medicaid. The principal U.S. federal laws implicated include those that prohibit the filing of false or improper claims for federal payment, those that prohibit unlawful inducements for the referral of business reimbursable under federally-funded healthcare programs, known as the anti-kickback laws, and those that prohibit healthcare service providers seeking reimbursement for providing certain services to a patient who was referred by a physician that has certain types of direct or indirect financial relationships with the service provider, known as the Stark law.

The laws applicable to us are subject to evolving interpretations. If a governmental authority were to conclude that we are not in compliance with applicable laws and regulations, we and our officers and employees could be subject to severe criminal and civil penalties, including, for example, exclusion from participation as a supplier of product to beneficiaries covered by CMS. If we are excluded from participation based on such an interpretation it could adversely affect our reputation and business operations.

Quality problems with our processes, goods, and services could harm our reputation for producing high quality products and erode our competitive advantage.

Quality is extremely important to us and our customers due to the serious and costly consequences of product failure. Our quality certifications are critical to the marketing success of our goods and services. If we fail to meet these standards our reputation could be damaged, we could lose customers and our revenue could decline. Aside from specific customer standards, our success depends generally on our ability to manufacture to exact tolerances precision engineered components, subassemblies, and finished devices from multiple materials. If our components fail to meet these standards or fail to adapt to evolving standards, our reputation as a manufacturer of high quality components will be harmed, our competitive advantage could be damaged, and we could lose customers and market share.

We are substantially dependent on patent and other proprietary rights and failing to be successful in patent or other litigation may result in our payment of significant money damages and/or royalty payments, negatively impact our ability to sell current or future products, or prohibit us from enforcing our patent and proprietary rights against others.

We operate in an industry characterized by extensive patent litigation. Patent litigation can result in significant damage awards and injunctions that could prevent our manufacture and sale of affected products or require us to pay significant royalties in order to continue to manufacture or sell affected products. At any given time, we are generally involved as both a plaintiff and a defendant in a number of patent infringement actions, the outcomes of which may not be known for prolonged periods of time. While it is not possible to predict the outcome of patent litigation incident to our business, we believe the results associated with any litigation could result in our payment of significant money damages and/or royalty payments, negatively impact our ability to sell current or future products or prohibit us from enforcing our patent and proprietary rights against others, which would generally have a material adverse impact on our consolidated earnings, financial condition, or cash flows.

We rely on a combination of patents, trade secrets and nondisclosure and non-competition agreements to protect our proprietary intellectual property, and will continue to do so. While we intend to defend against any threats to our intellectual property, there can be no assurance that these patents, trade secrets, or other agreements will adequately protect our intellectual property. There can also be no assurance that pending patent applications owned by us will result in patents issuing to us, that patents issued to or licensed by us in the past or in the future will not be challenged or circumvented by competitors or that such patents will be found to be valid or sufficiently broad to protect our technology or to provide us with any competitive advantage. Third parties could also obtain patents that may require us to negotiate licenses to conduct our business, and there can be no assurance that the required licenses would be available on reasonable terms or at all. We also rely on nondisclosure and non-competition agreements with certain employees, consultants and other parties to protect, in part, trade secrets and other proprietary rights. There can be no assurance that these agreements will not be breached, that we will have adequate remedies for any breach, that others will not independently develop substantially equivalent proprietary information, or that third parties will not otherwise gain access to our trade secrets or proprietary knowledge.



32

Table of Contents

Product liability claims could adversely impact our financial condition and our earnings and impair our reputation.

Our business exposes us to potential product liability risks which are inherent in the design, manufacture and marketing of medical devices. In addition, many of the medical devices we manufacture and sell are designed to be implanted in the human body for long periods of time. Component failures, manufacturing flaws, design defects or inadequate disclosure of product-related risks or product-related information with respect to these or other products we manufacture or sell could result in an unsafe condition or injury to, or death of, a patient. The occurrence of such a problem could result in product liability claims or a recall of, or safety alert relating to, one or more of our products which could ultimately result, in certain cases, in the removal from the body of such products and claims regarding costs associated therewith. We have elected to self-insure with respect to product liability risks. Product liability claims or product recalls in the future, regardless of their ultimate outcome, could have a material adverse effect on our business and reputation and on our ability to attract and retain customers for our products.

Our self-insurance program may not be adequate to cover future losses.

We have elected to self-insure most of our insurable risks. We made this decision based on conditions in the insurance marketplace that have led to increasingly higher levels of self-insurance retentions, increasing numbers of coverage limitations and dramatically higher insurance premium rates. We continue to monitor the insurance marketplace to evaluate the value to us of obtaining insurance coverage in the future. While based on historical loss trends we believe that our self-insurance program accruals will be adequate to cover future losses, we cannot guarantee that this will remain true. Historical trends may not be indicative of future losses. These losses could have a material adverse impact on our consolidated earnings, financial condition, or cash flows.

If we experience decreasing prices for our goods and services and we are unable to reduce our expenses, our results of operations will suffer.

We may experience decreasing prices for the goods and services we offer due to pricing pressure experienced by our customers from managed care organizations and other third-party payors; increased market power of our customers as the medical device industry consolidates; and increased competition among medical engineering and manufacturing services providers. If the prices for our goods and services decrease and we are unable to reduce our expenses, our results of operations will be adversely affected.

Our international operations are subject to a variety of risks that could adversely affect those operations and thus our profitability and operating results.

Our operations in countries outside the U.S., which accounted for 36 percent of our net sales for the year ended April 27, 2007, are accompanied by certain financial and other risks. We intend to continue to pursue growth opportunities in sales internationally, which could expose us to greater risks associated with international sales and operations. Our international operations are, and will continue to be, subject to a number of risks and potential costs, including:

  • changes in foreign medical reimbursement programs and policies,
  • changes in foreign regulatory requirements,
  • local product preferences and product requirements,
  • longer-term receivables than are typical in the U.S.,
  • fluctuations in foreign currency exchange rates,
  • less protection of intellectual property in some countries outside of the U.S.,
  • trade protection measures and import and export licensing requirements,
  • work force instability,
  • political and economic instability, and
  • the potential payment of U.S. income taxes on certain earnings of our foreign subsidiaries’ upon repatriation.


33

Table of Contents

Consolidation in the healthcare industry could have an adverse effect on our revenues and results of operations.

Many healthcare industry companies, including medical device companies, are consolidating to create new companies with greater market power. As the healthcare industry consolidates, competition to provide goods and services to industry participants will become more intense. These industry participants may try to use their market power to negotiate price concessions or reductions for medical devices that incorporate components produced by us. If we are forced to reduce our prices because of consolidation in the healthcare industry, our revenues would decrease and our consolidated earnings, financial condition, or cash flows would suffer.

Healthcare policy changes may have a material adverse effect on us.

Healthcare costs have risen significantly over the past decade. There have been and may continue to be proposals by legislators, regulators, and third-party payors to keep these costs down. Certain proposals, if passed, could impose limitations on the prices we will be able to charge for our products, or the amounts of reimbursement available for our products from governmental agencies or third-party payors. These limitations could have a material adverse effect on our financial position and results of operations.

Our business is indirectly subject to healthcare industry cost containment measures that could result in reduced sales of medical devices containing our components.

Most of our customers, and the healthcare providers to whom our customers supply medical devices, rely on third-party payors, including government programs and private health insurance plans, to reimburse some or all of the cost of the procedures in which medical devices that incorporate components we manufacture or assemble are used. The continuing efforts of government, insurance companies, and other payors of healthcare costs to contain or reduce these costs could lead to patients being unable to obtain approval for payment from these third-party payors. If that were to occur, sales of finished medical devices that include our components may decline significantly and our customers may reduce or eliminate purchases of our components. The cost containment measures that healthcare providers are instituting, both in the U.S. and internationally, could harm our ability to operate profitably. For example, managed care organizations have successfully negotiated volume discounts for pharmaceuticals. While this type of discount pricing does not currently exist for medical devices, if managed care or other organizations were able to affect discount pricing for devices, it may result in lower prices to our customers from their customers and, in turn, reduce the amounts we can charge our customers for our medical devices.

Our research and development efforts rely upon investments and alliances, and we cannot guarantee that any previous or future investments or alliances will be successful.

Our strategy to provide a broad range of therapies to restore patients to fuller, healthier lives requires a wide variety of technologies, products, and capabilities. The rapid pace of technological development in the medical industry and the specialized expertise required in different areas of medicine make it difficult for one company alone to develop a broad portfolio of technological solutions. In addition to internally generated growth through our research and development efforts, historically we have relied, and expect to continue to rely, upon investments and alliances to provide us access to new technologies both in areas served by our existing businesses as well as in new areas.

We expect to make future investments where we believe that we can stimulate the development of, or acquire, new technologies and products to further our strategic objectives and strengthen our existing businesses. Investments and alliances in and with medical technology companies are inherently risky, and we cannot guarantee that any of our previous or future investments or alliances will be successful or will not materially adversely affect our consolidated earnings, financial condition, or cash flows.



34

Table of Contents

The success of many of our products depends upon strong relationships with physicians.

If we fail to maintain our working relationships with physicians, many of our products may not be developed and marketed in line with the needs and expectations of the professionals who use and support our products, which could cause a decline in earnings and profitability. The research, development, marketing, and sales of many of our new and improved products is dependent upon our maintaining working relationships with physicians. We rely on these professionals to provide us with considerable knowledge and experience regarding our products and the marketing of our products. Physicians assist us as researchers, marketing and product consultants, inventors, and as public speakers. If we are unable to maintain our strong relationships with these professionals and continue to receive their advice and input, the development and marketing of our products could suffer, which could have a material effect on our consolidated earnings, financial condition, or cash flows.

Item 1B.  Unresolved Staff Comments

None.

Item 2.  Properties

Our principal offices are owned by us and located in the Minneapolis, Minnesota metropolitan area. Manufacturing or research facilities are located in Arizona, California, Colorado, Connecticut, Florida, Indiana, Massachusetts, Michigan, Minnesota, Tennessee, Texas, Washington, Puerto Rico, China, France, Ireland, Mexico, The Netherlands, and Switzerland. Our total manufacturing and research space is approximately 3.0 million square feet, of which approximately 75 percent is owned by us and the balance is leased.

We also maintain sales and administrative offices in the U.S. at approximately 90 locations in 40 states or jurisdictions and outside the U.S. at approximately 100 locations in 36 countries. Most of these locations are leased. We are using substantially all of our currently available productive space to develop, manufacture, and market our products. Our facilities are in good operating condition, suitable for their respective uses and adequate for current needs.

Item 3.  Legal Proceedings

The information in Note 15 to the consolidated financial statements is incorporated herein by reference to Exhibit 13 and will be included in our 2007 Annual Report.

Item 4.  Submission of Matters to a Vote of Security Holders

Not applicable.

PART II

Item 5.  Market for Medtronic’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities

The information in the sections entitled “Price Range of Medtronic Stock” and “Stock Exchange Listing” are incorporated by reference herein to Exhibit 13 hereto and will be included in our 2007 Annual Report.

In October 2005, the Company’s Board of Directors authorized the repurchase of 40 million shares of the Company’s stock and in April 2006, the Board of Directors made a special authorization for the Company to repurchase up to 50 million shares in connection with the $4.400 billion Senior Convertible Note offering. As authorized by the Board of Directors each program expires when its total number of authorized shares has been repurchased.



35

Table of Contents

The following table provides information about the shares repurchased by Medtronic during fourth quarter of fiscal year 2007:

Fiscal Period     Total Number of
Shares Purchased		     Average Price
Paid per Share		     Total Number of
Shares Purchased as a
Part of Publicly
Announced Program		     Maximum Number
of Shares that May
Yet Be Purchased
Under the Program		  
         
1/29/07 – 2/23/07         511,900     $ 52.94       511,900       26,271,030  
2/26/07 – 3/30/07         4,943,774       50.04       4,943,774       21,327,256  
4/2/07 – 4/27/07         6,274,200       51.79       6,274,200       15,053,056  
       
Total         11,729,874     $ 51.59       11,729,874       15,053,056  

On June 25, 2007, there were approximately 53,600 shareholders of record of the Company’s common stock. Cash dividends declared and paid totaled 11 cents per share for each quarter of fiscal year 2007 and 9.625 cents per share for each quarter of fiscal year 2006. Stock price comparison follows:

Fiscal Qtr.     1st Qtr.     2nd Qtr.     3rd Qtr.     4th Qtr.  
         
2007 High       $ 51.43     $ 50.93     $ 54.51     $ 54.58  
2007 Low         46.86       42.47       48.33       48.67  
2006 High         53.94       57.85       59.54       57.14  
2006 Low         51.56       52.87       55.41       49.05  

Item 6.  Selected Financial Data

The information for fiscal years 2003 through 2007 in the section entitled “Selected Financial Data” is incorporated herein by reference to Exhibit 13 and will be included in our 2007 Annual Report.

Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

The information in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” is incorporated herein by reference to Exhibit 13 and will be included in our 2007 Annual Report.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

The information in the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Market Risk” as well as Note 5 to the consolidated financial statements is incorporated herein by reference to Exhibit 13 and will be included in our 2007 Annual Report.

Item 8.  Financial Statements and Supplementary Data

The Consolidated Financial Statements and Notes thereto, together with the report of independent registered public accounting firm, are incorporated herein by reference to Exhibit 13 and will be included in our 2007 Annual Report.

Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A.  Controls and Procedures

Disclosure Controls and Procedures

An evaluation was carried out under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (CEO) and the Chief Financial Officer (CFO), of the effectiveness of our disclosure controls and procedures (as defined in the Exchange Act Rules



36

Table of Contents

13a-15(e) and 15d -15(e)) as of the end of the period covered by the report. Based on that evaluation, the CEO and CFO have concluded that the Company’s disclosure controls and procedures were effective as of April 27, 2007.

Management’s Annual Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Management conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this evaluation, management concluded that the Company’s internal control over financial reporting was effective as of April 27, 2007. Management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of April 27, 2007 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included herein.

Changes in Internal Control over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting during the fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

Item 9B.  Other Information

None.

PART III

Item 10.  Directors, Executive Officers and Corporate Governance

The sections entitled “Proposal 1 — Election of Directors — Directors and Nominees”, “Governance of Medtronic — Committees of the Board and Meetings”, “Governance of Medtronic — Audit Committee”, “Governance of Medtronic — Corporate Governance Committee”, and “Share Ownership Information — Section 16(a) Beneficial Ownership Reporting Compliance” of our Proxy Statement for our 2007 Annual Shareholders’ Meeting are incorporated herein by reference. See also “Executive Officers of Medtronic” on page 27 herein.

We have adopted a written Code of Ethics that applies to our Chief Executive Officer, Chief Financial Officer, Corporate Treasurer, Corporate Controller and other senior financial officers performing similar functions who are identified from time to time by the Chief Executive Officer. We have also adopted a written Code of Business Conduct and Ethics for Board members. The Code of Ethics for senior financial officers, which is part of our broader Code of Conduct applicable to all employees, and the Code of Business Conduct and Ethics for Board members are posted on our website, www.medtronic.com under the “Corporate Governance” caption. Any amendments to, or waivers for executive officers or directors of, these ethic codes will be disclosed on our website promptly following the date of such amendment or waiver.

Item 11.  Executive Compensation

The sections entitled “Governance of Medtronic — Director Compensation”, “Governance of Medtronic — Compensation Committee — Compensation Committee Interlocks and Insider Participation”, “Compensation Discussion and Analysis”, and “Executive Compensation” in our Proxy Statement for our 2007 Annual Shareholders’ Meeting are incorporated herein by reference. The section entitled “Compensation Committee Report” in our Proxy Statement for our 2007 Annual Shareholders’ Meeting is furnished herein by reference.

Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters

The sections entitled “Share Ownership Information” and “Executive Compensation — Equity Compensation Plan Information” in our Proxy Statement for our 2007 Annual Shareholders’ Meeting are incorporated herein by reference.



37

Table of Contents

Item 13.  Certain Relationships, Related Transactions and Director Independence

The sections entitled “Proposal 1 — Election of Directors — Certain Relationships and Related Transactions” and “Proposal 1 — Election of Directors — Director Independence” in our Proxy Statement for our 2007 Annual Shareholders’ Meeting are incorporated herein by reference.

Item 14.  Principal Accounting Fees and Services

The sections entitled “Governance of Medtronic — Audit Committee — Audit Committee Pre-Approval Policies” and “Audit and Non-Audit Fees” in our Proxy Statement for our 2007 Annual Shareholders’ Meeting are incorporated herein by reference.

PART IV

Item 15.   Exhibits, Financial Statement Schedules

(a)  1.   Financial Statements

The following report and consolidated financial statements are incorporated herein by reference in Item 8.

The sections entitled “Report of Independent Registered Public Accounting Firm” and “Consolidated Statements of Earnings” — years ended April 27, 2007, April 28, 2006, and April 29, 2005 are set forth in Exhibit 13 hereto and will be included in our 2007 Annual Report.

The section entitled “Consolidated Balance Sheets” — April 27, 2007 and April 28, 2006 is set forth in Exhibit 13 hereto and will be included in our 2007 Annual Report.

The section entitled “Consolidated Statements of Shareholders’ Equity” — years ended April 27, 2007, April 28, 2006, and April 29, 2005 is set forth in Exhibit 13 hereto and will be included in our 2007 Annual Report.

The section entitled “Consolidated Statements of Cash Flows” — years ended April 27, 2007, April 28, 2006, and April 29, 2005 is set forth in Exhibit 13 hereto and will be included in our 2007 Annual Report.

The section entitled “Notes to Consolidated Financial Statements” is set forth in Exhibit 13 hereto and will be included in our 2007 Annual Report.

2.         Financial Statement Schedules

Schedule II. Valuation and Qualifying Accounts — years ended April 27, 2007, April 28, 2006, and April 29, 2005 (set forth on page 43 of this report).

All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or Notes thereto.

3.         Exhibits

    3.1   Medtronic Restated Articles of Incorporation, as amended (Exhibit 3.1).(a)
    3.2   Medtronic Bylaws, as amended to date (Exhibit 3.2).(b)
    4.1   Rights Agreement, dated as of October 26, 2000, between Medtronic, Inc. and Wells Fargo Bank Minnesota, National Association, including as: Exhibit A thereto the form of Certificate of Designations, Preferences and Rights of Series A Junior Participating Preferred Shares of Medtronic, Inc.; and Exhibit B the form of Preferred Stock Purchase Right Certificate (Exhibit 4.1).(c)
    4.2   Indenture, dated as of September 11, 2001, between Medtronic, Inc. and Wells Fargo Bank Minnesota, N.A. (Exhibit 4.2).(d)


38

Table of Contents

    4.3   Credit Agreement ($1,000,000,000 Five Year Revolving Credit Facility) dated as of January 20, 2005, among Medtronic, Inc. as Borrower, certain of its subsidiaries as guarantors, Citicorp USA, Inc., as Administrative Agent and Bank of America, N.A. as Syndication Agent, and Citigroup Global Markets Inc. and Banc of America Securities LLC as Joint Lead Arrangers and Joint Book Managers (Exhibit 4.1).(e)
    4.4   Form of Indenture between Medtronic, Inc. and Wells Fargo Bank, National Association (Exhibit 4.1).(f)
    4.5   Indenture dated as of September 15, 2005 between the Company and Wells Fargo Bank, National Association, as Trustee, with respect to the 4.375% Senior Notes due 2010 and 4.750% Senior Notes due 2015 (including the Forms of Notes thereof) (Exhibit 4.1).(g)
    4.6   Form of 4.375% Senior Notes, Series B due 2010 (Exhibit 4.2).(g)
    4.7   Form of 4.750% Senior Notes, Series B due 2015 (Exhibit 4.3).(g)
    4.8   Indentures by and between Medtronic, Inc. and Wells Fargo Bank, N.A., as trustee dated as of April 18, 2006 (including the Forms of Convertible Senior Notes thereof) (Exhibit 4.1).(h)
    4.9   Credit Agreement dated as of December 20, 2006, among Medtronic, Inc., as Borrower, the Lenders party thereto, Bank of America N.A., as Issuing Bank, and Citicorp USA, Inc., as Administrative Agent, Issuing Bank and Swingline Lender (Exhibit 4.1).(i)
*10.1   1994 Stock Award Plan, as amended (Exhibit 10.1).(j)
*10.2   Medtronic Incentive Plan (Exhibit 10.2).(k)
*10.3   Executive Incentive Plan (Appendix C).(l)
*10.4   Form of Employment Agreement for Medtronic executive officers (Exhibit 10.5).(a)
*10.5   Capital Accumulation Plan Deferral Program, as restated October 19, 2005 generally effective January 1, 2005 (Exhibit 4.1).(m)
*10.6   Stock Option Replacement Program (Exhibit 10.8).(a)
*10.7   Medtronic, Inc. 1998 Outside Director Stock Compensation Plan (as amended and restated) (Appendix B).(n)
*10.8   Amendment effective October 25, 2001, regarding change in control provisions in the Management Incentive Plan (Exhibit 10.10).(j)
  10.9   Indemnification Trust Agreement (Exhibit 10.11).(b)
  10.10   Asset Purchase Agreement and Settlement Agreement among Medtronic, Inc., Medtronic Sofamor Danek, Inc., SDGI Holdings, Inc., Gary K. Michelson, M.D. and Karlin Technology, Inc. (Exhibit 10.13).(o)
*10.11   Form of Restricted Stock Award Agreement (Exhibit 10.3).(e)
*10.12   Form of Non-Qualified Stock Option Agreement 2003 Long-Term Incentive Plan (four year vesting) (Exhibit 10.1).(e)
*10.13   Form of Non-Qualified Stock Option Agreement 2003 Long-Term Incentive Plan (immediate vesting) (Exhibit 10.2).(e)
*10.14   Form of Initial Option Agreement under the Medtronic, Inc. 1998 Outside Director Stock Compensation Plan (Exhibit 10.17).(o)
*10.15   Form of Annual Option Agreement under the Medtronic, Inc. 1998 Outside Director Stock Compensation Plan (Exhibit 10.18).(o)
*10.16   Form of Replacement Option Agreement under the Medtronic, Inc. 1998 Outside Director Stock Compensation Plan (Exhibit 10.19).(o)
*10.17   Form of Restricted Stock Units Award Agreement 2003 Long-Term Incentive Plan (Exhibit 10.20).(o)


39

Table of Contents

*10.18   Form of Performance Share Award Agreement 2003 Long-Term Incentive Plan (Exhibit 10.21).(o)
*10.19   Medtronic, Inc. Supplemental Executive Retirement Plan (as restated October 19, 2005 generally effective May 1, 2005) (Exhibit 10.2).(p)
  10.20   Purchase Agreement by and among Medtronic, Inc. and the Initial Purchasers named therein dated as of April 12, 2006 (Exhibit 10.1).(h)
  10.21   Registration Rights Agreement by and among Medtronic, Inc. and the other parties named therein dated as of April 18, 2006 (Exhibit 4.2).(h)
*10.22   2003 Long-Term Incentive Plan as Amended and Restated (Exhibit 10.22).(q)
*10.23   Form of Option Agreement under the 2003 Long-Term Incentive Plan effective June 22, 2006 (Exhibit 10.23).(q)
*10.24   Form of Restricted Stock Agreement under the 2003 Long-Term Incentive Plan effective June 22, 2006 (Exhibit 10.24).(q)
*10.25   Form of Restricted Stock Unit Agreement under the 2003 Long-Term Incentive Plan effective June 22, 2006 (Exhibit 10.25).(q)
*10.26   Form of Performance Award Agreement under the 2003 Long-Term Incentive Plan effective June 22, 2006 (Exhibit 10.26).(q)
  10.27†   Form of Confirmations of Convertible Note Hedge related to Convertible Senior Notes issued on April 12, 2006, including Schedule thereto (Exhibit 10.27).(q)
  10.28†   Form of Warrants issued on April 12, 2006, including Schedule thereto (Exhibit 10.28).(q)
  10.29†   Form of Amendment issued on April 13, 2006 to Form of Warrants issued on April 12, 2006, including Schedule thereto (Exhibit 10.29).(q)
  10.30   Amendment No. 1 dated September 5, 2006, to Indemnification Trust Agreement (Exhibit 10.1).(r)
*10.31   Summary of Compensation Arrangements for Named Executive Officers and Directors
  12.1   Computation of ratio of earnings to fixed charges
  13   This exhibit contains the information referenced under Part II, Items 5, 6, 7, 7A and 8
  21   List of Subsidiaries
  23   Consent of Independent Registered Public Accounting Firm
  24   Powers of Attorney
  31.1   Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
  31.2   Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
  32.1   Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
  32.2   Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(a) Incorporated herein by reference to the cited exhibit in our Annual Report on Form 10-K for the year ended April 27, 2001, filed with the Commission on July 26, 2001.
(b) Incorporated herein by reference to the cited Exhibit in our Annual Report on Form 10-K for the year ended April 30, 2004, filed with the Commission on June 30, 2004.
(c) Incorporated herein by reference to the cited exhibit in our Report on Form 8-A, including the exhibits thereto, filed with the Commission on November 3, 2000.


40

Table of Contents

(d) Incorporated herein by reference to the cited exhibit in our Report on Form 8-K/A, filed with the Commission on November 13, 2001.
(e) Incorporated herein by reference to the cited Exhibit in our Quarterly Report on Form 10-Q for the quarter ended January 28, 2005, filed with the Commission on March 7, 2005.
(f) Incorporated herein by reference to the cited Exhibit in our registration statement on Amendment No. 2 to Form S-4, filed with the Commission on January 10, 2005.
(g) Incorporated herein by reference to the cited Exhibit in our Form S-4, filed with the Commission on December 6, 2005.
(h) Incorporated herein by reference to the cited Exhibit in our Current Report on Form 8-K, filed with the Commission on April 18, 2006.
(i) Incorporated herein by reference to the cited Exhibit in our Quarterly Report on Form 10-Q for the quarter ended January 26, 2007, filed with the Commission on March 6, 2007.
(j) Incorporated herein by reference to the cited exhibit in our Annual Report on Form 10-K for the year ended April 26, 2002, filed with the Commission on July 19, 2002.
(k) Incorporated herein by reference to the cited exhibit in our Annual Report on Form 10-K for the year ended April 25, 2003, filed with the Commission on July 14, 2003.
(l) Incorporated herein by reference to the cited appendix to our 2003 Proxy Statement, filed with the Commission on July 28, 2003.
(m) Incorporated herein by reference to the cited Exhibit in our Form S-8, filed with the Commission on November 21, 2005.
(n) Incorporated herein by reference to the cited appendix to our 2005 Proxy Statement, filed with the Commission on July 21, 2005.
(o) Incorporated herein by reference to the cited Exhibit in our Annual Report on Form 10-K for the year ended April 29, 2005, filed with the Commission on June 29, 2005.
(p) Incorporated herein by reference to the cited Exhibit in our Quarterly Report on Form 10-Q for the quarter ended October 28, 2005, filed with the Commission on December 6, 2005.
(q) Incorporated herein by reference to the cited Exhibit in our Annual Report on Form 10-K for the year ended April 28, 2006, filed with the Commission on June 28, 2006.
(r) Incorporated herein by reference to the cited Exhibit in our Quarterly Report on Form 10-Q for the quarter ended October 27, 2006, filed with the Commission on December 5, 2006.

*Items that are management contracts or compensatory plans or arrangements required to be filed as an exhibit pursuant to Item 15(a)(3) of Form 10-K.

†Confidential treatment requested as to portions of the exhibit. Confidential portions omitted and filed separately with the Securities and Exchange Commission.










41

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

MEDTRONIC, INC.  
 
Dated:   June 25, 2007 By:    /s/   Arthur D. Collins, Jr.
  Arthur D. Collins, Jr.
Chairman of the Board and
Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, the report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 
Dated:   June 25, 2007 By:    /s/   Arthur D. Collins, Jr.
  Arthur D. Collins, Jr.
Chairman of the Board and
Chief Executive Officer
Dated:   June 25, 2007 By:    /s/   Gary L. Ellis
  Gary L. Ellis
Senior Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)
  Directors  
    Richard Anderson
Michael Bonsignore
Arthur D. Collins, Jr.
James Lenehan
William Hawkins
Denise M. O’Leary
Robert C. Pozen
Jean-Pierre Rosso
Jack W. Schuler
Gordon M. Sprenger

Terrance L. Carlson, by signing his name hereto, does hereby sign this document on behalf of each of the above named directors of the registrant pursuant to powers of attorney duly executed by such persons.

Dated:   June 25, 2007   By:      /s/   Terrance L. Carlson
  Terrance L. Carlson
Attorney-In-Fact
Senior Vice President,
General Counsel and Corporate Secretary


42

Table of Contents

MEDTRONIC, INC. AND SUBSIDIARIES
SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS

(dollars in millions)

    Balance at
Beginning of
Fiscal Year		     Charges to
Earnings		     Other
Changes
(Debit)
Credit		     Balance
at End of
Fiscal Year		  
       
Allowance for doubtful accounts:                            
Year ended 4/27/07       $ 184     $ 31     $ (59 )(a)   $ 160  
                  $ 4  (b)      
Year ended 4/28/06       $ 175     $ 39     $ (24 )(a)   $ 184  
                  $ (6 )(b)      
Year ended 4/29/05       $ 145     $ 43     $ (20 )(a)   $ 175  
                  $ 7  (b)      
(a) Uncollectible accounts written off, less recoveries.
(b) Reflects primarily the effects of foreign currency fluctuations.














43

 GRAPHIC 2 a724867op.jpg GRAPHIC begin 644 a724867op.jpg M_]C_X``02D9)1@`!`@``9`!D``#_[``11'5C:WD``0`$````/```_^X`#D%D M;V)E`&3``````?_;`(0`!@0$!`4$!@4%!@D&!08)"P@&!@@+#`H*"PH*#!`, M#`P,#`P0#`X/$`\.#!,3%!03$QP;&QL<'Q\?'Q\?'Q\?'P$'!P<-#`T8$!`8 M&A41%1H?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\? M'Q\?'Q\?'Q\?_\``$0@`PP);`P$1``(1`0,1`?_$`+4``0`"`P$!`0`````` M```````%!@,$!P((`0$!``,!`0$```````````````$$!0(#!A```0,#`@,# M!0@.!PV@L/LJZ1H'LJZ1H'LJZ1H'LJZ M1H'LJZ1H'LJZ1H'LJZ1H'LJZ1 MH'LJZ1H'LJZ1H'LJZ1H'LJZ1H'LJZ1H'LJZ1H'LJZ1H'LJZ M1H'LJZ1H'LJZ1H'LJZ1H'LJZ1 MH'LJZ1H'LJZ1H'LJZ1H'LJZ1H'LJZ1H'LJZ1H'LJZ1H'LJZ M1H'LJZ1H'LJZ1H'LJZ1H'LJZ1 MH'LJZ1H'LJZ1H'LJZ1H'LJZ1H'LJZ1H.=?L5M/X;]7^"H_(_:[X/Y>CP^J?!/K'(M_P`OG>/3^%QH.B]+OW$Q MGY_](!M1(23LL?= M:@J`=1-SQ7\'.E9*0N(RN3""##F-;241QFI)2VW`4XY-@]H;)DA`BX+=./$) M#%_6'VUEH4-[%8J?D)N022*@P[ MJZ\8^.&=P\")+@[@AX_*R8!RFVD1'L7#26JNL$:N"V:$B`2C8[%9>%!YW9O7 M?T7HYMS?N*>$W@@X_([EB`TVI.Q9#+9RCCJ:$C9AJ4DO<;7X+:@]P^ML"'E6 MAR"3)D?.M,Y7#,,L-ZHV)D/C%CO.(FAQPGG%)[2B*H-)Q\2+J#V7UCMH-,9E MZ1C1I2Q?6_?.X-P-1<2,:*WF0)@8UA09,O6)CCIL M"PQ;TC4VB[;6%-:^!4)0QQ.M.PY\R%!B3'4D9$HS$=QR*\@!)G`X<5ET20"$ MG$8-?)PXDG"@A874??F6Z))OG#X^"_GV?6W7\:0/*RZS"E/,&C5G$-#T-:TN MJW7PVXI8,6)Z[8LHD7/9.4R.VI\(3A*S$>24[+88]8R2HG->'D0P3QK;TU4$ M4B'QA8&^M73]W)+`9FN/.*,I8[C;+A-OG`CA*E-M$B>(FV71/LXW\-Z"0VUU M#Q6[,--R.UV)$PHS8E&"6P]!;?)UOF-:''P&X%?B8HMNVR\+AS]KK5O1J:6W MY^,QZ;@/,2<5%G1R?/'N!#B>M/F*%H<(VUTMD.K@2_BV4([%_6?')NQ9K.-: M9PS+^%A9A'")7@?S+;YD31^$-$;D)?4/CNOHT%XZ8]68>_)TLHRM0HR-F_C< M:\#J3GX@O*R,Y2/0VC1&!#I!#LMKDB\*#H=`H%`H%`H%`H%`H%`H%`H(3?&; MF8'9N;SL,&W9&)@R)P-/(6@TC-JZ0+I4534(*B+W=O'LH.;8GK3GY^"Q><$< M06/R#\"%(=0I=H\Z:,5]8A<)T1".B!=WC&>1AH')SY@VKVAB,1 MH!*OW^H?O;D$NO63IVDN?&7)EJQK0;>G&V]=Y9@V2'R-2:D&_#BET MH-[$;[Q^Y<#,R>T0/*.,*+<8)#;T%MPW0!QL]**-!DQ7UD8 M^3RF.-C&GUEEMPF ME-`)"05(%0K:D1>V@ALWM#8^!$U*G%>''@E!:)&Q\`_LL M=FF#OP",0,>C`NFA^K-@C8MJXBZ[:$TWO>@A8'2_84E,#EL8Z^08O'ACL;.A MSGD%_&(J&U'<=:/W=A%LHHJ\?/00;AY*(V3RPVHQP,FTN2?(&8ZR/A M!6G/=/%N,<=F>C3[B`VC@MD;9B MX6IL=2I]\/'LH(J+T6Z8S,/%!AAR7!=`S&6DQYXI4>6C9&#C^LB=9<1EM4\7 M8B6X4$Y!Z;;/@[D7<46%RL@CK\EL4,N2W(E-`S(?!J^@7'6F0`EMV)P[2N$G MMC$87$8*)!PEEQ8"3DT5H*>71?;9=/A MV,DZ<.,3U<2F"L5)9MPWD?9;-SU?0HBXE_0OW7H(F5]7C;$F:]DURZJ&SE>AD#*;IC[FF;CRKN3C2(4 MMDS]2)`=@B0CRT*,O*%S62F`6!2\2HJH-@M>S-E0=H[4:VUC)DIR*PL@F)4A M63?`I+IO$J*+0-K9QTE&X+Y[T%/9^K[M>+@MMXJ'DYX+M1Z6]B)CR0Y#@A/5 M5D-.`Y'5AP"5;IJ;NB]]!B3ZO&WTW(F?7.94I@'-)K4L0U;"?%]4<:$SCD>@ M&_[L251#[U$NMPN^%V>QA=EQMJ8_(S&8\.+ZE%R-V%F-@B:0)"Y7*U@G!%5O M^F@I\;H%@8T%A@,]F7I,)P7,;.D/L&Y%1&W6C!H18;;LZ,@U!=?.,QE8KL-]]M!4Q:?!6W-.I%&Z@2HETH*O)Z2 MXU[9>'VLF0?::PTB#):G`VRCSI8T`;C\U-&@K`TV*K:ZH-!`-_5TP3$SX5A9 M:3!SCY<@_ MD`D,R6R=:ADHJU')@@$D911`]6K0%AOW*ME0+3MKI]#V]T^;V5"FO'#:CO16 MYCB`KR`^1D2V1$!53F+;A05=CH#AHV,VS#BY>4#NUAE,PI+C45]7(\U=3K;K M3S1LDJ%Q`M'#ST&HY]73&.9?(Y)S<60P]R)QN%]A[1<@[%C;3@923$2'!;QT;*M(VDH&V01H#&XJ"'H&VK3V\>V@I M+?U>\4.-B1G=P9*3+QPR&,=.?Y!%'BS(IQ),=MM&Q;03;=(M5KZ[*M[6H,[? MU?-GQY[#T&3*APXYP93<1M6UM-Q<4X<.4+A`I(38.ZU3L(T0O*BA:]K[(;PL M][*S,C(S.9>C-03R4L&`=6.P9F`+R&VD)=3BW(KKV4%EH%`H%`H%`H.5_P`1 M_P`\?J.@M72[]Q,9^?\`TAR@M5`H%`H%`H*]U$A9:=L;.P\1J7(OPW@8!M5$ MS51\0`J*EC,;B*W[5H.9[LPW4;+YQF?MJ&[HA/2W]M9,7V`@,Q'\$Y%C"D4W M`,'@FO%JU,*J)WZ404#/FML[_G)-Y>+GR,>ZQDVL7$F2HKLF/ZWBP8Y;CKDA M5(3E:]/C+2G>@Z4H,>3QO5YS*/A#A9>/CGFA;]QG04T*#V/45:O)%`LPW+&P MMHNHN)'P40MVS,7O*!G\VUE%F2,*K:#BGY4D77K-F38A;FNB2DV(FCBHVOBL M:$2*5!6-N8;JPQE,3(G,9)MB.WB&I#*S8A,^!)09(G&AD$)W$F%X(JW]'BBT M&WN?:V_2W7FLA@4FL),D`X)M26`BO1AQ7JY@K1N(O.]9`-!$*6M?4B7N$0]L M_?[V:9GEAI2$F0QTQQ])$'F(C&`D0'B3_4>D,EX4_I[*#-%Q'6E<3%:>&:SE MV8L$`>"7'Y'+;Q?*G,.@CV@I!SM1-NZ?O@76@B2(&2)ANKS#\1&QR9,,3(LA MQN9-C'S`6-$"2*NMR",4%\7S$2$P](=%B"P7SIZS)"#EGE10Q\K+3)&(!>"> MJN&BZA2R6!Q[F.!Y1)%[%H+30*!0*!0*!0*!0*!0*!0*#')5Y([JL(A/H!*T M*]BG;PHO9WT'"GWMQRL-MR*D2>\PW^SF6U,PCD^LY,,H+F9*>^##IL/1^5J4 M4(%]-/$GA0-X-%QSH.,?!$ARSY1I[C1)_IG"NDIN,"H1#9 M"]!1+6(7_9^6W\FY<=#RQSM'9'[_ECI/4BBJ$W M]_05R;GM^0'G0Q+64C,,R2? MA,/2MOS0FHQ'YO+P\EKQ,;C1X5TM1Q'4D=.9P2]KEWT$Y%S74>(PY$Q4&9&1 MN1.=Q@#C.4S,?+.R$4)B*P",`Y"-IU'45O4I&6JXJE!IQMX=7@QCQ*.4D37& MQ?!M_$.-:5;E3`-AMQN&0BIQVF"%7&S\1)Z(EJ$.B[+=E+G]PMBV;<#_`$3Q M-$B(C>0?94YH(B>%%MRC-!X:R)>U5H+?0*!0*!0*!0*!0*!0*!0*#1SKF2:P MF0*"VME0GT;56DX\.)VH.*YF=N)^-M:%`BSI;,-W"9/'"U$=?9F M.'KUAR=!+HR:F2RVA:74:6\2:.&N@Z)MC+[T3?4G$9,Y$_##$5R-D%A^J@KFB M,XG,0FPL7NS@BHF2+9141)LE(*FQN#J-`D,LPHLQC'QWYCKS#6'=0']6XU9% M2]R4AYN/=5]="HOW]^V@F=U+NW']29,W`(\"3(>":-@89/1Y8A/FA-4Y""HM M'&BO(YZ2*O@3CP%0I"8S.R)N%E%@IK!A'VDKZ-8R0R#3T/,OE+L"-(@!6#A0_@UQMF63^6D-SD?4FT]7Y43EN@NH?24U MUIPH,";TZOL8CFDS.E229@23!<2ZPZCCK<_UJ*U=@FU("CQB]T1-2GH0@4P4 M0Z-LU^26-26W89$G=06N@4"@4"@4" M@Y7_`!'_`#Q^HZ"U=+OW$QGY_P#2'*"U4"@4"@4"@4"@4"@4"@4"@4"@4"@4 M"@4"@4"@4"@4"@4"@4"@\@VV&K0*#J52*R(ER7M5;=]!ZH%`H%`H%`H%!Y!M MML5%L4`5525!1$342J1+P[U5;K0>J!0*!0*!0*!0*!0*!0*!0*#RTRTT*BT` MMBI$:B*(B:C)2(N'>1*JKYZ#U0*!0*!0*!0*#PRPRP'+9;%INY%H!$%-1DI$ MMD[U)55?/0>Z!0*!0*!0*#E?\1_SQ^HZ">V-F,9ANF$7*Y20,6!#"0[(?.ZH M(I(<[D1255[$1$NJ\$XT$SBMYX7(3G<<2NP,DTV$A8,]M8[Q,.JJ`Z"'P(54 M%1;+<5X$B+02`9K#F^]'"?NH('% M[YPF4B8R7#&2(N'A^Q+WYM[(36(:&]$D3( M_KD`9C)Q_68R*(JXTKB)>RN#<%L:72XI>@E?AK#^MI$]=862K12.2C@J7*`M M!.*E_1U<+_\`LH,,K<..B1\C)DJ;4;&-HZ^^0+H,%;YMV5_]YPX>'OX4&;%9 M:#E($2=$)AU50'00^!"J@J+9;BO M`D1:"1#-8@WW6!FL$\PVVZ^VC@W!MU5%LBX\$)16U!I9?=N)Q&&RF8R'-9A8 MA'%DDK:ZB%EM'2)H>TTT+=%3ST$JK[5W!$D-QI+N-BJ*272Z73S]U!!XO>^& MRD3&RX827(^5DNPXCBL&BX\A#R M\<)F.`W-F;@P\.#C4EQCAXB5.F M0GD%SF/%*]8Y3;P=@"WZVNI1)=2BED&@U"V#N%S>4;="2(47),D2RI<47FRF M1UBJV,.4TE@4P,HR;CY2*]$=<#TA%X%#4 M/G&]Z"D;@Z9[CW&Q!7+3H02<-`D//BF MY&@-%F8U[6TRTXP;)!'<4,46-)U66P$`,;ZPLEK*H\.V@F>GW2C);9S#$Z=* MB32C,HVS+$9"2;%%8CN,V)U64;U1A)%T7L@IW4$OC]D9:),E,+)8/$R,V>=1 MVQI(0C)'?5]'H61U/3U>CPTWXT&GDM@;ARNY<5GI3T&-D\>_&<^%(2/,R/5F MU19,$AO9YA_C9'"\&HE2_"P7J!Z_ZHU\(*TLRWNRL(2-7O\`>H:J79Y:#/0* M!0*!0*!0*!0*!0*!0*!0*!00>]]L?M/M>=A$DK$5Z"`;Z&YMK#)C/7H;EXT5I9("XRZ#T0I>@P54>!1M*'4#@$A(BC;BBH M&7,=%]Q3FLNV$O&Z,HSDXRLNLFK0?"4>*SZV`"B($@"A*7?Z:I?A<@M&QNGT M_;^>R&4F/Q9+DM95I30R$D.#*EK+07>8Z;2(T1D*:`\5[\.-PR;:V;N'"Q(> M-];BNP,5+G3(#VESFN^M<_E-/#Z(\OUI=1"JZK)P'C0:CVP=Q/[SA;H]9A0\ ME'+_`%4R&CS92XRQ5;2%):]!UL))@RT"@4"@4"@4"@4"@4"@4"@4"@4'*_XC_GC]1T%JZ7? MN)C/S_Z0Y06J@Y+NO=>6PG5..OK,C+076G6HN&QCH>L-2`CMN\B1%.PN`]?6 M#HKJ%5XV$:"0V1NF3+QVYH^X4-]D\; ML/"BB%RV-E-XEU!F8G**^X,:/.>S+JO-/P^:Y.%<7ZL@&9,+ZGS$)L@`E1$( MD)?$H=.H%!BE2HL2..TFIQYTD`!3RD1*B)04C,=<>F6,(FUS`S7D[` M@MN2154\CK8JS]TZ]:\-[;0]*\-YVA6)7UGMH@JC%Q&2>5/OC2,V*\.%K/&7 MW4KUCIW>L=2[8P?U@(^7!UQG!N"VP:`XBR!4[JE_"B@@KV]Y)4_\5_@K\T?; MG$IR/UCPQK:1BL@Q;TC1([@?932]K7_O&$60#D%V6,%@T9TPC(FE14`-7+2^K4NJ@L>P>H6>S>ZX M3V0C&Q!R;IP\=BEDN)(@-LX\)B.S&-'NRO:U3F&?ANW9$55H.PT"@TLOF\/A MHBS,M.8@11X*])<%H;^1%)4NOF2D01#FV<^LAL2"2MXUJ7EW$X(XTWR&47R* M3ZMG]L0)*L4ZMY],+%>M>?3"FSOK09UQ5]0P,6,GUU_P`4>[R[/!]N MGEG*Y-=6-V`6IZ/`>'_E@V\RJ_UU=>M_NTGH?%G_`'O@E8?61NZ)D<*ZTB_? M0W@D(/G+FI%6WY**M>5NE>-M74!2E152(ZA,2%1.U49> M0'%'\9$M56U+5WAZ1,2G*Y24"@4"@4"@4"@4"@4'(-T[CGX_K)`BOYQP,3+C M28[;,1YL2@O(S',BEQWDY9M:3YHNI1>;Q< M]V9)L&A M&2^WS"-4L1O"`EY$]%+Z550Z#0*#RZZVTV3KIBVV"*1F2H@HB=JJJ]E!2LUU MJZ:8E2!W--2W4X(U!$Y=U\FME#;%?RB2O2O%:VT/2O%:VT*I,^L[M!LE&+B< MD^J??D,=L%^PO.,O[->T=.[UCJ7>L-]8>/EWW68V","9%#)7)*(EB542VEHO M)77_`!7SO#QYZ3Q8SZI]CK)C55!D8>:Z(M$OY)K7A;AO7>'46B5G:=;=;%UHQ<;-$( M#%4451>Q45.VO-T]4"@4"@4"@4"@4"@Y7_$?\\?J.@M72[]Q,9^?_2'*"U4& M)8L59(RE9!90`K8/J* MG"@_`APP-LP8;$VA4&B$!10!;7$51."+;L2@],1X[`J##0-"1*9"`H**1+E>28=%VUU7@2G&X>?;'&2S5!;EHMX;I+P1-9<627\ M%SAQ1$,EK.YNM:GQA[UY(E?JKNR@4"@4"@4"@4"@4&)R+%V@\KCX"LJRL9I62 M+F$WH'2IWOJ4;6O?C>@]I'CH^LA&@1\A0"=04UJ*<4%2[;4'Z^^Q'8I-M;:0M\75FVLZ0X?E\3E+5RDH%`H%`H%`H%`H,#D&"Y)&4Y':.4+9,"^0"KB-. M*BFVA*E])***J=BV2@)!A(R+"1VD8!%$&D`="(7!40;6XT&06&!:%D6Q%H;: M6T%$%++=+)V<*#UH#6IZ4UJEE*W&R=UZ#\<<;:;)QPD!L$4C,E1!042ZJJKV M(E!QC??UCL;!-R#M%D,G)%5$LF]?U,5_Z8BHF_\`911'O0BJUQ=6UM9TA9XN MK:VLZ0X;N3=^Y]S/*YGLD_/2^H6#5!8!46Z:&`06A5+=NF_E6M#CZ]*[0OTX M*5VA$5[/8H+5T[_\G._P6_\`C*HC=D_D_P"/S7RNV24&3&R\AB75=P\MW'&J MZB2.J(T:JMU4V20F35;]I`J^1:\.3KTMO#NMYAT#;O5L-01MS-!&5>"92.A> MK?GFU4C9_*N0]Y*-9_-U+5UC6'O7DB71FG6G6@=:,7&G!0FW!5"$A)+HJ*G! M45*J/1ZH%`H%`H%`H%!RO^(_YX_4=!:NEW[B8S\_^D.4%JH%`H%!%[GW+B-M M823F**BT%EV=OZ5MI6X60(Y6W MKH*$MS=A#Y1[2-@?P.T$]&Z>%,[L]3^5?\/?CY/279FW&W6Q<;)#;-$(#%44 M5%4NBHJ=J+6<]WJ@4"@4"@4"@4"@4"@4&&;-B08CTR8\$>)&`G7WW"00``2Y M$1+P1$1*#Y4ZJ]6\GO.8Y!AJ<3;#)^X1N(G)45X/2/-W@WW=J^+T=/K=;QUM MNTNOUL:VW<^JZN%`H%!+[2_>;'_E._Y#E1.\*/Y#^OYNGUVP2@4"@]Q9>0Q\ MT,CBY'JF192S;UM0D*\5;="Z7AB\8EW6TP[1LK>,7K^5WF^<*'S(. MVA7W.&OAQU8MK7=[4Y,:2[;`GP\A"9FPGA?B2!0V7@6Z$*UEK#/0 M*!0*!0*!0# MQC,[RT^MP^,9G>5)JVME`H%`H+MTY_[7(?XP_P"6E17>6'^2_L^2X5VSR@4" M@4%TZ6;I7'S0VS+/_0RE(L02_P#NG413.-^20HIM^2Q#^`E97;X/&?*-I6>* M^='6*I/4H%`H%`H%`H%`H%`H/G;ZQ'4,YV0_8['._P"BA$#F7,5X.R.!ML?D MM)8R_&LG!06KW3X<_5*[U.'/U2XM6DT2@4"@4$OM+]YL?^4[_D.5$[PH_D/Z M_FZ?7;!*!0*!09\9EIN$RK&9@BIOQKB]'1;<^.2HKC*W[UM<%[C1%[+HM?L< M/G7XNZ6Q+ON.R$/(P(\^$XCT24V+S#J71"`TU"MEXIP6L5;;%`H%`H%`H%`H M%`H%!\Q=>.I![@S9[=QSO_['BG-,A1[)$QM50E7R@R7A'\:Y6XM@<3R`\7A/\94+\-:SNYP?RCYO?BOZ.TUG/'V:.(C'HF9\RCDJ M=J1&T19*I^5J%M?,=6.MQ^5_A#WZ_'Y6?,%;#72F`P#N:?<89E1X[P`1MA(5 MQ%J5Q>_BXO?Q;S6Q.)Q!8+*`3\874-$&.`$Z M3[CFE6Q%&P4[:E+3QTV5+Q]V-?@C[L:_!IY[;LC#>K<^2R\LH%=:%KFH2-HM MA,A=;:5$);HG?P6]JFE_)-;^2)KMV4%VZ<_]KD/\8?\`+2HKO+#_`"7]GR7" MNV>4"@4"@QOMN&W[DZ3#X*+C#X^DVZV2&VX/G`Q0D^Q7%Z1:)B4Q.)=[VKG` MSNWH.504`Y+?N[0K=&WP50>;OWZ'1(?M5@VKB<+D3E*U"2@4"@4"@4"@4"@A MMY;B:VWM;)YQQ$)8+!.--DMD-U?"TW?\=PA'[=36N9PFL9G#XI>??D/NR)+B MO29!F](>+M-UPE,S7SD2JM;M*Q6,0VZ5BL8ADA1'9DD([2@)G==3ABV`H**1 M$1$J(B(B7J9G"9G"8/9&=`IP*D=7(`&Z;:2&E)QMII'W#9'5=Q!9-#6W=7'W M8T:5P3/0HM*V)*?,TN"2C;@E[VLM(Y(F<0 M1R1,X0E>CT*"7VE^\V/_`"G?\ARHG>%'\A_7\W3Z[8)0*!0*!0=#Z.Y>S>0V M^X7",7KL)%X>Y2"+G`/&ZZ'D4U_Q$2LCN5HA\? MB*"*"G8B63[5;<1ALQ&$C@L.67R#<$)3,5QXA!LY',TD9D@"*(T#IJJJ7<-1 M>WC&46MB,I"-LO(2HZG%DQI$E)34)839&KO-D.$TUXM'*\1`O#7JMQM:N9Y8 MC=S/)$,.;VM(Q,-F6Y,C2&I#A-L^Z*ETXU->3,X36 M^9PA:[=E!:NG?_DYW^"W_P`95$;LG\G_`!^:^5VR2@4"@4'AYIMYHVG1U-N" MHF/E14LM1,9T2[5T\S[V:VPP[*/7/B$4.<2VN3C-K.+;@BNMJ#EN[56%RT\; M3"W6/U'06KI=^XF,_/_I#E!:J!0*#Y=^L7ECF= M0_4T7W+&0V6$!>YQV[YDGY0N`GVJTNC7Z9EH]*NDRY?5Y=36UMQ#@)Z9%IIX MY[)`<8FW^4U8553;?;T&KK9\+BA#_37')3RC#B]/*,)*7O\`F/01::!Z-+-( M(R934A4NF/9*.VK`H%V3-LO&6I>_@B*J5Q'#&?\`/^W$<49_S_MCW%ON7F<: M$$F%8`55%1'%,%!'",/"HHJN"&AM7%55403RE>:<45G*:<7C.57KU>I07;IS M_P!KD/\`&'_+2HKO+#_)?V?)<*[9Y0*!0*!0=)Z-S%6!EL:17]7DC)9!/O6I M+:):WG>9=+[=8_Y6F`-WC]AU&UJSU*YO\`HL]6N;OFJM=JMG'G&;FM.22$Y)"JN M**+X55.-UOXQQS&(]'E'',8CT>F.H:?`SD*8P4J4:"X4DT;76ZA$A":*/H$& MA%+TU\?'W1;)X='7,*57N]R@E]I?O-C_`,IW_(KD8$2J7>KFF?:7KQ3J[A64LE M`H%`H%`H%`H%!\^_6@RYGD<%AA54;9:>FO#W$3I(TTOV11MS_>J]T:ZS*[TJ MZS+A]:3126`R MN8PE9&^))1,B,8'HTO+O+)GD+_\`IT>]922+L=@0%63%1$4+67AOY:XCBUCX M.(XMO@S9/J'/G84\6;9H)7%'3>)PB!0;3W:Z7=)";,Q55LBN%9.RT5X8B<7&D^U67WJ_5$K'#.CJE47L4"@4"@4'*_XC_GC]1T% MJZ7?N)C/S_Z0Y06J@4"@^0.LY&7576M[YA:*[4R@4"@4"@O71M5^%]P)?@D?'JB?9.769W_`-T+ M'#LZE5![%`H%`H%`H%`H%!PCZTAJC>V@U<"6:2CY51&$O]J]7>C^Z?T7.E^Z M?T<$K3:10*!0*#\4D11'M(UL`)Q(E\@HG%5\R5$S$.;6BL9F<+3M+;N8#*QL MA(CK&C,ZR]U72X6IL@2S:7)/2XZ[5$9F63W>W2]?&J_5Z,LH%`H%`H-W`.,YPN=>C.*!0*!0*"T=+%7]ND2ZV^"Y?#N_[B)5#O[0]N'=V2LQ8*!0*!0* M#E?\1_SQ^HZ"U=+OW$QGY_\`2'*"U4"@4'Q]UI=5>L&ZFE[0/ M-SUXXS*^[>V9$QQ!*F*,K(#8A*WN;2_],5[_`,=>/DMV5,5]98?8[=N3X0LE M=JI09HL.3*,A8#5H%3<)501$4[2(B5$1./?7-K1&Z8C+*SBI[[/.9:5QM7QC M"0\=3IHJB(^7@-1-XC2?U,2_)>,F1&QW9N]M/1C1L2TJ?CJLUQ?[+@UE=Z?J6>'9V"J3U*!0*!0* M!0*!0*#@'UK'%!S:/D,YX+]L&5_VBE6^G/UK74_>X96JU"@4&:#"FSS4($1S_`%9Q&-',5U15!0?*J]G'N\M/.,XRC$M6NT%!Y@R=&\-JL"OB>RK" MD/X@(JJOVB4:J=S]CUXMWT=60LE`H%`H%`H%`H%!\N_65=MU2C-+]]@XI#]J M7+0O]J5H=&=X7^E.[E]:"^4"@_%)$(1[3-=(`B7(B\@BG%5\R5$S$.;6BL9F M<)_%[)S4VQR$3'QUXW<34ZJ>9M%\/]9;I^#4:RSN;\C$:5U7'$[5PV,47&6> M;)'LE/6-SR>%;(@?U$2NHI#,Y>>]_P!TI>NGB4&6+%D2GQ8C@KCI7L*<.")= M555X(B)Q55KFUHB,RF(;0X2>;!O@C1MMHI%9YG6HBNE2$-6LDU<+HE<_CDH)SI;)4NJ M811[&\'-=<3\N7#$/^`JSN_.SWX7<*SGN4"@4"@4'*_XC_GC]1T%JZ7?N)C/ MS_Z0Y06J@4"@^-^NPN1>M><=<32U+]405\J>I,`*_P"^"C]NM+J3BK1ZL_2J MM7ETH"JB)=>R@F,#M;(9?2\MXN/7CZP2>-Q/^D*_\:\/)JKG,SLSNSWXKI76 M70\9BH&,C)&A-(VWVDO:1%^$9+Q)?LUU%8ACWO-IS.[;KIP4"@E<'F!QXR6R M)QM'^6O-:1").4>O2J$HHHEW\?NUY'B[;(B5-.*8G)-LH*O=PQR'VH[#C[Q(#3(DXX:]B"*75?N5$SA M*>^K0K\B9NS(NBHE,6$2BJ>BNJ26B_?H$Q'[597;!R_!#,!<$53S\G^BK/5_=/Z+/5_=/Z.#-R&G&6 MW4*PNVT7[;K][]GS5J^48RT_.,9E-XW:>>GV)(_JC"V]VDW!;?BM>G=/QD'[ M-,S.RER_D*5VU6G&["Q$=$.:I9!WM5'/"S?S-)P5/,:E4^'NS>7NJE!0*!0;N$FM0"..F`:E0/"J-*V`@ME2ZJVW^3?3WI75N*+8?VJC$S\&9S?DO2D+ABL!B<6B^IL(+A)8WR53=+[)E=;>;LK MJ*Q#-Y.6UYS:(>(^3RI7GR4\H= M5G#-+S31G-=C`K3TLVK&B(E@:\1*J)]\;@B:_8KFO'MGT3-FU(W(P_CBCNL\ MQ[2MG"::1%-P5YBV3@W8RNFE..E+V6]_EC)C(%O,2B9I]FLSN3F(E[\6[Z'J@]R@4"@4"@Y7_$?\\?J.@M M72[]Q,9^?_2'*"U4"@4'RY]:_;W(W7B\R@KRI.I.[7 M=/="_LIY%[:CQSNQ>SW;7TC2JWUZ*)0*!0*!0*!0*"G[TS*.N)AXY7$5$YY( MO9V$#7#O7@1>:WX5>=M9PG9VSZO.&*%L9S(&ECRTMUX+]J-,VCBGV-31$GY5 M9/:MF\K/%&*NH57>C"4R&!F!/MB;::G!4Q11'AQ)+\$XI0>U?81A7U<%&$%3 M5W4FA!1+J6KLM;OH/:*BI=.*+0>>:WS$:UCS5%21NZ:E%%1%6W;:ZT'J@4"@ M4"@YA]8_!'E>ETQYL=;N)?9R`BB7\(*K3I>;2T\9+]BO;@MB\/7@MB\/G7I? M+A1G38?:;1V4X?JLI136A)Z3.KML7I#Y]7FK5X])>'SA0>FWF76T=:,3;6]C%445MP7BE!Z`P<`7&R0P-$(#%;H MJ+Q145*#\)UL3`",1-R^@55$4K)=;)WVH/5`H%`H%!\^?6TP1.0\!G0"X-./ M09)(E_[T4=:U>9.4Y]VK?4M]4Q[K74M]4Q[N.[$PK&;1YF9+)M8ED%EM$1QU MNR6/F+?@E])6&_?=+I6A3,Z>R.SV[4GQC_+IV.Q.-QK2M08X,"MM9"ER*W>9 MKL5B&5:\VG,SEMUTY*!0*!0*!0*!0*"O;PS7JD3U".:I-F"J:A6Q- M,]A.<.Q5]$//Q[EKB\^B87WZL^&4&ZI?@G&@]J^PC"OJX*,(*FK MNI-""B74M79:W?0>T5%2Z<46@\\UOF(UK'FJ*DC=TU***B*MNVUUH/5!RO\` MB/\`GC]1T%JZ7?N)C/S_`.D.4%JH%`H*)UJV,>\=ARX48.9E82^O8P4[2?:$ MD5KN_O6R($OPNJ+W5Z<5_&V7IQ7\;9?%"DZVO-:70\"+I546WG$D\E:LSIF& MG>V*^4>D.Q;*'`C#-(`*$Y$%)O.5"?OW*I62X=NG2B#V\$6Z5ZTQ\WS_`"\M MKSF962O1Y%`H%`H%`H%`H*[N7="0M4&`J'D"2QGP46$5+H17[3XW$?MKP[>+ M6](2K.`P<[-YF'AH*J4W(O*H#0H(W7O6R<5K%F5QMT'--UXJ2SO7<$U,2_+8S MNVV<9$>C1U>0YC3TM2:=(47EZ@?:L;M@X>EPH(#<+74J,UGL?!.>_#Y$^%BH M*08[L30F(CK&1$6/8A+('BH#[O5&/DY3$1W,,P94MV0,H(;,M1 M-8L,HC(-NJSH84DD`Y=4$504+3%4M92!1+P^B7#M2MCKV\Z M:J_8M,WRM.V]T#)4(&0-!G=C+R\!?1$^XCB=X]_:G>B>\6QI+R66NT%`H%`H M%`H%`H-+*Y:'BXOK$DNU=+30\3<.UT$$\O\`0G:O"N9MA+GN0GR9\LYTPD0U M2P-HO@:;3CI%5M]DB[U\UD3F(]91,OIGH?M%S`;+;D2P4,CF"2:^!)8@;(41 MAI;\4LWXE1>PB)*Q^?D\[3*W2N(="KQ=J+N.(<+J7B-Q.XUZ7CDP^0QKS\6. M4DP?>D1'61,&T)Q!(&G$0K:4[U2]!4X<+J#ABQ6-8/(,8V%!QL1Z!'B,/11) M<=)&6J$+#BFH248+TU\2KVC=$")Q:]6X<:.T:96&$J-B&9KT:$R_ZHC>*5MY M(\>S0CIR">(6TLB>*VE>(3^#C[SG]2\'/SL":+^/')LR)!L-!#".ZRSZJK;C M2FBDY8M8\PK'=/1TT'7:!0*!0*"M=1]GM;OV9D\"2H#TAO5#=+L"0TJ.,DO? MIUBB%;[V]=4MXSEU2WC.7QK@VYT!QVZ%$R,*28D))XFW`1!-LQ\ET422MBF+ M1F'CV[9Y)F/@Z;@=PQ,*\2M]\2\=()WE_M6R5S:V/U3A02*;+ ME*XYJE9"68B@@G$W"5`;;;&_#BJ"(_\`K=:XF8K$S)O+Z^V!M8-K;2Q^&N)/ ML@IS'![#D.JKCI(O;IUDJ#?[U$2L2]O*9E447E:@D-V-RP<.)<*"!SK74B(>5QL%9S^*Y8TG,544>WP^*@_)+O5-C(26(3F78@R9;KPRFH; M$D@)8<18;3;3JLH+"FCX.7X"2#JM!]EPF9#?%MYM;$GE3O147O1>"UIS&61$K1B][BB(UEF^678 MDMD5)M?RP2Y!_2G?=*CRF-TK0Q(CR&A>CN@\R?$'&R0A5/,J72NXG(R5*"@4 M"@4&K/R<#'M([,?%D5X`A+XB5.X!2Y$OF1*B;1"<*EE]X39:$SCD*''7@4@K M=?%YA6N,S/P,J^(@V%D1;755[5555;JO>I$J_;5:G2(1N^D>B/ M31W;L$L]EVE#.9!M`;CFEBBQB5"Y:_\`4<5$)SR60>Y57(['-YS\%KCIXPZE M5=Z%!3NHV]IVU&L>^VPT$"2;H3,M*%XHL4A"[*/JRA$V#SBZ>:OA#M6]!JM] M7L`S%GOY*/(B!C)80);PBCK/,6*U*,P=!5%0$7T1/OBX:46]![C=7]JN/>KO MA)CR%GR,(K<21"140)>@4"@4"@4',.MW3AW<>+'-8EE7,[C`5 M%9!/%)C7U$TG>IAQ)O[8_?73WZ_-X6^#CDIY0^:R$'0TDEQ7N6Z*BHOW45%^ MY6QI,?!4V3N'W=.A68R"%-BIP%]+*^"?C)PYB>?TOREJ,S'QA.D)F M[6-1)K_9S47W`5\YIZ?V`OYU2N//.R<*C(?E2I"RICJOR"2VM>""*\=("G`1 M\WW;K415$RZ#T=Z:N;JRPY3(M+^SN.<17$)/#*?!45&4OZ38KQ<7L7T.\K4^ MWSX^F'MQ4]9?3M9JP4%8Z@[KF;8P\?(L1N;'*4#,^6K;KX0XY`9%*=:9]T(! M,1`M/HZM78E!#PNKV)2))/)1S`\?#@RILJ&HR(9%-9-Z[#Z*B*V@MJJ&>F_9 MVV10]>VC:`^O*\,IL(DKU5LD94R?%(S$HW6@&YJ(!+"XVU\4L*WH++M_=F'S M[L\,:X3J8Y\XT@[)IYC;AM&**BKQ$VB2Q66UBMI(54)B@4"@4"@4'!.O/38X MTE[>6)9O%>LN<9!/[LQ1$279$]%12SJ]UD+O):N]3G\9\9V>/+3.L.,>-#!U MHR9?:74T\VMC!?*B_P"U%X+WUI3&5>)6C$[WT(C.8#2J<$G-"J@O^("7(%\Z M7'O\-1Y3&Z=UJ8D,2&0?CN"\RXEP=;)"$D\J$ET6NXG(R5*"@4"@4'AUUIIL MG73%ML$N9DJ"*(G>JK43*57RV]F[$SB!1X^Q9CB+R4_(3@KG]`^=>RN/*9V% M6,G''3?><)Y]U;N/&MR*W9YD1.Y$X)W5,1A$R[/T%Z<./26]XY9K3';1?@1@ MT],B2RRU1?O42Z->7B7X*UF]OG\I\8V6.*F-9=YJD]B@IW4;>T[:C..D`PT. M.E.N-3LM)%THT14"[//Y**0`ZYX.:OA#[Z@T@ZR;<8@SI649D0VL9*&%,DB* M/1T/U-J8XX+P*H2RJMRX:46Z)09XW5[:KKWJ[XR(TA9\G'BP3>H[Q)7J M9O*@*7N?.X>6UU5+"2H%@VONK$[FQQ9'%$3D,72:%TALA**(5QXK^%9>\5N) M(A(J($O0/U'06KI=^XF,_/_I#E!:J!0*!0>'V&7V7&'VQ=8=%0=:- M$("`DL0D*\%14[4H/G7J;T3R&#<>R^VVG)N%55-R`"$Y(BHOX")L.5`8F*$"H0DET)%NBI6A$J[]95V.ZKT5TXSQ<2<9)0 M4E3LUHG`_P"LBUS-83E+QMV[@8LANM2@3M5UO2XO]9I0%/\`/@;SA*;A6[+F2J2_=J8K$(F66-'DRI342(RY)ER"T,1V14W#+R"(W5? M*OD3C47O%8S)$3.SZ"Z5=%1PCS.>W*(O9D/'$@(J&S%7A8R5.#CR>5%TC][= M?%65S]B;Z1LM4X\.MU6>A0*"J[M@;1RV09QV5RWJ60*%+!(C4L6''(+_`"_6 M=;:KX@]R'Q6\/&RI05T>FG27/1Y;^.GX;D79O36-,8S$;+&TLR5)4'&\H8M27);R//QULX@N"3_C4/*JIV*J4$ M_M7$;6P\C)P\-(;=FO/C(R@2>7D.BXO\`\1&?]M3Y3[&C/^W>._\`LY7W&?\`YM/+X#PYOR): MS4&01=RN*T(_=$S7^S3RGV&A(WMEW$5(\=B-W:C4WU^SPY*)_33-C,(:;+FS M_P#OI+DD?^6:HC?F]S!!!;>54O4>/OJC+%V?8KI"_=,NDV4W>^W/FB9CMZTX$NE%2UDH+-@=N;5 MP&9F%!<$,KEVVR>;<=0GC9CDXK=A7Q$+:OFB$MU1+#?2(H@6*@4"@4"@4'EQ MMMULFW!0VS11,"1%%15+*BHO:BT'SWU/Z(2<23N8VG'*1B;*`WNOVL:6>')Q>L.1B0D*$*H0KV*G96C$Y5WI@GXSI/0WG(K MQ<2-DM.I?*0\0/\`K"M1-83E,Q=Y9UA$1\6)H)PN2*RXOG4AUA]P$I]4)S"2 M:WXQV/P'D+RLDVX/W3)I?Z*GRGV-&7]N<;:_JLJ_DLU?_,IY?`8G=^1[*C$! M\B[E=)L!^Z!.K_9IY3[&B/E;SS3R*C#;,05X7\3Y_90EY8HOV06H^HS"&E/2 M9CB.37W)1BMQYJW$5\H@E@%?R12GC",O!$(BI$J(*=JKP2NIE#K?2OHK,RC[ M.;W3&6/B!L<7%O(HNR5[4)\%X@S^(OB/O1!]/-[':SI58X^+UE]"B(B*"*(( MBEA%."(B51>[]H%!6-TXK:V:R4;&9')+%R3T62PU#9DBR\]$D\M)`\OM,2Y0 M\43AW*E!7\ETFZ6Y)K(B3IM16-8Y!B//<;9C_P"A"$XC@">EO_3,AJU-!.T'*_P"(_P"> M/U'06KI=^XF,_/\`Z0Y06J@4"@4"@4'/M[=%-I[E-V9'%<1EW24SF1A10=-> MU7V.`'=>*DFDU_"KVX^>U-G%J1+C&Y.B^_\`!D9C!^%H8]DG'7=*W=JCK9[5 MY@$T3\*KU.Y6=]'C;AGT4=X38D+&D"3$D?28=16W$^R!6)/N5:K>L[2\IB8? ME=(*!0;6*Q>4R[W)Q,)_(N7L0Q6C>T]WC4$)`3SE9*\[[6VDPH8B M+:2X*#(GO+S)+MOPG%1+)?CI!$'R)5&]YM.9>\5B-EDKA)0*!0,XX!O.B',&'S'2;RL?)"*"UDXU@?%$[!*Z*+@_BFBV[K+QKTX^6U)T4%XO+^7X?Q+\:H\O9M?3:'O7CB'641$1$1+(G!$3LM59Z M%`H%!S3?VV\]*W[ALMA,UD@*^7P**?A5?X^Y6=]'A; MBF-E+0A4S"Z:VUTN#WBOD5.Y:M1:)V>\E\B)W MK43:(W3$973;72'?N?(2;QQ8V&OI3,BA1TM^*TJ*\2V[/`@K^%57D[E8VU>E M>*9W=KV)T3VSMEUN=+)IO4#]U8==$!%;&1 M&1*OA750%VEE5P462F)U9:;N6/F9C`*P)1V&I0(%U,P&[4)AMM="JJJG!*"> MVMA]#6-`R;\-R"]J:5'N5%%MTM($1C[HB^F*7H+904>$>R2@],^GT(D)C;T!7$XBZZP#SB+>_`W4,D^[7$WM.\IB(A9&FFF6Q M;:`6VQX"`(@BB>9$KE+U0*!0*!0*!0*!0*!0*!0*!0*!0*!0*#2RN"PF791C M+8^-D&4[&Y3(/"GV$-"I$BI3>B'3*62D6'Y!KV+'D2613[``XC?]FO6.>\>L MN9I'LC2^KWL!251*<`JO`4?143S7("+[JUW_`-7)[N?M5;$;H%TU:5%>AR)1 M#WNRY`\;WNJ,FTG]%JB>SR3ZI^W7V6;"["V7A#%W%X6)'D!Z,I&A-_WX]3G] MJO*UIG>741$)ZN4E`H%`H%`H%`H%`H%`H%`H%`H%`H%!&Y?;.W,R*)E\7$R" M(EA64PV\J)YE-%5/M5,3@529T+Z9R2U)BSCGY6),D$MY-',4/Z*]8Y[QZN)I M'LT/_P#/>P-5]4Y1OZ'/2UO)?1J_IO77_5R>Z/M5;\3H7TQCJA?!1O'WD]*E M&B_U.;H_LUS//>?5,4K[+3A]K;:PM_@C%1(!$EB..RVV1?E$*(2_;6O*9F=W M>$I4!0*!0*!0*!0*!0*#E?\`$?\`/'ZCH+5TN_<3&?G_`-(0&.K("T#RDC+>IYQI"==Y9*(IPLGB4;I<,B;\VB$,QSTAM'L@VZ\Z:/,*$5MJ*LM3?+7P%6Q MOJ2Z=ZJB*EPV1WYLTGT93,Q=:LG)5>:*"C;;RQS527@BH\B@H]NI%2U!KS.H MFUF7\0Q&FLSW,T^TS%2*\T:H+VM!=)-:+HNT2<$5>"^1;!HYSJCBL+F`W&7)+H,`)H*K9$==$2+L2]UX4&KN'J!"P^XXNWDA/S"]Z&*I]E/*E!&Y M+J'"A[[A[."!(DSY,<9;CK:M"+;3CO*0T$S$W!!457%%/"ENWN#\?Z@$.(G9 M"+@I\IW'R9,:3"!8R."D0=;KBN$\C*#;T4UZE\G;8/>?W\SB]KL;D8Q,W)8] MR$63?]7%H"8A@T+QN.L>WHAES(LE6')$F#!?1& M[/RXCC;3C"(I(3:JX[85-$3PDJV2UPM&W=Q1LY'E.--''?@RGH,V.[I4FWV% ML27%2%1(5$Q5%]%4[%X4$K0*!0*!0*!0*"$W)NJ-A7\;"2,]/R>8?*/CX,?0 MA$K8*ZZX1.$``VV`W(E7R(B*JHE!AB;VQ6KD9FV"GD^L9J%/=9%QQ4(1!QM1 M,A('"<$06_%50?2X4'IGJ!L5]I]YC<&.>9C**/N-RF3$%R@U\WU,PN$_9]_),O,8[<""H9!=*LQ5,0 M4/6EOX`(G1#7Q%"5+VH-Z)O?"J`)E7FD2(\>)+?91QSU5XV2,+$OA(FU MT]_V^%!JY7J3MR%MC$[D8=];Q>;=CLX^0)@TVJRD50)TWB;%H4TV+5Q0O#:] M!L'OS"M0%=DWC948IS%P+QLA.06P,U#EZ].I19-4L6E4%515%+T&6/OG:CK; M?-RD:/(*,W+:`_"+.=F, M0L<,&[*(KIX^);)YT#9C;Q:D9H\,..F!.#&-Y86G$9!2!T ME!&4N[X74,5$D/2*+WVXT'N)NL)^T,=N3'8^5,'*Q8TN'CVT;1]1E@)@)J1B MT&D3N9*=DLO;PN%>B=8\'(9:?6!,98%8@9$S1I5B.SYCL!@#$'#4_P#4,$*D MWJ2UEX\;!/[9W;\-SQDO%3,,!4D$>% MK75+I<-D]];/9!U969A1#CMH[*:?D--FTEQ14-")+*)."*^121.]*#+'WGM* M2#!L9F$Z$D''6#%]M1(&N9S"1;V\/(Q,&7:6 MP_'%ALX<;UI6WG''`%M3;MI4K#Q155$XT'N;U,VQ#S.,Q3L@.9D6GGW7T=9Y M44&(WK2K(+7X;M65%3A947L5*#;'J%LDY7JPYF*KGJZRU7F(@(TCZQE\:^'5 MSA)O1?5J2UJ#Q)Z@[9;GX2%%EM3W,ZZ+<0HKK3B(!LNO`Z7CNH$C!(BBBT$9 MENJV(Q>8SN&D0WTR6%AED66E5L1FL-MHZ]ZL9$@JXT"HI`5EXHJ<+J@3$G?N MT8CGJ\S*Q69HN,L/1.%5[$[Z#5SF_X6+W3&VV,*1,R, MB.$S0RK0KR3?Y"DV+A@KRMV4W!"ZB''O2@]SNH6W6),&/%?'(E,R`8MPHKC1 MHP\X+BBKOB14&[!CP1>**GH#6RFX,A^:4/UY^0"M"#;9.@T*H!F+C@HI^,@1=/G\6 MD,+G4N&D9HF<9+=G/R\A#;QUV$=OB^9ZPXI3ZEX:+ MC,=D(<>1DF\GC7LVPW'04-,=';;=<>)'"#ND-B(]JD5O+01Y=8]OK)SPL,&_ M%V_%];D/BZPCCJ*`$"-1B-'[&3FA'"`0NB^*@M.UL^UN#`Q M9D(H(2BB\R.3C2WM]Z2V[^/"@E:!0*!0/U'06KI=^XF,_/_I#E!:J M!0*"LR]H36]S2]P87)^H2LG'9BY-AYCUEEP8RGR76QUM*VZ*.D-[D*IV@MJ" MO9+HVU.;DQW,RZL9QV?)C:V0)X'\HB)*(S$@$Q6YJ`(`Z5+O1$1`QY'HG"R< MJ0[-RKJ-RRG(_P"JMK'=Y.1)XWV.8+A(0*4B]G!*VD5'25U4-E>DIN2_7Y.7 MYN1<#E2'TC(`.`,!S'M^YHY820'S,EOXBMV"EJ#2D=%Y9,G&C;D>BQC1URPQ MFR=&2_C4QCC@N$?`.6*&@6NBW\5K(@8O8,S>X1`4.;Z\&1:U`XX MXA@$@%U"=]8K9514U*$C#Z2N0\DQ+C9A&F/6HL^9#;ALMMG(B*YIY*-J`LMD MCME'278BWU*2D$AO3IE`W?`S$'*R51K((V4!YD-#\)]IM01UMU"N2KJ5"3A< M;CV+01[W2$%D9%Z-E!965D!RL,UAL&ZR_P#"+.3(''_"Z\UZQ'\(:AL)66]A MTA);VZ?N[K-EN3D1:A-K%,06.AR&7HKRNK(AR$,%CNN(J`1:2\*=E!!AT6-< MC(ER<\Y)21*BRG!..*&J0IEN+=.$R\B?HB89]N6S M&1H>:#[+@.)RGNT1=Y2`ZBHMQNB6U+0?F0V!.DXC(XQG,>KM93(N9"6J1Q-# M;=5%*,0D=B;+2B'^$GA7@JI09,QLW<.4QS4![<:JP#K3KB%"85'19:`>6X** M($!/"3JC;O0?13B&F]TFPTK+R\Q.&)-G/Q#B`+T)KD$3Z`C\F4T"ASWG>4** MNH11.""G%5"?V;M'&[4P@XJ`I.(3KLF3(-!0WI#YJ;CA(""*75;(B)9$LE!. M4"@4"@4"@4"@K^Z=I_#,S$Y.++6!F<&^;^/E\M'F[/-JR\R\TI!K;<`N-B$K MHBHJ4$+F.F3^9FOR\CF2=+)168.7:".``<>-)64R,:Q:F%$W#341.*J%Y4%4 M")BE[HI(H;4GHVR]"D M0%R[I12]?.(KC(F\VYEC1R81N(0H:*6I0%!'3JXZK)8/.5Z/.SI.0D!FR8Q@OC`CBCD)]A8Y(^+?+) MU_39>:I]J>CQ*X6U[9,>3'Q,.8\$O'X^"[CY49YE"22T\T#1:E0D0>#:?>K0 M06+Z.PL5D<;)B9(W6(#+439?9Q3+41Y9D,)$>7%9CE'!B1'UA<;*!+8T74/DX4%<:Z&> MK?!81L^]R,5'2/';?91ZR+$E0STKS`TB03BLG:FD4NJ(E@SM=%(H-3([F0;? MBRT:(@>A,DYS`;:;<17T)'^2YR-6@#$A);B?!+!,Y7I[(F[/@;;7)K(9C"VU M,6>TDIN4T+@&2/`9:E7P>%5-5[B4KJM!M8;8HXC*1Y\6>XZL3"L8-A)(\TU" M,2D#[KB$.LU5?%P2]!CB[+S,':<#;>.SYQ(T#&-8MN0$<%=7DZ`!_4I>$^2V MH+;O+4EE1+!H+TFQLF3@W\F['E'@>6<1LZ>SN:?GL)E?@][+M,M96.ZPDELUC(H-/,W-M6W4`M-UU`O" MX<*"#F='VI0FTYEW#C@_-E0=;#:NMNY.2$J6IN"H(8DX):!$0TZN.JPV#7R7 M0_'9+GA+R;H-RER22#C!R'B:RKLI]YE30U$P1R+4&;(='UR,R M1D9N84\G,&0$Q\8Z"!H_CDQJ:6^8NE1;N?:MR7\&R4&G(Z)27`%EC.UZ MPY&T1@YK;\N&,-TN9K]"P:A&VI%5?'V6#Q["U0;CGB0T4S%%AM&WK7)GE0U- MF1(3://&)#]\-DNEKJ$I`Z3N0,Q%G10JB>M=8N-^$QX: MA4D7@O`-#V0`T_*=B95&3/(?"4%Q8;!O-&<\<@XVZ_X77PYHJ@(1)I1>.JR6 M"3WGT^/=,^,4'UG$ MO,N,2HT-J&XHL*U:Y,$"D;@-:'5-2`D7T$L-@EMP=/#S>]<-N"3D%]4PQ&_& MBHV/-;?4F%]R>[1;,6%1Q+75")+^+@'AWINYH!Z/DT:R3,S)2V)2QT,$'+:^ M>T3?,34@J:$"ZDXB-[I=%#7D=*56#%AP\PY&;@8Y[!0BY`$;>*DQX[+C.I%# M4Z)Q!=!TO15532J4&^ULG*L3!G1LLTW,@QG,?A7%AH2,0WGV'B9?N[J?L,4& MQ)"#A=>)<:";VU@&,%BD@-'S-3\B4\X@HV*O2WSDNJ`#P`>8Z6D>-D[55>-! M*4"@4"@Y7_$?\\?J.@A-F_MQ^SL?U']KO5.8_P`GX/\`V2]5T^L.?W/KW^IT M_P"+XJ":^D7Y<_,>@?2+\N?F/0/I%^7/S'H'TB_+GYCT#Z1?ES\QZ!](ORY^ M8]`^D7Y<_,>@?2+\N?F/0/I%^7/S'H'TB_+GYCT#Z1?ES\QZ!](ORY^8]`^D M7Y<_,>@?2+\N?F/0/I%^7/S'H'TB_+GYCT#Z1?ES\QZ!](ORY^8]`^D7Y<_, M>@?2+\N?F/0/I%^7/S'H'TB_+GYCT#Z1?ES\QZ!](ORY^8]`^D7Y<_,>@?2+ M\N?F/0/I%^7/S'H'TB_+GYCT#Z1?ES\QZ!](ORY^8]`^D7Y<_,>@?2+\N?F/ M0/I%^7/S'H'TB_+GYCT#Z1?ES\QZ!](ORY^8]`^D7Y<_,>@?2+\N?F/0/I%^ M7/S'H'TB_+GYCT#Z1?ES\QZ!](ORY^8]`^D7Y<_,>@?2+\N?F/0/I%^7/S'H M'TB_+GYCT#Z1?ES\QZ!](ORY^8]`^D7Y<_,>@?2+\N?F/0/I%^7/S'H'TB_+ MGYCT#Z1?ES\QZ!](ORY^8]`^D7Y<_,>@?2+\N?F/0/I%^7/S'H'TB_+GYCT# MZ1?ES\QZ!](ORY^8]`^D7Y<_,>@?2+\N?F/0/I%^7/S'H'TB_+GYCT#Z1?ES M\QZ!](ORY^8]`^D7Y<_,>@?2+\N?F/0/I%^7/S'H'TB_+GYCT#Z1?ES\QZ!] M(ORY^8]`^D7Y<_,>@?2+\N?F/047_P#M_P`+?Q/SOVG^3/-]9^#O>O6N5_\` 'E^5_U:#_V3\_ ` end GRAPHIC 3 a72487crdm.jpg GRAPHIC begin 644 a72487crdm.jpg M_]C_X``02D9)1@`!`@``9`!D``#_[``11'5C:WD``0`$````/```_^X`#D%D M;V)E`&3``````?_;`(0`!@0$!`4$!@4%!@D&!08)"P@&!@@+#`H*"PH*#!`, M#`P,#`P0#`X/$`\.#!,3%!03$QP;&QL<'Q\?'Q\?'Q\?'P$'!P<-#`T8$!`8 M&A41%1H?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\? M'Q\?'Q\?'Q\?_\``$0@`M`(]`P$1``(1`0,1`?_$`+0``0`"`@,!```````` M```````&!P0%`@,(`0$!``,!`0$```````````````$"!`4#!A```0,"`P0# M"@8."`4$`P```@$#!``%$1(&(3$3!T$B%%%A<3*3HV56%RB!0B.T%0B1H5)B M`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`A9HW]AVWYFW0 M2J@4"@4"@4%+\\KUJ.VZZT3'LW;I27"+?3DV:'-?AI+.#"%^.*JTXVJ*#A*O M55").KMV)0:V?S&O.@=0:JM^>?J`+4Y:&,\R04E&HTF-+D')1@&^-B",B+Q" M18^/@F7*H;,.?=UD6&[ZBA6J$[9K3).W//.3."XLH$C93%LQ0G&WNT.*V`]8 MD;[IX('3I+F7>-5;;;>X1Y\\*-(N_AJI* MN9!P#-NGUA]0VVP0KC)L$;BS8KMQCY96<7HK<1F4.1H$)X4573;5TQR(H9MQ MHB!,=%\QM2:IU9<8$>T1F;%:S:"5.*22R?\`$Q`E,Y6>'E^/E+K]^@K/FIK+ M4^F+OJ^98-7/3G(]L-J3;77F5&/.D2FU!(4<>N'982D1FN*(N&*J2JB!H+_S M-Y@0[MJ.S,W65&M>GG=0N6FX*X1N/'`1@X[+KIYB>1DGE'`E5"0D0L<$H+1T MC:]0N$".9C3;\%!@6WG==9:CF:3'89H\I+G:5"84D3*6(D. MY5PH.OE]S+GZRUH^W&<=:_%HV0$2XO60LR$H(F"+\(5MJ#7W-'3UUGP7K MRST0NW19 M%PL=L1IGLI6UB8L+CD^BN/%(1YM1,2R#@NP5\:@MN@4"@4"@4"@4"@4"@4"@ M4'GFS\R.8Y[ MNK;K/?9(7"YL7Z"OT;9FFHQ/&Y;&D^DY2*V#9DI/_)--_&(2+!!5,H;^3]8/ M3T>=?(9VN9QK)%F37&UX8N&U;W1:>Q`B%6R)#1QM"\8-NS'"@DS6H;[?]%R+ MI$;723Y*1-S+J++Z-1!P-92`TZK:H36*CG-$1=JXHFT*3NO/GF99+6S])HQ] M(VNQMWV8%R MH5TANP9_9&B$"4.+@TN3]^NE\T:$ZZW"1<+DD ME]B6LN"W;7V'&2R%'.,V;HHH*F_.N./P($VH%`H%`H%!%?YI_N/];H'*?^%F MC?V';?F;=!*J!0*!0*!0:2ZV_1\S4%M2YP(M!@!I[EUJ49%[6RP9SAO/L2ICL(>T&]!<=M'35LFW& MTQZ-VQ:#76RU.7!< M,$H-_:]":)M,IN9:]/VZ#+:)PV9,>(PTZ!/)E=4#$4(U:VK3%&*X+:M/0OI`W9D&YRPM2-9G`1M933 M[ZLBB\3CIL,L'-N&;!:#='HC1SD&-`[;)!!AB29D6.+J,\/.N*XA@J[ M5VT&D/EUREE1)>IC;1VWW%7+G-GE<9BQ7A<5IYQTT5_@JVO9FUPPRX"FS"@1 M.6/*2\QWA@1ADQ8]P2<342?+1J-/4$>S-`T^@1R()"$0MH**BIBFZ@V^E.6& MB=)S>VV&"Y%D)%2`BG+EOBD87%=%M`?==!$$U51P3%,5PV*M!BN7%UNVI M'W8O;9]U$(.I&CF2G!).&#K3;C*O*VVHMF!-Y1111>KA0=,WDERUG&T[+MCS MS[3(1DD%/G\8FFG^T-HXZC^=Q0=1"$C553!$1<$PH-A:+;H31KDNW0Y`P'KK M*&7)9DS7W7'94]W@BXBR'7#SON]7J[R[]!'M,\K>2BK)6Q1&I9S0!]UU)TN4 M:BW*4A=;<JT'=IW1FA['>Y3]EAM1KIPXI5SA/BN*BAY5Q MQH.M>0_+)7Y3RVZ0B31E-R&1G30:)N<:.2&T`'A$0,DQRC@GVJ#-OK'+"Z:: M/2MUN$8[,R",NP_I!QH\D5_LN1QP'@>)!D!PE0BVFF5=M!A6[D]RG=BQ4MUN M!V-`==8Q"5(>0R9F"\ZQ((G35Y&Y<454'%7*08=U*#-E0`NMMB0D5S%61.WSBF$R\(HI<*8TZ3)DB+@B;EQ1%"/P M.4&H6'4<<*W`G:QE1`:-W&V\.]2;JHPB1EO\^U+[.YL'8"+UAZB!AW#DWK*9 M8TMBNVP4*VV^V.$3KSB804N**Z*%'P15*X@2(J+XBHBH2B8AV0>25Z;))L@; M8E[#7WSE5>+KH72NGI+=NE2[%; MG8,EZ0;A-DXMM."VZWBR:K\H0NKBB8**88KMH-6YR;U4D6]1HPVN.U=(EUBL M@V\\(L)=($6,N`I&VH#T4W5W9LZ]..(94_E/JR;.N,GBV^.MPD7"02HZ\YB$ MSL9#'-%8;SMEV(@BMOHH9":D%QE%3',)*F.U4H(Q:N7W,N)98UN-7!C==7.ZW4[>Y/",Z](>MY,W-V,(YK3P&4R@\. M5$GBCB#A@B8KAM5%#-UWI;6MWN$"3;WIC8,6HFW0C3W(B=O67%<`R%IUL2RL MMOBJ[4ZR)X`U`:)Y@=H1IT9+]N8E17HS$B:CR"U$U-])-_G'3ZXVX&V\R[5( M0TI+F%#R*!% M@N-!A,Z%YL-/D^Y.N$@T!6V<+J8J++EMG,9.L:MJZV^]$7BJVN)-J>U?&"4: M/M.J&KY8_I4"X]J@7-BXRL3RN#+F,G"!45Q\<_#8(R`'#1KQ47`DH+$H%`H% M`H%`H%`H%`H%`H%!23>E]=2K-I^WA$D.I;&[(DDADHPVS=;9=$DW61(8<-GM M*20;%QHE$TQZR89LU!D-:2YDJEJ4VXT(5,<)38AEGI=V^DL(S<)B\J]<1>CN"W:'6)1\!)#@D1S^"YFR9MBK MTKB&)?-*\SG;M>)41;LO&?N16[A756V!$DC+;U1E90`(B8/*HY-RX$BILH.$ MS27,*6DTI5ME23=&Z-12>E1G"%B3>&941I2.0JX-Q6<,,<$PPH,T=/T`O/+;%6X#C'QO3L@2E8/'VALK"HH69HEA\7=0S,I-V^X79R M3:VS0AP9[,PTZ8B6"H+LIIYU/NLV;IH)-0*!0*!0*"*_S3_D<*WNDD'G0DJ,Q(6SY`?; M%Q$[3F5,XH6'YI.[4_Z-O=SK;8B<-K%YLV)Q/DC;"0VS5FG+F0A#GM&Z?B,FJM.KX&W$`U^Q6>^NU>\+Q:);:J)*!0*!0* M!0*!0*!0*!0*!0*!0*#!NU^LEG9XUUGQX#2[BD.@UCWAS*F*]Y*F*S/9,1,] MD'NG/_EM"(A:EOSS'8216#PQ[Q.\(5^!:]Z\79/H]J\:\^C0N_6=TJBKP+3/ M(<.KQ.`"JO?07'$3[->G^E?X>G^G?X2"#SFMTF*Q)*V/B#P"YE$P(D0DQP3' M(BKM[J4_T;^\,%MD1.&TB\U-+O*G&&3$1>EUI#^TR3JU2W$V1Z$;:I#;=062 MY[($UJ0>&*M"2<1$^^;7`T^%*\+4FO>%XF)9]524"@4"@4"@4"@4"@4"@4"@ M4"@4$=OG,31%B(@NEYC,O!CG8$^*\F'=::0W$_Y:O77:W:%ZZ[6[0AL_ZR'+ M^,2C':GSNX;+("*]_P"6<:+#X*]XX=Y>T<2\L2!]8^Q3[A'A1[1*1Q\B3,X; M8HB""FN[-CL&K?Z5_>%=O'MKKY2D;7-VTXX/6^4*+N5I6C3\;,;?VL:3P;_# M'_=AM87,C24E4$Y1137XLALA1$[JN(A-I\)5Y6XVR/1:-D2D469$ELH_%?;D M,EN=:(3%?QA54KPF%W;0*!0*!0*!0*!017^:?[C_`%N@1E=<1>SPVD0WW53[@,4V??$J)WZ]->JUYQ"^O7 M:\XAY]UGS\UA?"./:R^A+K M+LXE+=NDKUV3"S=,ZVM%]1&07LT_#$H;BIF7#>K9;C3[?=1*YNW1:G=HK>)2 M&O%8H%`H%`H%`H%`H%`H%`H-)JO66G=*V_MMZEBP!8HRRG6>=)/BMMIM+?OW M)TJE7IKFTXA>E)M.(4#K/ZPVI[L1QK`'T-!7%$=3`Y1IWS\5OP!M3[JNAKX< M1]NK?KX<1]NJK)DV9-D')F/N29#GCO/&3AEX2)55:V5K$=FNM8CLZ:E)06S9 M?\F@?H[7Y"5->SY?9]I_+-J7F8)BB](KB*]Q4Z4J)B)[I26RE=LPLS3NK[/?6\(QJU*%,7(CN".)W5 M3H(>^GPX5SMNFU)ZO>MHENZ\EB@4"@4"@4"@4"@4"@4"@KWF!SJTSI,W(3/_ M`-I>0Q0H3)(@-%W'G<"0%^]1%+NHE:-7'M?\/?5Q[7_"@M66J7UUMWA: M+3'9.+!S4F,D+-[;[2UN[6T*"ZG?($P`OQM7K7;[K'@7"%<(H2H M3POL'XI@N.WI1>E%3I1=M8)B8G$O>)9%0%`H%`H%`H(K_-/]Q_K=`Y3_`,+- M&_L.V_,VZ"54"@4"@KWFOS8A:,B)$B($K4$D[W.\7!ZXW.2\N_ ME'6.S1KV9Z2G58WJ4&EG:UTI`N"VZ7)@4D(."NBBC*=_-L&BKB#A_%$L%7HH,UJ]VAV[/6=J6T=TC-"_(AB2*ZV MTXN`&8IXJ%T8[Z#-H%`H%`H%!!>:/-*W:*@"V`C*O^C1-Y^'MITS>?AY7OU_N]_N;MSNTDY4QY=IDNP1WH`#N$4QV"FR MNM37%8Q#JTI%8Q#7U=9,FGFUS-N`JB0JG2BIM2JVK$QB4Q.%K:'UX-VRVZY*@7-$^2<1$$7T%,5V M)L0T1,51/"G<3D\CC33K'U::;,IG65Z%!H)6OM&1)+D:1>(S;K)N-.XGB(N, M`3CK:FF((;8-D1CCB*;Z#ZFO=&%%64-YB$P+S,8R%P547I"8L-D*;4)U%ZB* MG6Z*#OCZPTK).$$>[172N3CC,%`=`N*ZR*DXV&"^."(N8=Z4&5"O5IGRYL.' M+:D2K<8M3V6R0B9<,GV4KQW:*WCKW7K>87-I[4$&^6\9D1<%1,V>&*B7V=B]-<;9K MFDXEJK;,-G5$NN3)CQ8[LF2Z#$=D5<>><)```%,2(B+!$1$WJM!I&^8.A7/% MU#;DZPAUI3(8D8D8(F8DQS`V1)W415W4'<_K31T=&5?OUN:20R,F.IRV!XC! MEE!T,3ZP$2X(2;%6@S`OEE<=FLA<(QNVX1.X-B\VI1P,5,">1%Q;0A%212PQ M2@[H,Z#/ALS8$AJ7#D"CD>2P8N-.`6U"`P51)%[J+01S^:?[C_6Z!RG_`(6: M-_8=M^9MT$JH%`H([K_64/2&F9-W?1#>3Y*%'5<.*^:+D#P;%(N\BUZ:MN;VQ#QU=KK<+O`2.Z8JG4=_&P7'OHO1A7%Y&GPMCT:J6S" M35X+H-9+)J*R7"]Q2M4>Z6^Z7<[O'FJ^+:BCJMFHO-F!%Q6":^24<47`-H88 MH%<0N4VOH6F)T%V(-PEW*TA;XZN26Q6WDU+XQL`F*-FP]LK;Q.N,^$D%BZA"@\".\V3K`0TE&,]XL0%7FWI8\,04L!#?MRH&UY>: M/U7:=83[U?P!Z9=+3":N=Q:,,CMP9>?<<0`1<_#;:D-LMJHIBC?1LQ"R:!0* M!0*#0ZXU=!TGIN5>9?7X2($9C'!77C\1M/#O7N(BK5]=)M;$+ZZ3:<0\=UQ=W<013H$41$%.A*[=*16,0[-*16,0P:LL4"@4"@MFR M_P"30/T=K\A*FO9\OL^T_EFU+S*!0*#D!FV8N-DH.`J$!BJHJ$BXHJ*FY46H MF(F,2F)73HC4Z7VU9GE3M\;!N6*;,57Q7$1.@T3[.-<3?J\+8]&NELPD->*R MK(6C=4V_E[/T45ICW!6V[D,*[G(!.(LSCDR]PS!3%[-(RN8KAXRH:[!4--%Y M>:X@0>SE!6YON7&PW/M[DEH7Q:M3S3CD)T5)&_DD:+@FVF!(:9\"154,J_\` M+;5USEW.Z,QV8=UN$]+Q;"9>$FX,N#&9:B$ZI("F4@F%%_(&"`6'6WJ$GY9: M0NNFY^I^W!B-TFL36Y:$"]H=[&RS*>4!55!7)+3CF"]!)WT0)W0*!0*!04YS M_P"9+EIA)I:U.Y9\]O-<'A7K-1RV(VG<)W;CW!_"1:V<33Y3Y3VAKXNGRG,] MH><*ZCIE`H%`H-MI+_/?[V->'(TQ>ORO2V)7G%DL2HS4F.:.,/@+C3B; MB$DQ1?L5Q)C#6CO,K35PU+HFXV>WF`37N`ZPCJJ+9E'D-R.$X2(2H#O"R$N" M[%W4$8UKI[5NJG+-*M]M=TY<(DYEUZZ<2$[+;;;ASF$7)BZV8-.SD($S8JBG ML!<,P8%BT?JNTE`0=.L.A$TX[8SB%*`XCDAR2)J9FX1O'R3Q;<=P6?R_M,Z MSZ$T[9YX(W.MEMB0I0(2$/$CL`T:B0JJ**J&*=Z@Q/YI_N/];H'*?^%FC?V' M;?F;=!*J!0*#S%]8;5AW76"65D\85E!`5$W%(=1#<+9ORIE#O*BUT^%KQ7R] MW2X>O%?+W556UL*!0*!0*"V;+_DT#]':_(2IKV?+[/M/Y9M2\R@4"@4&YT?> M2M&H8DE2PCN%P)7=<9J5EJO7UWTYS`:& MYR%;TNK#JL#$9&5Q7V60=6U[O<>1'=O4 M.2^RPTV)@"*KXBTPUQ`7.[D<%L#(,"-44A1%RT&/;=8:LDVBR70[B0N2ITB- M(M)1`20+4!Z2])&3B@Y7QBQQ9+AH@<7:.(D-!N^5NM;EJ2,_]+MN,718T*YK M&1&5C!$N0N'&X!MJ1EL:(3XBXXIC@B*B4$ZH%`H%`H/,WUBM6G<]5MV)D\85 MF!.(*;BDNBA&O?R@HCWES5T^%KQ'E[NEP]>(\O=4U;6PH%`H%`H+9LO^30/T M=K\A*FO9\OL^T_EFU+S*!0*!0;W1-Z*TZCBND6$>0O9I*=&1U41"[V4\I*O< MQK+R]?E3/K#TUVQ*[ZX[4J:XG4QJ-V\-QGX@/R;O-9C(N+4;BJ8M-.K@ M&.4<%7-L3#?MH(Y(YD:WTW=;:UJ=I]UQU121!8AJK3L5NS]JDR&7P'#C-7#Y M#(I(F51ZNW-033E9JZ7J>P2YDU]I^7'N$R,YP`(&P!MXD:`5,RIBN M]<%V4$QH%`H%!BW6Y1;7;)=REEEC0F7)#Q=*`V*D6'P)4Q&9PF(S.'B>_P!Z MFWR]3;O-+-*G.DZYTH./B@GWH#@*=Y*[FND5K$.UKIXUB&OJZY0*!0*#;:2_ MW-;_`,)W^X7A&VN7)U ME55!^:DML^UR;/*CO1W#`WK0K69V1&!5*8]QLR<,6FLJ@J)@IJ@KCF M%*"(_P"O.8#NG9\F*\W(FL:>MVI&SCQ0<1#N`2F@C?\T_W'^MT#E/_``LT;^P[ M;\S;H)50*#X9@V!&:H(`BD1+N1$VJJT'AF[7)VZ76;A/&IJ MG_57=UUQ6(=NE<5B&)5UR@4"@4"@MFR_Y-`_1VOR$J:]GR^S[3^6;4O-(M/6 MJUR(3ARC;4B-GB$IHBM-=H`"V;-I"J[?!W:S;;VB>G\='I6(9:1;6CC7;(HL MRG4=SADP;%EET\Q$**.5VFWE52T8EJJ]57PD0A45W*F"U"5^Z>FG.L-NF&N+C\ M9HW<=^=03.B]]"QQK@7KB9ALB>CBYIG3SEZ;OAVV,5X:0A;GJT'&3,*`JY\, M<B8HFQ5JJ71<=':9N4MF5-MS#Y,!*;%LVQ5LDFJ"R%,<,"4^$../AW MX4&9#L=GA<#LD-EA8R/(PH`B*':#1QY47NN&*$:_&7:M!QM&G['9@<;M,!B" M#JHK@QVQ;1JK0>&[U< MW;K>)UT=QXDZ0[)/'>BNFIX=[#'=7=UU\:Q#MZZXK$,*KKE`H%`H%!;-E_R: M!^CM?D)4U[/E]GVG\LVI>:0PK9'*QH]':;F3UDQTR9L5^4%Y$:R[]XB2]WP) MC6>UY\NO2,3_`-GI$=&PCP;8[=3BR(*-.FC2N9@)MM4R(V2ABHJVAOKL7#N; MD5:\YM:*YB?X_P"$XC*-WB,,>X.@)(J$N?*@*V@YMN"`JK@G<[U:=O,>VQF;K('(_-!H1=(5)27$D3'K*O67XVS')$\(LJB]ZM'%KF\-'&KF\/*M=AUB@ M4"@4"@VVDO\`$@IUL3PZ.C##IK/>\^6.T+Q'1L$AV])ZQIL%&))--JZ7#4&<`0^, M8HJCAUL@YDV+@67>E4\IQF)Z?QA;$9:/4,((ES<;#**$I+PA%10,#(VJV:J6C$M;7JJD/+^8L75T%<<`D9X[J_>F"J*?"X(5DYE<4D_XT'*C2EG($!$%>HK614Z6^&2CD7 MJX;,*#?HB(B(B8(FQ$3=A017^:?[C_6Z!RG_`(6:-_8=M^9MT$JH%!KM2&K> MG;H:%E4(;Y(6[!4:)<:F$P\/5WW=*!0*!0*!06=I:YQIMH8!I?E8S8,O-KO1 M1'!%\!8;*0^;Y.J:7G+<59G$54141=B[Z#ZIFJXJ2JJI@JJO14)?%557%5Q6 MI04"@NS0!Y](6]<?RV4[0D%>2Q0*!0*!0*!0:[49D MWIZZ&*Y2"(^2%W%1HEQJ8[IAX>KONZ4"@4"@4"@M/3-_EU9GC\=UMTRQWXD^XJUP=OVG\ME>R7U1)0* M!0*!0*!0:K5G^UKS^@R?[DJ#P]'<5QALU7%2%%7PX;:[\3T=V.SLJ4E`H%`H M%!N]*7SZ,GY'2PAR,!>QW"OQ3^#I[W@HP\[C^=33E@Z$*Y$*_#&4?64GJS`4"@4"@^1Y*LW_3S:+@LF\0 M&\>\D@7%^R@85FY<_P#KEZ:^[T;7&:B@4"@4$5_FG^X_UN@";0\I,\(]A)UD1=BX+O3X M%KNTG,.W2`Y$QP623Q"%%807B(C[T@9+D@."N!.--$X"9%; M;:;(CPQ<+!I24&TL%\?M,Q'$Q..Y@DAKNCW4^^3HHR\KC1MK_P"2S8TE MB5';D,&ALN)F`D[E2^?M68G$]W;4JE`H-'J^?V:U$P*_*S%X2)]YO<7_`)>K MX52JV]DK[Y2L&SRWT^A[W8HOC^`^JNA_TFE<+;.;3^6NO:$MJBQ0*!0*!0*! M085[AG-LMPAAX\F,\R.&_%QM13?X:#P7:'\[&1=Z=8?`6W^FN[2\1\L&VZ1TY,LDPF6P[;%91MUV2%+,^&XAHV.4D;)UL6^$A M8EAGV'LM;9:)6MLM$J\>:5IXVE5"5LE%5%<4547#8OKK1.75B7.I24%EVO3>BIS4"4V`LVU(SP39DQ)#9-2XYQ0 M,I0`^J<(BDH@*TJ8$?6V"M9;7O&??_EFM>T9]_\`E]BZ0TL;=S:1D1E6OM:3 M@EN2![.^VZ^+;1FTBMD(--"?R>8C7,FS8BIV6Z?*)V6Z?*NIT1R'-D0W"$G( MSILF08Y5)LE%5'%$7#9W*TQ.8RTQ.8RZ*E+NA3'XS7-+36654O,H%`H-/;9 M*S^9^G(3*XC#G1R+#;B:."\:?BMMIM\-9.5/\DO37WAZDKD-10*!0*"*_P`T M_P!Q_K=`Y3_PLT;^P[;\S;H)50*!0>%N8]B=TUS"O=N$,@1YCCD4<,$[.^O& M:%%Z4X;B#X:ZO'MFD?#J:+9I'PPV70=;1P%Q%?\`U@M:HG+3$Y M#A<92=F%1CX/.?)B0(VJ!UNJB@B#LZ-E5\(]E?"/9ULW>[,O*\S-?;>5PGE< M!TQ)7#11(\47',HDJ*O?J?&/9/C#%(B(E(E4B)<55=JJJU*7R@4"@WVEM1G; M)'`?55@O+U^GADNS.G>^ZHP4?;]UC@8&`F!(0$B*)(N**B[E1:LX;[ M1#@\\TRT;SI(#38J1F2X(@HF*JM1*5?3GYNH+RTU&'!^6X$2W-DFY730&\WX M1DBE_97E>WC6;$1FTSKR]6O+E2',;,J9NMOWU7PKC&%?"N,8=$>Z7..F$>6\RB9T1&W#'8ZB(YN5 M/'RIF[N%3-8E,UB6+4I*!0=T.8_#E-RF"RNM%F%>COHO>5-BT>>W7%ZS65K6 MRXL7&$U+87J.)M%=XDFPA7OHM3$OF]FN:6FLLJI>90<7'`;;)QPD!L$4C)5P M1$3:JJM0E7MTF2[]=FPB`I./&,6VLJBXJ3I((;.ZX:I]KN5Y7MB)L1&9P]C6 MJW,6RUP[='QX$)AN.SCOR-`@#C\`UPVUE4"@4"@4"@4"@@//:P.7KE=>F604 MY$,!G,HF_P#PIHXY@G2JM(:5Z:K>-HEZ:K>-HEXWM\GAGPC7J&O57N$O1\-= MB)PZ\3AM*]%R@V)ZDU$Y+28=TEG,$%;223[JN("KBHYU+-EQZ*KX5QC"OA7M MATLW>ZL.<5B:^T[G-S.#IB6=U,KA8HN.)CL)>FIFL)FL,3?M6I24"@W^C[Y] M'3NSO%A$DJB%CN`]PG_4O]E.SG\_C^=?*.\+'JSAE`H-=?;NW;(1.["D'B,= MI?C'W5^]'>O_`!JLRESY!6=VX\PPGGF(;2P]+=>[KTA%8%"[YHZZ7XM8>;;% M8J]=,9G+TU7-:"@4"@4$5_FG^X_UN@).@:U<79XSB?5JXNSQG$^KSE%DE' M-51,1+#./]:=^NE'1T>S;-.MN@AMKB*_^L%J\3E:)RYU*2@4"@4"@4$KT?J; MLQC;IA?XI)+?\` M]?9\S<5238Y,<##9CO1ELL5^^(<-RU@YNW^F'OIKZO1=<][E`H%`H%`H%`H% M!YY^M+H-PTAZUA-J0M",*[H*8X"I?X=YXO=2NC$X=")PVP&!BA`N(KN5*],KN5`H%`H%`H)!H^^?1\[ ML[Q81)*HA8[@/<)?#N7^RG9S^?Q_*OE'>/V6-5G#<7'&VVR<<)`;!%(S)41$ M1-ZJJU"4'U%J+Z2_PT;,,$5Q(EV*ZJ;4Q%4Q047HZ:KW0FO(/1QW?5!7Z0"_ M1]D_-*J=5R8X*H`]_A`6=>XJ@M8>;M_IA[::^KTC7.:"@4"@4"@4"@4'PP`P M(#%"`D5"%4Q147>BI0>'.:>A7M%ZRFVCADEN-5?M3JXJAQ7%503-TJWM;+OI MCN5*ZG'V>5?F'4X^SRK\PT<.>BX-/+UMPFO3WE[]:8LT1+.JZQ0*!0*!0*"P M]&WU9\/LCY8RXR(F*[S;W(7A32&5)`TP)MK#!AE4V*F4%SDB[4(B2N-OV>=LM=*XA8=>*Y0* M!0*"*_S3_B2FA>C2`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`N($HKTJ*JF/APHC#O"?+'XZ%^$B?U9:G,IS+L2YR.D07P(O_`!J?*3,O MGTI(P\4$7X5_K2GE)F7`KA,+XXA^`/\`W9JC,F9=!F;GYPE/\)<4^QNJ$8?* ME*SN4O*W4VKXP.,-K!LZ.EQKJ^*Y%'-M2.*X<8N^G53I7'8N:_*BD8CK+A\G M7Y;9GT>J=(Z/L6D[0-LL[*MM8YWWC7,\^ZJ(A.NG@F8EP[B(B;!1$1$KG6M- MIS)$8;JJI*!0*!0*!0*!0*!0*#5:GTO8]3V=ZT7J*,J$]MREL(#1%07&RW@8 MX["2IB9B3%ND]W0UYG7_MIY2>4N!W*4J=5`#N[%5?@7 M'^JHS)F70X\\[L<<(T[B[$^PF"5",,_3R(DMY$W<,?REJ:]W+_\`I?TK`T7H M+4>L)O`M3.2(!995S=1>SLX;TQ3#B.)_[8KCWT1H M:QZ/M78;8VJNNX'-F.;77W$3#,:]")\44V#T=-;7)BS:ZB]K84(&I&`RQ[AEZKHCC@S(1-I!BNPO&'HV8BOKJV MS2>CUU;9I/1Y+U1I/46EKF5LOL)R'*3%6U),6W11<,[+B=5P>^F[O M;6\='2U[8OV:C!*N]'LO1,6 M+&B1FHL5H&(S`"VPPV*```"8"(BF"(B(F"(E8'N[*!0*!0*!017^:?[C_6Z! MRG_A9HW]AVWYFW09U_UC:;'=K);)JDC]\D%&CD*=0%$=A.+T(3IMM#W2,:#$ MMVNH\S4[E@[$ZT\V_,81\B!0583<9PBP1<>N,TTL2FW74AR!'-2S8;E7!7C)I<#1& M\NO=:O91VI_JUZ MNKKIG4EG)4NUIF6_#'K28[K(JB;U0C$45.^E>\;J3ZO>-M9]6K%QL_%)"\"H MM>D3$KQ,/I&`IB1(*=]<*3),LVV66\W54&U6^5<27<,1AR0OV&A*J3MK'>5) MVUCU6!ISZN_,Z\F)/P6[/%+;QY[B"6'3@RWQ'<>\0CX:\;2+4%Q;5"3M`HW$$DW*,9%+-_P#(1)WDK)LY%K?ADV;[6_"V MP```0`4$!1$$43!$1-R(E>#Q?:!0*!0*!0*!0*"+7/7T"WZ[M>E'6MMR9,EF MJ8H+;COECT913XZ4&-I/7LN]7%(LN"U$#LLF23H/$[@46>[# M(<";;ZN#6;-W]R4&D?YS'`T[:]6W6UF%DW%B[J=K*(ZJ1E<:D*+S7"C&F!JT(\;--`59%5- M-E!N-/\`,32VH9P0;2](DODPDDU[)*!IMLB,!XCIMBV!*31B@J6*J*]R@DA@ M!@0&*$!(J$*IBBHN]%2@J/77U;-&WXG)ED)=/W$U4B1@,\0R7;UH^(Y/_C(4 M[RU[Z^1:OX>VO?:OX4=J;D)S.L)DOT6MUC)NDVQ5D8]Q.%@+^/\`\>'?K73E M5GOT;*8RY%D)L5A\";<14[H&B%7O6\3VE[Q>)[2ZJNL4' MUH2=>%EI%<>+Q6A3,2^`4VU6;1'>59M$=Y3?3G)3F9?R!8UD=AQSP_Q5QQB- MBB[B47$XI)^`V5>%N52/EXVY-(^5UZ&^K!8K48S-2SCNTE43-"8S,14PVX$2 M+Q7,%[XHO2-9+\FT]NC!NV?W)ZQV71#A0X,5J)#8;C16!0&6&10&P%-R"(HB M(E9WF[J!0*!0*!0*!0*"!^U>*]!U(_#@J;^GI3+/!>98+O;";OS*(4-B*;DF,\VY$D2FC)]&0)I%[$Z!XMKEPS;1Q5` MS(G.+09VZ)*G7%(#\@FV7(K[,@#;>-MAQ4(3:`D;09C2\540,"1<<*"0Z=U/ M9M10W)EI<==BMN$RKKL>1'0C'#-DX[;6=$QPS#BF.*8XHM!SU!INPZBMQVV] MP6I\(]JM/#C@700$F!`2=!"J+4Q..R8G"B-9_54)3.3HZY"(JJJEMN*E@G3@ MW(!"7O(A@O?.M5.7,=^K53ES'?JI[4'++F!I]3^E;#,::!>M(;;X[")T*KS' M$;3'OE6JO(I/JU5Y%)]470D52%%ZPK@2=**G0M>T3$]GK$Q+[4I*#,M5FO%W M=1FTP)-Q=5<.'$97/BJ;T'> M@T'VSZ#DQ-4)J!RZC))7I;SK`QT!"*6U'8-,W$/#)V)M4V;\W=3`/B\LX:Y8 M7;G?]/#=5O?T3E'_`/J5_M63BXX\#M7RV3+CFV9LO5H(_P"PIAVU-VB7?'I% MN")%M^7@-@[V6)#DP0#B"6&96IIXEEWHG?Q"1:7Y>G8KPS(-@+(]7I3'''$L0:>T_I2S'' MO,.Z*\Q);.-%?=?9)ESM<++@O>2@PY'*C1QP0M,MV0Y:!9EQ M;7:G7A1F*DQEQI_LV`BXI<%UP0SF>057)E2@U[_+/E]-C1GG[N\^+L@CAS.V M-(12S!AL3:<`1^5`H31!EW$.[?02VQ:3AV:=*G-2Y4J3-:::DN2G$=4D9)PQ M+'**HN9\U[FW!$1$%$#=T"@4'3+APYC*LRV&Y#*[5;=`3''P$BI0:21RYY>R M3XDC2]I>-<54W(,8EVKBNU06IBTIBTN#/+/EPR2$UI6S@0I@A#`C(74MW!MEN@-JW!BLQ&UW@PV+8KAWA1*A#)H%`H%`H%`H%`H%`H.F9'*3$> MCB\Y&)X"!)#*BC@9DPS`I(8YDZ,46@@5>F(]Y6Y0+U<`NAM-\9QB2R!N1NSL1D`D;:'Y,VX3763!<4 MQ$DQ6@ENG+#'L-H9M<9]Z0PPIJV;^13P,U-4Q;!L=Y+T4&SH%`H,"X:?L-R7 M&XVV+-7##&0RV[L_'$NY0:@N5_+4BS%I.S*6.*K]'Q=JKW?D]M6\I]UO*?=D M1-`Z$A+C#TY:XRJN.+,*.WM_%!.Y43,RB9F6]``;!``4`!3`1%,$1.XB)4(? M:!0*!0*!0*!0*!017^:?[C_6Z!RG_A9HW]AVWYFW0;Z\KA9YRX/KA'=V1$QD M^(OYE.ES[COT%%Z.TR[-T7/M3]ND.R4O;]KM]W4949'F9,S+,F+%/*C#K3+1 M]9$P0TRXH6:@E^LKIJ:[:@L9Z=A2)=AM-U!F?P5)@NU,/&T\CS9@A*RR`H0$ MGR99L?BC01N7:K1<+%JJ-"AW.VE<#!FUQKA:[P8+):9>;242*+6=^1UB0T4D M%4:(L7%RT%TV8IAVB"4UGL\TH[2R6,V?ANJ"9PS_`!LI8ICTT&90*!0*!0*! M0*!0*!0*!0*!0*!0*!0:;65K9NVE[C;7H[\EF4UPW&8A@W(RJJ8DT3BH&($V1(2( MWALQ50C5ZY>W?_ M`$-IWZ&^B/H?Z,A?1O:,W&[-V<.#Q\=Z#\Y0/>.]!^@_.4#WCO0?G*![QWH/SE`]X[T'YR@>\=Z# M\Y0/>.]!^@_.4#WCO0?G*![QWH/SE`]X[T'YR@>\=Z#\Y0/>.]!^@_.4#WCO0?G*![QWH/SE`]X[T'YR@>\=Z#\Y0/>.]!^@_.4#WC MO0?G*![QWH/SE`]X[T'YR@>\=Z#\Y0/>.]!^@_.4#WCO0?G*![QWH/ MSE`]X[T'YR@>\=Z#\Y0/>.]!^@_.4#WCO0?G*![QWH/SE`]X[T'YR@ M>\=Z#\Y0/>.]!^@_.4#WCO0?G*![QWH/SE`]X[T'YR@>\=Z#\Y0/>. M]!^@_.4#WCO0?G*![QWH/SE`]X[T'YR@>\=Z#\Y0/>.]!^@_ M.4#WCO0?G*![QWH/SE`]X[T'YR@>\=Z#\Y0/>.]!^@_.4#WCO0?G*! M[QWH/SE`]X[T'YR@>\=Z#\Y0/>.]!^@_.4#WCO0?G*![QWH/SE`]X[ KT'YR@>\=Z#\Y0:?'XW$XN3#O8T'__V3\_ ` end GRAPHIC 4 a72487cs.jpg GRAPHIC begin 644 a72487cs.jpg M_]C_X``02D9)1@`!`@``9`!D``#_[``11'5C:WD``0`$````/```_^X`#D%D M;V)E`&3``````?_;`(0`!@0$!`4$!@4%!@D&!08)"P@&!@@+#`H*"PH*#!`, M#`P,#`P0#`X/$`\.#!,3%!03$QP;&QL<'Q\?'Q\?'Q\?'P$'!P<-#`T8$!`8 M&A41%1H?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\? M'Q\?'Q\?'Q\?_\``$0@`M`(]`P$1``(1`0,1`?_$`+(``0`!!0$!```````` M```````&`P0%!P@"`0$!``,!`0$```````````````$$!0(#!A```0,#`@(# M"@@*!@D$`@,``@$#!``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` MH%`H%!X>:%YEQHU)`<%0)0(@)$)++I,%$A7N*BW2@Y7VUNC>;W(Z7O*?/S0R M,?"1U3)AN/J2/M"@`K9M*/9JJ'\]%M06,I[>&7^[3BMTPLY-8W#B<> MN6?DI)=;\[:CZCD-2%`A4M30+9>E%1+*EUH+C![.+C M2)QD$/&27PBMM1NV+LQ)MM2DO75$4ET)PTV"UC_>4RKT"9(#`L&^R$!Z.VDD MT:()TTH2AVR-F)]F8HJ.MHH$G103;F!,S`\M')N?RA[5R3:%VWV3('4Y(76W M&89D/"%D<<4"7@G<54'4M!IQ[F=S)A3`,,FN5R&%?VQC66HSO:19Y3XTK[05 M4#P'E-]O2CMN"A<>%[A<;2W3NC<.$FN9O=N5@XN%@HFYLI,@.BW+\X+SL#C- M/&)BT#VD"[-`M<4042ZT&_.76.S6.V-A(F[=WZQP",N* MZ"/0G>2@D5`H%`H%`H%`H%`H%`H%!A=ZS9L#9^:._I>V\!GWLE)9CO3,1`RK;T6&JO.SU8>[2,(M-Z6'` M=-I54U).!)QH)1B_O$8O+&S%QF%D2LM+D/M/@:"3+HBQI M$514(B2Q6U*@6V\>?"LPMP8S'0W\7GH./R$F(X\K#KC3V/::=(9#"*X((7;^ M#Q*]EZ.%!D>8^[]X;>VAMK>T.82XB,<)S=L,&F2-R')T(;S2F!$)`96TCTHO M5:]!1QO.9W'Y&=A\G!GY7)1$&7.2.VT2PVYL9Z;%C+V0@"]FPR`&Z9)=P^%Q MOI#RS]X>#)A,O0<#(G2'\G%PX1V)#*H4B=$67'4'#[,2%1$A)5M94X:DH,SS M/RF_`V7$RFVY:X+- -X@X[,V3(FO:.S@<5-M$XFCAAT6U:D$2H-49_[P^^ M<-E,C*5&949F5D\8UCF@`V!<@8UJ0W)%Q![4Q5\R(_#T]GT(B\:"Y+[P&\,? M..;X(1=G?A:UQ)>D.@MN9*+E-OX MO)Q)#DJ+.B,28\IX1!UUMYL3!QP0%L1(A*ZH@HE^I*#(4"@4"@4"@4"@4"@4 M"@4&M>=VZMP[;C[3D8:<]$'*;@AXB>W'98D..1I:&IJT+K;J]L/9?5VX<>*+ MPL$4B<:'-+.FUSZ M;#02B%SSQTY)3F/P.1R$?'1PD9-V%V$CL>VBNS&!32Y9Q'&6?EBNG48#QNM@ MQ$/G2]N/<^U&,(I1((>#Q-4)`K1/O"X M0MOAE1Q61?A$33<7(OBVTR^)H^B.&Z-FFS58BW;1/E&"<+KI#,X+G+%SVK5KD2Q[,!LB+T#=1(J#7^.Y^[[F3V=MD^` M3I,?'9!,N+#2DV$S`KE'&4!1[+A('2*J*KHNG$O"H)%MKFKOG<&Z-GR9I3,% MMW-1H@V;QC4B%,FDR3SH)--WM6-97`4[,N`]/2J!OB@4"@4"@4"@BO\`-/\` M-B(`X+<;Q!`QXX\1B270:WX M%X7@]?'IH+2/RKY91T)&=IX@$,4`D2#'LHH?:(BHH=1^%\-NY06.=SO+/,N1 M,1N+'MS34X*QH.3QCIHVYDU=:BKHD,V;4ECN"JK;3:RV7A09C%;;V>X&,RD+ M"1HKD1D1QJE"2*]&:5"L`M LZ4<)-.E-.HNZM!6:VEM*'$FLLX:&W%FDCT MYAN,VHO$"ZQ4VQ%=:B7$>'3T<:#(8_(0\C!9G0G4>BR!0VG$NET7NHME14Z% M14NB\%H+B@4"@4"@4"@4"@4"@4"@L<[C,;E,-,Q^4U?9LIDVYB"ZY'NTJ>&B MNM$V8HH]-B3A01=-D\M7\+A-IIJ/'QU#)X/'_:$SM-,515MULNV[4FVE<&R* M2BG#A08^5R_Y-X^7'Q\A&XN3:5LA^2\YB'$.64DY"-SI[8DLY$23X`/B*(Z@IJ1$LM!F=S[4V9-V>WM MW/BJ;;#S6(C+DN0RA6,&8[;CP.`Z>IQ0'PS745KW6@MI7*?84N0[(DXXWG9$ M),;+4Y4M4D1@;)H!D#VNEX@`UTN.(1CTH5T2@QZ\UC!N66Q-^SBD)';;R#\=`,(X2)% MQC/-:B".0F6J^D5ZD6@R4;E?R\&0DYG#,$KD*T%K,Y5\LHN&-J7CA9@QR=D.S#DR1>#M8_FKI%+5WMT!8_U9(KF MG2G>H)A"B1(4-B'#:%B)&;!F.RVE@!ML4$!%$Z$04LE!6H%`H%`H%`H%`H%` MH%`H,!NW:NU-P?9?^804_L^:W+Q5I3\73-"_9&/8N-:W!XZ;WZ[4&/F;)V%N M/-/99%)_+X]M,0_)ASI`$P+1!)\V(&G4;%4)0,A4;KPU71:#!8WECR7EO2<= MBE;,I,!^L)DB)O6:*HEPO=.`93"B]!C7=D.,6E<:=%])$CS@58C>9M"$C7VH@$; MZI!0K:>_QH+O&\O=CX;,M2X;"QI+G9>:P5E/^;(41CL`-F&3BL(3;-AU"%T2 M@E=`H%`H%`H%!%?YI_N/];H'*?\`A9LW]AXW]#;H)50*!0*!08O=.(=S6V,O MAFGO-WQ+F8\R<(7&X\QR0(F) M1UUDK+Y-+J5>]850!#.Q.5V5C[&WAMT2AHYN%N0,%+D0,N2&E#M#<[$7"0'" MUMH2&8HB#VBV2P7FV-@YC&;[>W*^S`:&7]II+*.XX3YC.=ANL:E5AO7V*Q#2 MRE\]53K10BS')/-1YS$UB)AVI#4J-*)P#<0U[#+/3G`U)&O];%?\W5>XEOD\ M*"[BN]!19Y+;C7$M M0Y$B"LAMB,V$H2<5QH8T5Z.40")JZQY"N(1]%M1^"7!5#UB^3V/=>U#I,7"%=2IK0PV'L3#3<3@"9F(K< MB7.R&1*.JB78)D)KTL6+CX*JV+R"5E5-5[<*"04"@4"@4"@4"@4"@4"@4$>Y M@XZ=D=H9")":5]XNR,HPK8GFFG@<>83ONM`067IO0:]S.TN861S[F7A-N$HG M*)F:LXVP?Q\B3$?;BLLJ0%'<6+'<8(M(6(M6KBJH'I=B[X*4VZ\PY(9&3#?B MB_)!UUB-&W"UDAC&X;A$9-Q&=*+J)-5AU*B:J"C@MF\S'LHPF<2>S`&44ET6 M,NZ@_P#U76T'4#_:$/G"-.>$ENE=*74*"08[;F^F=@EC9#LAW,-Y&,['>\Z( M7SB-2&3<[8U><'4;0.(0"XH'>^D=2B(-D[7WAC',ND\YJL383B-)(R#DHTE> M=RR#LR<=<5I?-G6!U"2<1X\4NH1>)R_YG1<9&`).17)!$;:D/%EGC$GBPC\9 M\AUOK:^25AT5LED&Z6Z%"\D[%WT;/>H/&XKAI(;R)`TY&<:92/&%L7$[)UAT24C M%!140O"+M"2@OL5@M]8?.Q)L[SJ1M^$60&3'>DG-4H;LJ<]&0`1TW3>%EZ,U MH,7$.R<15L5()WL3&Y'%[*P6.R7"?#@1V)(J?:*)MM"*@I_/TVMJZ^F@SM`H M%`H%`H%`H%`H%`H%!!^8,'<+N4@R<0NE],7F(>.>5%4&,M*;86`^?`D%$1IX M-992.YQS'Q\AC&LFLE_'`>41Q]C(%`QT>))E/(^:OLMNQ']0 M$I^`J?5K>PA6-W(*C[:L.[FS,9C5^T?.F<\XY*TY!0EKA_/GG&P.6+XF:I#)L%^LU7_#01W%[:YKQQ MQ@/-Y1UMM8IY,9&2;?[51@S69(V.4=Q-YR,2#\GP5+@O2'V%M'F;$;ACBXK^ M,F!&B1G)*R8ZL(K."D0D)UH'B[46ISC#B(H+P%53OA2RVT^;;IH>/+*L148> M)B&67U.A+\SCH"N.K(N;:R0-4$C).FZ(A::#,-8K?"RG(^2%]7)6>@3\*XZ\ MKSK$=F<)]FX\TVTD2[($G9H2&@*%TN8;7H%`H%`H%`H(K_-/]Q_K=`Y3_ M`,+-F_L/&_H;=!*J!0*!0*!0*!0*!0*!0*!0*!08O,[FPV&>B,3G7/.9RFD2 M+'8>E/N=DB*X0M1P=-!<8?+X_,8UC)8]PG8B@R4^=&@09$Z42A&BMD\^8B1J@`FHE000B*R)T(E!2Q>6A9-A9$-7"9111# M<:=90D-L71(.U$-8J+B>$-TO=+W140+R@4"@4"@4"@4"@4"@4"@4"@4"@4"@ M4&)S^Y8&%6"T\#LF;DW_`#7'08XH3S[J`3A(.I0`1!L",B,D%$3IH/,/=>)> M!$F']E2B-X$@SS::?7L%760BAFA!85+4*JEN-!993F'M>"<``EMSBR+CC4?S M1Z.Y;LFW7"(M3H>!_P!.8ZDX(7!;4&1B[GP3[".%.CL.)&"8_'@A(;HJ+WJ"I017^:? M[C_6Z!RG_A9LW]AXW]#;H)50*!0*!04)L^#`C'*G2&HL5M+N/OF+;8I_:(E1 M$I$9(AK7;)H)9$W+61&W&6%^*Z-H:_&MZB>'KE5_+9F(/- MO+M6\_AL2`3@IM*3"HGTEU=JBK^"O&_`]I=1N]V7VUSMY?9TA9&?]G2B6R,3 MD1F_&R:7+DTM^KP[]ZJE^/>OHN6T7B,X3Q%14146Z+Q14Z+5XO(H%!%<_MS, MEO#%[JPRQWI,.'*QLJ!,=<9;<8E.,O(;;K;;^AP'(Z?X:ZD6UTM00;=O*O?6 M>S&0FK]D"SD(SD<@%U]I11]@$)"_Z=TG.S?:0T\,1+Y6@"NI!;YKDGGG\C)7 M',8AJ'HG-PGR-QI\&I;+(1XZ@$8A1N&3"]G8^BW@BM!7>Y3[T7'#42KW56@NJ!0*!0*!0*!0?"(1%2)4$12Y$O!$1*"`[FY MX^ZJBUT]*:KIW*]Z<:]O1[4X][>C6V9^\YG'5(< M/AXT4>@7)1G()4[ND.P1%^-:M5X/O*S7A>\HK-Y[\SY*KHRHQ06Z*#,>/:R_ MVC`R3XEKUCATA[1Q*+_9_-#?V0R;K,S-/NM"R1H/@#X2&*7N(IW:Z_\`EUY[ M?]J7.UQKK$UZ)JUOG>+-M.3=T+Q03;9-%ZOE&!%^.D\37/HS?RV96'S4W''5 M$EL1Y8)9;*),N+?^V*D*?ZE>5N#7TEU&Z?5D\=SWV.[//'9-QS%RVU02-T5< MCJ2I>PNMHMK7XJ8BEZJWXMX^*Y35:U?*(Z-@0YL.;&"5#?;DQG4NV^R8N`2= MT2%51:K3#SPK4"@P^\=NM[EVIE]ON/+&'*PWHBR!34K?;`H(>FZ7M>]K\:"( M[KVGOW\B@ZQ&QK(D!>;'93/'.$2H*%]8GA<"$PG?+C9^2VY%DAD@A% M-=%IIW(0U=[6:K"N6E2D-!$7G$<\)!1>/SR32@A,:!0*!0*!0*!049DV'"C' M*FOMQHS27,6VQ3ND1*B)2((AK+2WO+4AQT:)C6E^2J`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`ZB6R*1+W2);J MH7U!%?YI_N/];H'*?^%FS?V'C?T-N@E5`H%`H-5+-^L](6=/&FW6>D.>MR[OW'N67YUFISDLD M55:;)=+3=^IML;`/Q)=>NM+7JK3M#1UZJU[0P]>CT*!0;0Y-R&(\>:ZX@*Z+ MKWFJNJH@CWF[>A55%2W>6Z66RWKSV1,Q_+%Y\_\`K_#9,/,8R._(CMO$S'`C M1LP>6YFZ"&2ZE3YIMZ1<)>M._7A;7:8B?Z_KX*46AK'F#E(\&(Y%ADMY:JVV MM[V;1$[146P\.-DX==6NN.JQPM/GL^$-:5+?3#97-7=^TC;;A2EDXT5\+&R5 M4V;?V..IO\Q42_2BU7V\:M_A+PV<>MOA+I'E_P`TMN;SCZ8I>:91L=3^,>). MT1.LFUX=H'?3HZT2]9NW3:D]6;MTVI/5,:\7DUIS?W'GL(4>7!R!Q\7$AR7\ MPQ$[))K8$;0M3F@?%1D-QUU(XR)"OAHM[Z:"VF\XLJQD7,='QL%^6,HX2-', M-I1-,TSB6S.S+I")>9DX6(W@,9,AP\J]&F'-?;2;$C2D= M;!I@6W`!9H`I"YQXDG"@V5C'9[N.BNY!D(\YQH"E1VRU@VZHHI@)JB:D$N%[ M<:"YH%`H%`H%`H(5S!YK;;V8RK3Y>>9^:KWK5IZN/6GS: M.OCUI\T2KW>Y0*"6\LECCN5%DI>.C:*\G3X':MZNCO5S;/IWPS?V7VU^;=)Y MJ$S.5Y2!'7A(Y)L/%I$67#)H&U\-40QT^`BV3A?A=*KQKF8PRO+JB^_,K`AG M,R##JOJFI4(BU(9J2BW:R)9"32MOFI\%>VK,5ZIIK\[Q$>K2;CAN.$XX2DX: MJ1DO2I$MU5?A6O1])6L5C$,QMG>6Y=LR_.<+.TM&7LM>I71+B*"*Z ME15&@0><&?RDN#'Q>%A']JSEA0#?R0BHZ69CQK);::><:)/L]4TD/RBM\U5H M)1L/=^4W(,_SV`,%S&.K!F@)$6F;]> MT.<]T[TW+NB6LG-33D655:CHNEAN_P#NVT\$>'7TKUJM:6O36G9I:]5:=F#K MU>A0*"8N)_YG^6=$J&Z(T%LF7XQ`C9@/9@#8@*BMR4D(;:K* MO2HIW/FK76FT]I1>&DMSYC[4R9.`5XK-VX_<447B?YR_BM7HW>%H_'3KWE4V MOO+E.I:XV:JW[K&S56_=T;RVYVX7=1 M-X[)".,SI6$&E+ZA]?\`@D7%"_L%Q[BE69NXTTZ]X9N[CS3KWALNJRNU_P`X M9,MC%X\XF0"(]'>',8*40N@*N%(>>:/2B:E&R(BHMPN,CS@W=`S MN5Q7:8B6N)T]HX#3C7:-NA#,)#8>=/.D`!*>==00+2#7`E5;T%Q'YE?[8HKCK[!#_T[`D%VR12-+*HJ)$&SMN3,C-P< M.;D1!N5*;[=6FP)M`!U5-H"$R-4,6U%#X_*O:R<*#)4$5_FG^X_UN@\N_P#Q,O\`[LO^2U2&'^Q_V?PE-=,] MJS<>5^T\JZ^*W8#ZN/W-`]?YRW6N'T/#T^%/C+&5*V4%>%.F0);4R$^<:4P2 M&R^T2B8DG6BIQJ+5B8Q*+5B8Q+J/E%S9C[OB?9V146=PQ@NZ*6$)`#P5UM.I M?IC\:<.C(Y&B:3\&5OT32?@G\O&8V8XTY+B,R'&5NR;K8F0+>]Q4D6W1U575 MT)+>&R)F8R\)K`/9*5C7M,AQB`$CM9".HRZ(JB*J&!<5[33<44ANB4&%VM+Y M7!E.W8A2GGLJ0L/O3V@<%DLC*=-EA]5\(E??CJ0*>M4\&Y#K2X2S'L[/W4DH ML:)!'QF31N;YLGF[4J1%$'$1W1;MVD5Q%X^"5NL>D);0*!0*!0*!0:OYQ-CZJL_D\ M?'U5;V>9:>:-EX!<:<%0<;-$(2$DLHDB\%14JBHHGNO,;-VRQCX=<<+41N.+Q)>K MX+)T)07]`H%`H%`H-*2W.,LJK&V=Q.WR:)HQ\\U_OT1.#3JK_BV M^27SOROE9?)XWC]4=F;R./X]8[-T534T+R7-/"XW<68Q4UAQB/@8OGF2G$0) MH9[!'^U%F_:.-+?LT,$7ZRXVX7H,#B]Z-_0VZ"54"@U M5SZYB.;>PP8/&NZ,ME07M'!6Q,Q;J)$G<)Q4417\I>E$JUQ=/G.9[0L\;3Y3 MF>T.8JUFJ4"@4"@4$]Y=_P#B9?\`W9?\EJD,/]C_`+/X7>\LMYCBB9;*TB7= MH.Z@6\,OP+;XZ2\N'I\[_"&MZ/H2@4"@N\3E9^)R4;)X]Y6)L0T<8='J)/Z4 M5."IUIPKF]8M&)[-LQ,S&L!NIHE,(M^R?#@X'X>(WZ15%Z MZQ-E)K;$L;92:SB4=B1Y/1I+88QC('&P)#B^V9;0AE">'0D8)F0))H4E1I5546V MC^UP"0;)V8.UARC3FK7-[8>FK7YVPX[GS MYF0FOSIKI/RY)DZ^\?$B,ENJK6W6L1&(;-:Q$8A0J4E`H%`H)-R__P#,O?\` M;E_MA3U9G[/[8^::Y7(-X_'OS'.*-#<1^D2\!'XR5$J9EE:]=+4ZX2F9=TB6ZU#Z:E(K$1'H\4=%`H%!U1R/YAGNC;RP,@ZIYK%((/&2W M)YE>#;JWXJ7#2??X_.K(Y.GPMT[2R>1J\+=.TLWS+V1,WAAF\;'DQXNEP'$D M.LF;[#@N-D,B*\VXT;3K8B:);Y6JUTJLKHJ_R'9.:Q("(9G"I!2ZU+ M+B)F<0U3ELD[DL@[,Y0*#TTZXTZ#K1 MJVZV2&VX*JA"0K=%14Z%1:B8RB8RZYY1;]3>&U@>D$GVM!5(^1%.&HK>`[9. MIQ$O^5>L;?J\+8]&1OU>%L>BEN_E+C-V9HLAEI[Y-"R\U$9;%H3CD_&6,79N MJ!%H\)7=!73M+$O!$&O%XK=[DUCWY61F/Y)PI>=54SYBT`C);U,*(MC=594$ MBHB*BK\HEM>RB$AVQL;#;?R63RD9IH\L34KA0*!0*#<7W;=T'#W+*V\Z?_3Y1I78XKU2&$4ELG]IK5?\ ME*H\W7TBRES*=(LZ0K-9Q0*!0*!0*!0*#F+[Q&Z#R>\AP[1WB89M`447@LAY M$<<+XAT#WE1:T^%KQ7R]VEPZ8KGW:JJZN%`H%`H%!)N7_P#YE[_MR_VPIZLS M]G]L?-7W[ENTD-XULO`9LX_;Z9)X*?$*W^.D]W/Z[3WO/\(E1JE`H%`H)9RL MW.>V]\XR>IZ(KKB19O<5A]4`E+O`MC_-KPY-/*DO#D4\J2[&K&9!0*!0*!0* M!0*#DOG=N@\[OZ<`'JAXI?,8PIT7:5>V7N75W5Q[B)6MQ-?C3/NU>+3QIGW0 M&K2R4"@4"@4$PY<_WV3_`"8_]+M([LC]GWK_`"][\S/`<4R739R4J?A`/_DO MQ4E'Z[1F?.?3LAE&P4"@4"@V'R*W0>$W]$CF=H>73S%\;\-9K=@K=WM;#\!+ M57ETS3/LJ\NF:Y]G5]9++*!0*!017^:?[C_6Z!RG_A9LW]AXW]#;H)501OF3 MDCQNPL]+!5%P83H-DG!1-T>S$OB(T6N]5J6F4"@4"@4&?V!D3 MQV]\#,%=*-SF$<5/]V;B`Y_["6O+?7-)>6^,TEVG6(QB@4"@4"@4"@4'#^Y, MD>3W#D\B:W69*>?X]2..*2)\2+:MS57%8CX-K5&*Q#&UZ/0H%`H%`H,]M"74ZZ2F:]\ENM3"[ MKI%:Q$>BG1V4"@4"@4';FT,D64VIALD9:G)D*.\XJK==9M"1(O?0E6]8-HQ, MPP[1B9AEJY).ZC8J7]5!PP\\Z^\;SQ:WG M24W#7K(ENJ_&M;\1B,-V(Q&'BI24"@4"@4$EV;D6<=&S$MWBC;+4ZZ2F9=]:EH:Z12L1'HIT=E`H%`H*L24 M]$E,RV%L_'<%UI>BQ@J$/XTKFT9B8-_0VZ"54$'YW*B'5!RT(EZ$D-*O^NE<;?MGY.-GVS\G<]83$*!0*!0*!0*!0<$QU0H[1)T* M`JGX*WZ]F[7LJ5*2@4"@4"@>%?@2HBI913H7KX_@J,.9K$S$^Q4NB@4"@4"@ M4'9/*Q47EUMY4XHL%I47XJP]OWS\Y8NW[Y^:4UYO,H%`H%`H%!A=[JB;+SZK MP1,;+5?$'75>\.J]X<3UO-PH%`H%`H%!]131"%"70:BI!U*H:D%?A36M1ASX MQG/J^5+HH%`H%`H%!V_MA4+;6)).A84=4\4-8$]V%+)U""@4"@BO\T_W'^MT M#E/_``LV;^P\;^AMT$JH(!S[)1Y2Y\DZ1&,2?"DMI:]-7WQ\WIJ^Z'):*BHB MHMT7BBUN-I]H%`H%`H%`H%`H%`H%`H*D4].0@IUG*8%/&(J_B2O+?]D_)Y;O MLGY.[JQ&,4"@4"@4"@4"@X"Q!Z\9&[HMB*_FI:MW7]L-O7]L+NNW90*!0*!0 M*!0*!0*!0*#RX:-MDXO0"*2_`B7J)E$R[%Y07]EVU[K=?LZ/=>_H2L*_W2Q+ M_=*7URY*!0*!0*!08'?_`!V)N-/1Y6Q_PH:R M2ZO!BD+Y=WJ;KO7.+1\W>N<6CYN-\:]K8[-?E-\/S>K_`$5MUELU7==.B@4" M@R0[=RY8ISOK[-'?`U6M>N?.,X<^<9PNDV5N7M7 M&EB(!LM-/.HXXTT@B^VKS8JKA"FM6Q(M'RN"\."US^6KG\E6+R$&1`G/PI*( M,F,9-/")":(8+8DU"JBMEX<%KN)S&7<3F,K>I24"@4"@4'O`,%D=ZX''!Q1[ M(1&2ZO[U\!);\>@5JOR)^F?D\-\_3+N^L=D%`H%`H%`H%`H.`FF"Q^1E8LTT ME'=-G3>]C9)0)+K^36UIGZ8^39U3TA=U[/4H%`H,GB-N9C+B90&$<0#!E%4P M#4\X)$#0:E34X8MEI%.*VKFUXCNYM>([O4;:^=DQ8R:VB>RQKIT4"@4"@4%EE'K-BTG2:W+\E/_6N+2YL[:Y90CAGAW*PV*NJ!0*!017^:?[C_6Z!RG_ M`(6;-_8>-_0VZ"54%#(08V0@28$D=<:6T;#X=T'!4"3\"T'`F0Q\[`YJ7C9B M6EX]]R+)3H0B:)0)4[RZ;C6SKOF(EL:[^41*^;F_#QMJS.7C;5 MFZU'X>F$?AZ M81_=.8AY7*E*B,)'8LJ"*-@U=%,C2X-^"FE#0$XJMA2ZUZ:ZS$=7I2LQ'5AZ M[=E`H%`H+>9)1AOA_>%P!/Z_BKFTHF4Z^[CMMS,[L"LYGE`H%`H%`H%`H.+N>VW',!S0RR". MAC(FF4BEW4DJI.K_`/R!I.!IP,>XM7(G*W$J MU2DH%!)-G;N+;QNF0><`#K4N-$-MLVUEL(:,.D97(.S[15\!/"Z.'37ELU^3 MRV:_)>N[^%['XV*,)N"<62^LHHPDX"Q'F(["M`W)<>!548_A(0VN@JEEU7C\ M/6?Z]T?BZRM=X;NBY\(Y-Q$8?1`[9=(7%00AL+O%PT)%3Y:\$$1^;=9UZ_%. MO7XHQ7J]2@4"@4'AYT&FU<->"?A5>XE1,X1,J>V,'(W1NO&X4$57,G);8/2O M$&E6[I)T?W;2$7Q57W7\:S+PVV\:S+O=ML&VQ;;%`;!$$!3@B(B61$K(9+U0 M*!0*!0*!0*#A+?\`M]W:V^LQB1#0$.6:Q$ZECN_6,?#]48HO?K6T7S2&KHMF MD+=EX'FT,%X+TIUHO<6K,3E8B7NI24%QCIK\'(1IL=Q69$5T'F7A1"4#;)"$ MD1>"JBI>RU$QF,(F,QA,4W[`'*1YK;)--0(I1&8@QV.SD@^3IR>V2]F>U-VW M@"5AX=]?'\4XQ[O'\4XP\8SF`TUAU@Y&/YZ[I`NU<:9)%)G0V#:H26LK#6A7 M513LJIQLBHMIZY@MJZYA":]WN4"@4"@4%.0^+#2F7'J$>ZO@Y?'$R3.]8#7_`$DS1&R^ ME.`2!32R\7><&S:KT7$>LJN<3;CZ97.+LQ],M&191L%](%^4/]:=^M")POLJ MTZVZ&H%NG]'PUW$Y=1+W4I*!0*!0*!0*!04),MMA++X3B]`)_7W*B9PB98EU MTC(G'%X]*KU(B5YS+AV-R%Y>N;0V8+DYKLLWF%&5/$D\)L;6987_`/&*JJIU M$15D[MGG;+*W;/*V6R:\GD4"@4"@4"@4"@U-]XKEV]N?:@9?',J[F,%K>%L$ MN;T4DN^VB)Q(ATH8IWE1.)5[:-GA;X/;1L\;?!R4R\;1HXVO^A4K6:K+1I3; MX^#P-/E`O2G_`*5W$Y=1*M4I*!0*!0*!0*!0>'GVV0U&MDZDZU7N)43.$3+$ MR9)OGY7$SERZ$^Z[R^,4D;WR#5M:%$PJ%TZ;VD/HG?5.S%>\?4M9W M*V9G$>C.Y6S,XCT=#U452@4"@4"@4"@4&@OO1).H:M<79XSB?5:XVS$XGUA$Z5^"HF<(F<,1(?-] MS6?"W`1[B5Q+ETO]U_8!X_$R-XSVM,K*#V&+0DL0PQ)"-SC_`+XQ2W]D45/E M5FQ`:67BG%%[BIQ3JH.+>:/*_,;"S7FS^J M1B))$N,R5N#@IQ[-RW`713Y2=?2G#@FIHW1>,3W:>C=%XQ/=#6W'&RUMDHEW M4_KJPL+]G*`O!X=*_2&ZI^#I2IBR?)>-N-N#J;)#'NBMT_%743E,2]5*2@4" M@4%-V0RU_>&@KU)TJOP(G&HF8A$RL7\D9>"RFA/I+T_$G17,VME^2GA4>3 MOS],*'(WY^F'3E4E,H%`H%`H%`H%`H%!RGS[Y-O[=R$C=&"8OMR4>N6PVG_T MGC7PO!3H9,N(KT"JZ>"::O<;?_;*]QM_]LM-(JHJ$BV).**G!4JZNKYC)D*: M7DU)],>GXT_T5U%C*]:D,O)]6:%;I3K3X4Z:ZB8EU$Y5*E)0*!0*#RXXVV.H MR04[JK:HF43*S>R8IP9'4OTRX)^#IKF;(\E@9FX6LR4B[JU"$^Y1\I)%;%F.PVE@!L$TB(IW$1*S&:KT"@4"@4"@4"@4%*5%C2XST64T+\:0 M!-/LN(A`;9HHD)"O!45%LJ4'&G-_E/D=BYDG&0)[;Z``9@:&!*))UI5E87[.4!;(^.E?ICQ'\ M'2E=1;W=>2\`P,=0$A"O0J+=/Q5W$IR]424"@4"@^&8`.HR013I55LE,BR?R M8IP934OTBX)^#I6N9LY\E@9FX2F9*1+UK7*&QN37*.=OC+C+FMDUM>&Y_P!= M(XBKY#Q\W:5.-UX:R3Y(]=U2JO(W^,8CNJ\C?XQB.[L6/'8C1VH\=L68[("V MRT"((``)81$4X(B(ED2LUG*E`H%`H%!%?YI_N/\`6Z!RG_A9LW]AXW]#;H)5 M0*!08[<.W<-N'$OXG,10EP9`V<:-.*+U&!)Q$QZ1(>*5,3CLF)PY1YG\A-R; M2=>R&*!S+[=2Y)(;'5(CCTVD-CTBB?X@);Z2#UW]/*B>EE_5R8GI9JU%1414 M6Z+T+5M;$2Q:A51+Z0JJ+^%*81A6";+#HJJF3D6\(05 M>\BI_6M3Y29D3*2+K<`MU=-1Y29D+)R5^2@)\2K_`%U/E)F5$Y4DTL3I6[B> M#_LV6H%*R?Z:@58L63+DM18C)R)3Y:&([0DXX9+\T`%%(E^"HM:(C,N;6B(S M+H3E1]VTA<9S6^6Q72J''P%Q,5[BRR2XEW>R%;?25>(U0W`FGFB4'6G!43`DX*)"5E%4ZT6K\6B8S"_$Q, M9AX5$6U^E.A>Y3!A6"5*#@+I6[A6+\976IZBL.3E)\I`7X$5/ZZGRE.9/M21 M?@`6[O&H\I,R%DY'S1!/A15_K2I\I,RIG-EGTN**=:"B)^/I_'49DZJ"\5U* MJJ762K=?PK481@541+JMD3I5:3(V[RP^[UN'R>'!S*[;XGVH)KD11Z;/@/$@ M1/\`%%+?2T]>AIY43TLOZ>3$]+-5(J*ETXHO0M7%P2XEJ%5$EZ2%5%5^%4J, M(PKA/F!;PT-.O6*+_LZ:G,IZJPY5U.!-"O?0E3\5E_IJ?*3,O7VJO^Z_]W_I M3R3Y/)95U?DM"G?4E7\5DIY2C,J1SY9?/0$_L(G_`,M51F3,KFS0EQ;!?I MDGY*+TI3W-_0VZ"^E;QQ,;>$+:KBDF1G M17)31V^K30O@MJ7TW!!TQ3Z+94%EM??L3/2WXWFCD-8[!27#=,%%!"7(ADEQ M5>@HA%\"T&)]LF#CXZ!FLI#D8[;N69D2,7E'-!HXW&9.3=QIM2<;[5AHG&DL MMT3PM)6&@RN+YE;6FSLI!>F,PI>+>("8?=!''&A!DT?$+WTEYT"6Z;JG=2@R M.-WIM+*3PQ^-S$.9.<922,5AX''.Q7YZB*JJ)\-!$-]8N((CQ@,9Z*BK8XQH MR]9/G&R\HHGP`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`*%NG M+_RAJ_-;$WI@R5,M@YL,4Z739-6;IW'@0FE^(JL5WTGU6*[Z3ZL")@7R20O@ M6]>L3$O2)R^U*7PB$4N2HB=U>%1E&64Q&V-R9HQ'$8J9D-=K%&8<=!$7H4C$ M5$4[ZK:O.VZD=Y<6W5CO+9>U_NR*/$DF1;NBTR2A_K.BO> MKPOS(](5[\N/2&\]B\C]B;0)N2Q%7(Y4.*9*=I<<$NZT"(C;=NI1'5W26J=] MMK=U2^VUN[8%>;S*!0*!0*!0*!0>776F6C>=-&VFQ4W#);"(BEU557J1*"#8 MGFD&6PT'(0\:3;LG+_8\J%*<5IV.1:B:<)$;._:-*VYIX60^E53B%9GF,Z_@ M]J26,E@Y+YF^K:EI:::+H;N162R7N@8B9SNA0BR./E8M MT=PXHI"3(;:NNQD&,Y%0B&4+/'4U/;<%%;3CX"V51N&=9> MCD2(JIJ1M\&STK;P5TV5.*<*#7V_?N^;(W2XY-B`N#RSEU*5#$>Q<)>.IZ/X M($MUNJBHDO65>NO=:O9ZZ]UJ]FB-U?=ZYE8(G'(\),U"#BDC'KK.W5>.5GM7 M>!"^&KM.76>_1TK% M;Q/:5&NG10*"M!A39\A(T",[,DKT1X[9/.+\``A%^*N+7B.\N;7B.\MD;4^[ MMS(SIMN2XH8."5E5^>MG=*_1CA=S4G<_+K';JKWY=8[=6^-@\@MD;3 M-N8\VN9RX*A#-F"*@V2+=%98X@"]PEU$GTJI[-UK=U/9NM;NV77D\B@4"@4" M@4"@BO\`-/\`@K[4V`>"R+\M[(#-;D1CBFQV'9I9R6_,4E7M' M/GRW!M]&W6BW#&3>3>/G8"/MV7DY#F$QL.7"PT;2.M@9<9R&)FXM^U*/'>(& MKHG#B6HN-!;Y/DR>5@4!4 M14LO%%H,5+VEM286J9A8,DOI/1F37AP^<*T%D'+CEXVX3C>U\0#AWUF,",BK M=;K=4;J?*4^4LK!P>$Q]O,,?&B:>`]@RVU;A;AH1.KA4(7M`H%`H%`H%`H%` MH%`H%!")FP-F-3,8#\THN923+DPY?:1VYLEV4CBR!55;17ATO'X%K(EN'@I8 M+O'[2VAAL7D(CTI'L9.CL8J:W,>;[-6H['FH,J2('%6EL5UNM!8Y3EEM,H%\ MSD9;H1VF(L"=+D-B<-F/(:DM`RYH!+J]&:4CE$(EH+1WEKL(7DG_`&P_ M'EX@U0)P2V@?)5+382(I;H*A](DHVH)=MS;D#"-2DA/O/MSGDDN$^X MCJJ:-`RBH=M2_5M!Q)5O:_2JK09>@4"@L)VW\#D%59^-BRU6]^W8;=Z>GY8K MW*#&ERYY>FZ+I;7Q).CP%Q8,922W<71>I\I3Y2O8>U-KPBU0\/!C$G%%9C,M MKQ_)%*A#*4"@4"@4"@4"@4"@4"@Q^X,*SF\-*Q+[[L>/,!6GS84$-6R^6'U@ MN#8Q\$O!Z%H(LYRQVE"S*RX4QS#+.EQI+.,B>:,QBDP6R0":9)DO"4%)3LOA M=?0E@OXFR,`>"Q.*BS7C+;;R+CXW*G; M47(Y)(N8R#,O+(^]E([E.:;(B<=):A\&@FN*QX8W&1 M<>VX;S<1H&6W'=.M1;%!'5H$!O9.I*"ZH%!;S][LH"UU%[1ZNHO:/58^POE/VW;?Y>9U] MSM7]/1;Y'::?Q5U^6_O+K\MO>5_#Y3Z$ZAK7,W MM/JYF]I]4EAP8,)E&(<=J,RG0TR`MBGYHHB5RY5Z!0*!0*!0*!0*!017^:?[ MC_6Z!RG_`(6;-_8>-_0VZ")<_F)AP<(_#8E39$:23C>.;:>445&_! M[O"]!<)EQ2-LG@LX0%Q%25%MT4$DH%`H%`H M%`H%`H%`H%`H%`H%`H%`H-5\QMM9F7S)VOF,3B79CT=R,$M]U&W(!1VWG'3U MHI";#T:_:MN)\I20;&J60+61MG+@;DA,`](@M9?,O)CQ1H5,)\,V6'A;4D!4 M(B)M;\1UW7AJH,?D\/OZ7$P(0@G?:VT\<>-COJ,!B'V=*S$O+XO;DO"S8+\8L:RL:*ZQ,\R.0((^(26R,Y'GCA MJXX8(WI!552O<-C;!P,W;^RL+A9SHO3($1IF0;=^S0Q'PA;OQT`O@AWD2@S] M`H%`H%`H%`H%`H%`H%`H%`H%`H%!K#F9MS(S-Z;:RN*@/2IS$B,R[VC8.0EC M:W3<&E;6&4UE8TF?AY\.%M[&L,0U8>E! MCHLIPY4F.3KAH;X%V6KP5+3<@%++01S.:09,8%'S7MG671&2.E6Q:$EXN+<)KRRP^\<7N+()E$?-B]X[T'Y2@>\=Z#\I0/>.]!^ M4H'O'>@_*4#WCO0?E*![QWH/RE`]X[T'Y2@>\=Z#\I0/>.]!^4H'O'>@_*4# MWCO0?E*![QWH/RE`]X[T'Y2@>\=Z#\I0/>.]!^4H'O'>@_*4#WCO0?E*![QW MH/RE`]X[T'Y2@>\=Z#\I0/>.]!^4H'O'>@_*4#WCO0?E*![QWH/RE`]X[T'Y M2@>\=Z#\I0/>.]!^4H'O'>@_*4#WCO0?E*![QWH/RE`]X[T'Y2@>\=Z#\I0/ M>.]!^4H'O'>@_*4#WCO0?E*![QWH/RE`]X[T'Y2@>\=Z#\I0/>.]!^4H'O'> M@_*4#WCO0?E*![QWH/RE`]X[T'Y2@>\=Z#\I0/>.]!^4H'O'>@_*4#WCO0?E M*![QWH/RE`]X[T'Y2@>\=Z#\I0/>.]!^4H'O'>@_*4#WCO0?E*![QWH/RE`] MX[T'Y2@>\=Z#\I0/>.]!^4H'O'>@_*4#WCO0?E*![QWH/RE`]X[T'Y2@>\=Z M#\I0/>.]!^4H'O'>@_*4#WCO0?E*![QWH/RE`]X[T'Y2@>\=Z#\I0/>.]!^4 HH'O'>@_*4&''VW?YOO0?_V3\_ ` end GRAPHIC 5 a72487dia.jpg GRAPHIC begin 644 a72487dia.jpg M_]C_X``02D9)1@`!`@``9`!D``#_[``11'5C:WD``0`$````/```_^X`#D%D M;V)E`&3``````?_;`(0`!@0$!`4$!@4%!@D&!08)"P@&!@@+#`H*"PH*#!`, M#`P,#`P0#`X/$`\.#!,3%!03$QP;&QL<'Q\?'Q\?'Q\?'P$'!P<-#`T8$!`8 M&A41%1H?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\? M'Q\?'Q\?'Q\?_\``$0@`M`(]`P$1``(1`0,1`?_$`+4``0`!!0$!```````` M```````&`P0%!P@"`0$!``,!`0$```````````````$$!0(#!A```0,"`P0# M"@@("P<#!0```@$#!``%$1(&(3$3!T$B%%%A<3*3HV56%RB!D4)2([05"*%R M),1UA3='L<'18H*BLC-S-!:2TE-CLW0UX4,EPH.45381`0`"`@$#`@4$`@(# M```````!`A$#!"$Q$D%187$B,A.!0C,%\,&Q%)'14O_:``P#`0`"$0,1`#\`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`X#\I8[-0)G.V^AJ-G2USL M[$23)5JWSEAS%?./)DPW'U)'VA0`5LVE'AJJ'\M%PH+&4]K"[_=IM6J85\FL M:AM-O6[/R4DNM]K:CYCD-2%`A4LS0+@N]%1,%3%:"XL7-*]L7R&D>WNSBU+; MXVIWHTB<9!#MDE\(K;4;C%PQ)MM2DO8JB*2Y$V9<`M8_WE+J]`F2`L+!OLA` M>CMI)-&B"=-*$H<9&S$^&8HJ.MHH$FZ@FW,"9>!Y:.3;_=#TK)%GE/C M2OM!50.H\IOMY4=PV*&([,<0N-):IU1J&R37+WJVZP;7"L434UTF0'1;E]H+ MM8'&:>,3%H'LH%PT##$4043%:#?G+JW7JW:&LD2^2GYEY&*!W!^49./<=WZ1 MP",MJY"/(G>2@D5`H%`H%`H%`H%`H%`H%!A=:S9L#1]\GP7ECS(<"3)CO"($ MHN,M$X/5<$Q5,1VXI0:4LO-'7TO3=@O[URDLQWIEH@75MZ+#57G9ZL/<2,(M M-Y6'`=-I54U)-A)MH)1:_O$6N[&S%MEED2KM+D/M/@:"3 M+HBQE$514(B3`L,RH%MK'GPK,+4%LMT-^UWZ#;[A)B./*PZXT];VFG2&0PBN M""%Q^KM+'!=VR@R/,?5^L-/:0TUK:',);1&.$YJV)&Y#DY$-YI3`B$@,L M,H[T7HPQH*-MYS.V^XSK/$(`O#89`#=,D MQ!HN)=--RUL5Z,&R;M!QV9LF1->R<.!M4VT3::.&&[#-F01*@U1 M?_O#ZYLUTN,I49E1F95SMC5N:`#8%R!;6I#B#=-00[1/;CLL2''(TM#4U:%UMU>,/"^CP MV;=J+LP"*1.G6;]%B]EC@8-S9D=EHI4AGAY28[1DW1PD7-V%P)'!XT5V8P*97,'$<99\<5RYC` M=N*X!B(?.E[4>I]*,612B0Y-WDVR\QR6/(;>$;>DQHFG@SKLS#XJCMS(J+LH M/NJM5\P;+S0=TN5Q<6WZHA&>CY(LQ,L24P0'+[0IM8N!'9S.[5VAU=IJA(%: M)]X6R%I\+J-JN+\(B:;BW%\6VF7Q-'T1PW1P:;-5B+BVB>,8)LQ7*&9L7.6+ M?KY;;7:;#<)(7"%"N9RT6.(1XDY"RN.B3J'U##*2"B]U,=F(8GF/K/7^E-3E M/B3(1+'A@."(NX<5$BH-?V[G[KN9/9T MV3X!.DQ[=<$NXL-*383+"MT<90%'A;)`Y1515*QG+$!3AEL'?O5`WQ0*!0*!0*!017]Z? MZC_.Z!RG_99HW]!VWZFW02J@4"@4"@\2!8)AP9""3!"2/"Y@H*"IUD+'9AAO MQH(I&A,N&T8_1FZAX;\5S8;UH,L7++ MER4D)1:7M2R`5M0=6$QF161RMX+D^0.Q*"]E633$'3+]L*T1UT^PRX1V=B&+ MK)-CBX0!#:`D-2+:@""J1;DQH*1Z#T02VY2L%N_^(Q^RQ2*RB1L2S+P40<`Z MW6ZO3MWT%I'Y5\LHZ$C.D[0"&*`2)!CX**'Q$144.@^MX<.Y06-]OO+.\N1+ M1J*WMS34X*QH-SMCIHVY6K]ELFDTS';XZA<[';_M"9Q,L515MULN-Q2;:5P<$4 ME%-FR@Q\KE_R;M\N/;Y"-Q;FTY#=B&5QE-SVR_R4-&G^.D@!+^Z`!/`NXM!< M2.1/*V0_)>+E>(`-G)OE;:6AG=A>C,V]YFY<4KC M<,C;L!E6F7RS2,N+3*9<5^30-:VCE'K-8P:EEL3?LXI"1VV[@_'0#".$B1B, M9YK,01R$RS8Y17H1:#)1N5_+P9"3F;,P2N1SCHBJ9LJR]'"*?T1$K69R.V+9 M'ES*.Q5VK06LSE7RRBV8VI=N%F#')V0[,.3)%X.+'[*Z12U=XZ`L?Z,D5S+E M3O4$PA1(D*&Q#AM"Q$C-@S'9;3``;;%!`11-R(*8)05J!0*!0*!0*!0*!0*! M0*#`:MTKI34'V7_J$%/[/FMR[5A*?BY9H8\(QX+C6=P=N7''IPH,?,T3H+4= MZ>NR*3]WM[:6A^3#G2`)@6B"3V8@:=1L50E`R%1Q79FQ1:#!6WECR7EO2;=: ME;,I,!;?/@0KB^B/QHJE%QD--/?2$R1$WG-%42V8XIL#*63DMR\LT^-<(,*2 MDN'(&7&<=GS74!\64C\3*;RB2DTF5Y7%.)J2T-/ MO6<4E/-FVT>5J08QVW``Q+.(.*0*BXH*]%!A%Y&\M^Q,04@R`AQ9"RH<<)TP M0CD2.(01T%Y."V7&/,(8(N/>3`+NRZ)Y=Z%D1Y\9?LY\HHVMF1,G/F)1XP'( M%E!D.DW]&#;A[$V"A+NQH,:[HCDU>=6?ZA=[/<;_`##!M'"N#[P.$[%-QMM( M_')A)UD3IH+YKDSR\9M:VYNW&+2N-.B^DB1V@58C=C:$)&?BB`1O MHD%"PR]_;07=MY>Z'LUY:EPV%C27.%V6"LI_LR%$8X`&S#)Q6$)MG`KCRCU,^Q=PAC:X+5W@W2(D!AUX(T4[E!C1,[( MHQM3B12=-$$,5+I7$B"UN?);4MUU-)N%Q&TR+7-GL2YEO,G"%QN/,G&@HL\EM1K:6 MH0KB$>[#,?5+8JAZM?)Z^6V9;I+0VZ M)&MUQ;N'`CD;HHV+%M:?`62CB*F\=O=>S#E,7"%+A&485P)YIIX''F$[[K0$&"[\:#7MYTES"N-_ET+K@I3;KS#DAD9,-^ M*+\D'76(T;4+5R&,;AN$1DW$9RHN8DS8#F5$S4%&Q:-YF/71A+XD]F`,HI+H ML7=U!_RKK:#F!_B$/:$:H/%\T;S6F,35B2ID:>XKAI(;N)`TY&<:92/&%L7$X3K#HDI&* M"BHA=8N(24%]:K%KJSWV)-G=JD:?A%C-9# M%Q#P3:*MBI!.]"6VXVO15BMURV3X<".Q)%3XBB;;0BH*?R\N&&;IWT&=H%`H M%`H%`H%`H%`H%`H(/S!@ZA=ND&3:%ROI:[Q#MSRHJ@Q=I3;"P'SV$@HB-/!G M+9U\ORJ"%AHWF4CM\X6QJYK)?MP'=$8<>;*DPK4\+QNW!4?;DL,J03;S'EY@X<@#ZT9LU4,X8^+G M3'&@H1M(:L.(F\Y&)!\7JJ6Q=X?86D>9L1N&-KBOVR M8$:)&+BBU.<8<1%!=@JJ=\*5VTGS;=-#MY75B*C#Q, M0RN^9T)?8XZ`KCJR,3;62!J@D9)OQ1$++09AJU:X64Y'N0OJY*OT"?97'7E> M=8CLSCD3Q/AN/--M)$Q9`DX:$AH"ABF)AM>@4"@4"@4"@BO[T_U'^=T#E/\` MLLT;^@[;]3;H)50*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0 M*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*"* M_O3_`%'^=T#E/^RS1OZ#MOU-N@E5`H%`H%`541%55P1-JJN["@@>I>=W+ZQ* M32SEN4H=\>WHCR^451:^#/C7O3CWMVA[4X][>C7-W^\]<24AL]D991/%=F.D M[CX6VT:P_P!M:LUX/O*S7A>\HO,^\%S+D$JM2X\3'Y+,=M43P<7BK^&O6.%3 MXO6.'3XLEH_FUS(N4F0$N^F8M@A"B1H8[57#H8KK_J:\]E'G4C7CQ]-N![ M2ZCOH]:6\NR6MN- MNMBXV2&V:(0&*HHJB[E14JNZ>J"A<)T:WP9$Z41#&BMD\^0@;A(`(I$J`"$9 M8(FY$QH,);.8.E+F"%"DO.&;+4IJ.426V^Y'?,6VWVV'&A=<:4C3$Q%13I5* M#+3;Q;X,VWPY3BMR+J\<>".0R$W6V7)!`IB*B"\)DR3,J8X;-M!G+RRJ3832NDD=BLP!1U/*JH,_$=>].->WH]Z<>]O1KZ[ M?>?N!$HVFQM-"GBN2W2<5?"#:-X?[2U9KP?>5BO"]Y1N3]XCF.\JJ#D.-CCU M68^*)CW.*3J_AKTCA4^+TCAT^*0Z*YI\P[S&<)ZX<:0DG@M-A'83,F0"1,$; MQWE4_P#4U]4T;7.`$BDN"Y05HV\Q)CMPQPZ: MXMQ=?O*M&RR^A\W"`U"Y6Y,!7`W8SB+\0'@GG*\[<&?24QNCU9W3/,_0VI#% MFVW1KM98(D-[%EY57H$3PS_T%6JM]5J]X6;:[1&9A*:\W!0*"-L8 MTJ-*CMR(KH/QW4S-/-$A@0KTB0XHJ4%2@4"@4"@4"@4"@IR)$>,R;\AT&6&T MS..N$@@*=U27!$H->ZAY^CZ8U!M4[X*56*<6]O3 M#WIQKV]$`NOWG[N9*EILD=@4V"#%:L5X/O*Q7A>\H])^\-S M(>55!Z+&QQV-1T5$Q[G%5Q=G?6O6.%3XO2.'3XI+I+FGKZYP$?D7'BO*ZK8@ M+#"8[$P3`6\>FI_Z>MFCN(6Q.E0<1O*B?CK7E?@VCM+J-L) M%IKF-HO4N4+3=&79)IBD1Q59?[^#3B"18=*BBI52^JU>\+%M=J]X22N'!0?# M)1`B05-41504PQ7O)BJ)00B%S8;,9N,LU35]M<8R?^Z(HJD0="**+BNQ*"NNI]-(+ MQ+=H2#'!MV02R&L&P?PX1GUNJ+F*957?T4&1$A(4(50A),1)-J*BT'V@BO[T M_P!1_G=`Y3_LLT;^@[;]3;H)50*!0*"#\PN;>G-&MK'<7M]Y5,6[:R2(HX[E M>/`D;3X%5>A*]M6BU^W9[:M%K]NSG'6?-#5^K3,+C+5J`J]6W1\6V$3HS)BJ MN+WS5>]A6GJX]:?-HZ^/6OS1.O=[E`H);R\_SDO_``Q_M4]65_:?M_7_`$VO M&2RG#B'+B-Q\[AB+J$^I'P65_O40CZKCQ#M`45,%PKRGRS.)_P"/\[,N,/FI M;0Q#X;C`MM@F`N-BKBGF,CVJAJ2(B<-1PS8]/333LF>Y:N&F=7WG[0N2M-%C M%BX@WAN(OEE^#!/_`%KU;7`T>%?*>\KG2',;5NDW46TS22+CF<@/?21SZ5ZB M^*J])!@O?KQV:*W[]UG9HK?NZ,Y<\Y-/ZORPG42W7O#;"<)%%W#>K![,W=RJ MF;PHF-9F[CVI\F=MT6I\DROT*1.L=PA1\G'E1G6&E<51!"&[(?==5H"'JP<@-B"^,JJ710 M62XZ\++N+-RCEF1(RJA87%H\54BQ##-XI4%.) MR.U!&CJW(EMP9,-]8\EC!U@!RPS`7,'"P+#!.NI!4;Y M+ZE2#ESV]JZ#,;DNW%'Y3W:S:%YM),AF0#K0N$W(42!M$+'K(\F`H(;HH%`H M%`H%`H%!K?F+SMT_I4G+?"1+I?`Q$XX%@TR7_.<3I_F#M[N6K&GC6OU[0L:N M/:_7M#GC5O,+5FJWE*[SC./CBW";^CCAW,&TV*J?.+$N_6EKT5IV:&O16G9' M*]GL4"@V5RBGA`9?DGF1!D/!F!$4A5R*+:&*+@BJ*EF2N+U\HF&)_83C;^G_ M`+;!C:IC-2T(VU.*B-XAPVQ4C46PD.+@NQ31K0>J./<3L82OVI_"2VB+)@.X"^UWU'':/<(=GPUF[-5J3B6=LU6I.)26O-YM:R^7 M6H[@M]M\LX35GOU^8O4ET'''9`LQ0AH#`-DT`";A04QVN@$9./#X(,<8G3BF;C9(V*J>&*IFSA8V;D9J.';68, MM+;(./;$MT::W+G,.,"D=R,ZVV#(-@02>)Q24\ MG3=MUE$+M>`Q$R0OR5DDV*AF*XF2+O$?A)%V5:T\6U^L](6=/&FW6>D.?=4Z MXU1JB1QKU/E:T=>FM.T-#7IK3LP5>KU*!0;5Y M2368)6W;I+H MO2&MM.ZLMW;K-)XJ#@C\A5K-OKFDXEGWUS6<2SAH:@ M2`J(>"Y55,41>C%,4Q^.N'#5Y!N+^HHYH#T=\(ZVX\F,>7%EH!"DO)E( MH>4L!0E0L24E3&@HG]WQA8-T@!=F4BW1B2BF<'.]&DRF763.*:OY6F<'O[K( MJY>JCB(M!>2>2LV44TW[U&5^3(>E,2P@.!)9?YR7_AC_:IZLK^T_;^O^D[XKO4ZY?1_W>U>KMQZOT-:4?0E!Z;<<;< M%QLE!P%0@,55"$A7%%14VHJ+28RB8RZ/Y,\Y/MM&=.ZA=PO`IEA32V))1$\0 MU_XJ)T_*_&WY?)XWCUCLS>1Q_'K'9L;6KEU;TS-6T2V8-S7AA$?D$@-\0W0% M&U,A<0%=QX8ED7!21<%JFJ-,VCF?JQS_`$Y(CRILRW@S%"\`\,=9#4EVX28J M-FC8JDD)3C*1FS;+%O*CAXJ2T%ZQK?6EQT+=Y97$HVI8MLCWME^')CK&=;F1 MW7VP;&1'012*C1YVDQ(\!S.[:#>$=Y'X[3R"0(Z`F@&F!(A)C@2=V@J4"@4" M@4"@4&BN;4FKE7?_B9?_=E_P!%JD,/^Q_D_1*:Z9[5 MVIKJMRNSKHKBPU]$QW,HKXW])<5\%%I\*?&6*J5LH+RTW>YVBX,W&V2# MBS8Y9FGFUP5.\O0J+THNQ:YO2+1B7-JQ:,2ZIY5K#Z#'OT4$69%3Q M3'8G&:Q^2JKM3Y*_`JY&_1-)^#*W:9I/P3VO!X-'VW56H7H^K&KIJ*:LRT-A MD6C$NKN6?,FVZVM"N@@Q[M&1$GPL?%5=SC>.U6RZ.YN M7NKD;M,TG#)W:II.$AU)C_IVZY9;L!>QR,)T<%<>87A%]*V"(JD8>,(X;5KQ M>30,/5FKV;3$;:=(HEJ^T)!"LB9(C7V7'"+V>+$D\1'AX@OFHLYC%71)%0T0 ML`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`(:VH^B*!0*"_L-\N5BN\6[6UW@S8AH;1= M"]!"2=(D*J))W*XO2+1B7%Z1:,2[)T=JF!JG3L.]0^J$D?I6<<2:='8XV7XI M?&F"]-8MZ36<2Q[TFLXE?LVBU,><\"[6HQ*J9$5-Q.X* MB_S?"BU@__``9?XQ_P#2&!S_Y9 M>=<7;LMN2&V6#TS$2PZ&D\;_`&O%\&-)3P=/G?,]JM?4;Q0*!09C2>J+GIB_ M1;S;CP>8+!QM5P%UI?':/NB2?$NU-J)7GMUQ>N)>>S7%XQ+LK3U]@7ZR0[Q` M+-$FMHXWCO%=Q`6'R@)%$N^E8MJS6<2QK5F)Q*_$``4$!013*Y]VIQ*8KGW:XJVM%`H%`H%!+>7G^K*_M/V_ MK_I=:[O/#:&ULEUW,#DJG0"+U1^%4Q\'AI+R_K]'E;SGM'_*$4;10*!0*"?\ MD-4E8=?0@,\(=U_()"*NS%U4X18;L4=04Q[BK57EZ_*F?96Y5/*F?9UG62RB M@4"@4"@4"@*J(BJJX(FU57=A0<7\P-4NZHU=<;N1*3#CBMPTZ!CM]5I$3HQ' MK+WU6MK1K\:1#9T4\:Q".U[/4H%`H%`H)[R[_P#$R_\`NR_Z+5(8?]C_`"?H MC.J;K]HW=TP+&.S]$QW%0?&+^D6/P85#0X.GPIF>\L14KA0*!0*#<_W:M4G% MODW3;Q_D]P;63%%5V(^RG704[IM;5_$2J'-U](LH\RG2+.BZSF>4"@4"@4"@ M4%*7*8B17I4@T;8C@3KQKN$`12)?@1*#B;5&H)6H=0S[U*QXLUXG$!5QR!N; M;Q[@`B"G@KK7$1#(TR*Y M>DE4L$%/"M1GJS/["DWFD1ZY_P!,!+E/2Y+LE]A.\B;$J5_5KBE M8K'HI4>A0*!0*#VR\ZP\#S)9'FB0VR[A"N*+\=1:,QA$QF,.Z+?+&;`C3`3* M,EH'A'?@C@H2)^&L!A*]`H%`H%`H%!&N9=S*V:!OTP"RN##<;;/'!4-Y.$*I MNW$:5Z:JYM$?%WKKFT0XRK<;90*!0*!0*"16F[?9^DYJ-EA)DRR:9PWIBRWF M+X$_#A4,S?I_)OB/2(1VI:90*!0*!02+EU/(KFDO'?&:2[0K%8Y0*!0*!0*!00CG5'KHKF\.1*VFR4"@4"@4"@D#5U[)I!8K:X/3'G`\#:(.?X\4'X:AF MSI\^1,SVC"/U+2*!0*!0*":A53*<4.71"BJB.3&!7#I3K%M_V:L<3^2%CB_P`D.6ZV&L4"@4"@4"@= M;I)53H1=R>"HPYBL1,S[E2Z*!0*!0*#.:$?)C7.FS'#%;M`;V[L')38+^`J\ M>1]DO'?]DNUJQ6.4"@4"@BO[T_U'^=T#E/\`LLT;^@[;]3;H)508K5G_`/+7 MG_L9/_1*@X=BGGC-EO511%\*;%_#6_7LW8[*M2DH%`H%`H%`H%`H%`H%!2DN M<..X>Y4%(13[1.@BN4I4=UA"[BN`HX_AH.![4\6"LN(HEXR"NQ47Y2?'6Y2 MJO<6H_+5' MY*L5<(,B!.?A2409,8R:>$2$T0P7`DS"JBN"[-BUW$YC+N)S&5O4I*!0*!0* M#&W>0@BC2;4'KN8=[=Y<6EWIIV`=NT_;+>:()PXC$I&SL<-5ZS>S^CT?R5MUELU7==.B@4"@R;FF[PW:QN9,?DI"!I@0J:-NF3; M;BMHN=`,P(47#?X4QY\XSASYQG"[30VJ%EO1.QH$A@FP=;<=:;5''6N.()Q# M',7#3%13:G37/Y:XRY_+7NPTJ.Y&DO1G%%7&3)LU`D,"9A-@E*Y370P%"**[%?PZ<.T`!*G@$U^"O71.+P]=$XO M#E&`]Q8Z(J]<.J7P;E^%*V:RUZKBNG10*"YM]OEW"6,6*&=XT,L%5!1!;%3, MB(E1$$0%255Z$J)F(C,HF<+UW2U\;*:A1L1@,-RI+@D)!P7\O",31G@6N?R1_Y<^A79$]F'KMV4"@4"@4"@R_+%ARX\U]-,,[5:G-N)@F.R/B^[_5:7XJJ< MJ?HE5Y,_1+MNLIEE`H%`H(K^]/\`4?YW0.4_[+-&_H.V_4VZ"54"@X=YK:<= MTSS&O4`1X;/:2EPOF\"2O%!!_FAG5O\`HK6IQKYI'P:G'MFD?!BH\@'V\P[T MV$/2BU;B88C,M**M,M$^\P)M-NF@9N$H-.J M"9%7%!02Q15KG\/1S^'HP.J;Q#NMU*5$82.Q@J"*-@UBBF1IB#?53*AH";57 M`4Q6O3768CJ]*5F(ZL/7;LH%`H%!2D2!8:4RVKN$>ZO(V[*!^;LZO9V%XKR+W$(`R)WU2JO(MBD_%6WV\:3\7=%93+*!0*!0* M!0*"VN=OCW*VR[?)3-&F,N1WQ[H.BH$GQ+0<#7"!.L5ZEVV6GY7;WW8LE$V( M1-&H%AWE4<4K9UWS$2V-=_*(E?-N`X"&"XBNY:]XEZQ+U1)0*"86WF`Y;K*U M$[*U/F@+;(NRF\@M1V3-UML#9('35'31Q"4DRJ*)@J5XVTYEXVU9E=Q^9##. MH$GI#5+>(1LL`%PQ<;;:9>-'#)UP%5IM1%0+H%5W+CS.GZ<>J)T],>J*W^XL M7&YN26&Q;;)!%$%MMG-E3!2X;74#'YJ8X)LQ7?7M2N(>M(Q#'5TZ*!0*!06\ MR4C#>S^\+Q$_C6N;2B93W[MVFG+OS*8GF*E%LC+DQXEVBKK@JRR*_P`Y2-33 M\2J7+MBN/=2Y=L5Q[NO:SF>4"@4"@4"@4&)U;86]0:8NMD<5$2XQ7HXF6X3< M!4`]GS2P*IB<3E,3B9,F93"^,)@2B8KWQ)%K9I;,9AL5M MF,PRH$)BA"N(JF*+7L]7V@4%_8KF[;+JS-;<5K)G`S1L'OHW0)MP>&XHB2$! MJ*HJ]-B1*Q`<%[S0NX^%*H2T^.( MK@2>,"[TKN)RZB56I24"@4"@4"@4"@I2)+3`XFO67Q13>M1,X1,L2\^X\><_ M@%-R)7#ETY]V/EZ=KLKVKK@UEF7<$;MJ$G6"$BYL_>XYHB_BB*]-9G)V^5L1 MVAF&NXG+J)>ZE)0*!0*!0*!0*"WE3&V$P\9Q=P?QK7,V1,L49FX:F2J1E MW/X$2N)GUEQ,X=E*8-,+_AAO3YRE63NV>= MLLG;L\K9;%KR>90*!0*!0*!0*#E3[RG+QVRZE_U5":_^)O1X2LJ;&IR)B6/> M>$XNW]LM0Q99L+@J9FUWCW.^E7HG"[$X95MUMP4,"S" MO37<2ZB7JI24"@4"@4"@4"@MIH/6=[G0GAKF;.9EC0"1)D`VV!/R7S$& MVP3,9F:H(B(IO4E5$1$KBTXC,N9G$9EVURCT$&BM%Q+6X(_:;ZK*NK@X+C)< M1,1Q38J-B@MHJ;\N/36/LOY6RR-E_*V4SKAP4"@4"@BO[T_U'^=T#E/^RS1O MZ#MOU-N@E5`H/A")"HDB$))@0KM146@Y*YX' M,GSQW_"G\E=1:4YE?,R6'O[LT)=ZCN5/"B[:ZBT2ZB8E4J4E`H%`H/#K[+28 MN&@X[D7>O@2HF<(F5D_J!0*!0*!0*!0*"UNMK@76VR;;< M&1DP9C9,R&#\4@-,%3_UH.,>:W*J[:"N^0\TFQRS7[-N.&_IX+N&P713X"3K M)TH.GHW^48GNT]&_RC$]T(`S;/."J);L4[E65A?,W1-SPX?SQVI\6^IBR?)> M-O-.CF;-"3IP7'#PUU$Y3$Y>ZE)0*!0*"D[*CM;#-,WS4VK\25$VA$RL7[DZ M>(M)PQ^G=%X^*+MNN-%F;+*73W%\*5 M[O=?LW0%V/"HK\X=J?RU/DGR7C;K;@YFR0Q[HJBI^"NHG*8EZJ4E`H%`H*+T MN.UBA&F9/DIM7XDJ)M")E8OW%USJM_1CW?E+\/17,RYRM-B(J[DWJM2;]M<8UAJ9C).48=%#`P),"$A+%"14V*BT'-7-3[MLZ"X[=]$-E+@DJF]957%YGI7LY*OT MH?S%ZZ=&;'!+FGE8Z67-/)QTLT2ZVZTZ;+H$V\T2@ZT:*)@8K@0D*X**HN]% MJ_$Q,9A>B8GK#P0B6]$7#=28)A5"1)#Q'C1.XJYO[6:@K#M0AZ;`W'`:;%3=<)`;;%%(B)=B"(IM55[B4F8CK),Q'=O'E=]VVY MW)QJZZT`X%N14-NT(N62\F].,J+BR'='QU_F51WE73,2)%AQ6H ML1D(\5@4;98:%```%,$$1'!$1*I*:K0*!0*!0*!0*!0*!06-[L=IOMKD6J[1 M@EP)0J#S#B;%3H5%3:))O$DVHNU*F)PF)PY9YG_=ZU#IIQVXZ>!V\6%,34!3 M/+CCO5'`':X*?/!,?G(F&*WM7*STLO:N5Z6:B147:FVKD2MQ+Y@F*+N)-Q)L M5/`J4P85@ER@V(Z2IW"P+\*HJ_AJ>HJC4IS+[]IR/FA\2_ MRU/E)F7DKC+7]:B#\UM4I[.]:+W%&7">VY2V$!ICE<;)-H&..PDVU,3 M,3F$Q,Q.80VI](./SK<#EXTZ.)I+;'%]@-^$AH4W#TN"F7I7+NK0UFU1R+`'`XT8T7$3) M53Z5T=Z+XHKNQ5$*L[=R)OTCLS]V^;]/1NRJZN4"@4"@4"@BO[T_U'^=T#E/ M^RS1OZ#MOU-N@OK_`*QM-CNUDMDU21^^2"C1R%.H"B.PG%Z$)TVVA[I&-!:6 M[74>9J=RP=B=:>;?F,(^1`H*L)N,X18(N/7&:.'@7&@L7.:-N;59AP7TT\-S M6RK>C)4V-!CWN&[.F$81H@O`KQDTN!HC> M.;JKOV4&/UMRLT3K)M5O,`>W896[E'P:E"B;$^D1.NB=`N(0]ZNZ7FO:7=+S M7LT7JG[J^J(9F]INX,76,FT(TG\FDHG0*%UF37OJH>"K=.9_]0M4Y?O#6=ZY M;Z_LI*-ST].80?&=!DGV4\+S'$:_K58KR*3ZK%=])]4:4P0U!21#38HX[47P M5Z1:)>D6B7VNG3XA@IH"$BFJX(..U5\%A3T3*5SDKQI2[,%P-4P;QZ M4;04[U5+[)MW5;[)MW3"N'!0*!0*!0*!0*!01:YZ^@6_7=KTHZUMN3)DLU3% M!;D*A''845VJKS<=\L>C**?+2@MM)Z]EWJXI%EP6H@=EDR2=!XG<"BSW89#@ M3;?5P:S9N_N2@PC_`#F.!IVUZMNMJX>F+T$AV$Y'=5Z6`,Q7IC*NLJ`#],Q& M->J?47!%5=I(&0@$Q4NXJ5Z4VVKV>E-MJ]FC]3?==UU;B M-RQR(U\CIXC:$D23X,CI*UL[O%^"K=.9'K"U3EQZPUS=M!:WLY$ESL,^,(>, M\4=Q6?+"A-+\!5[UWTGU6(WTGU1\G`$U`B1#'80JN"IX4KTBT>[N+1+ZI"B8 MJJ(G=6I=/<9MR4YPHH$^[_PVD4R^(<5KF;UCO+F;UCU2ZR9EY(>QZ=F`" MX+Q98=C#!?E(LE6LR?BXUY6Y-(]7E;DTCU;2TI]U&69MOZKNX--I@I0;:BF: M].!2'11![BHC:]XJKWY1%-YW#_B. MGF@ZD?AP5-_3TIEG M@O.<-)$9\Q:"6T2`?T9&CJ!\[)O3&@N)/,4HNFY-T=@"4Y+P=B@0`?ZK\I9O M86,7C`<@F6!FN198+O;";OS*(4-B*;DF,\VY$D2FC)] M&0)I%[$Z!XMKEPS;1Q5`O(G.+09VZ)*G7%(#\@FV7(K[,@#;>-MAQ4(3:`D; M09C2\540,"1<<*"0Z=U/9M10W)EI<==BMN$RKKL>1'0C'#-DX[;6=$QPS#BF M.*8XHM!#M;\A=`ZJ)R4D9;1='%S%.@96\Q;\76516CQ7>N5"7YU>M-UJ]GK3 M=:O9I+4OW8N8-L(CM!QK['3'+PC2,_@G233Y(VGP.K5NG,CUA:KRX]8:[NVB M=8V=2^U+'/AB..+KL9U&MF_!W+PU^`J]Z[Z3ZO>-U)]6#XC:$HYDS"N!#BF* M*G0M=Q:)>D6B7U2$=ZHGAJ15AQI,USA0F3E.JN"-L"KA8KT9015KF=E8[RYF M]8]4PL7)KF=>B'LNGI3#:KUG9HI#$4[N$A6S)/Q16O*W)I#RMR:0VKI'[J.! M@_JV[(8I@JP+;BB+AT%(=%%P7I06T7N%5:_+F>W17ORYGMT;QTSI'36EX'8+ M!;VK?&5H04"@4"@4"@4$5_>G^ MH_SN@[3H&7"U2E_>N@OFKLM]U@8_#0BF,QV23-Q#PR]C;5-GSNZF M`>5Y9PURPNW._P"GANJWO[)RC_FE?[5DXN./`[5]-DRXYMF;+U:"/^PIAVU- MVB7?'I%N")%M^7@-@[V6)#DP0#B"6&96IIXEEWHG?Q"1:7Y>G8KPS?+=+3;4>2Q;HCT@!B1&[@V;#A1SP$\5;?(&U<,LB%@&"4%D_ MRXYFM-VNWR'[K M"GR+@=P9:;=DO/"^C@LDX8DA"*?*?/.RV]EQ MR\04+#'?ABE!9,Z9TVR:.,VJ&VXFXPCM"NWOH-!D&VVVP0&Q0`'8(BB(B)WD M2@]4"@4"@4"@4"@4"@4"@HS(Y28CT<7G(Q/`0)(944<#,F&8%)#',G1BBT$# MF%QHWLS*H;Y."F!;^A-ZXAF0T5I]^T7" MPN2WI:.SEN;KBN-))C2W'TEMN-JT`9%!XA`R0\-&`;X,IS!$;3K$JXXT%.+RHTU;[X$]B\W&-=Y(HT MIA(9:'":55'K"J8BHXK02S3EACV&T,VN,^](884U;-_(I MX&:FJ8M@V.\EZ*#)T"@4%"3!@RDPDQVGTP4<'`$]B[TZR+06K&F].L&IL6N( MT:I@I`PT*X;\,4&@R````(`*"`HB"*)@B(FY$2@^T"@4"@4"@4"@4"@4$5_> MG^H_SN@)<`\ M,N;#8:BM!2TP$P[S`DS[;.@,.Z69;EQE28Z#+HFF9@753'BH'0F#B]*9J"PB M734C?+#3>F+=%E%JD[#!.Y1W>)%DM1P8%F40..BB<='41O+CG'-GZ$Q"//P] M8#:]/S[#!>:U;;;$]'GPWV):/-NK:'.REVD_RBOS&RBLN./2`D$;A.H\9MFXJ]91[J+03:@4"@4" M@4"@4"@4"@4"@4"@4"@4"@U;SUTU=;S%L[MHM3URN<1UQ(Z(C;L,D=-E"CS6 M#-M5:?0=KB$F3+M),=H?;OI^\.7^[3F[0X49;K9;B\VT@HDD8>''(-J<0FCR MN8%@I9-FW"@QJV6;-T..D;C:+NWFW6U0'[=`=N%UA.*4)CA!(AO$XZR)1IC M1$"HVZ*?W@D.7+M)$7`@L+)9KQIG5+][?%Y^T1DF1D((RMR),R^W5M_(:DX1 M2&H9XB+J-@N4NIGVT&-CZ1UE'U4YV-C&%B0@J[ MG;F(0$'$P)&;#IH,][QWH/SE`]X[T'YR@>\=Z#\Y0/>.]!^@_.4#WCO0?G*![QWH/SE`]X[T'YR@>\=Z#\Y0/>.]!^@_.4#WC MO0?G*![QWH/SE`]X[T'YR@>\=Z#\Y0/>.]!^@_.4#WCO0?G*![QWH/ MSE`]X[T'YR@>\=Z#\Y0/>.]!^@_.4#WCO0?G*![QWH/SE`]X[T'YR@ M>\=Z#\Y0/>.]!^@_.4#WCO0?G*![QWH/SE`]X[T'YR@>\=Z#\Y0/>. M]!^@_.4#WCO0?G*![QWH/SE`]X[T'YR@>\=Z#\Y0/>.]!^@_ M.4#WCO0?G*![QWH/SE`]X[T'YR@>\=Z#\Y0/>.]!^@_.4#WCO0?G*! M[QWH/SE`]X[T'YR@>\=Z#\Y0/>.]!^@_.4#WCO0?G*![QWH/SE`]X[ MT'YR@>\=Z#\Y0/>.]!^@_.4#WCO0?G*![QWH/SE`]X[T'YR@>\=Z#\ MY0/>.]!^@_.4#WCO0?G*![QWH/SE`]X[T'YR@>\=Z#\Y0/>.]!^'"PS=G[%QCSX_*XG%R8=[&@__9 ` end GRAPHIC 6 a72487ent.jpg GRAPHIC begin 644 a72487ent.jpg M_]C_X``02D9)1@`!`@``9`!D``#_[``11'5C:WD``0`$````/```_^X`#D%D M;V)E`&3``````?_;`(0`!@0$!`4$!@4%!@D&!08)"P@&!@@+#`H*"PH*#!`, M#`P,#`P0#`X/$`\.#!,3%!03$QP;&QL<'Q\?'Q\?'Q\?'P$'!P<-#`T8$!`8 M&A41%1H?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\? M'Q\?'Q\?'Q\?_\``$0@`M`(]`P$1``(1`0,1`?_$`+<``0`!!0$!```````` M```````&`P0%!P@"`0$!``,!`0$```````````````$$!0,"!A```0,#`@(# M"P4+!PD&!P$``@$#!``1!1(&(0Q8H(S&2HM)38S0U\-'"0X,E\;*S1%1T-A@1`0`"`@$#`P0! M!`(#```````!`A$#!"$Q$D%1<6$R$P71(D)2,_"!P>$4_]H`#`,!``(1`Q$` M/P#;?+3EQL2?RYVK.FX*'(F2L/`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`E`B`D0DLNDP42%>XJ+=*#E?;6Z-YO M\I\_-#(Q\)'5R0Y)U/3UD9*3%,01STAI@XPL-65&KK=;HNI%0-A2_M!28NY9 M&WWL8VS)/+-8?&N/$X@.`_*6.W.)T0[,V=+9$NA45#^C6WC4"9SMSH;C9VMD M\.Q$DR5:Q\Y8@3)`8%@WV0 M@/1VTDFC1!.FE"4.V1LQ/LS%%1UM%`DZ*";`\IOMZ4=MP4+CPO<+C:6Z=T;APDUS-[MRL'%PL%$W-E)D!T6Y?I M!>E@<9IXQ,6@>T@79H%KBB"B76@WYRZQV:QVQL)$SDI^9F1B@>0?E&3CW;N_ M2.`1EQ701Z$[R4$BH%`H%`H%`H%`H%`H%`H,+O6;-@;/SD^"\L>9#@29,=X1 M`E%QEHG!\%P3%4N/&Z4&E,+S1W]+VW@,^]DI+,=Z9B(&5;>BPU5YV>K#W:1A M%IO2PX#IM*JFI)P).-!*,7]HC%Y8V8N,PLB5EI;C[4/%HZV$A7(K#TA]I\#0 M29=$6-(BJ*A$26*VI4"VWCSX5F%N#&8Z&_B\]!Q^0DQ''E8=<:>Q[33I#(81 M7!!"[?P>)7LO1PH,CS'W?O#;VT-M;VAS"7$1CA.;MA@TR1N0Y.A#>:4P(A(# M*VD>E%ZK7H*.-YS.X_(SL/DX,_*Y*(@RYR1VVB6&W-C/38L9>R$`7LV&0`W3 M)+N'PN-](>6?M#P9,)EZ#@9$Z0_DXN'".Q(95"D3HBRXZ@X?9B0J(D)*MK*G M#4E!F>9^4WX&RXF4VW+7!9HP;)O$''9FR9$U[1V<#BIMHG$T<,.BVK4@B5!J MC/\`VA]\X;*9&4J,RHS,K)XQK'-`!L"Y`QK4AN2+B#VIBKYD1^'I[/H1%XT% MR7V@-X8^S958\3B2')46=$8DQY3PB#KK;S8F#C@@+8B1"5U1!1+]24&0H%`H%`H% M`H%`H%`H%`H-:\[MU;AVW'VG(PTYZ(.4W!#Q$]N.RQ(<R M^CMPX\47A8(I$YR9G;TMB;N.9)R&)E[=9ST6+Z+'`P;FS([+12I#/9Z28](T M.:6=-KGTV&@E$+GGCIR2G,?@0V\(X])C1-/!K7AJ'Q5'CJ14 M7A0?=U;KY@X7F@[M)JA M(%:)]H7"%M\,J.*R+\(B:;BY%\6VF7Q-'T1PW1LTV:K$6[:)XQ@G"ZZ0S."Y MRQ<]G,;B\3@K5KD2Q[,!LB+T#=1(J#7^.Y^[[F3 MV=MD^`3I,?'9!,N+#2DV$S`KE'&4!1[+A('2*J*KHNG$O"H)%MKFKOG<&Z-G MR9I3,%MW-1H@V;QC4B%,FDR3SH)--WM6-97`4[,N`]/2J!OB@4"@4"@4"@BO M\4_V'^ET#E/^ZS9OZCQOYFW02J@4"@4"@\2!8)AP9""3!"2/"Y904%3PD*_" MUNF]!%(T+EDF$QN'C8B`."W&\00,>./$8DET&G)6HFNR1OBU&)P2-+$B(HJO M"@LMR8[E'M^'-BYC#0VHDN'(GS61QZO`Y&A$+KQEV;1C]&;J';INNJW2M!EB MY9'8 MABZR38W<(`AM`2&I%Q0!!5(NA+T%(]A[()<#U\>F@M(_*OEE'0D9VGB`0Q0"1(,>RBA]HB*BAU'X7RV[E!8YW.\L\R MY$Q&XL>W--3@K&@Y/&.FC;F35UJ*NB0S9M26.X*JMM-K+9>%!F,5MO9[@8S* M0L)&BN1&1'&J4)(KT9I4*P"T8-FSI1PDTZ4TZB[JT%9K:6TH<2:RSAH;<6:2 M/3F&XS:B\0+K%3;$5UJ)<1X=/1QH,AC\A#R,%F="=1Z+(%#:<2Z71>ZBV5%3 MH5%2Z+P6@N*!0*!0*!0*!0*!0*!0*"QSN,QN4PTS'Y35]6RF3;F(+KD>[2IX M:*ZT39BBCTV).%!%TV3RU?PN$VFFH\?'4,G@\?\`6$SM-,515MULNV[4FVE< M&R*2BG#A08^5R_Y-X^7'Q\A&XN3:BQ$9!P'3U.*`^&:ZBM>ZT%M*Y3["ER'9$G'&\[ M(A)C9:G*EJDB,#9-`,@>UTO$`&NEQQ",>E"NB4&/3DWRMQ+0SO07HS./>9R7 M:ED0?CH!A'"1 M(N,9YK401R$RU7TBO4BT&2C"KQ6@M9G*OEE%PQM2\<+,&.3LAV8*M*?BZ9H7[(Q[%QK6X/'3>_7:@Q\S9.P MMQYI[+(I/Y?'MIB'Y,.=(`F!:()/HQ`TZC8JA*!D*C=>&JZ+08+&\L>2\MZ3 MCL4K9E)@+CY\"%D7T1^-%4HMY#33WTA,D1-ZS15$N%[IP#*83DMR\PT^-D(, M*2DN'(&7&<=GS74!\64C]II-Y1)2:32NI%NG#HM09;+[9VAE-VX?)9%.TW)B M&GWL.*2GFS;:/2U(,8[;@`8EK$'%(%1;H*]5!A%Y&\M_0F(*09`0XLA94..$ MZ8(1R)'$((Z"\G8MEVQZA"R+?O)8+O"[)Y=[%D1Y\9?JY\HHXMF1,G/F)1XP M'(%E!D.DW]&#;A\$X"A+T7H,:[LCDUF=V?XA=]'R.?F&#:.%D'W@<)V*;C;: M1^W)A=443,0T>)X2)UT%\UR9Y>,XM<-_,VZ"54"@4"@4&+W3B'E>F@_'QKCX6"6XI^GP+X6 M1B7(S"@!";2/R/21(7!NM[=14'K(\H]S/L9<(8XN"UEX.4B)`8=>"-%/)08T M36R*,<4[2*3IH@A=2ZUN1!:Y/DMN7*[FDY#(CB9&+FSV)T6R6"\VQL',8S?;VY7V8#0R_K-)91W'"?,9SL-UC4JL-Z^Q6( M:64OGJJ=:*$68Y)YJ/.8FL1,.U(:E1I1.`;B&O899Z/;P;3H]N\J&.%DS'SLBQ__.&:B(G5IZ[T%%GDMN-< M2U#D2(*R&V(S82A)Q7&AC17HY1`(FKK'D*XA'T6U'X)<%4/6+Y/9S&S,=):' M'1(V.R+>0[".1NBC8L8UI\!9*.(J;QX]U[4.DQ<(5U*FM##8>Q,--Q.`)F8B MMR)<[(9$HZJ)=@F0FO2Q8N/@JK8O()654U7MPH)!0*!0*!0*!0*!0*!0*!01 M[F#CIV1VAD(D)I7WB[(RC"MB>::>!QYA.^ZT!!9>F]!KW,[2YA9'/N9>$VX2 MBEV+O@I3;KS#DAD9,- M^*+\D'76(T;<+62&,;AN$1DW$9THNHDU6'4J)JH*."V;S,>RC"9Q)[,`9127 M18R[J#_RKK:#J!_M"'TA&G/"2W2NE+J%!(,=MS?3.P2QLAV0[F&\C&=CO>E$ M+YQ&I#)N=L:O.#J-H'$(!<4#O?2.I1$&R=K[PQCF72>*74(O$Y?\SHN,C`$G(KD@B-M2'BRSQB3Q81^, M^0ZWUM?)*PZ*V2R#=+="A>2=B[Z-N4;4=UN:[(=ELRVY0-NBX6VF<4!=H+B& MA^ELJ5T7Q>/>H/&XKAI(;R)`TY&<:92/&%L7$[)UAT24C M%!140O"+M"2@OL5@M]8?.Q)L[TJ1M^$60&3'>DG-4H;LJ<]&0`1TW3>%EZ,U MH,7$.R<15L5()WL3&Y'%[*P6.R7"?#@1V)(J?:*)MM"*@I_/TVMJZ^F@SM`H M%`H%`H%`H%`H%`H%!!^8,'<+N4@R<0NE],7F(>.>5%4&,M*;86`^?`D%$1IX M-992.YQS'Q\AC&LFLE_'`>41Q]C(%`QT>))E/(^:OLMNQ']0 M$I^`J?1K>PA6-W(*C[RT?.-1X<>,I9-38<)II4D$3;;RCK;:Q3R8R,DV_VJC!FLR1L9L1N&.+BOX MR8$:)&+M1:G.,.(B@O`55.^%++;3YMNFAX\LJQ%1AX MF(99?4Z$OT..@*XZLBYMK)`U02,DZ;HB%IH,PUBM\+*@4"@4"@4"@BO\4_V'^ET#E/^ MZS9OZCQOYFW02J@4"@4"@4"@4"@4"@4"@4"@4"@4"@4"@4"@4"@4"@4"@4"@ M4"@4"@4"@4"@4"@4"@4"@4"@4"@4"@4"@4"@4"@4"@4"@4"@4"@4"@4"@4$5 M_BG^P_TN@-_,VZ"54"@4"@4"@P&X]_;.VXBIF,JQ&>1+^C(JN/ MV7H7L6T)RW?M7NFNUNT/=-=K=H:VS/VF\`P1!A\1)G*G#M)!A&!>^.E'R5/E M1*LUX5I[SA9KP[3WZ(I-^TSO-PE]#QV/8!;V[07G21/E1UM+_P!&NT<&/676 M.%'K*OMGGKO[+94(3OHMC%51&F%U*2=")\J_+TQKKF/=/F-Y< MPA><96-%=)MQ631T+%VB*B*(J+K8K;4E[(MKUXGC:_>6?^2WLQUL/2B1N2:@1-LL$+AF/2@I>_101C(D2&8+DJ.ZX1BPYZ.@N745`B2ZHBKI"\QNZ]^RL]A<618K M5E<4YF25&)`H+3,B(V32%VQ>$;A'9;H,?=T-H_?_`$DJS7@V]96*\*WK*+R_M+;Y<54C0L='!>M6WG#3 MY%5U!_U:[1P:^LRZQPJ^LLSLCG'S!W)-?AVCD^*LBP#+*(I$ZIHM]1*GS*3P M]<9F9G"GR]?XYB*^J70]^;Z6.DA8T1Z,@DYVA@H'I'4JEP=%+>`2)X'&UN*U MYMQ-><9E3C9/LQG_`/H_%0LFY`RV)>%&=(G(AN"[=2%"_JW.RM:_'PUKG;A6 M])7=.BUZ^4)QMOFEL3<1@SCLJTDHUL,21=AY27YHBYIUK^1>JU]-J]X>;ZK5 M[PE=3?D#CW#QWH4N`XYZ2T\](:C')<5'20&D[,T'0J\.-_!"X>YD[AE06L MYA9&,DX"9EL;BX1G'D=O;(O1VR5Q.W!$)CTE4).LAM8:#9&/3()!93(JR4Y! M3T@HZ$+2GUJ"&I$B=Y56@N*!0*!0*!0*!0*!08C/[NVQMYKM,SDF(5TU`VX: M=H2)^(TES+^BE>JTFW:'JM)MVAKC,_:5VA%(@Q<&7D23H<)!CM+\BEJ<^^%6 M:\.\]^BQ7AWGOT1.9]I[<1E>%A8DES@2"R;V9Q+C#30*X1LGJ(@&]R%MP6^ MM+>/7.W"GTF)>Z[,SC#+[>YM;`SR@W#RS34D_P#[:5>.Y?\`%3M+"2_DJM5[ MZ;U[PL7TVKWA+ZY.90*"*LYW:WH.\'W(VZO3#BR4B0=(-,PU>8/2L>Y:G!N71X*VX+X5!MZ M@4"@BO\`%/\`8?Z70.4_[K-F_J/&_F;=!*J!0*!08+=^]MN[3QWIV9D]DA71 MB.":GGB3YK8<+]]5LB=:I7NFN;SB'NFN;3B'/&]N?>[<\3D;%$N%QA71!8+^ M\F/\]_@H_(%NY=:T=7#K'?K+0U\2L=^LM9&9&1&:J1DJJ1*MU55XJJK5R(PM M1#Y1)02CEQ+2)N8'NS1U49=04)52RD-M2*BHMTZJ\WKGHH?L9QKCY_EN,-TQ MDR4IXFB6&\X1-,*(JHBY;M%4E74M]">!JM]Y*Y3HGQB/5C>?5HK=>4;RFX9L MUI$%DST,H@B"*#8HV):!\$=:#J5$ZUKK2,0^@XNOQUQ#$UZ6$LV?S/WCM0P' M'35=@CXV.DW=CJG<055%#^@J5PV<>M_EPV<>MOET1R\YQ[$ER(+=(\`EE`H%`H%`H%`H%!%-]^FR6ZTJ+ZNN89E9]&A)TLIDV1+(4`I#INJ"=`ZR4M*=Y+VKK6,0 M^EUT\:Q'LH*B*EEZ*E[3O9G.7>FV";922N2Q@V18,LE-$%.IISB;?#HZ1_FU M6V\6MNW25;9QJV[=)=%;$YF[9WE'_N#O89`!U/XUY41X43I(>HP_G#]VU9NW M3:D]6?LTVIW2VN3DMT4G$4="(-[E=+4$* MACRECL8;(,9$%9:)J/A5*?*"X-PT\44=2=%!>2DY6O8^<+ MLN$U!B3V\I/5N4K`-SD?^C?)0,+$LAE;=2N"OSD6@F=`H%`H%`H%`H%!B=S; MKP.V<:60S,H8S"71L5XN.%^(V"<27_LO"O5*3:<0]4I-IQ#GS>_VA=R98G8N MWQ7#XY;HC_!99CW5/B+?]#BGXU:.KAQ'6W5H:N)$=;=6JGWWY#QOR'">?=74 MXZX2D9$O61+=56KD1$=EN(B.RG4I*"0;&_Z\']F?\E&?^R_UQ\_RW069:$8; M;CL=YT1*.])!IT!2,8`"":"C)$0HBIP3HZUKC^/OW_\`;'\D/YP[AQDB%%8A MJOI,S23]]>H&VT15`KV#^LMIT)Q1%5>*VIJK:.DKW!UQ:_E[-3UV;28;.YK; MSVJ0-PIJR<>-D7'2KNLV[@75";_H*G?O5?9QJ6^DN&SCUM])=#/:GPSMNBU/A/*X.+!;UF;4B8!UW M=+#,K$J8"49^/Z6+CE[@(LZ7-172_B\.G@B7H+#&KRT@Y"#)@PH&/R61"2_$ M=&&,60HM"*2B-5;`V["V*'KMT(B]%!8#N_E8Y'QV1>C"RW"%U[%/RL5)8*.R M'9"Y(:1Z.!LL?W@$[6PAW^"V"=T"@4$5_BG^P_TN@-_,VZ"54" M@4$*YG?HY M3S^X,QG\H[D\M)*5,>Z3+@@BG0`"G`13J1*UZ:XK&(:M*16,0QU>WLH%`H)! ML;_KP?V9_P`E&?\`LO\`7'S_`"FNX9RP<-*D"MC0-#:]:&:Z!7[BK>IGLR=& MOSO%6JD1$2R=%0^F*!0>@,VS%P"4#!4(#%;*A(MT5%3K2DQE$PZ(Y-%E^(\)HB/AVGT9B@J2$)W2RWLMJIJ;$XK;.Y,?FBS M(XIQJ1Z$K&;BQ9;?HV2E"D86),5ATT:9)@6G-*F+:HFD>*<1#$P>4><:=Q3( MR7V6UE1I&07G!4!6ZEJ)?&#<-`H%`H%`H%` MH-9%%\)-01@+H,TZS7Y@_=7A9"L\?CS?K/98T://K/9 MS%/GSFSGSDRWR4WGW24C(EZU5:UJUB(Q#5K6(C$+>I24"@4$PY<_UV3_ M`"8_\KM([LC]GWK_`-LOO:=Z-@S:1?#E$C2?D^,7W+#;[M)5N%K\MD?3JUQ1 M]`4"@KP9TR!+:F0GSC2F"0V7VB4#$DZT5*BU8F,2BU8F,2Z>Y0\WF=VL)BLJ MHL[B8%5NB:0D@/28(G!#3YP_=3A=!R>1Q_"_1X=8[)WN7'CDMOY''E$ M;GA*CN,G"=,F@>$Q5%;5P?"#4G!"3H7C596:MPNPMWIB,.Q)CR!RL!YES#YM M93;3\&(*1$>C3A:(?2M8L&*(HN7%`$U14UH!CEQNUK;4[&K&$GXV`3;\4D=: MO,=])-Q92K=-`:-)>%8M1'X/!%4-Q@2D`DHJ"JB*HK:Z=Y;*J4'V@4"@4"@4 M"@B/,?F-BME8CTA^S^2D(0P(*+97"3I(OQ0&_A+]Q.-==.F;SB'75JF\XARC MN?=.;W-E7,GEY"OR#N@!T-M!?@VV/S13_.MUK7UZXI&(:NO7%(Q#$UT="@4" M@D&QO^O!_9G_`"49_P"R_P!F&U;N7(_6&9?>%;M`O9,]S0'"Z?* MMU^[7B'T/"U>&N/>>K%U*V4'IMQQIP7&C5MP%0@,542$D6Z*BIQ14J)C*)C+ MHCDWSI^M59V[N9]$R2V"!D#LB/\`4C3J_P"]_%+YWY7C9G)XWCUKV9W(X_CU MCLV)S"V](W#M29B6(L684@53T>:I""J@KH('!0B;1F+CI8QTDP8S6AL#"0<97+J@(V9*HBJ>"H;9H%`H M(K_%/]A_I=`Y3_NLV;^H\;^9MT$JH%!B=U[E@;:V_,S4Y;LQ`N+:+8G'"72# M8]/$R5$[W37JE)M.(>J5FTXAQMN3<63W%FI.7R3G:2I)75..D!^:V"=0BG!* MV]>N*1B&SKI%8Q#&5[>R@4"@4$@V-_UX/[,_Y*,_]E_KCY_EE.84[P8L$5Z5 M5]Q/D\$/OW*D]U;];KS:;>R%T;)0*!0?1(A)"%5$A6XDBV5%3K1:#JWDMS$+ M=NWECSW$+-XS2W+5>EYM4\!^W=*UB[_RI6/R-/A;Z2R.1J\+?1L2J[@4"@4" M@4"@4"@BG,O?,?9VUW\BJ"Y/=^@QS!?/>)."JGXH)X1?>Z52NNG7-[8=-6OS MMAQ_.G2Y\U^;,=)^7),G7WC6Y$9+=56MJM8B,0V:UB(Q"A4I*!0*!03#ES_7 M9/\`)C_RNTCNR/V?>O\`VM=^SNVRK<45N,5OPD[AN>$O^J@T]73];KQ6;>Z, MT:90*!05X$^9CYK$Z$Z3$N,8NL/!P(3%;HJ5%JQ,8E%JQ,8EV#RUWQ'WCM=C M)H@MS6U[#(,#T`^")=4_FFBH0]Y;=*+6+NUS2V&-MU^%L)57)S*!0*!0*!0* M!08[<6>Q^W\)+S&0/1$AMJ9VZ27H$!O\XR5!3OK7JM9M.(>JUF9Q#C?=VZLI MNC/2 M^7YI]_C\ZL?DZ?"W3M+)Y&KPMT[2V/5=7*!0*!017^*?[#_2Z!RG_=9LW]1X MW\S;H)50*#G?[2NZCD9B#MIDU]'@@DN6*="ONHJ-HJ=T&^/].M'A:^]FAPZ= M[-*U?7B@4"@4"@D&QO\`KP?V9_R49_[+_7'S_*SW-.],SDIU%N`%V3?Y+?@\ M.\JW7[M1#KPM?CKCZ]6+J5LH%`H%!+.5NZSVQO;'SR/1#=-(L].A%8>5!)2[ MP+8_Z-<.3K\J2X'KQ7/NT^)KQ7/NUK5M;*!0*!0*"7O\`VC$^64R:_**Z*^9&B+U(J\$^XG"HAI:-?A2*J%2ZE`H% M`H-F\@-U'A][MXUP[0LT/HQHJ\$>&Y,%\M[A_2JGS->:Y]E3ETS7/LZEK+9A M0*!0*!0*!0*#0'VE]V.%*@;6CG9IL4FSD3K,K@R"_DHA$J=]*O\`"U][+W#U M][-&5HM`H%`H%`H)!L;_`*\']F?\E&?^R_UQ\_RN-^Y'MLBW"!?`BC=Q/^(X MB+Q^0;??IZO'ZW5B)M[HO1IE`H%`H)1RUW8YM;>6/RFO3%4T8GIU+&=5$-_,VZ" M54"@XNYAY0LIOG.SB74CDUX&RZ;M-$K37FP&MKCUQ2&SHKBD(]79U*!0*!0* M#)X"=Z#*?E7L3<=SLU7\=400_P!94J)4^;3RK6OO:/\`RQG_`&XU*W$8*)*! M0*!0%1%2R]%!VOLC*'E=G87(N%J>DPF#?6]_I>S1'./Y=ZP;UQ:88=XQ,PS= M>7DH%`H%`H%!2ER6HL1Z4[?LF&R=K7$1#U?ZB%4 M2H\C7Y;:1\L54KQ0*!0*!07&.G/8_(19[%T?AO-R&E3@NMHD,;?=2O-ZYB8> M;US$P[H:=;>:!UM=3;@H8%Q2Z$ET7C6"PWJ@4"@4"@4"@4'&O-#*EE.86?EJ MNI$F.1P6]T4(R]@"IWE%M%K9XU<4AL<>N*0B]=W8H%`H%`H,UM*4U$RAR7?Z MMEATR[]DO9.^M1,J'["LS2(C_)B9,AV3(=D.K=QXR,^Y3V+@IKBZG7(3(O$O6XV"`:\>Z0JM86RN+3#$V5Q:8 M2&O#P4"@4$5_BG^P_P!+H'*?]UFS?U'C?S-N@E5`H.$YKZR)C[ZII5UPS44Z M$4B5;5NZ_MCX;>O[8^%&O;V4"@4"@4'PD55&RJB(MU3N\.A?Y:B81-;X?\`#D.!_P"&L3?]\_+&W??/RFU;A0*!0*!0*#XFI" M+PO!)$N/?&]E_P!:HQU>?'KE]J7HH%`H%`H%!W!MD]>V\4=]6J''74O2MVA6 M]8$L*62J$%`H%`H%`H%!PUG'B?S60>+QG9+QK\I.*M;FK[(^&UJ^V/A95T=" M@4"@4"@:C3@):4+@:=U.FWWT1:B8>;5B-_,VZ"54"@X) M8/4))^(9#;N:25$_!6YI^R&UJ^V%2NCH4"@4"@4"@4"@4"@4"@^$0@*D2V$4 M557O)0=9\@U5>4FWR7QB"0I?*LIU5K#V_=+%V_=+8%NMZ)Z-R'NI24"@4"@4"@4"@4"@4"@I2S MT1G23@NE4'Y5X)^&HMV1;L[BVG__`"V&_P#T8W_T1K`83*T"@4"@4"@4"@X1 MEGJR$WNC)?%?*%;\%;>C[(^&SI^R/A3KJZE`H%`H%`H%`H%`H%`H/BJ@HJJM MD3BJK0=:'!:]1.8R]1.8RMZE)0* M!0*!06>3>TL=DGC.\%_)3QO^ZO-I]'FSLWDY#](8`"(%!#T$ M9CK$5='40W1+TG9$=T3LB&%5+*J=-NNNCH^4"@4"@4"@QV7>+2+((I%XY"G% M5MXJ63NK7/9.'B\N]\-"*#B(,(EN46.TRJ]U6P0?\E8;$7E`H%`H%`H%`H.$ M<\R6/WIGL<::4:R,MH4[[3YBEK]-Q3IK8X\_TPU]$_TPIU8=R@4"@R47;N7E M8X\BPRA1@1U4\,4,A802>(&U760MHX*DJ)_(MO,WB)P\S>(G"\/8^XQF%"5E ME938(;S228R]EJ-&Q!TD"@4"@BO\4_V'^ET#E/\`NLV;^H\;^9MT$JH%!QKS_P!NO8/FADG!11CY M31DHI6X?2I9WCT7[=LUMW%2M+BVS7'LT>+;-<>R(Q9`OMZDX$G`Q[BU=B5RI2HC"1V+*@BC8-713(TN#?@II0T!.*K84NM===9 MB.KI2LQ'5AZ]O90*!0*#RXX#8*9K812ZK291,K''P)N=S<3&Q4_O>0?:BQDZ MA)TT`;]Y%*ZK7#9?$3+ELMB)EWW`@QH$"-!BCHC1&@88#\5ML4$4^XB5C,=7 MH%`H%`H%`H%!PCO[;[VUM]9C$H'9A#E&L5.A%CN+VC'FC&_?K6T7S2&KHMFD M*#+P/-H8+P7I3K1>XM68G*Q$O=2DH%!/<=S-.)`"(0N*^^SV4[*-@VU)'LXA MPXO9*"HI=@#B^$1(I='@]-5[:,SG_G?*O.G,O4?F6P&6E2'8Y.PWD!IIDFVE MLA-($AXTOX1/&V)FTI:"U%?C9:3HZ$Z>B%926W,GNR&VT;`U2PH@BJZ10=2H M"".HK:BLG2M=ZQB'>L8A:U*2@4"@4%-]\&6U,ON)UJO<2HF<(F<+_ECM][_:*VXYAN9TR6`J,;,-M3XY(G@H=NR=2_XW:-J:_E)6CQ+9KCV:/%M MFN/9"8DD7V[]!CP,>_W?NU>BFBV3T ME0<<>CB]R>]=)K'5ZUTFL=6!KHZ%`H%`H/+C@-@IFMA%+JM)E$R MQT6).S.6CP8@:YDYYN+$;_GNF@`B_P!(N-<+WQ$S+E>V(F7?6(QD;%8F%BXJ M6C0&&HS"+^(R"`/X!K&8Z[H%`H%!%?XI_L/]+H'*?]UFS?U'C?S-N@E5`H-4 M?:)Y?.[FV@.4Q[*NYC!*;[8`ES=C$B=NV*=:H@H8ITKILGC5VT;/"WT=M&SQ MM]')##YM&CC:IT?<5*UHEJLM'E-OC<5L2>,"]*5[B)G+S,MX?9@Y?.3,N[O2F/:U.0@2-F$%.*L*5V7K?\,R42[Q)U#5KB[?&<3VE9XVSQG$]I M(KXP]W_`#UI1.&DR[+[;P:@6Z=:=:+WZ]Q.7J)>ZE)0*!0*!0*! M0*"F_(;9#4:_(*=*_)43.$3.&)D2#?/47!$\4>I*\3+RZ7^R_P`OW,?B9&\9 M[6F3E1[#%H2>$,,2N;G_`*QBEOYHHJ<"K,Y.WRMB.T,WD[/*V([0WK596*!0 M*!0*!0*!0:RY_US>&4I,,!2YNM*GT[`]/$Q%"%.LA1.NNNG9 MX6RZZ=GA;+CUEX@(7&UX]2]2HM:T3ZM6)9>-+;?3AX)IXP+T_P#PKI$Y>XE6 MJ4E`H%`H%`H%`H/+CK;0*9KI%.NHF<(F6)ERBD$B6TMBMQ%>F_=6O$SEYGJW M7]F+E^>1SCN\)S7]PQ>IG&ZNAR68V,T[S+96_*+AQ&J'+V?VPH\K9_;#I^J2 MD4"@4"@BO\4_V'^ET#E/^ZS9OZCQOYFW02J@4"@Y5Y^/\`E3_NJ8LG*]:>:=2[9H5NFW2GRUZBR;8\&DUE^-T#_`)Z\S9Y\E@ZZXZ6IPKKU)U)\B5Y0EG++ MEMF-]Y\8,1"9QL=1+*9&W@LMK\T;\"=-/$'[J\$JOOW12,>JOOW12,>KM7"8 M7&8/$Q,1BV!CP(3:-1V1ZA3K55XJ2KQ)5XJO%:RYG+,F5'=C26A>CO@3;S+B(0&!II(2%>"HJ+94H..>)*R1<4CO*O'4/S"7QD[]ZTN/O\HQ/=H\??Y1B>[70&;9H8$HDG6E6EI?L M9,5X/)I7\<>*?>Z4J8LGR7C;C;@ZFR0A[J+>O43E,2]5*2@4"@4'DW&VQU&2 M"G=5;4F43*R?R:=#(W_GEP3[B=->)LCR6!F9FIFJD2]*K4(;+Y+$[:6Y=1*2X/'T=I4XVZ.T+J3@GA=%3D;\=([JG(WXZ1W=A,,,L,ML, M`+3+0H#38(@B(BEA$43H1$K.9[W0*!0*!0*!0*!0*#E_[0?)UW$S7]X8".I8 MB4:N9:*T/_*O$OA/(B?^4X2W+\0N/BKX-WC;\?TRNL9,QL+PZT_'&R+]U.BO46,KYJ2P]_5FA+TJ/0J?*B\:]1,2]1,2J5 M*2@4"@4'PC`!4C)!%.E56R4%F]DVQX-)K7\9>`_YZ\S9Y\E@ZZXZ6IPM2]7< M3Y$KRA+.6G+7-;\SB08:*QCF%$LGD53P66UZAOP)TD\0?NKP1:X;]T4CZN&[ M=%(^KM/`X+%X'#Q,/BF$CX^$VC3#2<;)TJJJO$B(E4B)>*JMUK+F"HJ=*4'-O-?[-\N*X]FMD-+(B$JN2,&G]8U?BJQ?QP_P"'XR?- MOP1+FGDXZ67-/)QTLT*ZVZTZ;+H$V\T2@ZT:*)@8K8A(5LHJB]*+5^)B8S"] M$Q/6'FR71>@DZ"3@J?(J4P850ERPZ'55$^:5B_"OA?AJ>J>JL.4D)XP@7>2X M_P"4JGRDS+W];.67Z%+]7AK_`+-/*3RE\7*O+T-B/RJI?Y!IY29E2.?,+YZ! M^0*?^+549DS*W)2(M1*I%U*2JJI\EZC","JB)=>BI2V9RRY$[GWDXU.FBYB- MNEX2SG!1'GA[D9LNF_\`O"33W-7153;R8CI7NJ;>3$=*]W6.V=LX3;.&8P^& MC#%A1T\$4XD1+XSCA=)F762UGS,S.94)F9G,LI4(*!0*!0*!0*!0*!06N5Q6 M-RV.D8W)QFY<"4"MR([J:@(5[J?A1>I:#EGFG]GG.;<<=R>V6WEFGD5%Z*N1*Y$B<"U"JB7XPJJ+] M]*8,*X3I8=#FKN(:(J?@LOX:G,IZJHY1]/&`2^2X_P"U4^4F9>OK9RW]2E_R MU_V:>4I\I>2RCZ^*`CWEN7^S3RE&94CG2SZ3THO2@(B)^&Z_AJ,R=5!555U$ MJD7XRJJK]]:A&#K1.M>"?*M)G!,X;FY6_9US6?<:R>ZVW<5A.!A"*[P$6%%!&H\=I$$``4LB(B M5145Q0*!0*!0*!0*!0*!0?"$2%1)$(22Q"O%%1:#G;FQ]FXU<>S6QFDTED]EK3R?'I/9SY)C28LAV-*9./)9)0>CO" M3;@$G2)@2(0KWE2K];1,9A?K:)C,*2B*VNE[=%3,)F%4),H/%>*W<*Q?A*ZT MZBL.3E)XR`OR(J?^*I\I3F7M,L[ULBO?UJGX-*U/E)Y2^+E'UZ`%/ENO^5*> M4F94CG2R_P#,T]U`1$3\.I?PU&9.J@JD2W)5)>Z2JJ_AJ,(P*J(EUX(G2M2E ML[EER'W1O!QF=/`\1MU;$LQT;//CW([1<>/^\)-/6FKHJIMY41TKW5-O)B.E M>[J[;.U\'MG#LXC"Q1BPF4\44\(SLB$XX729E;B2UGS,S.94)F9G,LK4(*!0 M*!0*"*_Q3_8?Z70.4_[K-F_J/&_F;=!?9_>.)P>6PF,FJ2/YR04:.0IX`*(\ M"<7J0G3;:'ND8T%ICM]1YFYW,!Z$ZT\V_,81\B!0583<9PBLBW\,9HV^1;T% MBYS1QS:K,."^FWAR:X5]&4^R0M?8>D?0]ITZOFZ?"H/>&YL;.RF M22($UJ,V_#C3\<_),6?26)3;KNH`/20Z`CFI:K="KT)096-OO9DJ;&@Q\W#= MG3",(T07@5XR:6QHC=]7@KT\*#&;XY3;(WF).9>"@9!401RD54:E(B)9+G94 M-$3H1P21.Y7NFRU>SW39->S0^[/LN;QQYF]MV4SFXJ746#5(TI.X-C7L2_*U MC\E6ZT=U8(R',8B9`0;W'R^7=[+$P9&1=O96XC+CY(O?1M"M M7.VRL=Y>+;*QWEL;;'V<>9.:)#FQVL'$6UW9IHKJBO6##6LK]YQ0KA?EUCMU M5[\NL=NK>.QOL];%VRXU,EMEG,JU8ADS$3L0-/G-1TN`]Y3U$G4M4]FZUNZI MLW6MW;/KDY%`H%`H%`H%`H%!%LGOZ!C]]XO:CK7'),F2S5,4%N0J$<=A17BJ MO-QWROU:13YZ4%MM/?LO-9%(LN"U$#T63))T'B=L46>[#(;$VWX-FM6KO]"4 M&$?YS'`V[B]VY7%=GMC-!(=A.1W5>E@#,5Z8RKK*@`_3,1C7P3\!;(JKQ)`R M$#G'MA9.18RZGBRB.JD97&I"B\UV48TL:M"/;:IH"K(JIIPH,QM_F)M;<,X( M.)>D27R822:^B2@:;;(C`>T=-L6P)2:,4%2NJBOSV%-0S&-E8Y4__*9<91>^BF(H MJ=]*L5VUGM*Q7;6>TL>BHJ73BE='0H"JB)=5LG=J!D%/RB`5$4[ZK7BVVL=Y<[;:QWEL[:WV9-_94FWVQ.2NQ-G*W)B1%G94.*92;I=>$NZTED;:^4 M!1;=*K5.^VUNZI?;:W=/*YN90*!0*!0*!0*!00/WKQ7H.Y'X<%3?V]*99[%Y MSLTD1GS%H);1(!_1D:.H'XVCI2]!<2>8I1=MR>91"AL13U5$"Q(M[4$AV[N?#;BAN3,2XZ[%;<)E778\B.A&-M6CMVVM:)>VH;I>Z7N MBT&.WGRVV;O%C1G,>#L@1TLSF_HY+:=6ET?"M?CI*X]U*]5O-9Z/5;S7LT1N MO[*NX8AF]MC)-9*-TC%F?0243\5#%%9<7OKV:5;IS/\`*%NG+_RAJS-\O-]X M-23*X"=&$?&>[$G&4_\`6:UM?ZU6:[Z3ZK%=])]4=U"I*-TU"JH0]:*G!46N ML3$]G6)B7VI2^*0BEU5$3NK4#(XC;N?S)".(QDK(J7!%BL./(GRJ`DB)WUKQ M;;6.\N=MM8[RV/MG[-7,;+F)Y)MG!15XJY*,7GE1>L665+[QF%5[\N([=7"_ M+B.S=VR/L_;"VP;**6HDZBJILW6MW5+[K M6[MF5R7$;<;F5?G3U: M5Y9PUTPO3G?\/#E5S?U3I'_FE?]*T=K>_8 M>E?3:--]7#5I\&@C_N*8=Q3>(EYQZ1C@B1*EQXH@A, M:!0*#%3]I;5R)$60PT&81\3)^,RZJWX<=8K>F1C%Y6R)`C(G M'NH@67[M>O.?=Z\I]UW$V#L6&MXFW,7&7NM0HX?_`"@E1,S*)F99P`!L$`!0 M`%+"(I9$3N(B5"'V@4"@4"@4"@4"@4"@4$-W!LC9SAN2\M+]&F3]RN%UAMJ[>V[+=GMSG-49EUI]9+K6AL),D MY9D=A#3J=<)4NO1PH,1.Y;[`;PS<7)3C_P`.HS)C8J%(DMA%C#/9<:<6,=A- M25ETQ;UF>@5719*"D?*O8N2-&#RVFWH$;3TW\71IOW[7J?.?=/G/NOH>R=F05186!QT51MI5F(PW:W1;2"5$ MRB99JH04"@4"@4"@4"@4"@4%&9'*3$>CB\Y&)X"!)#*BC@:DMJ!20QU)U71: M"!S.4.R(@@XS)'6&H?OIPH,7D^7.T)%R5E2?CB\B%%>@@R0]FC`-]G)=011M/")5Z:#S%Y4;:Q^<">QFSA-*JCX0JEQ4;K02S;F!CX'$,XN,^](884U;-_ M0IV,U-4NV#8])+U4&3H%`H+.=A;`(A,M MLXHB#B!+!C*J7[BZ.%3F4YE=Q-I[6A+>'AH,9>*W9C,M]/!?%%*A#*T"@4"@ M4"@4"@4"@4$5_BG^P_TN@-_,VZ##\]8SDC8;@-'(!P'P='L6#D MLDK8&>B6VW/V3NX5AQWXFWW)[982.^!M(+:08XOJTVX@F`+(1SIZ3U+UT M$SH%`H%`H%`H%`H%`H%`H%`H%`H%`H-6\]=M97,Q<.[B,4]DLG$=<2.B(V[# M)'390H\U@S;56GT'BXA)HT\22_$/N7V_F',_EIS>(<*,N5PN1>;:0422,.W; MD'%.T)H]+EBLI:.'&U!2QV$R,K89F/HWV)ZC'M M($8D5P43@B(@ZM5!39Y=Y&'NN2L!K7MF&SDGD!QA!>==G1FH_H(&3BJ\R*,Z MKJV*)8!12LM@F_+:!.QW+S;.-GL%&G0,5"BRXYVU`ZQ'!IP;BJHMB%>*+02. M@4"@4"@4"@4"@4"@4"@4"@4"@4"@UISOV]-RN*@/XZ`[D,K"<4H3'9!(AO$X MZR)1IC1$"HVZ*?U@D.G3Q)$6Q!8X'#9;;.ZWLU*%]["QO2XJFW%4),B7G6 MQ*(2C+V(^DMF#[KMA+6B*2*B4%_RXVCOS;FYXK60=>F$B-PLI,^([U'YR@?$=ZC\Y0/B.]1^H_.4#XCO4?G*!\1WJ/SE`^([U'YR@?$=ZC\Y0/B.]1^H_.4#XCO4? MG*!\1WJ/SE`^([U'YR@?$=ZC\Y0/B.]1^H_.4#XCO4?G*!\1WJ/SE` M^([U'YR@?$=ZC\Y0/B.]1^H_.4#XCO4?G*!\1WJ/SE`^([U'YR@?$= MZC\Y0/B.]1^H_.4#XCO4?G*!\1WJ/SE`^([U'YR@?$=ZC\Y0/B.]1^ MH_.4#XCO4?G*!\1WJ/SE`^([U'YR@?$=ZC\Y0/B.]1^H_.4# MXCO4?G*!\1WJ/SE`^([U'YR@?$=ZC\Y0/B.]1^H_.4#XCO4?G*!\1W MJ/SE`^([U'YR@?$=ZC\Y0/B.]1^H_.4#XCO4?G*!\1WJ/SE`^([U'Y MR@?$=ZC\Y0/B.]1^H_.4#XCO4?G*!\1WJ/SE`^([U'YR@?$=ZC\Y0/ MB.]1^H_.4#XCO4?G*!\1WJ/SE`^([U'YR@?$=ZC\Y0/B.]1^ DH_.4&''WW?XOO0?_9 ` end GRAPHIC 7 a72487fy07.jpg GRAPHIC begin 644 a72487fy07.jpg M_]C_X``02D9)1@`!`@``9`!D``#_[``11'5C:WD``0`$````/```_^X`#D%D M;V)E`&3``````?_;`(0`!@0$!`4$!@4%!@D&!08)"P@&!@@+#`H*"PH*#!`, M#`P,#`P0#`X/$`\.#!,3%!03$QP;&QL<'Q\?'Q\?'Q\?'P$'!P<-#`T8$!`8 M&A41%1H?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\? M'Q\?'Q\?'Q\?_\``$0@`QP#4`P$1``(1`0,1`?_$`+<``0`#``,!`0`````` M```````%!@<"`P0(`0$!``(#`0````````````````(%`0,$!A```0,#`@,# M!0H*!@8(!P```@$#!``1!1(&(1,',2(405%A,E9Q([05=<46AC=(@9%"4G*3 MU)87"(+B,U.49J&Q8J+2I<&20W,D=+4VLL*S-%1%&!$!``("`0,"!`4$`@,! M``````$"$0,$(3$2407P02(R87&!H1.1L=$CX3-"0Q05_]H`#`,!``(1`Q$` M/P#6^FG3C8D_ISM6=-P4.1,E8>`_)D.-H1N.N16R,R)>U2)555H+)_"KIQ[. M0?U(T#^%73CV<@_J1H'\*NG'LY!_4C0/X5=./9R#^I&@?PJZ<>SD']2-`_A5 MTX]G(/ZD:!_"KIQ[.0?U(T#^%73CV<@_J1H/-DNG/3/'XZ5/>VU#-J(T;[@M ML@IJ+8J1:4542]D\]!4L5(Z%9%Z`V.WH\8,DRDJ._(89!H6"C++1QTT,D:3D MZ25#L2:ANB:DH+!]%^AVG5X;!:5;1Y%YD>W+(D!#];U5(D2_9>@BI<7HJPQG MWPVXQ*:VVRQ)R)1HP/(L>2TKX.M*)6<'EHI+;R4'?A<9T1RW%K#XZ.)@TY'. M0D<$>1V.,E>39PM?+:<%3MV7H/<&V.AINQV@C8(G99:(C8N1U)TM?+TMHA7- M=?=X>7A0064`%XHGEOI1 M5H(UG$U'3V7XW140+?M M;9_2K2\G*<)HM39=X>\"]M!+?PJZ<>SD']2-`_A5 MTX]G(/ZD:!_"KIQ[.0?U(T#^%73CV<@_J1H'\*NG'LY!_4C0/X5=./9R#^I& M@?PJZ<>SD']2-`_A5TX]G(/ZD:#-_H+L_P#_`*-^(_BB-\3_`$/\;X#0G)\3 M\9\KG:.S7R^[?S4&D=)_LLV;\AXWX&W06J@4"@4"@4"@4'DS$`LCB9N/1SDK M,8<8YNG5IY@*&K3<;VOYZ#.7N@V'7;>&P4>6##.+!T)))'[LM78H0U-P!<#0 M:LM)J)LD53[Z6*@\(?R[Q&H#\-O/O+XAR+(?.0V]RS4F^:VXZ7$A5"'A9%[U!([+ MZ%8W;6;B9-W)%E/!E*<:9E,"5G9:QR5Q#(C5";.("@O:G'C?C0>O/=(Y6:W+ M)STK<3ZN\Z))QD98S"MQ7($@)$9-7!PVQ("U!K35K5>U!L$=M7^7G;FV,G&R M&)R,EMV%&<"&1B!$$MV&,(I5^Q?>QOHM;4J\;<*#2,%AXF%PL#$0T5(N.CM1 M6-7K:&00!4E\ZHG&@]U`H%`H%`H%`H,J^]/]1OG>@M?2?[+-F_(>-^!MT%JH M%`H%`H%`H%!$[MR,S&[8RN0A(GBHL5UUE5%302`%76H)Q+3ZUO+09Y)Z@;WC M9J8,?'29$-A'8C8NPI+C8%&*8K+Y.L@G-*<+,?2K:Z11U."JG>#R'O[J%AG' MI.1RS4/,X? MP3,G'N36GA8D!RW0D$RC+Z/:2$B`4,40;K?R<-0>+9&]M]3T;BY;!28HABD? M25(C20<66U"Q[Q-NZ@;`B-Z:^WI!!6[!\/((1L??_4>>+3,K;\O'\U`)7X\. M6A-J0,$HKS6G16RR33L3^R+SV0.K"[RZAPW(29&#D)+3S+?B9V#<2Y"`&2J\ M8@EQ7N+VEW:#0=I9"7.Q;KDESG\F9,C,R;(G-:8DFTV2V1$5=(V54X%:Z=M! M-4"@4"@4"@4"@RK[T_U&^=Z"U])_LLV;\AXWX&W06J@4"@4"@4"@X2)#$=AR M1(<%EAD2<>><)!``%+D1$MD1$1+JJT$7'WAM*20#&S^(/$EM5^`+?LH*;C>M+:/Y1K<6#E MX=<;J(2L;HN-`I*3J\UN,30JT'.%'!%=%U6W90>^3UEVBPXJ&;C;3"@4QQP% MN++L-V8VX`M\PC0VV;BMK%Q1%4D4:"VX;-1,O&?(,.R($EADA%UYHVVR-%44(A5 M$4D2RVO09E'Z.2WL5$@/Y5M&(D44@3V.>Y)8F`Q'9;ELN/.N"@:8J(K*)H42 M(>PEH+;MW:#^)SCD\WFG6"Q6.QC;8@HF)X\I1*]=55/?/&EP\ENU;T$_DL9C M\I"=@Y!@)4-ZW-8<2XEI)"2Z>@A1:#,,[GMB9(]QO/8J9$DXZ:WB,EE&?!-O MJCB>&)1\0[=`<;][3N:R`T5M%5;B!_<_2R=()Y=LE,?7)MX-YQQB*(@\`%&' MG&\\`-@@>]\LU1Q4(4Y:ZDH-0Q^.@8Z*,6"P$:.*D2--H@IJ,E(B]TB555?* MM!Z*!0*!0*!0*!0*!0*#*OO3_4;YWH+7TG^RS9OR'C?@;=!:J!0*"O;EWI%P M,UJ&YCYDUQR#+R2K$1A4&/`-@'U5'76B4D\4"H(HJKQMQX4$9,ZM[0C88\GS MR>%"-&F&K*;@@\36H554%.#9GH54/2)=VZ*E!WN]5^GP$VV.99>><)L19:0C M-.:Z#/>%$N.@W1UW]6Z7[4H)#!;ZVCGY'A\-E&9[VCFD#"J2B&H@13X=W439 M:=7K654NE![MP8]BCF!:F3(`O*33EC5YMIWNBK@MN&J MBI=[R*JCPH-"H%`H%`H%`H%`H%`H%!E7WI_J-\[T%KZ3_99LWY#QOP-N@M5` MH%!!9_9>$STUJ7D?$$;45^#H9D.L"4:439/MDC1`JHXK`:N/Y-!G.2Q?0L)$ M^1->E-?%DV1$?("R",A*%J1+?;:%I.62M"Z\:Z4X6X\$&@D96$Z0"&1`SEG$ M+(`.3)AS(.QSR2/-\QUSE:FU=Y@`#SO8B]TE1;I06K%;%VIB,U!FLD\>4CQ2 MB02E2G7W/#A;4@\TR)41%%"\GJWXV6@M%`H/PA$A421"$DL0KQ146@SW96Z< M!MN/+V;ELFQ&F8"4Y#QL=UQ.<]CU%'X:MMW4S1J.:-$HWXMKV48F8CNY[LZN M8:'B)_Q`Z,S.,M$L2.\P^+).HB$(&1'L]'/\`RU243?VT)2H@9)MN_E?%R.GXWA;2M=M% MX[Q*47A.L2&)#0NL.`\T7JN-DA"ON*G"M23G0*!0*"LS]WS`R&3B8W%%.'#J MR$]XGA91#?!'40$434D;;,3<7A9%[NI;I00.`ZNIGHN.=Q>(5\\C(*,W:2'* M4P@I.(0=05$B`;M&G#2ZFF]KD@>)GK_MM^%/>9A2"D1TAE"BEW2DI-$25!6R MH)1T.[_:@IQ15NE!J*7LETLOE1.*7H%!E7WI_J-\[T%KZ3_99LWY#QOP-N@M M5`H%`H,ZSG17$9K(Y6=,R4E#RD@)!-M"TV*WSE__`"#NC7NB MGK'_`*$7SUP;_<*4Z1]4NS5PK6ZSTA3MVOYJ7")]9KRHUA750 MFC)5)4"_>.WE\G&NSC1_LAU\S7,4F?CNT"K93%!VQ94J&]SHCSD9Y;7<9(FR M6WG4515J%]=;=X2BTPM^%ZI9J(J-Y-L<@QY7$LT^GX11`+W-*?I5Q[.#$_;+ M97=ZM%P>Y,/FV5<@/H9BEW6"[KH?I`O&WI3@OD6J^^NU9Q,-\6B>R3J#)04K M,%L-=\+C)@/-YV9`\=-<9=D,1UB1U(`=E?EL8H\4<> M=(>\!$ANMR(CHJK$931GF$UR0&.Q'U:5'AI'M)!4-11+):@4&5?>G^HWSO06 MOI/]EFS?D/&_`VZ"U4"@4"@4"@C\]GL3@<6_E,K(&-#82YFO%55>P1%.)$OD M1*S$3/2$J4FTXCNHN;F8_>F',7>5.Q,@=3$="][U)Q`E,.\C@E^4G$%[.*51 M,0!?>:6 M]SX\ZKYC[+?W0C^!QF-@KX!A&11T34$4E3O$2*B:E72B*\163A7?KGJT\#=, M;HS\^CHC_P#W\3_O"_\`I'5AQOOA><[_`*I_1.5:O/E`H%!V1I4F+("1&=)E M]M;@Z"Z23\*5&](M&)9B<-6V5OUO+*./R.EK)(GO;B<`?MYD\A^=/+VIYDJ> M1QIIUC[7339E)9G=S4/,Q,#CHQ93-R5`W8K9:`C15*QR93MC1H+(6A%34X2: M13M5.5L=.X^G^%W%G327`V]**!(JK M!RDH94EZ3SU=?CO&R>ILK`*P&!%1L:"")J[;A;:!095]Z?ZC?. M]!:^D_V6;-^0\;\#;H+50*!0*!0<'WV8[#DA\Q:89$G'7"6PB`I\7C_P`=%`6TABR>A&4Y?**QJ$1@3T:>T_6\NFG*Q/7KV_/XZRY;\?,=/CX MQ"[EB)[POY1V9W\>-N MN:6^)4R4PKK#T=Q%`B$VC14XBO$51?9:+:@M?2?[+ M-F_(>-^!MT%JH%`H%`H,C_F*W>YC=NQ\!%/3(RZDLE17BD9I4N/#LYAJB>E$ M)*Z>+3-L^CNX&KROF?D^;JL5T4"@ONT.K&5Q.B)EM60QZ<$-5O(;3_9)5[Z> M@OQU2-D#(97@5N!"OYIBMB%?=KS& M[1?5;QO&)80^Z<;RW$R#2=QQ4"0B>0NP3_#ZJ_@KMX&__P`)_11^\<3,?R5^ M7=0.7R\T#?D209(OGYC1N?ZRM7I>%.;0U5V>7$_+I^Z9JX5I0*#IFRX\*&_, MDGHCQFR=>-?(`(I$OXDK$SB,RS$(#XZ?W%:/M]Y0QRHGBLT*<$14ORHNI.\Y M;@1*E@])<$U>?G]O;U_PEC'=.8[&PL=$")#;1ID.-NU2)>)$9+Q(B7BI+Q6M ME:Q$8A&9RF,%F'?5GMTKH M=KTXZ"LZ6$9'V8VJ]WI!Z&QMYULJ_@1%K$SA&UL1E/)T[W&KA-J+*.-$@20U MW5E3YG*UV147F\DM&F]_PU#^6&K_`.BJ#RF,DXR"^E*G6!)Z%2M6_CTVU\ M;QF&9C+7=K=5L1F&OB[/@$*2Z/+5U5M'=U<%2Z_V:^ZMO3Y*\QS/:-FJ?+7] M5?WA"UR.SV/<@;DAM&NJ^I`<_.`6S4"_#K5%]*+5G[3O_DF)^.SSFS3. MF+Z_ETF/ZO37HG`4$S$VS+?89>-P6A>5$%%155%(VP;O^ESD+]'\5:;;HB+M5%<(K7]%;::XK&(1F9E(U-$H-KZ?S2E[1QY M$O>9$HZHO:B,&387_H"*\?=JBWU\;S#LI.86&M210*!095]Z?ZC?.]!:^D_V M6;-^0\;\#;H*+N7:V\<;NF=G,5&?%K*RV&7SAZ79BB[,8$^2\($XTR<5E5=1 MY5%LD%0(44D0/?&VQU=BQP4<@!3@'7(<9<899D23;9%QTQY"]JBZJ7%>T55% M5.`=NVML]3(,;<60G^%=W!/QC,."ZKRJA'&FY%UKF$@W10C360%5U745U+Y5 M"1Z/[1W)M3#RL/EM*PV74^*U%Y'/>52_?!`'2ZI*I.JA**DO=1!2@F9O4'#, M3'X$.)D$8A=\6;?QQB%6R>(R.0AFP],`=5E$6V M](HHJBHJJ2F7#T*E2OKM:,3+9MTVO7$S^R=VN^NWW8SS8#.YC-Y5@!!N26@%N M`%8T1;BO!"1>Q6Q5/-:M:IL%`H-:Z5.*>VW1_NY1BG_4`O_FJFYD?[)=6K[5RKF;"@4"@RK[T_P!1 MOG>@M?2?[+-F_(>-^!MT%.R@=4HNXY\_%++G899\UQN"]K0V#9QCJ1U:$C9\ M1%?DJ-V]?`Q33P);!Z5S'5J1$;>E8]&XRI$>-MMIT7T<'((R\SI9=!RW(#GZ MO55%TJ*HMJ""PW4WJ=N#&@_AH[,SFN/-./0HW,!A":81DE<-Q0U(X;IH.E>Y MIU+>Z*$NFY.J[,22L#%..N`J$P4N,\I/%W$?UB3OO?+;53;$.Z9)H2U!>]ES M\]-PRN9UOESVWW6U7D'&0VQ+WLD;,C7B*IY:#Y&WN=]_[J;\H9:8J)Z">)?] M=ZLN+.:X7G!M_KPB*Z'84"@]$#'3\C*")`CN2I+GJ,M"IDOILGD3RK6)M$=T M-FRM(S:<0U+:W03(2%"1N.2D1G@JPHZH;R^@W.(#_1U?@KGOR/13[_=H[:X_ M66MX3;6W=NQ";Q<-J&V@^^NHEW"0>-W'"N9?A6N:UIGNI]FV^R*;U+-1>OLT*N-,H%`H,J^]/]1OG>@M?2?[+-F_(>-^!MT%&SV]]U,9S<\`/8BT&CT"@^*>JD<\7U:W(P?!')A.GQ\D MH1D`OX.;75QKXG\UGPMF,(BK!:O7B\3D\K+&)C8KDN278VT*DJ)YU\@IZ5X5 MBUHCNU[-U:1FTX:MM;H&^?+D[DE\H>U8$544_<-Y;BGI047]*N:_(]%/O]V^ M6N/UEK6%V]A,)%2-BH;41KAJY:=XK>4S6Y&OI)5KGF9GNI]FRUYS:D]D?<.!&V/*OW_P!UU:=;=;%QLD-LTN))Q146N^)R\M,3$XER MK+!0*""WCF!QV'<$"M)E(K3*)VI=.\7]%/\`3:IZZ>4X2B&U=!X;D7I=A]:6 M)[GO6M:PF^>G\8V6JCW&V=T_'R=5.R_UPI%`H%!E7WI_J-\[T%KZ3_99LWY# MQOP-N@M5D155$XKVK0?@``)8!0455)41+)$D*B<$D1[J*JOG<:*R?H+4JNC1;Y('HOM+;^ZWGPS4IT7( MKFAF&%@20(@)E=VZE=-?$41%MQ0NVW5'(MC"?)]QO3Z8[^KZ.Q.&Q6(B#$QD M5N)''CRVA0;KYR7M)?2O&M4SE3WO:TYM.9>/=.4?QV-8DL/`TJSH+#I.(BHK M3\QIEY.*I9>69S=]]0!9EO0V6GDB*#DME&_?&G3E2XXPA[=2KR6 M=2\21%4N`F*AC*?C"_[2SAY3:\/)RD,35J[[AB`ZR;2QN(+9&*(2HJV15]U> MVLYZ(3'7"9"5#QD0)&1>",3AW2X]U;:_"?1LR@>J>-C[ M@Z?.S89(^D80R41T>*$V(W(D]"LF2I71Q+^&R/Z.CB[/'9$OGAF-)?U\AHW> M6*FYH%2TBG:2V[$3SU>K^9B.Z:QDK)X9!2=%?:@/+P)QLQ1"5+W"Z<>'%43W M?=WZ=WCTGLJ/<.%7=]5/OC]UK`Q,4,%0A)$421;HJ+V*BUWO-3#]K+#HFS8T M*,;6FT_-TP]M0"@4" M@RK[T_U&^=Z"U])_LLV;\AXWX&W06J@4"@4"@KG4+9<+>6TYN!DDC1OBAQ)- MKJS(;[S3EN"V1>!(B\154\M&:SBRF.F@ZZ MG)'+T\31-(MW03[54$2DM-/5I_3?:SNU=D8K`O/C)?AMGSI#=U%QQUTG3-%+ MCWB<5>-9B"TYG*RUE%P%OQ$P&/\`LVK//>GBO+'\)"I-3,Y]'7NK!/YO&,PV9(1":FP9RNFTKR+X"6U+0-*&UZY,(-[\$\E5=;8EW M3"C1^E.`S$.=REU4-Q3EF!JJ(G!%045+UMG;, M?)'"][?P;F-V^QB)LL\F38&#TE]3(G$,B6R\PWCLB%I34:\/+6JULSE*'SZD MEG:DW/;?FQO$BKZ`FL0/6#0/"VA:TN"'S@=8LO*Q.VM;1/Q MT_P\VXMZ0\MCHT.0P*9+4XYSUT"IDXH./&(BB=[F:NQ.(JFJZHE3B,2EKU>% MN_?Y?D\F!SA0C2/()5B$O!>WEDOE3_97R_C\]=>G=X])[.#W+V_S^ND?5\_Q M_P"5@RV>QF+CH])=15--3306(S_13S>GLKOK6;=GF\,VSVXIN8?0G?>XX+=F M.*W0?2J_E%Z:[M6J*_FG$-E_ERZLJHHN/^XB7`?P^9 M*JO=.5_ZX_7_``VTK\WT#5&VE`H%`H,J^]/]1OG>@M?2?[+-F_(>-^!MT%JH M%`H%`H%!D'6;;C69RT6'MEM'-^/L*X3/!&/!`JCSYA*J(.D^ZRO:1=WU;D&8 MG"%]<68_C\2F*%Z$Z#@3VG%3(>(32^K]DU*ZGG5+6\FFVGNVK9#BOG/59,!N M_/8-1"%(U14[8;US9M_LI=%#^@J<>V]98RON-ZO8(V5++,N8X@%2-P45]FR) M?@H)S/QA;TTRE'5=MNY3$3HNJ%-8EON>_2!9<`R$BLFDD%;IH2P\4\E4>^TV MM,RM-=8K&'OR$4Y<&1%"0[$)]LFQE1U%'FU-%36VIB8H0WNEQ6M,2FSCH#L> M/M?:3[D7(2I4?+279*1I)`:-$#IM:A(1!5)QL`UJOE3A:M^^_E*-8PT^M"3" M.O6$2)GHN9%-+,]G0\7DYL>R7)?2V0HGZ-6WM^S-9KZ+7V_9TFL_FP;=[$"> M,=\):D[!UN-L,W7F$JBMM8KW5L"I^&NV^)9YOA;$YZU^4.US#3E,D* M*#A+K<453AVW2_XZ3?T8OS)F/IZ.F&XXXPAN$IFI&BD2JJV0U1.*UZ3@_P#3 M5Y[?/URUGI#T:F;JDMY;,-G'VXVMT[1.40KZC?E0/SC_``)QXIHYO.C7'C7[ M_P"R-:Y?4L:.Q&CM1X[8M,,B+;30)81`4L(HB=B(E>Z79= M=*BJWK,3A&U(MW8CN?8NZ-LZW,E%YT`/_P!I%13CZ4_*<3UV?3K33Y$(JG%G M+?3,=E7R9"6*ED*H0DPXJ*G%%106LSV:Z]X>T@`E%2%"45N*JE[+Z*KEBD(V M>ST5$&-DYC(#;2T$AU&TM;L!"T^3S5B:QZ,YEX]E[OW/%VOCFX^3D"T;(NHB MFI<7.^JIJO9%O>EZ1,]F8M*1=W3N=Q%0LO-2ZJJZ9+H=J6X:22U8\*^AY2HG M4=^1(CPG)+SDASG%[X\9.GZBKQ(U(JZ-$=6S3]RDUU.ISVU@R M$O\`MF6(X*:HV:\5)?5`1-;:B5$2Z5C+7Y17I+Z6Z6?RXQ<='8R.\D&5-0B< M'$`J$PVJDI)SC3@ZOG%.[^E7;_\`H6KKBE>GXN&U8FTRW-MMMIL6VQ0&P1!` M!1$%!1+(B(G8B57S++E0*!0*!0*#*OO3_4;YWH+7TG^RS9OR'C?@;=!:J"I[ M_B[ED#B?HW)=BY5F4;P\'%ANMA'<58\S1=$;>/0&OU@5=0]E!2F-P]984!MI MK"."U&C1K@\)S9)N.QFB<(GB=[Y#(<<$D2]M'D'B0>B/N/K'(C:IF.$`?,VU M99AO-.`VDEMH[N<]2$DB&;X&B64TT)Q[I!%3=_=4MN[;QY38K31^':BN/Y!E MQ3&2C;"MDKBNISR=%9!N]BCR[=JIJ"98W;U'Y,=?C5=R/2G?L%AUU8 M4>4C0D:K%DBJ6%+_`/;I'7_14?XI,H':G3G?Y[6PQL8%YY@X,8FGDD010P5D M5$D0I"$ET\Z4G7.1,M=,.H1VU80VKW]>1#X>[I>*L?Q29<\C_+KN_.C&;G3X M.-9;<4R-M793B(HV_L]$<;\?[RMNNOC*5+^,Y63;?\KVQ<>HNYF1)S;XJBJ! M%X:/=.SWME>9[J$XJ>BMF4K;K2N,K9^#QN6VZ>W`@8>7BWG$6$"`SSX$D.7) M;T`FHE4@;<1;<3!+K6&I<'76F6R<=,6VQXD9J@BB>E5H/T#`QU`2$*]A"MTX MG^HWSO06OI/ M]EFS?D/&_`VZ"U4"@K'4S*93%[(RDW%2@AY!EL2CR'$N*6-%-+J#HB1`A")& M.E"5+\*#P[9W>[(>`LG)-F/)QN(=CC+:!EX9DXGVS!P0N*&2MMKIO9-7#@J4 M%3:WWN\Y>W6IDL6($N,^>4G&TP(M.-K,TNJV8W-`Y#9%RU3E<%-"0TTAH6Q, MCE,CM>-*R9\V8KLELGNY9P&9+C33HDV+8&+C8"0F("AHJ$@C>U!/T"@4"@J7 M4-W=4*+C\KMX79;D61RI>):THDEN4"L-DI+WAY+YMN*J+ZB%?T!38_4W?D)) M6/7;/=7L)0FMD[\WGN#<)0IN%+&XUDI*O2 M'XDQHC%MJ,3(@;B(TA$*JJHTJZ1U<`T2@4&=Y'8VY4>W,<%K'2966DE. MQ67DOO,RXKA0QC`'O;#A(C2A8"!Q%027A=.\%:E],.K,_!S(62S+$MR5[SR' M,E-5CDI'T`96CIG0-D5$7MOV]M! M/T"@RK[T_P!1OG>@M?2?[+-F_(>-^!MT%JH%`5$5%14NB\%1>RU!Q-ML].L4 M+2J$-T1;$G8J7\M!RH%`H%`H%!&[EG3(&W\C-@K'2:Q'<.*LPE"/S4%>7S21 M4L&JUUNGNI04G8W4J9EQP1Y:1$99G8>3-G&H>'4)468W%)$4GG0Y=R)$_.5- M2+9;($*O5S.MY*1';GXG(QHKQF,F*"HD@0D0HQ1@'GN:3URWD$U];0)(.F]P MO73[<66SF,FNY98JS8DPHYK`N411Y33P*P\IN-QTHHT%HH%`H%! MG>YMO;@F]2X$MN/-D;?XM@@ MX>T^J4*9&:A&8NJ+92),B:7A@CNQ$23&`K2#1T)AF;1*R2(FGBJ=V@TC9T?+ MQMIX:-F1T95B%':G#S>>O.!H1.[OY:W3BOG\J]M!,4"@4"@RK[T_U&^=Z">P M>QMW87"X_#0=VD,+&QF8<5#@1R)&F&T;#46KBND4XT'M^CN^_:[_`)='_P"* M@?1W??M=_P`NC_\`%05O(Y_+P,G)QCF[,C(F0E`90P=LRIP-DX`N").Q&'F[ MJ!HMM5Z#I^E.8]HLY^YV4_9*!]*T6<_<[*?LE`^E.8]HLY^YV4_9*# M\7=&75%1=Q9Q47@J+L[)VM_A*#R.Y(WF$CNY;+&P+:,HT6RLBHHV/8WI\';2 MGYO90=H9N6VB"&:S`(A:D0=EY)$0K6OPA]MJ#L;W)E&@1MK<&;!L?5`=FY-$ M3W$2)0<_I3F/:+.?N=E/V2@?2G,>T6<_<[*?LE`^E.8]HLY^YV4_9*!]*T6<_<[*?LE!W8[/Y>?DXV,;W9D8\R:IC%&=MF5!!PFP)PA%V6PRW=`!5M MJO063Z.[[]KO^71_^*@?1W??M=_RZ/\`\5!"?PNW%]-/IC]+'/CKXM^)]?@8 M_+\+S_$VT7];F>6@T6@4"@JNU?\`W=O3_P`]#_\`38U!:J!0*"D[CWGFV=X. M[8Q`0X[T?".YLIV1U^'-1>Y`,W`V^6@Z5)QSO:45.[05UW^9'9H&0AC,H\@F MMS!N.@HTBNIS5UO@ME\.XJ"B:N'%$O0>?)?S);8"!D5A8^<$^(CS0C*9;1L' MT%$CJZ(N\S0ZX8IW4NB=Y;#I)0BV/YCI#D?%-+CA^,).0@LY&X(+#4*4;#9F M)$_=34I"J"\4LG?0;T$DS_,QM=^1'Y.+G+%?CF8ZD:1\I"R8L=AEMM#421SQ MJ&I:N")PO02^V^KQ;GW%/@XJ$<;'Q<7)E`Y.;07O&1G@:,"`'B70*N:5%4%; MBME5%H(7;_7Y]52/N;$/1,LVD5A[&0V2=(G9#,F4DEITG$$XYQHNH$MJ0KBO M9>@DK+#K3A@)BWS5&Z@*JNDDH( MZ?\`S(X)B6"M17B@07GVLPZK8DK@-1)SK9PB%W2NI_&F'OB)P5+Z5O8+)#ZN M1\J&>AXO$3&,[AH!S1@Y-&XHN$((6E")SU4,D$BX(BWNJ<%4(;;/5[-9>#`- MX,?#*3A,AD9,R7SXS;$G'3&8SB/-E=0`0?4R1#6ZI9"1.]0=I]6LRNS]N9AI M,0N4GOLM9?&%*43%''+&C-U1&B%D7'2YQ=W3HL1+05W$=>M^2,M`A3]KBPP[ MD8^*DR!!ZRS'UBX[%%]\C,K@:-<+76P;O0*!057=7_`+NV7_YZ9_Z; M)H+50*!0*!0*#/X>X"P^\]W`N+GY!'Y<1P7(#(OB-L>P.D[&B@7=O94[.-!+ M?3[_`"YG/\%_7H'T^_RYG/\`!?UZ!]/O\N9S_!?UZ"'SV_MG^(A?'^W)GB=2 M_%WCX3&O7<=7)YIWO?3?3Z*")R._NDFMSXRVX&OG/\[Q$*%?G\/$:M9^OV'L]R=,*'HT\I.?IL=K_NC7A2Y>W&?"Z3UZ84'EZ;-Z[V.UKC3?5PM:@[)>_M@^$C> M,VX_X31$\'SH4;EZ._X+E:CTV_M.3I_VM/EH.N5O[IQX!GQ>W'/B_G/^'YL* M+R>?=?$:-1Z==]7,MQ[;T'A^,'^9MQKXPUN^*U0H7.YG?YO,N>K5Z^N M_IOY:"0Q>_NGG*E_%6W'>5X8?'^%A1M/A>6FGG]N%[T'C:WMT.;F"\.W65DO\M8Z%&AE9 M![K?(`G50$O_`':)=>/;06:!O[:7-@_%^W)O-Y)_%GAX3.KD7]\Y&@[Z+^MI MX4$O]/O\N9S_``7]>@?3[_+F<_P7]>@?3[_+F<_P7]>@B9FX"S&\]H@F+GX] =&)^.D+FJF7>O9$[.-!H%`H%!_]D_ ` end GRAPHIC 8 a72487neuro.jpg GRAPHIC begin 644 a72487neuro.jpg M_]C_X``02D9)1@`!`@``9`!D``#_[``11'5C:WD``0`$````/```_^X`#D%D M;V)E`&3``````?_;`(0`!@0$!`4$!@4%!@D&!08)"P@&!@@+#`H*"PH*#!`, M#`P,#`P0#`X/$`\.#!,3%!03$QP;&QL<'Q\?'Q\?'Q\?'P$'!P<-#`T8$!`8 M&A41%1H?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\? M'Q\?'Q\?'Q\?_\``$0@`M`(]`P$1``(1`0,1`?_$`+,``0`"`P$!`0`````` M```````%!@0'"`,"`0$!``,!`0$```````````````(#!00!!A```0,"`P0# M"@<+"@8"`P$``@$#!``%$1(&(3$3!T$B%%%A,I.C9587""AQ@9%"QP8*R0U-S)!8VDJ)C@[,TX2725&15$0$``@$#`@4%``$$`P`` M`````0(#$3$$(1)!47$R$V&!(C,%0O"A8A21L='_V@`,`P$``A$#$0`_`-M\ MM.7&A)_+G2LZ;8HCD'Q(T# MU5JKEQZ.0?$C0/55RX]'(/B1H M'JJY<>CD'Q(T#U5JKEQZ.0?$C M0/55RX]'(/B1H'JJY<>CD'Q(T#U5JKEQZ.0?$C0/55RX]'(/B1H'JJY<>CD'Q(T#U5JKEQZ.0?$C0/55RX]'(/B1H'JJY<>CD'Q(T#U5JKEQZ.0?$C0/55RX]'(/B1H'JJY<>CD M'Q(T#U5JKEQZ.0?$C0/55RX]' M(/B1H'JJY<>CD'Q(T#U5JKEQZ M.0?$C0/55RX]'(/B1H'JJY<>CD'Q(T#U5JKEQZ.0?$C0/55RX]'(/B1H'JJY<>CD'Q(T#U5JKEQZ.0?$C0/55RX]'(/B1H'JJY<>CD'Q(T#U5< MN/1R#XD:!ZJN7'HY!\2-`]57+CT<@^)&@>JKEQZ.0?$C0/55RX]'(/B1H'JJ MY<>CD'Q(T#U5JKEQZ.0?$C0/5 M5RX]'(/B1H'JJY<>CD'Q(T#U54_P"ZS1OZCMOYFW06 MJ@4"@4"@^'FA>9<:-20'!4"4"("1"3!LI\^ M]#(M\)'5N0W)U.WK(N4F*8@CG:&F#C"PU@J-8KBN*+F14#84OV@I,74LC3[U ML;9DG=FK/;7'B<0'`?E+';G$Z(<,V@3)`6%@WV0@/1V MTDFC1!.FE"4.,C9B?#,45'6T4"3=07;F!,O`\M')M_NAZ5N3:%QOLF0.9R0N M=N,PS(>$,$<<4"78G<54',M!IQ[F=S)A3`,+FMUN%E?TQ;66HSO$BSRGQI7V M@JH'4>4WV\J.X;%#$=F.(9&DM4ZHU#9)KE[U;=8-KA6*)J:Z3(#HMR^T%VL# MC-/&)BT#V4"X:!AB*(*)BM!OSEU;KU;M#62)?)3\R\C%`[@_*,G'N.[]8X!& M6U5AUQIZWM-.D,AA%<$$+ MC]7:6."[ME!(\Q]7ZPT]I#36MHC#&@\;;SF=M]QG6>YP9]UN41!ESDCMM$L-N;&>FQ8R\(0!>&PR`&Z9)BX> MS$<9]TUX&BXETTW+6Q7HP;)NT''9FR9$U[)PX&U3;1-IHX8;L,V9!$J#5%_\` M:'US9KI<92HS*C,RKG;&K'N1%VT&27M`: MPM\YS2SXN7"X([V@[PVQ'XXV]BUMW&;PV56/'-\$(N'CLPPQ$EWAT%IRY1;I MI^UW.)(&S; MM1=F`52)SDO.GI;$W4_`:"T0N>=NG)*U'J?2C%D4HD.3=Y-LO,:#NERN+BV_5$(ST?)%F)EB2F"`Y?:%-K%P([.9W:NT.KM-4)`]HGM M"V0M/A=1M5Q?A$33<6XOBVTR^)H^B.&Z.#39JL1<6T3PC!-F*Y0F;%SEBWZ^ M6VUVFPW"2%PA0KF).0LKCHDZA]0PRD@HO=3'9B$3S'UGK_2FIRGQ) MD.;86+=<+A-LBL95CQXD4BCONR\V;/(ECPP'!$7<.*B14&O[=S]UW,GLZ;)\ M`G28]NN"7<6&E)L)EA6Z.,H"CPMD@-O$8DET&G)68FN$C>UJ,3@D:8$B(HJNR@PM2 M6[E'I^'-BWBS0VHDN'(GS61MZO`Y&A$+KQEPVC'ZLW4/#?BN;#>M!+%RRY"Y/F#L2@S95DTQ!TR_;"M$==/L,N$=G8ABZR3 M8XN$`0V@)#4BVH`@JD6Y,:#R/0>B"6W*5@MW_P!1C]EBD5E$C8EF7@H@X!UN MMU>G;OH,2/RKY91T)&=)V@$,4`D2#'P44/B(BHH=!];X<.Y08-]OO+.\N1+1 MJ*WMS34X*QH-SMCIHVY MG;^*IIL.RQ$9N:YBPQQ6@QI7*?04N0[(DVXWG9 M$)+;+4Y4M4D1@;)H!D#QA8HE!'IR;Y6VEH9W87HS-O>9N7% M*XW#(V[`95IE\LTC+BTRF7%?FT#6MHY1ZS6,&I9;$W[.*0D=MNX/QT`PCA(D M8C&>:S$$CA%/ZHB5K,Y'; M%LCRYE'8J[5H,69RKY91;,;4NW"S!CD[(=F')DB\'%C]E=(I:N\=`6/]62*Y MERIWJ"X0HD2%#8APVA8B1FP9CLMI@`-MB@@(HFY$%,$H/:@4"@4"@4"@4"@4 M"@4"@@-6Z5TIJ#[+_P!0@I_9\UN7:L)3\7+-#'A&/!<:SN#MRXX].%!'S-$Z M"U'>GKLBD_=[>VEH?DPYT@"8%H@D]F(&G4;%4)0,A4<5V9L46@@K;RQY+RWI M-NM2MF4F`MOGP(5Q?1'XT52BXR&FGOK"9(B;SFBJ);,<4V!*63DMR\LT^-<( M,*2DN'(&7&<=GS74!\64C\3*;RB2DTF5LXI*>;-MH\K4@QCMN`!B6<0<4@5%Q05Z*"$7D;RW[$Q!2#("'%D+*AQP MG3!".1(XA!'07DX+9<8\PA@BX]Y,`R[+HGEWH61'GQE^SGRBC:V9$R<^8E'C M`<@64&0Z3?U8-N'L38*$N[&@C7=$,VM;_MH,NV\O=#V:\M2X;"QI+G"[+!64_P!F0HC'``V89.*PA-LX#F$, M42@M=`H%`H%`H%!5?XI_L/\`2Z!RG_=9HW]1VW\S;H+50*!0*!01>J;0[>M, M7>S-/=G=N4*3#;D)O;)]HFT/9^"I8T&L;QRLU9?I7;0?CVUQ\,`EN*?;X&-E MD6ER,PH`0FTC\CM(D+@XKCAT%0?5QY1ZF?8NX0QM<%J[P;I$2`PZ\$:*=R@Q MHF=D48VIQ(I.FB"&*ETKB1!BW/DMJ6ZZFDW"XC:9%KFSV)S#E,7"%+A&485P)YIIX''F$[[K0$&"[\:#7MYTES"N-_9CUT82^)/9@# M**2Z+%W=0?\`U76T',#_`!"'M"-.=9,-ZY4Q4*"P6[3FNF=`E;9#LAV\-W&, M['>[40OG$:D,FYQC5YP..4,2 M>*R/QGR'.^N&-R5AT5P3!!Q3#8.'(`^M&;- M5#.&/@YTQQH/"-I#FN]99)OO7:/?&H\./&4KFIL.$TTJ2")MN8VGUKC08N9A M<1"4DQ7,)!9]=VC7U,WYQR5EN"A+6S]N><;`Y8OB9JD,FP7ZS-C\M!7; M7IKFO'&V`\W='6VUBGJI;%WA^PM(\S8C M<,;7%?MDP(T2,Y)63'5A%9L4B$A.M`\7%%J5VTGS;=-#MY M75B*C#Q,0RN^9T)?8XZ`KCJR,3;62!J@D9)OQ1$++03#5JUPLIR/:;:2)BR!)PT)#0%#%,3#:]`H%`H%`H%!5?XI_L/ M]+H'*?\`=9HW]1VW\S;H+50*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0* M!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0* M!0*!0*"J_P`4_P!A_I=`Y3_NLT;^H[;^9MT%JH%`H%`H%!%7W5FFK`UQ+S'>=^CHKQ+SOT5.;[3]Y-5[#8H["?-X[QO?+E%FK8X/G*V.%YR_+ M)[0NM[G=6XG8[8TT8DJKP9!%B(JN_CHGW*E_T:^5@C'36%P;YLZA1?K8T M0A[@@Z*_=<*D\"/-G_-]$I#YOLJJ=MM9MCN58[HNK\*"8LI_S?+5=N#;PE[& M:%DM>NM+W%1!J:++R[.#(162Q7YJ*>`DOT56N:^&]=X61>)3]5)%!J;F5JG5 M^GM0WF="DN/Z;AV:,=SA,B)2(;LIR6#=P8V*2@V48$=!<>JJDF[!0\VN=,QB M2S#[#'F/S&TD(93(\)UUU@44Q'_,\5")$'##;UDH/2QMF1>]08LSG?=+G9KL<*S=F&)97KI+_ M`,XK4E@$MC,\";-([S1*12%:%-B]7/AE)*"9NO.18C,]]IJW*,:;)MS,9V:H MRN-$E''+BLHTJ"CHMJXVJFB95157#%4"2Y6ZKFZDEZDF.O$<1)$!R#'(A-([ M+KIKP[SOT=%> M)>=^BISO:?O1JO8;'&83HX[SCZ_\HLU;'!\Y6QPO.7G9?:'UU<;NS#*):VV7 M<^U&9"DF4%+?VC#H[E3_`.C7SE5R<$8Z=T+BUS8U*F'&CPC[N1MT/Y72I/`C MS9OS2DXG-\<42;:R$4WG'=0R7OH!BVB?!G^.JK<&WA*49H62V\A5SWP7KO"R+Q*Q(J*F*;46J4B@U'K#4NL+/?;JC,QZ M5IR9W<-4/#%37#:"XAE1>;]]E$*MVJ"TQ(?9:QE=%T7[O$BSWN#P(T:R6J M717AV\95J5[3FJ25>RV MF"TFW!'5>=^#P3:JV.#'FLCA1YI32W/36]W;D$_'MC?!441`8D;-NJ4986FTZHL%V5!@36W753%&%Q;=PW MX\,T$\._A7-?':N\+(M$[)2H/4/K-^;'TC>9$&:MNFL0I#L:<@MN<%QMLB$U M!U";)$5-J$FZ@U@'-G6%KN4ZW7:WE*U!"^S[9]E\2/#A/3)*3WNVM2GA'!J0 MQ"#()'U37)AFH)![GC+",9!9(ZRQ!TAC+<1+:VW"=1%-IAP<%&X^$*DG4V*J M+C0>&I^:VH$LMRCA$"V3FDN$49D1]9!LS;6#;KN8'HX#P7<^`&NW!1V(I]4) M"=SF=B*1E:6UC/'(;B/=I55#LEV9M+JRFQ9(F^M)%P1#.I(BCO3&@\HW->Z) M.:;EVUN%<;FS;UBP)D[AQ63DQYLG!QU8HN-N$D10P)"Q+#8.!4'A-YLS;G-. MVP4;A.1;C9D23%?&0+S,B\1H4IDL[()@H/KUFU7Z6.*4&VJ"J_Q3_8?Z70.4 M_P"ZS1OZCMOYFW06J@4"@4$/JC5VG],6Y9]ZEC&:7%&F][CI)\QL$VDO\G3@ ME2I2;3I"5*3:=(<^ZU]H74UW)R+8!6S6]<41U%0I9CWSW-_T-J?A5HXN'$>[ MJT,?$B/=U:KD2)$E\WY+IOONKF<><)3,B7>I$6*JOPUV1$1TAUQ$1L\Z]>E! M.Z*_W"Q]%S^HM'!_1_7]VSVX4MQCCMM$37$%E"1,<7#15$4[ZH*TFT:Z,/1[ MK9;IG($CD2B.=5'`DRYE'82*J+UD5,$Z4PJ/R5\WO;+&D1WH[QL/AD=#88+O M1>XM3B8F-8>3#+A:[NFEHRR&Y:I":3_U'?K&E[@@"JBBJ_B*G?KGR\:EOI*W M%-IG2.K8/+[G%IK5Z!$Q^SKTJ=:WO$BH:HF*JPYL1SX,$+O8;:SB`*D,5I7 M2%XD10(<@]3!21=F%!D7BYZ+MDV;#N$!L5:MCESFN=D0FRAP5`2150?K%;Q' M`$QP^2@J0/\`+EZZ?ZF=MDZ<!M3CKE*6:=U2VBU\`XK^-6CBX<1 MUMU=^/AQ'NZM4R94F4^-9V;;Y?^M$2T"%,TI*N068;2C,FX15NCC+T06Q(6G1;7B*J8$Z)NIW<-^-!A_P"I]$'= M9D1;@4"@ M4"@4%+U]S7TQHT%9DFLR[*.+=M85,^U,45TEV-BO?V]Q%J[%@M?;9;BPVOLY MYUCSCUKJ8W&SEK;[<6*#`AJK8J*]#AIUW-F_%<.XB5HX^+2OUEHX^-6OUE1T M1$3!-U=+H*!07;EW^1G?2;_D*D;L;^G[X]%\&T7(@:,8Y$CRB+>&"KB:*HXH MFTS'F0Q[+[05_M%R5EQM+I8Q5`$'B5)"(F\P=7%? MZ)HOQ5Q9.)6W6.C9Q<*>SK/Y-XZ7UCI'7-J,H)MRF\![7;I(BKC:XXHCC19D M5,4V$F(]Q:SLF.U)TES7QS6=)3,RS6B:R;$V#'DLN"`.-/-`X)"TJDV*B2*B MH"DJCW,:@@@]8.Z&TY:I>HKW;8RMBC;3KB1FG'GB,A:9:Q5$QQ+**9E04Z51 M$H(V5J_ET,Y]9T`6WG1:C7&0_"3$#(#=9C2,15Q2RQE41P4?!VXD.(0FJ;]R M_NEBN*R;-;9HC2E MNM86QFV1CBC@I"ZRV:FJ&KB*6(X;#)5%,,!^:B)099:;TZH.WO)02-!5?XI_L/]+H'*?]UFC?U';?S-N@M5`H%!3>9? M,JV:)M0N."DFZRD)($''#,J;W'%3P0''X5W)W4NPX9O.BW#AF\N4]2:FO>I+ MHY<[Q)*3*8GVYT26+2)L48W$Q3-CL5>+]RJ\E)M/VF/ M_+%K.C+9U%'BMQXK*D[$CB1%Q&QQ<=SN*WOS8(*.[?C[U1G%,ZS.\O>Y$:FN MUL)]ZOD"1<+6_"8=9:-]!$EDL)*9)O,BN-N,J09P<#$"3,FQ:XG&I>E.5LVR1 M])@Y=A=_TVY,=5A&C("28T32,LF;JDVVSGZN*%CW!38@9I:2U1=09N%UNC,& M[NV.7:9*P6"^J?F$V?:62-X\%:5I.HJ%M^=00\3D\;-A'3W'@A9>W+<&(P1G MB.WN#P5'[-<.02L8FVZXJKC@3BX=5,"#9M`H%`H%`H%!4>8_,:U:*M':'\'[ ME(0A@047!7"3>1?@@./67XDVU;APS>=(6XL4WG2'*.I]4WO4UU"]5XFU;SJ2$.Q$7:F"XX=&^J\F/NEAUMHRDU%$ M=MKC,MOC2G,'"-6Q45-$(<-Z8+ER]?>G6_%J/PS%M8V>]W10M4Z@&UQ>&TJ+ M->3ZH?P4W*:_S=^KYE?Q>-.2W_&&MB(C)2)5(B55(EVJJKM556O'T$1$1I`B MJBHJ+@J;45*/6^>3_.]YQZ/IS5+RF3BHU!NSA=;-L06GU7?CN1S'''PN[6=R M.+I^56?R.-I^56V=!PHBWZ&O5F9A2(%U&5.M5DDVN)VIDW,[[IMNMN&12,V0"9$PF1RY3(S3;!*+RL/2"BX/YK"^K[91SXA*TDC-PW17-U=U!LB@4"@4"@4"@T_ MSBYT)8E=T_IUP3O&"C,F)UAC8IX`="N_<'X=W9Q^-W=9V=?'X_=UG9SB^^_( M?OT_U M+/[NCXOMX@3X[(L-*#@;%4A%%01(_G)T$A#U41$QQ[M>XLK3X'%_SM]O_JHT:S-LUZNMEN+-RMD5V+TU&](M&DHWI%HTEU/RJYJP-:05CR$&-?HH(LJ-C@+B M;N*SBN*C^$GS5^)5R,^":3]&5FPS2?HL6M[#)O\`I>?9XZQ5.8VK9-S6N.P8 MKO$A145.Z))CE7!<%W50H4^'R>./)M4E9PG(M.#Z&9RC&7)81U(*2&S>4>%# MXR('A.$@CUQ1,%"5MFA[_P#9"0;S<(DEQZY1[C+D>>1(+8 M"8Y6P3P6P1=PBGW]];6/'%(TALX\<4C2$55B90*!0*"=T5_N%CZ+G]1:.#^C M^O[MDU)A/AUUMILW720&P12,UV(B)M55H]B-6N-3:CJ+$5MN3N>]VL4%PU7K/ ML+L!WODG@GW\%^=61RHTTG@-A^**?*NW>M;6+'%*Z0V,>.*1I"'JQ84"@4"@FM'?[CB?]S_Q% M1Q?T/U2V94F`P;Q=H]KA')>VKX+3?29KN1/YZ\F5N'%.2W;#5TZ;(FRG)4@L MSKBXKW$3H1.\E>/H\6**5[8>%%A0*#IKD+S'V=8VEMBN5RE`H%`H%`H%`H*!SDYB+I M#3N2$:)>[CF:A)L56A1.N_@NSJ8H@X_.5-Z(M7\?#WV^B_!B[[?1RK=, MQ;S&1`-Q.'+8QQX3X8<0/@VXCW15%K$R8YI;26-DI-;:2L%00*!0*!057^*? M[#_2Z!RG_=9HW]1VW\S;H+50*#GOVEM5F]SOX=-[-(UH.\H%`H%`H)W17^X6/HN?U%HX/Z/Z_NV01"(J1*B"B M8JJ[$1$J3#:]U7J9;BXL2*6$%M=I)C]:2=*_BIT?+4=VUPN)V?E;W?\`I7*- M$H%`H+%R^U2YI?5]NNZ$HQVW$;FHGSH[G5=3#IP'K)WT2J<^/NI,*<].ZLP[ M0145$5%Q1=J*F["L5CE`H%`H%`H%`H-!>TQJLU?MVEV#P`![=-1%WD6(,BN' M<1")4[XK7?PL>]G=P\>]FBJT6@4"@4"@4$UH[_<<3_N?^(J.+^A^J6R),AF, MP;[YH#3:9C)>A$KUA5K,SI#5]^O3UVFJ\6(L!B,=K\$>ZO?7IKQ]!Q>/&*OU M\4;1U%`H%!,Z/U)*TUJ6!>HZKC$=0G03Y[1=5T/Z0*J?=JO-C[ZS"O+3NK,. MUF'V9##;[)HXRZ*&V8[4(23%%3X4K#8K[H%`H%`H%`H%!Q]S9U4>I=S+CX^"3IBLQG%`H%`H*K_%/]A_I=`Y3_NLT M;^H[;^9MT%JH%!QES*N9W/7]_EDN;&:ZR!=UN.7!;7_@;2MKCUTI#8X]=*0K M57+B@4"@4"@G=%?[A8^BY_46C@_H_K^[.U=JCM)';X)_Y85P?>%?RB_@C^+W M>[\&]NIX7$T_.WV52C5*!0*!0*#LSEE@+#+-1L)PB)?A(% M6L/+72TQ]6)EKI:86:JT"@4"@4"@4"@X[YM7,KES'O[Y%BC4HHHICBB)%1&, M$\7\M;/&KICAK\:NE(5&KUY0*!0*!03.CO\`<<3_`+G_`(BHXOZ'ZF3JW47V MB_V2,7^297PD_M#3YWT4Z/EINKX/%[8[K;RKM&B4"@4"@4'8')VY'<>6EA?- M<2;8*-M[D5PV$^XVE8F>NEY8V>-+RN55*B@4"@4"@4$1J^YG:M*7FY-EE=AP MI#S2[ES@T2@B=]2PPJ5(UF(2K&LQ#B1-FRMYN%`H%`H%`H+=HJ=&@VZY2I!9 M6FU;5>ZJX%@B=]5W5YJR.?2;9*Q&^BO7>ZR+G-.4]LQV-MHN*`";A2O6AQ\$ M8ZZ0PJ+R@4"@4$GIBY':]1VNX@N!0Y;+WPH#B$J+WE38M5Y:ZUF/HKRUUK,. MWZPV*4"@4"@JO\4_V'^ET#E/^ZS1OZCMOYFW06J@4'#-Y=)V\3W27$G)#I*J M[\5-5KR/1M8O;'HPZL6%`H%`H%!]M//-$I-&H*0J!*F]1),%3XTKR80OC MBV[XKU,H%`H%`H%!UGR&>)[E393+:J%,#X@FO@GW!K%Y'OEC\CWRO]4J2@4" M@4"@4"@XHUPJ+KC4N'_^O<$^26Y6W@]D>C9P^R/1"5:M*!0*!0*#Z!QQLLS9 MJ!8**JG2A(HDGQHM>3"-J1;=\UZD4"@4"@4"@ZJ]GTD+EG#5/_V)*?(ZJ5C\ MK]DLCD_LELBN=04"@4"@4"@JW-)43EUJ%5V(D)W%?BJS%[X]868O?'JXVK<; M10*!0*!0*#ZSN9.'F7AJJ%DZ,R(J8_#@M>:(]D:]WB^:]2*!0*!0*#SD$@1W M37<($OR)7EMGEMG>U8#"*!0*!057^*?[#_2Z!RG_`'6:-_4=M_,VZ"U4"@X0 ME&A7"^6R*J5%`H%`H%`H%!Q!JUS- MK?50](7NYI\2S'5_GK9XWLAK\?V0C*O7E`H%`H%`H%`H%`H%`H%!U'[-QY^5 M4$_PY4PD^!9!K6+G]\L;/[Y;/JE44"@4"@4"@J'-_'U7ZHP7!?LZ1@O]!:E3 MW0E3W0XZ;-'&Q--Q(BI\=;L2VX?5>O2@4"@4"@4"@4"@4"@4&'>#R6R1W3`@ M3^DF"_%=+H*!0*"9 M@:0U!<(S,B'%XR/Y59:$PXI@3Z1D<1M5S9..2-YL,,U0G)6-T)R1&[['1>HC M(N&P!M"".I(1]E&2$N)AD=(T`U^H?)5%W"#(@3GX4E$&3& M,FGA$A-$,%P),PJHK@NS8M3B=8U3B=8U8]>O2@4"@4"@P[D]D9X:>$[L7Z/3 M]ZHVE&SL;DA"`KN15S<-'ER*6&&-0[XUT1[XUT>P: M/U`Y3Y*O/DA'7"#(@3GX4E M$&3&,FGA$A-$,%P),PJHK@NS8M2B=8U2B=8U8]>O2@4"@4"@Q+B^@,<-%Z[N MS^C\[[U1M*-G77L_P"AT7J%F2,;&DKZ];TN",@$16BD(;CS($K0Y^ MNC9&CF"\(T'J]94V5[.2-='LY(UT0]33*!0*!0*!08S44#JF\0[K=2E1& M$CL8*@BC8-8HID:8@WU4RH:`FU5P%,5JS'68CJLI68CJAZFF4"@4"@^'G6VF MU,UP%/N]Y*\F='DSHPK9;I]^O<2VQ$_SEQ?;BQT7:@DZ2`./>''$OCJG)?MB M959+=L3+OFV6^/;;;$M\9,L:&RW'8'N`T*`*?(E8S'9-`H%`H%`H%`H.5_:D MTN<#6<2_MC_E;U'0'2__`*8J(!8_2:5O#X%KNX=^DU=W$OO5JJ#+1P4:-?K1 M38J_.1.GX:T*SX.Z)9=22*!06:+JY6=*NV8QXKSK?9&GR:;3L\4I"27``_#< M4W$QP)40=N_'95./\M54X_RU9H:[:B:CEW&)QG8+_#="*Z#8*K[;7!0E)%<4 M,HF>T5V^"J8*M1^+6NDH_%K724)JF\0[K=2E1&$CL8*@BC8-8HID:8@WU4RH M:`FU5P%,5JS'68CJLI68CJAZFF4"@4"@^'70:;4S7!$^[WJ\F='DRCX4.?>; MM&@1`SS9[S<:*WT9W20`1>]B6U:IO?2)F55[=L3,N^+':8]GLL"TQO\`U[=& M:BLJNQY73$ZK MXG5Z5Z]*#]$B`D(5P(5115-Z*E!>7]?0I=Q@G*%WLT5N>;[[;+(NOS+DTK;S MJM`0`*>#LS+N[^SGC%,1/V_V41BF(G[?[,>P:Z9@VERWS@.2A@3(.*TR7#;! M1)E$0TZZYE/P\E`H%`H,:;*X#>`[72\%.YWUJ-I1F5T]GO2[E]YEP7S#/$LR%<9 M1+NSAU6$Q_"XQ"?P"M<7*OI73S+K;1KL:*"+>K>2RK62JB9G!3`V55>AT-FW9FRJ MNZK,63LMJLQ9.VVKB[ZYEU45":>;51(53`A)%P5%1=RHN]%K7B=8UAK1.L:P MDXL]MW`#P!WH3H+Z/WJG%DHLRJDD4"@4"@4"@4"@\WY#3`YG%W^"*;U^"O)G M1Y,Z(F1($ZO4??'O M`F+2+W5/N5G\K+K/;#@Y676>V'25<;C*!0*!0*!0*!05+FEH1C6VCI=F51;F MCA(MKY;FY+:+D5=_5)%4"_%)>FITO-9UA.EYK.L.(9D.9`FO0Y;1QIL5PFGV M3ZIMN`N4A7OHJ5KUM%HUAK5M%HUAF1;B)X`]@)[D+YJ_>6K(MYIQ;S9M22*! M0*!0*!0*!0>3\EI@<37:O@BF]?@KR9T>3.B*D27'RQ/8*>"";DJ&J+>_LP\N M3DSG-;W%K_*Q<\>RH2>&]M!Y].\VF+8K^$I=(UG\K+K/;#@Y676>V'2M<;C* M!0*!0*!0*!0:+]IKEP[<[8WK*VAFE6II6KJT*=8XB*I([L_N%(E+\557'JUT M\;+VSI.TNGC9>V=)VES,R\XR><%^%.A4[]:;22D:8T^F"+E<1,5!=_Q=U*G% MM4HE[UZ]*!0*!0*!0*!08LJ>#.(!@;O1?+H]&:/19P(-\NRC*N*=+:9<&HZ_X0JN;\;LAAK\H:"O0G2OP)OKR9B'DS$,-ZZ*NQD;/G[>D;N;/G[>D;NRK=;H-M@1[?`8"-"B-BS'8;3`0;!,!%$ M[R5FLUD4"@4"@4"@4"@4"@TQSVY)KJ<'-2Z>;1-0L@B2HB8(DQL$P3!?[X1V M"J^$G57HPZ,&;LG2=G1@S=D]=G*[K3C;ALO`3;K9*#K3@J)B0K@0D)8*BHNQ M46M.)B8UAI1,3&L/1B9(9P05S`GS"_F7>E>Q,P]V9S5SC%L-5:7\;P?^+=\M M2[X>]S*$A(4(50A73:&&]< MS7%&1RI^$6U?DW5&;(ZL,B(B4B52)=ZKM6O!L7E#R?N>NKBDF4+D33,8O\W- MP45>5%VL1U7>6S`BW!\."5RY^1V](WZ& M14DB@4"@*J(F*[$3>M!C.W",";"XB]P-OW=U1[H1[F$_/?=Q0?JP[@[_`)?O M5&9EYJQ=@ICL1$KS9YLZ,Y"1'U?JJ.K+K2\2SVIT<"$D\&2^*[B3>V" M[O"7;AAGM,*W;;XXJN28A=6+*)=Y;$7A.+^$B927PDQ52 MKHP\B:=/!?BSS3IX.9K_`*=ONGKB=MO<%V!-'%>$\."$*?.;),0<'\8%5*T* M9*VV:%,E;;(ZK%C]`B;_`"9$"=P55$^1-E>:/-'L,Z6F]U2^%!_F2O=9>]7U M]I3/^G_PE_\`E3NDUE^+<):_/05_%%/Y\U-9-9>9R)!^&Z2_`N7^KA7CQY(* M)C@F&.^FAH^VP-QP&FQ4W7"0&VQ12(B78@BB;55>XE)F(W)F(W;KY9^S9>;N MXS5X5=-6NU6VTV]BW6V M,W$@Q1R,1VA00`4V[$3O[5[JUPN)E4"@4"@4"@4"@4"@4"@UCS4Y%V#6N>Y0 MR&UZC1/_`'1'%I_!,$&2"88[-B&G63\9$RU;BS33T6XLTT]'+NL-`ZLT?,[- M?X!QQ(LK$P.O&>_PWD3*J].5<"[J)6CCS5MMNT,>:ME>JY<"F4LP]4EWD*Y5 M^5*\T>:/494H?!=+X\"_K(M>O7UVZ7_>?<'[U-9.K\6;,7^U5/@0?O4UDZO, MW'#\,R).XI*J?)NKQYH^41$3!$P3N4>O2-&DRI+46*RY(E/%E9CL@3CAE^"` M`BD2_`E>6M%8UE&UHB-9;UY:^S+<9ALW/6RK#A;#"S-'_F'$WHC[@+@T*_@@ MN;OBM<.7E:]*N++RM>E72%OM\&W0F8,".W%A1@1MB.R*`V`)N$1'!$2N-QLB M@4"@4"@4"@4"@4"@^7&VW6R;<%#;-%$P)$45%4P5%1=Z+0<_L.>[I:KG:9SD M"Z1'H,UK\I&D`39HG0N!(F*+T*FQ>BN^EXM'1W5O%MF+4TWZ"D'@$0)W!)13 MY$KS1YH]4F2TW.KAW%05_E2O=9>OKMTO^\^X/WJ:R=7P4N46]TL.XF"?=1$6 MFLCR+$UQ-5->A252_EKS1YH5Z]2^F=(ZEU/.[%8;>[/?141Q6TP;;1>EUTL` M;3Z2ICT55DRUKNKR9:UW=+\K/9WM&FG6;QJ,F[K?&U0V&115B1B3:A`)(BNF MB[C),$^:**F-9^7/-_1GY<\W]&XZH4%`H%`H%`H*K_%/]A_I=`Y3_NLT;^H[ M;^9MT%JH*<]S.LJ0-42HS+L@]*N*W+83*!.B*;7&U)?`X@NMX])-EA09$CF# M;HNG)U[?BO(,.>Y:VX89">?E#+[$VVUB0CBZ\J9<23!%Q7#;08A8?D-$RZ'5P(8CHKG0<"'N*BJ&79>9NBKI8X5V&[1&& MY8M(39OMYFG76VW.$XN.Q11X,5W;4[J4'NXNA-=VR5#(H.H+>PZK,@1('P;> M'8N!"JY#'\(5Q2O8G1[$Z-4:K]E.RR3B/MCW-A$")5L9J3XK(S4GQ1A1)0DHDRX)"JH M0J*HJ*F]%V5+Y*^<)?)7SAEQ=/Z@F*B0[7,E*6T48CNNJNW#8@"5>3EK'C#R M;;RM=01*!0*!0*!0*!0*#\,P` M",R00%%4B5<$1$WJJT&O[/S9;N]D"XPX*"\EZCVF1$>>P,&)CH=ED]42_*QW MVG,BX88J..([0RDYB2CTYIZ:$!M;OJ.;]GQ(2O*C(.#QC<,W=;=IX$A]PV>SE%E"\V8.&SE>:5O.TI.-$(H:)BNZ@F;5=+!J_ M3XRVF"EV:>'5;FQ7&@>:)$5"X,D`4FS1445RX*FZ@UOJWV8]#7`\O?4 M'T!M/&+737F1XPZ*\N/&%0G9\(E&1IF>I"JHO`;[2FSN%'5T5^):MCDTG MQ6QR:>:+X**WM7X*E\]/-+YJ>;)CE[J*_\`5A2&D^5P!2O)Y%/-Y.>GFL=H]GKFO<2'-:0M[1>"]-D,@/Q@V3KJ M?\%5SRZ0A/*K#8NFO9.9%1=U->R<[L2VAE39W7WD)51>\TGPU1?EVG;HHMR[ M3MT;ETIH'1^DV.%8;6S#(DRN2$13?-.X;QJ3A)LW*6%\PB)'@,JB.ONDN`MACC\*KT(BKT4$#=^ M9HQG([ENAM3[=,AP)\:9QR;4VI\UN*BY.$7@B\AIUNMNZN^@S+QK:XM7RZV> MR6MNY2+)`:N%Q)Z5V5$60KG`8;P:?4G#&.X2YLHIU=O6V!`QN?>DI0QIC3,H M+,2.%-GNQY&+(C`9N`FC;33JF'"D?6%BF3#%>JJ%03DKFWR^C2Y,,KJKTN*X MC+L>-'E27%<4S:RMBPTXKF#C9`N3'`MB[53$)C46D],ZG@C%OMM9N$?#%M'@ MP<;4DVJV?5<;+OBJ+7L3,;/8F8V:9U1[*-J>(WM,7=R$JKBD*\@U?7E MUG=?7EUG=5Y7+'F/%7!W3%T)=WU41Y[?_A"=6QR*>:R.13S8@Z&UP3A-#IJ[ MDZ.TVTM\M33X11O%*]^>GF]^:GFD(7*?F7,5$8TS<45<,$>8*/O[[_#1/CJ, M\BD>*,\BD>*V6;V9N9T\T[:U$M+?SUDR!RSI"WD#^H)K]Z?%456!3LL9<-NT0(G2V_P#4P7N5SWY-I^CGOR;3]&W[ M39K39X(0+3#9@0F_`CQVQ:!%7>N441,5Z5KG<[,H%`H%`H%`H%!5?XI_L/\` M2Z!RG_=9HW]1VW\S;H++*;?`^8$++^5#R&J*@GE7865=N%!KV1R=B M4LE)C9-H1._DGQQ3-CBFQ<=N(85QY7%<+HM]?O#@ZAXS;@S M08#A`RU$E0PC@P2E@&6X.FJYU)27?@B(@1;7(Z*,B-(*R7SD$F7,> MXG51-NZ@EZ!0*!0*!0*!0*!0*!0*!0*!0*!085[M+%XM$NUR''&H\UHF'S95 M!/AFF!BBDA(F8<1W?!054]"Z(U:?[8:.0GDGV9]'FTE@\"F:/M;,IX(X2+B"BHJJ M$BI01%SY9:#D.O).N+PW)&ICMUEE):"0^U/%EM\Y*94$0RQ64'*(B*"B)@E! M]Q>7^B0ER+Y"O,AHKF\:3)+$QL6I+CKRO`V>4PV/`)V'BQ'"9VYK%%8Q$$>;ZN.S*F5-B;`L%YTA9[I(DW=N?( MMY3X*0[A)A.M@,B(.XT]KG7;)<>-+GL20-B2VZR^V$0`9;+M, M24"<(V5SY7&C7P\<.L0XAYP8-U2V:"48EP0XNIIYRA-F4A-PW$N*-G($QQ0% M4V9:071(1%L\[3J)F1"7 M#9LPH-?7)G6#-ALJQHLQR-!"^2XUJEPY3P3;@,_&WQI8$H.HCC+A$T3J9<>L MNT1H-\4"@4"@4"@4"@4"@4"@4"@4"@4"@4"@TI'T?>F=9ZX<9L#IVBZ6^4A&&]GZS,K#BDV2?5KEQ(=@T&2YIK4KZ!);CL<(VRD19BL(;C9+U-F8P1,M!(N6VZM< MK;SI"?;WI-^.(_\=YC\I0/>.\Q^4H'O'>8_*4#WCO,?E*![QWF/RE`]X[S'Y2@>\=YC\I0/> M.\Q^4H'O'>8_*4#WCO,?E*![QWF/RE`]X[S'Y2@>\=YC\I0/>.\Q^4H'O'>8 M_*4#WCO,?E*![QWF/RE`]X[S'Y2@>\=YC\I0/>.\Q^4H'O'>8_*4#WCO,?E* M![QWF/RE`]X[S'Y2@>\=YC\I0/>.\Q^4H'O'>8_*4#WCO,?E*![QWF/RE`]X M[S'Y2@>\=YC\I0/>.\Q^4H'O'>8_*4#WCO,?E*![QWF/RE`]X[S'Y2@>\=YC M\I0/>.\Q^4H'O'>8_*4#WCO,?E*![QWF/RE`]X[S'Y2@>\=YC\I0/>.\Q^4H M'O'>8_*4#WCO,?E*![QWF/RE`]X[S'Y2@>\=YC\I0/>.\Q^4H'O'>8_*4#WC MO,?E*![QWF/RE`]X[S'Y2@>\=YC\I0/>.\Q^4H'O'>8_*4#WCO,?E*![QWF/ MRE`]X[S'Y2@>\=YC\I0/>.\Q^4H'O'>8_*4#WCO,?E*![QWF/RE`]X[S'Y2@ M>\=YC\I0/>.\Q^4H(?'YW$XN3#O8T'__9 ` end GRAPHIC 9 a72487phys.jpg GRAPHIC begin 644 a72487phys.jpg M_]C_X``02D9)1@`!`@``9`!D``#_[``11'5C:WD``0`$````/```_^X`#D%D M;V)E`&3``````?_;`(0`!@0$!`4$!@4%!@D&!08)"P@&!@@+#`H*"PH*#!`, M#`P,#`P0#`X/$`\.#!,3%!03$QP;&QL<'Q\?'Q\?'Q\?'P$'!P<-#`T8$!`8 M&A41%1H?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\? M'Q\?'Q\?'Q\?_\``$0@`M`(]`P$1``(1`0,1`?_$`+0``0`!!0$!```````` M```````&`P0%!P@"`0$!``,!`0$```````````````$$!0(#!A```0,#`@,! M"P0-"0<#!0```@$#!``1!1(&(1,',4%1(C*3HQ1E5AAL<&"HC-CZKIQ[.0?(C0/=5TX]G(/D1H'NJZ<>SD'R(T#W5=./9R#Y$:![JNG'LY!\B M-`]U73CV<@^1&@>ZKIQ[.0?(C0/=5TX]G(/D1H'NJZ<>SD'R(T#W5=./9R#Y M$:![JNG'LY!\B-`]U73CV<@^1&@>ZKIQ[.0?(C0/=5TX]G(/D1H'NJZ<>SD' MR(T#W5=./9R#Y$:![JNG'LY!\B-`]U73CV<@^1&@>ZKIQ[.0?(C0/=5TX]G( M/D1H'NJZ<>SD'R(T#W5=./9R#Y$:![JNG'LY!\B-`]U73CV<@^1&@>ZKIQ[. M0?(C0/=5TX]G(/D1H'NJZ<>SD'R(T#W5=./9R#Y$:![JNG'LY!\B-`]U73CV M<@^1&@>ZKIQ[.0?(C0/=5TX]G(/D1H'NJZ<>SD'R(T#W5=./9R#Y$:![JNG' MLY!\B-`]U73CV<@^1&@>ZKIQ[.0?(C0/=5TX]G(/D1H'NJZ<>SD'R(T#W5=. M/9R#Y$:![JNG'LY!\B-`]U73CV<@^1&@>ZKIQ[.0?(C0/=5TX]G(/D1H'NJZ M<>SD'R(T#W5=./9R#Y$:![JNG'LY!\B-`]U73CV<@^1&@>ZKIQ[.0?(C0/=5 MTX]G(/D1H'NJZ<>SD'R(T#W5=./9R#Y$:![JNG'LY!\B-`]U73CV<@^1&@>Z MKIQ[.0?(C0/=5TX]G(/D1H'NJZ<>SD'R(T#W5=./9R#Y$:![JNG'LY!\B-`] MU73CV<@^1&@>ZKIQ[.0?(C0/=5TX]G(/D1H'NJZ<>SD'R(T#W5=./9R#Y$:! M[JNG'LY!\B-`]U73CV<@^1&@>ZKIQ[.0?(C0/=5TX]G(/D1H'NJZ<>SD'R(T M$>3I[LA.H)8Q,)$3''B1DE%Y:S4@DJ7H)#TG_=9LW]1XW\S;H) M50*!0*!0>'FA>9<:-20'!4"4"("1"2RZ3!1(5[RHMTH.5]M;HWF]T.E[RGS\ MT,C'PD=7)#DG4]/61DI,4Q!'/2&F#C"PU94:NMUNBZD5`V%+^L%)B[ED;?>Q MC;,D\LUA\:X\3B`X#\I8[-0)G6W.AN-G:V3P[$2 M3)5K'SEAS%?./)DPW'U)'VA0`5LVE'EJJ']VBVH+&4]O#+_5IQ6Z86NJ(I+H3AIL%K'^LIE7H$R0&!8-]D(#T=M M))HT03II0E#G(V8GRS%%1UM%`D[*";=0)F8'IHY-S^4/:N2;0N=]$R!U.2%U MMQF&9#PA9''%`EX)WE5!U+0:<>ZG=284P##)KEY[OY1P",N M*Z"/0GR)02*@4"@4"@4"@4"@4"@4"@PN]9LV!L_.3X+RQYD.!)DQWA$"47&6 MB<'P7!,52X\;I0:4PO5'?TO;>`S[V2DLQWIF(@95MZ+#57G9ZL/D/M/@:"3+HBQ MI$514(B2Q6U*@6V\>O"LPMP8S'0W\7GH./R$F(X\K#KC3V/::=(9#"*X((7/ M\'B5[+V<*#(]1]W[PV]M#;6]HY:]!1QO69W'Y&=A\G!GY7)1$&7.2.VT2PVYL9Z;%C+RA`%Y;#(`;IDEW#X7 M&^D/+/UAX,F$R]!P,B=(?R<7#A'8D,JA2)T19<=0 MI^4WX&RXF4VW+7!9HP;)O$''9FR9$U[1RX'%3;1.)HX8=EM6I!$J#5&?^L/O MG#93(RE1F5&9E9/&-8YH`-@7(&-:D-R1<0>:8J^9$?AZ>7V(B\:"Y+ZP&\,? M.6RJQXYO@A%R[\+6N)+VAT%MS)1 M%@BD3K)F=O2V)NXYDG(8F7MUG/18OHL<#!N;,CLM%*D,\O23'I&AS2SIM<^V MPT$HA=<\=.24YC\#D=%=F,"FERSB.,L^.*Z=1@/&ZV#$ M0^M+VX]S[48PBE$AR0V\(X])C1-/!K7AJ'Q5'CJ147A0?=U;KZ M@X7J@[M)JA(%:)]87"% MM\,J.*R+\(B:;BY%\6VF7Q-'T1PW1LTV:K$6[:)XQ@G"ZZ0S."ZRQ<]G,;B\ M3@K5KD2QY8#9$7L&ZB14&O\=U]WW,GL[;)\`G28 M^.R"9<6&E)L)F!7*.,H"CRN$@=(JHJNBZ<2\*@D6VNJN^=P;HV?)FE,P6W:QK*X"G++@/;VJ@;XH%`H%`H%`H(K_%/]A_I=`Z M3_NLV;^H\;^9MT$JH%`H%`H/$@6"8<&0@DP0DCPN64%!4\)"OPM;MO012-"Z M9)A,;AXV(@#@MQO$$#'CCQ&))=!IR5J)KE(WQ:C$X)&EB1$457A066Y,=TCV M_#FQR"7'*6`QW_`+1?Z+%(K*)&N6I>2B#8/"\+P>[Q M[:"TC]*^F4="1G:>(!#%`)$@Q[**'S$144.X?A?/;O4%CG<[TSS+D3$;BQ[< MTU."L:#D\8Z:-N9-76HJZ)#-FU)8[@JJVTVLMEX4&8Q6V]GN!C,I"PD:*Y$9 M$<:I0DBO1FE0K`+1@V;.E'"33I33J+OK05FMI;2AQ)K+.&AMQ9I(].8;C-J+ MQ`NL5-L176HEQ'AV]G&@R&/R$/(P69T)U'HL@4-IQ+I=%[Z+945.Q45+HO!: M"XH%`H%`H%`H%`H%`H%`H+'.XS&Y3#3,?E-7T;*9-N8@NN1[M*GAHKK1-F** M/;8DX4$739/35_"X3:::CQ\=0R>#Q_TA,YFF*HJVZV7.YI-M*X-D4E%.'"@Q M\KI_T;Q\N/CY"-Q\UC!N66Q-^CBD)';;R#\=`,(X2)%QC/-:B".0 MF6J^D5[B+09*-TOZ>#(2G4H\%7 MBM!:S.E?3*+AC:EXX68,.F]^[:@Q\S9.PMQYI[+(I/ MY?'MIB'Y,.=(`F!:()/HQ`TZC8JA*!D*C=>&JZ+08+&],>B\MZ3CL4K9E)@+ MCY\"%D7T1^-%4HMY#33WY0F2(F]9HJB7"]TX!E,)T6Z>8:?&R$&%)27#D#+C M..SYKJ`^+*1^9I-Y1)2:32NI%NG#LM09;+[9VAE-VX?)9%.9N3$-/O8<4E/- MFVT>EJ08QVW``Q+6(.*0*BW05[E!A%Z&]-_0F(*09`0XLA94..$Z8(1R)'$( M(Z"\G);+G'J$+(M_D2P7>%V3T[V+(CSXR_1SY11Q;,B9.?,2CQ@.0+*#(=)O M\F#;A\$X"A+V7H,:[LCHUF=V?ZA=]'R.?F&#:.%D'W@<)V*;C;:1^>3"ZHHF M8AH\3PD3NT%\UT9Z>,XM<-!=XWI[L?#9EJ7#86-)@UCF.EF[,]*]-!^/C7'PL$MQ3]/@7PLC$N1F%`"$ MVD?D>DB0N#=;V[A4'K(](]S/L9<(8XN"UEX.4B)`8=>"-%/)08T36R*,<4YD M4G31!"ZEW5N1!:Y/HMN7*[FDY#(CB9&+FSV)&W1*&CFX6Y`P4N1`RY(:4.8;G)%PD!PM;:$AF*( M@\Q;)8+S;&P1EGIS@:DC7_`"L5_P!'5>\EO%X4%W$Z M4;M:^BA<^C3;Q[>#:='GO*ACA9,Q\[(L?_G#-1$3N:>[>@HL]%MQKB6H/=>U#I,7"%=2IK0PV'L3#3<3@"9F(K::>!QYA/E=:`@LO;>@U[F=I=0LCGW,O";<)1.43,U9 MQM@_CY$F(^W%994@*.XL6.XP1:0L1:M7%50/2[%WP4IMUYAR0R,F&_%%^2#K MK$:-N%K)#&-PW"(R;B,Z4742:K#J5$U4%'!;-ZF/91A,XD]F`,HI+HL9=U!_ M\5UM!U`_S"'TA&G/"2W:NE+J%!(,=MS?3.P2QLAV0[F&\C&=CO>E$+YQ&I#) MN<'4;0.(0"XH'>^D=2B(-D[7WAC',ND\YJL383B-)(R#DHTE>ERR#EDX MZXK2^C.L#J$DXCQXI=0B\3I_U.BXR,`2++/&)/%A'XSY#K?6U\ MDK#HK9+(-TMV*%Y)V+OHVY1M1W6YKLAV6S+;E`VZ+A;:9Q0%S!<0T/TME2NB M^+Q^2@\9S9O5:8Q-6)*F1I[BN&DAO(D#3D9QIE(\86Q<3E.L.B2D8H**B%X1 MC-:#%Q#LG$ M5;%2"=[$QN1Q>RL%CLEPGPX$=B2*GS%$VVA%04_N]-K:N[VT&=H%`H%`H%`H M%`H%`H%`H(/U!@[A=RD&3B%TOIB\Q#QSRHJ@QEI3;"P'SX$@HB-/!K+AX>G[ MJ@A8;-ZE([G',?'R&,:R:R7\H.7(`_"C-FJAK"_BZTO>@H1 MMH=5WL+)-][+1\XU'AQXREDU-APFFE201-MS&T_*N-!=S4+B(2DEUU"02??> M(WW,IL1N&.+BOXR8$:)&< MDK)CJPBLX*1"0G6@>+FBU.<8<1%!>`JJ?*%++;3ZMNFAX\LJQ%1AXF(99?4Z M$OT..@*XZLBYMK)`U02,D[;HB%IH,PUBM\+*R8K,]FO$4^Y<>E*5^]O6]-PY,<=!Q M4)MU1(R)1=<2R63LYC5KJJ)VTMPXCO9X\G1^.N8Z]4G'J5O:/%T.^\?BQB56GU^9IU`<_L MU7OKM7O#PMKM7O"0UPX*!01KJ9D)F-Z=[FR4&24.=`Q#ZM2(+N6;:B)+2"[-E*CTE5)V.Q*99Y<6S0W.S]T!?%72-UU:D#: MM`H%`H%`H%`H%`H+7)9;%XN,LK)3&849.UZ0X+0?-R8B9[-?9KZP MG3S'$01G9&4<'A:*U8-7X[RM(J?*-ZL5XMY],/>O%O/IA$9OUHO"48.WKCW' M'Y5EM^(+2_\`%7M'!GUE[1PI]94$N*B-B^IIKU.JJ:6R/LU)] M[77_`,,>[SY''_'2;9RG#/43=G,<$L,#Q-*(N-MHZ"HI)=!5?REE5/DKB>)7 M_N9_Y9]E"=UWPF)?:9S>.D1S=4Q3T<@?TJ"HA:D+DK;CW+US;AV])B7OIK.S M./1)-O\`5+8.>(6X&88207`8TB\=U2^]$74#4OXMZKWTVKWAW?5:O>$JKS>9 M0*"-=1,C,QVUG)<-XV'QEP&T-M40E!Z$#A#]F@P4#<&[<7N&9`RA MA)8=*",)ET@YC#D20@R M@%5,F9`N-L24TBBF3;XA-*!0*!0*!0*!0*!08'<._=G;>4AS&6CQ7A2 MZQ]2N/V[_);0W/[-=UUVMVAW77:W:&OLM]9?:,QPD!AI?F55,_ MMA5BO"O/?H]Z\.\]^B.2OK0Y,E7T3;[+*=SFR#=^SX+;5>L<'WEZQPOJS.UN MM^YL\S(<#%Q06/:5@$=1$OA):U/_`(H]U+DU_';$=>B2M]2L^RQSY>#0 MX^D25X3-D40K6\8'+ZM26XIP[]^"5Y6XEX^JY31>U8M$=T[PFYMO9UE7L/D8\X!1%-&7!(@ MOV:P\8/ZR5X6K,=X>=JS'=DZY:C/J92&1CSBU` MAQM#S1%"X60RXS/8Y[>EQ6V MO#!.!);O%]U9`E-`H(K_`!3_`&'^ET#I/^ZS9OZCQOYFW02J@4"@4&+W'N?! M;R).1-M-?1 M4);BDLT0Y1IWT[0:O\EU[Q5H:N%$=;+^OAQ'6S4TV=-G23E39#DJ2YQ,G M'"^:8W2W(-Y&29:)QJ[2/"1BHKI(55.% MKK\_VTXO&8PH?V/\&*BX>>,UO\`[>7SXL-KEHXK;;_-<%#N0ZT0 MW5NE^(W1;HM>5M4]&;QH\KQ#2$]UAZ=(>CM\F.XZ9LL_>`1*HCP[R<*]X[/H M([*"<%NG:G94I3_9W6S>VW"!IR2N6QR6O$F$1DB?X;W$P^2]Q3[VJNSB5MVZ M2K;.+6W;HZ#V'U3VOO%I`A.K&R8I=W&OJB.\$XDW;@X/RCQ[Z)6=MTVIW9^S M3:G=,*\GDI2HD66P4>6RW(CG;6RZ*&!65%2XDBHME2]!"YFZ=DO[FG;:7"ED M)F$8;;?Y4,'P;UL^DM1A2VI-3>E1X:+KIOJX4&.Q.[-@Q8,:"[%F2#R,MPY+ M>2$'WPD-30Q:D[S#+5RWM#2S-RO3G<+!:=9QLPQ*>C+/* M.6)$+AM&*D2FFCB2HG:E!*Z!0*!0*!0*!06>7S.+PT!W(924W#ALI=QYU;)\ MB)W5)>XB<5[E3%9F<0F(F9Q#0^^/K'SWRFRB[7GS)PK=Y%)5LGR)PJ]6D5[0NUI M%>T+2NG109_8,EF+O#&/NM*\C9.J`B2#8N0YI*ZB:>"O'LKF\9Z*G.G_`/*6 M\6]S8],L;IHXL)7!<%%\)S6:-@X6I$&W@M\.[?Y%6O&=,^/U8?G&6E>HF4CS M]SO^BB(1HP@P"`BB*D(W<)!555/#54^Q7K2)QU;/`UXIGW1FNUY,=H=6-Z[7 M,`AS2E0!LBX^6JNLZ4[@774W_45/EO5?9QJ6^DO#9QJV^CH'I_UGVQNU6X;B M_1F9*R>@O$BBXO\`@N<$/\540OD[M9VWCVI\,_;Q[4^&P*\'@\/,,O!H>;%T M.W2:(273Y%H,*WE]O9&1-;1I22"+@OS=&D06.9-N"C@^&V;9"MKZ57Q@NG&@ M\8;,[<*'B68G--J=`/+02>!UPR8%6B-PS-"+F*LH%5%74MUH+S!Y'&9!M_T2 M,49S'OE&>CNM5V>8ZF,K1U\2M>_66AKXM:]^K7JJJJJJMU55557M55XJ MM6L+3Y0*#:72/*P(F(RC#[+FM]7!)YLT'4A,Z0;45`N"$JK>_=XIP2O&])F< MQ]&-_8SB\?\`K^J7Y/=>.:V[,=F@CDD05\K`J";FDQ0>WQO$L7RDB=@U'XYB M'TE:Q$8A4C29,5\)$9XV)#:W;>: M)0,5[XD*HJ5$UB>Z9B)[MJ;+^L-N;$DW&SX_3,!."O<`E@GR'P%SYCXK]]5/ M;PXG[>BILX<3]O1T#M;=^W]T8Y)^%EC(:2R.M^*XT2_^ MJ)08B2NR7LMMV.H.P)4YUQ^+B6FO1T>-_,VZ"54 M"@4$2ZC=1L3LG$I(DIZ1D)%T@P!+23A)VD2V72`WXE:O73IF\XAZZM4WG$.4 MMT[LSNZ,H>2S$E7WBNC;:<&V@[@-!V"/\_:MUK7UZHI&(:NO7%(Q##UZ/0H% M`H)!L;_^\'^6?\U&?_9?QQ\_JR7425=84-%OX[YIWE3P`7^4ZB>ZM_64S:;> MR&U+9*!058TF3%D-R8SIL2&20VGFR4#$DXH0DEE14J)B)C$HF(F,2Z0Z/]:$ MW`36`W`2!F[6BR^`A*MQTJB607+?8+Y%X5E\CC>'6.S,Y''\>L=FW:J*K7V2 MZ=9^1U`/=L;*1&C:CFS%;**YJ<$VG&TCS.6\V+[(DYS$O8M2"B6TKJ#''T3' MFXLV)[,4<=*=FQV8S!M-PWGI;47E`W'S5P_2%0E4_%$4[EU"2T"@4"@4"@4&" MWGO/"[2PKF3R;G#Q8T8;Q$KO7KF\XAWKUS:<0Y.WOO[<&\
=8V[NI[6XXJ-P,JXJ755X"V^J]U>P3^WWZS>1Q*>Q2$\RI$Z3JQU1VZ.)I$5B)X''@MM7"@RFWL;E(,9TDJI>#:^I$04042R4&4H%`H%`H%`H-4=7NLS6V>9@\&HNYXA3G M/JB$W%0DNET7@3BIV#V)VKWEM?6>RUHX_GUGLYJF39*UJUK$1B&G6L1&(4:E)0*!03GIY_X4O\`S!_X:1W8G]E_)'Q^ MJKOZ=RL8U#%?"E'4UP6W$#'N@X/80KW47^>N-FN+QB7%]<6C$NK.F?4S%[UQ>H=,;,1A3TZ#?L M[G,;OQ)LE^UV+W%7(W:9I/T96[3-)^C+[WP,G/[7GX>.L53F-JV3V8FU)4F$]$>ESYDB7RG4?8)!)>[I7OBH;&H%`H(K_`!3_`&'^ET#I/^ZS9OZCQOYFW02J@4&,W-N''[=P M4S,SRM&AAK44MJ,E6P`-_NC)4%*ZI6;3B'5:S:<0XXW9NG*;HSLG,9(]3SZV M;;1?`:;3Q&@3[T4^WVKQ6MK5KBD8AL:]<4C$,/7H]"@4"@4$@V-__>#_`"S_ M`)J,_P#LOXX^?U4-X2_2=PR++<6$!@%3LL*:B^T9DE1'=U_7TQKS[L-4KQ0* M!0>FW'&G`=;)0<;5"`Q54(2%;HJ*G8J+43&43&76/1SJ(F[]NZ)AI]-X[2U. M3LY@K_=OHB??V\+\)%[EJQ^1I\+?1D[]7A;Z)_7@\"@4"@4"@4"@4%ODLC#Q MN/DY":XC,2(V3S[B]@@"75:F(ST3$9<>=0M\Y#>.X7/BWX-,WX) M^,7::]_Y+5LZ-,4KCU:^G5%(QZHQ7L]B@4"@4&6VE_\`)L?^,[_T'*A3Y_\` M%/\`I_E*]^3N3B0C"MCE.(BIW=#?A+_:TU,LW@:_+9GV:^HWB@4"@4'3'0;J M2>>QA;>RCNO+8X$6.Z:W)^,EAXKW3;X(O?2R]^LKE:?&%FT7AWR5.Y>O?1 MJ\[8]'MHU>=OHY*?>>?>,2XV4BT8EV1M+<^/W-M^'FH*V:E!VL2])K.) M8UZ36<2R]OK*[L-_)P M=L1S5&(@I+FHB\"><2S0K^(%R_K?)6APM?>R_P`/7WLTE6@OE`H%`H%!GME& M`9M#-4$!:<(B7L1$2ZK4,_\`LOXX^?U81Y\Y+SDDT5#?,G31>XKBJ2I_+2O9 MO-L^SGBM-I%`H%`H%!EMI?_)L?^,[_`-!RH4^?_%/^ MG^5UO>=Z3FR91;MQ01M.]J7PB7^5$^Q4^KS_`*[7BF?='Z-`H%`H%!E]I[BE M;[7-S;XGR1/5"B$L.`B=G*9)4U MI_F'J/YEMW*V.-K\:?+6XVOQI\H;5A8*!0*!0*"9[)E-Q,/D9+GB,KS"3OH( M7M498W]A69VQ$>W^Z'....N&ZXNIQPE,R[Y$MU7[=3#7I7QB(CT>:.B@4"@4 M&Y_JV;K.+G)>VGS_`.WR(+(B"J]DAE+F@I^&U=5_$2J'-U](LH\S7TBSHNLY MGE`H%`H(K_%/]A_I=`Z3_NLV;^H\;^9MT$JH%!Q?U$RAY3?6>G$NI#FO`V5[ MW;9+E->;`:VN/7%(;&BN*0CM>SV*!0*!0*"YARO1ADDBV)U@V1[_`.55`6WS M"2K7-E;DT\O&/_*/]UM72R4"@4"@4!414LO90=K[(RAY79V%R+A:GI,)@WUO M?\KRT1SC^/>L&]<6F&'>,3,,W7+DH%`H%`H%`H.2NN.5/(=2\K=;M0^5$9^1 M&VT4D\H1UK\2N*?+5XE<4^4"JRLE`H%`H%!DMMR&XV=BR'/[ME'W#^88[BK_ M`#5$JG-C.N8^/\K!]YQ]YQ]U;N.D1FOX1+=?YZF%C73QK$>SQ1V4"@4"@4'7 M?13)GD.F>%-Q;N1VSBJG>&.Z3;:>3$:Q>17%Y8^^N+RF]>+Q*!0*!0*!08?> M.5/$[3S&3;72]$A/NLJG_P"06U4/[5JZI7,Q#JD9F(<2IPX5O-PH%`H%`H%! ME&9W)VY(C"OARI`(J=W0V.I5_P![2E<^JE?7Y M3/%[TP6^N:2[4K$8Q0*!0*"*_Q3_8? MZ70.D_[K-F_J/&_F;=!*J!0<)S'RD2WWR1$)YPG%1.Q%(E7A6[K^V/AMZ_MC MX4:[=E`H%`H%!Y-M"("7[@M2?[JC_343")AZJ4E`H%`H%`H.N^BDA7^E^"-; M(J-O-\/\.0X'_P!-8F_[Y^6-N^^?E-Z\GD4"@4"@4"@4'&'4=Q7-_P"XB555 M4R,D;K^"Z0_T5MUMMHH%`H%`H%!\LNJ]U5+ MCT*!0*!0*!0*!0*!0*!0?#(0%2+@(HJJOR)21UGT#55Z1[?4 MO&4)"E\ZRG56L/;]TL7;]TM@5YO,H%`H%`H%`H.)]]G?J!ND+\0RTRR?(3Q+ M_/>MCB_9#6XWV0PM6%@H%`H%`H%`H%`H%`H%`H.F_JSN]8C%*!0*!017^*?[#_`$N@=)_W6;-_4>-_,VZ"54"@X,R; M!8W=.8QCB("QYLEC2G8ALO$"V^?36SHM^V/AKZ)_;'P^U[O5#(=+2/+H4U\%%[5KB=D1.'$[(B<*Y[%W*!J/( M9,4:%_G-RXKC*@?,TZ70=)M27D&NE"U6%5M4?EJC\M6(R$&1`G/PI*(,F,9- M/")":(8+8DU"JBMEX<%KN)S&7<3F,K>I24"@4"@4%GDWM+*-(OA.=J?@IV_; M[*YM[.;.SNCT-R)TOVRTXEB."T_;LLDA.'!:ZBKL)R9TQW,TWXX8]Y]$3M7D#SK?9T6KJDXM$NJ3BT2XOQCR M$TK2^,WV?BKV?:[*W*RVJKRNG10*"I'CO29#4=@%,6VFQ[2,EL(I\ZK29 MPB9PRKNT,ZT:HXR",BT3YRD=:*.+8.JR2J\A*'!T5"U[JO8BW2_'Y(<_D@/: M.=#'KD'&0;B(RDE3-YD21HE1`)6U/F)K4AT>#X5TMP6GY(S@_)&<,-7;LH%` MH%`H%!XQT.@WLBF^Z+:7[UM7;5??/[9^'ANG]L_#O6L=D M%`H%`H(K_%/]A_I=`Z3_`+K-F_J/&_F;=!*J!0<=_6'VT[A>ILV2`:(N8!N? M&(4X:U30\E_ON:VIK^,E:/$MFN/9H\6V:X]D*B2A?#CP<'QQ_I^S5Z)RN1*O M4I*!026/N\F=IO890YTAUI8C+QMMCZ/%*0DEP`-+F?,=&_&R#Q[;\/*=?[LO M*=?[LKJ'OM86:>DQP<7&`#00X1(%_P#MF?1F2(UU*V7+(B)0\95LMT5:B=68 M^J)U9CZL1NG,0\KE2E1&$CL65!%&P:NBF1I<&_!32AH"<56PI=:[UUF(ZNZ5 MF(ZL/7;LH%`H%!X==!IM3-;"G\J]Y*B9PB9PM<-BINXMP0<3'X2LE(;C-*G' M0CA:=7S`*J2_,M>&V_C69>.R_C69=]0XD>'$8B1@1N/';%IEM.P0`4$4^PB5 MCLA5H%`H%`H%`H%!RW]:C;+D/=N/W`V'_:Y6-R'B3L](C+;POQFC#3^*M7N' M?O5=XE^\-30)7-#EFOY0>ZOW2=^M"LK\2NZZ=%`H)MM3J,>WX<,5CI-D17&Q M9YC;8HU%"6,QQL'$0C)7'`[MD"ZVO?AX;-/E/_7P\-FGRE43J-R9D5QLGYC4 M6/H<=DBVC\J0CCRMNNG=Q05MF2H(HDJD@V+P5LD?AZ'X>B.[IS$/*Y4I41A( M[%E011L&KHID:7!OP4TH:`G%5L*76O7768CJ]*5F(ZL/7;LH%`H%!\,Q`5(E ML*<55:#$KZ3/F-M,-JX^^8LQ6$\8B,D$!3\(B5*\;6Q&9>5K8C,N\]HX!O;V MU\5@P5"^CHK4 MMC5?RK$M?5?RK$J[+S;S:&"W1?MHO>6O>)R]HG+W4I*"M#DNQ9C$IDU:>8"V5*B8S")C,-A1^JS+7+BBRZQ!8:1 M1;%N1Z2J*/A(.D?&XU6GCJ\Z%AB>H<=C&G$R$;THU05!2:9,!Y"M`PUI).(H MPTK:F5R1%3AX`UU;3US#JVGKT0:K#W*!0*!0*"WF2D8;X?WA<`3^E?FKFTHF M4V^KOMES-=3(4HQUQ,,!SY)%Q131-#*7^^YIH:?BK5+EVQ7'NI\JV*X]W8E9 MS.*!0*!017^*?[#_`$N@=)_W6;-_4>-_,VZ"54"@UMUWZZ>.$^]OC(-V:%'(N%$DXD2^"_( M3Y$XM#_7^2L[E;;:'4X5D[GR_-43.$3+%2I9OKV:6T[`_I6N)G+G+<7U:NG1Y MC<*[KR#-\7ACM!U)P=FVNA)WT8%=7XRC]ZM4>7M_XPI8\EQ@[CQ%?&!>Q:T8EHLJQ(:>&X+Q3QA7M3YTKN)RZB56I24"@4" M@4"@4"@MI4T&4TIX3OWO>^5:YFR)EBS,W#4R52,N]_,B5Q,^LN)G#LCH3T[< MV;LX2G-Z,YEB&5D17QFT1+,QU_RQ55+\,B[E9.[9YVRRMVSSMEL>O)Y%`H%` MH(K_`!3_`&'^ET#I/^ZS9OZCQOYFW02J@4"@YQZ_=$W@?E[SVTQK9M38SBH@FB$O8)<%^Q?M^Q4Q:'7E"O722@4"@4%-U]E MI+N&@]Y.ZOS)VU$SA$RLWLI?@R/]/A,083(1X<5L6H[#::0``2PB*)W$2LUG*]`H%`H%`H%`H%`H-)=?>BSV MXQ+=.W&4+.,-HD^"*668T"6$@_Q@'@GWXV3M0:L:-_A.)[+&C=X3B>SEPP,# M-MP5!P%4'&S11(2%;$)"O%%1>"HM:<3$PTHF)A78G/M615Y@)]R7:GS+4Q,P MG*^:R,4^"ERU[Q\/Y>RNO*$^4+FNG10*!0*#PZ^RTEW#0>\B]J_,E1,Q")E9 MO91.QD;_`(9<$^UVUS-D>2Q,S<+49*1=]?Z*A"9=,.EV:W[F/1X^J+B8ZHN2 MR:C<6T7CRV[\"=).Q.YVKP[:^_?%(Q'=7W;XI&([NSL!@L5@,/%P^*82-`A@ MC;#0]Y.*D2KQ(B7B1+Q5>*UF3.6;,Y7]0@H%`H%`H%`H%!3DQH\J.[&DM"]' M?`FWF7$0@,#320D*\%146RI04=H[_`!(HQ$O!AY>/ M#N`:^-V+X7;H\??Y=)[M'1OSTGNUH)$)(0JHDG82=M6UI>LY0DX/#J_#'M^R ME3%DY7C4J.ZMFS12^]["^TO&NHM$IB85:E)0*!0*"@[.C-W130B3[D>*_P`G M9]FN?*'/E"Q?R+SG`/R8_P!K[?*DTJ?W3B][Q%7[WBM6=/(FO2>RQIY$UZ3V&[`G->/'?%0*W9J3N$*]PANB]Q:T*;(M'1H4V1:.BR5$5+*ET7M1:Z=OH&X MW_=F0(G8B*NG_=[/Y*81A6&=,'_F:E_"$?Z$&IS*>KZN2GWX*U;\0O\`[Z9D MS+ZN0EK]T(_BC_M4J9DS*DF?U:\QE3:R6\D/&8S@08L5TRWD[ M;.*G]P*_[_XB\:H[>5Z54MO*]*NF<;C8&,@,8_'QPBPHP(W'CM(@@`IV(B)5 M)27-`H%`H%`H%`H%`H%`H-5]5^@^%WDKF5Q9!B]R*ERD67D2;=B2!'BA=SF" MFKOH5D2O;5NFGP]M6Z:?#EW=>R]S[3G^A9_'N0W%549>5-3#MN-VG1N!\.-D M6Z=U$K1U[JW[-#7NK;LPE>KU!N'B*H?B*H_;M:HPC"L,V6G_`#55.XBH/^RI MS*>KVF1EIV**_C#_`+%2F9,R^+/EJGCV7OHB?THM,R=5,Y$@_&=-?F73_P`- MJA"FB(G8EK]M,&'T1(S$`12,U00%$NJDJV1$1.U5I,Q'WE>E73V"P.'P&*8Q. M'BA#Q\9-+3#?8EUNJJJW4B)5NI+Q5>VJ,SE2FAS&&Y,20"MOQWA0VS`DL0D)(J*BIW%H.;>IWU:,A#==RFR$67!6YN89 MP[OM?^G,_P"]'\$EU=Y2O9+FKE8Z67-7*QTLT2^P_'D.QI#1L26"4'F'14'` M).T3`D0A7Y%J]6T3&87:VB8S"FJ(O!4NGRU+I4!YX/$<,>\EU5$^PMTHC"JD M^6G:Y?YT'^A*G,IZOOTC,LB*H?.@\?Y55*9DS+R4Z6O8ZH_,@_TI3,G51,S< M\%1A&'RI2R.!V[G=P9`<=A(+V0FE9>4R-]*+PU.$M@;'\(U1 M/EKSOLK7NXOLK7NZ3Z5?5RQ^"=9S.[%:R67;5'(T`?"B1R3BA%J1.- M_,VZ"54$.>ZG85(&Z)49EV0>U7%;EL)I`G1%.+C:DOBYBVX8:">?E#+]";;:N0C=UY4TW)+(MUMQH+0NJ&*B95_!Y> M,[`S[:MHQ`N+HR$>8?D-$RZ'@V(8CHKK0;$/>5%4+O"]3=E93!PLL.6B,-RQ M:0FS?;U-.NMMNY4?I[U!QLB([Z#N"%&=)ETFS%WDO) MP+0ZVNIL_E`D6IB9CLF)F.S4F[/JHPW3-_:F66+?B,#((KC=^\+X?E!3\8#7 MY:LTY=H[]5FG*M'?JUAF^@O53$D2EAEG,C?\O`<"0BV[S:*+WFZLUY5)[]%B MO*I/T1&;M?<\!22?AY\/1?5Z1%>:M9+_`'8#W.->D;J3ZP]8W4GU8XFW`,0( M5$SOH%4LI6[;)W:Z\Z^Z?.ONNXN%S,O_`,3'R9*\>#++CB\.WQ!6HG;6/6$3 MMK[PDV(Z-]4,J0I&VY,:%>TI8I#04[ZI)5HOM)7G;DTCU<6Y-(]6Q]L_51S+ MZB[N;,-0F[\8L`5?=4?E==0``OZAI7A?F3Z0KWY<^D-V;,Z6[(V<.O"XX!F* MFD\@\JO221>U.8=U!%[HAI'Y*JVO-N\JMKS;O*5UPY*!0*!0*!0*!0*`JHB* MJK9$XJJ]EJ"+1=]LRL2<]J(0N,Y.-C7XKAZ3`9DEEIA[@)>.Q*:?0>\NF]Z" MLSO$7,?B7EBZ9F9FNX^)&1RX,A)WE(,K_K3;2&`+,LZXZL=&5;= MYB.\TF4$V]&L-3@*(ZD34O9>@K-.;?W7@A,XX9##SP$A;EQR1MULD0A+EO@* MJ*HJ*BVH-4;M^JUM/(F"&0NC?\=43N#5BG)M'U6* M"=M/>$BQ/1 M;JEE"'D;=E,@7:N+32&PMM_50SKY"YN3,,0FKH MJQX`E(=).ZG,<1H`7^J=>%N9/I#QMRY](;JV7TGV-L[2[A\>BST11+)25YTE M;\%L9<`OW4;04^2JM]EK=Y5;[)MWE+ZX<%`H%`H%`H%`H%!A-Z;H#;&W)>86 M(Y/>81$CP&51'7W26PMA>_SJO<1%7N4&!R_4T8SD=S'0VI^.F0X$^-,YY-J; M4^:W%1='*+Q1>0T\+PNSP>V@O,QO;(M9S*X?"8MO)2,)`:R&1)Z5Z*B+(5SD M,-V:?4G#&.X2ZM(IX/'PN`8&-U[VE*&-,:9E!AB1PIL]V/(NR(P&<@)HVTTZ MIARI'Y0KIHM=?!5"H,Y*ZM]/HTN3#+*J]+BN(R['C1Y4EQ7%,VM+8L-.*Y9Q ML@71>Q<%XJEPNMV].]E[P8'Z=Q;O*I/T6*\JDHS*VCNV'_YF"R, M7_/AR&NWL\D;J>ZU3#Y=2(4@R%(;:A1H[I?LOPJ?RU]X3^6OO#( MPMA[XG*/HFWC2GVZYG?2/5S.^D>J6X7ZN_57)D/,QK6, M:+BCTY]L$M^(RKSJ?9"O.W+K';J\KW17ORK3VZ-SX';N"V_CQQ^%@LP(8<>4P""BEV:B7M M(E[I$JJM5IG*O,Y9&H04"@4"@4"@4$5_BG^P_P!+H'2?]UFS?U'C?S-N@DLI MM]R*\W'=Y#Y@0LOZ4/0:HJ">E>!:5XVH->R.CL3DK'A91892")07+.`PC,.%C5=4SCO%,@.$ M8H^+JD9DX"B@W_O21>%E%5%;BJI06F0V=MF6Z+J(\XS-;:: M?5Q%NEM,=I!6R:4%$2R<*#[$VQ@(^1'(QYSH2YAN$1@^(I(572>TD(H@FC3A MDHI;A=46Z*J4&:Q&,CXK%0\7&4EC06&XS"FJ*7+:%`"ZHB772E!=T"@4"@4" M@4"@4"@4"@4"@4"@4"@P^>VIB<])@.94/2HL`S=''/`T[%=<-M6T-UMP#55` M3+194M>@B4;I5M2%&^C6\[-!O'L-CR"=AW8CA,].:NBL7$$>;\&_#2FE."<` MD.8V?BAP-)(A+X7901]WI% ML:1'?9A3I$3&9-A\!AQ7F%85E^`UCG595QMT[>C,MI=#X+QH+W%],L$S'BK` MS&0.!'F)DH+(OLN1P=5PG35L>40Z7'#4E^][`THJI03>@4"@4"@4"@4"@4"@ M4"@4"@4"@BO\4_V'^ET#I/\`NLV;^H\;^9MT$JH-1Y!F8UU[C2&HLR9&DQS9 MDJXV^V,0!BI^7BOMIRW&24T`P)4L[=4\*U!=8")D6\=TW0XN0!Z+E)OIJ.,R MT5N.<&>"%)0A\%%=<902=[J\.[06KXY3/=0,7F,$1S,;,DL2#FFW)C.X^+": MD1Y48M;0BHR'2\36A:EU:%$=2!8Y2/OS_0.+B8C&3766,L\]-:4G(\LA#,H< M<"%\>:3!,DID2=Q$55T:D4-T@I*`J2:25$51O>R]Z]!]H%`H%`H%`H%`H%`H M%`H%`H%`H%`H-?RMM9GTW<@1H).8S(X^:+4:0K!FDQ]XE1(SJGX+,C4KK@.+ MX):>Q."!>GA,VC@FC!:C/%OB_K:NP$%4)^/Q/_F()@BC=/RJW5$O08?,[4W% ME,CE<@Q#,8N5CNBN/DNB&DGL:TTCXDV:FW)1QM&#"_+THA(0EJ4@K8_:>Z6( MTV/(19#DM!;BSB)H76C&H;F2Q&E6HQ>C+$% MM&.:^^V>I$=T$BZ55!!$4)STN@+"VVZV6.>Q1O3),IR&ZV+(`-_,VZ"54"@4'EMMML!;;%`;!+"`HB(B)W$1*#U0*!0*!0*!0*!0*!0*!0 M*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0 M*!0*!0*!0*!0*!0*!0*"*_Q3_8?Z70:WV%[]_P#0VW?H;Z(^A_HR%]&^D:N= MZ-Z.')YNGAKY=M5N[09[XCO4?G*!\1WJ/SE`^([U'YR@?$=ZC\Y0/B.]1^H_.4#XCO4?G*!\1WJ/SE`^([U'YR@?$=ZC\Y0/B.]1^H_.4#XC MO4?G*!\1WJ/SE`^([U'YR@?$=ZC\Y0/B.]1^H_.4#XCO4?G*!\1WJ/ MSE`^([U'YR@?$=ZC\Y0/B.]1^H_.4#XCO4?G*!\1WJ/SE`^([U'YR@ M?$=ZC\Y0/B.]1^H_.4#XCO4?G*!\1WJ/SE`^([U'YR@?$=ZC\Y0/B. M]1^H_.4#XCO4?G*!\1WJ/SE`^([U'YR@?$=ZC\Y0/B.]1^H_ M.4#XCO4?G*!\1WJ/SE`^([U'YR@?$=ZC\Y0/B.]1^H_.4#XCO4?G*! M\1WJ/SE`^([U'YR@?$=ZC\Y0/B.]1^H_.4#XCO4?G*!\1WJ/SE`^([ MU'YR@?$=ZC\Y0/B.]1^H_.4#XCO4?G*!\1WJ/SE`^([U'YR@?$=ZC\ MY0/B.]1^H_.4#XCO4?G*!\1WJ/SE`^([U'YR@?$=ZC\Y08 GRAPHIC 10 a72487spinal.jpg GRAPHIC begin 644 a72487spinal.jpg M_]C_X``02D9)1@`!`@``9`!D``#_[``11'5C:WD``0`$````/```_^X`#D%D M;V)E`&3``````?_;`(0`!@0$!`4$!@4%!@D&!08)"P@&!@@+#`H*"PH*#!`, M#`P,#`P0#`X/$`\.#!,3%!03$QP;&QL<'Q\?'Q\?'Q\?'P$'!P<-#`T8$!`8 M&A41%1H?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\? M'Q\?'Q\?'Q\?_\``$0@`M`(]`P$1``(1`0,1`?_$`+0``0`"`P$!`0$````` M```````%!@0'"`,"`0D!`0`#`0$!```````````````"!`4!`P80``$#`P(# M`0H'#00'!@8#``(!`P0`$042!B$3!S%!42*3HQ1E5A%2_]H`#`,!``(1`Q$`/P#; M?33IQL2?TYVK.FX*'(F2L/`?DR'&T(W'7(K9&9$O:I$JJJT%D]E73CU<@^)& M@>RKIQZN0?$C0/95TX]7(/B1H'LJZ<>KD'Q(T#V5=./5R#XD:![*NG'JY!\2 M-`]E73CU<@^)&@>RKIQZN0?$C0/95TX]7(/B1H'LJZ<>KD'Q(T#V5=./5R#X MD:![*NG'JY!\2-`]E73CU<@^)&@>RKIQZN0?$C0/95TX]7(/B1H'LJZ<>KD' MQ(T#V5=./5R#XD:![*NG'JY!\2-`]E73CU<@^)&@>RKIQZN0?$C0/95TX]7( M/B1H'LJZ<>KD'Q(T#V5=./5R#XD:![*NG'JY!\2-`]E73CU<@^)&@>RKIQZN M0?$C0/95TX]7(/B1H'LJZ<>KD'Q(T#V5=./5R#XD:![*NG'JY!\2-`]E73CU M<@^)&@>RKIQZN0?$C0/95TX]7(/B1H'LJZ<>KD'Q(T#V5=./5R#XD:![*NG' MJY!\2-`]E73CU<@^)&@>RKIQZN0?$C0/95TX]7(/B1H'LJZ<>KD'Q(T#V5=. M/5R#XD:![*NG'JY!\2-`]E73CU<@^)&@>RKIQZN0?$C0/95TX]7(/B1H'LJZ M<>KD'Q(T#V5=./5R#XD:![*NG'JY!\2-`]E73CU<@^)&@>RKIQZN0?$C0/95 MTX]7(/B1H'LJZ<>KD'Q(T#V5=./5R#XD:![*NG'JY!\2-`]E73CU<@^)&@>R MKIQZN0?$C0/95TX]7(/B1H'LJZ<>KD'Q(T#V5=./5R#XD:![*NG'JY!\2-`] ME73CU<@^)&@>RKIQZN0?$C0/95TX]7(/B1H'LJZ<>KD'Q(T#V5=./5R#XD:! M[*NG'JY!\2-`]E73CU<@^)&@>RKIQZN0?$C0/95TX]7(/B1H'LJZ<>KD'Q(T M%>3I[LA.H)8Q,)$3''B1DE%Y:S4@DJ7H+#TG_E9LW]QXW]3;H+ M50*!0*!0?#S0O,N-&I(#@J!*!$!(A)9=)@HD*]Y46Z4'*^VMT;S>Z'2]Y3Y^ M:&1CX2.KDAR3J>?K(R4F*8@CGG#3!QA8:LJ-76ZW1=2*@;"E_:"DQ=RR-OO8 MQMF2>6:P^-<>)Q`WAE_LTXK=,+.36-PX MG'KEGY*276_.VH^HY#4A0(5+4T"V7M142RI=:#(P75+-L9R&D?'NSBW+CXVY MWHTB<9!#QDE\(K;4;G%RQ)MM2DO75$4ET)PTV#%C_:4RKT"9(#`L&^R$!Z.V MDDT:()TTH2ASD;,3Y9BBHZVB@2=E!=NH$S,#TT4^-*^L M%5`\!Y3?;TH[;@H7'A>X9&TMT[HW#A)KF;W;E8.+A8*)N;*3(#HMR_."\[`X MS3QB8M`]I`N6@6N*(*)=:#?G3K'9K';&PD3.2GYF9&*!Y!^49./<]WZ1P",N M*Z"/0GP)06*@4"@4"@4"@4"@4"@4"@A=ZS9L#9^J._I>V\!GWLE)9CO3,1`RK;T6&JO.SU8>YD81:;TL. M`Z;2JIJ2<"3C06C%_:(Q>6-F+C,+(E9:6X^U#Q:.MA(5R*P](?:?`T$F71%C M2(JBH1$EBMJ5`QMX]>%9A;@QF.AOXO/0TTZ0R&$5P00N? MX/$KV7LX4$CU'W?O#;VT-M;VAS"7$1CA.;MA@TR1N0Y.A#>:4P(A(#*VD>U% M[EKT'CC>LSN/R,[#Y.#/RN2B(,N(..S-DR)KVCEP.*FVB<31PP[+:M2")4&J,_]H?? M.&RF1E*C,J,S*R>,:QS0`;`N0,:U(;DBX@\TQ5\R(_#T\OL1%XT&27V@-X8^ M./8Q;>1F\ME5CQS?!"+EWX6M<27M#H+;F2BY3;^+ MR<20Y*BSHC$F/*>$0==;>;$P<<$!;$2(2NJ(*)?N)02%`H%`H%`H%`H%`H%` MH%!K7K=NK<.VX^TY&&G/1!RFX(>(GMQV6)#CD:6AJ:M"ZVZO.'E?1VX<>*+P ML%4B=9,SMZ6Q-W',DY#$R]NLYZ+%\UC@8-S9D=EHI4AGEZ28\XT.:6=-KGVV M&@M$+KGCIR2G,?@W'N?:C&$4HD.3EY.,S,.I%1>%!^[JW7U M!PO5!W:Y9%Q,:D0IDTF2>=!)IN\UC65P%.67`>WM5`WQ0*!0*!0*!057^J?\#_`&N@ M=)_Y6;-_<>-_4VZ"U4"@4"@4'Q(%@F'!D(),$)(\+EE!05/"0K\+6[;T%4C0 MNF283&X>-B(`X+<;Q!`QXX\1B270:,N6T8_1FZAV[;KJMVK02Q=,NG)20E% MM?%+(!6U!U83&I%9'2W9='X@\$H,V5A-L0=LOXPL1'7;[#+A'AV(8NLDV-W" M`(;0$AJ1<4`052+L2]!Y'L/9!+CE+`8[_P!HO]5BD5E$C7+4O)1!L'A>%X/= MX]M!B1^E?3*.A(SM/$`AB@$B08]E%#YB(J*',=-&W,FKK45=$AFS:DL=P55;:;66R\*"8Q6V]GN!C,I"PD:*Y$ M9$<:I0DBO1FE0K`+1@V;.E'"33I33J+OK0>S6TMI0XDUEG#0VXLTD>G,-QFU M%X@76*FV(KK42XCP[>SC02&/R$/(P69T)U'HL@4-IQ+I=%[Z+945.Q45+HO! M:#(H%`H%`H%`H%`H%`H%`H,'.XS&Y3#3,?E-7U;*9-N8@NN1[M*GAHKK1-F* M*/;8DX4%739/35_"X3:::CQ\=0R>#Q_UA,YFF*HJVZV7.YI-M*X-D4E%.'"@ MCY73_HWCYWMW/BJ;;#S M6(C+DN0RA6,&8[;CP.`Z>IQ0'PS745KW6@QI72?84N0[(DXXWG9$),;+4Y4M M4D1@;)H!D#S=+Q`!KI<<0C'M0KHE!'IT;Z6XEH9WF+T9G'O,Y+FEDN(Z1[S6,&Y9;$WZN*0D=MO(/QT`PCA(D7&,\UJ((Y M"9:KZ17N(M!)1NE_3P9"3F<,P2N1SCHBJ9LJR]'"*?T1$K6IR.V+9'IU*/!5 MXK08LSI7TRBX8VI>.%F#')V0[,.3)%X.;'\U=(I:N\]`6/\`1DBN:=*?!07" M%$B0H;$.&T+$2,V#,=EM+`#;8H("*)V(@I9*#VH%`H%`H%`H%`H%`H%`H(#= MNU=J;@^J_P#,(*?U?-;EXJTI^+IFA?E&/)<:UN#QTWOW;4$?,V3L+<>:>RR* M3^7Q[:8A^3#G2`)@6B"3YL0-.HV*H2@9"HW7AJNBT$%C>F/1>6])QV*5LRDP M%Q\^!"R+Z(_&BJ46\AII[Z0F2(F]9HJB7"]TX!*83HMT\PT^-D(,*2DN'(&7 M&<=GS74!\64C\S2;RB2DTFE=2+=.'9:@ELOMG:&4W;A\ED4YFY,0T^]AQ24\ MV;;1Z6I!C';<`#$M8@XI`J+=!7N4$(O0WIOYDQ!2#("'%D+*AQPG3!".1(XA M!'07DY+9G>Q9$>?&7ZN?**.+9D3)SYB4>,!R!909#I- M_1@VX?!.`H2]EZ"-=V1T:S.[/\PN^;Y'/S#!M'"R#[P.$[%-QMM(_/)A=443 M,0T?,\)$[M!G-=&>GC.+7'-XXQ:5QIT7TD2/.!5B-YFT(2-?-$`C?1(*%;3\ M/&@R\;T]V/ALRU+AL+&DNQ+F8\R<(7&X\QR0(F)1UUDK+ MY-+J5?@L*H`A.Q.EV5C[&WAMT2AHYN%N0,%+D0,N2&E#F&YR1<)`<+6VA(9B MB(/,6R6#,VQL',8S?;VY7V8#0R_K-)91W'"?,9SL-UC4JL-Z^2L0TLI?CJJ= MU%"K,=$\U'G,36(F':D-2HTHG`-Q#7D99Z>\J&.%DS'SLBQ_^<,U$1.YI[MZ#Q9Z+;C7$M0Y$B"L MAMB,V$H2<5QH8T5Z.40")JZQY"N(1]EM1^"7!5#ZQ?1[.8V9CI+0XZ)&QV1; MR'(CD;HHV+&-:?`62CB*F\>/=>U#I,7"%=2IK0PV'L3#3<3@"9F(K::>!QYA/A=:`@LO;>@U[F=I=0LCGW,O";<)1.43,U9Q MM@_CY$F(^W%994@*.XL6.XP1:0L1:M7%50/I=B[X*4VZ\PY(9&3#?BB_)!UU MB-&W"UDAC&X;A$9-Q&=*+J)-5AU*B:J#QP6S>ICV483.)/9@#**2Z+&7=0?_ M`,5UM!U`_P`PA\X1ISPDMVKI2ZA06#';*74*O$Z?\`4Z+C(P!)R*Y((C;4AXLL\8D\6$?C/D.M M];7R2L.BMDL@W2W8H9DG8N^C;E&U'=;FNR'9;,MN4#;HN%MIG%`7,%Q#0_.V M5*Z+\WC\%!\9S9O5:8Q-6)*F1I[BN&DAO(D#3D9QIE(\86Q<3E.L.B2D8H** MB%X1C-:#%Q M#LG$5;%2"][$QN1Q>RL%CLEPGPX$=B2*GS%$VVA%04_Q]-K:N[VT$[0*!0*! M0*!0*!0*!0*!04?J#!W"[E(,G$+I?3%YB'CGE15!C+2FV%@/GP)!1$:>#67# MP]/XU!2PV;U*1W..8^/D,8UDUDOXX#RB./L9`H&.CQ),IY'S5]EMV(_J`E/P M%3Z-;V$/9S:O4./-E286*>%XW<@J/MR6&5()N9CR]0@\(VT.J[V%DF^]EH^<:CPX\92R:FPX332I((FVYC:?2N-!=S4+B(2DEUU"0 M6??>(WW, M[FS,9C5^L?.F<\XY*TY!0EKA_/GG&P.6+XF:I#)L%^DU7^[05W%[:ZKQQQ@/ M-Y1UMM8IY,9&2;?YJC!FLR1LT/V%M'J;$;ACBXK^,F! M&B1G)*R8ZL(K."D0D)UH'BYHM3G&'$107@*JGPAY9;:?5MTT/'EE6(J,/$Q# M++ZG0E^9QT!7'5D7-M9(&J"1DG;=$0M-!,-8K?"RG(^2%]7)6>@3\*XZ\KSK M$=F<)\MQYIMI(EV0).6A(:`H72YAM>@4"@4"@4"@JO]4_X'^UT#I/_*S9 MO[CQOZFW06J@4"@4"@4"@4"@4"@4"@4"@4"@4"@4"@4"@4"@4"@4"@4"@4"@ M4"@4"@4"@4"@4"@4"@4"@4"@4"@4"@4"@4"@4"@4"@4"@4"@4"@4"@4%5_JG M_`_VN@=)_P"5FS?W'C?U-N@M5`H%`H%`H"JB(JJMD3BJKV6H*IF>JW3S#D03 M,Y&)P>!-1U*2:+WB%A'%%?CKTKPWMM#TKQ6MM"J2_M)[`8/2U&R,I+VULLM( MGQ_2O-K]ZO:.G=ZQU+OO"=?\%ES?&/BY0)'0%U,$OQ"\@*M>-N*U=X2BT2FZ\TB@4"@4"@4"@4"@4"@4"@4"@4"@\9DV'"CG M)F/MQH[:7-YXQ;`4^$B5$2D0*-F>NO3?&$H#D2GNCVA";)U/D<70TOR'7O7K M7GT>]>O>?15)?VG\$*KYEA);H_B\]QIE>WNH'.M]VO:.E;XP]8Z5OC#-P/7\ M^J_>9^"N_P"C/Q5>Q7\4Q$ZI^/U>QZK_`(G'/@B_^28. M?=UJSPKD]&_R>$ZBI7BD^J!0*!0*!0*!0*!0*!0*!0*!0*"N;CZB M[*VZI-Y;+,,R![8H*KKZ?&TVAFE_A2ITXK6VA.G':VT-?97[36V6"(<9BIG:=U>D?:@S!+>/@8[*7^:X^;O#XT!K\%>D M='YO2.E\UHQ'6?-S8#$MR!&'G!JT#S.'RJ2UW_0^;,Y.3QM,?"4S%ZOLJO\` MC,4;0]WD/"\7R(8,)]^H6Z-O281CFA8L;U`VK/5`26D5U?\`ER4Y7%>Q-:_1 MJJ]Y"JO?@O7>'I%XE8D5%1%1;HO%%3LM7BD4"@4"@Q)N8Q$%YEB;.CQ7Y*VC MM/.@V3BW0;`)*BEQ)$X=^@]9,R'%1M93[;"/."RRKIB&MUQ;`V.I4N1+V(G% M:#VH,:)D\=,9<>B2F9#+)DT\XTX)B!M_/`E%51"'NHO90?L#(X_(11EP)+4R M*=T"0P8NMDHK9;&"JBV5+4%=_JG_``/]KH'2?^5FS?W'C?U-N@M5`H%`H/EQ MQMILG'"0&P12,R5$$11+JJJO8B4&G]\_:)P^,-R#MED?9+_\`5%>7'3O69#2' MRJEZOTX*5VA>IPUKM"OUZO4H+ATY_39/\V/^%VD;LC]GO7ZKM4F44$EA]R9S M#J*8^6;;0_\`ZQ>&RJ=[EEP2_?&R_#7AR=>EMX3K>8;%VYU.QTX@CY0$@R2X M(]>[!+^HS>8 M@X]^8]S(T=[SB$9MQVF&3>&?"R"#RV>49J+K+BJCBIV77B$%AMQ=3LIAL/FU M69E4=QPSH,P\6RAM3W\*^;J-:8P+RDD*T#1HECYA#J-.P)(=U]5(SF.9DM96 M2"3VO/75Q:$+D-QW'*^)\F,MN6T]+0+("^#\XB%$(,S*1,\UT6@8*'CY##N2 M=^1+P2NQ&78C+1V^OM'Z2)50;]J`/S03X!1$J_3CK7:%VG'6N MT(ZIIE!=NG?Z&=^ MW4VMP5?A5+UX\G!6^\)UO,-B;_'C MR''_`*=1<1YH3C+&,W&UYIJ3UP4241M0;IH%`H%`H%!6-[]1=M;.AH[E'E*4 MZEXT!FQ/N]RZ#=$$?[1*B?+PKTX^*UYT>G'Q6O.CG;>?6_>>XR<8COKA\85T M2+$)1,A[SCZ6,N'!432*]ZM+BZE:[ZRT./JUKOK+7J\5NO:O;5I:*!0;3VS_ M`-!A?W:?A6E7S/8_LM[RDZD\2@E,+N;-X4D\PDD+*=L5RYL+_N*O@W[JC9?A MKPY.M2_NG6\PV=M?J!C,R019`^99$N`M$MP<7_Z9\./]E>/>OVUF4("ZV MZRFI%[+]E!5=O!O[*MQ\IC7LGD<6.14)FJ=&-'DBY=T5-A#?'E@$-M0,?!4U M4%TK92H,>3ANNC6`0A"35H-+ MHH6N+B-Z1]E;HCL8AUO(9;-27VXA.Q%>+'SI(*ZSNUW5I:*!0*"X=.?TV3_-C_A=I&[(_9[U^J[5)E/?ZOGZP M#S9W6Z.MH=!7(>VXI;BE1\X^+N)?@0Y9@I@PX0(2BI()*B$B75+V[;4\H,/& MI.+9L[?6EV.K%M:[O:G)C26W8\AF0PV M^P:.,NBAMN"MQ(22Z*B_#65,+")WCF9^$VSD,MCXH39<)I76HCA\H75'\378 MM*EV(JI052+U:PJZ\?N: M@RO:)LW%8]S'X9L8K>-)8S48(KS<9H6TCE=!8;+2T03F5`A'3X2<;7H,V1U4 MV8Q)F1BD/D["YG-T19!`O)DE#=TN(WH\"0V0%X7"RK\WC01R]9-JK.0.:4?' MMO&#T^2S(!IQD,2F75QDQ;(?!8(247%%;7LB\+AE3.L&QH4A(LR1)CRD-P'X M[D.4)L\I&",WDY?T8($QDM1<+$E!=*!0*!0*"-W%N'%;>P\C+91[DQ(XW)>T MB)>`@"=TB7@B5*M9M.(2K6;3B'*/47J=G-Z3[ODL7$M%>)C0*X#W-;BHB:S^ M%>SN=V^MP=>*1\VKP\$4]U-JP]R@4"@NW3O]#._.;_`5(W8W[/[X]EPJ3,2H M[>D''20$A@V40U?(2->4K8H2H?@\?G(G@:DO7E^6,XQ*7B]%VM/`C1YUEK3J M5%)35%;#M=32)>!Q[O'X.%<_/#OA*&KV06K9N^).$<")*57L22V4.*DS_:;_ M`+/?'[G'MI=CJQ;6N[UIR8TEMZ/(8D,-OL&+K+HH;;@K<2%>**BUE3&%EZ4& MML=U:DNYGZDR4!O'Y2/D)4>8T1..([`CM271GP](:G1)81-D%KB?!>Y<)+&[ M]Z?,RW3QS"L3KKKK$* M=,<==C249C_5[4=XTDBVV;P)HFM$M@51OQLO"@E]6>JT39L'S.'ID;@E!>,RO$&@6Z_!P3>?DY:RF5R.6R#^0R4@Y4V06MY]Q;DJ_Z$1."(G!$X)6M6L5C M$-6M8K&(8E22*!0*#:>V?^@PO[M/PK2KYGL?V6]Y2B"2]B*O"_#O)Q6I/%^J MTZB`J@2(Y^C6R^%W.'?KF77XH$B(JHJ(M[*J=[MH/R@V1L3?Q&3>)S#NHUL$ M28?:7<1MQ>_^27=[O'MS.SU?'^5=GOQ\F=);$JB]F+E793.,ENQ"`)+;+ALF MZ"N-H8BJBI`)-J27[40D^.@UIA.KV56:W#S\1J+/@0S//8V."Z^<4B(S%DQ7 MWGVV_-9`3-::TN.DD4KBM!)IUBQ$R*0P(,]N6_CVLC"YC4_A*@J5!XL=7X>1,'(421%@`_CVWI;S;3BWF2GHIM$V+X*&DX]N8*GW M]*\+A^N];L""1$##Y1UV>PS-A,@,-"=B2(LF8U(%2DB*"34![@2H2*EE%+I0 M9OUQ#_SQ]<^%YE_EKSSL\/E><]?JNU292T'D(0XUV$63;>-]HM,C3(N M+KCK+CFK4V*H*BR@H@W[ZVO57PGRSC_CYO3.F[W+D..8,OR'UE M%):=34/.1&1UBC:&8\55+*E!*^R/8'($7I3[\`'.0Y'=DB3)/'!'"J!<+H91 MK,V0D6]K>%:@R\ET>VODC<>FOS7I3S3C,B23HJXX#PQP+4JA;YD%D?!1/FW^ M<1*H7E$5$1%6ZIW5[5^Y0*!0*`JHB*JK9$XJJ]EJ#DWK#U&=W=N`F(CB_4./ M(@@@B^"Z2<"?7OZOQ>\/QK6MU>'PC,[RU>MP^,9G>6OZM+)0*!0*"[=._P!# M._.;_`5(W8W[/[X]EPJ3,3`9R&W%&,W#(6E:)IY.;?5KLI$/@60E,16ZW[$3 MLKQ_'.4247E\!M'%TMB@*`Z$5%%#'P2UV[1^.HSP1C!YH: M5(*1)*U[UC$81F7E77%XZ;;J.','#2S_`,'**T55_P"6 M\2_-_-<7_B^-:S^YP?Y1]7OQ7]&U*S7NJDWIGMG(,1!R*/2Y,)9RQIYF@203 M)M.M2A1UI&UL:2"7X%LJ=B4$=C-H]-L4R)>>MNAMW(+,)V3*!4BRC9Y.EQ;B M((J*A(!<-2(J?-2P0N0Z90X&XL?EESC47$MB##+LHVD?57Y+\B2VV9`@ZI7G M*BAMD!CW+\*"1:Z+[%9!_&M2YHN28;\5]GSN[APY4>/">%15%\`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`YX7A"B:P^EV;U"?W5/G$$5H,ICTC MR))//(0L)*0AAH0HI-D,?P%(/QE(T745Z"Y=,L7E<3L'!XS*QPB38<4&7([: MZA!`2PCPX71.VW"@L]`H%`H.;/M(;J.=N>/MYD_\-B&T72@4"@4"@VGMG_`*#"_NT_"M*OF>Q_9;WE)U)X ME`H/*1*C1FU"YJ)>W2BZD[.*)7AV./S MI,+L?KXK69SFSK5%14NG%%K&4V%FXKLO#3XK3+,EV1&>:;CR5(6'",%%`=44 M(D`E6Q615M0:XVSL/=6-Q$;'F`^80MQI/QL1QX778^-:541LGM(JZ6JZAJ4E MTVN7<0/K/;4W5N3>.)W#YE]7)C933/+60)-NL0\FIN'*:-M.:+D<>9%LEVW? M"O;PJ"L,]$M\.[*S&$\_8BK*AHV$*0*2F79:0G(Z@TX"M$Q#;,]49LD/E*NK M0BH-!O2($EN*R$IT7Y(-B+[P!RQ-Q$1"(0N>E"7CIU+;OT%:_JG_``/]KH'2 M?^5FS?W'C?U-N@M5`H.>_M/98SRV%Q"%8&&')9BG=5X^6*K\7)*WQK6AT:[R MO]*N\M(UH+Y0*!0*!07#IS^FR?YL?\+M(W9'[/>OU7:I,HH,"5GL-%OSIC2$ MG:`DAE_V1N7WJYY0]:<-[;1*)D[^P[=T8!V0OXJH.@?EUJA?\-Q;[I'I-F8UJ5252<0FW555X_\`+;K.[M<3$O#M\<5F M,1AO.J*F4"@4"@4"@4"@YN^TSE3?W9C<8BW9A0N;;N(Y(<)"_P"%H*TNC729 M:/2KI,M/5>72@4"@4"@NW3O]#._.;_`5(W8W[/[X]EPJ3,8LS*8Z&G^*DMLK MVH)$B$OQ#VK\EQ43F&G^\7@_\--5RGZVL?=.4),R,^9?SN0X^B_BF2J/R#\U M/D2N87*=>E=H8U=>SH?[,.5-["YO%$MQAR&9`(O<\Y`A5/\`^O69W:XM$LWN M5_E$MUU24R@4"@4"@4"@4'$F[LJ>6W3E\D2W\ZEO.!\`*:Z$^0;)6YPUQ2(; M7#7%(A$5Z/0H%`H%`H-I[9_Z#"_NT_"M*OF>Q_9;WEGOR&&&U=?<%IM.TS)! M%/E6NY>41,[(&?OC#1[C'4I;B=P$TA?X3+_PHMF/=79^^X_UU(^[5`OR)$ASF/NF\XOX[A*2_=6],+U..M=HP M\Z)E!V;TTRI938.!FFNIPH;;;I+^,XRG*,OE(%6L/EKBTPQ.2N+3"RUYH%`H M%`H*K_5/^!_M=`Z3_P`K-F_N/&_J;=!:J!05SJ*`JO%K'1P'\U7'3_ M``DM:?1^V?=I=+[9]VK:NKA0*!0*!02N!W`]ABE*TR+I24;2Y$J(/+U]Q$XW MU]^N*G9ZOY9C7&&1)WKN!^^EX(Z+W&@3L^,]:_?KNKSI^NXXWS*)DSILJ_G, MAQ]%_%<,B3Y$5;5S"U3@I7:(>%=>I0*!0;A^S*9)O#)A?P2QY$H]]1?:1%^_ M5'O;0I=W:'2-9K.*!0*!0*!0*!0_WZXI]CJ1R MVB9E\3-R9R7='9CB`OXC:\M+=Y=&FZ?'3"5.GQU],^Z-[JKW5XJM=68B(V*. ME`H%!NG[,+^G/YJ/I_21&W-5^S0Y:UOAUUG]_P!/JH=[T^KHFL]0*!0*!0*! M0*!0<%,DI-`2KJ4A15+MO=.VM^NS=KL^ZZZ4"@4"@4$TWN[+LP&H4908!H=* M.".HU^4KC]ZN:J/^A2;3:VN91,B3(DN==3* M!0*!0=9]!B4NE.$55NNJ8EU^":^E8W9_LEC]C[Y7^O!XE`H%`H*K_5/^!_M= M`Z3_`,K-F_N/&_J;=!:J!01?PI6ET=I:/2VEK> MKRZ4"@4"@4"@4"@4"@4"@VS]F9R_4#(M_DXEPE3\Z2RG_AK/[T[*'=]'3-9Z M@4"@4"@4"@4"@Y%ZYG__`*YGF_[$,T3_`/BMHOX$K4Z7VM+I_:H]7%PH%`H% M`H%`H%`H%`H%!N#[,)WWEFA[@X\/NJ\E9W>WAG]W>'254%$H%`H%`H%`H%!P M'BSUXV,2\5Y8HJ_"B67[Z5N\?VPV^/[89533*!0*!0*!0*!0*!0*!0=6?9Y< MYG2'"'VH3D]4^+ZQD6^]6)S_`'RQN;[Y;&KR>10*!0*"J_U3_@?[70.D_P#* MS9O[CQOZFW06J@4'*?VGVBB=3X4Q47DOXMC42]ET??`D^)$02J_TYTE?ZDZ2 MUS6BOE`H%!,0-HY^?$:E0XO.!]11D$,.8:$^$9"$%5"4>>Z(7MVK4)Y(B=4) MY(C=Z#LO<1D7+8`VA!'4D(^RC)"7,MH=(T`U^@>Z(7MVK4)Y(B=4)Y(C=Z#LO<1D7+8`VA!'4D M(^RC)"7,MH=(T`U^@90T;/1H56M?,35S@4;CQ0D7LI^2,X/ MR1G"'J:90*!0*!0>$U[E1R5%L1>"/QK_`*DXU&TZ.6=;_9^BE&Z0[?;+M))3 MJ=S@[,><3[Q5B\T_SEC.''1(:/.XS%Q MR;::=%L3=?-Y]SF*J*:M:1EF*:"6]K%P)4KL\.^6HVGT1F72/V4]OG$VEE,XX.EWCUX'<387;5',=*/O+^F83_P"] M5OJ6UF/BM]2VLQ\6C&2VYS@>UE*S$:H M>IIE`H%`H,#)24MR`7^\7_14+3Z(S+I_[+VWG,?L%_*O!I=S,LW6E7@O(81& M0X?W@N*GP+65V;9O[,KLVS?V;BJN\"@4"@4"@4"@4'$/5O!O;>ZFYV.@Z0?&?>!76670<<:$E!2$215%"3B*JG=2N3&84A_&N MP7)(LM`3KKCI$!FV+B`.AM1!5154K7[:\:\4Q&/F\:\4Q&/F^<9U`::PZPL2]8EDU)TH%`H%`H%`H%!BRYP-7`+$[]X?C_U5&;(S+SV_@LIN M+.P\-C0YL_(.HTU?L15XD9_V0%%(O@2O'DO%:Y>7)>*UR[NVU@(.WL!`PD%% M\UQ[(,-DOSBTIX1E_:,KD7PK61,YG+)FSX^[] MGY'`NJ@.26]41XNQN0VNMD^'&R&B:K=HW2I4M-9S"5+36.':J M`V*"EU[J\.*]U:R)ED,R@4"@4"@4"@4"@T3]J/89SL3%WA";4I&+1(V20>U8 MAE=MS_TG27L[AJJ\!JSU>3QMCXK/6Y/&V/BYKBR28-5M<"^>/^E/AK3B<-*- M$LVX#@(8+J%>Q:](E++ZHZ4"@4"@4"@4!51$NO901LV:CB*TTOT:\#+\KX/B MJ$SE"9RV3]G38I;BWN&6DMWQ>WU&4:K\TY5_\.W_`+JHKB_FI?YU4NWR8CQ^ M*IVN3$>+KNL]GE`H%`H%!5?ZI_P/]KH'2?\`E9LW]QXW]3;H+50*!0:5^T%T M?=W%%7=.!8UYR&W:=$;&YRV`3P5%$^<\TGS>Z0^#VH*58X.;PG798X.;PG79 MRPBWXI\B_"E:<3EI1.69'R3@6%U-8_E)\[_;4HL[EGM2&'OT9H2]U.Q4^1>- M2B8E*)>E==*!0*!0>3TIAG@X:(7Y*<2^XG&N3,0Y,L"1D7'+BW=L>_\`C+_J MJ,RC,L4`,S%ML5-PR00`44B(B6R"*)Q555>"5&9B(TL>6=SC M*)N3(!I%E;*L2.O'E73_`)A\%<7NOS>,XG9S**HJ(0K\(DB_?14K2:.[.8R1#87DU)^6G;\J5*+ M)1+/:?9=2[9H5NU$[4^-*E$Y=B7W772@4"@4'D]+CLK8S35^0G$ON)7)M$.3 M,(^1D'7/!;NV'_$OR]RH3.49ECM-.NNMLLMDZ\Z2`TTV*D9F2V$1$;J1$JV1 M$J,S$1F7)F(C,NN^A/21-F8DLKEFQ77&>BR6Q>C2`)I]DT MN)@::2$D7M146RT'%W5[I?-V'N%6P$G,!.,BQ,M>/!/"5AQ>XXW?_>'PD_&0 M=/K\WE&)W:77YO*,3NH[+[K):FUMWT[B_&E65E(L9%ERR']&7P_-^[_KJ46= M\F54DB@4"@4"@\'ID=FZ$6HT_$'BO^SY:Y-HL'V?XFYG7 ML]MK1#SY^%)BE8(\M4_&X)]&ZOY787XW'PJLS^EC/CI-+]BIW"%>X0W1>XM:-+Q:,PT:7BT9AAJB+VI>W94L)8> MH2I0?-=*W>+POOE=:[JZ]AR4F9?)9*4 MO9H3O^"O^NN>4F9>+DB2Y\YTK=Y%T_\`=M7''FB(G8EJ"0P6`S6?R3>,PL)V M?/=XBPREU1/RC);"`IW2)43X:A?DBL:HWY(K&KJ3I!T$QVTC9S>=5O(;D1+L MH-UCP[I9>5>VMSCQ<5.'8*)Q4L[FYYO[,WFYYO[-NUX/$H%`H%`H%`H%`H%` MH%!HKK#]GD,P\_N'9X`SE7%5R;B546V9!+Q4V26PMNEW47P27CX*W4K/#V)K MI.RQP]B:Z3LYJGP)V/FO09\=R)-CEH?C/`K;@%WB$K*G?3OUHUO%HS#1K>+1 MF'A;C?NIV*G!4^):[AW#V;F2@['%5$[A6+[Z\?OUW5UZCDY'XP@OQ(J?Z5KO ME)F7U]:O6MRA1>_J5?O63\-/*3,O@LG*7YJ`GR*O^FN>4F9>+DB2YP-TE3O( MNG_NVKCCR013@B(GQ4P826`V[G-PY,,9A(3L^VMPEL#8?VC5$^ M&H7Y(K&J-^2*QJZHZ0=",;L[EYG,*WD-S:?`<&ZL1-26(6-2)J-46RN*E[)0*!0*!0*!0*!0*!01NXMN87<>(?Q&9BA,@2$ ML;1]Q4^:8$G$3%>(DG%*[$XUAV)PY&ZI]%-Q;(D.3&!/);;555O)`-R9'\F4 M(_,5/R_F+_95=-:/#V8MI.[0X>S%M)W:YJTM/IMUUK]$:@G>3L^XMTKCF&0& M3DC\Y!-/B45^[Q_!7?*7-W7++;AV"ER7N)7ER\T4]WCR\T4]W7G3+I9@-A8 MLF(7^*R6V*_-"Z_"JKQK,Y.2;3F6;RS57@B8+&_J;=!X0.IV'R6"CYG',.OL/Y5O$ M*VND#`WGT::=)"7YK@.-NCW=)C0>J]0X1;>P&49AO/2MRN-L8K&B0(X3CC9O M+K-501!MIHC,N-D3@BK9%",E]9=O0HN5"6P\QF\,,HYN))1U(,)&#=,7D56M M"MRVW!5515%>RZ*E!8@WYLHFV'4SD+E2%-&7%?;055HB$T556R*A-FG'NBJ= MR@S\-G,/FX`9'#S69\%Q51N3'-'&R45LMB'@M!A[IV7M?=4+S//XYJ"7#X%XUZQ>)]7K%XGU?.H;:KII[]^%= MR[E]QP.2[RHPJ^[_`.6VBF7'X!NM1F]8WER;Q&\K;@^D74O-$GF6W9@`O_-E MAYF%ORD62K6I/S;UY6[-(]7E;LTCU;8VA]E)S6W(W=E1T)92Q^.OQ[MCD."* MV[BH+?Q%5:_;F=M%:_;F=M&]-M;3VYMC'IC\#`:@1DMK1M/#<5.&IUPKFX7] MHU5:JS,SNJS,SNEJXX4"@4"@4"@4"@Q,QE(N)Q4S)RU5(T)DWWK<5TMBI*@I MW56UD2@H[75:1)VYA,`N/MM*YDW<6YYN;39%()'8Y*`H"*2=G%%1`F3ZT=. M!;1U$5&<]CPD.`*BQ+'Z.0U?C]&Z-B1+\=/ MS5[J+4JWFLYA*MIK.8:'W;]E;/13-_:V1;R,;M&)-5&)")WD<%.4XOQH%6Z= MS_U"W3M_^H:JS73O?>$(DRF`G1A'YSW))UE/_6:YC7_%5FO/2?58KSTGU5W6 M&I0U)J%50AOQ14[45*]8M$O6)B7[771M>8Z++?AO&MA;'B2K\")QJ,VB-Y1F MT1O*UX+I5U&SJC]7;>F$V78^^WYJTJ?E(Y(5H23\U5KRMV*1ZO*W8I'JVUL_ M[*;RF$C=^4%&TLJX_&W55[MCD."EN\J"'Q%56_;F=M%:_;F=M&]MM[4VYMF` MD#!8]F!&X:T:'PC5$MJ<-;FX7]HE5:JS,SNJS,SNEJXX4"@4"@4"@4"@K>^M M\P-GX^+.F,F^V_);9=1OM985;ORCX+]&PWX1?(G=H,.5OR4QNI,']7MDRL^- M!\Z1]=6F5#>E(YR^5:Z*QHTZ^[>_Y,A&Q8RL%M1\(V8FK)T/: MD:;?DJPPC3B.7:BDT_&Q[ZN,,SWF)"7E-Y%< M:C9BC2BVV;R"@N&:)_'V+5^<-%;GZ(=2]O$1/X=R? M&&]I>-O+!43NZ`3G"ENZ3:5-NQ2/5Y6[%(]6Z=D?96CMJW+WG/\X+@JXJ`I`W\3DE=+ MA?"@"-OREJIR=J9VT5.3M3.VC>^(PV)PT!K'XF&S!@L_HX[`(V"7XJMA[JKQ M5>U:JS*K,LR@4"@4"@4"@4%5_JG_``/]KH(W9.*?R_0_;6+9E%".;M[',+*$ M=9`!PVD/2EQXJ%T146Z=M!^/=+F6-!(4"@4'PZRR\"MO`+C:]H&B$ MG#X%H,)-N[?1_P`X3&1.?_YW(;U]EOG:;]E!G---,MHVT`MMC\T`1!1+K?@B M4'U0*!0*!0*!0*!0*!0*".SN#B9J&W#F$:1A?9D.-#HTN*PXCH`XAB:*&L45 M4[MK=EZ"K.].MEM95V,W.WBV76&Q0GXJPGW66-%T'DE9;<-7A+X7 M&@DGMM[>GP,5+AY$V',"TXSC\S$=9(VFE;1MX2(Q<8,2%L=2&"I<47@J(M!% MQ>F&QQ=A9.!*>:%$CH#S,@3"2['F.3FW7")#YCBR7G");^%J5.]8,?%])-DI MCYN/QF2F+`?%8V0C1Y8DV3HM\E3=$15.:C*HVM^X@K;4*$@;#`5$!%24U1$1 M26UU^%;(B4'[0*!08LW%8R'!8Y' M2[7$B,:E^71>@DXL&%$;Y<2.W';X)H:`02R=G`42@]J!0*!0*!0*!0*!0*!0 M5S@L1G@8<:8\X5%-]E'&S47O!%-5[<.R@AH&PMM8^0S M+7<$MY<0_$)Q9#\0D%R'&*,R#Y(R)75E^Q75"6Z+>_&@DC93(OMX82;QS,AYMYL&" M;Y8L\6[Z1#@A7UKW26R6"W4"@4&%D\%A,JWR\ICXT]M$L@2F6WDMV]AH5!7) M/1_I=(6Y[8Q[?%%^@8%CL2W_`"=%3CDM'K*<2,XCS4@8QYPFG(S3SILAL\IMP7(`*)FCK,5;QAX21'R>W":;*1AW,9!%B.*NRY$D#D/NK MI34YS'7&1U%V$!+?MH-AX=57$PE4";+D-HH."H&BH"70A)$5%^.@RZ!0*!0* M!0*!0*!0*!0*!0*!0*!057^J?\#_`&N@=)_Y6;-_<>-_4VZ"U4'R3;9D!$*$ M3:ZFU5$51*RC=.\MB5*#ZH%`H%`H%`H%`H%`H%`H%`H%`H%`H%`H%`H%`H%` MH%`H%`H%`H%`H%`H%`H%`H%`H%`H%`H%`H%`H%`H%`H%`H%`H%`H%`H%`H%` MH%!5?ZI_P/\`:Z#6^PO;O_D;;OU-]4?4_P!60OJWSC5SO-O-PY/-T\-?+MJM MW:">]X[T'Y2@>\=Z#\I0/>.]!^4H'O'>@_*4#WCO0?E*![QWH/RE`]X[T'Y2 M@>\=Z#\I0/>.]!^4H'O'>@_*4#WCO0?E*![QWH/RE`]X[T'Y2@>\=Z#\I0/> M.]!^4H'O'>@_*4#WCO0?E*![QWH/RE`]X[T'Y2@>\=Z#\I0/>.]!^4H'O'>@ M_*4#WCO0?E*![QWH/RE`]X[T'Y2@>\=Z#\I0/>.]!^4H'O'>@_*4#WCO0?E* M![QWH/RE`]X[T'Y2@>\=Z#\I0/>.]!^4H'O'>@_*4#WCO0?E*![QWH/RE`]X M[T'Y2@>\=Z#\I0/>.]!^4H'O'>@_*4#WCO0?E*![QWH/RE`]X[T'Y2@>\=Z# M\I0/>.]!^4H'O'>@_*4#WCO0?E*![QWH/RE`]X[T'Y2@>\=Z#\I0/>.]!^4H M'O'>@_*4#WCO0?E*![QWH/RE`]X[T'Y2@>\=Z#\I0/>.]!^4H'O'>@_*4#WC MO0?E*![QWH/RE`]X[T'Y2@>\=Z#\I0/>.]!^4H'O'>@_*4#WCO0?E*![QWH/ MRE`]X[T'Y2@>\=Z#\I0/>.]!^4H'O'>@_*4$./MN_P`WN:OJK_,/U>'*MJ\W /\RYQZ[_C@__9 ` end GRAPHIC 11 a72487vasc.jpg GRAPHIC begin 644 a72487vasc.jpg M_]C_X``02D9)1@`!`@``9`!D``#_[``11'5C:WD``0`$````/```_^X`#D%D M;V)E`&3``````?_;`(0`!@0$!`4$!@4%!@D&!08)"P@&!@@+#`H*"PH*#!`, M#`P,#`P0#`X/$`\.#!,3%!03$QP;&QL<'Q\?'Q\?'Q\?'P$'!P<-#`T8$!`8 M&A41%1H?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\? M'Q\?'Q\?'Q\?_\``$0@`M`(]`P$1``(1`0,1`?_$`+,``0`"`P$!`0`````` M```````%!@0'"`,"`0$!``,!`0$```````````````$$!0(#!A```0,"`P0" M#`8-"`H#`0```@$#!``%$1(&(3$3!T$B46%Q,I.C%&56%P@H@9%"4B,5H;%B MCD'P(T# MU5JKEQZ.0?`C0/55RX]'(/@1H M'JJY<>CD'P(T#U5JKEQZ.0?`C M0/55RX]'(/@1H'JJY<>CD'P(T#U5JKEQZ.0?`C0/55RX]'(/@1H'JJY<>CD'P(T#U5JKEQZ.0?`C0/55RX]'(/@1H'JJY<>CD'P(T#U5JKEQZ.0?`C0/55RX]'(/@1H'JJY<>CD M'P(T#U5JKEQZ.0?`C0/55RX]' M(/@1H'JJY<>CD'P(T#U5JKEQZ M.0?`C0/55RX]'(/@1H'JJY<>CD'P(T#U5JKEQZ.0?`C0/55RX]'(/@1H'JJY<>CD'P(T#U5JKEQZ.0?`C0/55RX]'(/@1H'JJY<>CD'P(T#U5< MN/1R#X$:!ZJN7'HY!\"-`]57+CT<@^!&@>JKEQZ.0?`C0/55RX]'(/@1H'JJ MY<>CD'P(T#U5JKEQZ.0?`C0/5 M5RX]'(/@1H'JJY<>CD'P(T#U54_P"ZS1OZCMOYFW06 MJ@4"@4"@^'FA>9<:-20'!4"4"("1"3!LI\^ M]#(M\)'5N0W)U/+UD7*3%,01SRAI@XPL-8*C6*XKBBYD5`V%+]H*3%U+(T^] M;&V9)W9JSVUQXG$!P'Y2QVYQ.B'#-G*V1+D5%0_HUP[Z@3.=M]#4;.EKG9V( MDF2K5OG+#F*^<>3)AN/J2/M"@`K9M*/#54/Y:+A08,I[6%W]FFU:IA7R:QJ& MTV];L_)22ZWY6U'S'(:D*!"I9F@7!=Z*B8*F*T&18N:5[8OD-(]O=G%J6WQM M3O1I$XR"';)+X16VHW&+AB3;:E)>Q5$4ER)LRX!BQ_:4NKT"9("PL&^R$!Z. MVDDT:()TTH2AQD;,3X9BBHZVB@2;J"[)%GE/C2 MOK!50.H\IOMY4=PV*&([,<0R-):IU1J&R37+WJVZP;7"L434UTF0'1;E^4%Y M6!QFGC$Q:![*!<-`PQ%$%$Q6@WYRZMUZMVAK)$ODI^9>1B@=P?E&3CW'=^D< M`C+:N0CR)VDH+%0*!0*!0*!0*!0*!0*!00NM9LV!H^^3X+RQYD.!)DQWA$"4 M7&6B<'JN"8JF([<4H-*67FCKZ7INP7]ZY268[TRT0+JV]%AJKSL]6'N)&$6F M\K#@.FTJJ:DFPDVT%HM?M$6N[&S%MEED2KM+D/M/@:"3+ MHBQE$514(B3`L,RH&-K'GPK,+4%LMT-^UWZ#;[A)B./*PZXT];VFG2&0PBN" M"%Q^KM+'!=VR@D>8^K]8:>TAIK6T.82VB,<)S5L,&F2-R')R(;S2F!$)`989 M1WHO1AC0>-MYS.V^XSK/$(`O#89`#=,DQ M*8J^9$?7R\/&S M;M1=F`52)SDO.GI;$W4'E)CRC(YE9R MX8GOP&@M$+GG;IR2G+?8;C<(]NCA(N;L+@2.#QHKLQ@4RN8.(XRSWXKES&`[ M<5P"(A\Z7M1ZGTHQ9%*)#DW>3;+S')8\AMX1MZ3&B:>#.NS,/>J.W,BHNR@_ M=5:KY@V7F@[I8^L]?Z4U.4^ M),AS;"Q;KA<)MD5C*L>/$BD4=]V7FS9Y$L>&`X(B[AQ42*@U_;N?NNYD]G39 M/@$Z3'MUP2[BPTI-A,L*W1QE`4>%LD#E%5%5R8IM+K4%BTUS5USJ#5&CY,TI MEBT[>HT0<&[8U(A3)I,D\Z"33=XK&,N&T8_1FZAX;\5S8;UH)8N67+ MDI(2BTO:ED`K:@ZL)C,BLCE;P7)\@=B4&;*LFF(.F7[85HCKI]AEPCL[$,76 M2;'%P@"&T!(:D6U`$%4BW)C0>1Z#T02VY2L%N_\`48_58I%91(V)9EX*(.`= M;K=7IV[Z#$C\J^64="1G2=H!#%`)$@Q\%%#XB(J*'0?6[N'8H,&^WWEG>7(E MHU%;VYIJ<%8T&YVQTT;6K]ELFDTS';XZA<[';_K"9Q,L515MULN-Q2;:5P<$4 ME%-FR@CY7+_DW;Y<>WR$;BW-IR&[$,KC*;GME_X4-&G^.D@!+^B`!/`NPM!D M2.1/*V0_)>WIV_ MBJ:;#R6(C+DN0RA8&#,=MQX'`=/,XH#US7,6&.*T&-*Y3Z"ER'9$FW&\[(A) M;9:G*EJDB,#9-`,@>+E>(`-C,V]YFY<4KC M<,C;L!E6F7RS2,N+3*9<5^30-:VCE'K-8P:EEL3?JXI"1VV[@_'0#".$B1B, M9YK,01R$RS8Y17H1:"2CU`H%`H%`H%`H%`H%` MH%!`:MTKI34'U7_B$%/ZOFMR[5A*?BY9H8\(QX+C6=P=N7''IPH(^9HG06H[ MT]=D4G[O;VTM#\F'.D`3`M$$GR8@:=1L50E`R%1Q79FQ1:""MO+'DO+>DVZU M*V928"V^?`A7%]$?C15*+C(::>^D)DB)O.:*HELQQ38$I9.2W+RS3XUP@PI* M2X<@9<9QV?-=0'Q92/Q,IO*)*3295S(N*;-V%!+7?3.D+IJVSW*XIQ-26AI] MZSBDIYLVVCRM2#&.VX`&)9Q!Q2!47%!7HH(1>1O+?R)B"D&0$.+(65#CA.F" M$,VM;J;0[>M,7>S-/ M>3NW*%)AMR$WMD^T3:'L^:I8T&L;QRLU9?I7EH/Q[:X^&`2W%/R^!C99%I#=(B0&'7@C13N4&-$SLB MC&U.)%)TT00Q4NE<2(,6Y\EM2W74TFX7$;3(MQ+F6\R<(7&X\QR0(F)1U MSDK+Y-+F5>U@*H`A.Q.5UUCZ&UAIT2AHYJ%N0,%,2(&7)#2AQ#U*^S`:&7]9I+*.XX3YC.=ANL9E5AO/P5B&F"E M\M53I10JS').]1YS$UB)9VI#4J-*)P#<0UX%V>G.!F2-C]+%?\G5>PF'>[*# M+B"+'_P"L,U$1.C+TXT'BSR6U&MI: MAR)$%9#;$9L)0DXKC0QHKTZ]F'*8N$*YE3.AAL/0EFFVFP$S,16Y M$N=<+B4=5$N`EPFO2Q8Q'JJK8O()8*J9L<-E!8*!0*!0*!0*!0*!0*!0*"O< MP;=.N.D+A$A-*^\7",HPK@3S33P./,)VW6@(,%WXT&O;SI+F%<;^Y=X3;A*) MRB9FK.-L'[?(DQ'VXK+*D!1W%BQW&"+*&!%FS;55`^ET+K@I3;KS#DAD9,-^ M*+\D'76(T;4+5R&,;AN$1DW$9RHN8DS8#F5$S4'C8M&\S'KHPE\2>S`&44ET M6+NZ@_\`BNMH.8'^(0^4(TYUDPWKE3%0H+!;M.:Z9T"5MD.R';PW<8SL=[RH MA?.(U(9-SC&KS@YC:!Q"`7%`\<*[/&)/%9'X MSY#G?7#&Y*PZ*X)@@XIAN4,R3H771MRC:CNMS79#LMF6W*!MT7"TTS:@+B"X MAH?E;*EBB][M[5!\7S1O-:8Q-6)*F1I[BN&DANXD#3D9QIE(\86Q<3A.L.B2 MD8H**B%UBXA)09UJL6NK/?8DV=Y5(T_"*X#)CO23FJ4-V5.>C(`(Z;IO"R]& M:R&+B'@FT5;%2"]Z$MMQM>BK%;KELGPX$=B2*GQ%$VVA%04_EY<,,W3OH)V@ M4"@4"@4"@4"@4"@4"@H_,&#J%VZ09-H7*^EKO$.W/*BJ#%VE-L+`?/82"B(T M\&92.WQRWQ[A;&KFLE^W`=T1Q]BX%`MT>))E/(^:OLMNQ'\ MP$I]14^C7'`0]G-*\PX\V5)A6IX7C=N"H^W)894@FWF/+S!PY`'UHS9JH9PQ M[W.F.-!X1M(:L..-L!YNZ.MMK%.YC(N3;_%48,UF2.!RCQ$WG(Q(/>]52V+O#]A:1YFQ&X8VN M*_;)@1HD9R2LF.K"*S8I$)"=:!XN*+4YQAQ$4%V"JIVP\KMI/FVZ:';RNK$5 M&'B8AE=\SH2_(XZ`KCJR,3;62!J@D9)OQ1$++03#5JUPLIR/:;:2)BR!)PT)#0%#%,3#:]`H%`H%`H%!5?XI_L/]+H' M*?\`=9HW]1VW\S;H+50*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*! M0*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*!0*! M0*"J_P`4_P!A_I=`Y3_NLT;^H[;^9MT%JH%`H%`H%!2M2\X^7]@4VG[D,R6& M^+!3R@\4WHI"J-BO:(TKVIHO;M#UIHO;M#7%X]I]Y2(;-8Q$?DO3'5)5[K32 M)AX1:LUX,^96:\*?,JM,]H?F1(55:=B1,=R,1T5$[G&)VO:.%3ZO6.'3ZI'2 M7./F)%3ZL_\LI:%S M)B+B"$@QSEO4FWRYS8PV%@-,NO6Z3'DA):TQ+B]=6)\9%('H3;:FX[!P:OQP69*L\=L!5R.@GG)P!ZR=;#"@M?* MS7=]UDCL^0<`+O:>BBI!9+(;B?)?FNH'BFT/'_7JU7@SYE9KPI\RJ,[VB^8DE5X*PX2; MDX#"DOCB=VU[1PJ>._>U%AS/F;"-$3O6R)-JLJN]. MS77_`,FOX>'+TUIKS'=>VN8>L05,UPXN'0;+"8_ZK8U,\*C*_+*3A\V;\TJ> M5Q8TD$V8!G9)>VI8NCCW!KRMP(\2ZCT3>)? M"0I5:_$O7ZNXVQ*VQI464P+\5X'V#V@ZT2&"]PA546JTP]'K01^H;25XL9.K+'#@7FY!Y-+(1LLJ M%/=?;;SNO.F*.$A&HM8X$.8D":Z MR^[&=X*,''B-DRZ1$_(:?(AQ1#10459S84$>/-BZ7F1%BS'6H!P9UL.2L0WF M7$=6[R8T&=H;F]J/55XMUN9>M3?'?,I)(VZ1%& M;API6#0C)+*9E*?;$CWT1H6VJ35O1^[OIBF+`<-E%3LN.Y5^$1*K%.)> M?HL4XMY^BA73VFM4O$26RU0X;:[N.KD@T3M$*L#C^#5BO!CS+WKPH\RKTCGY MS/=5>'#=>#3Q,O*-TIR M!S=VH-QMRX?*=C&BJOXMS+A_KUX6X-O$NHW0MUGU?IZ[J@0Y8\=?_KNXMNX] M*()X9L.R.*55OJM7O#TBT3V3%>;HH-9ZVT?=#UDT_:H:/6W5T9+1J8T%,&`C MGQTD8X8HKL='F,=G7X782@KEGUSS7=&"*VVX9!F15?CG:GHKA17&XR&VA.1D M8;0'2=$QS]4<51XLB9P^+QK/FRW8&;C;F[L[,D097E$(K(8E&N@1FS:8`>"1 MN-<=#07%'(J+AQ"7:@>X:@U;9[XXQ:+?VK3:_9ZZM-K]G..M>;.L-6$XS M*E+$MAXHENC*H-*/8<7OG/PEP[")6EJXU:_66CKXU:_65,JPL%`H+5R^_O.3 M_8_\:4\LO^S[5;$;M\UQ&5!DU1_-P5PP0LB8FJ*O0/2M)O#(P]`LUU<,P;B. MF0$@$@BI=9<%1-G=2HG97Y3ZRQ"11)17>BX+7;D+7]PT>QY1$D+F-5X<`ES- M.%O7,&.Q/G$."]NJ^[16_P"JSQM=KVQ'9LWEWSBT[K`1B'_ZZ]HG6@NDBHY@ MF*JP>S/W-A=K#;69NX]J?HN;=%J?HOCKB-MFXJ*J`*DJ"F*K@F.Q*\'@HVG^ M;,"\Z8C:C;M4MJWR[C'MK!9XQ_\`ESD@-NEE=V972'B!WPX[$).M03>IM7?4 M+T5'+7+EQ'G8[,FF(5J5SNT]&M!71 MR%)&.ZRQ+MY&K(!(BR'S8!Y'"<1MH1X7$+B$.`$/2N"!?K?**7`C2B!&B?:! MTFT,7$%3%"RYP50+#'OA7!>B@]Z!0*!0*!0*!006K];:=TG;O+KS)X2%BC$< M$S//$GR6PV8]M5P1.E4KNFN;SB'=-G15K MG<6+="=EOKU&TV"F\B78(IVU6O>93KUS>T5A0K1KK55FNSMTMEP)-NL](6]/%FW6>D-!:@U/J#4,Q9EYG M.S7L54>(74#'H;!,`!.T*)6C356O:&A376O:$77H[*!0;-T=_ER)^,_*E2KY MSE_RV7^1I!EB8+!R2$%!3%.1,QG#RFB(O%K M.W24:ZQ!@F#A(B9BRHI8(BEL3-LV[4P7IKVUW]HM[^2N);(IJG#43D MF._,BH0`B]KOE^#MUU/5I_U_&S^^?\)_0O/O5-A)N+>2*]6M,$7BE_W38_'>.`N MT5^WT8I6;>DUG$LZ])K.)2]IOH)F@4"@JO\4_V'^ET#E/\`NLT;^H[;^9MT%JH%`H-8\X.;K&E( MY6BTD+NHGPQQ7`@B@2;'#1=BFJ=X/PKLP0K/'X_O.9^U9T:/>67_9]JMK0;G#9AQF#(D5!F-NDB=[Y2V@"J=G!4ZW:KRM29F9_3_P`,J)9[ M&J(@OB+P*Y$8;:8:1!P)N;VQ5JFYW.5TE2^AT:8UUQ#&:==:LQET9RC MYOGJ..NF+_))B]FV3<&Y#E$GDRKLW94>'>BX8%W=^9R>-Z]8[,WDUCMO-A;P)X^"0*J(9JKPHI[L&Q3+WV8+;9K5$M%H@VF&A)$M M\=J+'0US%PV`1L,R]*Y1H,R@4"@4"@4"@IW,SF1;M%6?C$@R+K)Q&!"QPS+T MN.8;4;'I[.[MI[:=,WG#UTZIO.'*&H=17C4-U>NEVD%)EO+WQ=Z`HN*``[A` M<=B)6OKUQ6,0UJ4BL8A&UV[*!0*":T=_F.)^,_)%12_L/XI;8@767!0D84>L M0N)F3'*8(0B2=M$,NU46I%N["B4!1H%!NWDUSI M]Z>KWN?R>-_M50Y'&_VJW9JZP/ M7^Q2;6U*2+Y0#C;F=H7VG`<:-H@=;+#,/7S;%1<43N5GJ"K0^2.D&W8"RV_* MF;;$2'&1!1AXTX/`XDB0THNN$+:D#:"HB`+EP7!%0/E>2UG$)C3-PD\"Z>5- M74'S.23T69*&23*&^9D*CE($+;BADJIF7-0;$H%`H%`H%`H/PS``(S)!`44B M(EP1$3:JJJT'-7-_G/*OKS]AT^ZK-C!5;D2@54.7AL)$5-S/:^5T[-E:7'XV M/W6[M'C\;'6W=J.KRZ4"@4"@V;H[_+D3\9^5*E7SG+_ELM,B^SWY`2#44=;- MQT2$(1@043$\$13)$WX M(B8_`E3%8KV>_'TSMOCPU.9D9D9DI&2J1$NU555Q55[M2^BK6(C$/RB4SI35 MEZTM=V[I:7U:>#8ZVN*MNMXXJVX/RA7[&],%KSV:HO&)>>S7%XQ+K306O+1K M*RC<("\-]O`)L(EQ-EQ4W+\X5^273W<43'VZII.)9.S7-)Q+!F\J[%.N\BZR MY4QZ69HY#,G`58I)*:F_1*H+F3CQFR$7;,M/+ZTVU(+34F4[ M!MSGE$6WNDUP!DJKA*_E!L"S*3YEE0LB+A@*91P"2TWIYBPV]R"Q)?E-NRI, MPG)/#4TPX0-)@KSIENV8X;L$0)6@4"@JO\4_V'^ET#E/\`NLT;^H[; M^9MT%JH%!5^9&MH^C]+2+H64YA_06]@OEOFBYFK7-[8>FK7[V MPX\GSYEPFOSIKI/RY)DZ^\>TB,EQ55K;K6(C$-FM8B,0\*E)0*!0*"U-QXU5^OE'462@^V7G670>9,FWFB0VG`51(2% M<1(53:BHNU%J)C*)C+K?E%K]-8Z8%V02?6\!18N()@F8L.H\B)N1Q$7\)"1- MU8V_5Z6QX9&_5Z6QX7BO%XE`H%`H%`H%`H,"_P![@6*S3+O/)0B0FU==5.^7 M#8@CCAB1%@*=NIK69G$)K69G$.-=7:IN>J+])O%Q+%U\L&FD7$6FD[QH.T*? M&NW>M;>K7%*XALZM<4C$(:O1Z%`H%`H)K1W^8XGXS\D5%+^P_BELRNF`K6M+ M[Y%$\A8+"5)'KJF\&EV*O=+=)`:;%2,UW M(B)BJU*O$9Z-6WV[NW6X'(+$6DZK#:_)!-WPKO6H?1<71^.N//E'462@4%DT M!K6?H_4;%UC8FQ_1SHR+@CS"JF8?ODWBO0M>._5%ZX\O+=JB]<.QK?/AW&!' MGPW4>B2FQ>8='<0&F85^):QIC#'F,,BH04"@4"@JO\4_V'^ET#E/^ZS1OZCM MOYFW06J@4'+WM":J.[:U6U-'C#LH<$437GFF6C>=)`:;12,UW(B;UJ M61$9G$-:ZDU"[=I.`8A":7Z%OL_=EVU^Q4-_B<6-<9G[D-1<*!0*"^\D]4G8 M->P1,U&%=%2#*'H^E5$:+;LZKN7;V,:KKQ,NTTLTJ:Z3SO81278*=H4V)VJW*4BL1$-JE(K$0P:[=E`H M%`H%!LW1W^7(GXS\J5*OG.7_`"V06N;[G/ZJCEU15"E$G2N\0^#>OP=NDKG] M?Q_]Y_PI]&N4"@4"@Z.]FS51S;#-T[(/%RUFCT3'>K#ZJI"GWCB*OX25E\S7 MBV?EFBIM14[E1 M,9C")C+N6S3TN-H@W!$1$F1VI"(F*)]*"'T]VL&8PPYC#+J$%`H%`H%`H%!R M!SBNAW'F3?'5)5!AY(K8]`I'`6E1.Z0JOPUL<6N-<-;C5Q2%,JPL%`H%`H%! M-:._S'$_&?DBHI?V'\4O35M]^LIW!9+&''54;PW&6XC_`)$[7=IW<\'C^E?: M>\H&B^4"@4"@4'8/)ZYG<>6MAD&N8FV%C8KOPBN$PGV&ZQ-]<7F&-NKB\KC7 MD\B@4"@4"@4&NN?MT*#RVFM@N4Y[S$5%3L*?$)/A%I4JQQ:YV0]^-7-X77-,NJZRF64"@4"@JO\`%/\`8?Z70.4_[K-&_J.V M_F;=!:J#%NW]U3/[!W_<6@X7KZ!O%`H%`H%`H/1J3(:!P&C4`>'(ZB;R'%%P MQ[&S;48>=]<6F)GP\ZEZ%`H%`H%`H.T>7)9^7NERQQS6F"N/9QC!6%L^Z?U8 MFS[I_58:X<%`H%`H%`H%!Q1KDLVN=2+CC_[:>F/6<+#^OD_E5K'Y7\D_\`/#(Y/\DMCU7>!0*!0*!0*#4/M.&HZ&MB8X9K MLTF'9_[62N'V*M\/[_\`"UP_O_PYKK5:A0*!0*!0*#[-]YQMIMP\P,HHM#N0 M14E)?LE41#SIKBLS,>7Q4O0H%`H%`H+ER=_>98?[D<5Q7ZEMV*_P#Y&ZP;=Y8=NZS5""@4"@4"@4"@XAU<>;6V MJ47:H7NYCC_^QU?M+6SQOLAK\?[(1=>[W*!0*!0*!0*!0*!0*!0*#J3V<7.) MRLA'O0I4Q4[GE!X?8K%Y'WRQ]_WRV=7B\2@4"@4"@4&FO:F/)HFR+T+>V15. MSFART_EJSQ/OA8XOWNJ786H_+5'Y*HNX09$"<_ M"DH@R8QDT\(D)HA@N!)F%5%<%V;%KN)S&7<3F,L>I24"@4"@4&#=7T%M&OG= M8E[`CM^W7%Y9NJ(SF*<:YRW4QW_3/$\/QBY]JM;C3^R&KQI_;"-JT MLE`H%!+0M*WR;"&9%C\1IQ5X0H8(X8B8M$0MJN91$W!%5P^TN'$[(B<.)O$3 MAD.:(U&#W#1EIP5:;?&0$F.3!`ZX309'DX4< ML%ZY]4>ZO3\";:YM/1S:76'LZ1#C:M@ M>TWS(OD)`X;?E9RX>SJ\"4O&!!^Y%'.'\"UJ\:V:1]&IQ[9I'T1;#X/-H8]Q M4Z47L+5J)RLQ.7I4I*!0772O,4K#!BM$QY:]',&V\X`WPHB2AE.M`Z.+A*ZX M/3@@8KOQV>&S3[2\+Z?:7[#Y@-VX;=$AH\[;+7')MIIT6Q-U\WGW.(JHIJUE M&68ID)<<,"V$J4G3G,SWDG5G,SWE`ZIO$.ZW4I41A([&"H(HV#6**9&F(-]5 M,J&@)M55M>;9>5M>9RSCUO;X5R;.T> M5%:VF4!J#)%I!0V4<\G3>ZN`D\9F6;$U(DP1%KG\4S'7NY_%,QU[H;6%]AWJ M[E+AQTC,=;*&0&RP)PC1"0-^030,Q*JEABN_!.]=)K&)=ZZS6,2@Z]'H4"@4 M"@*J(BJJX(FU56@AY#KLN0B-`1JJY&&Q15(E5=F"=DEKRM;S+SM;S+O'1EA3 M3^DK/9-F>WPV6'2'<3H`B.'^$>)5BS.9RQIG,Y3-0@H%`H%`H%!4.;FG7-0\ MN+[;&6U=DE&5^*VB8D3T8D?;$<.DB;R_#7=+>MHEU2V+1+B6!*%H]J_1.;57 MH1>@JV8ELQ*7KT=E`H,ZRW)^V76-.8>5AQDL>*+8NJ@JBB2<,U$31154457! M:YM7,8 MG3DZLN=\(?\`M[9$2.VJ[N-*)%11[8MM$B_?)6?S+=H4.7;M#J*J*D4"@4"@ MJO\`%/\`8?Z70.4_[K-&_J.V_F;=!:J!0:+]I_E\[U9XVSUMB>TK/&V>ML3VES/'D&P>8-J+WP]"UI]FDEF M)#3X9FUQPWHN]%[==Q.743EZ5*2@4"@4"@4"@4'P\\VR"FXN`I\:KV$J)G") MG"(DR#D.9BV`/]&'8[:]NN)ZN70/LMZ!=XDK6TYO!O`X=G1?E;<)#Z?%PQ7[ M_M5G'1=5%0H%`H%`H%`H%!K3G]H%S5FB#>@LJ[>;,2RX M0`F)N!A@^RG9S@F9$3>0BE>NG9Z6R]=.SUMEQVR\39HZVNW#X%1>BM:)\M6/ ME+QY3;XXCL).^!=Z5Z1.7<2]JE)0*!0*!0*!0*#\(A$5(E1!3:JKL1$H(N9- MXZ<,/Z+I5?E?S5YS.7$SELOV=]`EJ36@7:4VJVFP$$HR7O3EHN,=O;\U1XBX M;LJ(O?53Y>S$>ORJSR@4"@4"@4"@4'%G.K0#FCM;2666LEFN2E M+M1(G40"7%QE/[$RRX?-45Z:T^-L]JX\PTN-L]JX\PIT*$J6VPF'?.+WH)]M>U43.$3**7BOO)@ M*N/.*@B(HJD1*N`B*)M7L(E>S?ACTUC[+^ULLC9?VME=ZX<%`H%`H*K_%/]A_I=`Y3_`+K- M&_J.V_F;=!:J!0?+S+3S1LO`+C3@J#C9HA"0DF"B2+L5%2@XWYS\I9FAKPLJ M("N:8GNJEO?Q4E9-44O)G57I'![1X^[VC$]VN1(@-#` ME$T^4GVJLK.&>Q=!P07QRK\\451^+:J5U%OE/M\LT#`QS`2$*[E1<4^Q7<2Z MR^J)*!0*!0?A$(HI$J(B;U78E!B/W)H<4:3B%\[Y/\] MRBXUW$NHE]424"@4"@4&._.8:Q1%SG\T=N'=7HKF;.9LC9$EU]>NN`IM0$W) M_IKF>J$CI32UYU3?HUCL[7%FR55G(?>F MG8[:(J=TO-9S#NEYK.8<57VQ7:PW:3:;O&*+<(I97F2^-"%4V$))M$DV*E:U M+Q:,PU:7BT9AC1Y;S&P5S-_U:[O@[%=QT=]DBQ/CNX)CD-=F0]BX]KH7X*ZB MT)BS(KIT4"@4"@4'RXXVV.8R04[*U$RB98#]S5>JPF'W9)]I/]-ON0 M56AR=^?VQV4.1OS^V.SI2J:H4"@4"@4%5_BG^P_TN@ MNEA!VZ:=Q4R$$4Y,4=^#HIM-L4_ZB;OE8;UOZ>5GI9?T\G/2S4J*BHBHN*+M M14JXN`XB68%4"Z2%5%5[N%,(PR`GS`WFA_?BF/\`LY:G,IS+V&ZG\II.ZA?R M85/M*?:7U]:IA_1;?OOYJ>Q[/E;J?R64^$OYJ>TGM+R.XRRV(H@G9$=OV55/ ML5&91F6.9&:XF2FOW2X_%V*A&'Y4I;*Y7\CM2:T<:G2D.U:<7`EGN#](^/8B M@7?8_P!8O53[K=53=R8CI7NJ[>3$=*]W6NG--V73=H8M%FBC$@1T7(T.*JJJ MN)&9+B1$2[5)5Q6L^9SUEGS.>LI*H04"@4"@4"@4"@4"@\Y,:/*CNQI+0/QW MA5MYEP4,#`DP(2$L45%3>BT',7-WV=Y]HCF3FVA54Y%I#,Y(CXKBJLIM M)UK[GOQ^Z3O;NGD^++NGD^+-'_;38O=2KT3E=BKV&ZG\IE$[:%_-4^TGM+[2[-8;6G,>G#+_`,U/=/L_ M%NH_):7\)43[6:GL>SR.Z2%[P`#NXE_RT]I1F6.X^^[_`$CA$GS=R?$F"5RA M\(B(F";JE*SZ#Y&W M?%/U>.W?%/U=>\N>6FG]"6=(5N#C37D%;AD&F.&.&.4!Q7("+@G;555 MFO9-)S#TU[)I.8CU?;;\AK8VZ0I\U>L MGQ%CA\%$89`722B=<`->UB'_`#U/M*6I]D^S]^MFNAH\ M>WEP^PJT]CV?!74ODM)W5+^3"GM)[2\7)\L]F=`3[A,/LKF^Q49E'5CKBI9B M52)?E*N*_&M0C#]`#<OR\-HKG[N3GI7LH;N3GI7LZ/$ M1$4$401%,!%-B(B545'[0*!0*!0*"J_Q3_8?Z70.4_[K-&_J.V_F;=!G2M8V MF-K"%I5Q22XSHKDIH\/HTR+U6U+Y[@@Z8I\ULJ#"TOKV)?I;\;R1R&L=@I+A MNF"B@A+D0R3$57<40B[BT$3ZY+''MT"]72'(MVG;LS(D6NZ.9#1QN,RF,PI=K>("8?=!''&A!DT?$,<5`F&_%4[*4$C;=::2ND\+?;;Q#F3G&4DC%8>!QS@K\M1%55$[M!3->>S_H? M51.S([2V6[N*I%,ABB-F:]+T?8!X[U4NO=:O9H;5?L\\R+" MINQH@WN$*['[>JF[EZ,T)[2L5O$]I>-=.B@4'W'8?DR!C1FS?DN?T;#0J;A? M>@.)+7-K1'>7-K1'>6PM+<@>9E_,#.VK:(989I-R56%1.GZ#`G\>Z")VZKWY M58[=7A?E5CMU;UT'[.>BM.&W,NF-_N@8*AR@1(P$FW%N-B28]MPBPZ,*I[-] MK?HI[-]K-KHB(F";$2O%XE`H%`H%`H%`H%!3CYC15UC=M,-1T63`@%+B/FZ@ MA(?9%#D1TP0B'A`^PJE@N.8MG46@QK5S/!W3UYOMSAC%AV>V1;LXC+BND;:\G3S]M#5-J\G"\1@DP5M[AS"%PI,:*;#HJVTN(%. M:7..PMJ(F."*'K;N=&DR@/NWAP[=.C//-'#X,AS/PY$A@%CEP@X^*1#55;1< MN"XX84%CT[K73^HI$EFSNO2$B('&?6-(:8Q<`71$7G6P;,N&X)9155P5%H*S MS`Y'Z)UD3DQUE;;>3Q5;G#1!(R[+[:]1WMAL0DKTU[;5[/37MM7LT!JW MV=>8MA,W(4<;]`'%4D0=CV"?/C&O$S+V&U/NU=IRZSWZ+E.76>_1K27%E0Y) M19C#D64'?QWP)MP>Z!HA)\56:WB>TK-;Q/:7E73HH%!^$0BBD2H*)O5=B5$R MC*TZ9Y8Z]U,0K:++(=8+_P"VZ/`CX=E'7L@%AV!55[5>-^12OEXWY%(\MW:( M]EBV15"7K&;]8.I@JVV$IMQT7L&\N1UQ/O4#X:J;.5:>W14V5MMEN MMD)F!;HS4.$P.5F,P`MM@/8$11$2JJLR:!0*!0*!0*!0?+KK3+1O.FC;38J; MADN`B(IBJJJ]")04:T\T@NUF@W"';2;=DW?ZGE0I3BM.QR+,33A(C9X\1I6W M,NS!#WJJ;0]F>8SK]CTI)8MP'>-6F+<.WK(R--Y6#DOF;ZMJ65IIHMS>)%@F M"8XH$1,YW0H17&WRK6Z.H;44A)D-M778R#&RL!F[+T;<$: M1<22U3U(A3IRM24S$B="(X)=LZMZ^7,=^JUKY4QWZM*:DY?ZUTT1?7EFE0VQ MWR5#B1_#M*;7P9L:MTWTMY6Z[Z6\J^BHJ8HN*+N5*]7L5(4"@R(%ON%QD^2V MZ*].E+AA'C-F\YMW=1M"+[%<6O6.\N+7K'>6TM(>S7KZ]&#MW1NP0%P52D8/ M2%1?FL-EL_&&*IV*K7Y<1]JM?EQ'9T#H+D]HG165^W15DW3+E.ZRU1R1MWH& MQ`:1>P`ICTXU2OLM;NIWV6MW7:N'!0*!0*!0*!057^*?[#_2Z!RG_=9HW]1V MW\S;H,*Z\MVYT\KJYD MN3>(,5I%1\BAFV2B2FV0@Y;6ERJ&!(I(N],`LFD=$_X=GS9(S$D!,9895D8[ M<<0X!O.8BC.4$12DGL0=B8;UQ50L]`H,>=;K?/85B=%:EL%O:?`7`7\$D5*" MLS.47+"62DYIBW`2KBJL,`PJKV^"@5U%[1Y=1>T>4<7(7E(2JJZ?#%=JX/RD M3XD=KK\U_F77Y;_,L^+R>Y7QBS!IBWN+O^G9%]-V&Y[.E1.RT^91.RT^96:W MVFU6UKA6Z$Q":7>W':!H=G:!$2N'#*H%`H%`H%`H%`H%`H%!2)F@-&-3+8#\ MTHMY23+DPY?$CMS9+LI'%D"JJVBO#E>/J88(F&SJI@&7;]):0LUKN$1Z4CUL MG1V+5-;F/-\-6H['DH,J2(&U6EP+%<5H,"X\L]).,,Q[O0U*::C+D',2NQFB(C0S/*B$JI08;_+GE^W-&0MZ>C7*TXN-R1F,@]%)R M0Z^IJJCU7L4%PTYIR!9&I20GWGVYSR27"?<1U5-&@914/#,OT M;0;25<<,=ZJM!+T"@Q+E:+5=&/)[G"8G,8X\&2T#P8_>FA)05.=R2Y4S24G= M-Q6LV\8W$BC\`L$VB?!7<;;1YEW&RT>91+OLX_P`NOSW^65&]G[E%'/.W8$)=FQR5,=39VG'B2HG=?Y1.Z_RLMFT%HFR& M#EIL4"$^'>R&H[:/>%RYU^.O.;3/=Q,S/=/5""@4"@4"@4"@4"@4$?J"RLWN MS2K2^^['CS`5I\V%!#5LN_#Z07!P,>J75W+059SECI*%>5EPICEF6=+C26;9 M$\D9C%)@MD@$TR3)=904E/!>MT[DP#/B:(L!V*TVJ+->,M-O(MMN3;C*RF'F MP)M451#A+]$Z39"3>"BNU,=M!#R>5VB9.$Q+I(;E3CDMR+B$AA3F.3'F'7$/ M.V;:DAPFD!&Q'!!RX84'K%Y2Z>C3;F<6[7)E^Z\9R[,M2&A1Y)3[[Z$X`M)@ M@O/NJ&&&*=4LPIEH+G:K>%MMD6WMN&\W$:!EMQW+G46Q01S9!`<<$Z$H,J@4 M%=N_+C0-W(CN.GK?(>-<2D+';%Y5_M107/LU,6F.R8M,=E=D>SYRA?+,=ARK MM_HY_ MRF(')?E9!-#:TU#<5-J))$I*?$^KB5Q.RT]YES.RT^5L@6ZWV^.D>!%9B1Q[ MUEAL6@3N""(E<.&10*!0*!0*!0*!0*"J_P`4_P!A_I=`Y3_NLT;^H[;^9MT% M2Y_,3#@V1^&Q*FR(TDG&[`#$N7"M ML>:MSBM1Y!*DJ7!(K<:((*I+B+@@28Y7,$V'A05NP6/FK$N6:.VLVZ-19"WB M\*X;#CSD]R,HQL7V^`X[!!MU&C$G!%$1%RYE%0V9RJ;N[7+RQ,7>*]#N#,4& MWF))*;V(;$)Q2ZV8DVKFV]F@M=`H%`H%`H%`H%`H%`H%`H%`H%`H%!JOF-IJ M\R^9.E[Q:;2[,>CN1@EONHVY`*.V\XZ>=%(38>C8\5MQ.^4D'`U3!`Q9&F;N M!N2$L#TB"U=[R\EO%&A4PGPS98>%M20%0B(FUQVCGQ79FH/J=:;Q=](6C3ZV MV8YJ6P+`BN71YF,<5^1`\CD.D3QFIHPX>U2;RFJ@2;TRD'XYIZ3!>O\`/A:: MFW6'<7VWF+9<6XKQ-W!UV0,F0(N."KD<6W$-`)S!55$##%5$-BZ,@!;M)6>V MML/QFH$-B(TQ+4%D"W';1H.*K2D&=1!%+*N&-!,4"@4"@4"@4"@4"@4"@4"@ M4"@4"@4&L.9FG+C,UIIJZVJ`]*G,2(S+O$;!R$L;.Z;CF=5$X[\7^E;/'`E5 M$RFJ(B!':/LTK2K4QN[195PLT^%#T];8\:&K$B6%NBRG#E2&">-P7'VRX6;J M$JBBD(I@J!7W]'7:7;[O(@Z7E0SN\"\-0X1--LMPKO<`A#&5EL2Z@`$9,TG` M>N)KLS84%^T)8M:0-=W^?J%EASZQMMN%RY1WW#;O?_``-IWZF^J/J?ZLA?5OE&;C>3 M>3AP>+EV9^'AFPZ:">]X[S'XR@>\=YC\90/>.\Q^,H'O'>8_&4#WCO,?C*![ MQWF/QE`]X[S'XR@>\=YC\90/>.\Q^,H'O'>8_&4#WCO,?C*![QWF/QE`]X[S M'XR@>\=YC\90/>.\Q^,H'O'>8_&4#WCO,?C*![QWF/QE`]X[S'XR@>\=YC\9 M0/>.\Q^,H'O'>8_&4#WCO,?C*![QWF/QE`]X[S'XR@>\=YC\90/>.\Q^,H'O M'>8_&4#WCO,?C*![QWF/QE`]X[S'XR@>\=YC\90/>.\Q^,H'O'>8_&4#WCO, M?C*![QWF/QE`]X[S'XR@>\=YC\90/>.\Q^,H'O'>8_&4#WCO,?C*![QWF/QE M`]X[S'XR@>\=YC\90/>.\Q^,H'O'>8_&4#WCO,?C*![QWF/QE`]X[S'XR@>\ M=YC\90/>.\Q^,H'O'>8_&4#WCO,?C*![QWF/QE`]X[S'XR@>\=YC\90/>.\Q M^,H'O'>8_&4#WCO,?C*![QWF/QE`]X[S'XR@>\=YC\90/>.\Q^,H'O'>8_&4 M#WCO,?C*![QWF/QE`]X[S'XR@>\=YC\90/>.\Q^,H'O'>8_&4$./KN_Q>YF^ :JO\`$/U>'"PS>3^1<8\^/RN)Q GRAPHIC 12 med_blue.gif GRAPHIC begin 644 med_blue.gif M1TE&.#EAWP!_`,00`$5XIL+3XH.EQ!=6C_#T^&2/M='>Z39MGJ.\TR9BE^'I M\56#K72:O++'VI.QRP=+B/___P`````````````````````````````````` M`````````````````````````"'Y!`$``!``+`````#?`'\```7_("2.9&F> M:*JN;.N*S?',B4"\>*[O?.__P%UC1IP!@LBD>PM:!!#)YQBR+1@T.!4!#T0)[:JDH= MFP)F3'_-(ATH("#`0GN]D#[(Q0/@IIUD\Y(X^0#`%`)]%&@B0DL$W!ER'U33 M03&CWL>"NWS=5>K-EBZ)S_7@]?7Q6%X!&GB#>$)!`P:%?$5I5\2H#IK)(GH& MBO0GA*6=2_1T\\7+CZ6N9[M<]P`O%'P0!,@84,`?WS=P'?=X*%MX0U#W2BS* M:-90-02#^\(=`&2I9NLMO>&%0)'2@B_$!U0C0/!-X@=!H!A$WY*-;1)L0*55 M+SO-8Q]*0&SU0/]6_*6SE%C#(&:"@@?LA,R""/Y@('(-YK,(>2@LQ^!H,BV% M6(8_W`)BA_FPP6$)D3UPW@CUS46`@2<6P>`.2RW&HC!FY4:"77VM5TX_VA2' MH@_8:68``%_\J(J"ZYE@@#;<:$=#*??MN`,4%L$V@Y!2VN$-E%ZRX>I,`?2BU86T:!8S)$).`C!`8T<&A!`'3E'7N,AEL&JBAL M@<`K+SQ'!`0ZRI(4"GN*NDTMQ-"E[QA(0A("?_7CC7NR><)D,"7]0GEUTR*[Q)`2<' MX(#'X1'W8M54"$R#)%5"H/8:>A"\8'(LGR!F%P-\+&P>7,/=1*WPB(%QNQ\# M,/A<4`Z&T`,=]WT"D0B(ID=?;"ASFM$2&]Y$_WUX/;GY(8IJ<0L#BRS03(4( M%^(.`AY#V54`E(`I>AU!FJ"``%!"7J\#A8NPCGR;R.5+[,FP@)W,NX_A8A+$ MN:)804+BMD*/T=.A(O4Z&\!%.Z4DD)ON*GS?O:0SG,S#O#+B^@Q3Z`(]PKCK MB^L?$EK/@!<"D?A*,U2@H-#E+V[^"\)AYF("`D#!9@-,@7X..`>SO$T(79C1 M"*@V@@B>P#P4G`-QZI:#^RCF!!P40<3(M8ESA;`*2+E@#A1D"*+D2R)+,P%P M7BA""?G@,/;CW@ADX+#[L8$T/#0#=J;E`ZUI\!,SF!&52E`?,B7Q"LVPF0[" MD0%O\>4"1C*6A&2M`'@5I,-H,#F"^VRR!!3Y":]`&4I1$J&/I=1DP`X)@?K`P2U1:^49:+B` M1J[,#B``KIW$FA\-1KQFQ;B/<O6K M8`UK6:1&UK*N)VIE+>MCQ)=6LC(U4O#+82SS\)BX@G-F=G7-4`>FE[PF88&` M\]WFVDD&OY)@KS4\F/(PRH&UO%2T(%T`X`H@I`ZNRF#=SPZVOIBEB;S`^8\J(M0TO@W[TU0*2@-2T"-AN%$4"7KO`B+CBI M25QW<7*UIE"PB`?68%PI[!>`6G&!(^2&T.CA192-L8@W*.)E''=SR-G(BN5S M/XH60[8+=L-HW6`#LY54I(,%987'J5OC59E(.Q:!C"'PX?^Z>,4T\$-CP?R+ M)+=AR=8:LZ;`3#^^N0'%O?"'8;&=L-$"3?,S>EUN9P>="VEA(78V0AYLMN!;@WBWG9;$D$;JZRC@PZ?*Y'&O!\O$%-BU M-XS&]+E-D.@V9,76F;SV7('<@(GHX58H[K84AECEO";9CB-8+0/,/`,2KQJX MKH!S%R*R66LK.=[;*,EKL[+9WT5WV-82M[46O*(4Z.$7K29,H[(]:!,T'.)G M1CG@"(7KS?+SXHCL-V9%W9=B1;?8(=$WR3==@I-C^^$_;X,&1)#`U7[%>*1.\MC.MUGD[DX[9)$NLR_N!0,@=PV:F0]$-')+[ MJ*BX=;KKK(%ZD$ZC'WETL=<=XV$G][G6+8)BVR3DCEW!(""P6LU,;G,EH?,> M%M-B=NMAQJ='O-Z+&_-3-T!J1OX%SLV'A@WCN0T"4OS>M[$PV4Q$4R.7.EN" MK0>PD:?U)7@ZF,50^3SP.F2A'MQVM3#QU_=5\VAZF/T2/M4C]_E=$` M^LUEI/H0D#YQ9<)A1C1>!*O]CZAC#V;,OS[]"`5]6C=HR8$$?W_#9C*A>K*RG!^=` M95EV&X.E..W6?QJX@2/8+BSW=>C29T9A``JG2=L`(Z=F`A^G33CG3S-R8:=6 M$M0R6-;4;!FX?J4A?D7@"Q'Q@<8U@YF&!@\V6+73.!\#6A?%A5'2 EX-10.31 13 medtronic072487s1_ex10-31.htm SUMMARY OF COMPENSATION ARRANGEMENTS Exhibit 10.31 to Medtronic, Inc. Form 10-K for fiscal year ended April 27, 2007

Exhibit 10.31

Summary of Compensation Arrangements for
Named Executive Officers and Directors

Compensation Arrangements for Named Executive Officers

Following is a description of the compensation arrangements that have been approved by the Compensation Committee of the Board of Directors of Medtronic, Inc. (the “Compensation Committee”) for the Company’s Chief Executive Officer, Chief Financial Officer and the other three most highly compensated executive officers in fiscal year 2007 (the “Named Executive Officers”).

Annual Base Salary:

The Compensation Committee approved the following base salaries, effective April 28, 2007, for four of the Named Executive Officers:

Gary L. Ellis       $ 600,000  
Senior Vice President and Chief Financial Officer          
William A. Hawkins       $ 806,000  
President & Chief Operating Officer          
Michael F. DeMane       $ 557,000  
Senior Vice President          
Stephen H. Mahle       $ 620,000  
Executive Vice President & President, Cardiac Rhythm Disease Management          

Because the base salary approved by the Compensation Committee for Medtronic’s Chairman and Chief Executive Officer, Arthur D. Collins, Jr., effective April 29, 2006 in the amount of $1,275,000 was determined for the period through the 2007 Annual Meeting rather than through fiscal year 2007, no new base salary was approved for fiscal year 2008.

Performance Bonus:

The Compensation Committee has approved the following bonus payments for performance in fiscal year 2007:

Arthur D. Collins, Jr.       $ 1,020,000  
Gary L. Ellis       $ 295,313  
William A. Hawkins       $ 490,963  
Michael F. DeMane       $ 529,470  
Stephen H. Mahle       $ 219,793  

A description of the performance goals for fiscal year 2007, which were previously approved by the Compensation Committee, is included in a Current Report on Form 8-K filed with the Securities and Exchange Commission on June 22, 2006 and is incorporated herein by reference.



 

Table of Contents

Stock Option and Restricted Stock/Restricted Stock Units:

On October 18, 2006, the Compensation Committee approved the following stock options and performance based restricted stock/restricted stock unit grants under the Company’s 2003 Long-Term Incentive Plan. The stock options were granted on October 30, 2006 at an exercise price of $48.70, which was the fair market value of the Company’s Common Stock on the date of grant and vest annually in 25% increments. The restricted stock/restricted stock unit grants will cliff vest in October 2009 (or, in the event of death, disability or retirement, they vest on a pro-rata basis) provided a minimum performance threshold is achieved.

Arthur D. Collins, Jr.   51,335 Restricted Stock   184,805 stock options
Gary L. Ellis   11,294 Restricted Stock   41,068 stock options
William A. Hawkins   18,481 Restricted Stock   67,762 stock options
Michael F. DeMane   12,321 Restricted Stock Units   45,175 stock options
Stephen H. Mahle   15,401 Restricted Stock   55,442 stock options

In addition to the above-mentioned grants, in fiscal year 2007 the Compensation Committee approved additional grants of restricted stock units to Messrs. Hawkins and DeMane with a grant date of May 15, 2006 and to Mr. Ellis with a grant date of July 31, 2006 as outlined below:

Gary L. Ellis         19,795 Restricted Stock Units   
William A. Hawkins         40,775 Restricted Stock Units   
Michael F. DeMane         40,775 Restricted Stock Units   

The restricted stock units granted to Mr. Ellis will cliff vest on the fourth anniversary of the date of grant and those granted to Messrs. Hawkins and DeMane will cliff vest on the third anniversary of the date of grant. All restricted stock units will vest on a pro-rata basis in the event of death, disability or retirement.

Long Term Incentive Plan Awards:

The Compensation Committee approved the following long-term incentive plan awards established for the three-year cycle ending in fiscal 2007. The amounts listed below include the value of both cash and stock. Half of the award is paid in Company common stock, with the other half paid in cash. The value of an award is determined at the end of the performance period based on Medtronic’s financial performance and the average fair market value per share for the last 20 trading days of the performance cycle.

Arthur D. Collins, Jr.       $ 1,407,129  
Gary L. Ellis       $ 211,330  
William A. Hawkins       $ 656,688  
Michael F. DeMane       $ 326,503  
Stephen H. Mahle       $ 412,794  

Change in Compensation Arrangements for Non-Employee Directors

Non-employee director compensation consists of an annual retainer, an annual cash stipend for committee chairs and special committee members, an annual stock option grant and an annual grant of deferred stock units. In addition, all new non-employee directors receive an initial stock option grant and a pro-rated annual stock option grant based on the number of days remaining in the plan year. Medtronic’s non-employee director compensation plan is currently based on a September 1 through August 31 plan year. The Board of Directors has approved a change to its director compensation program so the plan period will correspond to Medtronic’s fiscal year, with a shortened plan year for the September 1, 2007 to April 25, 2008 period, along with an increase in retainers and stipends as described below.

The annual retainer for all non-employee directors for the shortened 2007-2008 plan year (September 1, 2007 through April 25, 2008) is $53,333, with an $80,000 retainer established for future periods based on Medtronic’s fiscal year. The Chairs of the Corporate Governance, Compensation and Technology and Quality Committees will receive a cash stipend of $6,667 for the shortened 2007-2008 plan



 

Table of Contents

year, with a $10,000 cash stipend for future periods. Similarly, the chair of the Audit Committee will receive a cash stipend of $10,000 for the shortened 2007-2008 plan year, with a $15,000 cash stipend for future periods. In addition, non-chair members of the Audit Committee will receive a cash stipend of $3,333 for the shortened 2007-2008 plan year, with a $5,000 cash stipend for future periods. Members of a Special Committee will continue to receive an additional annual fee of $10,000 for each Special Committee upon which they serve, paid at the end of each fiscal quarter ($2,500 per quarter), so long as the committee is convened. The annual retainer and annual cash stipend are reduced by 25% if a non-employee director does not attend at least 75% of the total meetings of the Board and Board committees on which such director served during the relevant plan year.

Each non-employee director also receives on the first day of each plan year an annual stock option grant for a number of shares of Medtronic common stock equal to the amount of the annual retainer (which is $53,333 for the shortened 2007-2008 plan year and $80,000 for future plan years) divided by the fair market value of a share of Medtronic common stock on the date of grant (which will also be the exercise price of the option).

On the last day of each plan year, each non-employee director is granted a number of deferred stock units (each representing the right to receive one share of Medtronic common stock) equal to the amount of the annual retainer earned divided by the average closing price of a share of Medtronic common stock for the last 20 trading days during the plan year. On the date he or she first becomes a director, each new non-employee director receives a one-time initial stock option grant for a number of shares of Medtronic common stock equal to two times amount of the annual retainer ($160,000 for all plan years since September 1, 2007) divided by the fair market value of a share of Medtronic common stock on the date of grant (which will also be the exercise price of such option) and a pro-rated annual stock option grant for a number of shares of Medtronic common stock equal to the amount of the annual retainer (pro-rated based on the number of days remaining in the plan year divided by 365 divided by the fair market value of a share of Medtronic common stock on the date of grant (which will also be the exercise price of such option).















 

 EX-12.1 14 medtronic072487s1_ex12-1.htm COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES Exhibit 12.1 to Medtronic, Inc. Form 10-K for fiscal year ended April 27, 2007

Exhibit 12.1

MEDTRONIC, INC. COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

The ratio of earnings to fixed charges for the fiscal years ended April 27, 2007, April 28, 2006, April 29, 2005, April 30, 2004, April 25, 2003, and April 26, 2002 was computed based on Medtronic’s historical consolidated financial information included in Medtronic’s most recent Annual Report incorporated by reference on Form 10-K.

    Year ended
April 27,
2007		     Year ended
April 28,
2006		     Year ended
April 29,
2005		     Year ended
April 30,
2004		     Year ended
April 25,
2003		     Year ended
April 26,
2002		  
           
Earnings:                                        
Net earnings       $ 2,802     $ 2,547     $ 1,804     $ 1,959     $ 1,600     $ 984  
Income taxes         713       614       740       838       742       540  
Minority interest (loss)/income         —       —       (1 )     3       (1 )     3  
Capitalized interest(1)         (3 )     (3 )     (1 )     —       (1 )     —  
           
      $ 3,512     $ 3,158     $ 2,542     $ 2,800     $ 2,340     $ 1,527  
           
Fixed Charges:                                        
Interest expense(2)       $ 229     $ 116     $ 55     $ 56     $ 47     $ 45  
Capitalized interest(1)         3       3       1       —       1       1  
Amortization of debt issuance costs(3)         14       4       1       —       —       32  
Rent interest factor(4)         34       26       24       21       18       16  
           
      $ 280     $ 149     $ 81     $ 77     $ 66     $ 94  
           
Earnings before income taxes and fixed charges       $ 3,792     $ 3,307     $ 2,623     $ 2,877     $ 2,406     $ 1,621  
           
Ratio of earnings to fixed charges         14       22       32       37       36       17  
           

(1) Capitalized interest relates to construction projects in process.
(2) Interest expense consists of interest on indebtedness.
(3) Represents the amortization of debt issuance costs incurred in connection with the Company’s registered debt securities. See Note 7 to the consolidated financial statements for further information regarding the debt securities.
(4) Approximately one-third of rental expense is deemed representative of the interest factor.












 

 EX-13 15 medtronic072487s1_ex13.htm INFORMATION REFERENCED UNDER PART II Exhibit 13 to Medtronic, Inc. Form 10-K for fiscal year ended April 27, 2007

Exhibit 13

Table of Contents

 

 






1


Table of Contents

Management’s Discussion and Analysis of Financial Condition and Results of Operations


Understanding Our Financial Information

 

The following discussion and analysis provides information management believes to be relevant to understanding the financial condition and results of operations of Medtronic, Inc. (Medtronic or the Company). You should read this discussion and analysis along with our consolidated financial statements and related Notes thereto as of April 27, 2007 and April 28, 2006 and for each of the three fiscal years ended April 27, 2007, April 28, 2006, and April 29, 2005.

 

Organization of Financial Information Management’s discussion and analysis, presented on pages 2 to 34 of this report, provides material historical and prospective disclosures designed to enable investors and other users to assess our financial condition and results of operations.

 

The consolidated financial statements are presented on pages 38 to 79 of this report, and include the consolidated statements of earnings, consolidated balance sheets, consolidated statements of shareholders’ equity, consolidated statements of cash flows and the related Notes, which are an integral part of the consolidated financial statements.

 

Financial Trends    Throughout this financial information, you will read about transactions or events that materially contribute to or reduce earnings and materially affect financial trends. We refer to these transactions and events as either special (such as asset impairments), restructuring, certain litigation, purchased in-process research and development (IPR&D) charges, or certain tax adjustments. These charges, or benefits, result from facts and circumstances that vary in frequency and/or impact to operations. While understanding these charges is important in understanding and evaluating financial trends, other transactions or events may also have a material impact on financial trends. A complete understanding of the special, restructuring, certain litigation, and IPR&D charges, and certain tax adjustments is necessary in order to estimate the likelihood that financial trends will continue. When discussing the special, restructuring, certain litigation, and IPR&D charges, we provide both pre- and post-tax amounts. The post-tax amounts reflect the tax benefit, if any, at the applicable statutory rates rather than our effective tax rates as these items are treated on a discrete basis.

 

Our fiscal year-end is the last Friday in April, and therefore, the total weeks in a fiscal year can fluctuate between fifty-two and fifty-three weeks. Fiscal years 2007, 2006, and 2005 consisted of fifty-two weeks.

 

Executive Level Overview

 

We are the global leader in medical technology, alleviating pain, restoring health, and extending life for millions of people around the world. During the fourth quarter of fiscal year 2007, we revised our operating segment reporting to separate Physio-Control from our Cardiac Rhythm Disease Management (CRDM) operating segment. As a result, we now function in eight operating segments, consisting of CRDM, Spinal and Navigation, Vascular, Neurological, Diabetes, Cardiac Surgery, ENT, and Physio-Control. The applicable information for fiscal years 2006 and 2005 has been reclassified to conform to the current presentation. Through these eight operating segments, we develop, manufacture, and market our medical devices in more than 120 countries worldwide while expanding patient access to our products. Our primary products include those for cardiac rhythm disorders, cardiovascular disease, neurological disorders, spinal conditions and musculoskeletal trauma, urological and digestive disorders, diabetes, and ear, nose, and throat conditions.

 

Net earnings for the fiscal year ended April 27, 2007 were $2.802 billion, a $255 million, or 10 percent, increase from net earnings of $2.547 billion for the fiscal year ended April 28, 2006. Diluted earnings per share were $2.41 and $2.09 for the fiscal years ended April 27, 2007 and April 28, 2006, respectively. Fiscal year 2007 net earnings include after-tax special, restructuring and certain litigation charges, and certain tax adjustments that reduced net earnings by $5 million and had no impact on diluted earnings per share. Fiscal year 2006 net earnings include after-tax special and IPR&D charges and certain tax adjustments that reduced net earnings by $136 million, or $0.11 per diluted share. See further discussion of these charges/benefits in the “Special, Restructuring, Certain Litigation, and IPR&D Charges, and Certain Tax Adjustments” section of this management’s discussion and analysis. The fiscal year 2007 increase in net earnings was driven primarily by net sales growth, a reduction in IPR&D charges, and increased interest income. Fiscal year 2007 net earnings were also impacted by our adoption of Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 123 (revised 2004), “Share-Based Payment” (SFAS No. 123(R)), related to stock-based compensation. We adopted SFAS No. 123(R) using the modified-prospective method and in accordance with this method, we did not adjust our historical financial statements to reflect the impact of stock-based compensation. Total stock-based compensation expense recognized during fiscal year 2007 was $127 million after-tax.

 

2


Table of Contents

Net sales in fiscal year 2007 were $12.299 billion, an increase of 9 percent from the prior fiscal year. Foreign currency translation had a favorable impact on net sales of $166 million when compared to fiscal year 2006. The increase in the current year was led by solid worldwide sales growth in the Vascular, Diabetes, Spinal and Navigation, and Neurological businesses and exceptional growth outside the United States (U.S.), where seven of our eight operating segments had growth rates ranging from 16 percent to 32 percent. As illustrated in the table below, four of our eight operating segments had double digit growth rates worldwide.

 

 

 

Net Sales

 

 

 

 

 

Fiscal Year

 

 

 

 

 

2007

 

2006

 

FY07 vs. FY06
% Change

(dollars in millions)

 

 

 

 

 

 

 

 

 

CRDM

 

$

4,876

 

$

4,794

 

2

%

Spinal and Navigation

 

 

2,544

 

 

2,244

 

13

 

Vascular

 

 

1,205

 

 

940

 

28

 

Neurological

 

 

1,183

 

 

1,016

 

16

 

Diabetes

 

 

863

 

 

722

 

20

 

Cardiac Surgery

 

 

704

 

 

663

 

6

 

ENT

 

 

539

 

 

501

 

8

 

Physio-Control

 

 

385

 

 

412

 

(7

)

Total Net Sales

 

$

12,299

 

$

11,292

 

9

%

 

CRDM net sales increased 2 percent over the prior fiscal year to $4.876 billion driven by a 6 percent increase in net sales of pacing systems and a 1 percent decline in net sales of implantable cardioverter defibrillators (ICDs). The overall U.S. market for ICDs declined from the prior period, but strong sales outside the U.S. helped to partially offset these declines. Net sales for pacing systems increased 6 percent over the prior year, primarily due to the Adapta family of pacemakers, including the Adapta, Versa, and Sensia models, that were launched in the U.S. in fiscal year 2007. Spinal and Navigation net sales increased 13 percent over the prior fiscal year to $2.544 billion. The increase reflects strong growth across our portfolio of spinal surgery products including the INFUSE Bone Graft, the CD HORIZON LEGACY Spinal System family of products for thoracolumbar stabilization, our Minimal Access Spinal Technologies (MAST) family of products, and increased acceptance of the CAPSTONE and CRESCENT Vertebral Body Spacers. Vascular net sales increased 28 percent over the prior fiscal year to $1.205 billion. Vascular growth was driven by Coronary Vascular net sales which grew 31 percent, and by Endovascular/Peripheral sales which grew 20 percent over fiscal year 2006. The growth in Coronary Vascular was primarily a result of increased commercial availability outside the U.S. of the Endeavor drug-eluting stent (DES) and strong performance of bare metal stents, due to reduced penetration of drug-eluting stents in the U.S. and the launch of the MicroDriver in the U.S. and Japan. Neurological net sales increased 16 percent over fiscal year 2006 to $1.183 billion reflecting solid growth in several product lines including the RestoreADVANCED and PrimeADVANCED neurostimulation systems for pain management, continued strength of Activa Therapy for the treatment of movement disorders associated with advanced Parkinson’s disease and essential tremor, and InterStim Therapy for the treatment of overactive bladder and urinary incontinence. Diabetes net sales increased 20 percent over the prior fiscal year to $863 million. The sales increase reflects solid global growth of the Paradigm REAL-Time sensor-augmented insulin pump system and consumables used with our Paradigm family of pumps. On January 15, 2007, we voluntarily suspended U.S. shipments of Physio-Control products manufactured at our facility in Redmond, Washington in order to address quality system issues, which led to Physio-Control’s decline in sales. See our discussion of “Net Sales” by operating segment within this management’s discussion and analysis for more information on the results of each operating segment.

 

3


Table of Contents

While we continue to make substantial investments in the expansion of our existing product lines and the search for new innovative products, we have also focused heavily on carefully planned clinical trials, which lead to market expansion and enable further penetration of our life changing devices. Fiscal year 2007 research and development spending of $1.239 billion increased 11 percent in comparison to the prior fiscal year. Our research and development efforts are focused on maintaining leadership in each of the markets we serve to ensure that patients receive the most advanced and effective treatments possible. Research and development expenditures have supported improvements in existing products and enhanced methods to deliver and/or monitor those products.

 

Increased investment in our future is fortified by our continued strong cash flow generated from operations of $2.979 billion during fiscal year 2007 and our $6.082 billion in cash, short-term debt securities, and long-term debt securities as of April 27, 2007. We may use our cash flow from operations to invest in research and development, fund certain strategic acquisitions, and to participate in expanded clinical trials, which support regulatory approval of our products.

 

We remain committed to our Mission of developing lifesaving and life enhancing therapies to alleviate pain, restore health, and extend life. The diversity and depth of our current product offerings enable us to provide medical therapies to patients worldwide. We will work to improve patient access through well planned studies, which show the cost-effectiveness of our therapies and our alliance with patients, clinicians, regulators, and reimbursement agencies. Our investments in research and development, strategic acquisitions, expanded clinical trials, and infrastructure provide the foundation for our growth. We are confident in our ability to drive long-term shareholder value using the principles of our Mission, our strong product pipelines, and continued commitment to research and development.

 

Other Matters

 

On December 4, 2006, we announced our intention to pursue a spin-off of Physio-Control into an independent, publicly traded company. Physio-Control is our wholly-owned subsidiary that offers external defibrillators, emergency response systems, data management solutions, and support services used by hospitals and emergency response personnel. On January 15, 2007, we announced our voluntary suspension of U.S. shipments of Physio-Control products manufactured at our facility in Redmond, Washington in order to address quality system issues. We are currently in discussions with the U.S. Food and Drug Administration (FDA) regarding the corrective actions that need to be taken before shipping in the U.S. can resume. We have a dedicated team from across the Company working on the corrective actions necessary to address the quality system issues. The suspension of U.S. shipments in fiscal year 2007 did not have a material impact on our overall results. We expect the suspension of U.S. shipments to continue into the second half of fiscal year 2008. Following the resolution of these matters, we intend to continue to pursue the spin-off of Physio-Control.

 

Critical Accounting Estimates

 

We have adopted various accounting policies to prepare the consolidated financial statements in accordance with accounting principles generally accepted in the U.S. (U.S. GAAP). Our most significant accounting policies are disclosed in Note 1 to the consolidated financial statements.

 

The preparation of the consolidated financial statements, in conformity with U.S. GAAP, requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying Notes. Our estimates and assumptions, including those related to bad debts, inventories, intangible assets, property, plant and equipment, asset impairment, legal proceedings, IPR&D, warranty obligations, product liability, self-insurance, pension and post-retirement obligations, sales returns and discounts, stock-based compensation, and income tax reserves are updated as appropriate, which in most cases is at least quarterly. We base our estimates on historical experience, actuarial valuations, or various assumptions that are believed to be reasonable under the circumstances.

 

Estimates are considered to be critical if they meet both of the following criteria: (1) the estimate requires assumptions about material matters that are uncertain at the time the accounting estimates are made and (2) material changes in the estimates are reasonably likely to occur from period to period. Our critical accounting estimates include the following:

 

4


Table of Contents

Legal Proceedings   We are involved in a number of legal actions involving both product liability and intellectual property disputes. The outcomes of these legal actions are not within our complete control and may not be known for prolonged periods of time. In some actions, the claimants seek damages, as well as other relief, including injunctions barring the sale of products that are the subject of the lawsuit, which, if granted, could require significant expenditures or result in lost revenues. In accordance with SFAS No. 5, “Accounting for Contingencies,” we record a liability in our consolidated financial statements for these actions when a loss is known or considered probable and the amount can be reasonably estimated. If the reasonable estimate of a known or probable loss is a range, and no amount within the range is a better estimate, the minimum amount of the range is accrued. If a loss is possible, but not known or probable, and can be reasonably estimated, the estimated loss or range of loss is disclosed in Note 15 to the consolidated financial statements. In most cases, significant judgment is required to estimate the amount and timing of a loss to be recorded. Our significant legal proceedings are discussed in Note 15 to the consolidated financial statements. While it is not possible to predict the outcome for the actions discussed and we believe that we have meritorious defenses against the matters detailed in Note 15 to the consolidated financial statements, it is possible that the outcomes of these legal matters could have a material adverse impact on our consolidated earnings, financial condition, or cash flows.

 

Tax Strategies   Our effective tax rate is based on income, statutory tax rates, and tax planning opportunities available to us in the various jurisdictions in which we operate. Significant judgment is required in determining our effective tax rate and evaluating our tax positions. We establish reserves when, despite our belief that our tax return positions are fully supportable, we believe that certain positions are likely to be challenged and we may or may not prevail. We adjust these reserves in light of changing facts and circumstances, such as the progress of a tax audit. Our effective tax rate includes the impact of reserve provisions and changes to reserves that we consider appropriate. In the event there is a special, restructuring, certain litigation, or IPR&D charge, and/or certain tax adjustments recognized in our operating results, the tax attributable to that item is separately calculated and recorded.

 

Tax regulations require certain items be included in the tax return at different times than when those items are required to be recorded in the consolidated financial statements. As a result, our effective tax rate reflected in our consolidated financial statements is different than that reported in our tax return. Some of these differences are permanent, such as expenses that are not deductible on our tax return, and some are timing differences, such as depreciation expense. Timing differences create deferred tax assets and liabilities. Deferred tax assets generally represent items that can be used as a tax deduction or credit in our tax return in future years for which we have already recorded the tax benefit in our consolidated statements of earnings. We establish valuation allowances for our deferred tax assets when the amount of expected future taxable income is not likely to support the use of the deduction or credit. Deferred tax liabilities generally represent tax expense recognized in our consolidated financial statements for which payment has been deferred or expense has already been taken as a deduction on our tax return, but has not yet been recognized as an expense in our consolidated statements of earnings.

 

The company’s overall tax rate including the tax impact on special, restructuring, certain litigation, and IPR&D charges, and certain tax adjustments has resulted in an effective tax rate of 20.3 percent for fiscal year 2007. Excluding the impact of these items, our operational and tax strategies have resulted in a non-GAAP nominal tax rate of 24.5 percent versus the U.S. statutory rate of 35.0 percent. The non-GAAP nominal tax rate is defined as the income tax (benefit) provision as a percentage of taxable income, excluding special, restructuring, certain litigation, and IPR&D charges, and certain tax adjustments. An increase in our nominal tax rate of 1 percent would result in an additional income tax provision for the fiscal year ended April 27, 2007 of approximately $37 million. See discussion of the tax rate in the “Income Taxes” section of this management’s discussion and analysis.

 

Valuation of IPR&D, Goodwill and Other Intangible Assets    When we acquire a company, the purchase price is allocated, as applicable, between IPR&D, other identifiable intangible assets, net tangible assets, and goodwill as required by U.S. GAAP. IPR&D is defined as the value assigned to those projects for which the related products have not received regulatory approval and have no alternative future use. Determining the portion of the purchase price allocated to IPR&D and other intangible assets requires us to make significant estimates. The amount of the purchase price allocated to IPR&D and other intangible assets is determined by estimating the future cash flows of each project or technology and discounting the net cash flows back to their present values. The discount rate used is determined at the time of acquisition in accordance with accepted valuation methods. For IPR&D, these methodologies include consideration of the risk of the project not achieving commercial feasibility.

 

5


Table of Contents

Goodwill represents the excess of the aggregate purchase price over the fair value of net assets, including IPR&D, of the acquired businesses. Goodwill is tested for impairment annually, or more frequently if changes in circumstance or the occurrence of events suggest that the carrying amount may be impaired. The test for impairment requires us to make several estimates about fair value, most of which are based on projected future cash flows. Our estimates associated with the goodwill impairment tests are considered critical due to the amount of goodwill recorded on our consolidated balance sheets and the judgment required in determining fair value amounts, including projected future cash flows. Goodwill was $4.327 billion and $4.346 billion as of April 27, 2007 and April 28, 2006, respectively.

 

Other intangible assets consist primarily of purchased technology, patents, and trademarks and are amortized using the straight-line or accelerated basis, as appropriate, over their estimated useful lives, ranging from 3 to 20 years. As of April 27, 2007, all of our intangible assets are definite lived and amortized on a straight-line basis. We review these intangible assets for impairment annually or as changes in circumstance or the occurrence of events suggest the remaining value may not be recoverable. Other intangible assets, net of accumulated amortization, were $1.433 billion and $1.592 billion as of April 27, 2007 and April 28, 2006, respectively.

 

Stock-Based Compensation   Effective April 29, 2006, we adopted the provisions of, and account for stock-based compensation in accordance with SFAS No. 123(R). Under the fair value recognition provisions of SFAS No. 123(R), we measure stock-based compensation cost at the grant date based on the fair value of the award and recognize the compensation expense over the requisite service period, which is generally the vesting period. We elected the modified-prospective method of adopting SFAS No. 123(R), under which prior periods are not retroactively revised. Estimated stock-based compensation expense for the non-vested portion of awards granted prior to the effective date is being recognized over the remaining service period using the compensation cost estimated for the SFAS No. 123, “Accounting for Stock-Based Compensation” (SFAS No. 123), pro forma disclosures. Total stock-based compensation expense recognized during the fiscal year ended April 27, 2007 was $127 million after-tax ($185 million pre-tax). See Note 11 to the consolidated financial statements for further information regarding our stock-based compensation programs.

 

We use the Black-Scholes option pricing model (Black-Scholes model) to determine the fair value of stock options as of the grant date. The fair value of stock options under the Black-Scholes model requires management to make assumptions regarding projected employee stock option exercise behaviors, risk-free interest rate, volatility of our stock price and expected dividends.

 

We analyze historical employee stock option exercise and termination data to estimate the expected life assumption. We believe that historical data currently represents the best estimate of the expected life of a new employee option. We also stratify our employee population based upon distinctive exercise behavior patterns. The risk-free interest rate we use is based on the yield, on the grant date, of a zero-coupon U.S. Treasury bond whose maturity period equals or approximates the option’s expected term. Beginning in the third quarter of fiscal year 2007 we began to calculate the expected volatility using a blended volatility, combining the historical volatility and an implied volatility. Implied volatility is based on market traded options of the Company’s common stock. Prior to the third quarter of fiscal year 2007, we calculated the expected volatility based solely on historical volatility. The dividend yield rate used is calculated by dividing our annual dividend, based on the most recent quarterly dividend rate, by the closing stock price on the grant date. The amount of stock-based compensation expense we recognize during a period is based on the portion of the awards that are ultimately expected to vest. We estimate pre-vesting option forfeitures at the time of grant by analyzing historical data and revise those estimates in subsequent periods if actual forfeitures differ from those estimates.

 

If factors change and we employ different assumptions for estimating stock-based compensation expense in future periods or if we decide to use a different valuation model, the expense associated with new awards in future periods may differ significantly from what we have recorded in the current period related to historical awards and could materially affect our net earnings and diluted earnings per share of a future period.

 

There is a risk that our estimates of the fair values of our stock-based awards on the grant dates as determined using the Black-Scholes model may bear little resemblance to the actual values realized upon the exercise or forfeiture of those stock-based awards in the future. Some employee stock options may expire without value, or only realize minimal intrinsic value, as compared to the fair values originally estimated on the grant date and recognized in our financial statements. Alternatively, some employee stock options may realize significantly more value than the fair values originally estimated on the grant date and recognized in our financial statements.

 

6


Table of Contents

Net Sales

The table below illustrates net sales by product line and operating segment for fiscal years 2007, 2006, and 2005:

 

 

 

Net Sales

 

 

 

Net Sales

 

 

 

 

 

Fiscal year

 

 

 

Fiscal year

 

 

 

(dollars in millions)

 

2007

 

2006

 

%
Change

 

2006

 

2005

 

%
Change

 

Low Power Pacing

 

$

1,895

 

$

1,795

 

6

%

$

1,795

 

$

1,756

 

2

%

High Power Defibrillation

 

 

2,917

 

 

2,932

 

(1

)

 

2,932

 

 

2,379

 

23

 

Other

 

 

64

 

 

67

 

(4

)

 

67

 

 

68

 

(1

)

CARDIAC RHYTHM DISEASE MANAGEMENT

 

 

4,876

 

 

4,794

 

2

 

 

4,794

 

 

4,203

 

14

 

Spinal Instrumentation

 

 

1,721

 

 

1,566

 

10

 

 

1,566

 

 

1,372

 

14

 

Spinal Biologics

 

 

696

 

 

570

 

22

 

 

570

 

 

413

 

38

 

Navigation

 

 

127

 

 

108

 

18

 

 

108

 

 

99

 

9

 

SPINAL & NAVIGATION

 

 

2,544

 

 

2,244

 

13

 

 

2,244

 

 

1,884

 

19

 

Coronary Stents

 

 

560

 

 

366

 

53

 

 

366

 

 

317

 

15

 

Other Coronary

 

 

358

 

 

334

 

7

 

 

334

 

 

308

 

8

 

Endovascular/Peripheral

 

 

287

 

 

240

 

20

 

 

240

 

 

226

 

6

 

VASCULAR

 

 

1,205

 

 

940

 

28

 

 

940

 

 

851

 

10

 

Neurological Implantables

 

 

962

 

 

833

 

15

 

 

833

 

 

739

 

13

 

Gastroenterology & Urology

 

 

221

 

 

183

 

21

 

 

183

 

 

188

 

(3

)

NEUROLOGICAL

 

 

1,183

 

 

1,016

 

16

 

 

1,016

 

 

927

 

10

 

DIABETES

 

 

863

 

 

722

 

20

 

 

722

 

 

649

 

11

 

Valves

 

 

250

 

 

229

 

9

 

 

229

 

 

230

 

—

 

Perfusion

 

 

334

 

 

321

 

4

 

 

321

 

 

327

 

(2

)

Cardiac Surgery Technologies

 

 

120

 

 

113

 

6

 

 

113

 

 

112

 

1

 

CARDIAC SURGERY

 

 

704

 

 

663

 

6

 

 

663

 

 

669

 

(1

)

Core ENT

 

 

278

 

 

266

 

5

 

 

266

 

 

241

 

10

 

Neurologic Technologies

 

 

261

 

 

235

 

11

 

 

235

 

 

218

 

8

 

EAR, NOSE, & THROAT (ENT)

 

 

539

 

 

501

 

8

 

 

501

 

 

459

 

9

 

PHYSIO-CONTROL

 

 

385

 

 

412

 

(7

)

 

412

 

 

413

 

—

 

TOTAL

 

$

12,299

 

$

11,292

 

9

%

$

11,292

 

$

10,055

 

12

%

 

The primary exchange rate movements that impact our consolidated net sales growth are the U.S. dollar as compared to the Euro and the Japanese Yen. The impact of foreign currency fluctuations on net sales is not indicative of the impact on net earnings due to the offsetting foreign currency impact on operating costs and expenses and our hedging activities. See the “Market Risk” section of this management’s discussion and analysis and Note 5 to the consolidated financial statements for further details on foreign currency instruments and our related risk management strategies.

 

Forward-looking statements are subject to risk factors (see “Risk Factors” set forth in our Form 10-K).

 

Cardiac Rhythm Disease Management CRDM products consist primarily of pacemakers, implantable defibrillators, leads, ablation products, electrophysiology catheters, and information systems for the management of patients with our devices. CRDM fiscal year 2007 net sales grew by 2 percent from the prior fiscal year to $4.876 billion. Foreign currency translation had a favorable impact on net sales of approximately $70 million when compared to the prior fiscal year. CRDM net sales increased despite a challenging U.S. market for ICDs, and fiscal year 2007 highlights include the following:

 

7


Table of Contents

 

•

 

Implantable defibrillator net sales of $2.917 billion for fiscal year 2007 decreased 1 percent as compared to fiscal year 2006. This minimal decrease is the result of sales declines in the U.S., offset by strong sales growth outside the U.S. Net sales from ICDs in the U.S. were $2.082 billion, a decrease of 9 percent. The decrease in U.S. ICD net sales in fiscal year 2007 is primarily the result of a decline in the U.S. ICD market. Outside the U.S., net sales from ICDs were $835 million, an increase of 29 percent over the prior fiscal year, driven by the Virtuoso ICD and the Concerto cardiac resynchronization therapy-defibrillator (CRT-D). Both of these devices feature Conexus wireless technology which allows for remote transfer of patient data and enables communication remotely between the implanted device and programmer at the time of implant, during follow-up in a clinician’s office, or remotely using a patient home monitor.

 

 

•

 

Pacing system net sales for fiscal year 2007 increased by 6 percent over the prior fiscal year to $1.895 billion. The increase in the current fiscal year is attributable primarily to increased market share in a pacing market that experienced low single digit growth. Instrumental in the increase in sales over fiscal year 2006 was the Adapta family of pacemakers, including the Adapta, Versa, and Sensia models, which were launched in the U.S. in the second quarter of fiscal year 2007 and experienced a full year of sales outside the U.S. This new family of pacemakers incorporates an array of automatic features to help physicians improve pacing therapy and streamline the patient follow-up process, potentially minimizing the amount of time spent in a physician’s office. Adapta offers Managed Ventricular Pacing, or MVP, which is an atrial based pacing mode that significantly reduces unnecessary pacing in the right ventricle while providing the safety of a dual chamber backup if necessary. Clinical studies have suggested that reducing this unnecessary pacing in the right ventricle decreases the risk of developing heart failure and atrial fibrillation, a potentially life-threatening irregular heartbeat.

 

 

•

 

Fiscal year 2007 implantable defibrillator and pacing system sales also benefited from the continued acceptance of the Medtronic CareLink Service. The Medtronic CareLink Service enables clinicians to review data about implanted cardiac devices in real time and access stored patient and device diagnostics through a secure Internet website. The data, which is comparable to information provided during an in-clinic device follow-up, provides the patient’s medical team with a comprehensive view of how the device and patient’s heart are operating. Today, over 120,000 implant patients are being monitored through Medtronic’s CareLink Service in the U.S., up from approximately 70,000 implant patients being monitored a year ago.

 

CRDM fiscal year 2006 net sales grew by 14 percent from the prior fiscal year to $4.794 billion. Foreign currency translation had an unfavorable impact on net sales of approximately $50 million when compared to the prior fiscal year. While the increase in CRDM net sales was solid across most product lines, fiscal year 2006 highlights include the following:

 

 

•

 

Implantable defibrillator net sales for fiscal year 2006 increased 23 percent over the prior fiscal year to $2.932 billion. This increase was driven by strong demand for the Maximo and EnTrust families of ICDs, and continued market acceptance of the InSync Maximo and InSync Sentry CRT-Ds. EnTrust ICDs were released in the U.S. in June 2005, and offer anti-tachycardia pacing during charging, a feature designed to stop fast, dangerous heartbeats as it prepares to deliver a shock if needed. InSync Sentry was the world’s first implantable medical device offering automatic fluid status monitoring in the chest area encompassing the heart and lungs. Both the InSync Maximo and InSync Sentry provide sequential biventricular pacing, which optimizes the beating of the heart and bloodflow throughout the body. In addition, growth was aided by continued strong performance of our Sprint Fidelis leads, which were first released in fiscal year 2005. The strong market acceptance of these products reflects CRDM’s continued product innovation as well as an overall expansion of the tachyarrhythmia and heart failure markets due to increasing clinical data that supports the uses of these devices for certain patient populations. Net sales of implantable defibrillators for fiscal year 2006 also benefited from one key competitor being out of the ICD market for a portion of the fiscal year due to quality concerns with its product. The negative publicity associated with these quality concerns softened the ICD market growth in the latter half of fiscal year 2006. Market share gains in defibrillator sales worldwide partially offset the impact of the slower market growth.

 

 

8


Table of Contents

 

•

 

Pacing system net sales for fiscal year 2006 increased by 2 percent over the prior fiscal year to $1.795 billion. The fiscal year 2006 increase was attributable primarily to increased market share in an otherwise flat growth pacing market, as physicians continue to focus more on the ICD and CRT-D marketplace. Instrumental in the year over year increase in sales was the introduction of the EnRhythm pacemaker, which was released in the U.S. in May 2005, and the Adapta pacemaker family, introduced in certain markets outside of the U.S. in the third quarter of fiscal year 2006. The EnRhythm and Adapta pacemakers both offer MVP.

 

 

•

 

Fiscal year 2006 implantable defibrillator and pacing system sales also benefited from the continued acceptance of the Medtronic CareLink Service. As of the end of fiscal year 2006, over 70,000 implant patients were being monitored through Medtronic’s CareLink Service in the U.S. and Canada up from 35,000 implant patients being monitored in the prior fiscal year.

 

Looking ahead, we expect our CRDM operating segment should benefit from the following:

 

 

•

 

Continued acceptance and increased account penetration of the Concerto CRT-D and Virtuoso ICD. These are our first devices with Conexus wireless telemetry, enabling remote communication between the implanted device and programmer in a clinician’s office and at implant, or between the device and a patient home monitor.

 

 

•

 

Continued acceptance of the Adapta family of pacemakers, including the Adapta, Versa, and Sensia models. Fiscal year 2008 will benefit from having the Adapta family of pacemakers available in the U.S. for a full fiscal year.

 

 

•

 

Continued expansion of the Medtronic CareLink Service, available on both the pacing and ICD platforms in the U.S., Canada, and Western Europe. The Medtronic CareLink Service continues to drive physician preference for our products. As of the end of fiscal year 2007, more than 1,400 clinics were monitoring patients in the U.S and we continue to expand this network.  In June 2007, we launched the Medtronic CareLink Service throughout Europe, which should facilitate the doctor-patient interaction outside the U.S. by offering more convenience, which should increase follow-up compliance.

 

 

•

 

A return to growth in the U.S. ICD market and continued strong growth outside the U.S. We believe the worldwide market is still significantly under-penetrated, and our investments to expand the physician referral network, enhance clinical evidence, and develop technologies that promote the ease of use and care will drive increased usage of defibrillator therapies.

 

Spinal and Navigation   Spinal and Navigation products include thoracolumbar, cervical, and interbody spinal devices, bone growth substitutes, and surgical navigation tools. Spinal and Navigation net sales for fiscal year 2007 increased by 13 percent from the prior fiscal year to $2.544 billion. Foreign currency translation of $9 million had a favorable impact on net sales when compared to the prior fiscal year. Spinal net sales for fiscal year 2007 increased 13 percent from the prior fiscal year to $2.417 billion driven by solid growth across our entire portfolio of product offerings. Spinal Instrumentation net sales were $1.721 billion, a 10 percent increase over the prior fiscal year, based on continual acceptance of our CD HORIZON LEGACY Spinal System family of products, strong growth in our minimal access technology platforms, and an increase in dynamic stabilization product sales outside of the U.S., led by the DIAM System. The CD HORIZON LEGACY Spinal System is the most comprehensive system on the market today, and is designed to provide procedural solutions for degenerative, deformity, or trauma applications using color coded implants and ergonomic instrumentation. CD HORIZON SEXTANT II, a percutaneous lumbar fixation system with minimal access technologies that reduce procedural steps, was the main driver of the growth in the minimal access technology portfolio. Other revenue growth drivers in Spinal Instrumentation were CAPSTONE and CRESCENT Vertebral Body Spacers which are minimal access devices and techniques designed to replace and restore vertebral height, and the VERTEX Max Reconstruction System which is used to stabilize the complex junction between the flexible cervical and rigid thoracic spine. Biologics net sales were $696 million in fiscal year 2007, a 22 percent increase over the prior year, based on continued strong acceptance of INFUSE Bone Graft. INFUSE Bone Graft contains a recombinant human bone morphogenetic protein, or rhBMP-2, that induces the body to grow its own bone, eliminating the need for a painful second surgery to harvest bone from elsewhere in the body. In addition to the Spinal approval for INFUSE Bone Graft received in fiscal year 2003, since fiscal year 2005 we have had FDA approval to use INFUSE Bone Graft for the treatment of certain types of acute, open fractures of the tibial shaft, and late in fiscal year 2007 we received FDA approval for the use of INFUSE Bone Graft for certain oral maxillofacial and dental regenerative bone grafting procedures. In the Spinal market, the trend has been that small companies continue to increase their presence in the U.S., putting pressure on the market. Navigation net sales for fiscal year 2007 increased 18 percent from the prior fiscal year to $127 million based on strong sales of the PoleStar N20, an intra-operative Magnetic Resonance Image (iMRI)-Guidance System and O-arm Imaging System, a multi-dimensional surgical imaging platform that is optimized for use in spine and orthopedic surgery.

 

9


Table of Contents

Spinal and Navigation net sales for fiscal year 2006 increased by 19 percent from the prior fiscal year to $2.244 billion. Foreign currency translation had an unfavorable impact on net sales of $11 million when compared to the prior fiscal year. Spinal net sales for fiscal year 2006 increased 20 percent from the prior fiscal year to $2.136 billion. While this increase reflected solid growth across our portfolio of product offerings, Biologics net sales were $570 million, a 38 percent increase over the prior year, based on continued strong acceptance of INFUSE Bone Graft. Since late fiscal year 2005, we have had the right to market Wyeth’s InductOs Bone Graft, the European equivalent of the INFUSE Bone Graft, for use in spinal fusion in European markets. Other products showing steady growth include our CD HORIZON LEGACY Spinal System family of products for thoracolumbar stabilization, our MAST family of products, our cervical stabilization family of products including the VERTEX Max Reconstruction System and MYSTIQUE Resorbable Graft Containment Plating System and the CAPSTONE Vertebral Body Spacer. Released in fiscal year 2005, the CAPSTONE Vertebral Body Spacer is designed to replace and restore the height of all or part of a vertebral body (the weight bearing portion of the vertebra) that has been removed for the treatment of a tumor or fracture. Navigation net sales for fiscal year 2006 increased by 9 percent from the prior fiscal year. Navigation net sales growth was primarily the result of continued strong sales of the StealthStation TRIA and the PoleStar N20 surgical navigation equipment.

 

Looking ahead, we expect our Spinal and Navigation operating segment should benefit from the following:

 

 

•

Continued acceptance of the CD HORIZON LEGACY 5.5, the VERTEX Max Reconstruction System, and the CD HORIZON SEXTANT I System in Japan and Western Europe.

 

 

 

 

•

Continued acceptance of the INFUSE Bone Graft for spinal fusion and certain types of acute, open tibia fractures and the expansion of indications for INFUSE Bone Graft. In late fiscal year 2007, we launched INFUSE Bone Graft for use in certain oral maxillofacial and dental regenerative bone grafting procedures.

 

 

 

 

•

Continued acceptance of our dynamic stabilization products outside the U.S., including the DIAM System, MAVERICK Lumbar Artificial Disc, and PRESTIGE LP Cervical Disc Systems.

 

 

 

 

•

Future acceptance in the U.S. of the PRESTIGE Cervical Disc System, which an FDA advisory panel unanimously voted to recommend approval of in September 2006. The PRESTIGE Cervical Disc System is the first in a portfolio of artificial discs designed to serve patients suffering from severe degenerative disc disease, while maintaining motion in a patient’s cervical spine. U.S. FDA approval is anticipated in the first quarter of fiscal year 2008. 

 

 

 

 

•

Acceptance of Synergy Experience StealthStation System, a combination of Navigational Procedure Solutions and MAST techniques, which can allow less invasive procedures, smaller incisions, and less radiation.

 

Vascular   Vascular products consist of coronary, endovascular, and peripheral stents and related delivery systems, stent graft systems, distal embolic protection systems and a broad line of balloon angioplasty catheters, guide catheters, guidewires, diagnostic catheters, and accessories. Vascular net sales for fiscal year 2007 increased 28 percent from the prior fiscal year to $1.205 billion. Foreign currency translation of $32 million had a favorable impact on net sales when compared to the prior fiscal year. Coronary Vascular net sales increased 31 percent in comparison to the prior fiscal year to $918 million. The growth in Coronary Vascular net sales was primarily a result of the commercial availability of Endeavor DES outside the U.S. for a full fiscal year and further acceptance of the Driver family of bare metal stents. Endeavor DES, which generated revenue of $300 million in fiscal year 2007, is now commercially released in over 100 countries outside the U.S. and continues to benefit from favorable safety and efficacy data, along with its ease of delivery. We recognized revenue of $260 million in fiscal year 2007 from the Driver family of bare metal stents, which experienced strong growth in the U.S. as a result of reduced penetration of drug-eluting stents in the U.S. marketplace. The Driver bare metal stent is a cobalt-chromium coronary stent which has thinner struts and provides greater maneuverability in placing the stent. Net sales of Other Coronary products, including balloons, guides, and guide wires grew 7 percent over the prior year. Endovascular/Peripheral fiscal year 2007 net sales grew 20 percent when compared to the prior fiscal year. Growth in the endovascular business was driven by the fourth quarter of fiscal year 2006 successful U.S. launch of the market-leading AneuRx AAAdvantage Stent Graft System, which is used to treat abdominal aortic aneurysms (AAA), and increased sales of the Valiant Thoracic Stent Graft System outside the U.S. The Valiant Thoracic Stent Graft System is a next-generation stent graft used for the minimally invasive repair of the thoracic aorta, the body’s largest artery, for several disease states including aneurysms, penetrating ulcers, acute or chronic dissections, and contained or traumatic ruptures. The Valiant Thoracic Stent Graft System received CE Mark approval in Europe in March 2005.

 

10


Table of Contents

Vascular net sales for fiscal year 2006 increased 10 percent from the prior fiscal year to $940 million. Foreign currency translation had an unfavorable impact on net sales of $24 million when compared to the prior fiscal year. Coronary Vascular net sales increased 12 percent in comparison to the prior fiscal year. The growth in Coronary Vascular net sales was primarily a result of the second quarter of fiscal year 2006 release of our Endeavor DES in approximately 85 markets outside the U.S., and the worldwide strong performance in our Other Coronary products, including balloons and guidewires. Endeavor DES sales grew to $138 million during fiscal year 2006, while stent sales in the U.S. were only $24 million of the total worldwide stent sales of $366 million. Endovascular net sales increased 9 percent in comparison to the prior fiscal year. Endovascular results were primarily a result of solid performance of the Talent Thoracic Stent Graft System outside the U.S., which is used to treat AAA, and the Valiant Thoracic Stent Graft System outside the U.S.

 

Looking ahead, we expect our Vascular operating segment should benefit from the following:

 

 

•

 

Continued acceptance in fiscal year 2008 of the Endeavor DES in currently available markets. Updated results from the ENDEAVOR I, II, and III clinical trials were presented at EuroPCR in May 2007. The clinical results for Endeavor DES have demonstrated excellent safety, sustained efficacy, low clinical event rates, and lack of late stent thrombosis.

 

 

•

 

Future acceptance of Endeavor Sprint. In May 2007, we received European CE Mark approval and launched the Endeavor Sprint in Europe. This product includes the proven Endeavor DES but provides even better delivery and trackability through enhancements and new technology we have leveraged from our successful Sprinter angioplasty balloon. This stent provides physicians with improved lesion access in tortuous vasculature, increased confidence in a successful outcome, greater ease-of-use, and reduced procedure time.

 

 

•

 

Our anticipated entry into the U.S. drug-eluting stent market. The final module of the Endeavor DES pre-market approval (PMA) was submitted in November 2006. The FDA has indicated that it will require nine month data from the ENDEAVOR IV clinical trial and the FDA has scheduled manufacturing site audits in our facilities in the U.S. and Ireland. We expect an FDA panel meeting in September or October of 2007, and anticipate FDA approval and U.S. launch of Endeavor DES in the second half of calendar year 2007.

 

 

•

 

CE Mark approval and the international launch of Endeavor Resolute in the third quarter of fiscal year 2008. Endeavor Resolute is a next-generation drug-eluting stent with Biolinx, a proprietary biocompatible polymer that is designed to address the special needs of patients who have complex medical conditions and is engineered to match the duration of drug delivery with the longer healing duration often required by these patients.

 

 

•

 

Continued net sales growth of the AneuRx AAAdvantage Stent Graft System and Valiant Thoracic Stent Graft System in the U.S and outside the U.S., respectively. The Valiant Thoracic Stent Graft System contains the Xcelerant Delivery System, which is designed to provide physicians with a smooth, controlled, and trackable delivery platform.

 

Neurological   Neurological products consist of therapeutic and diagnostic devices, including implantable neurostimulation systems, implantable drug administration devices, and urology and gastroenterology products. Neurological net sales for fiscal year 2007 increased 16 percent from the prior fiscal year to $1.183 billion. Foreign currency translation of $16 million had a favorable impact on net sales when compared to the prior fiscal year. The increase in sales was driven by strong growth of both Neurological Implantables and Gastroenterology and Urology sales. Net sales from Neurological Implantables were $962 million, an increase of 15 percent over the prior period. The growth in Neurological Implantables was driven by key products including the RestoreADVANCED and PrimeADVANCED neurostimulation systems for pain management and Activa Therapy for the treatment of movement disorders associated with advanced Parkinson’s disease and essential tremor. Fiscal year 2007 revenue for Neurological Implantables also benefited from increased sales of our Synchromed II drug delivery pump. Net sales of Gastroenterology and Urology products increased 21 percent over fiscal year 2006 to $221 million. The growth in Gastroenterology and Urology was led by sales of our InterStim product line for the treatment of overactive bladder and urinary incontinence and our Prostiva product line for the treatment of an enlarged prostate. The InterStim II was launched in the second quarter of fiscal year 2007, and the smaller design has been widely accepted.

 

11


Table of Contents

Neurological net sales for fiscal year 2006 increased 10 percent from the prior fiscal year to $1.016 billion. Foreign currency had an unfavorable impact on net sales of $11 million when compared to the prior fiscal year. The increase in Neurological net sales reflected solid growth in several product lines including the Restore Rechargeable Neurostimulation System for pain management, which benefited from the introduction of our Single Stretch-Coil Extension that enabled physicians to convert patients with existing neurostimulators to the new rechargeable technology. The Restore System, our first fully rechargeable neurostimulation system, was launched in late fiscal year 2005. The Restore System is indicated to manage chronic, difficult-to-treat pain in the trunk and/or multiple limbs that is associated with failed back syndrome, post laminectomy pain, unsuccessful disc surgery, or degenerative disc disease. Sales growth was also driven by continued strength of Activa Therapy for the treatment of movement disorders associated with advanced Parkinson’s disease and essential tremor, as well as InterStim Therapy for the treatment of overactive bladder and urinary incontinence. The increase in Neurological net sales was partially offset by a decrease in sales of our Gastroenterology/Urology diagnostics product line as a result of supplier issues.

 

Looking ahead, we expect our Neurological operating segment should benefit from the following:

 

 

•

 

Continued acceptance of the RestoreADVANCED rechargeable neurostimulation system for pain management that provides increased power without compromising device longevity. Additionally, the anticipated launch of the RestoreULTRA, our next generation rechargeable neurostimulator with advanced programming capabilities and longer recharge intervals, is expected to help drive future sales. The RestoreULTRA is expected to launch in the second half of fiscal year 2008. Additionally, our new surgical lead, the Specify 5-6-5 with Durable Electrode Technology, received FDA approval in June 2007. The Specify 5-6-5 surgical lead offers exclusive advantages and electrode programming patterns when used with our neurostimulators.

 

 

•

 

Continued acceptance of our Activa Therapy for the treatment of Parkinson’s disease and essential tremor. We continue to educate neurologists and the patient population of the benefits that our Activa Therapy offers them. The New England Journal of Medicine recently published a study that confirmed the advantages of Activa deep brain stimulation for the treatment of dystonia, and the journal Neurology published a study that supports earlier treatment of Parkinson’s disease with Activa deep brain stimulation.

 

 

•

 

Continued acceptance of InterStim II for overactive bladder and urinary incontinence. Interstim II is a smaller, next-generation device that adds a new implantable neurostimulator, a new improved patient programmer, and upgraded software.

 

The Neurological business may experience slower growth in comparison to prior years as the diagnostics product line is being divested. This divestiture should be complete by the end of the first quarter of fiscal year 2008. The diagnostics product line generated net sales of $67 million in fiscal year 2007.

 

Diabetes   Diabetes products consist of external insulin pumps and related consumables, continuous glucose monitoring systems, and subcutaneous glucose sensors. Diabetes net sales in fiscal year 2007 increased 20 percent over the prior fiscal year to $863 million. Foreign currency translation of $13 million had a favorable impact on net sales when compared to the prior fiscal year. External pump sales for fiscal year 2007 were $389 million, representing growth of 32 percent over the prior fiscal year. This increase reflects strong worldwide market acceptance of the Paradigm REAL-Time sensor-augmented pump system that integrates continuous glucose monitoring and insulin pump functionality. Sales of consumables during fiscal year 2007 were $425 million, an increase of 10 percent.

 

Diabetes net sales in fiscal year 2006 increased 11 percent over the prior fiscal year to $722 million. Foreign currency translation had an unfavorable impact on net sales of $6 million when compared to the prior fiscal year. The sales increase reflected continued global growth of the Paradigm family of insulin pumps and related consumables. The Paradigm family of insulin pumps offers increased customization of the insulin dosage based on patient specific information and enhanced information management capabilities.

 

Looking ahead, we expect our Diabetes operating segment should benefit from the following:

 

 

•

 

Continued acceptance of the Paradigm REAL-Time sensor-augmented pump system, which integrates continuous glucose monitoring and insulin pump functionality.

 

 

•

 

Continued acceptance of the Guardian REAL-Time Continuous Glucose Monitoring System for diabetes management. The Guardian REAL-Time System is a stand alone glucose monitoring system that provides patients with real-time glucose trend graphs and predictive alarms informing them when their glucose levels become too high or too low, enabling better management of diabetes.

 

 

12


Table of Contents

 

•

 

Continued acceptance of the MiniLink REAL-Time Transmitter, our next generation sensor transmitter which received FDA approval in the third quarter of fiscal year 2007. The MiniLink REAL-Time Transmitter significantly improves patient comfort as the transmitter has no cable and is about one third the size of the previous version. The MiniLink REAL-Time Transmitter is rechargeable and can be used with the Paradigm REAL-Time System, as well as the Guardian REAL-Time System.

 

 

•

 

Continued acceptance of the pediatric versions of our Guardian REAL-Time and Paradigm REAL-Time Systems. In March 2007, we received FDA approval to market the systems specifically designed for ages 7 through 17. The Guardian REAL-Time System is clinically proven to help patients monitor and better control their diabetes.

 

Cardiac Surgery   Cardiac Surgery products consist of products for the repair and replacement of heart valves, perfusion systems, positioning and stabilization systems for beating heart surgery, surgical accessories, and surgical ablation products. Cardiac Surgery net sales for fiscal year 2007 increased 6 percent as compared to the prior fiscal year to $704 million. Foreign currency translation of $11 million had a favorable impact on net sales when compared to the prior fiscal year. The primary drivers for the increase in net sales during the year were the Valves and Perfusion businesses, which grew net sales by 9 percent and 4 percent, respectively, as compared to fiscal year 2006. The Valves business growth was led by tissue valves, which increased 10 percent as compared to the prior fiscal year. Key components of the tissue valve growth were sales of the Mosaic and Mosaic Ultra tissue valves, which incorporate several design features to facilitate implantation and improve hemodynamics, as well as sales of the Melody Transcatheter Pulmonary Valve and Ensemble Transcatheter Delivery System outside the U.S. Growth in the Perfusion business was led by sales outside the U.S., specifically the cardiopulmonary and cannulae product lines.

 

Cardiac Surgery net sales for fiscal year 2006 decreased 1 percent as compared to the prior fiscal year to $663 million. Foreign currency translation had an unfavorable impact on net sales of $7 million when compared to the prior fiscal year. Excluding the negative impact of currency, the performance of Cardiac Surgery was flat with the prior year, indicative of a market showing little to no growth. Cardiac Surgery Technologies enjoyed modest growth during fiscal year 2006, led by our Cardioblate BP2 (Bipolar) Surgical Ablation System, which offers surgeons the unique ability to perform an irrigated surgical ablation procedure.

 

Looking ahead, we expect our Cardiac Surgery operating segment should benefit from the following:

 

 

•

 

Continued acceptance of our Mosaic and Mosaic Ultra tissue valves. These two tissue valves have been shown to preserve the structure and function found in a natural aortic valve.

 

 

•

 

Further acceptance of the Melody Transcatheter Pulmonary Valve and Ensemble Transcatheter Delivery System, which received CE Mark approval for commercial sale in October 2006. A feasibility study to evaluate the use of the Medtronic Melody Transcatheter Pulmonary Valve and Ensemble Transcatheter Delivery System in the U.S. was initiated in February 2007, with the first U.S. patient being implanted. This technology provides a catheter-based approach to pulmonic valve replacement for patients with congenital heart defects, with the goal of reducing the number of open-heart surgeries required during the patient’s lifetime.

 

ENT   ENT operating segment consists of ear, nose, and throat related products (Core ENT) and neurologic technology-related products (Neurologic Technologies) including powered tissue-removal systems and other microendoscopy instruments, implantable devices, nerve monitoring systems, disposable fluid-control products, image-guided surgery systems, a Ménière’s disease therapy device, hydrocephalus shunt devices, external drainage systems, cranial fixation devices, neuroendoscopes, and dura repair products. ENT net sales for fiscal year 2007 increased by 8 percent over the prior fiscal year to $539 million. Foreign currency translation of $6 million had a favorable impact on net sales when compared to the prior fiscal year. Core ENT net sales grew 5 percent to $278 million in fiscal year 2007 led by continued physician acceptance of the Straightshot M4 Microdebrider and the NIM-Response 2.0 Nerve Integrity Monitor. Net sales within Core ENT were impacted by the loss of revenue from our tonometry product line, which was sold in the third quarter of fiscal year 2006. Neurologic Technologies net sales grew 11 percent to $261 million in fiscal year 2007. The primary drivers of growth in Neurologic Technologies were continued acceptance of high-speed powered surgical drill systems, including the EHS Stylus system and the Strata valve used in the treatment of hydrocephalus. The Strata valve is an adjustable flow control valve in which the resistance properties of the valve can be changed non-invasively by the caregiver. The valve is designed to minimize overdrainage of cerebrospinal fluid and maintain intraventricular pressure within a normal physiologic range, regardless of patient position.

 

13


Table of Contents

ENT net sales for fiscal year 2006 increased by 9 percent over the prior fiscal year to $501 million. Foreign currency translation had an unfavorable impact on net sales of $3 million when compared to the prior fiscal year. Core ENT related product net sales grew 10 percent to $266 million in fiscal year 2006. The primary drivers of the increase in Core ENT related product net sales were continued physician acceptance of the Straightshot M4 Microdebrider, the NIM-Response 2.0 Nerve Integrity Monitor, and image guided surgery systems. Neurologic Technologies net sales grew 8 percent to $235 million in fiscal year 2006. The primary drivers of growth in Neurologic Technologies were continued acceptance of the EHS Stylus powered surgical drill system and the Strata valve.

 

Looking ahead, we expect our ENT operating segment should benefit from the following:

 

 

•

 

Continued adoption of power systems for sinus procedures as well as continued adoption of nerve monitoring for ENT and thyroid procedures.

 

 

•

 

Continued development of the normal pressure hydrocephalus market, resulting in increased sales of our shunt products, including the Strata valve.

 

 

•

 

Continued acceptance of our Legend high-speed drill systems, electric bone mill, and Durepair dura substitute.

 

Physio-Control Physio-Control offers external defibrillation and emergency response systems, data management solutions, and support services used by hospitals and emergency response personnel. Physio-Control fiscal year 2007 net sales decreased 7 percent from the prior fiscal year to $385 million. Foreign currency translation of $9 million had a favorable impact on net sales when compared to the prior fiscal year. The decrease in sales was caused by our January 15, 2007 voluntary suspension of U.S. shipments of Physio-Control products manufactured at our facility in Redmond, Washington in order to address quality system issues. The U.S. suspension led to a 20 percent reduction in U.S. sales which was partially offset by 19 percent growth in sales outside the U.S. driven by continued market acceptance of the LIFEPAK CR Plus defibrillator, an automated external defibrillator designed for both the commercial and consumer market. See further discussion related to the U.S. suspension of shipments in the “Other Matters” section of this management’s discussion and analysis.

 

Physio-Control fiscal year 2006 net sales were essentially flat as compared to the prior fiscal year at $412 million. Foreign currency translation of $5 million had an unfavorable impact on net sales when compared to the prior fiscal year. Our results were flat as a result of supplier issues which negatively impacted our operations in the second and third quarters of fiscal year 2006, but growth accelerated in the fourth quarter as supplier issues were corrected. We also experienced continued acceptance of the LIFEPAK CR Plus defibrillator and the LIFEPAK 20 defibrillator, an external defibrillator for use by both first responders and professionals in a hospital or clinical setting.

 

14


Table of Contents

Looking ahead, we expect our Physio-Control operating segment should benefit from the following:

 

 

•

 

Our anticipated return to the U.S. market in fiscal year 2008. We look forward to returning to strong growth in the U.S. once we have agreed with the FDA on a correction to the quality system issues.
 

 

•

 

The continued market acceptance outside the U.S. of our LIFEPAK family of automated external defibrillators.

 

Continued net sales growth in all operating segments is contingent on our ability to gain further market share, penetrate existing markets, develop new products, improve existing products, and develop new markets.

 

Costs and Expenses

 

The following is a summary of major costs and expenses as a percent of net sales:

 

 

Fiscal Year

 

 

 

2007

 

2006

 

2005

 

Cost of products sold

 

25.8

%

24.9

%

24.3

%

Research and development expense

 

10.1

 

9.9

 

9.5

 

Selling, general and administrative expense

 

33.8

 

32.4

 

32.0

 

Special charges

 

0.8

 

0.9

 

—

 

Restructuring charges

 

0.2

 

—

 

—

 

Certain litigation charges

 

0.3

 

—

 

6.5

 

IPR&D charges

 

—

 

3.2

 

—

 

Other expense, net

 

1.7

 

1.5

 

2.9

 

Interest income, net

 

(1.3

)

(0.8

)

(0.4

)

 

Cost of Products Sold   Fiscal year 2007 cost of products sold as a percent of net sales increased 0.9 of a percentage point from fiscal year 2006 to 25.8 percent. The increase in cost of products sold as a percentage of net sales was due to 0.1 of a percentage point increase for the recognition of $15 million of incremental stock-based compensation expense in fiscal year 2007, 0.2 of a percentage point increase for unfavorable manufacturing variances, and 0.9 of a percentage point increase relating to geographic and product mix shifts. The product mix impact was the result of decreased sales of higher margin ICDs in the U.S. and increased sales of INFUSE Bone Graft and certain tissue products in our Spinal business which have margins that are below our average gross margins. These increases were offset by 0.3 of a percentage point of favorable foreign currency adjustments. We expect cost of products sold, as a percentage of revenue, to continue in the 24.0 percent to 25.0 percent range.

 

Fiscal year 2006 cost of products sold as a percent of net sales increased 0.6 of a percentage point from fiscal year 2005 to 24.9 percent. The increase in cost of products sold as a percentage of net sales was driven by two main components. Unfavorable foreign currency translation reduced gross margin by 0.2 of a percentage point and product mix reduced gross margin by 0.4 of a percentage point. The product mix impact was the result of increased sales of INFUSE Bone Graft and certain tissue products in our Spinal business which have margins that are below our average margins, and strong sales of ICDs outside the U.S. which have lower gross margins than ICDs in the U.S.

 

Research and Development   We continue to invest heavily in the future by spending aggressively on research and development efforts. Research and development spending was $1.239 billion in fiscal year 2007 representing 10.1 percent of net sales, an increase of 0.2 of a percentage point over fiscal year 2006. The 0.2 of a percentage point increase over the prior year was the result of the recognition of $31 million of incremental stock-based compensation expense in fiscal year 2007. Excluding the incremental stock-based compensation expense, research and development expense was flat as a percentage of sales as compared to fiscal year 2006, but on a gross basis increased $95 million, or 9.0 percent as compared to the prior fiscal year. We remain committed to developing technological enhancements and new indications for existing products and new, less invasive, technologies to address unmet medical needs. That commitment leads to our initiation and participation in numerous clinical trials in every fiscal year. Furthermore, we expect our development activities to help reduce patient care costs and the length of hospital stays in the future.

 

15


Table of Contents

Research and development spending was $1.113 billion in fiscal year 2006. This level of spending represented 9.9 percent of net sales, an increase of 0.4 of a percentage point over fiscal year 2005. The increase was a result of our commitment to developing technological enhancements and new indications for existing products and new, less invasive, technologies to address unmet medical needs.

 

In addition to our investment in research and development, 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 2007 selling, general and administrative expense as a percentage of net sales increased by 1.4 percentage points from fiscal year 2006 to 33.8 percent. The recognition of incremental stock-based compensation expense of $104 million drove 0.9 of a percentage point of the overall increase. The remaining increase in selling, general and administrative expense for fiscal year 2007 was due to expenses associated with our previously communicated investment in our marketing campaign for CRDM, the expansion of our sales forces across all businesses, especially in the Vascular business as we prepare for the U.S. launch of Endeavor DES, and costs associated with our global information technology system implementation. These increases were offset by our continual cost control measures across all of our businesses and attempts to leverage the general and administrative expense categories.

 

Fiscal year 2006 selling, general and administrative expense as a percentage of net sales increased by 0.4 of a percentage point from fiscal year 2005 to 32.4 percent. The increase in selling, general and administrative expense as a percentage of net sales primarily related to our continued investment in expanding our sales organization, increased spending on our global enterprise resource planning (ERP) infrastructure, and the compensation expenses associated with our record revenues and strong earnings. These increases were partially offset by continued cost control measures across all of our businesses.

 






16


Table of Contents

Special, Restructuring, Certain Litigation, and IPR&D Charges, and Certain Tax Adjustments 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 special, restructuring, certain litigation, and IPR&D charges, and certain tax adjustments. Special charges (such as asset impairment charges), restructuring charges, certain litigation charges in connection with either settlements or judgments from material litigation, IPR&D charges, and certain tax adjustments recorded during the previous three fiscal years are as follows:

 

 

 

Fiscal Year

 

 

 

2007

 

2006

 

2005

 

(dollars in millions, except per share data)

 

 

 

 

 

 

 

 

 

 

Special charges:

 

 

 

 

 

 

 

 

 

 

Asset impairment charges (net of $39 tax)

 

$

59

 

$

—

 

$

—

 

Medtronic Foundation donation (net of $34 tax)

 

 

—

 

 

66

 

 

—

 

Total special charges

 

 

59

 

 

66

 

 

—

 

Restructuring charges (net of $11 tax)

 

 

25

 

 

—

 

 

—

 

Certain litigation charges (net of $0 and $236 tax, respectively)

 

 

40

 

 

—

 

 

418

 

IPR&D charges (net of $69 tax)

 

 

—

 

 

295

 

 

—

 

Tax benefit from the reversal of tax reserves

 

 

(129

) 

 

(225

) 

 

—

 

Tax impact for the repatriation of foreign earnings

 

 

—

 

 

—

 

 

49

 

Total special, restructuring, certain litigation, and IPR&D charges, and certain tax adjustments, after-tax

 

$

(5

) 

$

136

 

$

467

 

 

 

 

 

 

 

 

 

 

 

 

Per Diluted Share Data:

 

 

 

 

 

 

 

 

 

 

Special charges

 

$

0.05

 

$

0.05

 

$

—

 

Restructuring charges

 

 

0.02

 

 

—

 

 

—

 

Certain litigation charges

 

 

0.04

 

 

—

 

 

0.34

 

IPR&D

 

 

—

 

 

0.24

 

 

—

 

Tax benefit from the reversal of tax reserves

 

 

(0.11

)

 

(0.18

)

 

—

 

Tax impact for the repatriation of foreign earnings

 

 

—

 

—

 

 

0.04

 

Total Per Diluted Share

 

$

—

 

$

0.11

 

$

0.38

 

 

Special Charges In fiscal year 2007 we concluded two intangible assets were impaired due to inadequate clinical results and the resulting delays in product development. As a result, in the fourth quarter of fiscal year 2007 we recorded a $59 million after-tax ($98 million pre-tax) special charge related to the impairments of intangible assets stemming from the July 1, 2005 acquisition of Transneuronix, Inc. (TNI) and the November 1, 2004 acquisition of Angiolink Corporation (Angiolink). TNI focused on the development of an implantable gastric stimulator to treat obesity. Angiolink focused on the development of wound closure devices for vascular procedures.

 

In fiscal year 2006, we recorded a $66 million after-tax ($100 million pre-tax) charitable donation to The Medtronic Foundation, which is a related party non-profit organization. The donation to The Medtronic Foundation was paid in the second quarter of fiscal year 2006.

 

There were no special charges in fiscal year 2005.

 

Restructuring Charges In fiscal year 2007, we recorded a $25 million ($36 million pre-tax) restructuring charge, which consisted of employee termination costs of $20 million ($28 million pre-tax) and asset write-downs of $5 million ($8 million pre-tax). These initiatives began in the fourth quarter of fiscal year 2007 and are designed to drive manufacturing efficiencies in our Vascular business, downsize our Physio-Control business due to our voluntary suspension of U.S. shipments, and rebalance resources within our CRDM business in response to current market dynamics. The employee termination costs consist of severance and the associated costs of continued medical benefits, and outplacement services. We have identified approximately 900 positions for elimination which will be achieved through early retirement packages offered to employees, voluntary separations, and involuntary separations, as necessary. Of the positions identified for elimination, 196 have been eliminated as of April 27, 2007. The asset write-downs consist of a $4 million after-tax charge for inventory write-downs, and a $1 million after-tax charge for asset write-downs. The inventory and asset write-downs were recorded within cost of products sold in the consolidated statement of earnings.

 

17


Table of Contents

The restructuring initiatives, which are scheduled to be completed by the end of fiscal year 2008, are expected to produce annualized operating savings of approximately $125 million. These savings will arise mostly from reduced compensation expense.

 

In the first quarter of fiscal year 2008 we expect to incur additional charges related to our restructuring initiatives that began in the fourth quarter of fiscal year 2007. Part of the additional expense is anticipated from increased retirement benefits in our defined benefit pension plans provided to those employees that elect early retirement. Additionally, we will recognize added expense associated with compensation provided to select employees whose employment terminates with the Company in the first quarter of fiscal year 2008 as part of the restructuring. These incremental costs were not accrued in fiscal year 2007 because they had not yet been communicated to the impacted employees.

 

There were no restructuring charges in fiscal years 2006 and 2005.

 

Certain Litigation Charges During fiscal year 2007, we recorded a certain litigation charge of $40 million related to a settlement agreement with the United States Department of Justice which requires the government to obtain dismissal of two qui tam civil suits pending against us, and is conditioned upon such dismissal being obtained. The two suits were based upon allegations about certain sales and marketing practices in the Spinal business. The settlement agreement reflects our assertion that the Company and its current employees have not engaged in any wrongdoing or illegal activity.

 

There were no certain litigation charges in fiscal year 2006.

 

In fiscal year 2005, we recorded after-tax certain litigation charges of $418 million ($654 million pre-tax). The largest of the charges, in the amount of $550 million pre-tax, occurred in the fourth quarter and related to costs for the settlement of all outstanding litigation and disputes with Gary Michelson, M.D. and Karlin Technology, Inc. (Michelson). The agreement reached with Michelson required a total cash payment of $1.350 billion for the settlement of all ongoing litigation and the purchase of a portfolio of more than 100 issued U.S. patents, over 110 pending U.S. patent applications and numerous foreign counterparts to these patents and patent applications. The $550 million was assigned to past damages between the parties and was recorded as an expense in fiscal year 2005. The remaining consideration, including $3 million of direct acquisition costs, was allocated between $628 million of acquired technology based intangible assets and $175 million of IPR&D that was expensed on the date of acquisition (May 18, 2005). Also, in the fourth quarter of fiscal year 2005, we recorded a pre-tax charge of $80 million resulting from a final arbitration award for breach of contract damages related to a March 2002 agreement between us and ETEX Corporation (ETEX). The $80 million included $64 million in damages, interest, and partial legal fees and the forgiveness of an existing $17 million note owed to us by ETEX. In the third quarter of fiscal year 2005, we recorded a pre-tax charge of $24 million related to the DePuy/AcroMed litigation. The jury found that the thoracolumbar multiaxial screw design of Medtronic Sofamor Danek, Inc. (MSD), which MSD no longer sells in the U.S., infringed patents held by DePuy/AcroMed under the doctrine of equivalents. In February 2005, the Court entered judgment against MSD in the amount of $24 million, which included prejudgment interest. Given the judgment entered by the Court and our conclusion that the incurrence of such an expense was both probable and could be reasonably estimated under SFAS No. 5 at that point and time, we recorded a $24 million charge related to this judgment. MSD has appealed the jury’s verdict and intends to continue to contest the charges vigorously. In fiscal year 2007, we paid the outstanding Depuy/AcroMed judgment and interest under protest.

 

18


Table of Contents

IPR&D Charges There were no IPR&D charges for fiscal year 2007.

 

During the first quarter of fiscal year 2006, we acquired TNI. At the date of the acquisition, $169 million of the purchase price was expensed as IPR&D related to a product being developed for the treatment of obesity by stimulation of the stomach that had not yet reached technological feasibility and had no future alternative use.

 

During the first quarter of fiscal year 2006, we acquired substantially all of the spine-related intellectual property and related contracts, rights, and tangible materials owned by Michelson. At the date of acquisition, $175 million of the purchase price was expensed as IPR&D related to spinal technology based devices that had not yet reached technological feasibility and which had no future alternative use. The patents pertain to novel spinal technology and techniques that have the potential for future patentable commercial products in the area of spinal surgery.

 

On July 27, 2005, we also entered into a royalty bearing, non-exclusive patent cross-licensing agreement with NeuroPace, Inc. On the date of the agreement, $20 million was expensed as IPR&D related to the licensed technology since technological feasibility of the project had not yet been reached and it had no future alternative use. This licensed technology is expected to enhance our ability to further develop and expand our therapies for neurological disorders.

 

There were no IPR&D charges recorded in fiscal year 2005.

 

We are responsible for the valuation of IPR&D charges. The values assigned to IPR&D are based on valuations that have been prepared using methodologies and valuation techniques consistent with those used by independent appraisers. All values were determined by identifying research projects in areas for which technological feasibility had not been established. Additionally, the values were determined by estimating the revenue and expenses associated with a project’s sales cycle and the amount of after-tax cash flows attributable to these projects. The future cash flows were discounted to present value utilizing an appropriate risk-adjusted rate of return. The rate of return included a factor that takes into account the uncertainty surrounding the successful development of the IPR&D.

 

At the time of acquisition, we expect all acquired IPR&D will reach technological feasibility, but there can be no assurance that the commercial viability of these products will actually be achieved. The nature of the efforts to develop the acquired technologies into commercially viable products consists principally of planning, designing and conducting clinical trials necessary to obtain regulatory approvals. The risks associated with achieving commercialization include, but are not limited to, delay or failure to obtain regulatory approvals to conduct clinical trials, delay or failure to obtain required market clearances, and patent litigation. If commercial viability were not achieved, we would likely look to other alternatives to provide these therapies.

 

See the “Acquisitions” section of this management’s discussion and analysis for detailed discussion of each material acquisition in fiscal years 2007 and 2006.

 

Certain Tax Adjustments In fiscal year 2007, we recorded a $129 million tax benefit associated with the reversal of excess tax accruals in connection with the settlement reached with the U.S. Internal Revenue Service (IRS) with respect to their review of our fiscal years 2003 and 2004 domestic income tax returns, the resolution of competent authority issues for fiscal years 1992 through 2000, and adjustments to the finalization of the fiscal year 2006 U.S. federal and state income tax returns. The $129 million tax benefit has been recorded in the provision for income taxes in the consolidated statement of earnings for fiscal year 2007.

 

In fiscal year 2006, we reversed excess tax accruals of $225 million associated with favorable agreements reached with the IRS involving the review of our fiscal years 1997 through 2002 domestic income tax returns. The $225 million tax benefit has been recorded in the provision for income taxes in the consolidated statement of earnings for fiscal year 2006.

 

19


Table of Contents

During the fourth quarter of fiscal year 2006, we repatriated the entire amount eligible under the American Jobs Creation Act of 2004 (Jobs Creation Act), or $934 million. The amounts repatriated were used for “qualified expenditures” as defined under the Jobs Creation Act such as qualified research and development activities, construction of a new U.S. facility, and qualified selling and marketing activities. As of April 29, 2005, we had recorded a deferred tax liability of $49 million associated with our planned repatriation of these funds, and we included that amount in the table above and in provision for income taxes in the consolidated statements of earnings.

 

Other Expense, Net   Other expense, net includes intellectual property amortization expense, royalty income and expense, realized equity security gains and losses, realized foreign currency transaction and derivative gains and losses, and impairment charges on equity securities. In fiscal year 2007, net other expense was $212 million, an increase of $45 million from $167 million in fiscal year 2006. This change is partially due to currency hedges, which resulted in gains in fiscal year 2007 of $20 million versus gains in fiscal year 2006 of $92 million. Fiscal year 2007 was also positively impacted by $55 million due to the accelerated amortization of deferred income in connection with a product supply agreement in the Vascular business, where the other party elected not to exercise its option to extend the agreement.

 

Net other expense decreased from $291 million in fiscal year 2005 to $167 million in fiscal year 2006, a $124 million decrease. This decrease was primarily driven by a shift from a loss in fiscal year 2005 to a gain in fiscal year 2006 on foreign exchange contracts used to hedge results of operations. In fiscal year 2006, our gain on foreign exchange contracts was $92 million compared to a loss of $135 million in fiscal year 2005. During fiscal year 2006, the gains on the foreign exchange contracts were partially offset by $42 million of expense associated with impairments on equity securities and $86 million in increased royalty expense, primarily in our Vascular and Spinal businesses.

 

Interest Income, Net   In fiscal year 2007, net interest income was $154 million, an increase of $67 million from net interest income of $87 million in fiscal year 2006. The increase in net interest income in fiscal year 2007 as compared to fiscal year 2006 is a result of higher average cash and cash investment balances as compared to prior periods. Interest income continues to increase, as we have maintained our ability to generate rates of return on our investments that exceed the interest rates we are paying on our outstanding debt.

 

In fiscal year 2006, net interest income was $87 million, an increase of $42 million from net interest income of $45 million in fiscal year 2005. The increase in net interest income in fiscal year 2006 as compared to fiscal year 2005 was primarily a result of increased levels of interest-bearing investments and higher interest rates.

 






20


Table of Contents

Income Taxes

 

 

Fiscal Year

 

Percentage Point
Increase/(Decrease)

 

 

2007

 

2006

 

2005

 

FY07/06

 

FY06/05

(dollars in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for income tax

 

$

713

 

$

614

 

$

740

 

N/A

 

N/A

Effective tax rate

 

 

20.3

%

 

19.4

%

 

29.1

%

0.9

 

(9.7)

Impact of repatriation, special, restructuring, certain litigation,
and IPR&D charges, and certain tax adjustments

 

 

(4.2)

 

 

(6.6

)

 

0.1

 

(2.4)

 

6.7

Non-GAAP nominal tax rate (1)

 

 

24.5

%

 

26.0

%

 

29.0

%

(1.5)

 

(3.0)

_______________

(1)

Non-GAAP nominal tax rate is defined as the income tax (benefit) provision as a percentage of taxable income, excluding repatriation, special, restructuring, certain litigation, and IPR&D charges, and certain tax adjustments. We believe that the resulting non-GAAP financial measure provides useful information to investors because it excludes the effect of certain discrete items so that investors can compare our recurring results over multiple periods.

 

The effective tax rate of 20.3 percent increased by 0.9 of a percentage point from fiscal year 2006 to fiscal year 2007. This increase reflects the 1.5 percentage points decrease in the non-GAAP nominal tax rate and 2.4 percentage points increase from the special, restructuring, certain litigation, and IPR&D charges, and certain tax adjustments. The non-GAAP nominal tax rate decreased from 26.0 percent in fiscal year 2006 to 24.5 percent in fiscal year 2007 as a result of increased benefits from our international operations subject to tax rates lower than our U.S. statutory tax rates. The remaining 2.4 percentage points increase is largely due to a $129 million tax benefit recorded in fiscal year 2007 compared to the $225 million tax benefit recorded in fiscal year 2006. The $129 million tax benefit reflects the reversal of excess tax accruals in connection with the settlement reached with the IRS involving the review of our fiscal years 2003 and 2004 domestic tax returns, the resolution of competent authority issues for fiscal years 1992 through 2000, and adjustments to the finalization of the fiscal year 2006 U.S. federal and state income tax returns.

 

The effective tax rate of 19.4 percent decreased by 9.7 percentage points from fiscal year 2005 to fiscal year 2006. This decrease reflected the 3.0 percentage points decrease in the non-GAAP nominal tax rate and 6.7 percentage points decrease from the amounts repatriated under the Jobs Creation Act, special, certain litigation, and IPR&D charges, and certain tax adjustments. The non-GAAP nominal tax rate decreased from 29.0 percent in fiscal year 2005 to 26.0 percent in fiscal year 2006 as a result of increased benefits from our international operations subject to tax rates lower than our U.S. statutory tax rates. The remaining 6.7 percentage decrease is primarily due to a $225 million tax benefit associated with the favorable agreements reached with the IRS involving the review of our fiscal years 1997 through 2002 domestic tax returns offset by taxes provided for amounts repatriated under the Jobs Creation Act, special, certain litigation, and IPR&D charges. As a result of the agreements reached with the IRS, we made approximately $326 million in incremental tax payments during the third quarter of fiscal year 2006. These payments reduced accrued income taxes in the fiscal year 2006 consolidated balance sheet.

 

Tax audits associated with the allocation of income, and other complex issues, may require an extended period of time to resolve and may result in income tax adjustments if changes to our allocation are required between jurisdictions with different tax rates. Tax authorities periodically review our tax returns and propose adjustments to our tax filings. Tax years settled with the IRS remain open for foreign tax audits and competent authority proceedings. Competent authority proceedings are a means to resolve intercompany pricing disagreements between countries.

 

The IRS has finalized its audits with us for all years through fiscal year 1996. The IRS has issued its audit reports for fiscal years 1997 through 2004. We have resolved or reached agreement with the IRS on all significant issues for fiscal years 1997 through 2004, except for an issue related to the allocation of income between Medtronic, Inc., and its wholly owned subsidiary in Switzerland. The unresolved issues from the fiscal years 1997 through 2004 tax audits and tax positions taken by the IRS or foreign tax authorities, with respect to potential issues on future tax audits could have a material impact on our effective tax rate in future periods. We continue to believe that we have meritorious defenses for our tax filings and will vigorously defend them through litigation in the courts, if necessary. We believe we have provided for probable liabilities resulting from tax assessments by taxing authorities.

 

21


Table of Contents

Liquidity and Capital Resources

 

 

Fiscal Year

 

 

 

2007

 

2006

 

(dollars in millions)

 

 

 

 

 

 

 

Working capital

 

$

5,355

 

$

5,971

 

Current ratio*

 

 

3.1:1.0

 

 

2.4:1.0

 

Cash, cash equivalents, and short-term investments

 

$

3,078

 

$

6,101

 

Long-term investments in public and private debt securities**

 

 

3,004

 

 

767

 

Cash, cash equivalents, short-term investments, and long-term debt securities

 

 

6,082

 

 

6,868

 

Short-term borrowings and long-term debt

 

 

6,087

 

 

7,923

 

Net cash position***

 

$

(5

)

$

(1,055

) 

_______________

*

Current ratio is the ratio of current assets to current liabilities.

**

Long-term investments include public and private debt securities with a maturity date greater than one year from the end of the period.

***

Net cash position is the sum of cash, cash equivalents, short-term investments, and long-term investments in debt securities less short-term borrowings and long-term debt.

 

The increase in our net cash position in fiscal year 2007 as compared to fiscal year 2006 primarily relates to income from operations and other cash proceeds offset by cash used for the retirement of $1.877 billion in debentures, capital expenditures, dividend payments, and share repurchases. See the “Summary of Cash Flows” section of this management’s discussion and analysis for further discussion of our cash uses and proceeds. The decrease in our working capital relates to our movement of cash into long-term investments from short-term investments in fiscal year 2007 to generate higher interest income offset by normal operating changes in other account balances.

 

At April 27, 2007 and April 28, 2006, $5.428 billion and $4.168 billion, respectively, of cash, cash equivalents, and short- and long-term debt securities were held by our non-U.S. subsidiaries. These funds are available for use by worldwide operations; however, if these funds are repatriated to the U.S. or used for U.S. operations, the amounts would be subject to U.S. tax.

 

We believe that our existing cash and investments, as well as our available unused lines of credit and commercial paper capacity of $2.440 billion, if needed, will satisfy our foreseeable working capital requirements for at least the next twelve months. However, we periodically consider various financing alternatives and may, from time to time, seek to take advantage of favorable interest rate environments or other market conditions.

 



22


Table of Contents

Summary of Cash Flows

 

 

Fiscal Year

 

 

 

2007

 

2006

 

2005

 

(dollars in millions)

 

 

 

 

 

 

 

 

 

 

Cash provided by (used in):

 

 

 

 

 

 

 

 

 

 

Operating activities

 

$

2,979

 

$

2,220

 

$

2,824

 

Investing activities

 

 

(1,701

)

 

(2,867

)

 

(1,603

)

Financing activities

 

 

(3,011

)

 

1,304

 

 

(494

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(5

)

 

105

 

 

(89

)

Net change in cash and cash equivalents

 

$

(1,738

) 

$

762

 

$

638

 

 

Operating Activities

Our net cash provided by operating activities was $2.979 billion for the fiscal year ended April 27, 2007 compared to net cash provided by operating activities of $2.220 billion in the same period of the prior year. The $759 million increase in net cash provided by operating activities was primarily attributable to:

 

•

A $1.055 billion decrease in cash used for operating assets and liabilities, primarily driven by a $657 million change in accounts payable and accrued liabilities and changes in deferred taxes and a $233 million change in inventory

 

partially offset by:

 

•

The timing of other receipts and payments in the ordinary course of business

 

Our net cash provided by operating activities was $2.220 billion for the fiscal year ended April 28, 2006 compared to net cash provided by operating activities of $2.824 billion in the same period of the prior year. The $604 million decrease in net cash provided by operating activities was primarily attributable to:

 

•

A $612 million payment for previously settled and accrued litigation

 

 

 

 

•

A $326 million payment of previously accrued income taxes in conjunction with the settlement reached with the IRS

 

 

 

 

•

A $49 million payment of income taxes associated with our repatriation of foreign subsidiary income

 

 

 

 

•

A $778 million decrease related to the timing of payment on inventory and other operating costs

 

 

 

partially offset by:

 

•

The timing of other receipts and payments in the ordinary course of business

 

 

 

 

Investing Activities

Our net cash used in investing activities was $1.701 billion for the fiscal year ended April 27, 2007 compared to $2.867 billion used in investing activities for the fiscal year ended April 28, 2006. The $1.166 billion decrease in net cash used in investing activities was primarily attributable to:

 

•

A decrease of $993 million in cash used for acquisitions and purchase of intellectual property, as fiscal year 2006 included several acquisitions

 

 

 

 

•

A $495 million decrease in cash used to purchase marketable securities

 

 

 

partially offset by:

 

•

A $166 million increase in capital expenditures for property, plant, and equipment

 

 

23


Table of Contents

Our net cash used in investing activities was $2.867 billion for the fiscal year ended April 28, 2006 compared to $1.603 billion used in investing activities for the fiscal year ended April 29, 2005. The $1.264 billion increase in net cash used in investing activities was primarily attributable to:

 

•

A $1.004 billion increase in cash used for acquisitions and purchases of intellectual property, as fiscal year 2006 included several acquisitions

 

 

 

 

•

A $440 million increase in cash used to purchase marketable securities

 

 

 

partially offset by:

 

•

A $45 million decrease in capital expenditures for property, plant, and equipment and an increase of $131 million from other investing activities

 

Financing Activities

Our net cash used in financing activities was $3.011 billion for the fiscal year ended April 27, 2007, compared to net cash provided by financing activities of $1.304 billion for the fiscal year ended April 28, 2006. The $4.315 billion increase in net cash used in financing activities was primarily attributable to:

 

•

$1.877 billion in cash used to repurchase long-term debt as the bond holders put the Contingent Convertible Debentures to us in fiscal year 2007

 

 

 

 

•

A $5.428 billion decrease in proceeds from the issuance of long-term debt as we had issued $1.000 billion in Senior Notes and $4.400 billion of Senior Convertible Notes in the prior year

 

 

 

 

•

A $175 million decrease in proceeds from issuance of common stock and $1.075 billion decrease in proceeds from the sale of call options

 

partially offset by:

 

•

A $2.550 billion decline in cash used to repurchase common stock

 

 

 

 

•

A $517 million net reduction in sale of warrants

 

Our net cash provided by financing activities was $1.304 billion for the fiscal year ended April 28, 2006, compared to net cash used by financing activities of $494 million for the fiscal year ended April 29, 2005. The $1.798 billion increase in net cash provided by financing activities was primarily attributable to:

 

•

Proceeds of $5.428 billion from the issuance of long-term debt and $506 million from the issuance of stock in fiscal year 2006, increases of $5.428 billion and $172 million over fiscal year 2005, respectively

 

 

 

 

•

Proceeds of $517 million from the sale of warrants in fiscal year 2006

 

partially offset by:

 

•

Stock repurchases of  $3.589 billion, an increase of $3.078 billion from fiscal year 2005

 

 

 

 

•

Cash of $1.075 billion used to purchase call options in fiscal year 2006

 

 

24


Table of Contents

Off-Balance Sheet Arrangements and Long-Term Contractual Obligations

 

We acquire assets still in development, enter into research and development arrangements and sponsor certain clinical trials that often require milestone and/or royalty payments to a third-party, contingent upon the occurrence of certain future events. Milestone payments may be required contingent upon the successful achievement of an important point in the development life cycle of a product or upon certain pre-designated levels of achievement in clinical trials. In addition, if required by the arrangement, we may have to make royalty payments based on a percentage of sales related to the product under development or in the event that regulatory approval for marketing is obtained. In situations where we have no ability to influence the achievement of the milestone or otherwise avoid the payment, we have included those milestone or minimum royalty payments in the following table. However, the majority of these arrangements give us the discretion to unilaterally make the decision to stop development of a product or cease progress of a clinical trial, which would allow us to avoid making the contingent payments. Although we are unlikely to cease development if a device successfully achieves clinical testing objectives, these payments are not included in the table of contractual obligations because of the contingent nature of these payments and our ability to avoid them if we decided to pursue a different path of development or testing.

 

In the normal course of business, we periodically enter into agreements that require us to indemnify customers or suppliers for specific risks, such as claims for injury or property damage arising out of our products or the negligence of our personnel or claims alleging that our products infringe third-party patents or other intellectual property. Our maximum exposure under these indemnification provisions cannot be estimated, and we have not accrued any liabilities within our consolidated financial statements or included any indemnification provisions in our commitments table. Historically, we have not experienced significant losses on these types of indemnification obligations.

 

 






25


Table of Contents

We believe our off-balance sheet arrangements do not have a material current or anticipated future effect on our consolidated earnings, financial position or cash flows. Presented below is a summary of contractual obligations and other minimum commercial commitments. See Notes 5, 7 and 14 to the consolidated financial statements for additional information regarding foreign currency contracts, long-term debt and lease obligations, respectively.

 

 

 

Maturity by Fiscal Year

 

 

 

Total

 

2008

 

2009

 

2010

 

2011

 

2012

 

Thereafter

 

(dollars in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contractual obligations related to off-balance sheet arrangements:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency contracts(1)

 

$

5,372

 

$

3,806

 

$

1,262

 

$

304

 

$

—

 

$

—

 

$

—

 

Operating leases(2)

 

 

193

 

 

68

 

 

53

 

 

33

 

 

13

 

 

5

 

 

21

 

Inventory purchases(3)

 

 

621

 

 

292

 

 

134

 

 

73

 

 

67

 

 

13

 

 

42

 

Commitments to fund minority investments/contingent acquisition consideration(4)

 

 

124

 

 

47

 

 

20

 

 

19

 

 

17

 

 

1

 

 

20

 

Interest payments(5)

 

 

652

 

 

116

 

 

115

 

 

115

 

 

106

 

 

64

 

 

136

 

Other(6)

 

 

383

 

 

241

 

 

40

 

 

31

 

 

23

 

 

14

 

 

34

 

Total

 

$

7,345

 

$

4,570

 

$

1,624

 

$

575

 

$

226

 

$

97

 

$

253

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contractual obligations reflected in the balance sheet:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt, excluding capital leases(7)

 

$

5,494

 

$

—

 

$

94

 

$

—

 

$

2,600

 

$

—

 

$

2,800

 

Capital leases(8)

 

 

89

 

 

5

 

 

12

 

 

14

 

 

17

 

 

18

 

 

23

 

Other(9)

 

 

12

 

 

12

 

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

Total

 

$

5,595

 

$

17

 

$

106

 

$

14

 

$

2,617

 

$

18

 

$

2,823

 

_______________

(1)

As these obligations were entered into as hedges, the majority of these obligations will be offset by losses/gains on the related assets, liabilities and transactions being hedged.

(2)

Certain leases require us to pay real estate taxes, insurance, maintenance, and other operating expenses associated with the leased premises. These future costs are not included in the schedule above.

(3)

We have included inventory purchase commitments which are legally binding and specify minimum purchase quantities. These purchase commitments do not exceed our projected requirements and are in the normal course of business. These commitments do not include open purchase orders.

(4)

Certain commitments related to the funding of minority investments and/or previous acquisitions are contingent upon the achievement of certain product-related milestones and various other favorable operational conditions. While it is not certain if and/or when these payments will be made, the maturity dates included in this table reflect our best estimates.

(5)

Interest payments in the table above reflect the interest on our outstanding debt, including the $4.400 billion of Senior Convertible Notes, $1.000 billion of Senior Notes and $94 million of Contingent Convertible Debentures. The interest rate on each outstanding obligation varies and interest is payable semi-annually. The interest rate is 1.500 percent on the $2.200 billion Senior Convertible Notes due 2011 and 1.625 percent on the $2.200 billion Senior Convertible Notes due 2013, 4.375 percent on the $400 million of Senior Notes due 2010, 4.750 percent on the $600 million of Senior Notes due 2015, and 1.250 percent on the Contingent Convertible Debentures due 2021.

(6)

These obligations include commitments to replace our existing legacy enterprise resource systems, construction of our new CRDM campus, and certain research and development arrangements.

(7)

Long-term debt in the table above includes $4.400 billion Senior Convertible Notes issued in April 2006, $1.000 billion Senior Notes issued in September 2005 and $94 million related to our Contingent Convertible Debentures. In September 2006 we repurchased $1.877 billion of Contingent Convertible Debentures as a result of certain holders exercising their put options. The table above also includes the impact of the five year interest rate swap entered into in November 2005.

(8)

Capital lease obligations include a sale-leaseback agreement entered into in the fourth quarter of fiscal year 2006 whereby certain manufacturing equipment was sold and is being leased by us over a seven year period.

(9)

These obligations include royalty payments and a financing arrangement associated with our fiscal year 2002 acquisition of Kobayashi Pharmaceutical Co.’s interest in a joint venture it had formed with us in 1996 to distribute spinal products in Japan.

 

26


Table of Contents

Debt and Capital

 

In October 2005, our Board of Directors authorized the repurchase of up to 40 million shares of our common stock and in April 2006, the Board of Directors made a special authorization for us to repurchase up to 50 million shares in connection with the $4.400 billion Senior Convertible Note offering (see below for further discussion). Shares are repurchased from time to time to support our stock-based compensation programs and to take advantage of favorable market conditions. During fiscal years 2007 and 2006, we repurchased approximately 21.7 million shares and 68.9 million shares at an average price of $47.83 and $52.12, respectively. The amounts disclosed as repurchased for fiscal year 2007 include 544,224 shares that we obtained as part of the final settlement of the previously announced and executed accelerated share repurchase program. Excluding the shares obtained in the settlement of the accelerated share repurchase program, for fiscal year 2007 we repurchased 21.2 million shares at an average price of $49.06. As of April 27, 2007, we have approximately 15.1 million shares remaining under current buyback authorizations approved by the Board of Directors.

 

In June 2007, our Board of Directors authorized the repurchase of an additional 50 million shares of our common stock.

 

In April 2006, we issued $2.200 billion of 1.500 percent Senior Convertible Notes due 2011 and $2.200 billion of 1.625 percent Senior Convertible Notes due 2013, collectively the Senior Convertible Notes. The Senior Convertible Notes were issued at par and pay interest in cash semi-annually in arrears on April 15 and October 15 of each year. The Senior Convertible Notes are unsecured unsubordinated obligations and rank equally with all other unsecured and unsubordinated indebtedness. The Senior Convertible Notes have an initial conversion price of $56.14 per share. The Senior Convertible Notes may only be converted: (i) during any calendar quarter if the closing price of our common stock reaches 140 percent of the conversion price for 20 trading days during a specified period, or (ii) if specified distributions to holders of our common stock are made or specified corporate transactions occur, or (iii) during the last month prior to maturity of the applicable notes. Upon conversion, a holder would receive: (i) cash equal to the lesser of the principal amount of the note or the conversion value and (ii) to the extent the conversion value exceeds the principal amount of the note, shares of our common stock, cash, or a combination of common stock and cash, at our option. In addition, upon a change in control, as defined, the holders may require us to purchase for cash all or a portion of their notes for 100 percent of the principal amount of the notes plus accrued and unpaid interest, if any, plus a number of additional make-whole shares of our common stock, as set forth in the applicable indenture. The indentures under which the Senior Convertible Notes were issued contain customary covenants, all of which we remain in compliance as of April 27, 2007. A total of $2.500 billion of the net proceeds from these note issuances were used to repurchase common stock. In April 2007, pursuant to provisions in the indentures relating to the Company’s increase of its quarterly dividend to shareholders, the conversion rates for each of the Senior Convertible Notes changed from 17.8113 to 17.8315, which correspondingly changed the conversion price per share for each of the Senior Convertible Notes from $56.14 to $56.08. See Note 7 to the consolidated financial statements for further discussion of the accounting treatment.

 

Concurrent with the issuance of the Senior Convertible Notes, we purchased call options on our common stock in private transactions. The call options allow us to receive shares of our common stock and/or cash from counterparties equal to the amounts of common stock and/or cash related to the excess conversion value that we would pay to the holders of the Senior Convertible Notes upon conversion. These call options will terminate upon the earlier of the maturity dates of the related Senior Convertible Notes or the first day all of the related Senior Convertible Notes are no longer outstanding due to conversion or otherwise. The call options, which cost an aggregate $1.075 billion ($699 million net of tax benefit), were recorded as a reduction of shareholders’ equity. See Note 7 to the consolidated financial statements for further discussion of the accounting treatment.

 

In separate transactions, we sold warrants to issue shares of our common stock at an exercise price of $76.56 per share in private transactions. Pursuant to these transactions, warrants for 41 million shares of our common stock may be settled over a specified period beginning in July 2011 and warrants for 41 million shares of our common stock may be settled over a specified period beginning in July 2013 (the “settlement dates”). If the average price of our common stock during a defined period ending on or about the respective settlement dates exceeds the exercise price of the warrants, the warrants will be settled in shares of our common stock. Proceeds received from the issuance of the warrants totaled approximately $517 million and were recorded as an addition to shareholders’ equity. See Note 7 to the consolidated financial statements for further discussion of the accounting treatment. In April 2007, certain of the holders requested adjustment to the exercise price of the warrants from $76.56 to $76.47 pursuant to the provisions of the warrants relating to our payment of dividends to common shareholders.

 

In September 2005, we issued two tranches of Senior Notes with the aggregate face value of $1.000 billion. The first tranche consisted of $400 million of 4.375 percent Senior Notes due 2010 and the second tranche consisted of $600 million of 4.750 percent Senior Notes due 2015. Each tranche was issued at a discount which resulted in an effective interest rate of 4.433 percent and 4.760 percent for the five and ten year Senior Notes, respectively. Interest on each series of Senior Notes is payable semi-annually, on March 15 and September 15 of each year. The Senior Notes are unsecured unsubordinated obligations and rank equally with all other unsecured and unsubordinated indebtedness. The indentures under which the Senior Notes were issued contain customary covenants, all of which we remain in compliance with as of April 27, 2007. We used the net proceeds from the sale of the Senior Notes for repayment of a portion of our outstanding commercial paper.

 

27


Table of Contents

In November 2005, we entered into a five year interest rate swap agreement with a notional amount of $200 million. This interest rate swap agreement was designated as a fair value hedge of the changes in fair value of a portion of our fixed-rate $400 million Senior Notes due 2010. We pay variable interest equal to the three-month London Interbank Offered Rate (LIBOR) minus 55 basis points and we receive a fixed interest rate of 4.375 percent.

 

In September 2001, we completed a $2.013 billion private placement of 1.250 percent Contingent Convertible Debentures due September 2021 (Old Debentures). Interest is payable semi-annually. Each Old Debenture is convertible into shares of common stock at an initial conversion price of $61.81 per share; however, the Old Debentures are not convertible before their final maturity unless the closing price of our common stock reaches 110 percent of the conversion price for 20 trading days during a consecutive 30 trading day period. In September 2002 and 2004, as a result of certain holders of the Old Debentures exercising their put options, we repurchased $39 million and $1 million respectively, of the Old Debentures for cash.

 

On January 24, 2005, we completed an exchange offer whereby holders of approximately $1.930 billion of the total principal amount of the Old Debentures exchanged their existing securities for an equal principal amount of 1.250 percent Contingent Convertible Debentures, Series B due 2021 (New Debentures), as described below. Following the completion of the exchange offer, we repurchased approximately $2 million of the Old Debentures for cash.

 

The terms of the New Debentures are consistent with the terms of the Old Debentures noted above, except that: (i) the New Debentures require us to settle all conversions for a combination of cash and shares of our common stock, if any, in lieu of only shares. Upon conversion of the New Debentures we will pay holders cash equal to the lesser of the principal amount of the New Debentures or their conversion value, and shares of our common stock to the extent the conversion value exceeds the principal amount of the New Debentures; and (ii) the New Debentures require us to pay only cash (in lieu of shares of our common stock or a combination of cash and shares of our common stock) when we repurchase the New Debentures at the option of the holder or when we repurchase the New Debentures in connection with a change of control.

 

In September 2006, as a result of certain holders of the New Debentures and Old Debentures exercising their put options, we repurchased $1.835 billion of the New Debentures for cash and $42 million of the Old Debentures for cash. We may be required to repurchase the remaining debentures at the option of the holders in September 2008, 2011 or 2016. Twelve months prior to the put options becoming exercisable, the remaining balance of the New Debentures and the Old Debentures will be classified as short-term borrowings. At each balance sheet date without a put option within the subsequent four quarters, the remaining balance will be classified as long-term debt. Accordingly, during the second quarter of fiscal year 2007, $93 million of New Debentures and $1 million of the Old Debentures were reclassified from short-term borrowings to long-term debt as a result of the September 2006 put option expiring. For put options exercised by the holders of the New Debentures and the Old Debentures, the purchase price is equal to the principal amount of the applicable debenture plus any accrued and unpaid interest thereon to the repurchase date. If the put option is exercised, we will pay holders the repurchase price solely in cash (or, for the Old Debentures, in cash or stock at our option). As of April 27, 2007, approximately $93 million aggregate principal amount of New Debentures remain outstanding and approximately $1 million aggregate principal amount of Old Debentures remain outstanding. We can redeem the debentures for cash at any time.

 

We maintain a commercial paper program that allows us to have a maximum of $2.250 billion in commercial paper outstanding, with maturities up to 364 days from the date of issuance. At April 27, 2007 and April 28, 2006, outstanding commercial paper totaled $249 million and $190 million, respectively. During fiscal years 2007 and 2006, the weighted average original maturity of the commercial paper outstanding was approximately 56 and 31 days, respectively, and the weighted average interest rate was 5.26 percent and 3.86 percent, respectively.

 

In connection with the issuance of the contingent convertible debentures, Senior Notes, Senior Convertible Notes and commercial paper, Standard and Poor’s Ratings Group and Moody’s Investors Service issued us strong long-term debt ratings of AA- and A1, respectively, and strong short-term debt ratings of A-1+ and P-1, respectively. These ratings remain unchanged from the same periods of the prior year.

 

We have existing lines of credit of approximately $2.433 billion with various banks at April 27, 2007. The existing lines of credit include a five-year $1.750 billion syndicated credit facility dated December 20, 2006 that will expire on December 20, 2011 (New Facility). This New Facility replaced two credit facilities: one for $1.000 billion which was scheduled to expire in January 2010, and a $750 million facility which was scheduled to expire in January 2007. The New Facility provides us with the ability to increase its capacity by an additional $500 million at any time during the life of the five-year term of the agreement. We can also request the extension of the New Facility maturity date for one additional year, at the first and second anniversary of the date of this facility. The New Facility provides backup funding for the commercial paper program and may also be used for general corporate purposes.

 

28


Table of Contents

Interest rates on these borrowings are determined by a pricing matrix, based on our long-term debt ratings, assigned by Standard and Poor’s Ratings Group and Moody’s Investors Service. Facility fees are payable on the credit facilities and are determined in the same manner as the interest rates. The agreements also contain other customary covenants, all of which we remain in compliance with as of April 27, 2007.

 

As of April 27, 2007, we have unused credit lines and commercial paper capacity of approximately $2.440 billion.

 

Acquisitions

 

During the fourth quarter of fiscal year 2007 we acquired manufacturing assets, know-how, and an exclusive license to intellectual property related to the manufacture and distribution of EndoSheath products from Vision–Sciences, Inc. (VSI), which was accounted for as a purchase of assets. The license acquired from VSI will expand our existing U.S. distribution rights of EndoSheath products to worldwide distribution rights. The EndoSheath is a sterile disposable sheath that fits over a fiberoptic endoscope preventing contamination of the scope during procedures and allowing reuse of the scope without further sterilization. The consideration paid was $27 million in cash which was primarily allocated to technology-based intangible assets with an estimated useful life of 10 years. The purchase price is subject to increases triggered by the achievement of certain milestones.

 

During the second quarter of fiscal year 2007, we acquired and/or licensed selected patents and patent applications owned by Dr. Eckhard Alt (Dr. Alt), or certain of his controlled companies in a series of transactions. In connection therewith, we also resolved all outstanding litigation and disputes with Dr. Alt and certain of his controlled companies. The agreements required the payment of total consideration of $75 million, $74 million of which was capitalized as technology based intangible assets that had an estimated useful life of 11 years at the time of acquisition. The acquired patents or licenses pertain to the cardiac rhythm disease management field and have both current application and potential for future patentable commercial products.

 

During the first quarter of fiscal year 2007, we acquired substantially all of the assets of Odin Medical Technologies, Ltd. (Odin), a privately held company. Prior to the acquisition, we had an equity investment in Odin, which was accounted for under the cost method of accounting. Odin focused on the manufacture of the PoleStar iMRI-Guidance System which we already exclusively distributed. We expect this acquisition to help further drive the acceptance of iMRI guidance in neurosurgery. The consideration for Odin was approximately $21 million, which included $6 million in upfront cash and a $2 million milestone payment. The $8 million in net cash paid resulted from the $21 million in consideration less the value of our prior investment in Odin and Odin’s existing cash balance. In connection with the acquisition of Odin, we acquired $9 million of technology-based intangible assets that had an estimated useful life of 12 years at the time of acquisition. Goodwill of $12 million related to the acquisition was assigned entirely to the Spinal and Navigation operating segment. This goodwill is deductible for tax purposes. The pro forma impact of Odin was not significant to our results for fiscal year 2007. The results of operations related to Odin have been included in our consolidated statements of earnings since the date of the acquisition.

 

During the second quarter of fiscal year 2006, we acquired all the outstanding stock of IGN, a privately held company. Prior to the acquisition, we had an equity investment in IGN, which was accounted for under the cost method of accounting. IGN specialized in precision navigation and delivery technologies for brain surgery. The IGN product line includes the NexFrame disposable, “frameless” sterotactic head frame, which is used in conjunction with image-guided surgery systems during deep brain stimulation. This acquisition complements our position in deep brain stimulation by offering instruments that simplify the procedure for surgeons and improve patient comfort during surgery. The total consideration for IGN was approximately $65 million, which included $58 million in net cash paid. The $58 million in net cash paid results from the $65 million in consideration less the value of our prior investment in IGN and IGN’s existing cash balance.

 

During the first quarter of fiscal year 2006, we acquired all of the outstanding stock of TNI, a privately held company. Prior to the acquisition, we had an equity investment in TNI, which was accounted for under the cost method of accounting. TNI focused on the treatment of obesity by stimulation of the stomach with an implantable gastric stimulator, known as the Transcend device. This acquisition was expected to complement the Company’s strategy to deliver therapeutic solutions for the worldwide challenges of obesity. The consideration for TNI was approximately $269 million, which included $227 million in net cash paid. The $227 million in net cash paid resulted from the $269 million in consideration less the value of our prior investment in TNI and TNI’s existing cash balance. The purchase price is subject to increases triggered by the achievement of certain milestones. As a result of the acquisition of TNI, we acquired $55 million of intangible assets of which $54 million were technology-based intangible assets that had an estimated useful life of 15 years at the time of acquisition and $169 million of IPR&D that was expensed on the date of acquisition related to a product being developed for the treatment of obesity by stimulation of the stomach that had not yet reached technological feasibility and for which no future alternative use had been identified. Goodwill of $51 million related to the acquisition was assigned entirely to the Neurological operating segment. This goodwill is not deductible for tax purposes. In fiscal year 2007, we recognized an impairment charge related to the intangible assets acquired from TNI. See discussion in the “Special, Restructuring, Certain Litigation, and IPR&D Charges, and Certain Tax Adjustments” section of this management’s discussion and analysis.

 

29


Table of Contents

The pro forma impact of the IGN and TNI acquisitions was not significant, individually or in the aggregate, to our results for the fiscal year ended April 28, 2006. Our fiscal year 2006 operating results included the results of TNI and IGN since their respective acquisition dates.

 

During the first quarter of fiscal year 2006, we acquired substantially all of the spine-related intellectual property and related contracts, rights, and tangible materials owned by Michelson and settled all outstanding litigation and disputes between Michelson and us. The acquired patents pertain to novel spinal technology and techniques that have both current application and the potential for future patentable commercial products. The agreement requires total consideration of $1.350 billion for the purchase of a portfolio of more than 100 issued U.S. patents, over 110 pending U.S. patent applications and numerous foreign counterparts to these patents and patent applications, and the settlement of all ongoing litigation. A value of $550 million was assigned to the settlement of past damages between the parties and was recorded as an expense in the fourth quarter of fiscal year 2005. The remaining consideration, including $3 million of direct acquisition costs, was allocated between $628 million of acquired technology based intangible assets that had a useful life of 17 years at the time of acquisition and $175 million of IPR&D that was expensed on the date of acquisition related to spinal technology based devices that had not yet reached technological feasibility and had no future alternative use. The patents pertain to novel spinal technology and techniques that have the potential for future patentable commercial products in the area of spinal surgery. During the first quarter of fiscal year 2006, we paid $1.320 billion and committed to three future installments of $10 million to be paid in May 2006, 2007, and 2008. The first two installments of $10 million were paid in May 2006 and 2007.

 

During the first quarter of fiscal year 2006, we also entered into a royalty bearing, non-exclusive patent cross-licensing agreement with NeuroPace, Inc. Under the terms of the agreement, the two companies cross-licensed patents and patent applications of neurological technology related to direct electrical stimulation or monitoring of the brain. On the date of the agreement, $20 million was expensed as IPR&D related to the licensed technology since technological feasibility of the project had not yet been reached and such technology had no future alternative use. This licensed technology is expected to enhance our ability to further develop and expand its therapies for neurological disorders.

 

New Accounting Pronouncements

 

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (FIN No. 48), which is an interpretation of SFAS No. 109, “Accounting for Income Taxes” (SFAS No. 109). FIN No. 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109. FIN No. 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN No. 48 also provides guidance on recognition, measurement, presentation, disclosure, and transition. FIN No. 48 is effective for us beginning with fiscal year 2008, with earlier adoption permitted. We are still evaluating the impact that the adoption of FIN No. 48 will have on the consolidated financial statements, but do not believe it will be material to the consolidated financial statements.

 

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106 and 132(R)” (SFAS No. 158), which requires the recognition of an asset or liability for the funded status of defined benefit pension and other post-retirement benefit plans in the statement of financial position. The funded status of a defined benefit plan is measured as the difference between plan assets at fair value and the benefit obligation. For a defined benefit pension plan, the benefit obligation is the projected benefit obligation (PBO) for any other defined benefit post-retirement plan, such as a retiree health care plan, the benefit obligation is the accumulated post-retirement benefit obligation. The initial incremental recognition of the funded status under SFAS No. 158 of our defined pension and other post-retirement benefit plans, as well as subsequent changes in our funded status that are not included in net periodic benefit cost will be reflected in accumulated other comprehensive (loss)/income. As of April 27, 2007, the net unfunded status of our defined benefit plans was $(2) million and recognition of this status upon the adoption of SFAS No. 158 resulted in an after-tax charge to shareholders’ equity of $209 million. Amounts recognized in accumulated other comprehensive (loss)/income are adjusted as they are subsequently recognized as a component of net periodic benefit cost. The method of calculating net periodic benefit cost will not change from existing guidance. SFAS No. 158 also prescribes enhanced disclosures, including current and long-term components of plan assets and liabilities, as well as amounts recognized in accumulated other comprehensive (loss)/income that will subsequently be recognized as a component of net periodic benefit cost in the following year. See Note 13 to the consolidated financial statements for additional information.

 

The funded status recognition and certain disclosure provisions of SFAS No. 158 are effective for our fiscal year ended April 27, 2007. SFAS No. 158 also requires the consistent measurement of plan assets and benefit obligations as of the date of our fiscal year-end statement of financial position effective for our fiscal year ending April 25, 2008. A select number of our plans, including the U.S. plans, currently have a January 31 measurement date. This standard will require us to change, in fiscal year 2008, that measurement date to match the date of our fiscal year-end. We do not expect a material impact on the financial condition for those plans in which we have not adopted the requirement to measure the plan assets and benefit obligation as of the date of the balance sheet.

 

30


Table of Contents

Discussed above are the significant new accounting pronouncements. Information regarding all new accounting pronouncements is included in Note 1 to the consolidated financial statements.

 

Operations Outside the U.S.

 

The table below illustrates U.S. net sales versus net sales outside the U.S. for fiscal years 2007, 2006 and 2005:

 

 

 

Fiscal Year

 

 

 

2007

 

2006

 

2005

 

(dollars in millions)

 

 

 

 

 

 

 

 

 

 

U.S. net sales

 

$

7,900

 

$ 

7,626

 

$

6,711

 

Non U.S. net sales

 

 

4,399

 

 

3,666

 

 

3,344

 

Total net sales

 

$ 

12,299

 

$ 

11,292

 

$ 

10,055

 

 

From fiscal year 2006 to fiscal year 2007, consolidated net sales in the U.S. grew 4 percent compared to 20 percent growth in net sales outside the U.S. The slower U.S. growth is primarily a result of declines in the overall ICD market in the U.S. and the voluntary suspension of U.S shipments of Physio-Control products from our Redmond, Washington facility. Outside the U.S. net sales growth was strong across all businesses and led by strong performance in Vascular and CRDM, and a favorable impact of foreign currency translation. Vascular net sales were led by market share gains with Endeavor DES. Increased sales of ICDs and pacemakers led the increase within our CRDM business.

 

From fiscal year 2005 to fiscal year 2006, consolidated net sales in the U.S. grew at 14 percent, or 4 percent faster than consolidated net sales outside the U.S., primarily as a result of the strong performance in both CRDM and Neurological operating segments and the negative impact of foreign currency translation. CRDM and Neurological sales increased approximately 15 percent and 12 percent, respectively, in the U.S. while sales of those products outside the U.S. grew 8 percent and 4 percent, respectively. The growth in the U.S. in CRDM during fiscal year 2006 was driven by the strong demand for implantable defibrillation systems.

 

Net sales outside the U.S. are accompanied by certain financial risks, such as collection of receivables, which typically have longer payment terms. Outstanding receivables from customers outside the U.S. totaled $1.456 billion at April 27, 2007, or 50 percent of total outstanding accounts receivable, and $1.179 billion at April 28, 2006, or 45 percent of total outstanding accounts receivable. The increase in the percentage of accounts receivable from customers outside the U.S. is primarily driven by increased sales volume outside the U.S. and the impact of foreign currency exchange rates.

 

Market Risk

 

Due to the global nature of our operations, we are subject to the exposures that arise from foreign currency exchange rate fluctuations. We manage these exposures using operational and economic hedges as well as derivative financial instruments. The primary currencies hedged are the Euro and the Japanese Yen.

 

Our objective in managing exposure to foreign currency fluctuations is to minimize earnings and cash flow volatility associated with foreign exchange rate changes. We enter into various contracts, principally forward contracts that change in value as foreign exchange rates change, to protect the value of existing foreign currency assets, liabilities, net investments, and probable commitments. The gains and losses on these contracts offset changes in the value of the related exposures. It is our policy to enter into foreign currency hedging transactions only to the extent true exposures exist; we do not enter into foreign currency transactions for speculative purposes.

 

We had foreign exchange derivative contracts outstanding in notional amounts of $5.372 billion and $1.561 billion at April 27, 2007 and April 28, 2006, respectively. The fair value of these contracts at April 27, 2007 was $125 million less than the original contract value. A sensitivity analysis of changes in the fair value of all foreign exchange derivative contracts at April 27, 2007 indicates that, if the U.S. dollar uniformly strengthened/weakened by 10 percent against all currencies, the fair value of these contracts would increase/decrease by $508 million, respectively. Any gains and losses on the fair value of derivative contracts would be largely offset by gains and losses on the underlying transactions. These offsetting gains and losses are not reflected in the above analysis.

 

We are also exposed to interest rate changes affecting principally our investments in interest rate sensitive instruments. A sensitivity analysis of the impact on our interest rate sensitive financial instruments of a hypothetical 10 percent change in short-term interest rates compared to interest rates at April 27, 2007 indicates that the fair value of these instruments would correspondingly change by $30 million.

 

31


Table of Contents

We have sold specific pools of trade receivables in Japan. During fiscal years 2007 and 2006 no trade receivables were sold, and in fiscal year 2005, we sold $146 million of our trade receivables to financial institutions in Japan. Additionally, we entered into agreements to sell specific pools of receivables in Italy in the amount of $37 million, $53 million, and $4 million in fiscal years 2007, 2006, and 2005, respectively. The discount cost related to the Japan and Italy sales was insignificant and recorded in interest income, net in the consolidated statements of earnings.

 

We lend certain fixed income securities to enhance our investment income. These lending activities are collateralized at an average rate of 102 percent, with the collateral determined based on the underlying securities and creditworthiness of the borrowers. The value of the securities on loan at April 27, 2007 and April 28, 2006 was $1.318 billion and $362 million, respectively.

 

Government Regulation and Other Considerations

 

Our medical devices are subject to regulation by numerous government agencies, including the FDA and comparable foreign agencies. To varying degrees, each of these agencies requires us to comply with laws and regulations governing the development, testing, manufacturing, labeling, marketing, and distribution of our medical devices.

 

Authorization to commercially distribute a new medical device in the U.S. is generally received in one of two ways. The first, known as the 510(k) process, requires us to demonstrate that our new medical device is substantially equivalent to a legally marketed medical device. In this process, we must submit data that supports our equivalence claim. If human clinical data is required, it must be gathered in compliance with FDA investigational device exemption regulations. We must receive an order from the FDA finding substantial equivalence to another legally marketed medical device before we can commercially distribute the new medical device. Modifications to cleared medical devices can be made without using the 510(k) process if the changes do not significantly affect safety or effectiveness. A very small number of our devices are exempt from 510(k) clearance requirements.

 

The second, more rigorous process, known as pre-market approval (PMA), requires us to independently demonstrate that the new medical device is safe and effective. We do this by collecting data, including human clinical data for the medical device. The FDA will authorize commercial release if it determines there is reasonable assurance that the medical device is safe and effective. This process is generally much more time-consuming and expensive than the 510(k) process.

 

Both before and after a product is commercially released, we have ongoing responsibilities under FDA regulations. The FDA reviews design and manufacturing practices, labeling and record keeping, and manufacturers’ required reports of adverse experience and other information to identify potential problems with marketed medical devices. We may be subject to periodic inspection by the FDA for compliance with the FDA’s good manufacturing practice regulations among other FDA requirements, such as restrictions on advertising and promotion. These regulations, also known as the Quality System Regulations, govern the methods used in, and the facilities and controls used for, the design, manufacture, packaging and servicing of all finished medical devices intended for human use. If the FDA were to conclude that we are not in compliance with applicable laws or regulations, or that any of our medical devices are ineffective or pose an unreasonable health risk, the FDA could ban such medical devices, detain or seize adulterated or misbranded medical devices, order a recall, repair, replacement, or refund of such devices, and require us to notify health professionals and others that the devices present unreasonable risks of substantial harm to the public health. The FDA may also impose operating restrictions, enjoin and restrain certain violations of applicable law pertaining to medical devices, and assess civil or criminal penalties against our officers, employees, or us. The FDA may also recommend prosecution to the Department of Justice.

 

The FDA, in cooperation with U.S. Customs and Border Protection (CBP), administers controls over the import of medical devices into the U.S. The CBP imposes its own regulatory requirements on the import of our products, including inspection and possible sanctions for noncompliance. The FDA also administers certain controls over the export of medical devices from the U.S. International sales of our medical devices that have not received FDA approval are subject to FDA export requirements. Each foreign country to which we export medical devices also subjects such medical devices to their own regulatory requirements. Frequently, we obtain regulatory approval for medical devices in foreign countries first because their regulatory approval is faster or simpler than that of the FDA. However, as a general matter, foreign regulatory requirements are becoming increasingly stringent.

 

In the European Union, a single regulatory approval process has been created, and approval is represented by the CE Mark. To obtain a CE Mark in the European Union, defined products must meet minimum standards of safety and quality (i.e., the essential requirements) and then comply with one or more of a selection of conformity routes. A Notified Body assesses the quality management systems of the manufacturer and the product conformity to the essential and other requirements within the Medical Device Directive. Medtronic is subject to inspection by Notified Bodies for compliance.

 

32


Table of Contents

To be sold in Japan, most medical devices must undergo thorough safety examinations and demonstrate medical efficacy before they are granted approval, or “shonin.” The Japanese government, through the Ministry of Health, Labour, and Welfare (MHLW), regulates medical devices under recently enacted revisions to the Pharmaceutical Affairs Law (PAL). Implementation of PAL and enforcement practices thereunder are evolving, and compliance guidance from MHLW is still in development. Consequently, companies continue to work on establishing improved systems for compliance with PAL. Penalties for a company’s noncompliance with PAL could be severe, including revocation or suspension of a company’s business license and criminal sanctions.

 

The process of obtaining approval to distribute medical products is costly and time-consuming in virtually all of the major markets where we sell medical devices. We cannot assure that any new medical devices we develop will be approved in a timely or cost-effective manner.

 

Federal and state laws protect the confidentiality of certain patient health information, including patient medical records, and restrict the use and disclosure of patient health information by healthcare providers. In particular, in April 2003, the U.S. Department of Health and Human Services (HHS) published patient privacy rules under the Health Insurance Portability and Accountability Act of 1996 (HIPAA privacy rule). The HIPAA privacy rule governs the use and disclosure of protected health information by “Covered Entities,” which are healthcare providers that submit electronic claims, health plans and healthcare clearinghouses. Other than our Diabetes operating segment and our health insurance plans, each of which is a Covered Entity, and the role representatives play in providing technical support to physicians while providing patient care, the HIPAA privacy rule affects us only indirectly. The patient data that we receive and analyze may include protected health information. We are committed to maintaining patients’ privacy and working with our customers and business partners in their HIPAA compliance efforts. The ongoing costs and impacts of assuring compliance with the HIPAA privacy rules are not material to our business.

 

Government and private sector initiatives to limit the growth of healthcare costs, including price regulation, competitive pricing, coverage and payment policies, and managed-care arrangements, are continuing in many countries where we do business, including the U.S. These changes are causing the marketplace to put increased emphasis on the delivery of more cost-effective medical devices. Government programs, including Medicare and Medicaid, private healthcare insurance, and managed-care plans have attempted to control costs by limiting the amount of reimbursement they will pay for particular procedures or treatments, and other mechanisms designed to constrain utilization and contain costs, including, for example, gainsharing, where a hospital agrees with physicians to share any realized cost savings resulting from the physicians’ collective change in practice patterns such as standardization of devices where medically appropriate. This has created an increasing level of price sensitivity among customers for our products. Some third-party payors must also approve coverage for new or innovative devices or therapies before they will reimburse healthcare providers who use the medical devices or therapies. Even though a new medical device may have been cleared for commercial distribution, we may find limited demand for the device until reimbursement approval has been obtained from governmental and private third-party payors. In addition, some private third-party payors require that certain procedures or that the use of certain products be authorized in advance as a condition of reimbursement. As a result of our manufacturing efficiencies and cost controls, we believe we are well-positioned to respond to changes resulting from the worldwide trend toward cost-containment; however, uncertainty remains as to the nature of any future legislation, making it difficult for us to predict the potential impact of cost-containment trends on future operating results.

 

The delivery of our devices is subject to regulation by HHS and comparable state and foreign agencies responsible for reimbursement and regulation of healthcare items and services. U.S. laws and regulations are imposed primarily in connection with the Medicare and Medicaid programs, as well as the government’s interest in regulating the quality and cost of healthcare. Foreign governments also impose regulations in connection with their healthcare reimbursement programs and the delivery of healthcare items and services.

 

Federal healthcare laws apply when we or customers submit claims for items or services that are reimbursed under Medicare, Medicaid or other federally-funded healthcare programs. The principal federal laws include: (1) the False Claims Act which prohibits the submission of false or otherwise improper claims for payment to a federally-funded health care program; (2) the Anti-Kickback Statute which prohibits offers to pay or receive remuneration of any kind for the purpose of inducing or rewarding referrals of items or services reimbursable by a Federal healthcare program; and (3) the Stark law which prohibits physicians from referring Medicare or Medicaid patients to an entity for the provision of certain designated health services if the physician (or a member of the physician’s immediate family) has a financial relationship with that entity. There are often similar state false claims, anti-kickback, and anti-self referral laws that apply to claims submitted under state Medicaid or state-funded healthcare programs.

 

The laws applicable to us are subject to evolving interpretations. If a governmental authority were to conclude that we are not in compliance with applicable laws and regulations, Medtronic, its officers and employees, could be subject to severe criminal and civil penalties including substantial penalties, fines and damages, and exclusion from participation as a supplier of product to beneficiaries covered by Medicare or Medicaid.

 

33


Table of Contents

We operate in an industry characterized by extensive patent litigation. Patent litigation can result in significant damage awards and injunctions that could prevent the manufacture and sale of affected products or result in significant royalty payments in order to continue selling the products. At any given time, we are generally involved as both a plaintiff and a defendant in a number of patent infringement actions. While it is not possible to predict the outcome of patent litigation incident to our business, we believe the costs associated with this type of litigation could generally have a material adverse impact on our consolidated results of operations, financial position or cash flows. See “Legal Proceedings” for additional information.

 

We operate in an industry susceptible to significant product liability claims. These claims may be brought by individuals seeking relief or by groups seeking to represent a class. In addition, product liability claims may be asserted against us in the future based on events we are not aware of at the present time.

 

We are also subject to various environmental laws and regulations both within and outside the U.S. Like other medical device companies, our operations involve the use of substances regulated under environmental laws, primarily manufacturing and sterilization processes. We do not expect that compliance with environmental protection laws will have a material impact on our consolidated results of operations, financial position, or cash flows.

 

We have elected to self-insure most of our insurable risks, including medical and dental costs, disability coverage, physical loss to property, business interruptions, workers’ compensation, comprehensive general, director and officer, and product liability. This decision was made based on conditions in the insurance marketplace that have led to increasingly higher levels of self-insurance retentions, increasing number of coverage limitations, and dramatically higher insurance premium rates. We continue to monitor the insurance marketplace to evaluate the value to us of obtaining insurance coverage in the future. Based on historical loss trends, we believe that our self-insurance program accruals will be adequate to cover future losses. Historical trends, however, may not be indicative of future losses. These losses could have a material adverse impact on our consolidated results of operations, financial position, or cash flows.

 

Cautionary Factors That May Affect Future Results

 

This Annual Report may include “forward-looking” statements. Forward-looking statements broadly involve our current expectations or forecasts of future results. Our forward-looking statements generally relate to our growth strategies, financial results, product development, regulatory approvals, competitive strengths, intellectual property rights, litigation, mergers and acquisitions, market acceptance of our products, accounting estimates, financing activities, ongoing contractual obligations, and sales efforts. Such statements can be identified by the use of terminology such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “possible,” “project,” “should,” “will” and similar words or expressions. One must carefully consider forward-looking statements and understand that such statements may be affected by inaccurate assumptions and may involve a variety of risks and uncertainties, known and unknown, including, among others, those discussed in the previous section, in the section entitled “Risk Factors” in our Form 10-K, as well as those related to competition in the medical device industry, reduction or interruption in our supply, quality problems and price decrease for our products and services, and international operations. Consequently, no forward-looking statement can be guaranteed and actual results may vary materially. We intend to take advantage of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 regarding our forward-looking statements, and are including this sentence for the express purpose of enabling us to use the protections of the safe harbor with respect to all forward-looking statements.

 

We undertake no obligation to update any statement we make, but investors are advised to consult any further disclosures by us in our filings with the Securities and Exchange Commission, especially on Forms 10-K, 10-Q, and 8-K, in which we discuss in more detail various important factors that could cause actual results to differ from expected or historical results. In addition, actual results may differ materially from those anticipated due to a number of factors, including, among others, those discussed in the section entitled “Risk Factors” in our Form 10-K. It is not possible to foresee or identify all such factors. As such, investors should not consider any list of such factors to be an exhaustive statement of all risks, uncertainties, or potentially inaccurate assumptions.

 

34


Table of Contents

Reports of Management

 

Management’s Report on the Financial Statements

 

The management of Medtronic, Inc. is responsible for the integrity of the financial information presented in this Annual Report. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. Where necessary, and as discussed under Critical Accounting Estimates on pages 4-6, the consolidated financial statements reflect estimates based on management’s judgment.

 

The consolidated financial statements have been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, who conducted their audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). The independent registered public accounting firm’s responsibility is to express an opinion that such financial statements present fairly, in all material respects, our financial position, results of operations and cash flows in accordance with accounting principles generally accepted in the United States.

 

Management’s Report on Internal Control over Financial Reporting

 

Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Management conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this evaluation, management concluded that the Company’s internal control over financial reporting was effective as of April 27, 2007. Management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of April 27, 2007 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included herein.

 

/s/   Arthur D. Collins, Jr.

Arthur D. Collins, Jr.

Chairman of the Board and Chief Executive Officer

/s/   Gary L. Ellis

Gary L. Ellis

Senior Vice President and Chief Financial Officer

 



35


Table of Contents

Report of Independent Registered Public Accounting Firm

 

To the Shareholders and Board of Directors of Medtronic, Inc.:

 

We have completed integrated audits of Medtronic, Inc.’s April 27, 2007, April 28, 2006 and April 29, 2005 consolidated financial statements and of its internal control over financial reporting as of April 27, 2007, in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.

 

Consolidated Financial Statements

 

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of earnings, shareholders’ equity and cash flows present fairly, in all material respects, the financial position of Medtronic, Inc. and its subsidiaries (the Company) at April 27, 2007 and April 28, 2006, and the results of their operations and their cash flows for each of the three fiscal years in the period ended April 27, 2007 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

As discussed in Note 1 to the consolidated financial statements, in 2007 the Company changed the manner in which it accounts for share-based compensation and defined benefit pension and other postretirement plans as a result of adopting the provisions of Statement of Financial Accounting Standard No. 123 (revised 2004), “Share-Based Payment” and of Statement of Financial Accounting Standard No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans,” respectively.

 

Internal Control over Financial Reporting

 

Also, in our opinion, management’s assessment, included in the accompanying Management’s Report on Internal Control over Financial Reporting, that the Company maintained effective internal control over financial reporting as of April 27, 2007 based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of April 27, 2007, based on criteria established in Internal Control – Integrated Framework issued by the COSO. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

 

36


Table of Contents

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

/s/   PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Minneapolis, Minnesota

June 21, 2007

 







37


Table of Contents

Medtronic, Inc.

Consolidated  Statements of Earnings

 

 

Fiscal Year

 

 

 

2007

 

2006

 

2005

 

(in millions, except per share data)

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

12,299

 

$

11,292

 

$

10,055

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

Cost of products sold

 

 

3,168

 

 

2,815

 

 

2,446

 

Research and development expense

 

 

1,239

 

 

1,113

 

 

951

 

Selling, general and administrative expense

 

 

4,153

 

 

3,659

 

 

3,214

 

Special charges

 

 

98

 

 

100

 

 

—

 

Restructuring charges

 

 

28

 

 

—

 

 

—

 

Certain litigation charges

 

 

40

 

 

—

 

 

654

 

Purchased in-process research and development (IPR&D) charges

 

 

—

 

 

364

 

 

—

 

Other expense, net

 

 

212

 

 

167

 

 

291

 

Interest income, net

 

 

(154

)

 

(87

)

 

(45

)

Total costs and expenses

 

 

8,784

 

 

8,131

 

 

7,511

 

 

 

 

 

 

 

 

 

 

 

 

Earnings before income taxes

 

 

3,515

 

 

3,161

 

 

2,544

 

Provision for income taxes

 

 

713

 

 

614

 

 

740

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

$

2,802

 

$

2,547

 

$

1,804

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

Basic

 

$

2.44

 

$

2.11

 

$

1.49

 

Diluted

 

$

2.41

 

$

2.09

 

$

1.48

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

Basic

 

 

1,149.7

 

 

1,204.5

 

 

1,209.0

 

Diluted

 

 

1,161.8

 

 

1,217.3

 

 

1,220.8

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per common share

 

$

0.44

 

$

0.39

 

$

0.34

 

See accompanying notes to the consolidated financial statements.

 



38


Table of Contents

Medtronic, Inc.

Consolidated  Balance Sheets

 

 

 

April 27,
2007

 

April 28,
2006

 

(in millions, except share and per share data)

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,256

 

$

2,994

 

Short-term investments

 

 

1,822

 

 

3,107

 

Accounts receivable, less allowances of $160 and $184, respectively

 

 

2,737

 

 

2,429

 

Inventories

 

 

1,215

 

 

1,177

 

Deferred tax assets, net

 

 

405

 

 

197

 

Prepaid expenses and other current assets

 

 

483

 

 

473

 

Total current assets

 

 

7,918

 

 

10,377

 

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

 

2,062

 

 

1,881

 

Goodwill

 

 

4,327

 

 

4,346

 

Other intangible assets, net

 

 

1,433

 

 

1,592

 

Long-term investments

 

 

3,203

 

 

957

 

Long-term deferred tax assets, net

 

 

204

 

 

—

 

Other assets

 

 

365

 

 

512

 

Total assets

 

$

19,512

 

$

19,665

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Short-term borrowings

 

$

509

 

$

2,437

 

Accounts payable

 

 

282

 

 

319

 

Accrued compensation

 

 

767

 

 

723

 

Accrued income taxes

 

 

350

 

 

461

 

Other accrued expenses

 

 

655

 

 

466

 

Total current liabilities

 

 

2,563

 

 

4,406

 

 

 

 

 

 

 

 

 

Long-term debt

 

 

5,578

 

 

5,486

 

Deferred tax liabilities, net

 

 

—

 

 

22

 

Long-term accrued compensation

 

 

264

 

 

189

 

Other long-term liabilities

 

 

130

 

 

179

 

Total liabilities

 

 

8,535

 

 

10,282

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Notes 7, 14 and 15)

 

 

—

 

 

—

 

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

 

Preferred stock-par value $1.00; 2.5 million shares authorized, none outstanding

 

 

—

 

 

—

 

Common stock-par value $0.10; 1.6 billion shares authorized, 1,143,407,452 and 1,155,237,090 shares issued and outstanding, respectively

 

 

114

 

 

116

 

Retained earnings

 

 

10,925

 

 

9,112

 

Accumulated other comprehensive (loss)/income

 

 

(62

) 

 

155

 

Total shareholders’ equity

 

 

10,977

 

 

9,383

 

Total liabilities and shareholders’ equity

 

$

19,512

 

$

19,665

 

See accompanying notes to the consolidated financial statements.

 


39


Table of Contents

Medtronic, Inc.

Consolidated  Statements of Shareholders’ Equity

 

 

 

Common
Shares

 

Common
Stock

 

Retained
Earnings

 

Accumulated
Other
Comprehensive (Loss)/Income

 

Receivable
from Employee
Stock
Ownership Plan

 

Total
Shareholders’
Equity

 

(in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance April 30, 2004

 

 

1,209

 

$

121

 

$

8,891

 

$

72

 

$

(7

)

$

9,077

 

Net earnings

 

 

—

 

 

—

 

 

1,804

 

 

—

 

 

—

 

 

1,804

 

Other comprehensive (loss)/income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss on investments

 

 

—

 

 

—

 

 

—

 

 

(16

)

 

—

 

 

(16

)

Translation adjustment

 

 

—

 

 

—

 

 

—

 

 

63

 

 

—

 

 

63

 

Minimum pension liability

 

 

—

 

 

—

 

 

—

 

 

(5

)

 

—

 

 

(5

)

Unrealized gain on foreign exchange derivatives

 

 

—

 

 

—

 

 

—

 

 

36

 

 

—

 

 

36

 

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,882

 

Dividends to shareholders

 

 

—

 

 

—

 

 

(405

)

 

—

 

 

—

 

 

(405

)

Issuance of common stock under stock purchase and award plans

 

 

11

 

 

1

 

 

338

 

 

—

 

 

—

 

 

339

 

Repurchase of common stock

 

 

(10

)

 

(1

)

 

(510

)

 

—

 

 

—

 

 

(511

)

Excess tax benefit from exercise of stock-based awards

 

 

—

 

 

—

 

 

61

 

 

—

 

 

—

 

 

61

 

Repayments from employee stock ownership plan

 

 

—

 

 

—

 

 

—

 

 

—

 

 

7

 

 

7

 

Balance April 29, 2005

 

 

1,210

 

$

121

 

$

10,179

 

$

150

 

$

—

 

$

10,450

 

Net earnings

 

 

—

 

 

—

 

 

2,547

 

 

—

 

 

—

 

 

2,547

 

Other comprehensive (loss)/income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain on investments

 

 

—

 

 

—

 

 

—

 

 

1

 

 

—

 

 

1

 

Translation adjustment

 

 

—

 

 

—

 

 

—

 

 

(13

)

 

—

 

 

(13

)

Minimum pension liability

 

 

—

 

 

—

 

 

—

 

 

(9

)

 

—

 

 

(9

)

Unrealized gain on foreign exchange derivatives

 

 

—

 

 

—

 

 

—

 

 

26

 

 

—

 

 

26

 

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,552

 

Dividends to shareholders

 

 

—

 

 

—

 

 

(465

)

 

—

 

 

—

 

 

(465

)

Issuance of common stock under stock purchase and award plans

 

 

14

 

 

2

 

 

516

 

 

—

 

 

—

 

 

518

 

Repurchase of common stock

 

 

(69

)

 

(7

)

 

(3,582

)

 

—

 

 

—

 

 

(3,589

)

Excess tax benefit from exercise of stock-based awards

 

 

—

 

 

—

 

 

99

 

 

—

 

 

—

 

 

99

 

Purchased call options, net of tax benefit

 

 

—

 

 

—

 

 

(699

)

 

—

 

 

—

 

 

(699

)

Sale of warrants

 

 

—

 

 

—

 

 

517

 

 

—

 

 

—

 

 

517

 

Balance April 28, 2006

 

 

1,155

 

$

116

 

$

9,112

 

$

155

 

$

—

 

$

9,383

 

Net earnings

 

 

—

 

 

—

 

 

2,802

 

 

—

 

 

—

 

 

2,802

 

Other comprehensive (loss)/income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain on investments

 

 

—

 

 

—

 

 

—

 

 

20

 

 

—

 

 

20

 

Translation adjustment

 

 

—

 

 

—

 

 

—

 

 

18

 

 

—

 

 

18

 

Minimum pension liability

 

 

—

 

 

—

 

 

—

 

 

24

 

 

—

 

 

24

 

Unrealized loss on foreign exchange derivatives

 

 

—

 

 

—

 

 

—

 

 

(70

) 

 

—

 

 

(70

) 

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,794

 

Dividends to shareholders

 

 

—

 

 

—

 

 

(504

)

 

—

 

 

—

 

 

(504

)

Issuance of common stock under stock purchase and award plans

 

 

10

 

 

1

 

 

330

 

 

—

 

 

—

 

 

331

 

Adjustment to adopt SFAS No. 158 (Note 1)

 

 

—

 

 

—

 

 

—

 

 

(209

)

 

—

 

 

(209

)

Repurchase of common stock

 

 

(22

)

 

(3

)

 

(1,036

)

 

—

 

 

—

 

 

(1,039

)

Excess tax benefit from exercise of stock-based awards

 

 

—

 

 

—

 

 

36

 

 

—

 

 

—

 

 

36

 

Stock-based compensation

 

 

—

 

 

—

 

 

185

 

 

—

 

 

—

 

 

185

 

Balance April 27, 2007

 

 

1,143

 

$

114

 

$

10,925

 

$

(62

)

$

—

 

$

10,977

 

See accompanying notes to the consolidated financial statements.

 

40


Table of Contents

Medtronic, Inc.

Consolidated  Statements of Cash Flows

 

 

 

Fiscal Year

 

 

 

2007

 

2006

 

2005

 

(dollars in millions)

 

 

 

 

 

 

 

 

 

 

Operating Activities:

 

 

 

 

 

 

 

 

 

 

Net earnings

 

$

2,802

 

$

2,547

 

$

1,804

 

Adjustments to reconcile net earnings to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

583

 

 

544

 

 

463

 

Special charges

 

 

98

 

 

—

 

 

—

 

IPR&D charges

 

 

—

 

 

364

 

 

654

 

Provision for doubtful accounts

 

 

31

 

 

39

 

 

43

 

Stock-based compensation

 

 

185

 

 

25

 

 

19

 

Excess tax benefit from exercise of stock-based awards

 

 

(36

) 

 

99

 

 

61

 

Deferred income taxes

 

 

(236

) 

 

105

 

 

(143

) 

Change in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(326

)

 

(217

)

 

(271

)

Inventories

 

 

(24

)

 

(257

)

 

(51

) 

Prepaid expenses and other assets

 

 

(45

)

 

(86

)

 

(107

)

Accounts payable and accrued liabilities

 

 

17

 

 

(981

) 

 

409

 

Other long-term liabilities

 

 

(70

) 

 

38

 

 

(57

) 

Net cash provided by operating activities

 

 

2,979

 

 

2,220

 

 

2,824

 
 

Investing Activities:

 

 

 

 

 

 

 

 

 

 

Acquisitions, net of cash acquired

 

 

(8

)

 

(285

)

 

(108

)

Purchase of intellectual property

 

 

(121

)

 

(837

)

 

(10

) 

Additions to property, plant and equipment

 

 

(573

)

 

(407

)

 

(452

)

Purchases of marketable securities

 

 

(11,837

) 

 

(8,065

)

 

(1,805

)

Sales and maturities of marketable securities

 

 

10,894

 

 

6,627

 

 

803

 

Other investing activities, net

 

 

(56

) 

 

100

 

 

(31

) 

Net cash used in investing activities

 

 

(1,701

)

 

(2,867

)

 

(1,603

)
 

Financing Activities:

 

 

 

 

 

 

 

 

 

 

Change in short-term borrowings, net

 

 

45

 

 

(18

) 

 

90

 

Payments on long-term debt

 

 

(1,880

)

 

—

 

 

(2

) 

Issuance of long-term debt

 

 

—

 

 

5,428

 

 

—

 

Purchase of call options

 

 

—

 

 

(1,075

) 

 

—

 

Sale of warrants

 

 

—

 

 

517

 

 

—

 

Dividends to shareholders

 

 

(504

)

 

(465

)

 

(405

)

Repurchase of common stock

 

 

(1,039

)

 

(3,589

)

 

(511

)

Issuance of common stock

 

 

331

 

 

506

 

 

334

 

Excess tax benefit from exercise of stock-based awards

 

 

36

 

 

—

 

 

—

 

Net cash (used in) provided by financing activities

 

 

(3,011

) 

 

1,304

 

 

(494

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(5

) 

 

105

 

 

(89

)

 

 

 

 

 

 

 

 

 

 

 

Net change in cash and cash equivalents

 

 

(1,738

) 

 

762

 

 

638

 

Cash and cash equivalents at beginning of period

 

 

2,994

 

 

2,232

 

 

1,594

 

Cash and cash equivalents at end of period

 

$

1,256

 

$

2,994

 

$

2,232

 
 

Supplemental Cash Flow Information:

 

 

 

 

 

 

 

 

 

 

Cash paid during the year for:

 

 

 

 

 

 

 

 

 

 

Income taxes

 

$

1,034

 

$

860

 

$

559

 

Interest

 

 

230

 

 

109

 

 

55

 

Supplemental Noncash Investing and Financing Activities:

 

 

 

 

 

 

 

 

 

 

Reclassification of debentures from short-term to long-term debt

 

$

94

 

$

—

 

$

1,973

 

Reclassification of debentures from long-term to short-term debt

 

 

—

 

 

1,971

 

 

—

 

 

See accompanying notes to the consolidated financial statements.

 

41


Table of Contents

Medtronic, Inc.

Notes to Consolidated Financial Statements  

(dollars in millions, except per share data)

 

1.

Summary of Significant Accounting Policies

 

Nature of Operations   Medtronic, Inc. (Medtronic or the Company) is the global leader in medical technology, alleviating pain, restoring health, and extending life for millions of people around the world. The Company provides innovative products and therapies for use by medical professionals to meet the healthcare needs of their patients. Primary products include those for cardiac rhythm disorders, cardiovascular disease, neurological disorders, spinal conditions and musculoskeletal trauma, urological and digestive disorders, diabetes, and ear, nose, and throat conditions.

 

The Company is headquartered in Minneapolis, Minnesota, and markets its products primarily through a direct sales force in the United States (U.S.) and a combination of direct sales representatives and independent distributors in international markets. The primary markets for products are the U.S., Western Europe, and Japan.

 

Principles of Consolidation   The consolidated financial statements include the accounts of Medtronic, Inc., and all of its subsidiaries. All significant intercompany transactions and accounts have been eliminated. The principles of Financial Accounting Standards Board (FASB) Interpretation (FIN) No. 46 (revised December 2003), “Consolidation of Variable Interest Entities” and Accounting Research Bulletin (ARB) No. 51, “Consolidated Financial Statements” are considered when determining whether an entity is subject to consolidation.

 

Fiscal Year-End   The Company utilizes a 52/53-week fiscal year, ending the last Friday in April. The Company’s fiscal years 2007, 2006, and 2005 ended on April 27, 2007, April 28, 2006, and April 29, 2005, respectively, all of which were 52-week years.

 

Use of Estimates   The preparation of the financial statements in conformity with accounting principles generally accepted in the U.S. (U.S. GAAP) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ materially from those estimates.

 

Cash Equivalents   The Company considers highly liquid investments with maturities of three months or less from the date of purchase to be cash equivalents. These investments are carried at cost, which approximates fair value.

 

Investments   Investments in marketable equity securities and debt securities are classified and accounted for as available-for-sale (AFS) at April 27, 2007 and April 28, 2006. AFS debt securities are recorded at fair value in both short-term and long-term investments and AFS equity securities are recorded at fair value in long-term investments in the consolidated balance sheets. The change in fair value for AFS securities is recorded, net of taxes, as a component of accumulated other comprehensive (loss)/income in the consolidated balance sheets. Management determines the appropriate classification of its investments in debt and equity securities at the time of purchase and reevaluates such determinations at each balance sheet date.

 

Certain of the Company’s investments in equity securities are long-term, strategic investments in companies that are in varied stages of development. The Company accounts for these investments under the cost or the equity method of accounting, as appropriate. The valuation of equity securities accounted for under the cost method considers all available financial information related to the investee, including valuations based on recent third-party equity investments in the investee. If an unrealized loss for any investment is considered to be other-than-temporary, the loss will be recognized in the consolidated statements of earnings in the period the determination is made. Equity securities accounted for under the equity method are recorded at the amount of the Company’s investment and adjusted each period for the Company’s share of the investee’s income or loss and dividends paid. Equity securities accounted for under both the cost and equity methods are reviewed quarterly for changes in circumstance or the occurrence of events that suggest the Company’s investment may not be recoverable. See Note 5 for discussion of the gains and losses recognized on equity securities. As of both April 27, 2007 and April 28, 2006, the Company had $190 of equity securities, which are recorded as long-term investments in the consolidated balance sheets. Of these investments, $150 and $176, respectively, represent investments in companies that do not have quoted market prices.

 

42


Table of Contents

Accounts Receivable   The Company grants credit to customers in the normal course of business, but generally does not require collateral or any other security to support its receivables. The Company maintains an allowance for doubtful accounts for potential credit losses. Uncollectible accounts are written-off against the allowance when it is deemed that a customer account is uncollectible. The allowance for doubtful accounts was $160 at April 27, 2007 and $184 at April 28, 2006.

 

Inventories    Inventories are stated at the lower of cost or market, with cost determined on a first-in, first-out basis. Inventory balances are as follows:

 

 

 

April 27,
2007

 

April 28,
2006

 

Finished goods

 

$

753

 

$

736

 

Work in process

 

 

209

 

 

197

 

Raw materials

 

 

253

 

 

244

 

Total

 

$

1,215

 

$

1,177

 

 

Property, Plant and Equipment   Property, plant and equipment is stated at cost. Additions and improvements that extend the lives of the assets are capitalized while expenditures for repairs and maintenance are expensed as incurred. Depreciation is provided using the straight-line method over the estimated useful lives of the various assets. Property, plant and equipment balances and corresponding lives are as follows:

 

 

 

April 27,
2007

 

April 28,
2006

 

Lives
(in years)

Land and land improvements

 

$

95

 

$

92

 

Up to 20

Buildings and leasehold improvements

 

 

1,007

 

 

955

 

Up to 40

Equipment

 

 

2,784

 

 

2,513

 

3-7

Construction in progress

 

 

423

 

 

234

 

—

Subtotal

 

 

4,309

 

 

3,794

 

 

Less: Accumulated depreciation

 

 

(2,247

)

 

(1,913

)

 

Property, plant and equipment, net

 

$

2,062

 

$

1,881

 

 

 

Depreciation expense of $401, $369, and $335 was recognized in fiscal years 2007, 2006, and 2005, respectively.

 

Goodwill   Goodwill is the excess of purchase price of an acquired entity over the amounts assigned to assets acquired and liabilities assumed in a business combination. In accordance with Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets,” goodwill is not amortized. Goodwill is tested for impairment annually and when an event occurs or circumstances change that would indicate the carrying amount may be impaired. Impairment testing for goodwill is done at a reporting unit level. An impairment loss is recognized when the carrying amount of the reporting unit’s net assets exceeds the estimated fair value of the reporting unit. The estimated fair value is determined using discounted future cash flows analysis. The Company completed its annual goodwill impairment test in the third quarter of fiscal years 2007, 2006, and 2005 and determined that no goodwill was impaired.

 

Intangible Assets   Intangible assets include patents, trademarks, and purchased technology. Intangible assets with a definite life are amortized on a straight-line or accelerated basis, as appropriate, with estimated useful lives ranging from 3 to 20 years. Intangible assets with a definite life are tested for impairment whenever events or circumstances indicate that a carrying amount of an asset (asset group) may not be recoverable. Impairment is calculated as the excess of the asset’s carrying value over its fair value. Fair value is generally determined using a discounted future cash flows analysis. As of April 27, 2007, all of the Company’s intangible assets are definite lived and amortized on a straight-line basis.

 

Warranty Obligation   The Company offers a warranty on various products. The Company estimates the costs that may be incurred under its warranties and records a liability in the amount of such costs at the time the product is sold. Factors that affect the Company’s warranty liability include the number of units sold, historical and anticipated rates of warranty claims, and cost per claim. The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary. The amount of the reserve recorded is equal to the costs to repair or otherwise satisfy the claim. The Company includes the covered costs associated with field actions, if any, in warranty expense.

 

43


Table of Contents

Changes in the Company’s product warranty obligations during the years ended April 27, 2007 and April 28, 2006 consisted of the following:

 

Balance April 29, 2005

 

$

43

 

Warranty claims provision

 

 

47

 

Settlements made

 

 

(49

)

 

 

 

 

 

Balance April 28, 2006

 

 

41

 

Warranty claims provision

 

 

27

 

Settlements made

 

 

(34

)

 

 

 

 

 

Balance April 27, 2007

 

$

34

 

 

Self-Insurance   It is the Company’s policy to self-insure the vast majority of its insurable risks including medical and dental costs, disability coverage, physical loss to property, business interruptions, workers’ compensation, comprehensive general, director and officer and product liability. Insurance coverage is obtained for those risks required to be insured by law or contract. A provision for losses under the self-insured program is recorded and revised quarterly. The Company uses claims data and historical experience, as applicable, to estimate liabilities associated with the exposures that the Company has self-insured. Based on historical loss trends, the Company believes that its self-insurance program accruals are adequate to cover future losses. Historical trends, however, may not be indicative of future losses. These losses could have a material adverse impact on the Company’s consolidated financial statements.

 

Retirement Benefit Plan Assumptions   The Company sponsors various retirement benefit plans, including defined benefit pension plans, defined contribution savings plans, post-retirement medical plans, and termination indemnity plans, covering substantially all U.S. employees and many employees outside the U.S. Pension benefit and post-retirement medical plan costs include assumptions for the discount rate, retirement age, compensation rate increases, and the expected return on plan assets. Post-retirement medical plan costs also incorporate healthcare cost trend rate assumptions.

 

Annually, the Company evaluates the discount rate, retirement age, compensation rate increases, expected return on plan assets and healthcare cost trend rates of its pension benefit and post-retirement medical plans. In evaluating these assumptions, many factors are considered, including an evaluation of assumptions made by other companies, historical assumptions compared to actual results, current market conditions, asset allocations, and the views of leading financial advisors and economists. In evaluating the expected retirement age assumption, the Company considers the retirement ages of past employees eligible for pension and medical benefits together with expectations of future retirement ages.

 

It is reasonably possible that changes in these assumptions will occur in the near term and, due to the uncertainties inherent in setting assumptions, the effect of such changes could be material to the Company’s consolidated financial statements. Refer to Note 13 for additional information regarding the Company’s retirement benefit plans.

 

Revenue Recognition   The Company sells its products primarily through a direct sales force in the U.S. and a combination of direct sales representatives and independent distributors in international markets. The Company recognizes revenue when title to the goods and risk of loss transfers to customers, provided there are no remaining performance obligations required of the Company or any matters requiring customer acceptance. In cases where the Company utilizes distributors or ships product directly to the end user, it recognizes revenue upon shipment provided all revenue recognition criteria have been met. A portion of the Company’s revenue is generated from inventory maintained at hospitals or with field representatives. For these products, revenue is recognized at the time that the product has been used or implanted. The Company records estimated sales returns, discounts, and rebates as a reduction of net sales in the same period revenue is recognized.

 

Research and Development   Research and development costs are expensed when incurred.

 

IPR&D   When the Company acquires another entity, the purchase price is allocated, as applicable, between IPR&D, other identifiable intangible assets, net tangible assets, and goodwill. The Company’s policy defines IPR&D as the value assigned to those projects for which the related products have not received regulatory approval and have no alternative future use. Determining the portion of the purchase price allocated to IPR&D requires the Company to make significant estimates. The amount of the purchase price allocated to IPR&D is determined by estimating the future cash flows of each project or technology and discounting the net cash flows back to their present values. The discount rate used is determined at the time of acquisition in accordance with accepted valuation methods. These methodologies include consideration of the risk of the project not achieving commercial feasibility.

 

44


Table of Contents

Other Expense, Net   Other expense, net includes intellectual property amortization expense, royalty income and expense, realized equity security gains and losses, realized foreign currency transaction and derivative gains and losses, and impairment charges on equity securities.

 

Stock-Based Compensation Our compensation programs include share-based payments. Beginning in fiscal year 2007, all awards under share-based payment programs are accounted for at fair value and these fair values are generally amortized on a straight-line basis over the vesting terms into cost of products sold, research and development expense, and selling, general and administrative expense in the consolidated statement of earnings, as appropriate. In fiscal year 2006 and earlier years, grants under share-based payment programs were accounted for using the intrinsic value method, which measured fair value based on the difference between the quoted market price of the stock and the exercise price on the date of grant. Refer to Note 11 for additional information.

 

Foreign Currency Translation   Assets and liabilities are translated to U.S. dollars at period-end exchange rates, and the resulting gains and losses arising from the translation of net assets located outside the U.S. are recorded as a cumulative translation adjustment, a component of accumulated other comprehensive (loss)/income in the consolidated balance sheets. Elements of the consolidated statements of earnings are translated at average exchange rates in effect during the period and foreign currency transaction gains and losses are included in other expense, net in the consolidated statements of earnings.

 

Comprehensive Income and Accumulated Other Comprehensive (Loss)/Income   In addition to net earnings, comprehensive income includes changes in foreign currency translation adjustments (including the change in current exchange rates, or spot rates, of net investment hedges), unrealized gains and losses on foreign exchange derivative contracts qualifying and designated as cash flow hedges, minimum pension liabilities, and unrealized gains and losses on AFS marketable securities. Comprehensive income in fiscal years 2007, 2006, and 2005 was $2,794, $2,552, and $1,882, respectively.

 

Presented below is a summary of activity for each component of accumulated other comprehensive (loss)/income for fiscal years 2007, 2006, and 2005:

 

 

 

Cumulative
Translation
Adjustments

 

Unrealized
Gain/(Loss) on
Foreign Exchange Derivatives

 

Minimum
Pension Liability
and SFAS No. 158
Adjustments

 

Unrealized
Gain/(Loss) on
Investments

 

Accumulated
Other
Comprehensive
(Loss)/Income

 

Balance April 30, 2004

 

$

127

 

$

(47

)

$

(10

)

$

1

 

$

72

 

Other comprehensive (loss)/income

 

 

63

 

 

36

 

 

(5

)

 

(16

)

 

78

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance April 29, 2005

 

 

190

 

 

(11

)

 

(15

)

 

(15

)

 

150

 

Other comprehensive (loss)/income

 

 

(13

)

 

26

 

 

(9

)

 

1

 

 

5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance April 28, 2006

 

 

177

 

 

15

 

 

(24

)

 

(14

)

 

155

 

Other comprehensive (loss)/income

 

 

18

 

 

(70

)

 

24

 

 

20

 

 

(8

)

Adoption of SFAS No. 158

 

 

—

 

 

—

 

 

(209

)

 

—

 

 

(209

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance April 27, 2007

 

$

195

 

$

(55

)

$

(209

)

$

6

 

$

(62

)

 

Translation adjustments are not adjusted for income taxes as substantially all translation adjustments relate to permanent investments in non-U.S. subsidiaries. The tax (benefit)/expense on the unrealized (loss)/gain on derivatives in fiscal years 2007, 2006, and 2005 was $(38), $14, and $21, respectively. The tax benefit on the minimum pension liability was $5 and $3 in fiscal years 2006 and 2005, respectively. The minimum pension liability was eliminated at the end of fiscal year 2007 as a result of our adoption of SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106 and 132(R)” (SFAS No. 158). The tax benefit/(expense) on the unrealized gain/(loss) on investments in fiscal years 2007, 2006, and 2005 was $(11), $(1) and $9, respectively.

 

Derivatives   SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” (SFAS No. 133) as amended, requires companies to recognize all derivatives as assets and liabilities on the balance sheet and to measure the instruments at fair value through earnings unless the derivative qualifies as a hedge. If the derivative is a hedge, depending on the nature of the hedge and hedge effectiveness, changes in the fair value of the derivative will either be recorded currently through earnings or recognized in accumulated other comprehensive (loss)/income in the consolidated balance sheets until the hedged item is recognized in earnings. The changes in the fair value of the derivative will offset the change in fair value of the hedged asset, liability, net investment, or probable commitment. The Company evaluates hedge effectiveness at inception and on an ongoing basis. If a derivative is no longer expected to be highly effective, hedge accounting is discontinued. Hedge ineffectiveness, if any, is recorded in earnings.

 

45


Table of Contents

The Company uses derivative instruments, primarily forward exchange contracts, to manage its exposure related to foreign exchange rate changes. The Company enters into contracts with major financial institutions that change in value as foreign exchange rates change. These contracts are designated either as cash flow hedges, net investment hedges, or freestanding derivatives. It is the Company’s policy to enter into forward exchange derivative contracts only to the extent true exposures exist; the Company does not enter into forward exchange derivative contracts for speculative purposes. Principal currencies hedged are the Euro and the Japanese Yen. All derivative instruments are recorded at fair value in the consolidated balance sheets, as a component of prepaid expenses and other current assets, other assets, other accrued expenses, or other long-term liabilities depending upon the gain or loss position of the contract and contract maturity date.

 

Forward contracts designated as cash flow hedges are designed to hedge the variability of cash flows associated with forecasted transactions denominated in a foreign currency that will take place in the future. Changes in value of derivatives designated as cash flow hedges are recorded in accumulated other comprehensive (loss)/income in the consolidated balance sheets until earnings are affected by the variability of the underlying cash flows. At that time, the applicable amount of gain or loss from the derivative instrument, that is deferred in shareholders’ equity, is reclassified to earnings and is included in other expense, net or cost of products sold in the consolidated statements of earnings, depending on the underlying transaction that is being hedged.

 

The purpose of net investment hedges is to hedge the long-term investment (equity) in foreign operations. The gains and losses related to the change in the forward exchange rates of the net investment hedges are recorded currently in earnings as other expense, net. The gains and losses based on changes in the current exchange rates, or spot rates, are recorded as a cumulative translation adjustment, a component of accumulated other comprehensive (loss)/income in the consolidated balance sheets.

 

In addition, the Company uses forward exchange contracts to offset its exposure to the change in value of certain foreign currency intercompany assets and liabilities. These forward exchange contracts are not designated as hedges, and therefore, changes in the value of these freestanding derivatives are recognized currently in earnings, thereby offsetting the current earnings effect of the related foreign currency assets and liabilities.

 

Earnings Per Share   Basic earnings per share is computed based on the weighted average number of common shares outstanding. Diluted earnings per share is computed based on the weighted average number of common shares outstanding increased by the number of additional shares that would have been outstanding had the potentially dilutive common shares been issued and reduced by the number of shares the Company could have repurchased from the proceeds from issuance of the potentially dilutive shares. Potentially dilutive shares of common stock include stock options and other stock-based awards granted under stock-based compensation plans and shares committed to be purchased under the employee stock purchase plan.

 





46


Table of Contents

The table below sets forth the computation of basic and diluted earnings per share:

 

 

 

Fiscal Year

 

(shares in millions)

 

2007

 

2006

 

2005

 

 

 

 

 

 

 

 

 

 

 

 

Numerator:

 

 

 

 

 

 

 

 

 

 

Net earnings

 

$

2,802

 

$

2,547

 

$

1,804

 

 

 

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

 

 

Basic-weighted average shares outstanding

 

 

1,149.7

 

 

1,204.5

 

 

1,209.0

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

 

Employee stock options

 

 

9.9

 

 

10.4

 

 

9.6

 

Shares issuable upon conversion of Contingent Convertible Debentures

 

 

0.2

 

 

0.7

 

 

0.7

 

Other

 

 

2.0

 

 

1.7

 

 

1.5

 

Diluted-weighted average shares outstanding

 

 

1,161.8

 

 

1,217.3

 

 

1,220.8

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

2.44

 

$

2.11

 

$

1.49

 

Diluted earnings per share

 

$

2.41

 

$

2.09

 

$

1.48

 

 

The calculation of weighted average diluted shares outstanding excludes options for approximately 35 million, 12 million and 11 million common shares in fiscal years 2007, 2006 and 2005, respectively, as the exercise price of those options was greater than the average market price, resulting in an anti-dilutive effect on diluted earnings per share.

 

New Accounting Standards

 

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (FIN No. 48), which is an interpretation of SFAS No. 109, “Accounting for Income Taxes” (SFAS No. 109). FIN No. 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109. FIN No. 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN No. 48 also provides guidance on recognition, measurement, presentation, disclosure, and transition. FIN No. 48 is effective for the Company beginning with fiscal year 2008, with earlier adoption permitted. The Company is still evaluating the impact that the adoption of FIN No. 48 will have on the consolidated financial statements, but does not believe it will be material to the consolidated financial statements.

 

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (SFAS No. 157). SFAS No. 157 establishes a framework for measuring fair value in accordance with generally accepted accounting principles, clarifies the definition of fair value within that framework, and expands disclosures about fair value measurements. SFAS No. 157 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value, except for the measurement of share-based payments. The standard does not expand the use of fair value in any new circumstances. SFAS No. 157 is effective, for the Company, beginning the first quarter of fiscal year 2009. For certain types of financial instruments, SFAS No. 157 requires a limited form of retrospective transition, whereby the cumulative impact of the change in principle is recognized in the opening balance of retained earnings in the fiscal year of adoption. All other provisions of SFAS No. 157 will be applied prospectively beginning in the first quarter of fiscal year 2009. The Company is currently evaluating the impact that the adoption of SFAS No. 157 will have on the consolidated financial statements.

 

In September 2006, the FASB issued SFAS No. 158 which requires the recognition of an asset or liability for the funded status of defined benefit pension and other post-retirement benefit plans in the statement of financial position. The funded status of a defined benefit plan is measured as the difference between plan assets at fair value and the benefit obligation. For a defined benefit pension plan, the benefit obligation is the projected benefit obligation (PBO); for any other defined benefit post-retirement plan, such as a retiree health care plan, the benefit obligation is the accumulated post-retirement benefit obligation. The initial incremental recognition of the funded status under SFAS No. 158 of our defined pension and other post-retirement benefit plans, as well as subsequent changes in our funded status that are not included in net periodic benefit cost will be reflected in accumulated other comprehensive (loss)/income. As of April 27, 2007, the net unfunded status of our defined benefit plans was $(2) and recognition of this status upon the adoption of SFAS No. 158 resulted in an after-tax charge to shareholders’ equity of $209. Amounts recognized in accumulated other comprehensive (loss)/income are adjusted as they are subsequently recognized as a component of net periodic benefit cost. The method of calculating net periodic benefit cost will not change from existing guidance. SFAS No. 158 also prescribes enhanced disclosures, including current and long-term components of plan assets and liabilities, as well as amounts recognized in accumulated other comprehensive (loss)/income that will subsequently be recognized as a component of net periodic benefit cost in the following year. See Note 13 for additional information.

 

47


Table of Contents

The funded status recognition and certain disclosure provisions of SFAS No. 158 are effective for the Company’s fiscal year ended April 27, 2007. SFAS No. 158 also requires the consistent measurement of plan assets and benefit obligations as of the date of the Company’s fiscal year-end statement of financial position effective for the Company’s fiscal year ending April 25, 2008. A select number of the Company’s plans, including the U.S. plans, currently have a January 31 measurement date. This standard will require the Company to change, in fiscal year 2008, that measurement date to match the date of the Company’s fiscal year-end. The Company does not expect a material impact on the financial condition for those plans in which the Company has not adopted the requirement to measure the plan assets and benefit obligation as of the date of the balance sheet.

 

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (SFAS No. 159). SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value. SFAS No. 159 will be effective at the beginning of fiscal year 2009. The Company is still evaluating the impact that the adoption of SFAS No. 159 will have on the consolidated financial statements, but does not believe it will be material to the consolidated financial statements.

 

2.

Special and Certain Litigation Charges

 

Special Charges

 

In fiscal year 2007 the Company concluded two intangible assets were impaired due to inadequate clinical results and the resulting delays in product development. As a result, in the fourth quarter of fiscal year 2007 the Company recorded a $59 after-tax ($98 pre-tax) special charge related to the impairments of intangible assets stemming from the July 1, 2005 acquisition of Transneuronix, Inc. (TNI) and the November 1, 2004 acquisition of Angiolink Corporation (Angiolink). TNI focused on the development of an implantable gastric stimulator to treat obesity. Angiolink focused on the development of wound closure devices for vascular procedures.

 

In fiscal year 2006, the Company recorded a $66 after-tax ($100 pre-tax) charitable donation to The Medtronic Foundation, which is a related party non-profit organization. The donation to The Medtronic Foundation was paid in the second quarter of fiscal year 2006.

 

There were no special charges in fiscal year 2005.

 

Certain Litigation Charges

 

In fiscal year 2007, the Company reached a settlement agreement with the United States Department of Justice which requires the government to obtain dismissal of the two qui tam civil suits and is conditioned upon such dismissal being obtained. To resolve the matter, Medtronic has entered into a five-year corporate integrity agreement effective upon dismissal of the two suits that further strengthens its employee training and compliance systems surrounding sales and marketing practices. The settlement agreement also reflects Medtronic’s assertion that the Company and its current employees have not engaged in any wrongdoing or illegal activity. Medtronic also agreed to pay $40 pending dismissal of the related lawsuits, and recorded an expense in that amount in the first quarter of fiscal year 2007.

 

There were no certain litigation charges in fiscal year 2006.

 

In fiscal year 2005, the Company recorded after-tax certain litigation charges of $418 ($654 pre-tax). The largest of the charges, in the amount of $550 pre-tax, related to costs for the settlement of all outstanding litigation and disputes with Gary Michelson, M.D. and Karlin Technology, Inc. (Michelson). The agreement reached with Michelson required a total cash payment of $1,350 for the settlement of all ongoing litigation and the purchase of a portfolio of more than 100 issued U.S. patents, over 110 pending U.S. patent applications and numerous foreign counterparts to these patents and patent applications. The $550 was assigned to past damages between the parties and was recorded as an expense in fiscal year 2005. The remaining consideration, including $3 of direct acquisition costs, was allocated between $628 of acquired technology based intangible assets and $175 of IPR&D that was expensed on the date of acquisition (May 18, 2005). Also, in fiscal year 2005, the Company recorded a pre-tax charge of $80 resulting from a final arbitration award for breach of contract damages related to a March 2002 agreement between the Company and ETEX Corporation (ETEX). The $80 included $64 in damages, interest, and partial legal fees and the forgiveness of an existing $17 note owed to the Company by ETEX. In the third quarter of fiscal year 2005, the Company recorded a pre-tax charge of $24 related to the DePuy/AcroMed litigation. The jury found that the thoracolumbar multiaxial screw design of Medtronic Sofamor Danek, Inc. (MSD), which MSD no longer sells in the U.S., infringed patents held by DePuy/AcroMed under the doctrine of equivalents. In February 2005, the Court entered judgment against MSD in the amount of $24, which included prejudgment interest. Given the judgment entered by the Court and the Company’s conclusion that the incurrence of such an expense was both probable and could be reasonably estimated under SFAS No. 5 at that point and time, the Company recorded a $24 charge related to this judgment. MSD has appealed the jury’s verdict and intends to continue to contest the charges vigorously. In fiscal year 2007, the Company paid the outstanding Depuy/AcroMed judgment and interest under protest.

 

48


Table of Contents

3.

Restructuring Charges

 

In fiscal year 2007, the Company recorded a $25 ($36 pre-tax) restructuring charge, which consisted of employee termination costs of $20 ($28 pre-tax) and asset write-downs of $5 ($8 pre-tax). These initiatives began in the fourth quarter of fiscal year 2007 and are designed to drive manufacturing efficiencies in the Company’s Vascular business, downsize the Physio-Control business due to the Company’s voluntary suspension of U.S. shipments, and rebalance resources within the Cardiac Rhythm Disease Management (CRDM) business in response to current market dynamics. The employee termination costs consist of severance and the associated costs of continued medical benefits, and outplacement services. The Company has identified approximately 900 positions for elimination which will be achieved through early retirement packages offered to employees, voluntary separations, and involuntary separations, as necessary. Of the positions identified for elimination, 196 have been eliminated as of April 27, 2007. The asset write-downs consist of a $4 after-tax charge for inventory write-downs, and a $1 after-tax charge for asset write-downs. The inventory and asset write-downs were recorded within cost of products sold in the consolidated statement of earnings. The restructuring initiatives are scheduled to be completed by the end of fiscal year 2008.

 

A summary of the activity related to the fiscal year 2007 restructuring initiatives is presented below:

 

 

 

Employee
Termination
Costs

 

Asset
Write-
downs

 

Total

 

Balance at April 28, 2006

 

$

—

 

$

—

 

$

—

 

Restructuring charges

 

 

28

 

 

8

 

 

36

 

Payments/write-downs

 

 

(5

)

 

(8

)

 

(13

)

Balance at April 27, 2007

 

$

23

 

$

—

 

$

23

 

 

In the first quarter of fiscal year 2008 the Company expects to incur additional charges related to its restructuring initiatives that began in the fourth quarter of fiscal year 2007. Part of the additional expense is anticipated from increased retirement benefits in the Company’s defined benefit pension plans provided to those employees that elect early retirement. Additionally, the Company will recognize added expense associated with compensation provided to select employees whose employment terminates with the Company in the first quarter of fiscal year 2008 as part of the restructuring. These incremental costs were not accrued in fiscal year 2007 because they had not yet been communicated to the impacted employees.

 

There were no restructuring charges in fiscal years 2006 and 2005.

 

4.

Acquisitions and IPR&D Charges

 

The values assigned to IPR&D are based on valuations that have been prepared using methodologies and valuation techniques consistent with those used by independent appraisers. All values were determined by identifying research projects in areas for which technological feasibility had not been established. Additionally, the values were determined by estimating the revenue and expenses associated with a project’s sales cycle and the amount of after-tax cash flows attributable to these projects. The future cash flows were discounted to present value utilizing an appropriate risk-adjusted rate of return. The rate of return included a factor that takes into account the uncertainty surrounding the successful development of the IPR&D.

 

At the time of acquisition, the Company expects all acquired IPR&D will reach technological feasibility, but there can be no assurance that the commercial viability of these products will actually be achieved. The nature of the efforts to develop the acquired technologies into commercially viable products consists principally of planning, designing, and conducting clinical trials necessary to obtain regulatory approvals. The risks associated with achieving commercialization include, but are not limited to, delay or failure to obtain regulatory approvals to conduct clinical trials, delay or failure to obtain required market clearances, and patent issuance, validity and litigation, if any. If commercial viability were not achieved, the Company would likely look to other alternatives to provide these therapies.

 

Fiscal Year 2007

 

On March 26, 2007, the Company acquired manufacturing assets, know-how, and an exclusive license to intellectual property related to the manufacture and distribution of EndoSheath products from Vision–Sciences, Inc. (VSI), which was accounted for as a purchase of assets. The license acquired from VSI will expand the Company’s existing U.S. distribution rights of EndoSheath products to worldwide distribution rights. The EndoSheath is a sterile disposable sheath that fits over a fiberoptic endoscope preventing contamination of the scope during procedures and allowing reuse of the scope without further sterilization. The consideration paid was $27 in cash which was primarily allocated to technology-based intangible assets with an estimated useful life of 10 years. The purchase price is subject to increases triggered by the achievement of certain milestones.

 

49


Table of Contents

On September 15, 2006, the Company acquired and/or licensed selected patents and patent applications owned by Dr. Eckhard Alt (Dr. Alt), or certain of his controlled companies in a series of transactions. In connection therewith, the Company also resolved all outstanding litigation and disputes with Dr. Alt and certain of his controlled companies. The agreements required the payment of total consideration of $75, $74 of which was capitalized as technology based intangible assets that had an estimated useful life of 11 years at the time of acquisition. The acquired patents or licenses pertain to the cardiac rhythm disease management field and have both current application and potential for future patentable commercial products.

 

On July 25, 2006, the Company acquired substantially all of the assets of Odin Medical Technologies, Ltd. (Odin), a privately held company. Prior to the acquisition, the Company had an equity investment in Odin, which was accounted for under the cost method of accounting. Odin focused on the manufacture of the PoleStar intra-operative Magnetic Resonance Image (iMRI)-Guidance System which was already exclusively distributed by the Company. This acquisition is expected to help the Company further drive the acceptance of iMRI guidance in neurosurgery. The consideration for Odin was approximately $21, which included $6 in upfront cash and a $2 milestone payment made in the three months ended October 27, 2006. The $8 in net cash paid resulted from the $21 in consideration less the value of the Company’s prior investment in Odin and Odin’s existing cash balance. In connection with the acquisition of Odin, the Company acquired $9 of technology-based intangible assets that had an estimated useful life of 12 years at the time of acquisition. Goodwill of $12 related to the acquisition was assigned entirely to the Spinal and Navigation operating segment. This goodwill is deductible for tax purposes. The results of operations related to Odin have been included in the Company’s consolidated statements of earnings since the date of the acquisition. The pro forma impact of Odin was not significant to the results of the Company for the fiscal year ended April 27, 2007.

 

Fiscal Year 2006

 

On August 26, 2005, the Company acquired all the outstanding stock of Image-Guided Neurologics, Inc. (IGN), a privately held company. Prior to the acquisition, the Company had an equity investment in IGN, which was accounted for under the cost method of accounting. IGN specialized in precision navigation and delivery technologies for brain surgery. The IGN product line includes the NexFrame disposable, “frameless” sterotactic head frame, which is used in conjunction with image-guided surgery systems during deep brain stimulation. This acquisition complements the Company’s position in deep brain stimulation by offering instruments that simplify the procedure for surgeons and improve patient comfort during surgery. The total consideration for IGN was approximately $65, which includes $58 in net cash paid. The $58 in net cash paid results from the $65 in consideration less the value of the Company’s prior investment in IGN and IGN’s existing cash balance. As a result of the acquisition of IGN, the Company acquired $22 of intangible assets of which $22 are technology-based intangible assets that had an estimated useful life of 12 years at the time of acquisition. Goodwill of $41 related to the acquisition was assigned entirely to the Neurological operating segment. This goodwill is not deductible for tax purposes.

 

The following table summarizes the allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed:

 

Current assets

 

$

3

 

Property, plant and equipment

 

 

1

 

Other intangible assets

 

 

22

 

Goodwill

 

 

41

 

Total assets acquired

 

 

67

 

 

 

 

 

 

Current liabilities

 

 

1

 

Deferred tax liability – long term

 

 

1

 

Total liabilities assumed

 

 

2

 

Net assets acquired

 

$

65

 

 

On July 1, 2005, the Company acquired all of the outstanding stock of TNI, a privately held company. Prior to the acquisition, the Company had an equity investment in TNI, which was accounted for under the cost method of accounting. TNI focused on the development of an implantable gastric stimulator to treat obesity. This acquisition was expected to complement the Company’s strategy to deliver therapeutic solutions for the worldwide challenges of obesity. The consideration for TNI was approximately $269, which included $227 in net cash paid. The $227 in net cash paid resulted from the $269 in consideration less the value of the Company’s prior investment in TNI and TNI’s existing cash balance. The purchase price is subject to increases triggered by the achievement of certain milestones. As a result of the acquisition of TNI, the Company acquired $55 of intangible assets of which $54 were technology-based intangible assets that had an estimated useful life of 15 years at the time of acquisition and $169 of IPR&D that was expensed on the date of acquisition related to a product being developed for the treatment of obesity by stimulation of the stomach that had not yet reached technological feasibility and for which no future alternative use had been identified. Goodwill of $51 related to the acquisition was assigned entirely to the Neurological operating segment. This goodwill is not deductible for tax purposes. In fiscal year 2007, the Company recognized an impairment charge related to the intangible assets acquired from TNI. See discussion in Note 2 for further information.

 

50


Table of Contents

The following table summarizes the allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed:

 

Current assets

 

$

13

 

Other intangible assets

 

 

55

 

IPR&D

 

 

169

 

Goodwill

 

 

51

 

Total assets acquired

 

 

288

 

 

 

 

 

 

Current liabilities

 

 

14

 

Deferred tax liability – long term

 

 

5

 

Total liabilities assumed

 

 

19

 

Net assets acquired

 

$

269

 

 

The pro forma impact of the IGN and TNI acquisitions was not significant, individually or in the aggregate, to the results of the Company for fiscal year 2006. The results of operations related to each company have been included in the Company’s consolidated statements of earnings since the date each company was acquired.

 

On May 18, 2005, the Company acquired substantially all of the spine-related intellectual property and related contracts, rights, and tangible materials owned by Michelson and settled all outstanding litigation and disputes between Michelson and the Company. The acquired patents pertain to novel spinal technology and techniques that have both current application and the potential for future patentable commercial products. The agreement requires the payment of total consideration of $1,350 for (i) the purchase of a portfolio of more than 100 issued U.S. patents, (ii) over 110 pending U.S. patent applications and numerous foreign counterparts to these patents and patent applications, and (iii) the settlement of all litigation. A value of $550 was assigned to the settlement of past damages between the parties and was recorded as an expense in the fourth quarter of fiscal year 2005. The remaining consideration, including $3 of direct acquisition costs, was allocated between $628 of acquired technology based intangible assets that had an estimated useful life of 17 years at the time of acquisition and $175 of IPR&D that was expensed on the date of acquisition related to spinal technology based devices that had not yet reached technological feasibility and had no future alternative use. The patents pertain to novel spinal technology and techniques that have the potential for future patentable commercial products in the area of spinal surgery. During the first quarter of fiscal year 2006, the Company paid $1,320 and committed to three future installments of $10 to be paid in May 2006, 2007, and 2008. The first two installments of $10 were paid in May 2006 and 2007.

 

During the first quarter of fiscal year 2006, the Company also entered into a royalty bearing, non-exclusive patent cross-licensing agreement with NeuroPace, Inc. Under the terms of the agreement, the two companies cross-licensed patents and patent applications of neurological technology related to direct electrical stimulation or monitoring of the brain. On the date of the agreement, $20 was expensed as IPR&D related to the licensed technology since technological feasibility of the project had not yet been reached and such technology had no future alternative use. This licensed technology is expected to enhance the Company’s ability to further develop and expand its therapies for neurological disorders.

 



51


Table of Contents

Fiscal Year 2005

On November 1, 2004, the Company acquired all of the outstanding stock of Angiolink, a privately held company that developed wound closure devices for vascular procedures. Angiolink’s EVS (Expanding Vascular Stapling) Vascular Closure System, which has received U.S. Food and Drug Administration (FDA) approval, is engineered to close the femoral artery access site after vascular procedures, such as diagnostic angiography, balloon angioplasty, and stenting. The net consideration paid for Angiolink was approximately $42 in cash, subject to purchase price increases triggered by the achievement of certain milestones. The net cash purchase price of $42 is the net difference of the $45 purchase price, including direct acquisition costs, less $3 of acquired cash. In connection with the acquisition of Angiolink, the Company acquired $62 of technology-based intangible assets that had an estimated useful life of 12 years at the time of acquisition and $11 in goodwill. The goodwill was assigned entirely to the Vascular operating segment and is not deductible for tax purposes. In fiscal year 2007, the Company recognized an impairment charge related to the intangible assets acquired from Angiolink. See discussion in Note 2 for further information.

 

The following table summarizes the allocation of the Angiolink purchase price to the estimated fair values of the assets acquired and liabilities assumed:

 

Current assets

 

$

3

 

Property, plant and equipment

 

 

1

 

Other intangible assets

 

 

62

 

Goodwill

 

 

11

 

Deferred tax asset – long-term

 

 

5

 

Total assets acquired

 

 

82

 

 

 

 

 

 

Current liabilities

 

 

3

 

Deferred tax liability – long-term

 

 

34

 

Total liabilities assumed

 

 

37

 

Net assets acquired

 

$

45

 

 

On August 25, 2004, the Company acquired substantially all of the assets of Coalescent Surgical, Inc. (Coalescent). Coalescent developed the U-Clip Anastomotic Device and the SPYDER Proximal Anastomotic Device. The U-Clip device creates high-quality anastomoses (a seamless connection) without sutures and is primarily used in coronary artery bypass surgery. The SPYDER device automatically deploys a series of U-Clip devices when attaching the bypass graft to the aorta. This acquisition complemented the Company’s surgical product line and strategy to develop technologies to promote surgical procedures that produce better patient outcomes, and reduce trauma and hospitalization. The consideration paid for Coalescent was approximately $65 in cash, including a $5 milestone payment made in March 2005 for the successful transition of product and technology to the Company following the acquisition and a $6 payment made in December 2005 related to the release of an indemnification escrow established at the date of acquisition. In connection with the acquisition of Coalescent, the Company acquired $42 of technology-based intangible assets that had an estimated useful life of 12 years at the time of acquisition, $2 of other intangible assets with an estimated useful life of 5 years, and $18 of goodwill, including the $5 milestone payment and $6 payment related to the release of the indemnification escrow. The goodwill was assigned entirely to the Cardiac Surgery operating segment and is deductible for tax purposes.

 


52


Table of Contents

The following table summarizes the allocation of the Coalescent purchase price to the estimated fair values of the assets acquired and liabilities assumed:

 

Current assets

 

$

3

 

Property, plant and equipment

 

 

1

 

Other intangible assets

 

 

44

 

Goodwill

 

 

18

 

Total assets acquired

 

 

66

 

 

 

 

 

 

Current liabilities

 

 

1

 

Total liabilities assumed

 

 

1

 

Net assets acquired

 

$

65

 

 

The pro forma impact of the Angiolink and Coalescent acquisitions was not significant, individually or in the aggregate, to the results of operations of the Company for the fiscal year ended April 29, 2005. The results of operations related to each company acquired have been included in the Company’s consolidated statements of earnings since the date each company was acquired.

 

Contingent Consideration

 

Certain of the Company’s acquisitions involve the potential for the payment of future contingent consideration upon the achievement of certain product development milestones and/or various other favorable operating conditions. While it is not certain if and/or when these payments will be made, the Company has developed an estimate of the potential contingent consideration for each of its acquisitions with an outstanding potential obligation. At April 27, 2007, the estimated potential amount of future contingent consideration that the Company is expected to pay associated with all acquisitions is approximately $64. The milestones associated with the contingent consideration must be reached in future periods ranging from fiscal years 2008 to 2013 in order for the consideration to be paid.

 





53


Table of Contents

5.

Financial Instruments and Investments

 

Investments   The carrying amounts of cash and cash equivalents approximate fair value due to their short maturities.

 

Information regarding the Company’s short-term and long-term investments is as follows:

 

 

 

Fiscal Year

 

 

 

2007

 

2006

 

2005

 

 

 

Debt

 

Equity

 

Debt

 

Equity

 

Debt

 

Equity

 

Cost

 

$

4,840

 

$

175

 

$

3,901

 

$

184

 

$

2,506

 

$

241

 

Gross unrealized gains

 

 

5

 

 

16

 

 

—

 

 

6

 

 

1

 

 

3

 

Gross unrealized losses

 

 

(10

)

 

(1

)

 

(27

)

 

—

 

 

(24

)

 

(2

)

Fair value

 

$

4,835

 

$

190

 

$

3,874

 

$

190

 

$

2,483

 

$

242

 

Proceeds from sales

 

$

10,870

 

$

24

 

$

6,625

 

$

2

 

$

790

 

$

17

 

Net gains/(losses) realized

 

$

2

 

$

16

 

$

(1

)

$

—

 

$

(1

) 

$

11

 

Impairment losses recognized

 

$

4

 

$

22

 

$

3

 

$

42

 

$

—

 

$

6

 

 

As of April 27, 2007, the Company has $606 in debt securities that have been in an unrealized loss position for more than twelve months. The aggregate amount of unrealized losses for these investments is $7. These investments are in high quality, investment grade securities but are currently in a loss position due to increases in interest rates. The Company considers these unrealized losses temporary as it has the intent and ability to hold these investments long enough to avoid realizing any significant losses. The total fair value of all investments currently in an unrealized loss position as of April 27, 2007 is $2,100.

 

As of April 27, 2007, the aggregate carrying amount of equity securities accounted for using the cost or equity method was $150. The total carrying value of these investments is reviewed quarterly for changes in circumstance or the occurrence of events that suggest the Company’s investment may not be recoverable. The fair value of cost or equity method investments is not estimated if there are no identified events or changes in circumstances that may have a material adverse effect on the fair value of the investment.

 

Gains and losses recognized on AFS debt instruments are recorded in interest income, net in the consolidated statements of earnings. Gains and losses recognized on equity instruments are recorded in other expense, net in the consolidated statements of earnings. Gains and losses from the sale of investments are calculated based on the specific identification method.

 

The Company lends certain fixed income securities to enhance its investment income. These lending activities are collateralized at an average rate of 102 percent, with the collateral determined based on the underlying securities and creditworthiness of the borrowers. The value of the securities on loan at April 27, 2007 and April 28, 2006 was $1,318 and $362, respectively.

 

Derivatives and Foreign Exchange Risk Management   The Company uses operational and economic hedges, as well as forward exchange derivative contracts to manage the impact of foreign exchange rate changes on earnings and cash flows. In order to reduce the uncertainty of foreign exchange rate movements, the Company enters into derivative instruments, primarily forward exchange contracts, to manage its exposure related to foreign exchange rate changes. These contracts are designed to hedge anticipated foreign currency transactions and changes in the value of specific assets, liabilities, net investments, and probable commitments. At inception of the forward contract, the derivative is designated as either a freestanding derivative, net investment hedge, or cash flow hedge. Principal currencies hedged are the Euro and the Japanese Yen. The Company does not enter into forward exchange derivative contracts for speculative purposes.

 

Notional amounts of these contracts outstanding at April 27, 2007 and April 28, 2006 were $5,372 and $1,561, respectively. All derivative instruments are recorded at fair value in the consolidated balance sheets, as a component of prepaid expenses and other current assets, other assets, other accrued expenses, or other long-term liabilities depending upon the gain or loss position of the contract and contract maturity date. Aggregate foreign currency gains/(losses) were $22, $52, and $(98), in fiscal years 2007, 2006 and 2005, respectively. These gains/(losses), which were offset by gains/(losses) on the related assets, liabilities, and transactions being hedged, were recorded in either other expense, net or cost of products sold in the consolidated statements of earnings. As a result of hedging inventory-related forecasted transactions, the Company recognized gains/(losses) of $1 and $(40) in cost of products sold in the consolidated statements of earnings in fiscal years 2007 and 2006, respectively; the remaining $21 and $92 gain was recognized in other expense, net in the consolidated statements of earnings for fiscal years 2007 and 2006, respectively.

 

54


Table of Contents

Freestanding derivative forward contracts are used to offset the Company’s exposure to the change in value of certain foreign currency intercompany assets and liabilities. These derivatives are not designated as hedges, and, therefore, changes in the value of these forward contracts are recognized currently in earnings, thereby offsetting the current earnings effect of the related foreign currency assets and liabilities. The aggregate foreign currency transaction gains/(losses) were $(9), $(3), and $6 in fiscal years 2006, 2005, and 2004, respectively, and are recognized in other expense, net in the consolidated statements of earnings.

 

Net investment hedges are used to hedge the long-term investment (equity) in foreign operations. Net gains/(losses) related to changes in the current rates, or spot rates, were $(41), $57, and $(83) during fiscal years 2007, 2006, and 2005, respectively, and recorded as a cumulative translation adjustment, a component of accumulated other comprehensive (loss)/ income in the consolidated balance sheets. Net gains associated with changes in forward rates of the contracts totaled $23, $15, and $8 in fiscal years 2007, 2006, and 2005, respectively, and are reflected in other expense, net in the consolidated statements of earnings.

 

Forward contracts designated as cash flow hedges are designed to hedge the variability of cash flows associated with forecasted transactions, denominated in a foreign currency, that will take place in the future. Net unrealized gains/(losses) related to the Company’s outstanding cash flow hedges totaled $(55) and $15 in fiscal years 2007 and 2006, respectively, and were recorded in accumulated other comprehensive (loss)/income in the consolidated balance sheets. During fiscal years 2007, 2006, and 2005, the Company’s net gains/(losses) related to the settlement of cash flow hedges were $8, $40, and $(112), respectively. In fiscal years 2007, 2006, and 2005, gains/(losses) of $7, $80, and $(149) were recorded as other expense, net and gains/(losses) of $1, $(40), and $37 were recorded in cost of products sold in the consolidated statements of earnings. No gains or losses relating to ineffectiveness of cash flow hedges were recognized in earnings during fiscal years 2007, 2006, and 2005. No components of the hedge contracts were excluded in the measurement of hedge ineffectiveness and no hedges were derecognized or discontinued during fiscal years 2007, 2006, and 2005.

 

In November 2005, the Company entered into a five year interest rate swap agreement with a notional amount of $200. This interest rate swap agreement was designated as a fair value hedge of the changes in fair value of a portion of the Company’s fixed-rate $400 Senior Notes due 2010. The Company pays variable interest equal to the three-month London Interbank Offered Rate (LIBOR) minus 55 basis points and it receives a fixed interest rate of 4.375 percent.

 

The following table summarizes activity in accumulated other comprehensive (loss)/income related to all derivatives classified as cash flow hedges in fiscal years 2007, 2006, and 2005 (amounts are net of tax):

 

Accumulated derivative losses, April 30, 2004

 

$

(47

)

Net losses reclassified to earnings

 

 

66

 

Change in fair value of hedges

 

 

(30

)

 

 

 

 

 

Accumulated derivative losses, April 29, 2005

 

 

(11

)

Net gains reclassified to earnings

 

 

(14

) 

Change in fair value of hedges

 

 

40

 

 

 

 

 

 

Accumulated derivative gains, April 28, 2006

 

 

15

 

Net gains reclassified to earnings

 

 

(11

)

Change in fair value of hedges

 

 

(59

)

 

 

 

 

 

Accumulated derivative losses, April 27, 2007

 

$

(55

)

 

The Company expects that the $(55), net of tax, in accumulated derivative losses at April 27, 2007 will be reflected in the consolidated statements of earnings over the next twelve months.

 

Concentrations of Credit Risk   Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist principally of interest-bearing investments, forward exchange derivative contracts, and trade accounts receivable.

 

The Company maintains cash and cash equivalents, investments, and certain other financial instruments (including forward exchange contracts) with various major financial institutions. The Company performs periodic evaluations of the relative credit standings of these financial institutions and limits the amount of credit exposure with any one institution.

 

Concentrations of credit risk with respect to trade accounts receivable are limited due to the large number of customers and their dispersion across many geographic areas. The Company monitors the creditworthiness of its customers to which it grants credit terms in the normal course of business. However, a significant amount of trade receivables are with national healthcare systems in many countries. Although the Company does not currently foresee a credit risk associated with these receivables, repayment is dependent upon the financial stability of the economies of those countries. As of April 27, 2007 and April 28, 2006, no customer represented more than 10 percent of the outstanding accounts receivable.

 

55


Table of Contents

6.

Goodwill and Other Intangible Assets

 

The changes in the carrying amount of goodwill for fiscal years 2007 and 2006 are as follows:

 

 

 

Fiscal Year

 

 

 

2007

 

2006

 

Beginning balance

 

$

4,346

 

$

4,281

 

Goodwill as a result of acquisitions

 

 

16

 

 

104

 

Purchase accounting adjustments, net (1)

 

 

(41

)

 

(32

)

Currency adjustment, net

 

 

6

 

 

(7

) 

Ending balance

 

$

4,327

 

$

4,346

 

 

(1)

Fiscal years 2007 and 2006 included $41 and $32, respectively, related to the reversal of tax valuation allowances on deferred tax assets previously established with certain acquisitions.

 

The Company completed its fiscal years 2007, 2006, and 2005 impairment tests of all goodwill and concluded there were no impairments.

 

Balances of acquired intangible assets, excluding goodwill, are as follows:

 

 

 

Purchased
Technology
and Patents

 

Trademarks
and
Tradenames

 

Other

 

Total

 

Amortizable intangible assets as of April 27, 2007:

 

 

 

 

 

 

 

 

 

 

 

 

 

Original cost

 

$

1,754

 

$

265

 

$

217

 

$

2,236

 

Accumulated amortization

 

 

(519

)

 

(150

)

 

(134

)

 

(803

)

Carrying value

 

$

1,235

 

$

115

 

$

83

 

$

1,433

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average original life (in years)

 

 

14.5

 

 

10.0

 

 

10.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortizable intangible assets as of April 28, 2006:

 

 

 

 

 

 

 

 

 

 

 

 

 

Original cost

 

$

1,761

 

$

265

 

$

230

 

$

2,256

 

Accumulated amortization

 

 

(423

)

 

(124

)

 

(117

)

 

(664

)

Carrying value

 

$

1,338

 

$

141

 

$

113

 

$

1,592

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average original life (in years)

 

 

14.7

 

 

10.0

 

 

9.7

 

 

 

 

 

Amortization expense for fiscal years 2007, 2006, and 2005 was $182, $175, and $128, respectively. See Note 2 for discussion of the special charges recorded in fiscal year 2007 and the impact on the above balances.

 

Estimated aggregate amortization expense based on the current carrying value of amortizable intangible assets is as follows:

 

Fiscal Year

 

Amortization
Expense

 

2008

 

$

172

 

2009

 

 

164

 

2010

 

 

158

 

2011

 

 

145

 

2012

 

 

120

 

Thereafter

 

 

674

 

 

 

$

1,433

 

 

 

56


Table of Contents

7.

Financing Arrangements

 

Debt consisted of the following:

 

 

 

 

 

April 27, 2007

 

April 28, 2006

 

 

 

Maturity by
Fiscal Year

 

Payable

 

Average
Interest
Rate

 

Payable

 

Average
Interest
Rate

 

Short-Term Borrowings:

 

 

 

 

 

 

 

 

 

 

 

 

 

Contingent convertible debentures

 

2008-2022

 

$

—

 

—

 

$

1,971

 

1.25%

 

Bank borrowings

 

2008

 

 

255

 

0.83%

 

 

270

 

0.31%

 

Commercial paper

 

2008

 

 

249

 

5.29%

 

 

190

 

4.67%

 

Current portion of capital lease obligations

 

2008

 

 

5

 

5.19%

 

 

6

 

5.20%

 

Total Short-Term Borrowings

 

 

 

$

509

 

 

 

$

2,437

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-Term Debt:

 

 

 

 

 

 

 

 

 

 

 

 

 

Contingent convertible debentures

 

2008-2022

 

$

94

 

1.25%

 

$

—

 

—

 

2011 senior convertible notes

 

2011

 

 

2,200

 

1.50%

 

 

2,200

 

1.50%

 

2010 senior notes

 

2011

 

 

400

 

4.38%

 

 

400

 

4.38%

 

2013 senior convertible notes

 

2013

 

 

2,200

 

1.63%

 

 

2,200

 

1.63%

 

2015 senior notes

 

2016

 

 

600

 

4.75%

 

 

600

 

4.75%

 

Other

 

2008-2013

 

 

84

 

5.38%

 

 

86

 

5.38%

 

Total Long-Term Debt

 

 

 

$

5,578

 

 

 

$

5,486

 

 

 

 

Senior Convertible Notes   In April 2006, the Company issued $2,200 of 1.500 percent Senior Convertible Notes due 2011 and $2,200 of 1.625 percent Senior Convertible Notes due 2013 (collectively, the Senior Convertible Notes). The Senior Convertible Notes were issued at par and pay interest in cash semi-annually in arrears on April 15 and October 15 of each year. The Senior Convertible Notes are unsecured unsubordinated obligations and rank equally with all other unsecured and unsubordinated indebtedness. The Senior Convertible Notes have an initial conversion price of $56.14 per share. The Senior Convertible Notes may only be converted: (i) during any calendar quarter if the closing price of the Company’s common stock reaches 140 percent of the conversion price for 20 trading days during a specified period, or (ii) if specified distributions to holders of the Company’s common stock are made or specified corporate transactions occur, or (iii) during the last month prior to maturity of the applicable notes. Upon conversion, a holder would receive: (i) cash equal to the lesser of the principal amount of the note or the conversion value and (ii) to the extent the conversion value exceeds the principal amount of the note, shares of the Company’s common stock, cash, or a combination of common stock and cash, at the Company’s option. In addition, upon a change in control, as defined, the holders may require the Company to purchase for cash all or a portion of their notes for 100 percent of the principal amount of the notes plus accrued and unpaid interest, if any, plus a number of additional make-whole shares of the Company’s common stock, as set forth in the applicable indenture. The indentures under which the Senior Convertible Notes were issued contain customary covenants. A total of $2,500 of the net proceeds from these note issuances were used to repurchase common stock. In April 2007, pursuant to provisions in the indentures relating to the Company’s increase of its quarterly dividend to shareholders, the conversion rates for each of the Senior Convertible Notes changed from 17.8113 to 17.8315, which correspondingly changed the conversion price per share for each of the Senior Convertible Notes from $56.14 to $56.08.

 

Under EITF 00-19, “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock” (EITF 00-19), the notes are accounted for similar to traditional convertible debt (that is, as a combined instrument) because the conversion spread meets the requirements of EITF 00-19, including the provisions contained in paragraphs 12–32 of EITF 00-19. Accordingly, the “conversion spread” is not separated as a derivative.

 

Concurrent with the issuance of the Senior Convertible Notes, the Company purchased call options on its common stock in private transactions. The call options allow the Company to receive shares of the Company’s common stock and/or cash from counterparties equal to the amounts of common stock and/or cash related to the excess conversion value that it would pay to the holders of the Senior Convertible Notes upon conversion. These call options will terminate upon the earlier of the maturity dates of the related Senior Convertible Notes or the first day all of the related Senior Convertible Notes are no longer outstanding due to conversion or otherwise. The call options, which cost an aggregate $1,075 ($699 net of tax benefit), were recorded as a reduction of shareholders’ equity.

 

57


Table of Contents

In separate transactions, the Company sold warrants to issue shares of the Company’s common stock at an exercise price of $76.56 per share in private transactions. Pursuant to these transactions, warrants for 41 million shares of the Company’s common stock may be settled over a specified period beginning in July 2011 and warrants for 41 million shares of the Company’s common stock may be settled over a specified period beginning in July 2013 (the “settlement dates”). If the average price of the Company’s common stock during a defined period ending on or about the respective settlement dates exceeds the exercise price of the warrants, the warrants will be settled in shares of the Company’s common stock. Proceeds received from the issuance of the warrants totaled approximately $517 and were recorded as an addition to shareholders’ equity. In April 2007, certain of the holders requested adjustment to the exercise price of the warrants from $76.56 to $76.47 pursuant to the provisions of the warrants relating to our payment of dividends to common shareholders.

 

EITF 00-19 provides that contracts are initially classified as equity if (1) the Contract requires physical settlement or net-share settlement, or (2) the Contract gives the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). The settlement terms of the Company’s purchased call options and sold warrant contracts provide for net cash settlement for the particular contract or net share settlement, depending on the method of settlement, as discussed above, which is at the option of Medtronic. Based on the guidance from EITF 00-19 and SFAS No. 133, the purchased call option contracts should be recorded as a reduction of equity and the warrants should be recorded as an addition to equity as of the trade date. SFAS No. 133 states that a reporting entity shall not consider contracts to be derivative instruments if the contract issued or held by the reporting entity is both indexed to its own stock and classified in shareholders’ equity in its statement of financial position. The Company concluded the purchased call option contracts and the warrant contracts should be accounted for in shareholders’ equity.

 

Senior Notes   In September 2005, the Company issued two tranches of Senior Notes with the aggregate face value of $1,000. The first tranche consisted of $400 of 4.375 percent Senior Notes due 2010 and the second tranche consisted of $600 of 4.750 percent Senior Notes due 2015. Each tranche was issued at a discount which resulted in an effective interest rate of 4.433 percent and 4.760 percent for the five and ten year Senior Notes, respectively. Interest on each series of Senior Notes is payable semi-annually, on March 15 and September 15 of each year. The Senior Notes are unsecured unsubordinated obligations of the Company and rank equally with all other unsecured and unsubordinated indebtedness of the Company. The indentures under which Senior Notes were issued contain customary covenants. The Company used the net proceeds from the sale of the Senior Notes for repayment of a portion of its commercial paper.

 

In November 2005, the Company entered into a five year interest rate swap agreement with a notional amount of $200. This interest rate swap agreement was designated as a fair value hedge of the changes in fair value of a portion of the Company’s fixed-rate $400 Senior Notes due 2010. The Company pays variable interest equal to the three-month London Interbank Offered Rate (LIBOR) minus 55 basis points and it receives a fixed interest rate of 4.375 percent.

 

Contingent Convertible Debentures   In September 2001, the Company completed a $2,013 private placement of 1.250 percent Contingent Convertible Debentures due September 2021 (Old Debentures). Interest is payable semi-annually. Each Old Debenture is convertible into shares of common stock at an initial conversion price of $61.81 per share; however, the Old Debentures are not convertible before their final maturity unless the closing price of our common stock reaches 110 percent of the conversion price for 20 trading days during a consecutive 30 trading day period. In September 2002 and 2004, as a result of certain holders of the Old Debentures exercising their put options, the Company repurchased $39 and $1, respectively, of the Old Debentures for cash. On January 24, 2005, the Company completed an exchange offer whereby holders of approximately $1,930 of the total principal amount of the Old Debentures exchanged their existing securities for an equal principal amount of 1.250 percent Contingent Convertible Debentures, Series B due 2021 (New Debentures), as described below. Following the completion of the exchange offer, the Company repurchased approximately $2 of the Old Debentures for cash.

 

The terms of the New Debentures are consistent with the terms of the Old Debentures noted above, except that: (i) the New Debentures require the Company to settle all conversions for a combination of cash and shares of our common stock, if any, in lieu of only shares. Upon conversion of the New Debentures the Company will pay holders cash equal to the lesser of the principal amount of the New Debentures or their conversion value, and shares of the Company’s common stock to the extent the conversion value exceeds the principal amount of the New Debentures; and (ii) the New Debentures require the Company to pay only cash (in lieu of shares of the Company’s common stock or a combination of cash and shares of our common stock) when the Company repurchases the New Debentures at the option of the holder or when the Company repurchases the New Debentures in connection with a change of control.

 

58


Table of Contents

In September 2006, as a result of certain holders of the New Debentures and Old Debentures exercising their put options, the Company repurchased $1,835 of the New Debentures for cash and $42 of the Old Debentures for cash. The Company may be required to repurchase the remaining debentures at the option of the holders in September 2008, 2011, or 2016. Twelve months prior to the put options becoming exercisable, the remaining balance of the New Debentures and the Old Debentures will be classified as short-term borrowings. At each balance sheet date without a put option within the subsequent four quarters, the remaining balance will be classified as long-term debt. Accordingly, during the second quarter of fiscal year 2007, $93 of New Debentures and $1 of the Old Debentures were reclassified from short-term borrowings to long-term debt as a result of the September 2006 put option expiring. For put options exercised by the holders of the New Debentures and the Old Debentures, the purchase price is equal to the principal amount of the applicable debenture plus any accrued and unpaid interest thereon to the repurchase date. If the put option is exercised, the Company will pay holders the repurchase price solely in cash (or, for the Old Debentures, in cash or stock at our option). As of April 27, 2007, approximately $93 aggregate principal amount of New Debentures remain outstanding and approximately $1 aggregate principal amount of Old Debentures remain outstanding. The Company can redeem the debentures for cash at any time.

 

Commercial Paper   The Company maintains a commercial paper program that allows the Company to have a maximum of $2,250 in commercial paper outstanding, with maturities up to 364 days from the date of issuance. At April 27, 2007 and April 28, 2006, outstanding commercial paper totaled $249 and $190, respectively. During fiscal years 2007 and 2006, the weighted average original maturity of the commercial paper outstanding was approximately 56 and 31 days, respectively, and the weighted average interest rate was 5.26 percent and 3.86 percent, respectively.

 

Bank Borrowings   Bank borrowings consist primarily of borrowings from non-U.S. banks at interest rates considered favorable by management and where natural hedges can be gained for foreign exchange purposes.

 

Credit Arrangements   The Company has existing lines of credit of approximately $2,433 with various banks at April 27, 2007. The existing lines of credit include a five-year $1,750 syndicated credit facility dated December 20, 2006 that will expire on December 20, 2011 (New Facility). This New Facility replaced two credit facilities; one for $1,000 which was scheduled to expire in January 2010, and a $750 facility which was scheduled to expire in January 2007.

 

The New Facility provides the Company with the ability to increase its capacity by an additional $500 at any time during the life of the five-year term of the agreement. The Company can also request the extension of the New Facility maturity date for one additional year, at the first and second anniversary of the date of this facility. The New Facility provides backup funding for the commercial paper program and may also be used for general corporate purposes.

 

Interest rates on these borrowings are determined by a pricing matrix, based on the Company’s long-term debt ratings, assigned by Standard and Poor’s Ratings Group and Moody’s Investors Service. Facility fees are payable on the credit facilities and are determined in the same manner as the interest rates.

 

Maturities of long-term debt, including capital leases, for the next five fiscal years are as follows:

 

Fiscal Year

 

Obligation

 

2008

 

$

5

 

2009

 

 

106

 

2010

 

 

14

 

2011

 

 

2,617

 

2012

 

 

18

 

Thereafter

 

 

2,823

 

Total long-term debt

 

 

5,583

 

Less: Current portion of long-term debt

 

 

5

 

Long-term portion of long-term debt

 

$

5,578

 

 

The Company has sold specific pools of trade receivables in Japan. During fiscal year 2007 and 2006 no trade receivables were sold, and in fiscal year 2005, the Company sold approximately $146 of its trade receivables to financial institutions in Japan. Additionally, the Company entered into agreements to sell specific pools of receivables in Italy in the amount of $37, $53, and $4 in fiscal years 2007, 2006, and 2005 respectively. The discount cost related to the Japan and Italy sales was insignificant and recorded in interest income, net in the consolidated statements of earnings.

 

59


Table of Contents

8.

Interest Income, Net

 

Interest income and interest expense for fiscal years 2007, 2006 and 2005 are as follows:

 

 

 

Fiscal Year

 

 

 

2007

 

2006

 

2005

 

Interest income

 

$

(382

)

$

(203

)

$

(100

)

Interest expense

 

 

228

 

 

116

 

 

55

 

Interest income, net

 

$

(154

)

$

(87

)

$

(45

)

 

9.

Shareholders’ Equity

 

Repurchase of Common Stock    In October 2005, the Company’s Board of Directors authorized the repurchase of 40 million shares of the Company’s stock and in April 2006, the Board of Directors made a special authorization for the Company to repurchase up to 50 million shares in connection with the $4,400 Senior Convertible Note offering (see Note 7 for further discussion). Shares are repurchased from time to time to support the Company’s stock-based compensation programs and to take advantage of favorable market conditions. The Company repurchased approximately 21.7 million and 68.9 million shares at an average price of $47.83 and $52.12, respectively, during fiscal years 2007 and 2006. The amounts disclosed as repurchased for fiscal year 2007 include 544,224 shares that the Company obtained as part of the final settlement of the previously announced and executed accelerated share repurchase program. Excluding the shares obtained in the settlement of the accelerated share repurchase program, for fiscal year 2007 we repurchased 21.2 million shares at an average price of $49.06. As of April 27, 2007, the Company has approximately 15.1 million shares remaining under the buyback authorizations.

 

Shareholder Rights Plan   On October 26, 2000, the Company’s Board of Directors adopted a Shareholder Rights Plan and declared a dividend of one preferred share purchase right (a “right”) for each outstanding share of common stock with a par value $.10 per share. Each right will allow the holder to purchase 1/5000 of a share of Series A Junior Participating Preferred Stock at an exercise price of $400 per share, once the rights become exercisable. The rights are not exercisable or transferable apart from the common stock until 15 days after the public announcement that a person or group (the Acquiring Person) has acquired 15 percent or more of the Company’s common stock or 15 business days after the announcement of a tender offer which would increase the Acquiring Person’s beneficial ownership to 15 percent or more of the Company’s common stock. After any person or group has become an Acquiring Person, each right entitles the holder (other than the Acquiring Person) to purchase, at the exercise price, common stock of the Company having a market price of two times the exercise price. If the Company is acquired in a merger or other business combination transaction, each exercisable right entitles the holder to purchase, at the exercise price, common stock of the acquiring company or an affiliate having a market price of two times the exercise price of the right.

 

The Board of Directors may redeem the rights for $0.005 per right at any time before any person or group becomes an Acquiring Person. The Board may also reduce the threshold at which a person or group becomes an Acquiring Person from 15 percent to no less than 10 percent of the outstanding common stock. The rights expire on October 26, 2010.

 

10.

Employee Stock Ownership Plan

 

The Company has an Employee Stock Ownership Plan (ESOP) for eligible U.S. employees. In December 1989, the ESOP borrowed $40 from the Company and used the proceeds to purchase 18,932,928 shares of the Company’s common stock. Shares of common stock acquired by the plan were allocated to each employee in amounts based on Company performance and the employee’s annual compensation. An allocation of 2.50 percent of qualified compensation was made to plan participants’ accounts in fiscal year 2005. Prior to fiscal year 2006, the Company match on the supplemental retirement plan (SRP) was also made in the form of an annual allocation of Medtronic stock to the participants’ ESOP account.

 

Fiscal year 2005 was the final year of the ESOP allocation, as all shares were either allocated or committed to be allocated at April 29, 2005. The ESOP made the final principal and interest payment to the Company upon commitment of the final shares to the participants, as required under the original terms of the loan. Prior to the fiscal year 2005 repayment of the remaining principal balance of the note, the receivable from the ESOP was recorded as a reduction of the Company’s shareholders’ equity. The allocated and unallocated shares of the ESOP are treated as outstanding common stock in the computation of basic earnings per share. As a result of the final ESOP share allocation in fiscal year 2005, contributions to the SRP for U.S. employees are now made in cash.

 

60


Table of Contents

Up to and including fiscal year 2005, the Company made contributions to the plan which were used, in part, by the ESOP to make principal and interest payments. ESOP expense was determined by debt service requirements, offset by dividends received by the ESOP. ESOP expense for fiscal year 2005 was $35. In addition to the fiscal year 2005 allocation of shares to the ESOP, the Company made a $33 cash contribution to the ESOP to supplement the portion of the Company’s ESOP and SRP requirements that were not covered by the remaining unallocated shares in the ESOP as of April 29, 2005.

 

At April 27, 2007 cumulative allocated shares remaining in the trust are 12.7 million.

 

11.

Stock Purchase and Award Plans

 

Effective April 29, 2006, the Company adopted SFAS No. 123 (revised 2004), “Share-Based Payment” (SFAS No. 123(R)) which replaced SFAS No. 123, “Accounting for Stock-Based Compensation” (SFAS No. 123) and supersedes Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees” (APB Opinion No. 25). Under the fair value recognition provisions of SFAS No. 123(R), the Company measures stock-based compensation cost at the grant date based on the fair value of the award and recognizes the compensation expense over the requisite service period, which is generally the vesting period. The Company elected the modified-prospective method of adopting SFAS No. 123(R), under which prior periods are not retroactively restated. The provisions of SFAS No. 123(R) apply to awards granted after the April 29, 2006 effective date. Stock-based compensation expense for the non-vested portion of awards granted prior to the effective date is being recognized over the remaining service period using the fair-value based compensation cost estimated for SFAS No. 123 pro forma disclosures. Total stock-based compensation expense included in our statement of earnings for the fiscal year ended April 27, 2007 was $127 ($185 pre-tax).

 

Stock Options   Stock option awards are granted at exercise prices equal to the closing price of the Company’s common stock on the grant date. The majority of the Company’s stock option awards are non-qualified stock options with a ten-year life and a four-year ratable vesting term. The Company currently grants stock options under the Medtronic, Inc. 2003 Long-Term Incentive Plan (2003 Plan) and the Medtronic, Inc. 1998 Outside Directors Stock Compensation Plan (Directors Plan). The 2003 plan was approved by the Company’s shareholders in August 2003 and provides for the grant of nonqualified and incentive stock options, stock appreciation rights, restricted stock, performance shares, and other stock and cash-based awards. The Directors Plan, a stock compensation plan for outside directors, was adopted in fiscal year 1998 and replaced the provisions in the 1994 stock award plan relating to awards granted to outside directors. As of April 27, 2007, there were approximately 25 million and 2 million shares available for future grants under the 2003 Plan and Directors Plan, respectively.

 

Restricted Stock Awards   Restricted stock and restricted stock units (collectively referred to as restricted stock awards) are granted to officers and key employees. Restricted stock awards are subject to forfeiture if employment terminates prior to the lapse of the restrictions. The Company grants restricted stock awards that typically cliff vest between three- and five-year periods. Restricted stock awards are expensed over the vesting period. The Company also grants shares of performance-based restricted stock that will cliff vest only if the Company has also achieved certain performance objectives. Performance awards are expensed over the performance period based on the probability of achieving the performance objectives. Shares of restricted stock are considered issued and outstanding shares of the Company at the grant date and have the same dividend and voting rights as other common stock. Restricted stock units are not considered issued or outstanding common stock of the Company. Dividend equivalent units are accumulated on restricted stock units during the vesting period. The Company grants restricted stock awards under the 2003 Plan and the Directors Plan.

 

Employee Stock Purchase Plan   The Medtronic, Inc. 2005 Employee Stock Purchase Plan (ESPP) allows participating employees to purchase shares of the Company’s common stock at a discount through payroll deductions. Employees can contribute up to the lesser of 10 percent of their wages or the statutory limit under the U.S. Internal Revenue Code toward the purchase of the Company’s common stock at 85 percent of its market value at the end of the calendar quarter purchase period. Employees purchased 2 million shares at an average price of $41.33 per share in the fiscal year ended April 27, 2007. As of April 27, 2007, plan participants have had approximately $6 withheld to purchase Company common stock at 85 percent of its market value on June 29, 2007, the last trading day before the end of the calendar quarter purchase period. At April 27, 2007, approximately 7 million shares of common stock were available for future purchase under the ESPP.

 

Valuation Assumptions   The Company uses the Black-Scholes option pricing model (Black-Scholes model) to determine the fair value of stock options as of the grant date. The fair value of stock options under the Black-Scholes model requires management to make assumptions regarding projected employee stock option exercise behaviors, risk-free interest rates, volatility of the Company’s stock price and expected dividends.

 

The expense recognized for shares purchased under our ESPP is equal to the 15 percent discount the employee receives at the end of the calendar quarter purchase period. The fair value of restricted stock awards equals the Company’s closing stock price on the date of grant.

 

61


Table of Contents

The following table provides the weighted average fair value of options granted to employees and the related assumptions used in the Black-Scholes model: 

 

 

 

Fiscal Year

 

 

 

2007

 

2006

 

2005

 

Weighted Average Fair Value of options granted

 

$

11.72

 

$

15.53

 

$

8.50

 

Assumptions used:

 

 

 

 

 

 

 

 

 

 

Expected life (years)(a)

 

 

4.83

 

 

5.00

 

 

3.00

 

Risk-free interest rate (b)

 

 

4.66

%

 

4.28

%

 

3.34

%

Volatility (c)

 

 

19.9

%

 

25.0

%

 

22.5

%

Dividend yield (d)

 

 

0.90

%

 

0.69

%

 

0.67

%

 

(a)

 

Expected life:   The Company analyzes historical employee stock option exercise and termination data to estimate the expected life assumption. The Company believes that historical data currently represents the best estimate of the expected life of a new employee option. The Company examined its historical pattern of option exercises and determined that relative to the employee population as a whole, management employees held their stock options longer prior to exercising compared to the rest of the employee population. Therefore, the Company stratifies its employee population based upon these distinctive exercise behavior patterns. Prior to adopting SFAS No. 123(R), the Company used one pool, the entire employee population, for estimating the expected life assumptions.

 

(b)

 

Risk-free interest rate:   The rate is based on the yield on the grant date of a zero-coupon U.S. Treasury bond whose maturity period equals or approximates the option’s expected term.

 

(c)

 

Volatility:   Beginning in the third quarter of fiscal year 2007, the expected volatility is based on a blend of historical volatility and an implied volatility of the Company’s common stock. Implied volatility is based on market traded options of the Company’s common stock. Prior to the third quarter of fiscal year 2007, the Company calculated the expected volatility based exclusively on historical volatility.

 

(d)

 

Dividend yield:   The dividend yield rate is calculated by dividing the Company’s annual dividend, based on the most recent quarterly dividend rate, by the closing stock price on the grant date.

 

Stock-Based Compensation Expense Prior to adopting SFAS No. 123(R), the Company accounted for stock-based compensation under APB Opinion No. 25 using the intrinsic value method and the impact of the fair value method on the Company’s net earnings was disclosed on a pro forma basis in the Notes to the consolidated financial statements. In the pro forma disclosures, the Company recognized stock-based compensation expense based on the stated vesting period, rather than the time to achieve retirement eligibility. Upon adopting SFAS No. 123(R), the Company changed its method of recognition and now recognizes stock-based compensation expense based on the substantive vesting period for all new awards. As a result, compensation expense related to stock options granted prior to fiscal year 2007 that are subject to accelerated vesting upon retirement eligibility is being recognized over the stated vesting term of the grant. If the Company had historically accounted for stock-based awards made to retirement eligible individuals under the requirements of SFAS No. 123(R), the pro forma expense disclosed below would have been increased by $2 for the fiscal year ended April 28, 2006. There was no stock-based compensation expense capitalized as it was deemed immaterial.

 

The amount of stock-based compensation expense recognized during a period is based on the portion of the awards that are ultimately expected to vest. The Company estimates pre-vesting forfeitures at the time of grant by analyzing historical data and revises those estimates in subsequent periods if actual forfeitures differ significantly from those estimates. Ultimately, the total expense recognized over the vesting period will equal the fair value of awards that actually vest.

 

62


Table of Contents

The following table presents the statement of earnings classification of pre-tax stock-based compensation expense, for options, ESPP, and restricted stock awards, recognized for the fiscal year ended April 27, 2007:

 

 

 

Fiscal Year

 

 

 

2007

 

Cost of sales

 

$

19

 

Research and development expense

 

 

39

 

Selling, general and administrative expense

 

 

127

 

 

 

$

185

 

 

The following table illustrates the effect on net earnings and net earnings per share for fiscal years 2006 and 2005 if the Company had applied the fair value recognition provisions of SFAS No. 123 to its stock-based employee compensation: 

 

 

 

Fiscal Year

 

 

 

2006

 

2005

 

Net earnings, as reported

 

$

2,547

 

$

1,804

 

Add: Stock-based compensation expense included in net earnings (1)

 

 

16

 

 

12

 

Less: Stock-based compensation expense determined under fair value based method for all awards (1)

 

 

(142

)

 

(224

)

Pro forma net earnings

 

$

2,421

 

$

1,592

 

 

 

 

 

 

 

 

 

Basic earnings per share:

 

 

 

 

 

 

 

As reported

 

$

2.11

 

$

1.49

 

Pro forma

 

$

2.01

 

$

1.32

 

 

 

 

 

 

 

 

 

Diluted earnings per share:

 

 

 

 

 

 

 

As reported

 

$

2.09

 

$

1.48

 

Pro forma

 

$

1.98

 

$

1.31

 

_________________

(1)

Compensation expense is net of related tax effects.

 

Tax Impacts of Stock-Based Compensation Prior to the adoption of SFAS No. 123(R), benefits of tax deductions in excess of recognized share-based compensation expense were reported on the consolidated statement of cash flows as operating cash flows. Under SFAS No. 123(R), such excess tax benefits are reported as financing cash flows. Although total cash flows under SFAS No. 123(R) remain unchanged from what would have been reported under prior accounting standards, net operating cash flows are reduced and net financing cash flows are increased due to the adoption of SFAS No. 123(R). For the fiscal year ended April 27, 2007, there were excess tax benefits of $36, which are classified as financing cash flows. For the fiscal years ended April 28, 2006 and April 29, 2005, there were excess tax benefits of $99 and $61, respectively, which were classified as operating cash flows.

 



63


Table of Contents

Stock Options   The following table summarizes all stock option activity, including activity from options issued as a result of acquisitions from fiscal year 2002 and prior, during fiscal years 2007, 2006, and 2005:

 

 

 

Fiscal Year

 

 

 

2007

 

2006

 

2005

 

 

 

Options
(in thousands)

 

Wtd. Avg.
Exercise
Price

 

Options
(in thousands)

 

Wtd. Avg.
Exercise
Price

 

Options
(in thousands)

 

Wtd. Avg.
Exercise
Price

 

Beginning balance

 

 

88,838

 

$

46.23

 

 

87,655

 

$

43.65

 

 

83,240

 

$

41.18

 

Granted

 

 

10,529

 

 

48.64

 

 

13,740

 

 

56.16

 

 

15,884

 

 

50.02

 

Exercised

 

 

(6,089

)

 

37.37

 

 

(10,617

)

 

37.53

 

 

(9,107

)

 

31.19

 

Canceled

 

 

(2,372

)

 

50.22

 

 

(1,940

)

 

47.59

 

 

(2,362

)

 

47.08

 

Outstanding at year-end

 

 

90,906

 

$

46.99

 

 

88,838

 

$

46.23

 

 

87,655

 

$

43.65

 

Exercisable at year-end

 

 

67,017

 

$

45.47

 

 

63,123

 

$

44.13

 

 

62,948

 

$

42.63

 

 

A summary of stock options as of April 27, 2007, including options issued as a result of acquisitions from fiscal year 2002 and prior, is as follows:

 

Options Outstanding

 

Options Exercisable

 

Ranges of
Exercise Prices

 

 

Options
(in thousands)

 

Wtd. Avg.
Exercise Price

 

Wtd. Avg.
Remaining
Contractual
Life (years)

 

Options
(in thousands)

 

Wtd. Avg.
Exercise Price

 

$

0.01 – 10.00

 

 

 

9

 

$

8.12

 

 

1.31

 

 

9

 

$

8.12

 

 

10.01 – 20.00

 

 

 

427

 

 

16.54

 

 

0.62

 

 

427

 

 

16.54

 

 

20.01 – 30.00

 

 

 

2,666

 

 

24.64

 

 

0.84

 

 

2,666

 

 

24.64

 

 

30.01 – 40.00

 

 

 

7,203

 

 

34.61

 

 

2.44

 

 

7,191

 

 

34.60

 

 

40.01 – 50.00

 

 

 

55,832

 

 

46.66

 

 

6.37

 

 

42,530

 

 

46.27

 

 

50.01 – 69.82

 

 

 

24,769

 

 

54.29

 

 

6.63

 

 

14,194

 

 

53.37

 

$

0.01 – 69.82

 

 

 

90,906

 

$

46.99

 

 

5.94

 

 

67,017

 

$

45.47

 

 

The total intrinsic value, calculated as the closing stock price at year-end less the option exercise price, of options exercised during fiscal years 2007, 2006, and 2005 was $88, $187, and $185, respectively. For options outstanding and exercisable at April 27, 2007, the total intrinsic value of in the money options was $640 and $561, respectively. The Company issues new shares when stock option awards are exercised. Cash received from the exercise of stock options for the fiscal year ended April 27, 2007 was $225 and the related tax benefits realized were $36. Unrecognized compensation expense related to outstanding stock options as of April 27, 2007 was $226, pre-tax, and is expected to be recognized over a weighted average period of 2.7 years and will be adjusted for any future changes in estimated forfeitures.

 


64


Table of Contents

Restricted Stock Awards

 

The following table summarizes restricted stock award activity during fiscal years 2007, 2006, and 2005:

 

 

 

Fiscal Year

 

 

 

2007

 

2006

 

2005

 

 

 

Awards
(in thousands)

 

Wtd. Avg.
Grant
Price

 

Awards
(in thousands)

 

Wtd. Avg.
Grant
Price

 

Awards
(in thousands)

 

Wtd. Avg.
Grant
Price

 

Nonvested, beginning balance

 

 

2,008

 

$

51.64

 

 

1,062

 

$

48.52

 

 

767

 

$

46.81

 

Granted

 

 

2,188

 

 

48.19

 

 

1,063

 

 

54.62

 

 

382

 

 

50.12

 

Reinvested dividend equivalent units

 

 

4

 

 

50.33

 

 

3

 

 

54.62

 

 

2

 

 

50.12

 

Vested

 

 

(112

)

 

47.57

 

 

(41

)

 

49.96

 

 

(51

)

 

36.20

 

Forfeited

 

 

(106

)

 

51.16

 

 

(79

)

 

50.68

 

 

(38

)

 

46.80

 

Nonvested at year-end

 

 

3,982

 

$

50.16

 

 

2,008

 

$

51.64

 

 

1,062

 

$

48.52

 

 

Unrecognized compensation expense related to restricted stock awards as of April 27, 2007 was $134, pre-tax, and is expected to be recognized over a weighted average period of 2.9 years and will be adjusted for any future changes in estimated forfeitures.

 




65


Table of Contents

12.

Income Taxes

 

The provision for income taxes is based on earnings before income taxes reported for financial statement purposes. The components of earnings before income taxes are:

 

 

 

Fiscal Year

 

 

 

2007

 

2006

 

2005

 

U.S.

 

$

1,579

 

$

1,581

 

$

932

 

International

 

 

1,936

 

 

1,580

 

 

1,612

 

Earnings before income taxes

 

$

3,515

 

$

3,161

 

$

2,544

 

 

The provision for income taxes consists of:

 

 

 

Fiscal Year

 

 

 

2007

 

2006

 

2005

 

Current tax expense:

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

712

 

$

471

 

$

517

 

International

 

 

239

 

 

11

 

 

390

 

Total current tax expense

 

 

951

 

 

482

 

 

907

 

Deferred tax expense (benefit):

 

 

 

 

 

 

 

 

 

 

U.S.

 

 

(216

) 

 

159

 

 

(192

) 

International

 

 

(22

)

 

(27

)

 

25

 

Net deferred tax expense (benefit)

 

 

(238

) 

 

132

 

 

(167

)

Total provision for income taxes

 

$

713

 

$

614

 

$

740

 

 

Deferred taxes arise because of the different treatment of transactions for financial statement accounting and income tax accounting, known as “temporary differences.” The Company records the tax effect of these temporary differences as “deferred tax assets” and “deferred tax liabilities.” Deferred tax assets generally represent items that can be used as a tax deduction or credit in a tax return in future years for which the Company has already recorded the tax benefit in the consolidated statements of earnings. The Company establishes valuation allowances for deferred tax assets when the amount of expected future taxable income is not likely to support the use of the deduction or credit. The Company has established valuation allowances related to certain acquisitions that, if not ultimately required, will result in a reduction to goodwill; these allowances were zero and $31 at April 27, 2007 and April 28, 2006, respectively. The Company has established valuation allowances for capital loss carryforwards and deferred taxes which are capital in nature in the amount of $35 and $1 at April 27, 2007 and April 28, 2006, respectively. In addition, at both April 27, 2007 and April 28, 2006, approximately $4 of non-U.S. tax losses were available for carryforward. These carryforwards are offset by valuation allowances and generally do not expire. The capital loss carryforwards expire within one to five years. Deferred tax liabilities generally represent tax expense recognized in the consolidated financial statements for which payment has been deferred or expense has already been taken as a deduction on the Company’s tax return, but has not yet been recognized as an expense in the consolidated statements of earnings. Deferred tax assets/(liabilities) are comprised of the following:

 


66


Table of Contents

 

 

Fiscal Year

 

 

 

2007

 

2006

 

Deferred tax assets:

 

 

 

 

 

 

 

Inventory (intercompany profit in inventory and excess of tax over book valuation)

 

$

235

 

$

207

 

Convertible debt interest

 

 

314

 

 

197

 

Accrued liabilities

 

 

86

 

 

81

 

Allowance for doubtful accounts

 

 

52

 

 

62

 

Warranty reserves

 

 

13

 

 

20

 

Unrealized loss on minority investments

 

 

11

 

 

39

 

Unrealized loss on investments

 

 

37

 

 

—

 

Pension and post-retirement benefits

 

 

29

 

 

—

 

Stock-based compensation

 

 

71

 

 

3

 

Accrued losses on legal settlements

 

 

—

 

 

9

 

Other

 

 

128

 

 

152

 

Total deferred tax assets

 

 

976

 

 

770

 

 

 

 

 

 

 

 

 

Deferred tax liabilities:

 

 

 

 

 

 

 

Intangible assets

 

 

(280

)

 

(394

)

Accumulated depreciation

 

 

(13

)

 

(42

)

Pension and post-retirement benefits

 

 

—

 

 

(87

)

Unrealized gain on investments

 

 

—

 

 

(5

) 

Other

 

 

(74

)

 

(67

)

Total deferred tax liabilities

 

 

(367

)

 

(595

)

 

 

 

 

 

 

 

 

Deferred tax assets, net

 

$

609

 

$

175

 

 

The Company’s effective income tax rate varied from the U.S. Federal statutory tax rate as follows:

 

 

 

Fiscal Year

 

 

 

2007

 

2006

 

2005

 

U.S. Federal statutory tax rate

 

 

35.0

%

 

35.0

%

 

35.0

%

Increase (decrease) in tax rate resulting from:

 

 

 

 

 

 

 

 

 

 

U.S. state taxes, net of Federal tax benefit

 

 

1.2

 

 

0.9

 

 

0.9

 

Research & development credit

 

 

(0.4

)

 

(0.4

)

 

(0.6

)

International

 

 

(12.9

)

 

(10.9

)

 

(7.7

)

Impact of repatriation, special, restructuring, certain litigation, and IPR&D charges

 

 

0.3

 

 

1.9

 

 

1.6

 

Reversal of excess tax accruals

 

 

(3.7

)

 

(7.1

)

 

—

 

Other, net

 

 

0.8

 

 

—

 

 

(0.1

)

 

 

 

 

 

 

 

 

 

 

 

Effective tax rate

 

 

20.3

%

 

19.4

%

 

29.1

%

 

During the fourth quarter of fiscal year 2007, the Company recorded a $129 tax benefit associated with the reversal of excess tax accruals in connection with the settlement reached with the IRS involving the review of the Company’s fiscal year 2003 and fiscal year 2004 domestic income tax returns, the resolution of competent authority issues for fiscal year 1992 through fiscal year 2000, and adjustments to the finalization of the fiscal year 2006 U.S. federal and state income tax returns. The $129 tax benefit has been recorded in the provision for income taxes in the consolidated statement of earnings for fiscal year 2007.

 

In the second quarter of fiscal year 2006, the Company reversed excess tax accruals of $225 associated with the favorable agreements reached with the IRS involving the review of the Company’s fiscal years 1997 through 2002 domestic income tax returns. The $225 tax benefit was recorded in provision for income taxes on the consolidated statements of earnings for fiscal year 2006. As a result of the agreements reached with the IRS, the Company made approximately $326 of incremental tax payments during the third quarter of fiscal year 2006. These payments reduced accrued income taxes in the fiscal year 2006 consolidated balance sheet.

 

The Company has not provided U.S. income taxes on certain of its non-U.S. subsidiaries’ undistributed earnings as such amounts are permanently reinvested outside the U.S. At April 27, 2007, and April 28, 2006, such earnings were approximately $6,573 and $5,444, respectively.

 

67


Table of Contents

Currently, the Company’s operations in Puerto Rico, Switzerland, and Ireland have various tax incentive grants. Unless these grants are extended, they will expire between fiscal years 2010 and 2020. The Company’s Swiss federal tax ruling expired at the end of fiscal year 2007, the loss in tax benefit from this ruling is expected to be offset by increased benefits from our international operations.

 

Tax audits associated with the allocation of income, and other complex issues, may require an extended period of time to resolve and may result in income tax adjustments if changes to the Company’s allocation are required between jurisdictions with different tax rates. Tax authorities periodically review the Company’s tax returns and propose adjustments to its tax filings. Tax years settled with the IRS remain open for foreign tax audits and competent authority proceedings. Competent authority proceedings are a means to resolve intercompany pricing disagreements between countries.

 

The IRS has finalized its audits with the Company for all years through fiscal year 1996. The IRS has issued its audit reports for fiscal years 1997 through 2004. The Company has resolved or reached agreement with the IRS on all significant issues for fiscal years 1997 through 2004, except for an issue related to the allocation of income between Medtronic, Inc., and its wholly owned subsidiary in Switzerland. The unresolved issues from the fiscal years 1997 through 2004 tax audits and tax positions taken by the IRS or foreign tax authorities, with respect to potential issues on future tax audits could have a material impact on the Company’s effective tax rate in future periods. The Company believes it has meritorious defenses for its tax filings and will vigorously defend them through litigation in the courts, if necessary.

 

13.

Retirement Benefit Plans

 

The Company sponsors various retirement benefit plans, including defined benefit pension plans (pension benefits), post-retirement medical plans (post-retirement benefits), defined contribution savings plans, and termination indemnity plans, covering substantially all U.S. employees and many employees outside the U.S. The cost of these plans was $184, $188, and $113 in fiscal years 2007, 2006, and 2005, respectively. The Company uses a January 31 measurement date for its U.S. plans and an April 30 measurement date for the majority of its plans outside the U.S.

 

In the U.S., the Company maintains a qualified pension plan designed to provide guaranteed minimum retirement benefits to all eligible U.S. employees. Pension coverage for non-U.S. employees of the Company is provided, to the extent deemed appropriate, through separate plans. In addition, U.S. and Puerto Rico employees of the Company are also eligible to receive specified Company paid healthcare and life insurance benefits through the Company’s post-retirement medical plans. In addition to the benefits provided under the qualified pension plan, retirement benefits associated with wages in excess of the IRS allowable limits are provided to certain employees under a non-qualified plan.

 

In September 2006, the FASB issued SFAS No. 158. This standard requires employers to recognize the funded status of defined benefit pension and post-retirement plans as an asset or liability in its statement of financial position, and recognize changes in the funded status in the year in which the changes occur through accumulated other comprehensive (loss)/income (AOCI), which is a component of shareholders’ equity. This standard also eliminates the requirement for the recognition of Additional Minimum Pension Liability required under SFAS No. 87, “Employers’ Accounting for Pensions.” As of April 27, 2007, the net unfunded status of our benefit plans was $(2) and recognition of this status upon the adoption of SFAS No. 158 resulted in an after-tax charge to shareholders’ equity of $209.

 

68


Table of Contents

The change in benefit obligation and funded status of our employee retirement plans follow:

 

 

 

U.S.

 

Non-U.S.

 

Post-Retirement

 

 

 

Pension Benefits

 

Pension Benefits

 

Benefits

 

 

 

2007

 

2006

 

2007

 

2006

 

2007

 

2006

 

Accumulated benefit obligation at end of year:

 

$

721

 

$

629

 

$

278

 

$

224

 

$

196

 

$

172

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in projected benefit obligation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Projected benefit obligation at beginning of year

 

 

750

 

 

678

 

 

286

 

 

258

 

 

172

 

 

 

 

Service cost

 

 

64

 

 

51

 

 

27

 

 

23

 

 

13

 

 

10

 

Interest cost

 

 

45

 

 

39

 

 

12

 

 

11

 

 

10

 

 

10

 

Plan amendments

 

 

2

 

 

(14

)

 

—

 

 

(3

)

 

—

 

 

(3

)

Actuarial loss/(gain)

 

 

23

 

 

25

 

 

3

 

 

12

 

 

5

 

 

(7

)

Curtailments/settlement recognition

 

 

—

 

 

(14

)

 

—

 

 

—

 

 

—

 

 

(2

)

Benefits paid

 

 

(16

)

 

(15

)

 

(2

)

 

(3

)

 

(4

)

 

(5

)

Foreign currency exchange rate changes

 

 

—

 

 

—

 

 

27

 

 

(12

)

 

—

 

 

—

 

Projected benefit obligation at end of year

 

 

868

 

 

750

 

 

353

 

 

286

 

 

196

 

 

172

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in plan assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value of plan assets at beginning of year

 

 

851

 

 

711

 

 

217

 

 

162

 

 

102

 

 

82

 

Actual return on plan assets

 

 

86

 

 

88

 

 

9

 

 

21

 

 

12

 

 

10

 

Employer contributions

 

 

87

 

 

67

 

 

34

 

 

44

 

 

17

 

 

15

 

Benefits paid

 

 

(16

)

 

(15

)

 

(2

)

 

(3

)

 

(4

)

 

(5

)

Foreign currency exchange rate changes

 

 

—

 

 

—

 

 

22

 

 

(7

)

 

—

 

 

—

 

Fair value of plan assets at end of year

 

 

1,008

 

 

851

 

 

280

 

 

217

 

 

127

 

 

102

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Funded status at end of year:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value of plan assets 

 

 

1,008

 

 

851

 

 

280

 

 

217

 

 

127

 

 

102

 

Benefit obligations

 

 

868

 

 

750

 

 

353

 

 

286

 

 

196

 

 

172

 

Funded status of the plan

 

 

140

 

 

101

 

 

(73

)

 

(69

)

 

(69

)

 

(70

)

Unrecognized prior service cost (benefit)

 

 

 

 

 

(15

)

 

 

 

 

8

 

 

 

 

 

(70

)

Unrecognized net actuarial loss

 

 

 

 

 

255

 

 

 

 

 

42

 

 

 

 

 

3

 

Recognized asset (liability)

 

$

140

 

$

341

 

$

(73

)

$

(19

)

$

(69

)

$

(21

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amounts recognized in the consolidated balance sheet consist of:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-current assets

 

$

229

 

 

 

 

$

2

 

 

 

 

$

—

 

 

 

 

Current liabilities

 

 

(4

)

 

 

 

 

(2

)

 

 

 

 

—

 

 

 

 

Non-current liabilities

 

 

(85

)

 

 

 

 

(73

)

 

 

 

 

(69

)

 

 

 

Prepaid benefit cost

 

 

 

 

$

376

 

 

 

 

$

9

 

 

 

 

$

—

 

Accrued benefit liability

 

 

 

 

 

(56

)

 

 

 

 

(34

)

 

 

 

 

(21

)

Other intangible assets, net

 

 

 

 

 

—

 

 

 

 

 

3

 

 

 

 

 

—

 

Accumulated other comprehensive
(loss)/income

 

 

 

 

 

21

 

 

 

 

 

3

 

 

 

 

 

—

 

Recognized asset (liability)

 

$

140

 

$

341

 

$

(73

)

$

(19

)

$

(69

)

$

(21

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amounts recognized in accumulated other comprehensive (loss)/income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Prior service cost (benefit)

 

$

(11

)

 

 

 

$

8

 

 

 

 

$

3

 

 

 

 

Net actuarial loss

 

 

250

 

 

 

 

 

42

 

 

 

 

 

46

 

 

 

 

Ending balance

 

$

239

 

 

 

 

$

50

 

 

 

 

$

49

 

 

 

 

 

 

69


Table of Contents

The following illustrates the adjustments made to the consolidated balance sheets to record the funded status as of April 27, 2007.

 

 

 

Balance as of
April 28, 2006

 

Additional Minimum
Liability Adjustments

 

SFAS No. 158
Adjustments

 

Balance as of
April 27, 2007

 

Asset/(liability), net

 

$

274

 

$

—

 

$

(276

)

$

(2

)

Intangible asset

 

 

3

 

 

—

 

 

(3

)

 

—

 

Deferred tax asset

 

 

17

 

 

(17

)

 

129

 

 

129

 

AOCI, net

 

 

24

 

 

(24

)

 

209

 

 

209

 

AOCI, gross

 

 

41

 

 

(41

)

 

338

 

 

338

 

 

In certain countries outside the U.S., fully funding pension plans is not a common practice, as funding provides no income tax benefit. Consequently, certain pension plans were partially funded as of April 27, 2007 and April 28, 2006. Plans with accumulated benefit obligations in excess of plan assets consist of the following:

 

 

 

Fiscal Year

 

 

 

2007

 

2006

 

Accumulated benefit obligation

 

$

201

 

$

165

 

Projected benefit obligation

 

 

241

 

 

204

 

Plan assets at fair value

 

 

95

 

 

79

 

 

Plans with projected benefit obligations in excess of plan assets:

 

 

 

Fiscal Year

 

 

 

2007

 

2006

 

Projected benefit obligation

 

$

355

 

$

319

 

Plan assets at fair value

 

 

191

 

 

169

 

 

The net periodic benefit costs of the plans include the following components:

 

 

 

U.S. Pension Benefits

 

Non-U.S. Pension Benefits

 

 

 

Fiscal Year

 

Fiscal Year

 

 

 

2007

 

2006

 

2005

 

2007

 

2006

 

2005

 

Service cost

 

$

64

 

$

51

 

$

48

 

$

27

 

$

23

 

$

16

 

Interest cost

 

 

45

 

 

39

 

 

34

 

 

12

 

 

11

 

 

9

 

Expected return on plan assets

 

 

(74

)

 

(64

)

 

(53

)

 

(13

)

 

(10

)

 

(8

)

Amortization of net actuarial loss and prior service cost

 

 

14

 

 

13

 

 

11

 

 

3

 

 

4

 

 

2

 

Net periodic benefit cost

 

 

49

 

 

39

 

 

40

 

 

29

 

 

28

 

 

19

 

Curtailment/settlement recognition

 

 

—

 

 

2

 

 

—

 

 

—

 

 

—

 

 

—

 

Total cost for fiscal year

 

$

49

 

$

41

 

$

40

 

$

29

 

$

28

 

$

19

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Post-Retirement Benefits

 

 

 

 

 

Fiscal Year

 

 

 

 

 

2007

 

2006

 

2005

 

 

 

 

 

 

 

Service cost

 

$

13

 

$

10

 

$

12

 

 

 

 

 

 

 

 

 

 

Interest cost

 

 

10

 

 

10

 

 

11

 

 

 

 

 

 

 

 

 

 

Expected return on plan assets

 

 

(9

)

 

(7

)

 

(6

)

 

 

 

 

 

 

 

 

 

Amortization of net actuarial loss and prior service cost

 

 

2

 

 

3

 

 

5

 

 

 

 

 

 

 

 

 

 

Net periodic benefit cost

 

 

16

 

 

16

 

 

22

 

 

 

 

 

 

 

 

 

 

Curtailment/settlement recognition

 

 

—

 

 

1

 

 

—

 

 

 

 

 

 

 

 

 

 

Total cost for fiscal year

 

$

16

 

$

17

 

$

22

 

 

 

 

 

 

 

 

 

 

 

 

70


Table of Contents

The estimated amounts that will be amortized from accumulated other comprehensive (loss)/income into net periodic benefit cost, before tax, in fiscal year 2008 are as follows:

 

 

 

U.S. Pension
Benefits

 

Non-U.S. Pension Benefits

 

Post-Retirement Benefits

 

Amortization of prior service cost

 

$

(1

)

$

(2

)

$

—

 

Amortization of net actuarial (gain) loss

 

 

15

 

 

1

 

 

2

 

 

 

$

14

 

$

(1

)

$

2

 

 

The actuarial assumptions were as follows:

 

 

 

U.S. Pension Benefits

 

Non-U.S. Pension Benefits

 

Post-Retirement Benefits

 

 

 

Fiscal Year

 

Fiscal Year

 

Fiscal Year

 

 

 

2007

 

2006

 

2005

 

2007

 

2006

 

2005

 

2007

 

2006

 

2005

 

Weighted average assumptions – projected benefit obligation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Discount rate

 

6.00

%

6.00

%

6.00

%

4.42

%

4.34

%

4.39

%

6.00

%

6.00

%

6.00

%

Rate of compensation increase

 

4.24

%

4.24

%

4.00

%

3.09

%

3.07

%

2.99

%

N/A

 

N/A

 

N/A

 

Healthcare cost trend rate

 

N/A

 

N/A

 

N/A

 

N/A

 

N/A

 

N/A

 

10.00

%

9.00

%

10.00

%

Weighted average assumptions – net periodic benefit cost:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Discount rate

 

6.00

%

6.00

%

6.25

%

4.34

%

4.39

%

4.90

%

6.00

%

6.00

%

6.25

%

Expected return on plan assets

 

8.75

%

8.75

%

8.75

%

5.59

%

5.46

%

5.86

%

8.75

%

8.75

%

8.75

%

Rate of compensation increase

 

4.24

%

4.00

%

4.00

%

3.07

%

2.99

%

2.97

%

N/A

 

N/A

 

N/A

 

Healthcare cost trend rate

 

N/A

 

N/A

 

N/A

 

N/A

 

N/A

 

N/A

 

9.00

%

10.00

%

10.00

%

 

The Company’s discount rates are determined by considering current yield curves representing high quality, long-term fixed income instruments. The resulting discount rates are consistent with the duration of plan liabilities.

 

The expected long-term rate of return on plan assets assumptions is determined using a building block approach, considering historical averages and real returns of each asset class. In certain countries, where historical returns are not meaningful, consideration is given to local market expectations of long-term returns.

 

Retirement Benefit Plan Investment Strategy   The Company has a master trust that holds the assets for both the U.S. pension plan and other post-retirement benefits, primarily retiree medical. For investment purposes the plans are managed in an identical way, as their objectives are similar.

 

The Company has a Qualified Plan Committee (the Plan Committee) that sets investment guidelines with the assistance of an external consultant. These guidelines are established based on market conditions, risk tolerance, funding requirements, and expected benefit payments. The Plan Committee also oversees the investment allocation process, selects the investment managers, and monitors asset performance. As pension liabilities are long-term in nature, the Company employs a long-term total return approach to maximize the long-term rate of return on plan assets for a prudent level of risk. An annual analysis on the risk versus the return of the investment portfolio is conducted to justify the expected long-term rate of return assumption.

 

The investment portfolio contains a diversified portfolio of investment categories, including equities, fixed income securities, hedge funds and private equity. Securities are also diversified in terms of domestic and international securities, short- and long-term securities, growth and value styles, large cap and small cap stocks, active and passive management and derivative-based styles. The Plan Committee believes with prudent risk tolerance and asset diversification, the master trust should be able to meet its pension and other post-retirement obligations in the future.

 

Plan assets also include investments in the Company’s common stock of $68 and $64 at April 27, 2007 and April 28, 2006, respectively.

 

71


Table of Contents

The Company’s pension plan weighted-average asset allocations and the target allocations at April 27, 2007 and April 28, 2006, by asset category, are as follows:

 

U.S. Plans

 

 

 

Pension Benefits Allocation

 

Target Allocation

 

 

2007

 

2006

 

2007

 

2006

Asset Category

 

 

 

 

 

 

 

 

 

 

 

 

Equity securities

 

64

%

 

65

%

 

60

%

 

60

%

Debt securities

 

11

 

 

12

 

 

15

 

 

15

 

Other

 

25

 

 

23

 

 

25

 

 

25

 

Total

 

100

%

 

100

%

 

100

%

 

100

%

 

Non-U.S. Plans

 

 

 

Pension Benefits Allocation

 

Target Allocation

 

 

2007

 

2006

 

2007

 

2006

Asset Category

 

 

 

 

 

 

 

 

 

 

 

 

Equity securities

 

41

%

 

40

%

 

42

%

 

37

%

Debt securities

 

10

 

 

10

 

 

13

 

 

16

 

Cash

 

4

 

 

3

 

 

—

 

 

—

 

Other

 

45

 

 

47

 

 

45

 

 

47

 

Total

 

100

%

 

100

%

 

100

%

 

100

%

 

It is the Company’s policy to fund retirement costs within the limits of allowable tax deductions. During fiscal year 2007, the Company made discretionary contributions of approximately $87 to the qualified U.S. pension plan and approximately $17 to post-retirement benefits. Internationally, the Company contributed approximately $34 for pension benefits during fiscal year 2007. During fiscal year 2008, the Company anticipates that its contribution for pension benefits and post-retirement benefits will be in the range of $110 and $140. Based on the guidelines under the U.S. Employee Retirement Income Security Act (ERISA) and the various guidelines which govern the plans outside the U.S., the majority of anticipated fiscal year 2008 contributions will be discretionary.

 



72


Table of Contents

Retiree benefit payments, which reflect expected future service, are anticipated to be paid as follows:

 

 

 

U.S.
Pension Benefits

 

Non-U.S.
Pension Benefits

 

Post-Retirement Benefits

 

Fiscal Year

 

Gross Payments

 

Gross Payments

 

Gross Payments

 

Gross Medicare
Part D Receipts

 

2008

 

$

15

 

$

6

 

$

4

 

$

1

 

2009

 

 

18

 

 

7

 

 

4

 

 

1

 

2010

 

 

22

 

 

8

 

 

5

 

 

1

 

2011

 

 

27

 

 

9

 

 

6

 

 

1

 

2012

 

 

30

 

 

10

 

 

7

 

 

2

 

2013 – 2017

 

 

227

 

 

65

 

 

58

 

 

11

 

Total

 

$

339

 

$

105

 

$

84

 

$

17

 

 

In August 2006, the Pension Protection Act (PPA) was signed into law in the U.S. The PPA replaces the funding requirements for defined benefit pension plans by subjecting defined benefit plans to 100 percent of the current liability funding target. Defined benefit plans with a funding status of less than 80 percent of the current liability are defined as being “at risk”. The PPA is effective for the 2008 plan year. The Company’s U.S. qualified defined benefit plans are funded in excess of 80 percent, and therefore the company expects that the plans will not be subject to the “at risk” funding requirements of the PPA and that the law will not have a material impact on future contributions.

 

The healthcare cost trend rate for other retirement benefit plans was 10 percent at April 27, 2007. The trend rate is expected to decline to 5 percent over a five-year period. Assumed healthcare cost trend rates have a significant effect on the amounts reported for the healthcare plans. A one-percentage-point change in assumed healthcare cost trend rates would have the following effects:

 

 

 

One-Percentage-
Point Increase

 

One-Percentage-
Point Decrease

 

Effect on post-retirement benefit cost

 

$

3

 

$

(2)

 

Effect on post-retirement benefit obligation

 

 

18

 

 

(15)

 

 

Defined Contribution Savings Plans    The Company has defined contribution savings plans that cover substantially all U.S. employees and certain non-U.S. employees. The general purpose of these plans is to provide additional financial security during retirement by providing employees with an incentive to make regular savings. Up to and including fiscal year 2005, the Company match on the SRP for U.S. employees was made in the form of an annual allocation of Medtronic stock to the participants’ ESOP account (see Note 10). Company contributions to the plans are based on employee contributions and Company performance and starting in fiscal year 2006 the entire match is made in cash. Expense under these plans was $64, $83, and $33 in fiscal years 2007, 2006, and 2005, respectively.

 

Effective May 1, 2005, the Company froze participation in the existing defined benefit pension plan in the U.S. and implemented two new plans including an additional defined benefit pension plan and a new defined contribution pension plan, respectively: the Personal Pension Account (PPA) and the Personal Investment Account (PIA). Employees in the U.S. hired on or after May 1, 2005 have the option to participate in either the PPA or the PIA. Participants in the PPA receive an annual allocation of their salary and bonus on which they will receive an annual guaranteed rate of return which is based on the 10-year Treasury bond rate. Participants in the PIA also receive an annual allocation of their salary and bonus; however, they are allowed to determine how to invest their funds among identified fund alternatives. The cost associated with the PPA is included in the U.S. Pension Benefits in the tables presented earlier. The defined contribution cost associated with the PIA was approximately $25 and $18 in fiscal years 2007 and 2006, respectively.

 

73


Table of Contents

14.

Leases

 

The Company leases office, manufacturing and research facilities, and warehouses, as well as transportation, data processing and other equipment under capital and operating leases. A substantial number of these leases contain options that allow the Company to renew at the fair rental value on the date of renewal.

 

Future minimum payments under capitalized leases and non-cancelable operating leases at April 27, 2007 are:

 

Fiscal Year

 

Capitalized
Leases

 

Operating
Leases

 

2008

 

$

10

 

$

68

 

2009

 

 

17

 

 

53

 

2010

 

 

18

 

 

33

 

2011

 

 

20

 

 

13

 

2012

 

 

20

 

 

5

 

2013 and thereafter

 

 

22

 

 

21

 

 

 

 

 

 

 

 

 

Total minimum lease payments

 

$

107

 

$

193

 

Less amounts representing interest

 

 

18

 

 

N/A

 

Present value of net minimum lease payments

 

$

89

 

 

N/A

 

 

Rent expense for all operating leases was $112, $89, and $79 in fiscal years 2007, 2006, and 2005, respectively.

In April 2006, the Company entered into a sale-leaseback agreement with a financial institution whereby certain manufacturing equipment was sold to the financial institution and is being leased by the Company over a seven year period. The transaction has been recorded as a capital lease and included in the table above. Payments for the remaining balance of the sale-leaseback agreement are due semi-annually. The lease provides for an early buyout option whereby the Company, at its option, could repurchase the equipment at a predetermined fair market value in calendar year 2009.

 

15.

Commitments and Contingencies

 

The Company is involved in a number of legal actions. The outcomes of these legal actions are not within the Company’s complete control and may not be known for prolonged periods of time. In some actions, the claimants seek damages, as well as other relief, including injunctions barring the sale of products that are the subject of the lawsuit, which, if granted, could require significant expenditures or result in lost revenues. In accordance with SFAS No. 5, “Accounting for Contingencies” (SFAS No. 5), the Company records a liability in the consolidated financial statements for these actions when a loss is known or considered probable and the amount can be reasonably estimated. If the reasonable estimate of a known or probable loss is a range, and no amount within the range is a better estimate, the minimum amount of the range is accrued. If a loss is possible but not known or probable, and can be reasonably estimated, the estimated loss or range of loss is disclosed. In most cases, significant judgment is required to estimate the amount and timing of a loss to be recorded. While it is not possible to predict the outcome for most of the actions discussed below and the Company believes that it has meritorious defenses against these matters, it is possible that costs associated with them could have a material adverse impact on the Company’s consolidated earnings, financial condition or cash flows.

 

On October 6, 1997, Cordis Corporation (Cordis), a subsidiary of Johnson & Johnson (J&J), filed suit in U.S. District Court for the District of Delaware against Arterial Vascular Engineering, Inc., which Medtronic acquired in January 1999 and which is now known as Medtronic Vascular, Inc. (Medtronic Vascular). The suit alleged that Medtronic Vascular’s modular stents infringe certain patents owned by Cordis. Boston Scientific Corporation is also a defendant in this suit. On December 22, 2000, a jury rendered a verdict that Medtronic Vascular’s previously marketed MicroStent and GFX stents infringed valid claims of two Cordis patents and awarded damages to Cordis totaling approximately $270. On March 28, 2002, the District Court entered an order in favor of Medtronic Vascular, deciding as a matter of law that Medtronic Vascular’s MicroStent and GFX stents did not infringe the patents. Cordis appealed, and on August 12, 2003, the U.S. Court of Appeals for the Federal Circuit reversed the District Court’s decision and remanded the case to the District Court for further proceedings. The District Court thereafter issued a new patent claim construction and a new trial was held in March 2005. On March 14, 2005, the jury found that the previously marketed MicroStent and GFX stent products infringed valid claims of Cordis’ patents. On March 27, 2006, the District Court denied post-trial motions filed by the parties, including Cordis’ motion to reinstate the previous damages award. On April 26, 2006, Medtronic filed its Notice of Appeal of the judgment of infringement. Briefing of the appeal was completed in March 2007. The Federal Circuit hearing date has not yet been set. The District Court has deferred any hearing on damages issues until after the U.S. Court of Appeals for the Federal Circuit resolves the appeal on the finding of liability. On February 23, 2007, the United States Patent and Trademark Office (USPTO) granted a request for reexamination of the claims of the patent at issue in the above proceedings. Until that reexamination is concluded, its impact remains unknown. Medtronic has not recorded an expense related to damages in this matter because any potential loss is not currently probable or reasonably estimable under SFAS No. 5.

 

74


Table of Contents

On December 24, 1997, Advanced Cardiovascular Systems, Inc. (ACS), a subsidiary of Abbott Laboratories, sued Medtronic Vascular in U.S. District Court for the Northern District of California alleging that certain models of Medtronic Vascular’s stents infringe the Lau stent patents held by ACS, and seeking injunctive relief and monetary damages. Medtronic Vascular denies infringement. In February 2005, following trial, a jury determined that the ACS Lau stent patents were valid and that Medtronic’s Driver, GFX, MicroStent, S540, S660, S670, Bestent2 and S7 stents infringe those patents. Medtronic Vascular made numerous post-trial motions challenging the jury’s verdict of infringement and validity. On March 30, 2007, the District Court denied the motions, and on April 24, 2007, the District Court decided that the patents were enforceable. The District Court entered Judgment in favor of ACS and against Medtronic Vascular on the issues of validity, infringement and enforceability of the Lau patents on May 3, 2007. On May 9, 2007, Medtronic Vascular filed its Notice of Appeal to the Federal Circuit of the District Court’s Judgment and all rulings underlying the Judgment. On May 21, 2007, the District Court entered an Amended Judgment. On May 24, 2007, Medtronic filed its Amended Notice of Appeal. ACS has filed a motion to dismiss Medtronic Vascular’s appeal as premature because they intend to file a motion for a permanent injunction. Medtronic Vascular will oppose the motion, and the District Court has previously indicated that it is not inclined to consider a request to issue any injunction until after the appeal is decided. Issues of damages have been bifurcated from the liability phase of the proceedings. Previously in August 2005, the Court had issued an order continuing a stay of any further proceedings on the questions of damages or willfulness. On May 18, 2007, the District Court confirmed that it would not hold a trial on damage issues until the U.S. Court of Appeals for the Federal Circuit has reviewed the underlying liability issues concerning alleged infringement, invalidity and inequitable conduct. In response to Medtronic’s Request for Reexamination for each of the four Lau patents, in December 2006, the USPTO issued an “office action” finding that the claims which Medtronic products were previously found to have infringed were not patentable. The patent holder will now have an opportunity to challenge the USPTO’s office action in further proceedings in the reexamination. Until this reexamination is concluded, its potential impact upon the claims relating to the Lau patents in the above proceeding remains unknown. The Company has not recorded an expense related to damages in this matter because any potential loss is not currently probable or reasonably estimable under SFAS No. 5.

 

On February 20, 2006, an arbitration panel issued a final, non-appealable award concluding that Medtronic Vascular’s S670, S660, S540, S7 and Driver stents, which were formerly the subject of a patent infringement dispute between J&J and Cordis and Medtronic Vascular, are licensed under a 1997 agreement between the two companies and subject to a covenant not to sue contained within a 1998 amendment to the 1997 agreement. Cordis since initiated arbitration proceedings against Medtronic Vascular alleging that certain of the products infringe certain patents of J&J and Cordis, and is seeking royalties for such infringement, if any. Medtronic Vascular believes it has meritorious defenses to these allegations and intends to assert these defenses vigorously. The arbitrators have not yet been selected. The Company has not recorded an expense related to damages in this matter because any potential loss is not currently probable or reasonably estimable under SFAS No. 5.

 

On January 26, 2001, DePuy Spine (formerly DePuy/AcroMed), a subsidiary of J&J, and Biedermann Motech GMBH (collectively, “DePuy”) filed suit in U.S. District Court for the District of Massachusetts alleging that Medtronic’s subsidiary, Medtronic Sofamor Danek USA, Inc. (MSD), was infringing a patent relating to a design for a thoracolumbar multi-axial screw (MAS). DePuy subsequently supplemented its allegations to claim that MSD’s M10, M8 and Vertex screws infringe the patent. On April 17, 2003 and February 26, 2004, the District Court ruled on summary judgment that the M10, M8 and Vertex screws do not infringe. On October 1, 2004, a jury found that the MAS screw, which MSD no longer sells in the U.S., infringes under the doctrine of equivalents. The jury awarded damages of $21 and on February 9, 2005, the Court entered judgment against MSD, including prejudgment interest, in the aggregate amount of $24. In the third quarter of fiscal year 2005, the Company recorded an expense equal to the $24 judgment in the matter. DePuy appealed the Court’s decisions that the M10, M8 and Vertex screws do not infringe, and MSD appealed the jury’s verdict that the MAS screw infringes valid claims of the patent. On November 20, 2006, the U.S. Court of Appeals for the Federal Circuit affirmed the decision of the District Court that the M10 and M8 screws do not infringe, affirmed the jury’s verdict and damage award on the MAS screws, affirmed the decision that the Vertex screws do not literally infringe, but remanded the case, ruling that there is a triable issue of fact as to whether the Vertex screws infringe under the doctrine of equivalents. On remand, DePuy has further supplemented its allegations to claim that the Vertex and Vertex MAX screw products infringe. A trial has been scheduled for September 2007. On March 20, 2007, the District Court declined to stay execution of the judgment relating to the MAS product. On March 30, 2007, the judgment plus accrued interest was paid under protest. On April 27, 2007, MSD filed a petition for a writ of certiorari seeking review of the decision of the Federal Circuit with respect to the Vertex screw. On May 30, 2007, the USPTO ordered reexamination of the patent. MSD has filed a motion with the District Court to stay the trial pending completion of the reexamination process. Until the reexamination is concluded, its potential impact on the remaining claims in the proceedings remains unknown. The Company has not recorded any additional expense related to damages in this matter because any potential loss is not currently probable or reasonably estimable under SFAS No. 5.

 

75


Table of Contents

On May 2, 2003, Cross Medical Products, Inc. (Cross) sued MSD in the U.S. District Court for the Central District of California. The suit alleges that MSD’s CD HORIZON, Vertex and Crosslink products infringe certain patents owned by Cross. MSD has countered that Cross’ cervical plate products infringe certain patents of MSD, and Cross has filed a reply alleging that certain MSD cervical plate products infringe certain patents of Cross. On May 19, 2004, the Court found that the MAS, Vertex, M8, M10, CD HORIZON SEXTANT and CD HORIZON LEGACY screw products infringe one Cross patent. A hearing on the validity of that patent was held on July 12, 2004, after which the District Court ruled that the patents were valid. Cross made a motion for permanent injunction on the multi-axial screw products, which the District Court granted on September 20, 2004, but stayed the effect of the injunction until January 3, 2005. MSD requested an expedited appeal of the ruling and the U.S. Court of Appeals for the Federal Circuit granted the request. On September 30, 2005, the Federal Circuit vacated the injunction, modified the trial court’s claim construction rulings, and remanded the matter for trial in the District Court. The Federal Circuit awarded costs to Medtronic on the appeal. In April 2005, the District Court ruled invalid certain claims in the patents Cross asserted against MSD’s Crosslink and cervical plate products. The Court also ruled that Cross cervical plate products infringe MSD’s valid patents and that MSD’s redesigned pedicle screw products infringe one claim of one of the patents owned by Cross. Cross thereafter moved for an injunction against the redesigned screw products, which the District Court granted on May 24, 2005. The District Court then stayed the effectiveness of the injunction until August 22, 2005. On July 27, 2005, the U.S. Court of Appeals for the Federal Circuit granted MSD’s motion to stay the District Court’s injunction pending a full hearing on the appeal. On March 20, 2007, the Federal Circuit ruled that MSD’s current multi-axial screw products do not infringe any claim of Cross’ patent and vacated the District Court’s injunction, which had already been stayed. The remaining issues in the case will now be decided in the U.S. District Court for the Central District of California, which has scheduled a trial for February 12, 2008. The Company has not recorded an expense related to damages in this matter because any potential loss is not currently probable or reasonably estimable under SFAS No. 5. Separately, on February 1, 2006, MSD filed a lawsuit against Biomet Inc., the corporate parent of Cross (Biomet) and its subsidiary EBI Spine, L.P., for patent infringement. The suit, which involves seven Medtronic patents and seeks injunctive relief and monetary damages, was filed in the U.S. District Court for the District of New Jersey. Three of the patents were purchased by Medtronic from Michelson and involve single-lock anterior cervical plating systems used in cervical spinal fusions. Medtronic claims that a cervical plate marketed by Biomet under the trade name VueLock Anterior Cervical Plate System, and openly promoted as a plate that has a “Secure One Step Locking” mechanism feature, infringes these patents. The other patents involve instruments and surgical implantation methods commonly used in spinal surgeries to implant pedicle screws.

 

On October 2, 2003, Cordis sued Medtronic Vascular in the U.S. District Court for the Northern District of California, alleging that Medtronic Vascular’s S7 stent delivery system infringes certain catheter patents owned by Cordis. On April 25, 2007, pursuant to a stipulation of the parties, the Court dismissed this matter without prejudice. The Company did not record an expense related to this matter.

 

On February 10, 2005, Medtronic voluntarily began to advise physicians about the possibility that a specific battery shorting mechanism might manifest itself in a subset of implantable cardioverter defibrillators (ICDs) and cardiac resynchronization therapy-defibrillators (CRT-Ds). These included certain Marquis VR/DR and Maximo VR/DR ICDs and certain InSync I/II/III Marquis and InSync III CRT-D devices. The Company provided physicians a list of potentially affected patients, and recommended that physicians communicate with those patients to manage the potential issue as physicians deemed medically appropriate. The voluntary field action was classified by the FDA as a Class II recall, defined as one where there may be temporary or medically reversible adverse health consequences, or where the probability of serious adverse health consequences is remote. Subsequent to this voluntary field action, a number of lawsuits have been filed against the Company in both federal and state courts, alleging a variety of claims, including individuals asserting claims of personal injury and third party payors (TPP) alleging entitlement to reimbursement (including a claim by an individual purporting to act as a surrogate for the Center for Medicare and Medicaid Services, whose claim has been dismissed by the Court for failure to state a proper cause of action). While the number of cases filed changes continually, as of this writing, there were approximately 1,045 federal court cases and approximately 67 state court cases, reflecting a total of approximately 1,106 individual personal injury cases and six TPP cases. In addition, five purported class action personal injury suits have been filed in Canada. The federal court cases have been consolidated for pretrial proceedings before a single federal judge in the District of Minnesota pursuant to the MultiDistrict Litigation rules (MDL). Separate master complaints have been filed in the MDL for the personal injury and TPP groups of cases. On November 28, 2006, the MDL court denied the Company’s threshold legal motion, which was filed on March 26, 2006, seeking federal preemption of the lawsuits, finding that fact issues remained for discovery and trial before the legal question could be resolved. On January 5, 2007, the MDL court denied the Company’s March 26, 2006 motion to dismiss the TPP litigation, thus permitting it to go forward into the remainder of the litigation process. The TPP master complaint contains class action allegations, which the Company plans to rigorously challenge. The personal injury master complaint does not contain such allegations, although the Plaintiffs’ Steering Committee has indicated that they may pursue class certification of those claims. On June 7, 2007, the Court issued an amended scheduling order for the MDL cases, setting deadlines for discovery and pretrial motions in the first half of calendar year 2008, and a ready for trial date for bellwether personal injury cases on July 1, 2008. During the pretrial and discovery phase the Company plans to assert its defenses to the merits of the various claims.

 

76


Table of Contents

The Company remains unaware of any confirmed death or serious injury resulting from any device failure due to the shorting mechanism described in the February 10, 2005 voluntary field action, although certain of plaintiffs’ claims make such allegations. The Company has not recorded an expense related to damages in connection with the various Marquis related lawsuits because potential losses are not currently probable or reasonably estimable under SFAS No. 5.

 

On October 24, 2005, Medtronic received a subpoena from the Office of the United States Attorney for the District of Massachusetts issued under the Health Insurance Portability & Accountability Act of 1996 requesting documents the Company may have, if any, relating to pacemakers and defibrillators and related components; monitoring equipment and services; a provision of benefits, if any, to persons in a position to recommend purchases of such devices; and the Company’s training and compliance materials relating to the fraud and abuse and federal Anti-Kickback statutes. The Company is cooperating fully with the investigation, and has begun to produce documents on a schedule requested by the United States Attorney.

 

Medtronic is a licensee to the RE119 patent (‘119 Patent) owned by Mirowski Family Ventures, LLC (Mirowski) relating to the treatment of hemodynamic dysfunction. Medtronic and Mirowski dispute the application of the ‘119 Patent to certain Medtronic cardiac resynchronization products. The parties have entered into a tolling agreement deferring and conditioning any litigation of the dispute upon conditions precedent. If certain conditions are fulfilled, the ‘119 Patent determined to be valid and the Medtronic products found to infringe the ‘119 Patent, Medtronic will be obligated to pay royalties to Mirowski based upon sales of certain CRT products. As of April 27, 2007, the amount of disputed royalties and interest related to CRT products is $52. This amount has not been accrued because the outcome is not probable under SFAS No. 5.

 

In addition, Medtronic is a licensee to the 4,407,288 Patent (‘288 Patent) owned by Mirowski relating to implantable cardiac defibrillators. Until November 2001, Medtronic accrued and paid royalties under the license based on a percentage of ICD sales. Medtronic and Mirowski dispute the application of the patent to certain Medtronic ICD products. In November 2001, Medtronic ceased paying royalties and entered into an agreement with Mirowski to pay putative royalties into an interest-bearing escrow account through the expiration of the ‘288 Patent in December of 2003. As of April 27, 2007, the current balance in the interest-bearing escrow account is $80. The parties also entered into a tolling agreement deferring and conditioning any litigation of the obligation to pay royalties upon certain conditions precedent. If these conditions are fulfilled and the patent determined to be invalid or Medtronic’s products found not to infringe, the escrowed funds will be released to Medtronic.

 

In the normal course of business, the Company periodically enters into agreements that require it to indemnify customers or suppliers for specific risks, such as claims for injury or property damage arising out of the Company’s products or the negligence of its personnel or claims alleging that its products infringe third-party patents or other intellectual property. The Company’s maximum exposure under these indemnification provisions cannot be estimated, and the Company has not accrued any liabilities within the consolidated financial statements. Historically, the Company has not experienced significant losses on these types of indemnifications.

 



77


Table of Contents

16.

Quarterly Financial Data

 

 

 

First
Quarter

 

Second
Quarter

 

Third
Quarter

 

Fourth
Quarter

 

Fiscal
Year

 

 

 

(unaudited)

 

Net Sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2007

 

$

2,897

 

$

3,075

 

$

3,048

 

$

3,280

 

$

12,299

 

2006

 

 

2,690

 

 

2,765

 

 

2,770

 

 

3,067

 

 

11,292

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2007

 

$

2,165

 

$

2,280

 

$

2,273

 

$

2,414

 

$

9,131

 

2006

 

 

2,036

 

 

2,070

 

 

2,071

 

 

2,299

 

 

8,477

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2007

 

$

599

 

$

681

 

$

710

 

$

812

 

$

2,802

 

2006

 

 

321

 

 

817

 

 

670

 

 

740

 

 

2,547

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic Earnings per Share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2007

 

$

0.52

 

$

0.59

 

$

0.62

 

$

0.71

 

$

2.44

 

2006

 

 

0.26

 

 

0.68

 

 

0.55

 

 

0.62

 

 

2.11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted Earnings per Share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2007

 

$

0.51

 

$

0.59

 

$

0.61

 

$

0.70

 

$

2.41

 

2006

 

 

0.26

 

 

0.67

 

 

0.55

 

 

0.61

 

 

2.09

 

 

The data in the schedule above has been intentionally rounded to the nearest million and therefore the quarterly amounts may not sum to the fiscal year to date amounts.

17.

Segment and Geographic Information

During the fourth quarter of fiscal year 2007, the Company revised its operating segment reporting to separate Physio-Control from the CRDM operating segment. As a result, the Company now functions in eight operating segments, consisting of CRDM, Spinal and Navigation, Vascular, Neurological, Diabetes, Cardiac Surgery, ENT, and Physio-Control. The applicable information for fiscal years 2006 and 2005 has been reclassified to conform to the current presentation.

 




78


Table of Contents

Each of the Company’s operating segments has similar economic characteristics, technology, manufacturing processes, customers, distribution and marketing strategies, regulatory environments, and shared infrastructures. Net sales by operating segment are as follows:

 

 

 

Fiscal Year

 

 

 

2007

 

2006

 

2005

 

Cardiac Rhythm Disease Management

 

$

4,876

 

$

4,794

 

$

4,203

 

Spinal and Navigation

 

 

2,544

 

 

2,244

 

 

1,884

 

Vascular

 

 

1,205

 

 

940

 

 

851

 

Neurological

 

 

1,183

 

 

1,016

 

 

927

 

Diabetes

 

 

863

 

 

722

 

 

649

 

Cardiac Surgery

 

 

704

 

 

663

 

 

669

 

ENT

 

 

539

 

 

501

 

 

459

 

Physio-Control

 

 

385

 

 

412

 

 

413

 

 

 

$

12,299

 

$

11,292

 

$

10,055

 

 

On December 4, 2006, the Company announced its intention to pursue a spin-off of Physio-Control into an independent, publicly traded company. Physio-Control is the Company’s wholly-owned subsidiary that offers external defibrillators, emergency response systems, data management solutions and support services used by hospitals and emergency response personnel. On January 15, 2007, the Company announced a voluntary suspension of U.S. shipments of Physio-Control products manufactured at its facility in Redmond, Washington in order to address quality system issues. The Company is currently in discussions with the FDA regarding the corrective actions that need to be taken before shipping in the U.S. can resume. The suspension of U.S. shipments in fiscal year 2007 did not have a material impact on the Company’s overall results. Physio-Control’s earnings before interest and income taxes for fiscal years 2007, 2006, and 2005 were $7, $15, and $50, respectively.

 

Geographic Information

 

 

 

United
States

 

Europe

 

Asia
Pacific

 

Other
Foreign

 

Consolidated

 

Fiscal 2007

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales to external customers

 

$

7,900

 

$

2,811

 

$

1,195

 

$

393

 

$

12,299

 

Long-lived assets**

 

$

6,947

 

$

1,040

 

$

165

 

$

35

 

$

8,187

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal 2006

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales to external customers

 

$

7,626

 

$

2,314

 

$

1,023

 

$

329

 

$

11,292

 

Long-lived assets*

 

$

7,100

 

$

1,039

 

$

156

 

$

36

 

$

8,331

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal 2005

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales to external customers

 

$

6,711

 

$

2,099

 

$

985

 

$

260

 

$

10,055

 

Long-lived assets*

 

$

6,435

 

$

989

 

$

169

 

$

37

 

$

7,630

 

_______________

*

Excludes other long-term financial instruments.

**

Excludes other long-term financial instruments and long-term deferred tax assets, net.

 

No single customer represents over 10 percent of the Company’s consolidated net sales in fiscal years 2007, 2006, or 2005.

 

79


Table of Contents

Selected  Financial Data

 

 

 

Fiscal Year

 

 

 

2007

 

2006

 

2005

 

2004(2)

 

2003

 

 

 

(dollars in millions, except per share data)

 

Operating Results for the Fiscal Year:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

12,299

 

$

11,292

 

$

10,055

 

$

9,087

 

$

7,665

 

Cost of products sold

 

 

3,168

 

 

2,815

 

 

2,446

 

 

2,253

 

 

1,890

 

Gross margin percentage

 

 

74.2

%

 

75.1

%

 

75.7

%

 

75.2

%

 

75.3

%

Research and development expense

 

$

1,239

 

$

1,113

 

$

951

 

$

852

 

$

750

 

Selling, general and administrative expense

 

 

4,153

 

 

3,659

 

 

3,214

 

 

2,801

 

 

2,372

 

Special charges

 

 

98

 

 

100

 

 

—

 

 

(5

) 

 

11

 

Restructuring charges

 

 

28

 

 

—

 

 

—

 

 

—

 

 

—

 

Certain litigation charges

 

 

40

 

 

—

 

 

654

 

 

—

 

 

(8

) 

Purchased in-process research and development charges

 

 

—

 

 

364

 

 

—

 

 

41

 

 

114

 

Other expense, net

 

 

212

 

 

167

 

 

291

 

 

351

 

 

188

 

Interest income, net

 

 

(154

)

 

(87

)

 

(45

)

 

(3

)

 

7

 

Earnings before income taxes

 

 

3,515

 

 

3,161

 

 

2,544

 

 

2,797

 

 

2,341

 

Provision for income taxes

 

 

713

 

 

614

 

 

740

 

 

838

 

 

741

 

Net earnings

 

$

2,802

 

$

2,547

 

$

1,804

 

$

1,959

 

$

1,600

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Per Share of Common Stock:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings

 

$

2.44

 

$

2.11

 

$

1.49

 

$

1.61

 

$

1.31

 

Diluted earnings

 

 

2.41

 

 

2.09

 

 

1.48

 

 

1.60

 

 

1.30

 

Cash dividends declared

 

 

0.44

 

 

0.39

 

 

0.34

 

 

0.29

 

 

0.25

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Position at Fiscal Year-end:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Working capital(1)

 

$

5,355

 

$

5,971

 

$

4,042

 

$

1,072

 

$

2,792

 

Current ratio(1)

 

 

3.1:1.0

 

 

2.4:1.0

 

 

2.2:1.0

 

 

1.3:1.0

 

 

2.5:1.0

 

Total assets

 

$

19,512

 

$

19,665

 

$

16,617

 

$

14,111

 

$

12,406

 

Long-term debt

 

 

5,578

 

 

5,486

 

 

1,973

 

 

1.1

 

 

1,980

 

Shareholders’ equity

 

 

10,977

 

 

9,383

 

 

10,450

 

 

9,077

 

 

7,906

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional Information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Full-time employees at year-end

 

 

34,554

 

 

32,280

 

 

29,835

 

 

27,868

 

 

26,732

 

Full-time equivalent employees at year-end

 

 

37,800

 

 

35,733

 

 

33,067

 

 

30,900

 

 

29,581

 

_______________

(1)

In fiscal year 2002 $2,000 of contingent convertible debentures were issued to fund acquisitions. These contingent convertible debentures include repayment provisions that give holders the option to require the Company to repurchase the debentures (referred to as a put option) in specific periods. Twelve months prior to the put option for the debentures becoming exercisable, the remaining balance of the debentures will be classified as short-term borrowings in the consolidated balance sheets. At each balance sheet date without a put option within the subsequent four quarters, the remaining balance will be classified as long-term debt in the consolidated balance sheets. Therefore, working capital and the current ratio are impacted by the periodic reclassification of these contingent convertible debentures. In fiscal years 2006 and 2004, the debentures were classified in short-term borrowings. See Note 7 to the consolidated financial statements.

(2)

Fiscal year 2004 consisted of 53 weeks, as compared to 52 weeks in all other fiscal years disclosed above. See Note 1 to the consolidated financial statements.

 

 

80


Table of Contents

Price Range of Medtronic Stock

 

Fiscal Qtr.

 

1st Qtr.

 

2nd Qtr.

 

3rd Qtr.

 

4th Qtr.

 

2007 High

 

$

51.43

 

$

50.93

 

$

54.51

 

$

54.58

 

2007 Low

 

 

46.86

 

 

42.47

 

 

48.33

 

 

48.67

 

2006 High

 

 

53.94

 

 

57.85

 

 

59.54

 

 

57.14

 

2006 Low

 

 

51.56

 

 

52.87

 

 

55.41

 

 

49.05

 

 

Prices are closing quotations. On June 25, 2007, there were approximately 53,600 shareholders of record of the Company’s common stock. The regular quarterly cash dividend was 11 cents per share for fiscal year 2007 and 9.625 cents per share for fiscal year 2006.

 









81


 EX-21 16 medtronic072487s1_ex21.htm LIST OF SUBSIDIARIES Exhibit 21 to Medtronic, Inc. Form 10-K for fiscal year ended April 27, 2007

Exhibit 21

MEDTRONIC, INC. AND SUBSIDIARIES

Company   Jurisdiction of Incorporation
   
Arterial Vascular Engineering Canada, Company   Canada
Arterial Vascular Engineering Netherlands Holding   Netherlands
Arterial Vascular Engineering UK Limited   United Kingdom
AVE Ireland Limited   Ireland
AVECOR Cardiovascular Limited   United Kingdom
B.V. Medtronic FSC   Netherlands
Cardiotron G.m.b.H.   Germany
Carmel Biosensors Ltd.   Israel
IGN AB   Sweden
IGN GmbH   Germany
India Medtronic Private Limited   India
Magnolia Medical LLC   Delaware
Medical Education Y.K.   Japan
Medtronic (Africa) (Proprietary) Limited   South Africa
Medtronic (Schweiz) A.G. / Medtronic (Suisse) S.A.   Switzerland
Medtronic (Shanghai) Ltd.   China
Medtronic (Thailand) Limited   Thailand
Medtronic A/S   Denmark
Medtronic Aktiebolag   Sweden
Medtronic Angiolink, Inc.   Delaware
Medtronic Asia, Ltd.   Minnesota
Medtronic Australasia Pty. Limited   Australia
Medtronic B.V.   Netherlands
Medtronic Bakken Research Center B.V.   Netherlands
Medtronic Belgium S.A./N.V.   Belgium
Medtronic Bio-Medicus, Inc.   Minnesota
Medtronic China, Ltd.   Minnesota
Medtronic Comercial Ltda.   Brazil
Medtronic Czechia s.r.o.   Czech Republic
Medtronic Danmark A/S   Denmark
Medtronic do Brasil Ltda.   Brazil
Medtronic Endonetics, Inc.   California
Medtronic Europe BVBA   Belgium
Medtronic Europe Sàrl   Switzerland
Medtronic Fabrication SAS   France
Medtronic Finland OY   Finland
Medtronic France S.A.S.   France
Medtronic Functional Diagnostics Zinetics, Inc.   Utah
Medtronic Functional Diagnostics, Inc.   New Jersey
Medtronic G.m.b.H.   Germany
Medtronic Hellas Medical Device Commercial S.A.   Greece
Medtronic Holding Switzerland G.m.b.H.   Switzerland
Medtronic Hungary Kereskeldemi Kft.   Hungary
Medtronic Iberica S.A.   Spain
Medtronic Image-Guided Neurologics, Inc.   Delaware
Medtronic InStent (Israel) ltd.   Israel
Medtronic International Technology, Inc.   Minnesota
Medtronic International Trading Sàrl   Switzerland
Medtronic International Trading, Inc.   Minnesota
Medtronic International, Ltd.   Delaware


 

Table of Contents

Company   Jurisdiction of Incorporation
   
Medtronic Interventional Vascular, Inc.   Massachusetts
Medtronic Ireland Holdings Company   Ireland
Medtronic Ireland Limited   Ireland
Medtronic Ireland Manufacturing Limited   Ireland
Medtronic Italia S.p.A.   Italy
Medtronic Japan Co., Ltd.   Japan
Medtronic Korea Co., Ltd.   Korea
Medtronic Latin America, Inc.   Minnesota
Medtronic Lifelink MD, Inc.   Delaware
Medtronic Limited   United Kingdom
Medtronic Medical Appliance Technology and Service (Shanghai) Ltd.   China
Medtronic Medical Technology Ticaret Limited Sirketi   Turkey
Medtronic Mediterranean SAL   Lebanon
Medtronic Mexico S. de R.L. de C.V.   Mexico
Medtronic Micro Motion Sciences, Inc.   Delaware
Medtronic MiniMed, Inc.   Delaware
Medtronic Navigation Israel Ltd.   Israel
Medtronic Navigation, Inc.   Delaware
Medtronic Norge AS   Norway
Medtronic Oesterreich G.m.b.H.   Austria
Medtronic of Canada Ltd.   Canada
Medtronic Pacific Trading, Inc.   Minnesota
Medtronic Physio-Control Limited   United Kingdom
Medtronic Poland Sp. z o.o.   Poland
Medtronic Portugal - Comércio e Distribuição de Aparelhos Médicos Lda   Portugal
Medtronic PS Medical, Inc.   California
Medtronic Puerto Rico Operations Co.   Cayman Islands
Medtronic S. de R.L. de C.V.   Mexico
Medtronic S.A.I.C.   Argentina
Medtronic Servicios S. de R.L. de C.V.   Mexico
Medtronic Sofamor Danek (NZ) Limited   New Zealand
Medtronic Sofamor Danek (UK) Ltd.   United Kingdom
Medtronic Sofamor Danek Australia Pty. Ltd.   Australia
Medtronic Sofamor Danek Co., Ltd.   Japan
Medtronic Sofamor Danek Deggendorf GmbH   Germany
Medtronic Sofamor Danek South Africa (Proprietary) Limited   South Africa
Medtronic Sofamor Danek USA, Inc.   Tennessee
Medtronic Sofamor Danek, Inc.   Indiana
Medtronic Synectics Aktiebolag   Sweden
Medtronic Trading NL BV   Netherlands
Medtronic Transneuronix, Inc.   Delaware
Medtronic Treasury International, Inc.   Minnesota
Medtronic Treasury Management, Inc.   Minnesota
Medtronic USA, Inc.   Minnesota
Medtronic Vascular Connaught   Ireland
Medtronic Vascular Galway Limited   Ireland
Medtronic Vascular, Inc.   Delaware
Medtronic Vertelink, Inc.   California
Medtronic VidaMed, Inc.   Delaware
Medtronic World Trade Corporation   Minnesota


 

Table of Contents

Company   Jurisdiction of Incorporation
   
Medtronic Xomed Instrumentation SAS   France
Medtronic Xomed U.K. Limited   United Kingdom
Medtronic Xomed, Inc.   Delaware
Medtronic-Mediland (Taiwan) Ltd.   Taiwan
MG Biotherapeutics LLC   Delaware
MiniMed Distribution Corp.   Delaware
MiniMed Pty Ltd.   Australia
Physio-Control International, Inc.   Washington
Physio-Control Manufacturing, Inc.   Washington
Physio-Control, Inc.   Washington
Physior SNC   France
Restoragen, Inc.   Delaware
Sofamor S.N.C.   France
Spike SNC   France
SpinalGraft Technologies, LLC   Tennessee
Synectics Medical - Equipamento Electronico de Medicina, Limitada   Portugal
Synectics Medical Limited   United Kingdom
Transneuronix International GmbH   Germany
Vidamed International Limited   United Kingdom
Vitatron A.G.   Switzerland
Vitatron B.V.   Netherlands
Vitatron Belgium S.A. / N.V.   Belgium
Vitatron Czechia s.r.o.   Czech Republic
Vitatron Denmark A/S   Denmark
Vitatron Finland Oy   Finland
Vitatron G.m.b.H.   Austria
Vitatron G.m.b.H.   Germany
Vitatron Holding B.V.   Netherlands
Vitatron Japan Co., Ltd.   Japan
Vitatron Medical Espana S.A.   Spain
Vitatron Nederland B.V.   Netherlands
Vitatron Portugal - Comércio e Distribuição de Dispositivos Médicos, Lda   Portugal
Vitatron S.A.R.L.   France
Vitatron Sweden Aktiebolag   Sweden
Vitatron U.K. Limited   United Kingdom
Warsaw Orthopedic, Inc.   Indiana


 

 EX-23 17 medtronic072487s1_ex23.htm CONSENT OF PRICEWATERHOUSECOOPERS LLP Exhibit 23 to Medtronic, Inc. Form 10-K for fiscal year ended April 27, 2007

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-136361) and on Form S-8 (Nos. 33-37529, 33-44230, 33-55329, 33-63805, 333-04099, 333-07385, 333-65227, 333-71259, 333-71355, 333-74229, 333-75819, 333-90381, 333-44766, 333-52840, 333-66978, 333-68594, 333-100624, 333-106566, 333-112267, 333-128531 and 333-129872) of Medtronic, Inc. of our report dated June 21, 2007 relating to the consolidated financial statements, management’s assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting, which appears in Exhibit 13 to this Annual Report on Form 10-K. We also consent to the incorporation by reference in the above Registration Statements of our report dated June 21, 2007 relating to the financial statement schedule, which appears in this Annual Report on Form 10-K.

/s/   PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
Minneapolis, Minnesota
June 25, 2007



Report of Independent Registered Public Accounting Firm on
Financial Statement Schedule

To the Board of Directors of Medtronic, Inc.:

Our audits of the consolidated financial statements, of management’s assessment of the effectiveness of internal control over financial reporting and of the effectiveness of internal control over financial reporting referred to in our report dated June 21, 2007 appearing in Exhibit 13 to this Annual Report on Form 10-K of Medtronic, Inc. (which consolidated financial statements and assessment are included in Exhibit 13 to this Annual Report on Form 10-K) also included an audit of the financial statement schedule listed in Item 15(a)(2) of this Form 10-K. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

/s/   PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
Minneapolis, Minnesota
June 21, 2007












 

 EX-24 18 medtronic072487s1_ex24.htm POWERS OF ATTORNEY Exhibit 24 to Medtronic, Inc. Form 10-K for fiscal year ended April 27, 2007

Exhibit 24

POWER OF ATTORNEY

Each of the undersigned directors of Medtronic, Inc., a Minnesota corporation, hereby constitutes and appoints each of ARTHUR D. COLLINS, JR. and TERRANCE L. CARLSON, acting individually or jointly, their true and lawful attorneys-in-fact and agents, with full power to act for them and in their name, place and stead, in any and all capacities, to do any and all acts and execute any and all documents which either such attorney and agent may deem necessary or desirable to enable Medtronic, Inc. to comply with the Securities Exchange Act of 1934, as amended, and any rules, regulations and requirements of the Securities and Exchange Commission in respect thereof, in connection with the filing with the Commission of Medtronic’s Annual Report on Form 10-K for the fiscal year ended April 27, 2007, including specifically, but without limiting the generality of the foregoing, power and authority to sign the names of the undersigned directors to the Form 10-K and to any instruments and documents filed as part of or in connection with the Form 10-K or any amendments thereto; and the undersigned hereby ratify and confirm all actions taken and documents signed by each said attorney and agent as provided herein.

The undersigned have set their hands this 22nd day of June 2007.

/s/   Richard H. Anderson
Richard H. Anderson		   /s/   James T. Lenehan
James T. Lenehan
/s/   Michael R. Bonsignore
Michael R. Bonsignore		   /s/   Denise M. O’Leary
Denise M. O’Leary
 
William R. Brody, M.D., Ph.D.		   /s/   Robert C. Pozen
Robert C. Pozen
/s/   Arthur D. Collins, Jr.
Arthur D. Collins, Jr.		   /s/   Jean-Pierre Rosso
Jean-Pierre Rosso
/s/   William A. Hawkins
William A. Hawkins		   /s/   Jack W. Schuler
Jack W. Schuler

Shirley Ann Jackson, Ph.D.		   /s/   Gordon M. Sprenger
Gordon M. Sprenger








 

 EX-31.1 19 medtronic072487s1_ex31-1.htm CERTIFICATION OF CEO PURSUANT TO SECTION 302 Exhibit 31.1 to Medtronic, Inc. Form 10-K for fiscal year ended April 27, 2007

Exhibit 31.1

Certification of Chief Executive Officer
Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002

I, Arthur D. Collins, Jr., certify that:

  1. I have reviewed this Annual Report on Form 10-K of Medtronic, Inc.;
  2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
  3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
  4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
    (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
    (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
    (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
    (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
  5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
    (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
    (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:   June 25, 2007

 

/s/   Arthur D. Collins, Jr.

Arthur D. Collins, Jr.
Chairman of the Board and
Chief Executive Officer



 

 EX-31.2 20 medtronic072487s1_ex31-2.htm CERTIFICATION OF CFO PURSUANT TO SECTION 302 Exhibit 31.2 to Medtronic, Inc. Form 10-K for fiscal year ended April 27, 2007

Exhibit 31.2

Certification of Chief Financial Officer
Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002

I, Gary L. Ellis, certify that:

  1. I have reviewed this Annual Report on Form 10-K of Medtronic, Inc.;
  2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
  3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
  4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
    (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
    (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
    (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
    (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
  5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
    (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
    (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:   June 25, 2007

 

/s/   Gary L. Ellis

Gary L. Ellis
Senior Vice President and
Chief Financial Officer



 

 EX-32.1 21 medtronic072487s1_ex32-1.htm CERTIFICATION OF CEO PURSUANT TO SECTION 906 Exhibit 32.1 to Medtronic, Inc. Form 10-K for fiscal year ended April 27, 2007

Exhibit 32.1

Certification of Chief Executive Officer
Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002

In connection with this quarterly report on Form 10-K of Medtronic, Inc. for the fiscal year ended April 27, 2007, the undersigned hereby certifies, in his capacity as Chief Executive Officer of Medtronic, Inc., for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

  (1) The report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
  (2) The information contained in this report fairly presents, in all material respects, the financial condition and results of operations of Medtronic, Inc.

Date:   June 25, 2007

 

/s/   Arthur D. Collins, Jr.

Arthur D. Collins, Jr.
Chairman of the Board and
Chief Executive Officer















 

 EX-32.2 22 medtronic072487s1_ex32-2.htm CERTIFICATION OF CFO PURSUANT TO SECTION 906 Exhibit 32.2 to Medtronic, Inc. Form 10-K for fiscal year ended April 27, 2007

Exhibit 32.2

Certification of Chief Financial Officer
Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002

In connection with this annual report on Form 10-K of Medtronic, Inc. for the fiscal year ended April 27, 2007, the undersigned hereby certifies, in his capacity as Chief Financial Officer of Medtronic, Inc., for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

  (1) The report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
  (2) The information contained in this report fairly presents, in all material respects, the financial condition and results of operations of Medtronic, Inc.

Date:   June 25, 2007

 

/s/   Gary L. Ellis

Gary L. Ellis
Senior Vice President and
Chief Financial Officer















 

 -----END PRIVACY-ENHANCED MESSAGE-----