ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS. Medtronic, Inc. (together with its subsidiaries, "Medtronic" or the "company") was incorporated as a Minnesota corporation in 1957. Medtronic is the world's leading therapeutic medical device company, developing, manufacturing and marketing therapies for improved cardiovascular and neurological health. Primary products include implantable pacemaker systems used for treatment of bradycardia, implantable tachyarrhythmia management devices for treatment of ventricular arrhythmias, mechanical and tissue heart valves, balloon and guiding catheters used in angioplasty, implantable neurostimulation and drug delivery systems, and perfusion systems including blood oxygenators, centrifugal blood pumps, autotransfusion systems and cannula products. More than half of Medtronic's revenues are generated from the sale of implantable cardiac pacemaker systems for treatment of bradycardia ("brady pacemakers"). These systems consist of implantable pulse generators ("IPGs") and leads, which are the insulated wires that carry electrical impulses from the IPG to the heart.
In March 1994, Medtronic acquired substantially all assets and liabilities of DLP, Inc. for approximately $128.3 million in cash. DLP is the market leader in the development, manufacture, and sale of cannula products used in heart surgery. Other DLP products are used in marking and targeting suspected malignancies during diagnostic and interventional procedures. DLP will operate as part of the company's Cardiac Surgery business.
In April 1994, Medtronic acquired all of the outstanding common stock of Electromedics, Inc. for approximately $95.3 million. The purchase price consisted of approximately $39.1 million payable in cash and approximately 778,000 shares of common stock valued at $56.2 million. Electromedics designs, manufactures and markets blood management and blood conservation equipment for use in autotransfusion, or retransfusion of a patient's own blood, during major medical procedures. Electromedics will operate as part of the company's Cardiac Surgery business.
In April 1994, Medtronic also acquired all of the remaining outstanding common stock of Carbon Implants, Inc. Carbon Implants is an innovator in pyrolytic carbon coating processes and the design and manufacture of mechanical heart valves using these processes for enhanced durability and biocompatibility. The total purchase price was approximately $34.6 million in cash.
In July 1993, Medtronic sold substantially all the assets of its Medtronic Andover Medical, Inc. ("AMI") subsidiary. AMI manufactured electrodes, cables and related devices for the neurological and cardiovascular markets. Annual sales of AMI were approximately $23 million. Medtronic has now completed its recent strategy to divest businesses that do not directly support its core implantable and invasive medical technology businesses.
Medtronic operates in a single industry segment, that of providing products for medical applications. Its revenues, operating profits and assets for the past three fiscal years (1992-1994) have been attributable to this single industry segment.
BUSINESS NARRATIVE. Medtronic generally has vertically integrated manufacturing operations, and makes its own lithium batteries, feedthroughs, integrated and hybrid circuits, and certain other components. Sales of pacemaker and tachyarrhythmia management products, such as IPGs, the implantable pacer/cardioverter/defibrillator ("PCD(R)") device, leads and instrumentation accounted for 67.2% of Medtronic's net sales during the fiscal year ended April 30, 1994 ("fiscal 1994"), 65.7% of net sales in fiscal 1993 and 66.1% of net sales in fiscal 1992.
Medtronic produces various models of brady pacemakers and leads. These include pacemakers which can be noninvasively programmed by the physician to adjust sensing, electrical pulse intensity, duration, rate, and other characteristics, as well as pacemakers which can sense in both the upper and lower chambers of the heart and produce impulses to cause upper or lower chamber contractions, or both, in appropriate relation to heart activity. Medtronic produces LEGEND II(R) and ELITE II(R) pacemakers, which are rate variable in response to patient activity levels. LEGEND II(R) and ELITE II(R) models currently account for a substantial portion of Medtronic's U.S. and international single chamber and dual chamber pacemaker product sales, respectively. The Thera(R) pacing system, consisting of a new line of pulse generators, a new specialized lead and a new model 9790 programmer which can be used with all brady pacing products as well as the Jewel(tm) family of PCD(R) devices, was commercially released outside the U.S. in March 1994, and the pulse generators are in clinical evaluation in the U.S. In addition to the "Medtronic" line of pacemakers, the company also produces a separate line of IPGs and leads under the brand name "Vitatron."
The Pacing business also produces the PCD(R), an implantable device for treating ventricular tachyarrhythmias using a tiered therapy of pacing, cardioversion and defibrillation. In December 1993, the Transvene(R) lead system was commercially introduced in the U.S. This transvenous lead system allows the PCD(R) device to be implanted without a thoracotomy, thereby reducing patient trauma and hospitalization time. Medtronic's Transvene(R) leads and the PCD(R) comprise the first complete transvenous, tiered therapy system to be cleared by the FDA in the United States.
The next generation of tachyarrhythmia devices is the Jewel(TM) family, which is designed to be implanted in the chest rather than the abdomen. The Jewel(TM) PCD(R) implantable defibrillator, which allows shorter implant procedures and reduced hospital stays, was commercially released outside the U.S. in December 1993 and has been in clinical evaluation in the U.S. since September 1993.
Medtronic's products, other than brady pacing and tachyarrhythmia management products, accounted for the following percentages of its net sales in fiscal 1994: other cardiovascular products, which include heart valves, oxygenators, blood pumps, angioplasty catheters and other related cardiovascular products, 23.6% (22.9% for fiscal 1993 and 21.4% for fiscal 1992); and neurological and other businesses, which include implantable neurostimulation devices, drug administration systems, and venture-related products, 9.2% (11.4% for fiscal 1993 and 12.5% for fiscal 1992). The decrease in percentage of revenue contributed by neurological and other businesses is due to divested product lines during fiscal 1993 and 1994.
GOVERNMENT REGULATION. The industry segment in which Medtronic competes involves development, production and sales of medical devices. In the United States, the FDA, among other governmental agencies, is responsible for regulating the introduction of new medical devices, laboratory and manufacturing practices, and labeling and recordkeeping for medical devices, as well as for reviewing manufacturers' required reports of adverse experience to identify potential problems with marketed medical devices. The FDA can ban certain medical devices, detain or seize adulterated or misbranded medical devices and order repair, replacement, or refund, and require notification of health professionals and others with regard to medical devices that present unreasonable risks of substantial harm to the public health. The FDA may also enjoin and restrain certain violations of the Food, Drug and Cosmetic Act and the Safe Medical Devices Act pertaining to medical devices, or initiate action for criminal prosecution of such violations. Many of the devices that Medtronic develops and markets are in a category for which the FDA has implemented stringent clinical investigation and premarket clearance requirements. Moreover, the FDA administers certain controls over the export of such devices from the United States.
The number of medical devices approved by the FDA for commercial release has decreased significantly in recent years due to more rigorous clinical evaluation requirements, increased enforcement actions, and enactment of the Safe Medical Devices Act of 1990, which reflect a trend toward more stringent product regulation by the FDA. Rigorous regulatory action may be taken in response to deficiencies noted in inspections or to any product performance problems. The risks in the United States of lengthened introduction times for new products and additional expense have increased substantially. In addition, the requirements for post-market surveillance and device tracking under the Safe Medical Devices Act will continue to increase the expense of the regulatory process.
Medical device laws are also in effect in many of the countries in which Medtronic does business outside the United States. These range from comprehensive device approval requirements for some or all of Medtronic's medical device products to requests for product data or certifications. The number and scope of these requirements is increasing. This trend toward increasing product regulation is evident in the European Economic Community, where efforts are underway to harmonize the regulatory systems.
President Clinton's administration has introduced a health care reform bill that would cause significant changes in health care delivery. Congress is currently considering this bill and others, and it is generally expected that Congress will pass a health care reform bill in some form which could affect health care expenditures in the United States. Similar initiatives to limit the growth of health care costs, including price regulation, are also underway in several other countries in which the company does business. These changes are causing the marketplace to place increased emphasis on the delivery of more cost-effective medical therapies. Although the company believes it is well positioned to respond to changes resulting from health care reform, the uncertainty as to the outcome of any proposed legislation or change in the marketplace precludes the company from predicting the impact such reform may have on future operating results.
The U.S. Health Care Financing Agency, which determines Medicare reimbursement policy and practice, appears to be changing its practice of reimbursing hospitals for procedures involving medical devices in clinical evaluation. Such a change in practice is causing some hospitals to treat Medicare patients only with medical devices that have been cleared for commercial release by the FDA. This action will probably limit the scope of clinical trials in the U.S., force more clinical research to non-U.S. markets and increase the cost and time required to complete clinical evaluations in the U.S.
Medtronic is also subject to various environmental laws and regulations both in the United States and abroad. The operations of the company, like those of other medical device companies, involve the use of substances regulated under environmental laws, primarily in manufacturing and sterilization processes. In addition, many of these substances contain chlorofluorocarbons which, under federal law, must be phased out in the mid-1990s. Medtronic believes that alternatives are available and plans to eliminate the use of chlorofluorocarbons in compliance with such requirements. While it is difficult to quantify the potential impact of compliance with environmental protection laws, management believes that such compliance will not have a material impact on the company's financial position.
SALES, MARKETS AND DISTRIBUTION METHODS. The primary markets for Medtronic's products are hospitals, other medical institutions and physicians, both in the United States and abroad. No one customer individually accounts for a material amount of Medtronic's total sales.
Medtronic sells most of its products and services directly through its staff of trained, full-time sales representatives. Sales by these representatives accounted for approximately 94.5% of Medtronic's U.S. sales and approximately 61.7% of its sales from other countries in fiscal 1994. The remaining sales were made through independent distributors. Medtronic maintains inventories of its high volume sales products in various locations in the United States and in the rest of the world.
NEW PRODUCTS. New products recently introduced by Medtronic include, in part, the following: (i) the Thera(TM) pacing system, consisting of a new line of pulse generators, a new specialized lead and a new 9790 programmer which can be used with all brady pacing products as well as the Jewel(TM) family of PCD(R) devices, was commercially released outside the U.S. in March 1994, and the pulse generators are in clinical evaluation in the U.S.; (ii) the Premier(TM) pacing system, consisting of a single chamber pacemaker and steroid-eluting lead in one package, began clinical trials in non-U.S. markets in November 1993; (iii) the Legend Plus(TM) dual sensor, single chamber pacemaker was commercially released in selected non-U.S. markets in April 1994; (iv) the Diamond(TM) dual chamber, dual sensor pacemaker was commercially released in Europe in January 1994 under the "Vitatron" brand name; (v) the Saphir(TM), a single-lead, atrial tracking pacemaker, was commercially released in Europe in May 1994 under the "Vitatron" brand name; (vi) the CapSure(R) Z steroid-eluting lead began clinical evaluation in Europe in October 1993; (vii) the Jewel(TM) PCD(R) implantable defibrillator, whose smaller size permits the device to be implanted in the chest rather than the abdomen, was commercially released outside the U.S. in December 1993 and has been in clinical evaluation in the U.S. since September 1993; (viii) the Jewel(TM) PCD(R) with the Active Can(TM) technology, which features a single tripolar transvenous lead that simplifies implantation, began clinical evaluation in non-U.S. markets in November 1993 and in the U.S. in April 1994; (ix) the Atakr(R) RF Ablation System, the world's first battery-operated radio frequency ablation system designed to automatically maintain temperature control, has been granted "expedited review" status by the FDA; (x) the Spirit(TM) balloon catheter for coronary angioplasty, offering superior control and maneuverability, was cleared for commercial release by the FDA in August 1993; (xi) the long-balloon version of the Gold Xchange(TM) rapid-exchange catheter for PTCA was commercially released outside the U.S. in 1993, while a new long-balloon model of the 14K(R) over-the-wire catheter was released worldwide in 1993, with both models permitting treatment of long arterial lesions that otherwise would require repositioning and repeat inflation with shorter balloons; (xii) the Panther(TM) PTCA balloon catheter, which offers superior flexibility, strength and angioscopic visualization, was cleared for commercial release in the U.S. in November 1993; (xiii) the Ascent(TM) guiding catheter, with a stiffer shaft for maximum balloon support, a larger lumen to increase visualization and compatibility with a wide range of balloons and adjunctive interventional devices, was cleared for commercial release in the U.S. in February 1994; (xiv) the Sculptor(TM) annuloplasty ring, which is used in repairing the heart's natural valves to improve control of blood flow and circulation, was commercially released in the U.S. in June 1993; (xv) the Hancock(R) M.O. II porcine tissue valve, a bioprosthetic heart valve that offers significant advantages in hemodynamics and durability for the older patient, was cleared for commercial release in the U.S. in December 1993; (xvi) the Mosaic(TM) porcine tissue valve, designed to combine the best features of earlier Medtronic tissue valves and serve each patient longer, began non-U.S. clinical evaluations in February 1994; (xvii) the Parallel(TM) bileaflet mechanical heart valve, made with an innovative pyrolytic carbon coating process to offer excellent biocompatibility and mechanical durability, began clinical evaluations in Europe in May 1994; (xviii) the Hall(TM) collagen impregnated aortic valved conduit, which reduces potential surgical complications by eliminating the need for preclotting prior to surgery, was cleared for commercial release in the U.S. in May 1994; and (xix) the Maxima Plus(TM) membrane oxygenator received clearance for commercial release in the U.S. in February 1994.
RAW MATERIALS AND PRODUCTION. Medtronic purchases many of the parts and materials used in manufacturing its products from external suppliers and internally manufactures certain of its product components. Medtronic's single- and sole-sourced materials include medical adhesives and resins, certain integrated circuits, power sources, switches, sensors, crystals, polyurethane, silicone rubber, certain electrolytic capacitors, pyrolytic carbon discs, Lioresal(R)* (baclofen, USP) Intrathecal, computer and other peripheral equipment, cable connector assemblies, MP-35N wire, and drawn-brazed stranded wire. Medtronic believes that its suppliers of polyurethane and medical adhesive are the sole U. S. suppliers of such materials. The other noted parts and materials are purchased from single sources for reasons of quality assurance and cost effectiveness. Medtronic works closely with its suppliers to assure continuity of supply while maintaining high quality and reliability. However, the medical device industry was recently advised that, in an effort to reduce potential product liability exposure, certain suppliers have terminated or are planning to terminate sales of certain materials and parts to customers that manufacture implantable medical devices. Medtronic believes that various design, material or supplier alternatives can be found for these materials and components without a significant interruption in production. - ----------- * Registered trademark of CIBA-GEIGY Corporation.
PATENTS AND LICENSES. Medtronic owns patents on certain of its inventions, and obtains licenses from others as it deems necessary to its business. Medtronic's policy is to obtain patents on its inventions whenever practical. Technological advancement has been characteristically rapid in the industry in which Medtronic competes, and Medtronic does not consider its business to be materially dependent upon any individual patent.
COMPETITION AND INDUSTRY. Medtronic sells therapeutic medical devices in the United States and throughout the world. In the businesses in which Medtronic competes, the company faces a mixture of competitors ranging from large multi-national industrial manufacturers to diversified pharmaceutical companies, as well as regional or national manufacturers that offer a limited number of products. Important factors to Medtronic's customers include product reliability and performance, product technology that provides for improved patient benefits, product price, and related product services provided by the manufacturer. Major shifts in industry market shares have occurred in connection with product problems, physician advisories and safety alerts, reflecting the importance and risks of product quality in the medical device industry.
Medtronic is the leading manufacturer and supplier of brady pacemakers in both the U.S. and non-U.S. markets. Worldwide, approximately ten manufacturers compete in the pacemaker industry. In the U.S., Medtronic and four other manufacturers account for a significant portion of pacemaker sales. Medtronic and five other manufacturers account for most of the non-U.S. pacemaker sales.
In the tachyarrhythmia management device market, Medtronic and two other manufacturers based in the U.S. account for most sales of implantable defibrillators within and outside the U.S. Medtronic and one of these other manufacturers has a transvenous lead system cleared for commercial sale in the U.S. Medtronic's PCD(R) device is commercially available with the company's Transvene(TM) leads in U.S. and non-U.S. markets. Five other companies have devices in various stages of development and clinical evaluation.
In the angioplasty device market, including balloon and guiding catheters used in coronary artery procedures, there are numerous competitors worldwide. Four competitors based in the United States account for a significant portion of sales of angioplasty devices both in the United States and abroad.
Medtronic is the second largest manufacturer and supplier of tissue heart valves and also of mechanical heart valves within and outside the U.S. Another large manufacturer and distributor of hospital products and services is the major competitor in tissue heart valves and another company is the major competitor in mechanical heart valves. These two companies and Medtronic are the primary manufacturers and suppliers of heart valves within the U.S. These three companies plus a few competitors outside the U.S. account for most of the non-U.S. heart valve sales.
In the blood oxygenator market, there are approximately seven companies that account for a significant portion of the U. S. and non-U.S. markets. Medtronic believes it is the largest manufacturer and supplier of blood oxygenators worldwide. Medtronic is the leading manufacturer of centrifugal blood pumps worldwide.
Medtronic recently entered the cannula market with the acquisition of DLP, Inc., the market leader in cannula products. See "General Development of Business" above. Medtronic and four competitors account for a significant portion of cannulae sales in the U.S.
Medtronic recently entered the autotransfusion market with the acquisition of Electromedics, Inc. See "General Development of Business" above. Medtronic and three competitors account for a significant portion of autotransfusion sales in both U.S. and non-U.S. markets.
In neurological devices, Medtronic is the leading manufacturer and supplier of implantable neurostimulation systems. There are a few competitors worldwide. Medtronic and one competitor account for most worldwide sales of implantable drug delivery systems.
Market complexity has been intensifying in the medical device industry in recent years. Factors such as relative patent portfolios, government regulation, including the regulatory approval process for medical devices, a more rigorous enforcement climate at the FDA, anticipated significant health care reform, government reimbursement systems for health care costs, product liability litigation and the rapid rate of technological change are increasingly important considerations for existing medical device manufacturers and any potential entrants to the industry.
RESEARCH AND DEVELOPMENT. Medtronic spent $156.3 million on research and development (11.2% of net sales) in fiscal 1994, $133.0 million (10.0% of net sales) in fiscal 1993 and $109.2 million (9.3% of net sales) in fiscal 1992. Such amounts have been applied toward improving existing products, expanding their applications, and developing new products. Medtronic's present research and development projects span such areas as sensing and treatment of cardiovascular disorders (including bradycardia and tachyarrhythmia, fibrillation, and sinus node abnormalities); improved heart valves, membrane oxygenators and centrifugal blood pump systems; implantable drug delivery systems for pain and other neurological applications; muscle and neurological stimulators; therapeutic catheters; coronary stents and treatments for restenosis; implantable physiologic sensors; cardiac assist systems (cardiomyoplasty) and other applications of transformed muscle; and materials and coatings to enhance blood and device interface.
Medtronic has not engaged in significant customer or government sponsored research.
EMPLOYEES. On April 30, 1994, Medtronic and its subsidiaries employed 8,709 persons on a regular, full-time basis and, including temporary and part-time employees, a total of 9,856 employees on a full-time equivalent basis.
U.S. AND NON-U.S. OPERATIONS AND EXPORT SALES. Medtronic sells products in the following markets: United States, Canada, Latin America, Europe, Middle East, Africa, Japan and other Asia/Pacific. For financial reporting purposes, the revenues, profitability, and identifiable assets attributable to significant geographic areas are presented in Note 14 to the consolidated financial statements, incorporated herein by reference to Medtronic's 1994 Annual Shareholder Report on page 51. U.S. export sales to unaffiliated customers comprised less than one percent of Medtronic's consolidated sales in each of fiscal 1994, 1993 and 1992.
Operation in countries outside the U.S. is accompanied by certain financial and other risks. Relationships with customers and effective terms of sale frequently 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 rapidly changing business conditions and currency exposure. Currency exchange rate fluctuations can affect income from, and profitability of, non-U.S. operations. Medtronic attempts to hedge these exposures to reduce the effects on net earnings of foreign currency fluctuations. Certain countries also limit or regulate the repatriation of earnings to the United States. Non-U.S. operations in general present complex tax and money management questions requiring sophisticated analysis and precise execution of strategy to meet the company's financial objectives.
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 experience for the past five or more years. Executive officers generally serve terms of office of approximately one year. There are no family relationships between any of the officers named, nor is there any arrangement or understanding pursuant to which any person was selected as an officer.
WILLIAM W. GEORGE, age 51, has been President and Chief Executive Officer since May 1991, was President and Chief Operating Officer from March 1989 to April 1991, and has been a director since March 1989. Prior to joining the company, Mr. George was President, Space and Aviation Systems Business, at Honeywell Inc. from December 1987 to March 1989. During his 11 years with Honeywell, Mr. George served in several other executive positions including President, Industrial Automation and Control, from May 1987 to December 1987; and Executive Vice President of that business from January 1983 to May 1987.
GLEN D. NELSON, M.D., age 57, has been Vice Chairman since July 1988, and has been a director since 1980. From September 1986 to July 1988, he was Executive Vice President of the company. Dr. Nelson was Chairman and Chief Executive Officer of American MedCenters, Inc., an HMO management corporation, from July 1984 to August 1986.
ARTHUR D. COLLINS, JR., age 46, has been Chief Operating Officer since January 1994. From June 1992 to January 1994, Mr. Collins was Executive Vice President and President of Medtronic International. Prior to joining the company, Mr. Collins was Corporate Vice President, Diagnostic Medical Products, at Abbott Laboratories from October 1989 to May 1992 and Divisional Vice President, Diagnostic Medical Products, from May 1984 to October 1989. Mr. Collins held various other management positions at Abbott Laboratories in the United States and Europe from March 1978 to May 1984. Prior to joining Abbott Laboratories, Mr. Collins was a consultant with Booz, Allen & Hamilton.
BOBBY I. GRIFFIN, age 57, has been Executive Vice President since July 1988, and President, Pacing, since March 1991. From September 1985 to July 1988, Mr. Griffin was Vice President of the Pacing Business Unit.
BILL K. ERICKSON, age 50, has been Senior Vice President and President, Americas, since January 1994. From May 1992 to January 1994, Mr. Erickson was Senior Vice President and President, U.S. Cardiovascular Sales and Marketing Division. Mr. Erickson was Senior Vice President, U.S. Cardiovascular Division, from January 1990 to May 1992 and was Vice President, U.S. Cardiovascular Distribution, from January 1982 to December 1989.
RONALD E. LUND, age 59, has been Senior Vice President and General Counsel since November 1990, and Secretary since July 1992, and was Vice President and General Counsel from February 1989 to November 1990. Prior to joining the company, Mr. Lund held various legal and management positions during his 28 years of employment with The Pillsbury Company, which included serving as Vice President and Associate General Counsel from 1984 to February 1989.
ROBERT L. RYAN, age 51, has been Senior Vice President and Chief Financial Officer since April 1993. Prior to joining the company, Mr. Ryan was Vice President, Finance, and Chief Financial Officer of Union Texas Petroleum Corp. from May 1984 to April 1993, Controller from May 1983 to May 1984, and Treasurer from March 1982 to May 1983. Prior to that, Mr. Ryan held several managerial positions at Citibank and McKinsey & Company.
JANET S. FIOLA, age 52, has been Senior Vice President, Human Resources since March 1994. She was Vice President, Human Resources, from February 1993 to March 1994, and was Vice President, Human Resources Development, from February 1988 to February 1993.
WILLARD H. LEWIS, age 62, has been Senior Vice President and President, Cardiac Surgery, since March 1994 and was Vice President and President, Cardiac Surgery, from March 1991 to March 1994. He was Vice President from January 1989 to March 1994 and General Manager, Vascular Business/Cardiopulmonary, from January 1989 to March 1991. Mr. Lewis was a consultant in medical business management from January 1986 to December 1988, which included responsibility for the operations of the company's Cardiopulmonary Business from October 1987 to December 1988. Prior to that, Mr. Lewis held various positions with Bentley Laboratories, including President from July 1978 to January 1986.
JOHN A. MESLOW, age 55, has been Senior Vice President and President, Neurological Business, since March 1994. He was Vice President and President, Neurological Business, from March 1991 to March 1994, and was Vice President, Neurological Division, from March 1985 to March 1991.
ITEM 2.

ITEM 2. PROPERTIES Medtronic's principal offices are owned by the company and located in the Minneapolis, Minnesota metropolitan area. Manufacturing or research facilities are located in Arizona, California, Colorado, Massachusetts, Michigan, Minnesota, Texas, Puerto Rico, Canada, France, Germany, Italy, the Netherlands and Japan. Approximately 81% of total manufacturing and research space (approximately 1,382,943 square feet) is owned by the company, and the balance is leased.
Medtronic also maintains sales and administrative offices inside the United States at 48 locations in 27 states and outside the United States at 87 locations in 20 countries. Most of these locations are leased.
Medtronic is utilizing substantially all of its currently available productive space to develop, manufacture and market its products. The company's facilities are in good operating condition, suitable for their respective uses and adequate for current needs.
ITEM 3.

ITEM 3. LEGAL PROCEEDINGS Notes 11 and 12 to the consolidated financial statements appearing on page 50 of Medtronic's 1994 Annual Shareholder Report are incorporated herein by reference.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable.
PART II ITEM 5.

ITEM 5. MARKET FOR MEDTRONIC'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The information in the sections entitled "Price Range of Medtronic Stock" and "Investor Information" on page 53 of Medtronic's 1994 Annual Shareholder Report is incorporated herein by reference.
ITEM 6.

ITEM 6. SELECTED FINANCIAL DATA The information for the years 1984 through 1994 on page 52 of Medtronic's 1994 Annual Shareholder Report is incorporated herein by reference.
ITEM 7.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information on pages 35 through 39 of Medtronic's 1994 Annual Shareholder Report is incorporated herein by reference.
ITEM 8.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The consolidated financial statements, together with the report thereon of independent accountants dated May 23, 1994, appearing on pages 40 through 51 of Medtronic's 1994 Annual Shareholder Report are incorporated herein by reference.
ITEM 9.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable.
PART III ITEM 10.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF MEDTRONIC
The information on pages 1 through 6 of Medtronic's Proxy Statement for its 1994 Annual Shareholders' Meeting and on page 10 of such Proxy Statement regarding Section 16(a) requirements is incorporated herein by reference. See also "Executive Officers of Medtronic" on pages 6 and 7 hereof.
ITEM 11.

ITEM 11. EXECUTIVE COMPENSATION The sections entitled "Election of Directors -- Director Compensation" and "Executive Compensation" on pages 7 through 9 and 14 through 19, respectively, of Medtronic's Proxy Statement for its 1994 Annual Shareholders' Meeting are incorporated herein by reference.
ITEM 12.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT "Shareholdings of Certain Owners and Management" on pages 9 and 10 of Medtronic's Proxy Statement for its 1994 Annual Shareholders' Meeting is incorporated herein by reference.
ITEM 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information on pages 8 and 9 of Medtronic's Proxy Statement for its 1994 Annual Shareholders' Meeting, concerning services provided to the company by the Chairman of the Board and the Founder of the company in fiscal 1994, is incorporated herein by reference.
PART IV ITEM 14.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. FINANCIAL STATEMENTS
Report of Independent Accountants (incorporated herein by reference to page 40 of Medtronic's 1994 Annual Shareholder Report)
Statement of Consolidated Earnings -- years ended April 30, 1994, 1993, and 1992 (incorporated herein by reference to page 41 of Medtronic's 1994 Annual Shareholder Report)
Consolidated Balance Sheet -- April 30, 1994 and 1993 (incorporated herein by reference to page 42 of Medtronic's 1994 Annual
Statement of Consolidated Cash Flow -- years ended April 30, 1994, 1993, and 1992 (incorporated herein by reference to page 43 of Medtronic's 1994 Annual Shareholder Report)
Notes to Consolidated Financial Statements (incorporated herein by reference to pages 44 through 51 of Medtronic's 1994 Annual Shareholder Report)
2. FINANCIAL STATEMENT SCHEDULES
V Property, Plant, and Equipment -- years ended April 30, 1994, 1993, and
VI Accumulated Depreciation of Property, Plant, and Equipment -- years ended April 30, 1994, 1993, and 1992
VIII Valuation and Qualifying Accounts -- years ended April 30, 1994, 1993, and 1992
IX Short-term Borrowings -- years ended April 30, 1994, 1993, and 1992
X Supplementary Income Statement Information -- years ended April 30, 1994, 1993, and 1992
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
(a) Incorporated herein by reference to the cited Appendix in Medtronic's Proxy Statement for its 1994 Annual Meeting of Shareholders filed with the Commission on July 27, 1994.
(b) Incorporated herein by reference to the cited exhibit in Medtronic's Annual Report on Form 10-K for the year ended April 30, 1993, filed with the Commimssion on July 23, 1993.
(c) Incorporated herein by reference to the cited exhibit in Medtronic's Annual Report on Form 10-K for the year ended April 30, 1992, filed with the Commission under cover of Form SE dated July 24, 1992.
(d) Incorporated herein by reference to the cited exhibit in Medtronic's Proxy Statement for its 1991 Annual Meeting of Shareholders, filed with the Commission on July 24, 1991.
(e) Incorporated herein by reference to the cited exhibit in Medtronic's Annual Report on Form 10-K for the year ended April 30, 1991, filed with the Commission under cover of Form SE dated July 24, 1991.
(f) Incorporated herein by reference to the cited exhibit in Medtronic's Annual Report on Form 10-K for the year ended April 30, 1990, filed with the Commission under cover of Form SE dated July 20, 1990.
(g) Incorporated herein by reference to the cited exhibit in Medtronic's Annual Report on Form 10-K for the year ended April 30, 1989, filed with the Commission under cover of Form SE dated July 20, 1989.
*Items that are management contracts or compensatory plans or arrangements required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed by Medtronic during the quarter ended April 30, 1994. 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: July 25, 1994
BY: /S/ WILLIAM W. GEORGE WILLIAM W. GEORGE PRESIDENT 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: July 25, 1994
BY: /S/ WILLIAM W. GEORGE WILLIAM W. GEORGE PRESIDENT AND CHIEF EXECUTIVE OFFICER Dated: July 25, 1994
BY: /S/ ROBERT L. RYAN ROBERT L. RYAN SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)
EARL E. BAKKEN F. CALEB BLODGETT WILLIAM W. GEORGE ANTONIO M. GOTTO, JR., M.D. BERNADINE P. HEALY, M.D. VERNON H. HEATH THOMAS E. HOLLORAN EDITH W. MARTIN, PH.D. DIRECTORS GLEN D. NELSON, M.D. RICHARD L. SCHALL JACK W. SCHULER GERALD W. SIMONSON GORDON M. SPRENGER RICHARD W. SWALIN, PH.D. WINSTON R. WALLIN
Ronald E. Lund, 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: July 25, 1994
BY: /S/ RONALD E. LUND RONALD E. LUND ATTORNEY-IN-FACT REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES
To the Board of Directors of Medtronic, Inc.
Our audits of the consolidated financial statements referred to in our report dated May 23, 1994 appearing on page 40 of the 1994 Annual Shareholder Report of Medtronic, Inc. (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the Financial Statement Schedules listed in Item 14(a) of this Form 10-K. In our opinion, these Financial Statement Schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.
/S/ PRICE WATERHOUSE
PRICE WATERHOUSE Minneapolis, Minnesota May 23, 1994
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in each Prospectus constituting part of the Registration Statements on Form S-8 (Registration Nos. 2-65157, 2-68408, 33-169, 33-36552, 2-65156, 33-24212, 33-37529, and 33-44230) and Form S-4 (Registration No. 33-52751) of Medtronic, Inc. of our report dated May 23, 1994 appearing on page 40 of the 1994 Annual Shareholder Report which is incorporated by reference in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedules as shown above.
/S/ PRICE WATERHOUSE
PRICE WATERHOUSE Minneapolis, Minnesota July 25, 1994
MEDTRONIC, INC. AND SUBSIDIARIES SCHEDULE V -- PROPERTY, PLANT, AND EQUIPMENT(B) (IN THOUSANDS OF DOLLARS)
(a) Completed and transferred to other categories.
(b) Depreciation is provided using the straight-line method over the following estimated useful lives: Land improvements -- 10 to 20 years Buildings -- 10 to 40 years Equipment -- 3 to 8 years.
(c) Includes assets associated with the acquisitions of DLP, Electromedics and Carbon Implants in fiscal 1994.
(d) Includes sales of assets of the Andover Medical, Inc. division in fiscal 1994 and CardioCare and Nortech divisions in fiscal 1993.
MEDTRONIC, INC. AND SUBSIDIARIES SCHEDULE VI -- ACCUMULATED DEPRECIATION OF PROPERTY, PLANT, AND EQUIPMENT (IN THOUSANDS OF DOLLARS)
(a) Includes sales of the assets of Andover Medical, Inc. in fiscal 1994 and CardioCare and Nortech in fiscal 1993.
MEDTRONIC, INC. AND SUBSIDIARIES SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS (IN THOUSANDS OF DOLLARS)
(a) Uncollectible accounts written off, less recoveries.
(b) Reflects the sale of all assets of the CardioCare division.
(c) Reflects reclassification of assets retained in the sale of the Nortech division.
(d) Includes both current and noncurrent amounts.
(e) Claims settled, less reimbursement by insurance carrier.
SCHEDULE IX -- SHORT-TERM BORROWINGS (IN THOUSANDS OF DOLLARS)
SCHEDULE X -- SUPPLEMENTARY INCOME STATEMENT INFORMATION (IN THOUSANDS OF DOLLARS)
(a) Does not include $18,000 of accelerated intangible assets amortization, a significant portion of which related to the Nortech division. UC9401963-EN
Commission File Number: 1-7707
SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
---------------
EXHIBITS
TO
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13
OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED APRIL 30, 1994
---------------
LOGO
MEDTRONIC, INC. 7000 CENTRAL AVENUE N.E. MINNEAPOLIS, MINNESOTA 55432 TELEPHONE: 612/574-4000
EXHIBIT INDEX
(a) Incorporated herein by reference to the cited Appendix in Medtronic's Proxy Statement for its 1994 Annual Meeting of Shareholders filed with the Commission on July 27, 1994.
(b) Incorporated herein by reference to the cited exhibit in Medtronic's Annual Report on Form 10-K for the year ended April 30, 1993, filed with the Commission on July 23, 1993.
(c) Incorporated herein by reference to the cited exhibit in Medtronic's Annual Report on Form 10-K for the year ended April 30, 1992, filed with the Commission under cover of Form SE dated July 24, 1992.
(d) Incorporated herein by reference to the cited exhibit in Medtronic's Proxy Statement for its 1991 Annual Meeting of Shareholders, filed with the Commission on July 24, 1991.
(e) Incorporated herein by reference to the cited exhibit in Medtronic's Annual Report on Form 10-K for the year ended April 30, 1991, filed with the Commission under cover of Form SE dated July 24, 1991.
(f) Incorporated herein by reference to the cited exhibit in Medtronic's Annual Report on Form 10-K for the year ended April 30, 1990, filed with the Commission under cover of Form SE dated July 20, 1990.
(g) Incorporated herein by reference to the cited exhibit in Medtronic's Annual Report on Form 10-K for the year ended April 30, 1989, filed with the Commission under cover of Form SE dated July 20, 1989.


ITEM 1. BUSINESS
ORGANIZATION
Registrant was organized in 1974 under the laws of the State of Ohio. It began operations in 1975 upon reorganization of its principal subsidiary, The Fifth Third Bank. The executive offices of the Registrant are located in Cincinnati, Ohio. The Registrant is a two-tiered, multi-bank holding company as defined in the Bank Holding Company Act of 1956, as amended, and is registered as such with the Board of Governors of the Federal Reserve System. The Registrant is also a multi-savings-and-loan holding company and is registered with the Office of Thrift Supervision. Registrant has thirteen wholly-owned subsidiaries: Fifth Third Kentucky Bank Holding Company; The Fifth Third Bank; The Fifth Third Bank of Columbus; The Fifth Third Bank of Northwestern Ohio, National Association; The Fifth Third Bank of Southern Ohio; The Fifth Third Bank of Western Ohio; Fifth Third Trust Co. & Savings Bank, FSB; Fifth Third Bank of Northern Kentucky, Inc.; The Fifth Third Bank of Central Indiana; The Fifth Third Bank of Southeastern Indiana; Fifth Third Community Development Company; Fifth Third Investment Company; and Fountain Square Insurance Company. Unless the context otherwise indicates the term "Company" as used herein means the Registrant and the term "Bank" means its wholly-owned subsidiary, The Fifth Third Bank.
As of December 31, 1994, the Company's consolidated total assets were $14,957,009,000 and stockholders' equity totalled $1,398,774,000.
Fifth Third Kentucky Bank Holding Company has two wholly-owned subsidiaries: Fifth Third Bank of Kentucky, Inc. and The Fifth Third Savings Bank of Western Kentucky, FSB. In addition, the Bank has four wholly-owned subsidiaries: Midwest Payment Systems, Inc.; Fifth Third Securities, Inc.; The Fifth Third Company; and The Fifth Third Leasing Company.
PRIOR ACQUISITIONS
The Company is the result of mergers and acquisitions over the years involving 27 financial institutions throughout Ohio, Indiana, Kentucky, and Florida. The Company made the following acquisitions during 1994:
On May 20, 1994, the Company purchased $294 million in deposits from Equitable Savings Bank. The seven offices were located in southern and central Ohio and were acquired by the Bank, The Fifth Third Bank of Columbus and The Fifth Third Bank of Southern Ohio.
On June 3, 1994, the Company acquired The National Bancorp of Kentucky, Inc., with consolidated assets of approximately $90 million, in a transaction accounted for as a pooling of interests. The Consolidated Financial Statements for prior periods have not been restated for this acquisition due to immateriality. National Bancorp's subsidiaries, First National Bank of Falmouth and National Bank of Cynthiana, were merged with Fifth Third Bank of Northern Kentucky, Inc. and Fifth Third Bank of Kentucky, Inc. (formerly Fifth Third Bank of Central Kentucky, Inc.), respectively.
Page 3
On August 26, 1994, the Company acquired The Cumberland Federal Bancorporation, Inc., with consolidated assets of approximately $1.1 billion, and its wholly- owned subsidiary, The Cumberland Federal Savings Bank ("Cumberland FSB") in a transaction accounted for as a pooling of interests. Financial information for all prior periods has been restated. In concurrent transactions, Fifth Third Bank of Kentucky, Inc. purchased substantially all of the assets and assumed substantially all of the liabilities of The Cumberland FSB, and The Cumberland FSB's main office was relocated to Mayfield, Kentucky and renamed The Fifth Third Savings Bank of Western Kentucky, FSB.
COMPETITION
There are hundreds of commercial banks, savings and loans and other financial services providers in Ohio, Kentucky, Indiana, Florida and nationally, which provide strong competition to the Company's banking subsidiaries. As providers of a full range of financial services, these subsidiaries compete with national and state banks, savings and loan associations, securities dealers, brokers, mortgage bankers, finance and insurance companies, and other financial service companies. With respect to data processing services, the Bank's data processing subsidiary, Midwest Payment Systems, Inc., competes with other third party service providers such as Deluxe Data Services, EDS and Electronic Payment Systems.
The earnings of the Company are affected by general economic conditions as well as by the monetary policies of the Federal Reserve Board. Such policies, which include regulating the national supply of bank reserves and bank credit, can have a major effect upon the source and cost of funds and the rates of return earned on loans and investments. The Federal Reserve influences the size and distribution of bank reserves through its open market operations and changes in cash reserve requirements against member bank deposits.
REGULATION AND SUPERVISION
The Company, as a bank holding company, is subject to the restrictions of the Bank Holding Company act of 1956, as amended. This Act provides that the acquisition of control of a bank is subject to the prior approval of the Board of Governors of the Federal Reserve System. The Company is required to obtain the prior approval of the Federal Reserve Board before it can acquire control of more than 5% of the voting shares of another bank. The Act does not permit the Federal Reserve Board to approve an acquisition by the Company, or any of its subsidiaries, of any bank located in a state other than Ohio, unless the acquisition is specifically authorized by the law of the state in which such bank is located.
On September 29, 1994, the Act was amended by The Interstate Banking and Branch Efficiency Act of 1994 which authorizes interstate bank acquisitions anywhere in the country effective one year after the date of enactment, and interstate branching by acquisition and consolidation effective June 1, 1997, in those states that have not opted out by that date. The impact of this amendment on the Company cannot be measured at this time.
Page 4
The Company's subsidiary state banks are primarily subject to the laws of the state in which each is located, the Board of Governors of the Federal Reserve System and/or the Federal Deposit Insurance Corporation. The subsidiary banks which are organized under the laws of the United States are primarily subject to regulation by the Comptroller of the Currency and the Federal Deposit Insurance Corporation. The Company and Fifth Third Kentucky Bank Holding Company, as savings and loan holding companies, and their savings and loan subsidiaries are subject to regulation by the Office of Thrift Supervision.
The Company and its subsidiaries are subject to certain restrictions on intercompany loans and investments. The Company and its subsidiaries are also subject to certain restrictions with respect to engaging in the underwriting and public sale and distribution of securities. In addition, the Company and its subsidiaries are subject to examination at the discretion of supervisory authorities.
The Bank Holding Company Act limits the activities which may be engaged in by the Company and its subsidiaries to ownership of banks and those activities which the Federal Reserve Board has deemed or may in the future find to be so closely related to banking as to be a proper incident thereto.
The Financial Reform, Recovery and Enforcement Act of 1989 (FIRREA) provides that a holding company's controlled insured depository institutions are liable for any loss incurred by the Federal Deposit Insurance Corporation in connection with the default of, or any FDIC-assisted transaction involving, an affiliated insured bank or savings association.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (the "FDIC Improvement Act") covers a wide expanse of banking regulatory issues. The FDIC Improvement Act deals with the recapitalization of the Bank Insurance Fund, with deposit insurance reform, including requiring the FDIC to establish a risk-based premium assessment system, and with a number of other regulatory and supervisory matters. The full effect of the FDIC Improvement Act generally on the financial services industry, and specifically on the Company, is not determinable.
EMPLOYEES
As of December 31, 1994, there were no employees of the Company. Subsidiaries of the Company employed 6,045 employees--1,015 were officers and 1,237 were part-time employees.
STATISTICAL INFORMATION
Pages 6 to 12 contain statistical information on the Company and its subsidiaries.
Page 5
SECURITIES PORTFOLIO
The securities portfolio as of December 31 for each of the last five years, and the maturity distribution and weighted average yield of securities as of December 31, 1994, are incorporated herein by reference to the securities tables on page 30 of the Company's 1994 Annual Report to Stockholders attached to this filing as Exhibit 13.
The weighted average yields for the securities portfolio are yields to maturity weighted by the par values of the securities. The weighted average yields on securities exempt from income taxes are computed on a taxable equivalent basis. The taxable equivalent yields are net after-tax yields to maturity divided by the complement of the full corporate tax rate (35%). In order to express yields on a taxable equivalent basis, yields on obligations of states and political subdivisions (municipal securities) have been increased as follows:
Under 1 year 2.16% 1 - 5 years 2.61% 6 - 10 years 2.63% Over 10 years 2.74% Total municipal securities 2.49%
AVERAGE BALANCE SHEETS
The average balance sheets are incorporated herein by reference to Table 1 on pages 26 and 27 of the Company's 1994 Annual Report to Stockholders attached to this filing as Exhibit 13.
ANALYSIS OF NET INTEREST INCOME AND NET INTEREST INCOME CHANGES
The analysis of net interest income and the analysis of net interest income changes are incorporated herein by reference to Table 1 and Table 2 and the related discussion on pages 26 through 28 of the Company's 1994 Annual Report to Stockholders attached to this filing as Exhibit 13.
Reserve for Credit Losses - -------------------------
The reserve for credit losses is established through charges to operations by a provision for credit losses. Loans and leases which are determined to be uncollectible are charged against the reserve and any subsequent recoveries are credited to the reserve. The amount charged to operations is based on several factors. These include the following:
1. Analytical reviews of the credit loss experience in relationship to outstanding loans and leases to determine an adequate reserve for credit losses required for loans and leases at risk. 2. A continuing review of problem or at risk loans and leases and the overall portfolio quality. 3. Regular examinations and appraisals of the loan and lease portfolio conducted by the Bank's examination staff and the banking supervisory authorities. 4. Management's judgement with respect to the current and expected economic conditions and their impact on the existing loan and lease portfolio.
The amount provided for credit losses exceeded actual net charge-offs by $18,306,000 in 1994, $20,963,000 in 1993 and $20,335,000 in 1992.
Management reviews the reserve on a quarterly basis to determine whether additional provisions should be made after considering the factors noted above. Based on these procedures, management is of the opinion that the reserve at December 31, 1994 of $155,918,000 is adequate.
Maturity Distribution of Domestic Certificates of Deposit of $100,000 - --------------------------------------------------------------------- and Over at December 31, 1993 ($000's) --------------------------------------
Three months or less $142,325 Over three months through six months 70,936 Over six months through twelve months 23,816 Over twelve months 25,325 -------- Total certificates - $100,000 and over $262,402 ========
Note: Foreign office deposits are denominated in amounts greater than $100,000.
Short-Term Borrowings - ---------------------
Short-term borrowings is comprised of various short-term sources of funds, primarily Federal funds borrowed from correspondent banks, securities sold under agreements to repurchase, short-term bank notes and commercial paper issuances. A summary of the average amount outstanding, maximum month-end balance and weighted average interest rate for the years ended December 31 follows ($000's):
1994 1993 1992 ------ ------ ------ Average outstanding $1,967,819 1,365,070 1,229,664
Maximum month-end balance $2,452,218 1,734,920 1,551,092
Weighted average interest rate 4.12% 3.17 3.80
Return on Equity and Assets - ---------------------------
The following table presents certain operating ratios:
1994 1993 1992 ------ ------ ------ Return on assets (A) 1.77% 1.71 1.63
Return on equity (B) 18.6% 17.8 16.9
Dividend payout ratio (C) 32.3% 31.7 33.0
Equity to assets ratio (D) 9.50% 9.61 9.62 - ------------------------------------ (A) net income divided by average assets (B) net income divided by average equity (C) dividends declared per share divided by fully diluted net income per share (D) average equity divided by average assets
ITEM 2.

ITEM 2. PROPERTIES
The Company's executive offices and the main office of the Bank are located on Fountain Square Plaza in downtown Cincinnati, Ohio, located in a 32-story office tower and a 5-story office building and parking garage known as the Fifth Third Center and the William S. Rowe Building, respectively. One of the Bank's subsidiaries owns 100% of these buildings.
The Company, through its subsidiary banks and savings banks, five located in Ohio, three in Kentucky, two in Indiana and one in Florida, operate 353 banking centers, of which 177 are owned and 176 are leased. The properties owned are free from mortgages and encumbrances.
ITEM 3.

ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are not parties to any material legal proceedings other than routine litigation incidental to its business.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5.

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required by this item is incorporated herein by reference to Page 1 of Registrant's 1994 Annual Report to Stockholders attached to this filing as Exhibit 13.
ITEM 6.

ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is incorporated herein by reference to page 35 of Registrant's 1994 Annual Report to Stockholders attached to this filing as Exhibit 13.
ITEM 7.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information required by this item is incorporated herein by reference to pages 26 through 34 of Registrant's 1994 Annual Report to Stockholders attached to this filing as Exhibit 13.
ITEM 8.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is incorporated herein by reference to pages 13 through 25 and page 35 of Registrant's 1994 Annual Report to Stockholders attached to this filing as Exhibit 13.
ITEM 9.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item concerning Directors is incorporated herein by reference under the caption "ELECTION OF DIRECTORS" of the Registrant's 1995 Proxy Statement. The names, ages and positions of the Executive Officers of the Company as of January 31, 1995 are listed below along with their business experience during the past 5 years. Officers are appointed annually by the Board of Directors at the meeting of Directors immediately following the Annual Meeting of Stockholders.
CURRENT POSITION AND NAME AND AGE BUSINESS EXPERIENCE DURING PAST 5 YEARS - ------------ ---------------------------------------- George A. Schaefer, Jr., 49 PRESIDENT AND CEO. President and Chief Executive Officer of the Company and the Bank since January, 1991. Previously, Mr. Schaefer was President and COO of the Company and the Bank.
George W. Landry, 54 EXECUTIVE VICE PRESIDENT. Executive Vice President of the Company and the Bank.
Stephen J. Schrantz, 46 EXECUTIVE VICE PRESIDENT. Executive Vice President of the Company and the Bank.
Michael D. Baker, 44 SENIOR VICE PRESIDENT. Senior Vice President of the Company since March, 1993, and of the Bank.
P. Michael Brumm, 47 SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER. CFO of the Company and the Bank since June, 1990, and Senior Vice President of the Bank.
Robert P. Niehaus, 48 SENIOR VICE PRESIDENT. Senior Vice President of the Company since March 1993, and Senior Vice President of the Bank. Previously, Mr. Niehaus was Vice President of the Company.
James R. Gaunt, 49 SENIOR VICE PRESIDENT. Senior Vice President of the Company and President and CEO of Fifth Third Bank of Kentucky, Inc. since August, 1994. Previously, Mr. Gaunt was Senior Vice President of the Bank.
Michael K. Keating, 39 SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY. Senior Vice President and General Counsel of the Company since March, 1993 and Senior Vice President and Counsel of the Bank since November, 1989, and Secretary of the Company and the Bank since January, 1994. Mr. Keating is a son of Mr. William J. Keating, Director.
CURRENT POSITION AND NAME AND AGE BUSINESS EXPERIENCE DURING PAST 5 YEARS - ------------ ------------------------------------------ Neal E. Arnold, 34 TREASURER. Treasurer of the Company and the Bank since October, 1990 and Senior Vice President of the Bank since April, 1993. Previously, Mr. Arnold was Vice President of the Bank since October, 1990. Previously, Mr. Arnold was CFO and Senior Vice President with First National Bank of Grand Forks, North Dakota.
Gerald L. Wissel, 38 AUDITOR. Auditor of the Company and the Bank since March 1990 and Senior Vice President of the Bank since November 1991. Previously, Mr. Wissel was Vice President of the Bank since March 1990. Mr. Wissel was formerly with Deloitte and Touche LLP, independent public accountants.
Roger W. Dean, 32 CONTROLLER. Controller of the Company and Vice President of the Bank since June, 1993. Previously, Mr. Dean was with Deloitte & Touche LLP, independent public accountants.
ITEM 11.

ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated herein by reference under the caption "EXECUTIVE COMPENSATION" of the Registrant's 1995 Proxy Statement.
ITEM 12.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated herein by reference under the captions "CERTAIN BENEFICIAL OWNERS, ELECTION OF DIRECTORS, AND EXECUTIVE COMPENSATION" of the Registrant's 1995 Proxy Statement.
ITEM 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated herein by reference under the caption "CERTAIN TRANSACTIONS" of the Registrant's 1995 Proxy Statement.
PART IV
ITEM 14.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
a) Documents Filed as Part of the Report PAGE
1. Index to Financial Statements
Consolidated Statements of Income for the Years Ended December 31, 1994, 1993 and 1992 *
Consolidated Balance Sheets, December 31, 1994 and 1993 *
Consolidated Statements of Changes in Stockholders' Equity for the Years Ended December 31, 1994, 1993 and 1992 *
Consolidated Statements of Cash Flows for the Years Ended December 31, 1994, 1993 and 1992 *
Notes to Consolidated Financial Statements *
* Incorporated by reference to pages 13 through 25 of Registrant's 1994 Annual Report to Stockholders attached to this filing as Exhibit 13.
2. Financial Statement Schedules
The schedules for Registrant and its subsidiaries are omitted because of the absence of conditions under which they are required, or because the information is set forth in the consolidated financial statements or the notes thereto.
3. Exhibits
EXHIBIT NO.
3- Amended Articles of Incorporation and Code of Regulations**
10(a)- Fifth Third Bancorp Unfunded Deferred Compensation Plan for Non-Employee Directors ***
10(b)- Fifth Third Bancorp 1990 Stock Option Plan ****
10(c)- Fifth Third Bancorp 1987 Stock Option Plan *****
10(d)- Fifth Third Bancorp 1982 Stock Option Plan ******
10(e)- Fifth Third Bancorp Stock Option Plan for Employees of The Fifth Third Bank of Miami Valley, National Association *******
10(f)- Fifth Third Bancorp Stock Option Plan for Employees of The Fifth Third Bank of Eastern Indiana ********
10(g)- Indenture effective November 19, 1992 between Fifth Third Bancorp, Issuer and NBD Bank, N.A., Trustee *********
10(h)- Fifth Third Bancorp Amended and Restated Stock Option Plan for Employees and Directors of The TriState Bancorp **********
10(i)- Fifth Third Bancorp 1993 Discount Stock Purchase Plan ***********
10(j)- Fifth Third Bancorp Amended and Restated Stock Incentive Plan for selected Executive Officers, Employees and Directors of The cumberland Federal Bancorporation, Inc. ************
10(k)- Fifth Third Bancorp Master Profit Sharing Plan*************
11- Computation of Consolidated Net Income Per Share for the Years Ended December 31, 1994, 1993, 1992, 1991 and 1990
13- Fifth Third Bancorp 1994 Annual Report to Stockholders
21- Fifth Third Bancorp Subsidiaries
23- Independent Auditors' Consent
b) Reports on Form 8-K
NONE. ____________________
** Incorporated by reference to Registrant's Registration Statement, Exhibits 3.1 and 3.2, on Form S-4, Registration No. 33-19965 which is effective.
*** Incorporated in this Form 10-K Annual Report by reference to Form 10-K filed for fiscal year ended December 31, 1985.
**** Incorporated by reference to Registrant's filing with the Securities and Exchange Commission as an exhibit to a Registration Statement on Form S-8, Registration No. 33- 34075, which is effective.
***** Incorporated by reference to Registrant's filing with the Securities and Exchange Commission as an exhibit to a Registration Statement on Form S-8, Registration No. 33- 13252, which is effective.
****** Incorporated by reference to Registrant's filing with the Securities and Exchange Commission as an exhibit to a Registration Statement on Form S-8, Registration No. 2-98550, which is effective.
******* Incorporated by reference to Registrant's filing with the Securities and Exchange Commission as an exhibit to a Registration Statement on Form S-8, Registration No. 33- 20888, which is effective.
******** Incorporated by reference to Registrant's filing with the Securities and Exchange Commission on November 18, 1992 a Form 8-K Current Report as an exhibit to a Registration Statement on Form S-8, Registration No. 33-30690, which is effective.
********* Incorporated by reference to Registrant's filing with the Securities and Exchange Commission on November 18, 1992 a Form 8-K Current Report dated November 16, 1992 and as Exhibit 4.1 to a Registration Statement on Form S-3, Registration No. 33-54134, which is effective.
********** Incorporated by reference to Registrant's filing with the Securities and Exchange Commission as an exhibit to a Registration Statement on Form S-8, Registration No. 33- 51679, which is effective.
*********** Incorporated by reference to Registrant's filing with the Securities and Exchange Commission as an exhibit to a Registration Statement on Form S-8, Registration No. 33- 60474, which is effective.
************ Incorporated by reference to Registrant's filing with the Securities and Exchange Commission as an exhibit to a Registration Statement on Form S-8, Registration No. 33- 55223, which is effective.
************* Incorporated by reference to Registrant's filing with the Securities and Exchange Commission as an exhibit to a Registration Statement on Form S-8, Registration No. 33- 55553, which is effective.
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.
FIFTH THIRD BANCORP (Registrant)
/s/George A. Schaefer, Jr. February 21, 1995 - ----------------------------- George A. Schaefer, Jr. President and CEO (Principal Executive Officer)
Pursuant to requirements of the Securities Exchange Act of 1934, this report has been signed on February 21, 1995 by the following persons on behalf of the Registrant and in the capacities indicated.
/s/P. Michael Brumm /s/Roger W. Dean - --------------------------------- ------------------------------ P. Michael Brumm Roger W. Dean Senior Vice President and CFO Controller (Chief Financial Officer) (Principal Accounting Officer)
/s/John F. Barrett - --------------------- ----------------------- ------------------------- John F. Barrett Ivan W. Gorr Michael H. Norris Director Director Director
/s/Joseph H. Head, Jr. /s/Brian H. Rowe - --------------------- ----------------------- ------------------------- Milton C. Boesel, Jr. Joseph H. Head, Jr. Brian H. Rowe Director Director Director
/s/George A. Schaefer, Jr. - --------------------- ----------------------- ------------------------- Clement L. Buenger Joan R. Herschede George A. Schaefer, Jr. Director Director Director
/s/Gerald V. Dirvin /s/William G. Kagler /s/John J. Schiff, Jr. - --------------------- ----------------------- ------------------------- Gerald V. Dirvin William G. Kagler John J. Schiff, Jr. Director Director Director
/s/William J. Keating /s/Dennis J. Sullivan, Jr. - --------------------- ----------------------- ------------------------- Thomas B. Donnell William J. Keating Dennis J. Sullivan, Jr. Director Director Director
/s/James D. Kiggen - --------------------- ----------------------- ------------------------- Richard T. Farmer James D. Kiggen Dudley S. Taft Director Director Director
/s/John D. Geary - --------------------- ----------------------- John D. Geary Robert B. Morgan Director Director