Charges related to patent litigation and restructuring sent Medtronic Inc. earnings down 38 percent in the first quarter to $445 million.

The company paid $444 million in the quarter to heart stent competitors Abbott Laboratories and evYsio Medical Devices LLC.

The companies agreed to cross-license the stent patent and not sue each other for the next 10 years, according to documents filed with the Securities and Exchange Commission Tuesday.

Medtronic has also spent $69 million since the fourth quarter of 2008 to lay off 1,500 employees worldwide in a "global realignment initiative."

In May, 400 employees in the company's Memphis-based spinal and biologics units were given early retirement or other separation agreements.

Medtronic chief financial officer Gary Ellis said one-third of the layoffs are complete and that they are necessary for future growth.

"Doing so helped get our (expenses) under control and to make other investments that drive growth," Ellis said.

He also noted the company has added 400 jobs globally in the past year and will continue to add mainly sales positions in key geographic regions.

Despite much of the quarter's bad news, the company beat Wall Street expectations with $3.9 billion in revenues, up 6 percent from the $3.7 billion posted in the year-ago quarter. Thomson Reuters analysts predicted revenues of $3.8 billion.

Revenues for the spinal division rose 7 percent in the quarter to $915 million based on double-digit international sales growth.

Spinal sales outside the U.S. spiked 14.7 percent in the quarter and Medtronic CEO Bill Hawkins III called China, Latin America and India "underpenetrated markets."

"I think the international market will outpace the growth of the company and do so faster than what we see in the U.S.," Hawkins said.

Leerink Swann analyst Rick Wise predicted double-digit growth in Medtronic earnings per share for the next five years. As for overall stock performance, though, "We remain on the sidelines," he said.

"Recent uneven execution makes us prefer to see clearer-cut, consistent operating and financial performance relative to management guidance before arguing the stock can move higher," Wise said.

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Medtronic Inc.

Earnings: Down 38 percent to $445 million

Patent disputes: $444 million spent in the quarter on settlements

International spinal products sales: Saw double-digit growth for the quarter

Web site: medtronic.com

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Originally published by Toby Sells sells@commercialappeal.com .

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