EX-99.1 2 exhibit991-fy19q1earningsr.htm EXHIBIT 99.1 Exhibit


Exhibit 99.1
 
mdtlogo2a61.jpg
 
 
  
NEWS RELEASE
 
 
 
 
 
 
 
 
Contacts:
  
 
 
 
 
 
 
Fernando Vivanco
  
Ryan Weispfenning
 
 
Public Relations
  
Investor Relations
 
 
+1-763-505-3780
  
+1-763-505-4626



FOR IMMEDIATE RELEASE

MEDTRONIC REPORTS FIRST QUARTER FINANCIAL RESULTS


▪
Revenue of $7.4 Billion Decreased 0.1% Reported; Increased 6.8% Organic
▪
GAAP Diluted EPS of $0.79; Non-GAAP Diluted EPS of $1.17
▪
Company Updates FY19 Revenue and EPS Guidance


DUBLIN - August 21, 2018 - Medtronic plc (NYSE: MDT) today announced financial results for its first quarter of fiscal year 2019, which ended July 27, 2018.

The company reported first quarter worldwide revenue of $7.384 billion, a decrease of 0.1 percent as reported, or an increase of 6.8 percent on an organic basis, which adjusts for the divestiture of its Patient Care, Deep Vein Thrombosis (Compression), and Nutritional Insufficiency businesses to Cardinal Health that occurred in the second quarter of fiscal year 2018, and a $78 million positive impact from foreign currency. As reported, first quarter GAAP net income and diluted earnings per share (EPS) were $1.075 billion and $0.79, respectively. As detailed in the financial schedules included through the link at the end of this release, first quarter non-GAAP net income and diluted EPS were $1.601 billion and $1.17, respectively, both increases of 4 percent. Adjusting for the divestiture and a positive 5 cent impact from foreign currency, first quarter non-GAAP diluted EPS increased 9 percent.

First quarter U.S. revenue of $3.864 billion represented 52 percent of company revenue and decreased 4.4 percent as reported, while it increased 6.4 percent on a comparable basis, which adjusts for the divestiture. Non-U.S. developed market revenue of $2.406 billion represented 33 percent of company revenue and increased 4.0 percent as reported and 5.5 percent on a comparable, constant currency basis. Emerging market revenue of $1.114 billion represented 15 percent of company revenue and increased 7.6 percent as reported and 11.2 percent on a comparable, constant currency basis.

“We are executing against our plan, growing our markets and driving share gains across multiple businesses and geographies,” said Omar Ishrak, Medtronic chairman and chief executive officer. “Our execution is not only on the top line, but also down the P&L, as we delivered margin expansion through our Enterprise Excellence program while increasing our investment in R&D.”


1



Cardiac and Vascular Group
The Cardiac and Vascular Group (CVG) includes the Cardiac Rhythm & Heart Failure (CRHF), Coronary & Structural Heart (CSH), and Aortic, Peripheral & Venous (APV) divisions. CVG worldwide first quarter revenue of $2.811 billion increased 6.2 percent, or 5.0 percent on a constant currency basis. CVG revenue performance was driven by strong, low-double digit growth in CSH, mid-single digit growth in APV, and low-single digit growth in CRHF, all on a constant currency basis.
▪
CRHF first quarter revenue of $1.426 billion increased 2.6 percent, or 1.4 percent on a constant currency basis. Arrhythmia Management grew in the low-single digits on a constant currency basis, driven by high-teens constant currency growth in AF Solutions and the high-thirties constant currency growth of TYRX® in Infection Control. Results were also driven by mid-single digit growth in Pacing, led by the adoption of the Micra® Transcatheter Pacing System and the Azure® wireless pacemaker.
▪
CSH first quarter revenue of $917 million increased 12.2 percent, or 10.9 percent on a constant currency basis, led by high-teens constant currency growth in transcatheter aortic valves on the global strength of the CoreValve® Evolut® PRO. Coronary grew in the high-single digits on a constant currency basis, driven by double digit constant currency growth of drug-eluting stents and guide catheters.
▪
APV first quarter revenue of $468 million increased 6.6 percent, or 5.2 percent on a constant currency basis, led by mid-teens constant currency growth in endoVenous on strong demand for the VenaSeal™ closure system. Peripheral Vascular grew in the mid-single digits on a constant currency basis, driven by strong PTA balloon growth globally and drug-coated balloon growth in international markets. Aortic grew in the low-single digits on a constant currency basis, driven by growth in thoracic stent grafts.

Minimally Invasive Therapies Group
The Minimally Invasive Therapies Group (MITG) includes the Surgical Innovations (SI) and the Respiratory, Gastrointestinal & Renal (RGR) divisions. MITG worldwide first quarter revenue of $2.052 billion decreased 17.5 percent as reported, or increased 4.9 percent on a comparable, constant currency basis. MITG revenue performance included mid-single digit growth in SI and low-single digit growth in RGR, both on a comparable, constant currency basis.
▪
SI first quarter revenue of $1.397 billion increased 5.8 percent on a comparable, constant currency basis, driven by low-double digit constant currency growth in Advanced Energy on the strength of the LigaSure™ vessel sealing instruments with innovative nano-coating. Advanced Stapling grew in the mid-single digits, driven by strong demand for Tri-Staple™ 2.0 endo stapling specialty reloads and the Signia™ powered stapler.
▪
RGR first quarter revenue of $655 million increased 2.9 percent on a comparable, constant currency basis. GI grew in the mid-single digits on a comparable, constant currency basis. Respiratory and Patient Monitoring grew in the low-single digits on a comparable, constant currency basis, with high-single digit constant currency growth in capnography and ventilation.

Restorative Therapies Group
The Restorative Therapies Group (RTG) includes the Spine, Brain Therapies, Specialty Therapies, and Pain Therapies divisions. RTG worldwide first quarter revenue of $1.949 billion increased 7.7 percent, or 6.8 percent on a constant currency basis. Group results were driven by mid-teens growth in Brain Therapies and Pain Therapies, with low-single digit growth in Specialty Therapies and flat results in Spine, all on a constant currency basis.
▪
Spine first quarter revenue of $652 million increased 0.5 percent, or decreased 0.3 percent on a constant currency basis. When combined with the company’s sales of enabling technology used in spine surgeries, which is recognized in the Brain Therapies division, global Spine revenue increased in the mid-single digits on a constant currency basis, driven by the success of the company’s Surgical Synergy strategy.
▪
Brain Therapies first quarter revenue of $599 million increased 14.8 percent, or 13.6 percent on a constant currency basis, driven by high-teens constant currency growth in Neurovascular and Neurosurgery. Neurovascular had strong growth in stents, flow diversion, and access products. Neurosurgery growth was led by strong capital equipment sales of the O-arm®2 surgical imaging system, StealthStation® S8 surgical navigation system, Mazor X™ robotic guidance system, and Visualase® MRI-guided laser ablation system.
▪
Specialty Therapies first quarter revenue of $384 million increased 4.1 percent, or 3.3 percent on a constant currency basis. Results were led by mid-single digit constant currency growth in ENT.
▪
Pain Therapies first quarter revenue of $314 million increased 16.7 percent, or 15.6 percent on a constant currency basis. The division had strong, low-twenties growth in Pain Stimulation on the strength of the recently launched Intellis™ platform for spinal cord stimulation, as well as low-double digit growth in Targeted Drug Delivery and high-single digit growth in Interventional Pain, all on a constant currency basis.


2



Diabetes Group
The Diabetes Group is now organized into the Advanced Insulin Management (AIM) and Emerging Technologies divisions. Diabetes Group worldwide first quarter revenue of $572 million increased 27.4 percent, or 26.3 percent on a constant currency basis. The group is experiencing strong global demand for its new sensor-augmented insulin pump systems.
▪
AIM first quarter revenue grew in the mid-twenties on a constant currency basis, driven by the ongoing U.S. launch of the MiniMed® 670G hybrid closed loop insulin pump system with the Guardian® sensor 3 continuous glucose monitor (CGM). In international markets, AIM delivered high-teens constant currency growth on the continued strength of the MiniMed® 640G system.
▪
Emerging Technologies first quarter revenue grew in the high-sixties on a constant currency basis, driven by the U.S. launch of the Guardian® Connect CGM system with Sugar.IQ™ personal diabetes assistant.

Guidance
The company today updated its fiscal year 2019 revenue growth and EPS guidance.

For fiscal year 2019, the company is increasing its organic revenue growth guidance from a range of 4.0 to 4.5 percent to a range of 4.5 to 5.0 percent. If recent exchange rates hold for the remainder of the fiscal year, the company’s fiscal year 2019 revenue would be negatively affected by approximately $420 million to $520 million.

For fiscal year 2019, the company is increasing its implied constant currency non-GAAP diluted EPS growth forecast from a range of 8 to 9 percent to a range of 9 to 10 percent. At recent rates, foreign exchange is expected to be neutral to fiscal year 2019 EPS versus a 5 cent benefit prior. As such, despite the increased constant currency EPS growth outlook, the company is maintaining its diluted non-GAAP EPS guidance in the range of $5.10 to $5.15.

“We are excited about the growth opportunities in our end markets, and we are bullish about our competitive position,” said Ishrak. “Our pipeline of innovation, invention, and disruption has never been stronger. We are also putting the pieces in place to improve free cash flow conversion, creating additional capital that can be returned to shareholders and reinvested to drive future growth, all with a goal of creating long-term shareholder value.”

Webcast Information
Medtronic will host a webcast today, August 21, at 8:00 a.m. EDT (7:00 a.m. CDT) to provide information about its businesses for the public, analysts, and news media. This quarterly webcast can be accessed by clicking on the Investor Events link at investorrelations.medtronic.com and this earnings release will be archived at newsroom.medtronic.com. Medtronic will be live tweeting during the webcast on our Newsroom Twitter account, @Medtronic. Within 24 hours of the webcast, a replay of the webcast and transcript of the company’s prepared remarks will be available by clicking on the Investor Events link at investorrelations.medtronic.com.

Financial Schedules
To view the first quarter financial schedules and non-GAAP reconciliations, click here. To view the first quarter earnings presentation, click here. Both documents can also be accessed by visiting newsroom.medtronic.com.

About Medtronic
Medtronic plc (www.medtronic.com), headquartered in Dublin, Ireland, is among the world’s largest medical technology, services and solutions companies - alleviating pain, restoring health and extending life for millions of people around the world. Medtronic employs more than 86,000 people worldwide, serving physicians, hospitals and patients in more than 150 countries. The company is focused on collaborating with stakeholders around the world to take healthcare Further, Together.


3



FORWARD LOOKING STATEMENTS
This press release contains forward-looking statements, which are subject to risks and uncertainties, including those described in Medtronic’s periodic reports and other filings with the U.S. Securities and Exchange Commission (the “SEC”). Anticipated results only reflect information available to Medtronic at this time and may differ from actual results. Medtronic does not undertake to update its forward-looking statements or any of the information contained in this press release. Certain information in this press release includes calculations or figures that have been prepared internally and have not been reviewed or audited by our independent registered public accounting firm, including but not limited to, certain information in the financial schedules accompanying this press release. Use of different methods for preparing, calculating or presenting information may lead to differences and such differences may be material.

NON-GAAP FINANCIAL MEASURES
This press release contains financial measures and guidance, including adjusted net income and adjusted diluted EPS, which are considered “non-GAAP” financial measures under applicable SEC rules and regulations. References to quarterly figures increasing, decreasing or remaining flat are in comparison to the first quarter of fiscal year 2018.

Medtronic management believes that non-GAAP financial measures provide information useful to investors in understanding the company’s underlying operational performance and trends and to facilitate comparisons with the performance of other companies in the med tech industry. Non-GAAP net income and diluted EPS exclude the effect of certain charges or gains that contribute to or reduce earnings but that result from transactions or events that management believes may or may not recur with similar materiality or impact to operations in future periods (Non-GAAP Adjustments). Medtronic generally uses non-GAAP financial measures to facilitate management’s review of the operational performance of the company and as a basis for strategic planning. Non-GAAP financial measures should be considered supplemental to and not a substitute for financial information prepared in accordance with U.S. generally accepted accounting principles (GAAP), and investors are cautioned that Medtronic may calculate non-GAAP financial measures in a way that is different from other companies. Management strongly encourages investors to review the company’s consolidated financial statements and publicly filed reports in their entirety. Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the financial schedules accompanying this press release.

Medtronic calculates forward-looking non-GAAP financial measures based on internal forecasts that omit certain amounts that would be included in GAAP financial measures. For instance, forward-looking revenue growth projections exclude the impact of foreign currency fluctuations. Forward-looking non-GAAP EPS guidance also excludes other potential charges or gains that would be recorded as Non-GAAP Adjustments to earnings during the fiscal year. Medtronic does not attempt to provide reconciliations of forward-looking non-GAAP EPS guidance to projected GAAP EPS guidance because the combined impact and timing of recognition of these potential charges or gains is inherently uncertain and difficult to predict and is unavailable without unreasonable efforts. In addition, we believe such reconciliations would imply a degree of precision and certainty that could be confusing to investors. Such items could have a substantial impact on GAAP measures of financial performance.

Mazor X is a trademark of Mazor Robotics.

-end-


View FY19 First Quarter Financial Schedules & Non-GAAP Reconciliations
View FY19 First Quarter Earnings Presentation



4


 


5


MEDTRONIC PLC
WORLD WIDE REVENUE
(Unaudited)
 
FIRST QUARTER
 
REPORTED
 
 
 
COMPARABLE CONSTANT CURRENCY
(in millions)
FY19
 
FY18
 

Growth
 
Currency Impact (2)
 
Revised(3)
FY18
 
Growth
Cardiac & Vascular Group
$
2,811

 
$
2,646

 
6
 %
 
$
34

 
$
2,646

 
5
 %
Cardiac Rhythm & Heart Failure
1,426

 
1,390

 
3

 
17

 
1,390

 
1

Coronary & Structural Heart
917

 
817

 
12

 
11

 
817

 
11

Aortic, Peripheral & Venous
468

 
439

 
7

 
6

 
439

 
5

Minimally Invasive Therapies Group(1)
2,052

 
2,486

 
(17
)
 
22

 
1,936

 
5

Surgical Innovations
1,397

 
—

 
—

 
15

 
1,306

 
6

Respiratory, Gastrointestinal, & Renal
655

 
—

 
—

 
7

 
630

 
3

Restorative Therapies Group
1,949

 
1,809

 
8

 
17

 
1,809

 
7

Spine
652

 
649

 
—

 
5

 
649

 
—

Brain Therapies
599

 
522

 
15

 
6

 
522

 
14

Specialty Therapies
384

 
369

 
4

 
3

 
369

 
3

Pain Therapies
314

 
269

 
17

 
3

 
269

 
16

Diabetes Group
572

 
449

 
27

 
5

 
449

 
26

TOTAL
$
7,384

 
$
7,390

 
—
 %
 
$
78

 
$
6,840

 
7
 %

(1) In the second quarter of fiscal year 2018, the Company realigned its divisions within the Minimally Invasive Therapies Group, which included a movement of revenue from certain product lines within Surgical Innovations to Respiratory Gastrointestinal & Renal. As a result, first quarter fiscal year 2018 results have been recast to adjust for this realignment.
(2) The currency impact to revenue measures the change in revenue between current and prior year periods using constant exchange rates.
(3) Revised revenue excludes revenue related to the divested Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency businesses for the first quarter of fiscal year 2018.

6


MEDTRONIC PLC
U.S.(1) REVENUE
(Unaudited)
 
FIRST QUARTER
 
REPORTED
 
COMPARABLE
(in millions)
FY19
 
FY18
 

Growth
 
Revised(3)
FY18
 

Growth
Cardiac & Vascular Group
$
1,389

 
$
1,333

 
4
 %
 
$
1,333

 
4
 %
Cardiac Rhythm & Heart Failure
764

 
765

 
—

 
765

 
—

Coronary & Structural Heart
362

 
316

 
15

 
316

 
15

Aortic, Peripheral & Venous
263

 
252

 
4

 
252

 
4

 
 
 
 
 
 
 
 
 

Minimally Invasive Therapies Group(2)
857

 
1,245

 
(31
)
 
835

 
3

Surgical Innovations
556

 
—

 
—

 
531

 
5

Respiratory, Gastrointestinal, & Renal
301

 
—

 
—

 
304

 
(1
)
 
 
 
 
 
 
 
 
 

Restorative Therapies Group
1,294

 
1,221

 
6

 
1,221

 
6

Spine
444

 
454

 
(2
)
 
454

 
(2
)
Brain Therapies
336

 
294

 
14

 
294

 
14

Specialty Therapies
285

 
280

 
2

 
280

 
2

Pain Therapies
229

 
193

 
19

 
193

 
19

 
 
 
 
 

 
 
 

Diabetes Group
324

 
243

 
33

 
243

 
33

TOTAL
$
3,864

 
$
4,042

 
(4
)%
 
$
3,632

 
6
 %

(1) U.S. includes the United States and U.S. territories.
(2) In the second quarter of fiscal year 2018, the Company realigned its divisions within the Minimally Invasive Therapies Group, which included a movement of revenue from certain product lines within Surgical Innovations to Respiratory Gastrointestinal & Renal. As a result, first quarter fiscal year 2018 results have been recast to adjust for this realignment.
(3) Revised revenue excludes revenue related to the divested Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency businesses for the first quarter of fiscal year 2018.


7


MEDTRONIC PLC
WORLD WIDE REVENUE: GEOGRAPHIC(1) 
(Unaudited)
 
FIRST QUARTER
 
REPORTED
 
 
 
COMPARABLE CONSTANT CURRENCY
(in millions)
FY19
 
FY18
 
Growth
 
Currency Impact(2)
 
Revised(3)
FY18
 
Growth
U.S.
$
1,389

 
$
1,333

 
4
 %
 
$
—

 
$
1,333

 
4
%
Non-U.S. Developed
947

 
887

 
7

 
35

 
887

 
3

Emerging Markets
475

 
426

 
12

 
(1
)
 
426

 
12

Cardiac & Vascular Group
2,811

 
2,646

 
6

 
34

 
2,646

 
5

 
 
 
 
 

 
 
 
 
 

U.S.
857

 
1,245

 
(31
)
 
—

 
835

 
3

Non-U.S. Developed
828

 
865

 
(4
)
 
27

 
754

 
6

Emerging Markets
367

 
376

 
(2
)
 
(5
)
 
347

 
7

Minimally Invasive Therapies Group
2,052

 
2,486

 
(17
)
 
22

 
1,936

 
5

 
 
 
 
 

 
 
 
 
 

U.S.
1,294

 
1,221

 
6

 
—

 
1,221

 
6

Non-U.S. Developed
428

 
394

 
9

 
14

 
394

 
5

Emerging Markets
227

 
194

 
17

 
3

 
194

 
15

Restorative Therapies Group
1,949

 
1,809

 
8

 
17

 
1,809

 
7

 
 
 
 
 

 
 
 
 
 

U.S.
324

 
243

 
33

 
—

 
243

 
33

Non-U.S. Developed
203

 
167

 
22

 
7

 
167

 
17

Emerging Markets
45

 
39

 
15

 
(2
)
 
39

 
21

Diabetes Group
572

 
449

 
27

 
5

 
449

 
26

 
 
 
 
 

 
 
 
 
 

U.S.
3,864

 
4,042

 
(4
)
 
—

 
3,632

 
6

Non-U.S. Developed
2,406

 
2,313

 
4

 
83

 
2,202

 
5

Emerging Markets
1,114

 
1,035

 
8

 
(5
)
 
1,006

 
11

TOTAL
$
7,384

 
$
7,390

 
—
 %
 
$
78

 
$
6,840

 
7
%

(1) U.S. includes the United States and U.S. territories. Non-U.S. developed markets include Japan, Australia, New Zealand, Korea, Canada, and the countries of Western Europe. Emerging Markets include the countries of the Middle East, Africa, Latin America, Eastern Europe, and the countries of Asia that are not included in the non-U.S. developed markets, as previously defined.
(2) The currency impact to revenue measures the change in revenue between current and prior year periods using constant exchange rates.
(3) Revised revenue excludes revenue related to the divested Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency businesses for the first quarter of fiscal year 2018.

8


MEDTRONIC PLC
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) 
 
Three months ended
(in millions, except per share data)
July 27, 2018
 
July 28, 2017
Net sales
$
7,384

 
$
7,390

Costs and expenses:
 

 
 

Cost of products sold
2,204

 
2,352

Research and development expense
585

 
549

Selling, general, and administrative expense
2,597

 
2,580

Amortization of intangible assets
446

 
454

Restructuring charges, net
62

 
8

Certain litigation charges
103

 
—

Other operating expense, net
151

 
65

Operating profit
1,236

 
1,382

Other non-operating income, net
(186
)
 
(99
)
Interest expense
242

 
286

Income before income taxes
1,180

 
1,195

Income tax provision
103

 
186

Net income
1,077

 
1,009

Net (income) loss attributable to noncontrolling interests
(2
)
 
7

Net income attributable to Medtronic
$
1,075

 
$
1,016

Basic earnings per share
$
0.79

 
$
0.75

Diluted earnings per share
$
0.79

 
$
0.74

Basic weighted average shares outstanding
1,352.7

 
1,361.9

Diluted weighted average shares outstanding
1,365.4

 
1,375.6

Cash dividends declared per ordinary share
$
0.50

 
$
0.46



9



MEDTRONIC PLC
GAAP TO NON-GAAP RECONCILIATIONS
(Unaudited)
 
Three months ended July 27, 2018
(in millions, except per share data)
Net Sales
 
Cost of Products Sold
 
Gross Margin Percent
 
Operating Profit
 
Operating Profit Percent
 
Income Before Income Taxes
 
Net Income attributable to Medtronic
 
Diluted
EPS (1)
 
Effective Tax Rate
GAAP
$
7,384

 
$
2,204

 
70.2
 %
 
$
1,236

 
16.7
 %
 
$
1,180

 
$
1,075

 
$
0.79

 
8.7
%
Non-GAAP Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Restructuring and associated costs (2)
—

 
(15
)
 
0.2

 
113

 
1.5

 
113

 
97

 
0.07

 
14.2

Acquisition-related items
—

 
(2
)
 
—

 
36

 
0.5

 
36

 
29

 
0.02

 
19.4

Certain litigation charges
—

 
—

 
—

 
103

 
1.4

 
103

 
91

 
0.07

 
11.7

(Gain)/loss on minority investments (3)
—

 
—

 
—

 
—

 
—

 
(110
)
 
(103
)
 
(0.08
)
 
6.4

Exit of business (4)
—

 
—

 
—

 
80

 
1.1

 
80

 
62

 
0.05

 
22.5

Amortization of intangible assets
—

 
—

 
—

 
446

 
6.1

 
446

 
379

 
0.28

 
15.0

Certain tax adjustments, net (5)
—

 
—

 
—

 
—

 
—

 
—

 
(29
)
 
(0.02
)
 
—

Non-GAAP
$
7,384

 
$
2,187

 
70.4
 %
 
$
2,014

 
27.3
 %
 
$
1,848

 
$
1,601

 
$
1.17

 
13.3
%
Currency impact
(78
)
 
27

 
(0.7
)
 
(76
)
 
(0.8
)
 
 
 
 
 
(0.05
)
 
 
Currency Adjusted
$
7,306

 
$
2,214

 
69.7
 %
 
$
1,938

 
26.5
 %
 


 


 
$
1.12

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended July 28, 2017
(in millions, except per share data)
Net Sales
 
Cost of Products Sold
 
Gross Margin Percent
 
Operating Profit
 
Operating Profit Percent
 
Income Before Income Taxes
 
Net Income attributable to Medtronic
 
Diluted
EPS (1)
 
Effective Tax Rate
GAAP
$
7,390

 
$
2,352

 
68.2
 %
 
$
1,382

 
18.7
 %
 
$
1,195

 
$
1,016

 
$
0.74

 
15.6
%
Non-GAAP Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Restructuring charges, net
—

 
(5
)
 
0.1

 
14

 
0.2

 
14

 
12

 
0.01

 
14.3

Acquisition-related items
—

 
(9
)
 
0.1

 
53

 
0.7

 
53

 
39

 
0.03

 
26.4

Divestiture-related items (6)
—

 
—

 
—

 
48

 
0.6

 
48

 
40

 
0.03

 
16.7

Amortization of intangible assets
—

 
—

 
—

 
454

 
6.2

 
454

 
374

 
0.27

 
17.6

Certain tax adjustment (7)
—

 
—

 
—

 
—

 
—

 
—

 
60

 
0.04

 
—

Non-GAAP
$
7,390

 
$
2,338

 
68.4
 %
 
$
1,951

 
26.4
 %
 
$
1,764

 
$
1,541

 
$
1.12

 
13.0
%
See description of non-GAAP financial measures at the end of the earnings press release.
(1)
The data in this schedule has been intentionally rounded to the nearest $0.01 and, therefore, may not sum.
(2)
Associated costs include costs incurred as a direct result of the restructuring program, such as salaries for employees supporting the program and consulting expenses.
(3)
Effective in fiscal year 2019, we exclude unrealized and realized gains and losses on our minority investments as we do not believe that these components of income or expense have a direct correlation to our ongoing or future business operations.
(4)
The net charge relates to the exit of a business and is primarily comprised of intangible asset impairments.
(5)
The net charge relates to the impact of U.S. tax reform.
(6)
The transaction expenses incurred in connection with the divestiture of our Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency businesses.
(7)
The net benefit in certain tax adjustments relates to the resolution of various tax positions from prior years and other certain tax charges recorded in connection with the redemption of an intercompany minority interest.


10


MEDTRONIC PLC
GAAP TO NON-GAAP RECONCILIATIONS
(Unaudited)
 
Three months ended July 27, 2018
(in millions)
Net Sales
 
SG&A Expense
 
SG&A Expense as a % of Net Sales
 
R&D Expense
 
R&D Expense as a % of Net Sales
 
Other Operating Expense, net
 
Other Operating Expense, net as a % of Net Sales
 
Other Non-Operating Income, net
GAAP
$
7,384

 
$
2,597

 
35.2
 %
 
$
585

 
7.9
%
 
$
151

 
2.0
 %
 
$
(186
)
Non-GAAP Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Restructuring and associated costs (1)
—

 
(36
)
 
(0.5
)
 
—

 
—

 
—

 
—

 
—

Acquisition-related items
—

 
(23
)
 
(0.3
)
 
—

 
—

 
(11
)
 
(0.1
)
 
—

(Gain)/loss on minority investments (2)
—

 
—

 
—

 
—

 
—

 
—

 
—

 
110

Exit of business (3)
—

 
—

 
—

 
—

 
—

 
(80
)
 
(1.1
)
 
—

Non-GAAP
$
7,384

 
$
2,538

 
34.4

 
$
585

 
7.9

 
$
60

 
0.8

 
$
(76
)
Currency impact
(78
)
 
(13
)
 
0.2

 
(3
)
 
0.1

 
(13
)
 
(0.2
)
 
—

Currency Adjusted
$
7,306

 
$
2,525

 
34.6
 %
 
$
582

 
8.0
%
 
$
47

 
0.6
 %
 
$
(76
)
See description of non-GAAP financial measures at the end of the earnings press release.
(1)
Associated costs include costs incurred as a direct result of the restructuring program, such as salaries for employees supporting the program and consulting expenses.
(2)
Effective in fiscal year 2019, we exclude unrealized and realized gains and losses on our minority investments as we do not believe that these components of income or expense have a direct correlation to our ongoing or future business operations.
(3)
The net charge relates to the exit of a business and is primarily comprised of intangible asset impairments.



11


MEDTRONIC PLC
GAAP TO NON-GAAP RECONCILIATIONS
(Unaudited)
 
Three months ended
 
Fiscal year
 
Fiscal year
(in millions)
July 27, 2018
 
2018
 
2017
Net cash provided by operating activities
$
1,702

 
$
4,684

 
$
6,880

Additions to property, plant, and equipment
(291
)
 
(1,068
)
 
(1,254
)
Free Cash Flow (1)
$
1,411

 
$
3,616

 
$
5,626

See description of non-GAAP financial measures at the end of the earnings press release.

(1)
Free cash flow represents operating cash flows less property, plant, and equipment additions.

12


MEDTRONIC PLC
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
(in millions)
 
July 27, 2018
 
April 27, 2018
ASSETS
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
4,380

 
$
3,669

Investments
 
6,624

 
7,558

Accounts receivable, less allowances of $184 and $193, respectively
 
5,674

 
5,987

Inventories, net
 
3,681

 
3,579

Other current assets
 
2,101

 
2,187

Total current assets
 
22,460

 
22,980

 
 
 
 
 
Property, plant, and equipment
 
10,336

 
10,259

Accumulated depreciation
 
(5,812
)
 
(5,655
)
Property, plant, and equipment, net
 
4,524

 
4,604

Goodwill
 
38,955

 
39,543

Other intangible assets, net
 
21,270

 
21,723

Tax assets
 
1,413

 
1,465

Other assets
 
1,099

 
1,078

Total assets
 
$
89,721

 
$
91,393

 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
Current debt obligations
 
$
1,545

 
$
2,058

Accounts payable
 
1,789

 
1,628

Accrued compensation
 
1,371

 
1,988

Accrued income taxes
 
784

 
979

Other accrued expenses
 
3,623

 
3,431

Total current liabilities
 
9,112

 
10,084

 
 
 
 
 
Long-term debt
 
23,678

 
23,699

Accrued compensation and retirement benefits
 
1,412

 
1,425

Accrued income taxes
 
3,042

 
3,051

Deferred tax liabilities
 
1,347

 
1,423

Other liabilities
 
801

 
889

Total liabilities
 
39,392

 
40,571

 
 
 
 
 
Commitments and contingencies
 
 
 
 
Shareholders’ equity:
 
 
 
 
 
 
 
 
 
Ordinary shares— par value $0.0001, 2.6 billion shares authorized, 1,351,728,548 and 1,354,218,154 shares issued and outstanding, respectively
 
—

 
—

Additional paid-in capital
 
27,817

 
28,127

Retained earnings
 
24,730

 
24,379

Accumulated other comprehensive loss
 
(2,323
)
 
(1,786
)
Total shareholders’ equity
 
50,224

 
50,720

Noncontrolling interests
 
105

 
102

Total equity
 
50,329

 
50,822

Total liabilities and equity
 
$
89,721

 
$
91,393


13


MEDTRONIC PLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)


 
 
Three months ended
(in millions)
 
July 27, 2018
 
July 28, 2017
Operating Activities:
 
 
 
 
Net income
 
$
1,077

 
$
1,009

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
666

 
636

Provision for doubtful accounts
 
15

 
10

Deferred income taxes
 
3

 
58

Stock-based compensation
 
64

 
92

Other, net
 
3

 
(5
)
Change in operating assets and liabilities, net of acquisitions:
 
  
 
 

Accounts receivable, net
 
138

 
(88
)
Inventories, net
 
(180
)
 
(164
)
Accounts payable and accrued liabilities
 
85

 
(392
)
Other operating assets and liabilities
 
(169
)
 
(419
)
Net cash provided by operating activities
 
1,702

 
737

Investing Activities:
 
 
 
 
Acquisitions, net of cash acquired
 
(104
)
 
—

Additions to property, plant, and equipment
 
(291
)
 
(278
)
Purchases of investments
 
(982
)
 
(615
)
Sales and maturities of investments
 
2,020

 
971

Other investing activities, net
 
—

 
5

Net cash provided by investing activities
 
643

 
83

Financing Activities:
 
 
 
 
Change in current debt obligations, net
 
(505
)
 
569

Issuance of long-term debt
 
—

 
18

Payments on long-term debt
 
(12
)
 
(8
)
Dividends to shareholders
 
(677
)
 
(625
)
Issuance of ordinary shares
 
450

 
143

Repurchase of ordinary shares
 
(824
)
 
(1,233
)
Other financing activities
 
(5
)
 
(5
)
Net cash used in financing activities
 
(1,573
)
 
(1,141
)
Effect of exchange rate changes on cash and cash equivalents
 
(61
)
 
45

Net change in cash and cash equivalents
 
711

 
(276
)
Cash and cash equivalents at beginning of period
 
3,669

 
4,967

Cash and cash equivalents at end of period
 
$
4,380

 
$
4,691

Supplemental Cash Flow Information
 
 
 
 
Cash paid for:
 
 
 
 
Income taxes
 
$
348

 
$
417

Interest
 
55

 
68


14