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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
January 27, 2023
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
For the transition period from __________ to __________
Commission File Number 001-36820
mdt-20230127_g1.jpg®
Medtronic plc
(Exact name of registrant as specified in its charter)
  
Ireland98-1183488
(State of incorporation)(I.R.S. Employer
Identification No.)
20 On Hatch, Lower Hatch Street
Dublin 2, Ireland
(Address of principal executive offices) (Zip Code)
+353 1 438-1700
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Ordinary shares, par value $0.0001 per shareMDTNew York Stock Exchange
0.375% Senior Notes due 2023MDT/23BNew York Stock Exchange
0.000% Senior Notes due 2023MDT/23CNew York Stock Exchange
0.250% Senior Notes due 2025MDT/25New York Stock Exchange
0.000% Senior Notes due 2025MDT/25ANew York Stock Exchange
2.625% Senior Notes due 2025MDT/25BNew York Stock Exchange
1.125% Senior Notes due 2027MDT/27New York Stock Exchange
0.375% Senior Notes due 2028MDT/28New York Stock Exchange
3.000% Senior Notes due 2028MDT/28ANew York Stock Exchange
1.625% Senior Notes due 2031MDT/31New York Stock Exchange
1.000% Senior Notes due 2031MDT/31ANew York Stock Exchange
3.125% Senior Notes due 2031MDT/31BNew York Stock Exchange
0.750% Senior Notes due 2032MDT/32New York Stock Exchange
3.375% Senior Notes due 2034MDT/34New York Stock Exchange
2.250% Senior Notes due 2039MDT/39ANew York Stock Exchange
1.500% Senior Notes due 2039MDT/39BNew York Stock Exchange
1.375% Senior Notes due 2040MDT/40ANew York Stock Exchange
1.750% Senior Notes due 2049MDT/49New York Stock Exchange
1.625% Senior Notes due 2050MDT/50New York Stock Exchange




Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filerEmerging growth company
Non-accelerated filerSmaller Reporting Company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 1(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes No
As of February 27, 2023, 1,330,423,708 ordinary shares, par value $0.0001, of the registrant were outstanding.





TABLE OF CONTENTS
Item Description Page
     
    
1.  
2.  
3.  
4.  
    
1.  
2.  
5.
6.  




PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
Medtronic plc
Consolidated Statements of Income
(Unaudited)
 Three months endedNine months ended
(in millions, except per share data)January 27, 2023January 28, 2022January 27, 2023January 28, 2022
Net sales$7,727 $7,763 $22,682 $23,597 
Costs and expenses:  
Cost of products sold, excluding amortization of intangible assets2,689 2,459 7,740 7,554 
Research and development expense688 668 2,055 2,094 
Selling, general, and administrative expense2,615 2,561 7,799 7,723 
Amortization of intangible assets431 432 1,275 1,298 
Restructuring charges, net38 12 81 32 
Certain litigation charges, net 35  95 
Other operating (income) expense, net(125)(63)(187)719 
Operating profit1,392 1,659 3,920 4,081 
Other non-operating income, net(149)(67)(342)(244)
Interest expense, net167 137 449 410 
Income before income taxes1,375 1,589 3,813 3,915 
Income tax provision146 106 1,218 346 
Net income1,229 1,483 2,595 3,570 
Net income attributable to noncontrolling interests(6)(4)(17)(16)
Net income attributable to Medtronic$1,222 $1,480 $2,579 $3,554 
Basic earnings per share$0.92 $1.10 $1.94 $2.64 
Diluted earnings per share$0.92 $1.10 $1.94 $2.63 
Basic weighted average shares outstanding1,330.2 1,343.7 1,329.6 1,344.4 
Diluted weighted average shares outstanding1,332.0 1,350.3 1,332.8 1,353.9 

The accompanying notes are an integral part of these consolidated financial statements.
1


Medtronic plc
Consolidated Statements of Comprehensive Income
(Unaudited)
 Three months endedNine months ended
(in millions)January 27, 2023January 28, 2022January 27, 2023January 28, 2022
Net income$1,229 $1,483 $2,595 $3,570 
Other comprehensive (loss) income, net of tax:  
Unrealized gain (loss) on investment securities 107 (70)(76)(114)
Translation adjustment1,689 (362)(20)(963)
Net investment hedge(1,858)475 (449)1,254 
Net change in retirement obligations(2)19 2 56 
Unrealized (loss) gain on cash flow hedges(760)100 (382)369 
Other comprehensive (loss) income(824)162 (924)602 
Comprehensive income including noncontrolling interests405 1,645 1,671 4,172 
Comprehensive income attributable to noncontrolling interests(11)(4)(17)(13)
Comprehensive income attributable to Medtronic$394 $1,641 $1,654 $4,159 

The accompanying notes are an integral part of these consolidated financial statements.
2


Medtronic plc
Consolidated Balance Sheets
(Unaudited)
(in millions)January 27, 2023April 29, 2022
ASSETS  
Current assets:  
Cash and cash equivalents$4,521 $3,714 
Investments6,616 6,859 
Accounts receivable, less allowances and credit losses of $207 and $230, respectively
5,887 5,551 
Inventories, net5,375 4,616 
Other current assets2,965 2,318 
Total current assets25,364 23,059 
Property, plant, and equipment13,926 13,365 
Accumulated depreciation(8,489)(7,952)
Property, plant, and equipment, net5,437 5,413 
Goodwill41,565 40,502 
Other intangible assets, net15,265 15,595 
Tax assets3,361 3,403 
Other assets3,142 3,008 
Total assets$94,134 $90,981 
LIABILITIES AND EQUITY 
Current liabilities: 
Current debt obligations$5,918 $3,742 
Accounts payable2,209 2,276 
Accrued compensation2,007 2,121 
Accrued income taxes657 704 
Other accrued expenses3,630 3,551 
Total current liabilities14,422 12,394 
Long-term debt22,210 20,372 
Accrued compensation and retirement benefits1,103 1,113 
Accrued income taxes2,305 2,087 
Deferred tax liabilities747 884 
Other liabilities1,730 1,410 
Total liabilities42,516 38,260 
Commitments and contingencies (Note 16)
Shareholders’ equity: 
Ordinary shares— par value $0.0001, 2.6 billion shares authorized, 1,330,376,287 and 1,330,743,395 shares issued and outstanding, respectively
  
Additional paid-in capital24,513 24,566 
Retained earnings30,117 30,250 
Accumulated other comprehensive loss(3,189)(2,265)
Total shareholders’ equity51,441 52,551 
Noncontrolling interests177 171 
Total equity51,618 52,722 
Total liabilities and equity$94,134 $90,981 
The accompanying notes are an integral part of these consolidated financial statements.
3


Medtronic plc
Consolidated Statements of Equity
(Unaudited)
Ordinary SharesAdditional Paid-in CapitalRetained
Earnings
Accumulated
Other
Comprehensive
Loss
Total
 Shareholders’
 Equity
Noncontrolling InterestsTotal Equity
(in millions)NumberPar Value
April 29, 20221,331 $ $24,566 $30,250 $(2,265)$52,551 $171 $52,722 
Net income— — — 929 — 929 2 931 
Other comprehensive income (loss)— — — — 326 326 (2)324 
Dividends to shareholders ($0.68 per ordinary share)
— — — (903)— (903)— (903)
Issuance of shares under stock purchase and award plans2 — 41 — — 41 — 41 
Repurchase of ordinary shares(3)— (333)— — (333)— (333)
Stock-based compensation— — 62 — — 62 — 62 
July 29, 20221,329 $ $24,335 $30,276 $(1,939)$52,672 $170 $52,843 
Net income— — — 427 — 427 8 435 
Other comprehensive (loss) income— — — — (422)(422)(2)(424)
Dividends to shareholders ($0.68 per ordinary share)
— — — (904)— (904)— (904)
Issuance of shares under stock purchase and award plans2 — 55 — — 55 — 55 
Repurchase of ordinary shares(1)— (85)— — (85)— (85)
Stock-based compensation— — 137 — — 137 — 137 
October 28, 20221,330 $ $24,442 $29,799 $(2,361)$51,880 $177 $52,057 
Net income— — — 1,222 — 1,222 6 1,229 
Other comprehensive (loss) income— — — — (828)(828)4 (824)
Dividends to shareholders ($0.68 per ordinary share)
— — — (904)— (904)— (904)
Issuance of shares under stock purchase and award plans1 — 48 — — 48 — 48 
Repurchase of ordinary shares(1)— (63)— — (63)— (63)
Stock-based compensation— — 81 — — 81 — 81 
Changes to noncontrolling ownership interests— — 5 — — 5 (11)(6)
January 27, 20231,330 $ $24,513 $30,117 $(3,189)$51,441 $177 $51,618 

4


Ordinary SharesAdditional Paid-in CapitalRetained
Earnings
Accumulated
Other
Comprehensive
Loss
Total
 Shareholders’
 Equity
Noncontrolling InterestsTotal Equity
(in millions)NumberPar Value
April 30, 20211,345 $ $26,319 $28,594 $(3,485)$51,428 $174 $51,602 
Net income— — — 763 — 763 6 769 
Other comprehensive income (loss)— — — — 276 276 (2)274 
Dividends to shareholders ($0.63 per ordinary share)
— — — (846)— (846)— (846)
Issuance of shares under stock purchase and award plans2 — 107 — — 107 — 107 
Repurchase of ordinary shares(2)— (311)— — (311)— (311)
Stock-based compensation— — 69 — — 69 — 69 
July 30, 20211,345 $ $26,184 $28,511 $(3,209)$51,486 $178 $51,664 
Net income— — — 1,311 — 1,311 6 1,317 
Other comprehensive income (loss)— — — — 167 167 (1)166 
Dividends to shareholders ($0.63 per ordinary share)
— — — (847)— (847)— (847)
Issuance of shares under stock purchase and award plans3 — 92 — — 92 — 92 
Repurchase of ordinary shares(3)— (358)— — (358)— (358)
Stock-based compensation— — 140 — — 140 — 140 
Changes to noncontrolling ownership interests— — 1 — — 1 (16)(15)
October 29, 20211,345 $ $26,059 $28,974 $(3,042)$51,991 $168 $52,159 
Net income— — — 1,480 — 1,480 4 1,483 
Other comprehensive income (loss)— — — — 162 162 — 162 
Dividends to shareholders ($0.63 per ordinary share)
— — — (847)— (847)— (847)
Issuance of shares under stock purchase and award plans1 — 49 — — 49 — 49 
Repurchase of ordinary shares(3)— (372)— — (372)— (372)
Stock-based compensation— — 78 — — 78 — 78 
January 28, 20221,343 $ $25,814 $29,607 $(2,879)$52,542 $171 $52,713 

The accompanying notes are an integral part of these consolidated financial statements.
5


Medtronic plc
Consolidated Statements of Cash Flows
(Unaudited)
 Nine months ended
(in millions)January 27, 2023January 28, 2022
Operating Activities:  
Net income$2,595 $3,570 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization2,018 2,019 
Provision for credit losses54 49 
Deferred income taxes(78)(234)
Stock-based compensation280 287 
Loss on debt extinguishment53  
MCS asset impairment and inventory write-down 515 
Other, net182 92 
Change in operating assets and liabilities, net of acquisitions and divestitures:  
Accounts receivable, net(408)(212)
Inventories, net(936)(359)
Accounts payable and accrued liabilities163 6 
Other operating assets and liabilities(344)(444)
Net cash provided by operating activities3,579 5,289 
Investing Activities:  
Acquisitions, net of cash acquired(1,867)(91)
Additions to property, plant, and equipment(1,081)(979)
Purchases of investments(5,472)(7,919)
Sales and maturities of investments5,387 7,130 
Other investing activities, net15 (71)
Net cash used in investing activities(3,018)(1,930)
Financing Activities:  
Change in current debt obligations, net625  
Proceeds from short-term borrowings (maturities greater than 90 days)2,284  
Issuance of long-term debt3,430  
Payments on long-term debt(3,083)(1)
Dividends to shareholders(2,711)(2,540)
Issuance of ordinary shares209 344 
Repurchase of ordinary shares(548)(1,138)
Other financing activities(276)(52)
Net cash used in financing activities(70)(3,387)
Effect of exchange rate changes on cash and cash equivalents317 (87)
Net change in cash and cash equivalents808 (114)
Cash and cash equivalents at beginning of period3,714 3,593 
Cash and cash equivalents at end of period$4,521 $3,479 
Supplemental Cash Flow Information  
Cash paid for:  
Income taxes$1,314 $842 
Interest262 295 
The accompanying notes are an integral part of these consolidated financial statements.
6

Medtronic plc
Notes to Consolidated Financial Statements
(Unaudited)



1. Basis of Presentation
The accompanying unaudited consolidated financial statements of Medtronic plc and its subsidiaries (Medtronic plc, Medtronic, or the Company) have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S.) (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, the consolidated financial statements include all the adjustments necessary for a fair statement in conformity with U.S. GAAP. Certain reclassifications have been made to prior year financial statements to conform to classifications used in the current year.
Operating results for interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole. The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures at the date of the financial statements and during the reporting period. Actual results could materially differ from these estimates.
The COVID-19 pandemic ("COVID-19" or the "pandemic") has had, and may continue to have, an adverse effect on our business, results of operations, financial condition, and cash flows, and its future impacts remain uncertain and unpredictable. While there was not a material impact to the Company’s consolidated financial statements as of and for the three and nine months ended January 27, 2023, changes in the Company’s assessment about the length and severity of the pandemic, as well as other factors, could result in actual results differing from estimates.
The accompanying unaudited consolidated financial statements include the accounts of Medtronic plc, its wholly-owned subsidiaries, entities for which the Company has a controlling financial interest, and variable interest entities for which the Company is the primary beneficiary. Intercompany transactions and balances have been eliminated in consolidation. Amounts reported in millions within this quarterly report are computed based on the amounts in thousands, and therefore, the sum of the components may not equal the total amount reported in millions due to rounding. Additionally, certain columns and rows within tables may not sum due to rounding.
The accompanying unaudited consolidated financial statements and related notes should be read in conjunction with the audited consolidated financial statements of the Company and related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended April 29, 2022. The Company’s fiscal years 2023, 2022, and 2021 will end or ended on April 28, 2023, April 29, 2022, and April 30, 2021, respectively. Fiscal year 2021 was a 53-week year.
2. New Accounting Pronouncements
Recently Adopted
For the three and nine months ended January 27, 2023, there were no newly adopted accounting pronouncements that had a material impact to our consolidated financial statements. As of January 27, 2023, there are no recently issued but not yet adopted accounting pronouncements that are expected to materially impact our consolidated financial statements.
3. Revenue
The Company's revenues are principally derived from device-based medical therapies and services related to cardiac rhythm disorders, cardiovascular disease, renal disease, neurological disorders and diseases, spinal conditions and musculoskeletal trauma, chronic pain, urological and digestive disorders, ear, nose, and throat conditions, and diabetes conditions as well as advanced and general surgical care products, respiratory and monitoring solutions, and neurological surgery technologies. The Company's primary customers include healthcare systems, clinics, third-party healthcare providers, distributors, and other institutions, including governmental healthcare programs and group purchasing organizations.
7

Medtronic plc
Notes to Consolidated Financial Statements
(Unaudited)


The table below illustrates net sales by segment and division for the three and nine months ended January 27, 2023 and January 28, 2022:
 
Three months ended
Nine months ended
(in millions)January 27, 2023January 28, 2022January 27, 2023January 28, 2022
Cardiac Rhythm & Heart Failure $1,431 $1,402 $4,255 $4,356 
Structural Heart & Aortic760 740 2,259 2,277 
Coronary & Peripheral Vascular 581 603 1,744 1,829 
Cardiovascular 2,772 2,745 8,257 8,462 
Surgical Innovations1,425 1,519 4,162 4,570 
Respiratory, Gastrointestinal, & Renal712 771 2,047 2,341 
Medical Surgical 2,137 2,290 6,208 6,910 
Cranial & Spinal Technologies1,128 1,102 3,253 3,292 
Specialty Therapies699 633 2,052 1,908 
Neuromodulation420 409 1,244 1,285 
Neuroscience 2,248 2,144 6,549 6,484 
Diabetes 570 584 1,667 1,741 
Total$7,727 $7,763 $22,682 $23,597 

The table below illustrates net sales by market geography for each segment for the three and nine months ended January 27, 2023 and January 28, 2022:
 
U.S.(1)
Non-U.S. Developed Markets(2)
Emerging Markets(3)
Three months endedThree months endedThree months ended
(in millions)January 27, 2023January 28, 2022January 27, 2023January 28, 2022January 27, 2023January 28, 2022
Cardiovascular $1,375 $1,297 $859 $935 $538 $513 
Medical Surgical 965 990 760 812 412 488 
Neuroscience 1,507 1,397 401 431 341 316 
Diabetes 215 255 274 261 80 68 
Total$4,062 $3,939 $2,294 $2,438 $1,371 $1,385 
U.S.(1)
Non-U.S. Developed Markets(2)
Emerging Markets(3)
Nine months endedNine months endedNine months ended
(in millions)January 27, 2023January 28, 2022January 27, 2023January 28, 2022January 27, 2023January 28, 2022
Cardiovascular $4,097 $4,090 $2,553 $2,886 $1,607 $1,486 
Medical Surgical 2,713 2,950 2,246 2,521 1,250 1,439 
Neuroscience 4,437 4,237 1,189 1,330 923 918 
Diabetes 650 760 792 780 226 201 
Total$11,897 $12,038 $6,779 $7,517 $4,006 $4,043 
(1)U.S. includes the United States and U.S. territories.
(2)Non-U.S. developed markets include Japan, Australia, New Zealand, Korea, Canada, and the countries within Western Europe.
(3)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 defined above.
The amount of revenue recognized is reduced by sales rebates and returns. Adjustments to rebates and returns reserves are recorded as increases or decreases to revenue. At January 27, 2023, $1.1 billion of rebates were classified as other accrued expenses, and $536 million of rebates were classified as a reduction of accounts receivable in the consolidated balance sheet. At April 29, 2022, $981 million of rebates were classified as other accrued expenses, and $548 million of rebates were classified as a reduction of accounts receivable in the consolidated balance sheet.
8

Medtronic plc
Notes to Consolidated Financial Statements
(Unaudited)


Deferred Revenue and Remaining Performance Obligations
The Company records a deferred revenue liability if a customer pays consideration, or the Company has the right to invoice, before the Company transfers a good or service to the customer. Deferred revenue at January 27, 2023 and April 29, 2022 was $403 million and $399 million, respectively. At January 27, 2023 and April 29, 2022, $311 million and $305 million was included in other accrued expenses, respectively, and $92 million and $94 million was included in other liabilities, respectively. During the nine months ended January 27, 2023, the Company recognized $211 million of revenue that was included in deferred revenue as of April 29, 2022.
Remaining performance obligations include goods and services that have not yet been delivered or provided under existing, noncancellable contracts with minimum purchase commitments. At January 27, 2023, the estimated revenue expected to be recognized in future periods related to unsatisfied performance obligations for executed contracts with an original duration of one year or more was approximately $662 million. The Company expects to recognize revenue on the majority of these remaining performance obligations over the next three years.
4. Acquisitions and Assets and Liabilities Held for Sale
During the nine months ended January 27, 2023 and January 28, 2022, the Company had acquisitions that were accounted for as business combinations. The assets and liabilities of the businesses acquired were recorded and consolidated on the acquisition date at their respective fair values. Goodwill resulting from business combinations is largely attributable to future, yet to be defined technologies, new customer relationships, existing workforce of the acquired businesses, and synergies expected to arise after the Company's acquisition of these businesses. The pro forma impact of these acquisitions was not significant, either individually or in the aggregate, to the consolidated results of the Company for the three and nine months ended January 27, 2023 and January 28, 2022. The results of operations of acquired businesses have been included in the Company's consolidated statements of income since the date each business was acquired. For the three and nine months ended January 27, 2023, purchase price allocation adjustments were not significant.
Fiscal Year 2023
Intersect ENT
On May 13, 2022, the Company acquired Intersect ENT, a global ear, nose, and throat (ENT) medical technology leader. The acquisition expands the Neuroscience segment portfolio of products used during ENT procedures, and combined with the Company's navigation, powered instruments, and existing tissue health products, offers a broader suite of solutions to assist surgeons treating patients who suffer from chronic rhinosinusitis (CRS). Total consideration, net of cash acquired, for the transaction, in which the Company acquired all outstanding shares of Intersect ENT for $28.25 per share, was $1.2 billion consisting of $1.1 billion of cash and $98 million previously held investments in Intersect ENT. Based upon a preliminary acquisition valuation, the Company acquired $615 million of goodwill, $635 million of technology-based intangible assets, $35 million of customer-related intangible assets, and $13 million of tradenames with estimated useful lives of 20 years. The goodwill is not deductible for tax purposes.
Revenue and net loss attributable to Intersect ENT since the date of acquisition as well as costs incurred in connection with the acquisition included in the consolidated statements of income were not significant for the three and nine months ended January 27, 2023.
Affera, Inc.
On August 30, 2022, the Company acquired Affera, Inc. (Affera) a privately-held company focused on the development of cardiac mapping and navigation systems and catheter-based cardiac ablation technologies. The acquisition expands the Cardiovascular segment suite of advanced cardiac ablation products and accessories, including its first cardiac mapping and navigation platform. Total consideration, net of cash acquired for the transaction, was $904 million. Based upon a preliminary acquisition valuation, the Company acquired $660 million of goodwill and $300 million of in-process research and development. The goodwill is not deductible for tax purposes. The Company recognized $201 million of non-cash contingent consideration liabilities in connection with the acquisition, which are comprised of product development milestone-based payments.
Revenue and net loss attributable to Affera since the date of acquisition as well as costs incurred in connection with the acquisition included in the consolidated statements of income were not significant for the three months and nine months ended January 27, 2023.
9

Medtronic plc
Notes to Consolidated Financial Statements
(Unaudited)


The acquisition date fair values of the assets acquired and liabilities assumed were as follows:
(in millions)Intersect ENTAffera
Cash and cash equivalents$39 $66 
Inventory32  
Goodwill615 660 
Other intangible assets683 300 
Other assets40 1 
Total assets acquired1,408 1,027 
 
Current liabilities63 2 
Deferred tax liabilities51 53 
Other liabilities18 1 
Total liabilities assumed131 56 
Net assets acquired$1,277 $970 
Other acquisitions
For acquisitions other than Intersect ENT and Affera, the acquisition date fair value of net assets acquired during the nine months ended January 27, 2023 was $123 million. Based upon preliminary valuations, assets acquired were primarily comprised of $66 million of goodwill and $57 million of technology-based intangible assets with estimated useful lives of 16 years. The goodwill is deductible for tax purposes. The Company recognized $73 million of contingent consideration liabilities in connection with these acquisitions during the nine months ended January 27, 2023, which are comprised of revenue and product development milestone-based payments.
Fiscal year 2022
The acquisition date fair value of net assets acquired during the nine months ended January 28, 2022 was $125 million, consisting of $154 million of assets acquired and $29 million of liabilities assumed. Assets acquired were primarily comprised of $80 million of goodwill and $50 million of technology-based intangible assets with estimated useful lives ranging from 15 years to 16 years. The goodwill is not deductible for tax purposes. The Company recognized $31 million of contingent consideration liabilities in connection with business combinations during the nine months ended January 28, 2022, which are comprised of revenue and product development milestone-based payments.
Acquired In-Process Research & Development (IPR&D)
IPR&D with no alternative future use acquired outside of a business combination is expensed immediately. The Company did not acquire any IPR&D in connection with asset acquisitions of technology not yet approved during the three months ended January 27, 2023. During the three months ended January 28, 2022 and the nine months ended January 27, 2023, IPR&D acquired in connection with asset acquisitions of technology not yet approved by regulators was not significant. During the nine months ended January 28, 2022, the Company acquired $101 million of IPR&D in connection with asset acquisitions of technology not yet approved by regulators, which was recognized in research and development expense in the consolidated statements of income.
Contingent Consideration
Certain of the Company’s business combinations involve potential payment of future consideration that is contingent upon the achievement of certain product development milestones and/or contingent on the acquired business reaching certain performance milestones. A liability is recorded for the estimated fair value of the contingent consideration on the acquisition date. The fair value of the contingent consideration is remeasured at each reporting period, and the change in fair value is recognized within other operating (income) expense, net in the consolidated statements of income.
The fair value of contingent consideration at January 27, 2023 and April 29, 2022 was $308 million and $119 million, respectively. At January 27, 2023, $137 million was recorded in other accrued expenses, and $172 million was recorded in other liabilities in the consolidated balance sheet. At April 29, 2022, $35 million was recorded in other accrued expenses, and $84 million was recorded in other liabilities in the consolidated balance sheet.
10

Medtronic plc
Notes to Consolidated Financial Statements
(Unaudited)


The following table provides a reconciliation of the beginning and ending balances of contingent consideration:
 Three months endedNine months ended
(in millions)January 27, 2023January 28, 2022January 27, 2023January 28, 2022
Beginning balance$349 $269 $119 $270 
Purchase price contingent consideration  274 31 
Purchase price allocation adjustments   25 
Payments(45)(41)(46)(83)
Change in fair value5 (81)(38)(97)
Ending balance$308 $147 $308 $147 
The recurring Level 3 fair value measurements of contingent consideration for which a liability is recorded include the following significant unobservable inputs:
Fair Value at
(in millions)January 27, 2023Unobservable InputRange
Weighted Average (1)
Revenue and other performance-based payments$88Discount rate
11.2% - 27.2%
16.9%
Projected fiscal year of payment2023 - 20282025
Product development and other milestone-based payments$220Discount rate
3.9% - 5.5%
4.1%
Projected fiscal year of payment2024 - 20272025
(1) Unobservable inputs were weighted by the relative fair value of the contingent consideration liability. For projected fiscal year of payment, the amount represents the median of the inputs and is not a weighted average.
Assets and Liabilities Held for Sale
On May 25, 2022, the Company and DaVita Inc. (“DaVita”) entered into a definitive agreement for the Company to sell half of its Renal Care Solutions (RCS) business. This sale is part of an agreement between Medtronic and DaVita to form a new, independent kidney care-focused medical device company (“NewCo”) with equal equity ownership. As a result of entering into the definitive agreement and as of that date, the RCS business met the criteria to be classified as held for sale. The transaction is expected to close in the fourth fiscal quarter, subject to customary regulatory approvals and closing conditions. RCS is part of the Company’s Medical Surgical portfolio. The Company recorded non-cash pre-tax charges $81 million, primarily related to impairment of goodwill and changes in the carrying amount of the disposal group, in the nine months ended January 27, 2023, recognized in other operating (income) expense, net in the consolidated statements of income. There were no impairment charges in the three months ended January 27, 2023. Refer to Note 10 to the consolidated financial statements for additional information on the goodwill impairment.

11

Medtronic plc
Notes to Consolidated Financial Statements
(Unaudited)


The following table presents information related to the assets and liabilities that were classified as held for sale in our consolidated balance sheet:
(in millions)January 27, 2023
Inventories, net$105 
Property, plant, and equipment, net156 
Goodwill154 
Other intangible assets, net115 
Other41 
Total assets held for sale (1)
$570 
 
Total liabilities held for sale (1)(2)
$41 
(1) Total assets held for sale and total liabilities held for sale are reported in other current assets and other accrued expenses, respectively in the consolidated balance sheets.
(2) No separate class of liability classified as held for sale was individually significant enough for separate disclosure.
There were no assets or liabilities classified as held for sale at April 29, 2022. The Company determined that the agreement to sell half of the RCS business does not meet the criteria to be classified as discontinued operations.
5. Restructuring and Other Costs
For the three and nine months ended January 27, 2023 and January 28, 2022, restructuring costs primarily related to Enterprise Excellence and Simplification restructuring programs, both of which the Company expects to be substantially completed by the end of this fiscal year. Further program details are described in Note 4 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended April 29, 2022. In total, the Company expects it will recognize charges of approximately $1.8 billion for Enterprise Excellence and approximately $450 million for Simplification.
The following table presents the classification of restructuring costs in the consolidated statements of income:
Three months endedNine months ended
(in millions)January 27, 2023January 28, 2022January 27, 2023January 28, 2022
Cost of products sold$26 $27 $67 $91 
Selling, general, and administrative expenses40 39 125 114 
Restructuring charges, net38 12 81 32 
Total restructuring and associated costs$104 $78 $275 $237 
The following table summarizes the activity related to Enterprise Excellence and Simplification restructuring programs for the nine months ended January 27, 2023:
(in millions)Employee Termination Benefits
Associated Costs(1)
Other
Costs
Total
April 29, 2022$81 $27 $1 $110 
Charges85 192 7 284 
Cash payments(102)(207)(6)(317)
Non-cash settlements and accrual adjustments(2)
(10) (1)(11)
January 27, 2023$53 $12 $1 $66 
(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)Accrual adjustments relate to certain employees identified for termination finding other positions within the Company and contract terminations being settled for less than originally estimated.
12

Medtronic plc
Notes to Consolidated Financial Statements
(Unaudited)


Mechanical Circulatory Support (MCS)
In June 2021, the Company announced the decision to stop the distribution and sale of the Medtronic HVAD System in light of a growing body of observational clinical comparisons indicating a lower frequency of neurological adverse events and mortality with another circulatory support device available to patients compared to the HVAD system. In connection with this decision, the Company recorded charges of $726 million (MCS charges) within the Cardiovascular segment during the three months ended July 30, 2021, including $58 million recognized in costs of products sold and $668 million recognized within other operating (income) expense, net in the consolidated statement of income. The charges included $515 million of non-cash impairments and write-downs primarily related to $409 million of intangible asset impairments and $58 million of inventory write-downs. The Company also recorded charges of $211 million for commitments and obligations associated with the decision, which included charges for patient support obligations, restructuring, and other associated costs. During the fourth quarter of fiscal year 2022, the Company recorded additional charges of $155 million within other operating (income) expense, net primarily related to incremental commitments and obligations associated with the exit of the business. As of January 27, 2023, accruals were recorded in the consolidated balance sheet for these obligations, with $84 million reflected in other accrued expenses and $104 million recorded in other liabilities. Medtronic remains committed to serving the needs of the patients currently implanted with the HVAD system.
13

Medtronic plc
Notes to Consolidated Financial Statements
(Unaudited)


6. Financial Instruments
Debt Securities
The Company holds investments in marketable debt securities that are classified and accounted for as available-for-sale and are remeasured on a recurring basis. The following tables summarize the Company's investments in available-for-sale debt securities by significant investment category and the related consolidated balance sheet classification at January 27, 2023 and April 29, 2022:
    
January 27, 2023
ValuationBalance Sheet Classification
(in millions)CostUnrealized
Gains
Unrealized
Losses
Fair ValueInvestmentsOther Assets
Level 1:
U.S. government and agency securities$548 $ $(26)$522 $522 $ 
Level 2:
Corporate debt securities4,208 7 (183)4,032 4,032  
U.S. government and agency securities997  (50)947 947  
Mortgage-backed securities570  (55)515 515  
Non-U.S. government and agency securities13   13 13  
Certificates of deposit10   10 10  
Other asset-backed securities597  (21)576 576  
Total Level 26,396 7 (309)6,094 6,094  
Level 3:
Auction rate securities36  (3)33  33 
Total available-for-sale debt securities$6,980 $7 $(338)$6,649 $6,616 $33 
April 29, 2022
ValuationBalance Sheet Classification
(in millions)CostUnrealized
Gains
Unrealized
Losses
Fair ValueInvestmentsOther Assets
Level 1:
U.S. government and agency securities$533 $1 $(15)$518 $518 $ 
Level 2:
Corporate debt securities4,457 4 (140)4,321 4,321  
U.S. government and agency securities910  (41)869 869  
Mortgage-backed securities592  (35)558 558  
Non-U.S. government and agency securities17   17 17  
Certificates of deposit20   20 20  
Other asset-backed securities567  (11)556 556  
Total Level 26,563 4 (227)6,341 6,341  
Level 3:
Auction rate securities36  (3)33  33 
Total available-for-sale debt securities$7,131 $5 $(245)$6,893 $6,859 $33 
The amortized cost of debt securities excludes accrued interest, which is reported in other current assets in the consolidated balance sheets.
14

Medtronic plc
Notes to Consolidated Financial Statements
(Unaudited)


The following tables present the gross unrealized losses and fair values of the Company’s available-for-sale debt securities that have been in a continuous unrealized loss position deemed to be temporary, aggregated by investment category at January 27, 2023 and April 29, 2022:
 January 27, 2023
 Less than 12 monthsMore than 12 months
(in millions)Fair ValueUnrealized
Losses
Fair ValueUnrealized
Losses
Corporate debt securities$197 $(3)$2,915 $(180)
U.S. government and agency securities76 (3)849 (73)
Mortgage-backed securities19 (1)463 (54)
Other asset-backed securities  545 (21)
Auction rate securities  33 (3)
Total$292 $(7)$4,806 $(331)
 April 29, 2022
 Less than 12 monthsMore than 12 months
(in millions)Fair ValueUnrealized
Losses
Fair ValueUnrealized
Losses
Corporate debt securities$222 $(1)$2,993 $(139)
U.S. government and agency securities  945 (56)
Mortgage-backed securities  507 (35)
Other asset-backed securities  526 (11)
Auction rate securities  33 (3)
Total$222 $(1)$5,004 $(244)
The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the ability to observe valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. There were no transfers into or out of Level 3 during the three and nine months ended January 27, 2023 and January 28, 2022. When a determination is made to classify an asset or liability within Level 3, the determination is based upon the significance of the unobservable inputs to the overall fair value measurement.
Activity related to the Company’s available-for-sale debt securities portfolio is as follows:
 Three months endedNine months ended
(in millions)January 27, 2023January 28, 2022January 27, 2023January 28, 2022
Proceeds from sales$1,777 $2,481 $5,365 $7,052 
Gross realized gains4 3 6 15 
Gross realized losses(8)(6)(27)(10)
The January 27, 2023 balance of available-for-sale debt securities by contractual maturity is shown in the following table. Within the table, maturities of mortgage-backed securities have been allocated based upon timing of estimated cash flows assuming no change in the current interest rate environment. Actual maturities may differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties.
(in millions)January 27, 2023
Due in one year or less$1,381 
Due after one year through five years3,706 
Due after five years through ten years875 
Due after ten years688 
Total$6,649 
15

Medtronic plc
Notes to Consolidated Financial Statements
(Unaudited)


Equity Securities, Equity Method Investments, and Other Investments
The Company holds investments in equity securities with readily determinable fair values, equity investments without readily determinable fair values, investments accounted for under the equity method, and other investments. Equity securities with readily determinable fair values are included in Level 1 of the fair value hierarchy, as they are measured using quoted market prices. Equity method investments and investments without readily determinable fair values are included within Level 3 of the fair value hierarchy due to the use of significant unobservable inputs to determine fair value. To determine the fair value of these investments, the Company uses all pertinent financial information available related to the investees, including financial statements, market participant valuations from recent and proposed equity offerings, and other third-party data.
The following table summarizes the Company's equity and other investments at January 27, 2023 and April 29, 2022, which are classified as other assets in the consolidated balance sheets:
(in millions)January 27, 2023April 29, 2022
Investments with readily determinable fair value (marketable equity securities)$77 $64 
Investments without readily determinable fair values816 732 
Equity method and other investments87 85 
Total equity and other investments$980 $881 
The table below includes activity related to the Company’s portfolio of equity and other investments. Gains and losses on equity and other investments are recognized in other non-operating income, net in the consolidated statements of income.
 Three months endedNine months ended
(in millions)January 27, 2023January 28, 2022January 27, 2023January 28, 2022
Proceeds from sales$1 $15 $22 $82 
Gross gains10 29 47 99 
Gross losses(2)(28)(13)(48)
Impairment losses recognized  (12)(10)
During the three and nine months ended January 27, 2023, there were $10 million and $15 million of net unrealized gains, respectively, on equity securities and other investments still held at January 27, 2023. During the three and nine months ended January 28, 2022, there were $1 million and $8 million of net unrealized gains, respectively, on equity securities and other investments still held at January 28, 2022.
7. Financing Arrangements
Commercial Paper
The Company maintains commercial paper programs that allow the Company to issue U.S. dollar or Euro-denominated unsecured commercial paper notes. The aggregate amount outstanding at any time under the commercial paper programs may not exceed the equivalent of $3.5 billion. Commercial paper outstanding at January 27, 2023 was $625 million. During the three months ended January 27, 2023, the commercial paper outstanding had a weighted average original maturity of 24 days and a weighted average interest rate of 4.392 percent. During the nine months ended January 27, 2023, the commercial paper outstanding had a weighted average original maturity of 24 days and a weighted average interest rate of 3.925 percent. No commercial paper was outstanding at April 29, 2022. The issuance of commercial paper reduces the amount of credit available under the Company’s existing Credit Facility, as defined below.
Line of Credit
The Company has a $3.5 billion five-year unsecured revolving credit facility (Credit Facility), which provides back-up funding for the commercial paper programs described above. The Credit Facility includes a multi-currency borrowing feature for certain specified foreign currencies. At January 27, 2023 and April 29, 2022, no amounts were outstanding under the Credit Facility.
Interest rates on advances on the Credit Facility are determined by a pricing matrix, based on the Company’s long-term debt ratings, assigned by Standard & Poor’s Ratings Services and Moody’s Investors Service. Facility fees are payable on the Credit Facility and are determined in the same manner as the interest rates. The Company is in compliance with the covenants under the Credit Facility.
16

Medtronic plc
Notes to Consolidated Financial Statements
(Unaudited)


Debt Obligations
The Company's debt obligations consisted of the following:
(in millions)Maturity by
Fiscal Year
January 27, 2023April 29, 2022
Current debt obligations2023 - 2024$5,918 $3,742 
Long-term debt
3.500 percent ten-year 2015 senior notes
2025 1,890 
0.250 percent six-year 2019 senior notes
20261,088 1,064 
2.625 percent three-year 2022 senior notes
2026544  
0.000 percent five-year 2020 senior notes
20261,088 1,064 
1.125 percent eight-year 2019 senior notes
20271,632 1,596 
3.350 percent ten-year 2017 senior notes
2027 368 
3.000 percent six-year 2022 senior notes
20291,088  
0.375 percent eight-year 2020 senior notes
20291,088 1,064 
1.625 percent twelve-year 2019 senior notes
20311,088 1,064 
1.000 percent twelve-year 2019 senior notes
20321,088 1,064 
3.125 percent nine-year 2022 senior notes
20321,088  
0.750 percent twelve-year 2020 senior notes
20331,088 1,064 
3.375 percent twelve-year 2022 senior notes
20351,088  
4.375 percent twenty-year 2015 senior notes
20351,932 1,932 
6.550 percent thirty-year 2007 CIFSA senior notes
2038253 253 
2.250 percent twenty-year 2019 senior notes
20391,088 1,064 
6.500 percent thirty-year 2009 senior notes
2039158 158 
1.500 percent twenty-year 2019 senior notes
20401,088 1,064 
5.550 percent thirty-year 2010 senior notes
2040224 224 
1.375 percent twenty-year 2020 senior notes
20411,088 1,064 
4.500 percent thirty-year 2012 senior notes
2042105 105 
4.000 percent thirty-year 2013 senior notes
2043305 305 
4.625 percent thirty-year 2014 senior notes
2044127 127 
4.625 percent thirty-year 2015 senior notes
20451,813 1,813 
1.750 percent thirty-year 2019 senior notes
20501,088 1,064 
1.625 percent thirty-year 2020 senior notes
20511,088 1,064 
Finance lease obligations2023 - 203655 56 
Deferred financing costs2023 - 2051(115)(109)
Debt discount, net2023 - 2051(58)(52)
Long-term debt$22,210 $20,372 
Senior Notes
The Company has outstanding unsecured senior obligations, described as senior notes in the tables above (collectively, the Senior Notes). The Senior Notes rank equally with all other unsecured and unsubordinated indebtedness of the Company. The Company is in compliance with all covenants related to the Senior Notes.
17

Medtronic plc
Notes to Consolidated Financial Statements
(Unaudited)


In September 2022, Medtronic Luxco issued four tranches of Euro-denominated Senior Notes with an aggregate principal of €3.5 billion, with maturities ranging from fiscal year 2026 to 2035, resulting in cash proceeds of approximately €3.5 billion, net of discounts and issuance costs. The Company used a portion of the net proceeds to repay at maturity €750 million of Medtronic Luxco Senior Notes for $772 million of total consideration in December 2022. The Company designated €750 million of the Euro-denominated debt issued in September as a net investment hedge of certain of the Company's European operations. Refer to note 8 for additional information regarding the net investment hedge.
Term Loan Agreements
In May 2022, Medtronic Luxco entered into a term loan agreement (Fiscal 2023 Loan Agreement) by and among Medtronic Luxco, Medtronic plc, Medtronic, Inc., and Mizuho Bank, Ltd. as administrative agent and as lender. The Fiscal 2023 Loan Agreement provides an unsecured term loan in an aggregate principal amount of up to ¥300 billion with a term of 364 days. Borrowings under the Fiscal 2023 Loan Agreement bear interest at the TIBOR Rate (as defined in the Fiscal 2023 Loan Agreement) plus a margin of 0.40% per annum. Medtronic plc and Medtronic, Inc. have guaranteed the obligations of Medtronic Luxco under the Fiscal 2023 Loan Agreement. In May and June 2022, Medtronic Luxco borrowed an aggregate of ¥297 billion, or approximately $2.3 billion, of the term loan, under the Fiscal 2023 Loan Agreement. The Company used the net proceeds of the borrowings to fund the early redemption of $1.9 billion of Medtronic Inc.'s 3.500% Senior Notes due 2025 for $1.9 billion of total consideration, and $368 million of Medtronic Luxco's 3.350% Senior Notes due 2027 for $376 million of total consideration. The Company recognized a total loss on debt extinguishment of $53 million in the three months ended July 29, 2022, which primarily includes cash premiums and accelerated amortization of deferred financing costs and debt discounts and premiums. The loss was recognized in interest expense, net in the consolidated statements of income during the nine months ended January 27, 2023.
Financial Instruments Not Measured at Fair Value
At January 27, 2023, the estimated fair value of the Company’s Senior Notes was $22.7 billion compared to a principal value of $25.3 billion. At April 29, 2022, the estimated fair value was $22.9 billion compared to a principal value of $24.2 billion. The fair value was estimated using quoted market prices for the publicly registered Senior Notes, which are classified as Level 2 within the fair value hierarchy. The fair values and principal values consider the terms of the related debt and exclude the impacts of debt discounts and hedging activity.
8. Derivatives and Currency Exchange Risk Management
The Company uses operational and economic hedges, including currency exchange rate derivative contracts and interest rate derivative instruments, to manage the impact of currency exchange and interest rate changes on earnings and cash flows. In addition, the Company uses cross currency interest rate swaps to manage currency risk related to certain debt. In order to minimize earnings and cash flow volatility resulting from currency exchange rate changes, the Company enters into derivative instruments, principally forward currency exchange rate contracts. These contracts are designed to hedge anticipated foreign currency transactions and changes in the value of specific assets and liabilities. At inception of the contract, the derivative is designated as either a freestanding derivative or a cash flow hedge. The Company also uses derivative and non-derivative instruments to manage the impact of currency exchange rate changes on net investments in foreign currency-denominated operations. Currencies of our derivative instruments include the Euro, Japanese Yen, Chinese Yuan, and others. The Company does not enter into currency exchange rate derivative contracts for speculative purposes. The gross notional amount of all currency exchange rate derivative instruments outstanding was $19.6 billion and $13.8 billion at January 27, 2023 and April 29, 2022, respectively.
The information that follows explains the various types of derivatives and financial instruments used by the Company, reasons the Company uses such instruments, and the impact such instruments have on the Company’s consolidated balance sheets and statements of income.
Freestanding Derivative Contracts
Freestanding derivative contracts are primarily used to offset the Company’s exposure to the change in value of specific foreign-currency-denominated assets and liabilities, and to offset variability of cash flows associated with forecasted transactions denominated in foreign currencies. The gross notional amount of the Company's freestanding currency exchange rate contracts outstanding at January 27, 2023 and April 29, 2022 was $5.4 billion and $4.9 billion, respectively. The Company's freestanding currency exchange rate contracts are not designated as hedges, and therefore, changes in the value of these contracts are recognized in earnings, thereby offsetting the current earnings effect of the related change in value of foreign-currency-denominated assets, liabilities, and cash flows.
The Company also uses total return swaps to hedge the liability of a non-qualified deferred compensation plan. The gross notional amount of the Company's total return swaps outstanding at January 27, 2023 and April 29, 2022 was $222 million and $226 million, respectively. The Company's total return swaps are not designated as hedges, and therefore, changes in the value of these instruments are recognized in
18

Medtronic plc
Notes to Consolidated Financial Statements
(Unaudited)


earnings. The cash flows related to the Company's freestanding derivative contracts are reported as operating or financing activities, depending on the nature of the underlying hedged item, in the consolidated statements of cash flows.
Cash Flow Hedges
Forward contracts designated as cash flow hedges are designed to hedge the variability of cash flows associated with forecasted transactions denominated in a foreign currency that will take place in the future. The gross notional amount of these contracts, designated as cash flow hedges, outstanding at January 27, 2023 and April 29, 2022 was $9.3 billion and $8.8 billion, respectively, and will mature within the subsequent three-year period. For derivative instruments that are designated and qualify as a cash flow hedge, the gain or loss on the derivative instrument is reported as a component of accumulated other comprehensive loss. The gain or loss on the derivative instrument is reclassified into earnings and is included in other operating (income) expense, net or cost of products sold in the consolidated statements of income in the same period or periods during which the hedged transaction affects earnings. Amounts excluded from the measurement of hedge effectiveness are recognized in earnings on a straight-line basis over the term of the hedge. The cash flows related to all of the Company's derivative instruments designated as cash flow hedges are reported as operating activities in the consolidated statements of cash flows.
At January 27, 2023 and April 29, 2022, the Company had $92 million and $474 million in after-tax net unrealized gains, respectively, associated with cash flow hedging instruments recorded in accumulated other comprehensive loss. The Company expects that $179 million of after-tax net unrealized gains at January 27, 2023 will be recognized in the consolidated statements of income over the next 12 months.
Net Investment Hedges
The Company has designated Euro-denominated and Yen-denominated debt as net investment hedges of certain of its European and Japanese operations to manage the exposure to currency and exchange rate movements for foreign currency-denominated net investments in foreign operations. At January 27, 2023, the Company had €16.0 billion, or $17.4 billion, of outstanding Euro-denominated debt designated as a hedge of its net investment in certain of its European operations, and ¥297 billion, or $2.3 billion, of outstanding Yen-denominated debt designated as a hedge of its net investment in certain of its Japanese operations. The Euro-denominated debt will mature in fiscal years 2023 through 2051, and the Yen-denominated debt will mature in fiscal year 2024.
The Company may also use derivative instruments to hedge the currency risk associated with its net investment in foreign operations. Foreign currency forward contracts may be used on a standalone basis or in combination with option collars. At January 27, 2023, the Company had foreign currency contracts with a notional value of €4.5 billion, or $4.9 billion, hedging a portion of its net investment in certain of its European operations. The foreign exchange contracts mature in fiscal years 2024 and 2025.
For instruments that are designated and qualify as net investment hedges, the gains or losses are reported as a component of accumulated other comprehensive loss. The gains or losses are reclassified into earnings upon a liquidation event or deconsolidation of the foreign subsidiary. Amounts excluded from the assessment of effectiveness are recognized in interest expense, net on a straight-line basis over the term of the hedge. During the three and nine months ended January 27, 2023, the Company recognized $26 million and $74 million in after-tax unrealized gains representing excluded components in interest expense, net. The cash flows related to the Company's derivative instruments designated as net investment hedges are reported as investing activities in the consolidated statements of cash flows. Cash flows attributable to amounts excluded from the assessment of effectiveness are reported as operating activities in the consolidated statements of cash flows.

19

Medtronic plc
Notes to Consolidated Financial Statements
(Unaudited)


Gains and Losses on Hedging Instruments and Derivatives not Designated as Hedging Instruments
The amount of the gains and losses on our hedging instruments and the classification of those gains and losses within our consolidated financial statements for the three and nine months ended January 27, 2023 and January 28, 2022 were as follows:
(Gain) Loss Recognized in Accumulated Other Comprehensive Loss(Gain) Loss Reclassified into Income
Three months endedNine months endedThree months endedNine months endedLocation of (Gain) Loss in Income Statement
(in millions)January 27, 2023January 28, 2022January 27, 2023January 28, 2022January 27, 2023January 28, 2022January 27, 2023January 28, 2022
Cash flow hedges
Currency exchange rate contracts$557 $(180)$(51)$(502)$(199)$(56)$(542)$(51)Other operating (income) expense, net
Currency exchange rate contracts155 41 (12)84 (8)17 12 42 Cost of products sold
Net investment hedges
Non-derivative instruments1,731 (475)381 (1,254)    N/A
Currency exchange rate contracts127  68      N/A
Total $2,570 $(614)$386 $(1,672)$(208)$(39)$(530)$(9)
The amount of the gains and losses on our derivative instruments not designated as hedging instruments and the classification of those gains and losses within our consolidated financial statements during the three and nine months ended January 27, 2023 and January 28, 2022 were as follows:
(Gain) Loss Recognized in Income(Gain) Loss Recognized in Income
Three months endedNine months endedLocation of (Gain) Loss in Income Statement
(in millions)January 27, 2023January 28, 2022January 27, 2023January 28, 2022
Derivatives not designated as hedging instruments
Currency exchange rate contracts$(1)$(34)$46 $(67)Other operating (income) expense, net
Total return swaps(9)10 4 (15)Other operating (income) expense, net
Total$(10)$(24)$50 $(82)
20

Medtronic plc
Notes to Consolidated Financial Statements
(Unaudited)


Balance Sheet Presentation
The following tables summarize the balance sheet classification and fair value of derivative instruments included in the consolidated balance sheets at January 27, 2023 and April 29, 2022. The fair value amounts are presented on a gross basis, and are segregated between derivatives that are designated and qualify as hedging instruments and those that are not designated and do not qualify as hedging instruments, and are further segregated by type of contract within those two categories.
 Fair Value - AssetsFair Value - Liabilities
(in millions)January 27, 2023April 29, 2022Balance Sheet ClassificationJanuary 27, 2023April 29, 2022Balance Sheet Classification
Derivatives designated as hedging instruments   
Currency exchange rate contracts $271 $481 Other current assets$107 $43 Other accrued expenses
Currency exchange rate contracts39 168 Other assets145 16 Other liabilities
Total derivatives designated as hedging instruments310 649 252 60 
Derivatives not designated as hedging instruments 
Currency exchange rate contracts15 46 Other current assets15 49 Other accrued expenses
Total return swaps16  Other current assets 20 Other accrued expenses
Total derivatives not designated as hedging instruments30 46 15 69 
Total derivatives$341 $695 $267 $129 
The following table provides information by level for the derivative assets and liabilities that are measured at fair value on a recurring basis.
January 27, 2023April 29, 2022
(in millions)Derivative assetsDerivative LiabilitiesDerivative assetsDerivative Liabilities
Level 1$325 $267 $695 $109 
Level 216   20 
Total$341 $267 $695 $129 
The Company has elected to present the fair value of derivative assets and liabilities within the consolidated balance sheets on a gross basis, even when derivative transactions are subject to master netting arrangements and may otherwise qualify for net presentation. The cash flows related to collateral posted and received are reported gross as investing and financing activities, respectively, in the consolidated statements of cash flows.

21

Medtronic plc
Notes to Consolidated Financial Statements
(Unaudited)


The following tables provide information as if the Company had elected to offset the asset and liability balances of derivative instruments, netted in accordance with various criteria as stipulated by the terms of the master netting arrangements with each of the counterparties. Derivatives not subject to master netting arrangements are not eligible for net presentation.
January 27, 2023
Gross Amount Not Offset on the Balance Sheet
(in millions)Gross Amount of Recognized Assets (Liabilities)Financial InstrumentsCash Collateral (Received) PostedNet Amount
Derivative assets:
Currency exchange rate contracts$325 $(174)$(41)$110 
Total return swaps16   16 
341 (174)(41)126 
Derivative liabilities:
Currency exchange rate contracts(267)174  (93)
Total$74 $ $(41)$33 
April 29, 2022
Gross Amount Not Offset on the Balance Sheet
(in millions)Gross Amount of Recognized Assets (Liabilities)Financial InstrumentsCash Collateral (Received) PostedNet Amount
Derivative assets:
Currency exchange rate contracts$695 $(109)$(254)$332 
Derivative liabilities:
Currency exchange rate contracts(109)109   
Total return swaps(20)  (20)
(129)109  (20)
Total$566 $ $(254)$312 
9. Inventories
Inventory balances, net of reserves, were as follows:
(in millions)January 27, 2023April 29, 2022
Finished goods$3,545 $3,070 
Work-in-process797 682 
Raw materials1,033 864 
Total$5,375 $4,616 
22

Medtronic plc
Notes to Consolidated Financial Statements
(Unaudited)


10. Goodwill and Other Intangible Assets
Goodwill
The following table presents the changes in the carrying amount of goodwill by segment:
(in millions)CardiovascularMedical SurgicalNeuroscienceDiabetesTotal
April 29, 2022$7,160 $19,957 $11,132 $2,254 $40,502 
Goodwill as a result of acquisitions726  615  1,340 
Purchase accounting adjustments(10) (3) (13)
Transfer to held for sale (208)  (208)
Currency translation and other(1)(44)(12)1 (56)
January 27, 2023$7,874 $19,705 $11,732 $2,255 $41,565 
The Company assesses goodwill for impairment annually as of the first day of the third quarter of the fiscal year and whenever an event occurs or circumstances change that would indicate that the carrying amount may be impaired. Impairment testing for goodwill is performed at the reporting unit level. The test for impairment of goodwill requires the Company to make several estimates related to projected future cash flows to determine the fair value of the goodwill reporting units. The Company calculates the excess of each reporting unit's fair value over its carrying amount, including goodwill, utilizing a discounted cash flow analysis. Internal operational budgets and long-range strategic plans are used as a basis for the cash flow analysis. The Company also utilizes assumptions for working capital, capital expenditures, and terminal growth rates. The discount rate applied to the cash flow analysis is based on the weighted average cost of capital ("WACC") for each reporting unit. An impairment loss is recognized when the carrying amount of the reporting unit's net assets exceeds the estimated fair value of the reporting unit. The Company did not recognize any goodwill impairments during the three months ended January 27, 2023 and the three and nine months ended January 28, 2022.

As a result of the agreement with DaVita, as disclosed in Note 4 to the consolidated financial statements, the Company allocated $208 million of goodwill to the RCS business that met the criteria to be classified as held for sale during the first quarter of fiscal year 2023. Upon allocation, a goodwill impairment test was performed for the RCS business, and the Company recognized $61 million of goodwill impairment during the nine months ended January 27, 2023. The goodwill impairment charges are recognized in other operating (income) expense, net in the consolidated statements of income.
Intangible Assets
The following table presents the gross carrying amount and accumulated amortization of intangible assets:
January 27, 2023April 29, 2022
(in millions)Gross Carrying AmountAccumulated AmortizationGross Carrying AmountAccumulated Amortization
Definite-lived:
Customer-related$16,956 $(7,736)$16,953 $(7,005)
Purchased technology and patents11,314 (6,106)10,802 (5,667)
Trademarks and tradenames486 (276)473 (266)
Other116 (67)80 (69)
Total$28,872 $(14,185)$28,308 $(13,006)
Indefinite-lived:
IPR&D$578 $— $293 $— 
The Company did not recognize any definite-lived intangible asset charges during the three and nine months ended January 27, 2023 and the three months ended January 28, 2022. During the nine months ended January 28, 2022, the Company recognized $409 million of definite-lived intangible asset charges in connection with MCS within the Cardiovascular Portfolio. Refer to Note 5 to the consolidated financial statements for additional information on what led to the impairment. Intangible asset impairment charges are recognized in other operating (income) expense, net in the consolidated statements of income.

23

Medtronic plc
Notes to Consolidated Financial Statements
(Unaudited)


Indefinite-lived intangible asset impairments were not significant for the three and nine months ended January 27, 2023 and January 28, 2022. Due to the nature of IPR&D projects, the Company may experience future delays or failures to obtain regulatory approvals to conduct clinical trials, failures of clinical trials, delays or failures to obtain required market clearances, other failures to achieve a commercially viable product, or the discontinuation of certain projects, and as a result, may recognize impairment losses in the future.
Amortization Expense
Intangible asset amortization expense for the three months ended January 27, 2023 and January 28, 2022 was $431 million and $432 million, respectively. Intangible asset amortization expense for the nine months ended January 27, 2023 and January 28, 2022 was $1.3 billion. Estimated aggregate amortization expense by fiscal year based on the carrying value of definite-lived intangible assets at January 27, 2023, excluding any possible future amortization associated with acquired IPR&D which has not yet met technological feasibility, is as follows:
(in millions)Amortization Expense
Remaining 2023$421 
20241,653 
20251,631 
20261,617 
20271,593 
20281,542 
11. Income Taxes
On August 18, 2022, the U.S. Tax Court (Tax Court) issued its opinion on the previously disclosed litigation regarding the allocation of income between Medtronic, Inc. and its wholly-owned subsidiary operating in Puerto Rico for fiscal years 2005 and 2006 (Opinion). While the Opinion rejected the IRS’s position and the Tax Court determined the methodology advanced by Medtronic was appropriate for purposes of determining the intercompany royalty rate between Puerto Rico and the U.S., it determined that the royalty rate should be higher, thereby increasing income allocated to the U.S. and consequently subject to U.S. tax. This case relates only to fiscal years 2005 and 2006. The Opinion remains subject to finalization by the Tax Court and to appeal by either or both parties. The Company has assumed the Tax Court findings will be applied for all years following fiscal year 2006. As a result, the Company recorded a $764 million net tax charge during the three months ended October 28, 2022 to recognize the estimated tax impact of the Tax Court Opinion.
The Company's effective tax rate for the three and nine months ended January 27, 2023 was 10.6% and 31.9%, respectively, as compared to 6.7% and 8.8% for the three and nine months ended January 28, 2022, respectively. The increase in our effective tax rate for the three months ended January 27, 2023, as compared to the three months ended January 28, 2022, primarily relates to the deferred tax impact associated with a step up in basis for Swiss Cantonal purposes recorded during the three months ended January 28, 2022. The increase in our effective tax rate for the nine months ended January 27, 2023, as compared to the nine months ended January 28, 2022 primarily relates to the $764 million net tax charge referenced above, and the deferred tax impact associated with a step up in basis for Swiss Cantonal purposes recorded during the prior fiscal year.

At January 27, 2023 and April 29, 2022, the Company's gross unrecognized tax benefits were $2.6 billion and $1.7 billion, respectively. In addition, the Company had accrued gross interest and penalties of $56 million at January 27, 2023. If all of the Company’s unrecognized tax benefits were recognized, approximately $2.4 billion would impact the Company’s effective tax rate. At January 27, 2023 and April 29, 2022, the amount of the Company's gross unrecognized tax benefits, net of cash advance, recorded as a noncurrent liability within accrued income taxes on the consolidated balance sheets was $1.7 billion and $802 million, respectively. The increase in the Company's gross unrecognized tax benefits, net of cash advance, was primarily due to an increase in unrecognized tax benefits relating to the Tax Court Opinion. During the three months ended January 27, 2023, the Company made a $300 million cash deposit with the Internal Revenue Service. The Company recognizes interest and penalties related to income tax matters within income tax provision in the consolidated statements of income and records the liability within either current or noncurrent accrued income taxes on the consolidated balance sheets.
Refer to Note 16 to the consolidated financial statements for additional information regarding the status of current tax audits and proceedings.
12. Earnings Per Share
Basic earnings per share is computed based on the weighted average number of ordinary shares outstanding. Diluted earnings per share is computed based on the weighted number of ordinary shares outstanding, increased by the number of additional shares that would have been outstanding had the potentially dilutive ordinary shares been issued, and reduced by the number of shares the Company could have
24

Medtronic plc
Notes to Consolidated Financial Statements
(Unaudited)


repurchased with the proceeds from issuance of the potentially dilutive shares. Potentially dilutive ordinary shares include stock-based awards granted under stock-based compensation plans and shares committed to be purchased under the employee stock purchase plan.
The table below sets forth the computation of basic and diluted earnings per share:
 Three months endedNine months ended
(in millions, except per share data)January 27, 2023January 28, 2022January 27, 2023January 28, 2022
Numerator:  
Net income attributable to ordinary shareholders$1,222 $1,480 $2,579 $3,554 
Denominator:  
Basic – weighted average shares outstanding1,330.2 1,343.7 1,329.6 1,344.4 
Effect of dilutive securities:  
Employee stock options0.8 5.2 1.7 7.3 
Employee restricted stock units0.8 1.3 1.0 1.8 
Employee performance share units0.2 0.1 0.5 0.5 
Diluted – weighted average shares outstanding1,332.0 1,350.3 1,332.8 1,353.9 
Basic earnings per share$0.92 $1.10 $1.94 $2.64 
Diluted earnings per share$0.92 $1.10 $1.94 $2.63 
The calculation of weighted average diluted shares outstanding excludes options to purchase approximately 28 million and 23 million ordinary shares for the three and nine months ended January 27, 2023, respectively, and 6 million and 4 million ordinary shares for the three and nine months ended January 28, 2022, respectively, because their effect would have been anti-dilutive on the Company’s earnings per share.
13. Stock-Based Compensation
The following table presents the components and classification of stock-based compensation expense for stock options, restricted stock, performance share units, and employee stock purchase plan shares recognized for the three and nine months ended January 27, 2023 and January 28, 2022:
 Three months endedNine months ended
(in millions)January 27, 2023January 28, 2022January 27, 2023January 28, 2022
Stock options$15 $13 $64 $58 
Restricted stock44 45 123 139 
Performance share units14 13 65 63 
Employee stock purchase plan8 7 28 28 
Total stock-based compensation expense$81 $78 $280 $287 
Cost of products sold$8 $8 $28 $29 
Research and development expense9 9 31 32 
Selling, general, and administrative expense64 62 221 227 
Total stock-based compensation expense81 78 280 287 
Income tax benefits(14)(13)(50)(51)
Total stock-based compensation expense, net of tax$67 $65 $230 $236 
25

Medtronic plc
Notes to Consolidated Financial Statements
(Unaudited)


14. Retirement Benefit Plans
The Company sponsors various retirement benefit plans, including defined benefit pension plans, post-retirement medical plans, defined contribution savings plans, and termination indemnity plans, covering substantially all U.S. employees and many employees outside the U.S. The net periodic benefit cost of the defined benefit pension plans included the following components for the three and nine months ended January 27, 2023 and January 28, 2022:
 U.S.Non-U.S.
 Three months endedThree months ended
(in millions)January 27, 2023January 28, 2022January 27, 2023January 28, 2022
Service cost$19 $25 $12 $16 
Interest cost36 26 10 7 
Expected return on plan assets(56)(57)(16)(16)
Amortization of net actuarial loss5 16 1 5 
Net periodic benefit cost$4 $10 $7 $12 
 U.S.Non-U.S.
 Nine months endedNine months ended
(in millions)January 27, 2023January 28, 2022January 27, 2023January 28, 2022
Service cost$57 $75 $36 $48 
Interest cost108 78 30 21 
Expected return on plan assets(168)(171)(48)(48)
Amortization of net actuarial loss15 48 3 15 
Net periodic benefit cost$12 $30 $21 $36 
Components of net periodic benefit cost other than the service component are recognized in other non-operating income, net in the consolidated statements of income.
15. Accumulated Other Comprehensive Loss
The following table provides changes in accumulated other comprehensive loss (AOCI), net of tax, and by component:
(in millions)Unrealized Gain (Loss) on Investment SecuritiesCumulative Translation AdjustmentsNet Investment HedgesNet Change in Retirement ObligationsUnrealized Gain (Loss) on Cash Flow HedgesTotal Accumulated Other Comprehensive (Loss) Income
April 29, 2022$(209)$(2,599)$841 $(773)$474 $(2,265)
Other comprehensive (loss) income before reclassifications(94)(20)(449) 43 (520)
Reclassifications18   2 (424)(404)
Other comprehensive (loss) income(76)(20)(449)2 (382)(924)
January 27, 2023$(285)$(2,619)$392 $(771)$92 $(3,189)
(in millions)Unrealized Gain (Loss) on Investment SecuritiesCumulative Translation AdjustmentNet Investment HedgesNet Change in Retirement ObligationsUnrealized Gain (Loss) on Cash Flow HedgesTotal Accumulated Other Comprehensive (Loss) Income
April 30, 2021$92 $(519)$(1,458)$(1,347)$(253)$(3,485)
Other comprehensive income (loss) before reclassifications(112)(960)1,254 10 364 556 
Reclassifications(2)  46 5 49 
Other comprehensive income (loss)(114)(960)1,254 56 369 605 
January 28, 2022$(22)$(1,479)$(204)$(1,291)$116 $(2,879)
The income tax on gains and losses on investment securities in other comprehensive income before reclassifications during the nine months ended January 27, 2023 and January 28, 2022 was a benefit of $22 million and $18 million, respectively. During the nine months ended
26

Medtronic plc
Notes to Consolidated Financial Statements
(Unaudited)


January 27, 2023, realized gains and losses on investment securities reclassified from AOCI were reduced by income taxes of $6 million. During the nine months ended January 28, 2022, there was no income tax on realized gains and losses on investment securities reclassified from AOCI. When realized, gains and losses on investment securities reclassified from AOCI are recognized within other non-operating income, net. Refer to Note 6 to the consolidated financial statements for additional information.
For the nine months ended January 27, 2023 and January 28, 2022, the income tax on cumulative translation adjustment was a benefit of $4 million.
During the nine months ended January 27, 2023 and January 28, 2022, there were no tax impacts on net investment hedges. Refer to Note 8 to the consolidated financial statements for additional information.
The net change in retirement obligations in other comprehensive income includes amortization of net actuarial losses included in net periodic benefit cost. During the nine months ended January 27, 2023 and January 28, 2022, the net change in retirement obligations in other comprehensive income before reclassifications resulted in income tax benefit of $1 million and income tax expense of $3 million, respectively. During the nine months ended January 27, 2023 and January 28, 2022, the gains and losses on defined benefit and pension items reclassified from AOCI were reduced by income taxes of $8 million and $14 million, respectively. When realized, net gains and losses on defined benefit and pension items reclassified from AOCI are recognized within other non-operating income, net. Refer to Note 14 to the consolidated financial statements for additional information.
The income tax on unrealized gains and losses on cash flow hedges in other comprehensive income before reclassifications during the nine months ended January 27, 2023 and January 28, 2022 was an expense of $20 million and $51 million, respectively. During the nine months ended January 27, 2023 and January 28, 2022, gains and losses on cash flow hedges reclassified from AOCI were reduced by income taxes of $98 million and $11 million, respectively. When realized, gains and losses on currency exchange rate contracts reclassified from AOCI are recognized within other operating (income) expense, net or cost of products sold, and gains and losses on forward starting interest rate derivatives reclassified from AOCI are recognized within interest expense, net. Refer to Note 8 to the consolidated financial statements for additional information.
16. Commitments and Contingencies
Legal Matters
The Company and its affiliates are involved in a number of legal actions from time to time involving product liability, employment, intellectual property and commercial disputes, shareholder related matters, environmental proceedings, tax disputes, and governmental proceedings and investigations, including those described below. With respect to governmental proceedings and investigations, like other companies in our industry, the Company is subject to extensive regulation by national, state, and local governmental agencies in the United States and in other jurisdictions in which the Company and its affiliates operate. As a result, interaction with governmental agencies is ongoing. The Company’s standard practice is to cooperate with regulators and investigators in responding to inquiries. The outcomes of legal actions are not within the Company’s complete control and may not be known for prolonged periods of time. In some actions, the enforcement agencies or private claimants seek damages, as well as other civil or criminal remedies (including injunctions barring the sale of products that are the subject of the proceeding), that could require significant expenditures, result in lost revenues, or limit the Company's ability to conduct business in the applicable jurisdictions.
The Company records a liability in the consolidated financial statements on an undiscounted basis for loss contingencies related to legal actions when a loss is known or considered probable and the amount may be reasonably estimated. If the reasonable estimate of a known or probable loss is a range, and no amount within the range is a better estimate than any other, the minimum amount of the range is accrued. If a loss is reasonably possible but not known or probable, and may be reasonably estimated, the estimated loss or range of loss is disclosed. When determining the estimated loss or range of loss, significant judgment is required. Estimates of probable losses resulting from litigation and governmental proceedings involving the Company are inherently difficult to predict, particularly when the matters are in early procedural stages with incomplete scientific facts or legal discovery, involve unsubstantiated or indeterminate claims for damages, potentially involve penalties, fines or punitive damages, or could result in a change in business practice. The Company classifies certain specified litigation charges and gains related to significant legal matters as certain litigation charges, net in the consolidated statements of income. The Company recognized no certain litigation charges during the three and nine months ended January 27, 2023, respectively, whereas the Company recognized $35 million and $95 million of certain litigation charges during the three and nine months ended January 28, 2022, respectively. At January 27, 2023 and April 29, 2022, accrued litigation was approximately $0.3 billion. The ultimate cost to the Company with respect to accrued litigation could be materially different than the amount of the current estimates and accruals and could have a material adverse impact on the Company’s consolidated earnings, financial position, and/or cash flows. The Company includes accrued litigation in other accrued expenses and other liabilities on the consolidated balance sheets. While it is not possible to predict the outcome for most of the legal matters discussed below, the Company believes it is possible that the costs associated with these matters could have a material adverse impact on the Company’s consolidated earnings, financial position, and/or cash flows.
27

Medtronic plc
Notes to Consolidated Financial Statements
(Unaudited)


Intellectual Property Matters
At any given time, the Company is involved in litigation relating to patents, trademarks, copyrights, trade secrets, and other intellectual property (IP) rights, and licenses, acquisitions or other agreements relating to such rights. This litigation includes, but is not limited to, alleged infringement or misappropriation of IP rights, or breach of obligations related to IP rights, or other claims asserted by competitors, individuals, or, consistent with a growing trend across technology-intensive industries, other entities created specifically to fund IP litigation. While the outcome of these litigation matters is inherently uncertain, it is possible that the results of such litigation could require the Company to pay significant monetary damages and/or royalty payments, and negatively impact the Company's ability to sell current or future products, which could have a material adverse impact on the Company's business, results of operations, financial condition, and cash flows.
Colibri

The Company is a defendant in patent litigation brought by Colibri Heart Valve LLC (Colibri) in the U.S. District Court for the Central District of California. Colibri alleges infringement of one patent by the Company’s Evolut family of transcatheter aortic valve replacement devices. The patent asserted by Colibri has expired. On February 8, 2023, a jury returned a verdict against the Company for approximately $106 million. The Company has strong arguments to appeal the verdict and will file post-trial motions and, if necessary, appeals with the appropriate appellate courts. The Company has not recognized an expense in connection with this matter because it does not currently believe a loss is probable.
Product Liability Matters
Pelvic Mesh Litigation
The Company is currently involved in litigation in various state and federal courts against manufacturers of pelvic mesh products alleging personal injuries resulting from the implantation of those products. Two subsidiaries of Covidien supplied pelvic mesh products to one of the manufacturers, C.R. Bard (Bard), named in the litigation. The litigation includes a federal multi-district litigation in the U.S. District Court for the Northern District of West Virginia and cases in various state courts and jurisdictions outside the U.S. Generally, complaints allege design and manufacturing claims, failure to warn, breach of warranty, fraud, violations of state consumer protection laws and loss of consortium claims. In fiscal year 2016, Bard paid the Company $121 million towards the settlement of 11,000 of these claims. In May 2017, the agreement with Bard was amended to extend the terms to apply to up to an additional 5,000 claims. That agreement does not resolve the dispute between the Company and Bard with respect to claims that do not settle, if any. As part of the agreement, the Company and Bard agreed to dismiss without prejudice their pending litigation with respect to Bard’s obligation to defend and indemnify the Company. The Company estimates law firms representing approximately 16,200 claimants have asserted or may assert claims involving products manufactured by Covidien’s subsidiaries. As of February 1, 2023, the Company had reached agreements to settle approximately 15,900 of these claims. The Company's accrued expenses for this matter are included within accrued litigation as discussed above.
Hernia Mesh Litigation
Starting in fiscal year 2020, plaintiffs began filing lawsuits against certain subsidiaries of the Company in U.S. state and federal courts that allege personal injury from hernia mesh products sold by those subsidiaries. As of February 17, 2023, the Company and certain of its subsidiaries have been named as defendants in lawsuits filed on behalf of approximately 6,070 individual plaintiffs, and certain plaintiffs’ law firms have advised the Company that they may file additional cases in the future. Approximately 5,950 plaintiffs have filed lawsuits in a coordinated proceeding in Massachusetts state court, where they have been consolidated before a single judge. Approximately 470 plaintiffs have filed lawsuits in a coordinated action in Minnesota state court, and there are approximately 280 actions coordinated in a federal Multidistrict Litigation in the U.S. District Court for the District of Massachusetts. The pending lawsuits relate almost entirely to hernia mesh products that have not been subject to recalls, withdrawals, or other adverse regulatory action. The Company has not recorded an expense related to damages in connection with these matters because any potential loss is not currently probable and reasonably estimable. Additionally, the Company is unable to reasonably estimate the range of loss, if any, that may result from these matters.

Diabetes Pump Retainer Ring Litigation

Starting in fiscal year 2021, plaintiffs began filing lawsuits against the Diabetes operating unit in U.S. state and federal courts alleging personal injury from Series 600 insulin pumps with allegedly defective clear retainer rings that were subject to field corrective actions in 2019 and 2021. As of February 17, 2023, 60 individual plaintiffs have filed lawsuits, and certain plaintiffs’ law firms have notified the Company that they may file additional lawsuits in the future on behalf of thousands of additional claimants. Most of the filed suits are coordinated in California state court. The Company has not recorded an expense related to damages in connection with these matters because any potential loss is not currently probable and reasonably estimable. Additionally, the Company is unable to reasonably estimate the range of loss, if any, that may result from these matters.
28

Medtronic plc
Notes to Consolidated Financial Statements
(Unaudited)


Environmental Proceedings
The Company is a successor to several investigation and cleanup actions at various stages related to environmental remediation matters at a number of sites, including in Orrington, Maine. These projects relate to a variety of activities, including removal of solvents, metals and other hazardous substances from soil and groundwater. The ultimate cost of site cleanup and timing of future cash flows is difficult to predict given uncertainties regarding the extent of the required cleanup, the interpretation of applicable laws and regulations, and alternative cleanup methods.

The Company is also a successor to a party named in a lawsuit filed in the U.S. District Court for the District of Maine in the early 2000’s by the Natural Resources Defense Council and the Maine People’s Alliance relating to mercury contamination of the Penobscot River and Bay and options for remediating such contamination. In March 2021, the parties notified the court that they had agreed on a settlement in principle of all issues in this matter, and in September 2022 the parties filed a joint motion for final approval by the court. The court has conditionally approved the settlement and the parties are awaiting issuance of the final court order approving the settlement. The conditional court approval did not result in a change to the Company's previous accrual for this matter.
The Company's accrued expenses for these various environmental proceedings are included within accrued litigation as discussed above.
Income Taxes
In March 2009, the IRS issued its audit report on Medtronic, Inc. for fiscal years 2005 and 2006. Medtronic, Inc. reached agreement with the IRS on some, but not all matters related to these fiscal years. The remaining unresolved issue for fiscal years 2005 and 2006 relates to the allocation of income between Medtronic, Inc. and its wholly-owned subsidiary operating in Puerto Rico, which is one of the Company's key manufacturing sites. The U.S. Tax Court (Tax Court) reviewed this dispute, and in June 2016, issued an opinion with respect to the allocation of income between the parties for fiscal years 2005 and 2006 whereby it generally rejected the IRS’s position, but also made certain modifications to the Medtronic, Inc. tax returns as filed. In April 2017, the IRS filed a Notice of Appeal to the U.S. Court of Appeals for the Eighth Circuit regarding the Tax Court opinion. Oral argument for the Appeal occurred in March 2018. The U.S. Court of Appeals issued its opinion in August 2018 and remanded the case back to the Tax Court for additional factual findings, which it concluded in June 2021. The Tax Court issued its opinion on August 18, 2022, and it remains subject to appeal by either or both parties. At this time, the Company is evaluating whether to file an appeal.
The IRS has issued its audit reports on Medtronic, Inc. for fiscal years 2007 through 2016. Medtronic, Inc. and the IRS have reached agreement on all significant issues except for the allocation of income between Medtronic, Inc. and its wholly-owned subsidiary operating in Puerto Rico for the businesses that are the subject of the U.S. Tax Court matter for fiscal years 2005 and 2006.
Medtronic, Inc.’s fiscal years 2017, 2018, and 2019 U.S. federal income tax returns are currently being audited by the IRS.
Covidien LP (a wholly owned subsidiary of Medtronic plc) has either reached agreement with the IRS or the statute of limitations has lapsed on its U.S. federal income tax returns through fiscal year 2019.
Although it is not possible to predict the outcome for most of the income tax matters discussed above, the Company believes it is possible that charges associated with these matters could have a material adverse impact on the Company’s consolidated earnings, financial position, and/or cash flows.
Refer to Note 11 for additional discussion of income taxes.
Guarantees
In the normal course of business, the Company and/or its affiliates periodically enter into agreements that require one or more of the Company and/or its affiliates to indemnify customers or suppliers for specific risks, such as claims for injury or property damage arising as a result of the Company or its affiliates’ products, the negligence of the Company's personnel, or claims alleging that the Company's products infringe on third-party patents or other intellectual property. The Company also offers warranties on various products. The Company’s maximum exposure under these guarantees is unable to be estimated. Historically, the Company has not experienced significant losses on these types of guarantees.
The Company believes the ultimate resolution of the above guarantees is not expected to have a material effect on the Company’s consolidated earnings, financial position, and/or cash flows.
29

Medtronic plc
Notes to Consolidated Financial Statements
(Unaudited)


17. Segment and Geographic Information
Segment disclosures are on a performance basis consistent with internal management reporting. Net sales of the Company's reportable segments include end-customer revenues from the sale of products the segment develops, manufactures, and distributes. The Company’s management evaluates performance of the segments and allocates resources based on net sales and segment operating profit. Segment operating profit represents income before income taxes, excluding interest income or expense, amortization of intangible assets, centralized distribution costs, non-operating income or expense items, certain corporate charges, and other items not allocated to the segments.
The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies in Note 1 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended April 29, 2022. Certain depreciable assets may be recorded by one segment, while the depreciation expense is allocated to another segment. The allocation of depreciation expense is based on the proportion of the assets used by each segment.
There were no changes to the reportable segments during the quarter ended January 27, 2023. The Company's four principal operating and reportable segments are as follows: Cardiovascular Portfolio, Medical Surgical Portfolio, Neuroscience Portfolio, and Diabetes Operating Unit.
The following tables present reconciliations of financial information from the segments to the applicable line items in the Company's consolidated financial statements:
Segment Operating Profit
 Three months endedNine months ended
(in millions)January 27, 2023January 28, 2022January 27, 2023January 28, 2022
Cardiovascular$1,034 $1,077 $3,037 $3,333 
Medical Surgical748 923 2,104 2,746 
Neuroscience897 903 2,587 2,753 
Diabetes106 161 279 450 
Segment operating profit2,784 3,064 8,008 9,282 
Interest expense, net(167)(137)(449)(410)
Other non-operating income, net149 67 342 244 
Amortization of intangible assets(431)(432)(1,275)(1,298)
Corporate(523)(483)(1,339)(1,347)
Centralized distribution costs(264)(401)(886)(1,382)
Restructuring and associated costs(104)(78)(275)(237)
Acquisition-related items(24)60 (61)54 
Certain litigation charges, net (35) (95)
RCS impairments / costs(10) (109) 
MCS impairments / costs   (726)
IPR&D charges (11) (101)
Medical device regulations(37)(25)(107)(70)
Exit of business  (37) 
Income before income taxes$1,375 $1,589 $3,813 $3,915 
30

Medtronic plc
Notes to Consolidated Financial Statements
(Unaudited)


Geographic Information
Net sales are attributed to the country based on the location of the customer taking possession of the products or in which the services are rendered. The following table presents net sales for the three and nine months ended January 27, 2023 and January 28, 2022 for the Company's country of domicile, countries with significant concentrations, and all other countries:
 Three months endedNine months ended
(in millions)January 27, 2023January 28, 2022January 27, 2023January 28, 2022
Ireland$23 $24 $70 $76 
United States 4,062 3,939 11,897 12,038 
Rest of world3,642 3,800 10,715 11,483 
Total other countries, excluding Ireland7,704 7,739 22,612 23,521 
Total$7,727 $7,763 $22,682 $23,597 
31


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
UNDERSTANDING OUR FINANCIAL INFORMATION
The following discussion and analysis provides information management believes to be relevant to understanding the financial condition and results of operations of Medtronic plc and its subsidiaries (Medtronic plc, Medtronic, or the Company, or we, us, or our). For a full understanding of financial condition and results of operations, you should read this discussion along with Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended April 29, 2022. In addition, you should read this discussion along with our consolidated financial statements and related notes thereto at and for the three and nine months ended January 27, 2023. Amounts reported in millions within this quarterly report are computed based on the amounts in thousands, and therefore, the sum of the components may not equal the total amount reported in millions due to rounding. Additionally, certain columns and rows within tables may not sum due to rounding.
Financial Trends
Throughout this Management’s Discussion and Analysis, we present certain financial measures that facilitate management's review of the operational performance of the Company and as a basis for strategic planning; however, such financial measures are not presented in our financial statements prepared in accordance with accounting principles generally accepted in the United States (U.S.) (U.S. GAAP). These financial measures are considered "non-GAAP financial measures" and are intended to supplement, and should not be considered as superior to, financial measures presented in accordance with U.S. GAAP. We believe that non-GAAP financial measures provide information useful to investors in understanding the Company's underlying operational performance and trends and may facilitate comparisons with the performance of other companies in the medical technologies industry.
As presented in the GAAP to Non-GAAP Reconciliations section below, our non-GAAP financial measures exclude the impact of certain charges or benefits that contribute to or reduce earnings and that may affect financial trends and include certain charges or benefits that result from transactions or events that we believe may or may not recur with similar materiality or impact to our operations in future periods (Non-GAAP Adjustments).
In the event there is a Non-GAAP Adjustment recognized in our operating results, the tax cost or benefit attributable to that item is separately calculated and reported. Because the effective rate can be significantly impacted by the Non-GAAP Adjustments that take place during the period, we often refer to our tax rate using both the effective rate and the non-GAAP nominal tax rate (Non-GAAP Nominal Tax Rate). The Non-GAAP Nominal Tax Rate is calculated as the income tax provision, adjusted for the impact of Non-GAAP Adjustments, as a percentage of income before income taxes, excluding Non-GAAP Adjustments.
Free cash flow is a non-GAAP financial measure calculated by subtracting property, plant, and equipment additions from operating cash flows.
Refer to the “GAAP to Non-GAAP Reconciliations," "Income Taxes," and "Free Cash Flow" sections for reconciliations of the non-GAAP financial measures to their most directly comparable financial measures prepared in accordance with U.S. GAAP.
EXECUTIVE LEVEL OVERVIEW
Medtronic is the leading global healthcare technology company — alleviating pain, restoring health, and extending life for millions of people around the world. Our primary products include those for cardiac rhythm disorders, cardiovascular disease, advanced and general surgical care, respiratory and monitoring solutions, renal care, neurological disorders, spinal conditions and musculoskeletal trauma, urological and digestive disorders, and ear, nose, and throat, and diabetes conditions.
The global healthcare system is continuing to respond to the challenges posed by the COVID-19 pandemic ("COVID-19" or the "pandemic"), including the impact on China and Japan in the third quarter of fiscal year 2023. Several of our businesses continued to be affected by the pandemic, including the impacts of healthcare system staffing shortages on procedural volumes, and, in the first quarter of fiscal year 2023, the COVID-19 lockdowns in China, which continued through the end of May. In addition to the impacts of the pandemic, certain businesses continue to be impacted by supply chain disruptions that began during the fourth quarter of fiscal year 2022. We cannot predict with confidence the duration and severity of the pandemic and its impact on global procedure volumes. We expect medical procedure rates may continue to vary by therapy and country and to be impacted by regional COVID-19 case volumes, vaccine and booster immunization rates, and new COVID-19 variants. Additionally, we cannot predict the impact further healthcare system staffing shortages will have on procedural volumes, and the impact certain supply chain disruptions will have on the business.
32


The following is a summary of revenue and diluted earnings per share for the three months ended January 27, 2023 and January 28, 2022, and operating cash flow for the nine months ended January 27, 2023 and January 28, 2022:
mdt-20230127_g2.jpg


33


GAAP to Non-GAAP Reconciliations
Starting with the quarter ended April 29, 2022, the Company no longer adjusts non-GAAP financial measures for certain license payments for, or acquisitions of, technology not approved by regulators due to recent industry guidance from the U.S. Securities and Exchange Commission. Historical non-GAAP financial measures presented in this quarterly report have been recast for comparability.
The tables below present our GAAP to Non-GAAP reconciliations for the three months ended January 27, 2023 and January 28, 2022:
 Three months ended January 27, 2023
(in millions, except per share data)Income Before Income TaxesIncome
Tax Provision
(Benefit)
Net Income Attributable to Medtronic
Diluted EPS
Effective
Tax Rate
GAAP$1,375 $146 $1,222 $0.92 10.6 %
Non-GAAP Adjustments:
Restructuring and associated costs (1)
104 21 83 0.06 20.2 
Acquisition-related items (2)
24 20 0.02 16.7 
(Gain)/loss on minority investments (3)
(8)— (8)(0.01)— 
Medical device regulations (4)
37 31 0.02 18.9 
Amortization of intangible assets431 65 367 0.28 15.1 
RCS impairments / costs (5)
10 0.01 10.0 
Certain tax adjustments, net
— (3)— — 
Non-GAAP$1,973 $239 $1,727 $1.30 12.1 %
 Three months ended January 28, 2022
(in millions, except per share data)Income Before Income TaxesIncome
Tax Provision (Benefit)
Net Income Attributable to Medtronic
Diluted EPS
Effective
Tax Rate
GAAP$1,589 $106 $1,480 $1.10 6.7 %
Non-GAAP Adjustments:
Restructuring and associated costs (1)
78 15 63 0.05 19.2 
Acquisition-related items (2)
(60)— (61)(0.04)— 
Certain litigation charges35 27 0.02 25.7 
(Gain)/loss on minority investments (3)
(1)— (50.0)
Medical device regulations (4)
25 20 0.01 20.0 
Amortization of intangible assets432 67 365 0.27 15.5 
Certain tax adjustments, net (6)
— 59 (59)(0.04)— 
Non-GAAP$2,101 $260 $1,838 $1.36 12.4 %
(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)The charges primarily include business combination costs and changes in fair value of contingent consideration.
(3)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 charges represent incremental costs of complying with the new European Union (E.U.) medical device regulations for previously registered products and primarily include charges for contractors supporting the project and other direct third-party expenses. We consider these costs to be duplicative of previously incurred costs and/or one-time costs, which are limited to a specific time period.
(5)Associated costs as a result of the anticipated sale of half of the Company's Renal Care Solutions (RCS) business related to the May 25, 2022 agreement with DaVita Inc.
(6)The tax benefit primarily relates to the deferred tax impact associated with a step up in tax basis for Swiss Cantonal purposes which is partially offset by the amortization on previously established deferred tax assets from intercompany intellectual property transactions.
34


The tables below present our GAAP to Non-GAAP reconciliations for the nine months ended January 27, 2023 and January 28, 2022:
 Nine months ended January 27, 2023
(in millions, except per share data)Income Before Income TaxesIncome
Tax Provision
(Benefit)
Net Income Attributable to Medtronic
Diluted EPS
Effective
Tax Rate
GAAP$3,813 $1,218 $2,579 $1.94 31.9 %
Non-GAAP Adjustments:
Restructuring and associated costs (1)
275 55 219 0.16 20.0 
Acquisition-related items (2)
61 18 43 0.03 29.5 
(Gain)/loss on minority investments (3)
(23)— (23)(0.02)— 
Medical device regulations (4)
107 20 87 0.07 18.7 
Amortization of intangible assets1,275 194 1,082 0.81 15.2 
RCS impairments / costs (5)
109 106 0.08 2.8 
Debt redemption premium and other charges (6)
53 11 42 0.03 20.8 
Exit of business (7)
37 — 37 0.03 — 
Certain tax adjustments, net (8)
— (783)783 0.59 — 
Non-GAAP$5,706 $736 $4,953 $3.72 12.9 %
 Nine months ended January 28, 2022
(in millions, except per share data)Income Before Income TaxesIncome
Tax Provision (Benefit)
Net Income Attributable to Medtronic
Diluted EPS
Effective
Tax Rate
GAAP$3,915 $346 $3,554 $2.63 8.8 %
Non-GAAP Adjustments:
Restructuring and associated costs (1)
237 46 191 0.14 19.4 
Acquisition-related items (2)
(54)(57)(0.04)(5.6)
Certain litigation charges95 17 78 0.06 17.9 
(Gain)/loss on minority investments (3)
(23)(1)(19)(0.01)4.3 
Medical device regulations (4)
70 14 56 0.04 20.0 
Amortization of intangible assets1,298 205 1,093 0.81 15.8 
MCS impairment / costs (9)
726 162 564 0.42 22.3 
Certain tax adjustments, net (10)
— (10)10 0.01 — 
Non-GAAP$6,264 $782 $5,470 $4.04 12.5 %
(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)The charges primarily include business combination costs and changes in fair value of contingent consideration.
(3)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 charges represent incremental costs of complying with the new European Union (E.U.) medical device regulations for previously registered products and primarily include charges for contractors supporting the project and other direct third-party expenses. We consider these costs to be duplicative of previously incurred costs and/or one-time costs, which are limited to a specific time period.
(5)The charges predominantly include non-cash pre-tax impairments, primarily related to goodwill, and other associated costs, as a result of the anticipated sale of half of the Company's Renal Care Solutions (RCS) business related to the May 25, 2022 agreement with DaVita Inc.
(6)The charges relate to the early redemption of approximately $2.3 billion of debt and were recorded within interest expense, net within the consolidated statements of income.
(7)The charges relate to the exit of a business and are primarily comprised of inventory write-downs.
(8)The charge primarily relates to a $764 million reserve adjustment that was a direct result of the U.S. Tax Court opinion, issued on August 18, 2022, on the previously disclosed litigation regarding the allocation of income between Medtronic, Inc. and its wholly owned subsidiary operating in Puerto Rico.
(9)The charges relate to the Company’s June 2021 decision to stop the distribution and sale of the Medtronic HVAD System within the Mechanical Circulatory Support Operating Unit (MCS). The charges included $515 million of non-cash impairments, primarily related to $409 million of intangible asset impairments, as well as $211 million for commitments and obligations in connection with the decision, including customer support
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obligations, restructuring, and other associated costs. Medtronic is committed to serving the needs of patients currently implanted with the HVAD System.
(10)The charge primarily relates to the amortization on previously established deferred tax assets from intercompany intellectual property transactions and a charge related to a change in the Company's permanent reinvestment assertion on certain historical earnings, which are partially offset by the deferred tax impact associated with a step up in tax basis for Swiss Cantonal purposes.
Free Cash Flow
Free cash flow, a non-GAAP financial measure, is calculated by subtracting additions to property, plant, and equipment from net cash provided by operating activities. Management uses this non-GAAP financial measure, in addition to U.S. GAAP financial measures, to evaluate our operating results. Free cash flow should be considered supplemental to, and not a substitute for, our reported financial results prepared in accordance with U.S. GAAP. Reconciliations between net cash provided by operating activities (the most comparable U.S. GAAP measure) and free cash flow are as follows:
Nine months ended
(in millions)January 27, 2023January 28, 2022
Net cash provided by operating activities$3,579$5,289
Additions to property, plant, and equipment(1,081)(979)
Free cash flow$2,498$4,310
Refer to the Summary of Cash Flows section for drivers of the change in cash provided by operating activities.
NET SALES
Segment and Division
The charts below illustrate the percent of net sales by segment for the three months ended January 27, 2023 and January 28, 2022:
mdt-20230127_g3.jpgmdt-20230127_g4.jpg
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The table below illustrates net sales by segment and division for the three and nine months ended January 27, 2023 and January 28, 2022:
 
Three months ended
 Nine months ended
(in millions)January 27, 2023January 28, 2022% ChangeJanuary 27, 2023January 28, 2022% Change
Cardiac Rhythm & Heart Failure $1,431 $1,402 %$4,255 $4,356 (2)%
Structural Heart & Aortic760 740 2,259 2,277 (1)
Coronary & Peripheral Vascular 581 603 (4)1,744 1,829 (5)
Cardiovascular 2,772 2,745 8,257 8,462 (2)
Surgical Innovations1,425 1,519 (6)4,162 4,570 (9)
Respiratory, Gastrointestinal, & Renal712 771 (8)2,047 2,341 (13)
Medical Surgical 2,137 2,290 (7)6,208 6,910 (10)
Cranial & Spinal Technologies1,128 1,102 3,253 3,292 (1)
Specialty Therapies699 633 10 2,052 1,908 
Neuromodulation420 409 1,244 1,285 (3)
Neuroscience 2,248 2,144 6,549 6,484 
Diabetes 570 584 (2)1,667 1,741 (4)
Total$7,727 $7,763 (1)%$22,682 $23,597 (4)%
Segment and Market Geography
The charts below illustrate the percent of net sales by market geography for the three months ended January 27, 2023 and January 28, 2022:

mdt-20230127_g5.jpgmdt-20230127_g6.jpg
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The table below includes net sales by market geography for each of our segments for the three and nine months ended January 27, 2023 and January 28, 2022:
 
U.S.(1)
Non-U.S. Developed Markets(2)
Emerging Markets(3)
Three months endedThree months endedThree months ended
(in millions)January 27, 2023January 28, 2022% ChangeJanuary 27, 2023January 28, 2022% ChangeJanuary 27, 2023January 28, 2022% Change
Cardiovascular $1,375 $1,297 %$859 $935 (8)%$538 $513 %
Medical Surgical965 990 (3)760 812 (6)412 488 (16)
Neuroscience1,507 1,397 401 431 (7)341 316 
Diabetes 215 255 (16)274 261 80 68 18 
Total$4,062 $3,939 %$2,294 $2,438 (6)%$1,371 $1,385 (1)%
 
U.S.(1)
Non-U.S. Developed Markets(2)
Emerging Markets(3)
Nine months endedNine months endedNine months ended
(in millions)January 27, 2023January 28, 2022% ChangeJanuary 27, 2023January 28, 2022% ChangeJanuary 27, 2023January 28, 2022% Change
Cardiovascular$4,097 $4,090 — %$2,553 $2,886 (12)%$1,607 $1,486 %
Medical Surgical2,713 2,950 (8)2,246 2,521 (11)1,250 1,439 (13)
Neuroscience4,437 4,237 1,189 1,330 (11)923 918 
Diabetes650 760 (14)792 780 226 201 12 
Total$11,897 $12,038 (1)%$6,779 $7,517 (10)%$4,006 $4,043 (1)%
(1)U.S. includes the United States and U.S. territories.
(2)Non-U.S. developed markets include Japan, Australia, New Zealand, Korea, Canada, and the countries within Western Europe.
(3)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 defined above.
The decline in net sales for three and nine months ended January 27, 2023, as compared to the corresponding period in the prior fiscal year, was driven primarily by unfavorable currency impact, sales in China due to volume-based procurement tenders and the impact of COVID-19 resurgence, as well as supply chain challenges in certain businesses, particularly in the first quarter of fiscal year 2023. For the three months ended January 27, 2023, currency had an unfavorable impact on emerging markets and non-U.S. developed markets of $89 million and $290 million, respectively. For the nine months ended January 27, 2023, currency had an unfavorable impact on emerging markets and non-U.S. developed markets of $190 million and $995 million, respectively. The decline in net sales for the three and nine months ended January 27, 2023 was partially offset by growth in certain product lines and businesses, including Micra, Transcatheter Aortic Valve replacements (TAVR), Core Spine in the U.S., and Diabetes in international markets.
Looking ahead, a number of macro-economic and geopolitical factors could negatively impact our business, including without limitation:
Competitive product launches and pricing pressure, geographic macro-economic risks including fluctuations in currency exchange rates, general price inflation, rising interest rates, reimbursement challenges, impacts from changes in the mix of our product offerings, delays in product registration approvals, and replacement cycle challenges;
National and provincial tender pricing for certain products, particularly in China;
The uncertain and uneven impact of COVID-19 on future procedural volumes, supply constraints including certain electronic components and semiconductors, healthcare staffing in certain regions, and resulting impacts on demand for our products and therapies; and
The potential impact that sanctions and other measures being imposed in response to the Russia-Ukraine conflict could have on revenue and supply chain. The financial impact of the conflict in the third quarter of fiscal year 2023, including on accounts receivable and inventory reserves, was not material, and for the three and nine months ended January 27, 2023, the business of the Company in these countries represented less than 1% of the Company's consolidated revenues and assets. Although the implications of this conflict are difficult to predict at this time, the ongoing conflict may increase pressure on the global economy and supply chains, resulting in increased future volatility risk for our business operations and performance.
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Cardiovascular
Cardiovascular products include pacemakers, insertable cardiac monitors, cardiac resynchronization therapy devices, implantable cardioverter defibrillators (ICD), leads and delivery systems, electrophysiology catheters, products for the treatment of atrial fibrillation, information systems for the management of patients with Cardiac Rhythm & Heart Failure devices, products designed to reduce surgical site infections, coronary and peripheral stents and related delivery systems, balloons and related delivery systems, endovascular stent graft systems, heart valve replacement technologies, cardiac tissue ablation systems, and open heart and coronary bypass grafting surgical products. Cardiovascular also includes Care Management Services and Cath Lab Managed Services (CLMS) within the Cardiac Rhythm & Heart Failure division. Cardiovascular's net sales for the three and nine months ended January 27, 2023 were $2.8 billion and $8.3 billion, respectively, an increase of 1 percent and decrease of 2 percent, respectively, compared to the corresponding periods in the prior fiscal year. Currency had an unfavorable impact of $152 million and $467 million on net sales for the three and nine months ended January 27, 2023. The net sales increase for the three months ended January 27, 2023 was primarily due to strong performance of Micra, TAVR and Diagnostics, partially offset by unfavorable currency impact. The net sales decrease for the nine months ended January 27, 2023 was primarily driven by unfavorable currency impact and supply chain challenges in certain businesses.

The graphs below illustrate the percent of Cardiovascular net sales by division for the three months ended January 27, 2023 and January 28, 2022:

mdt-20230127_g7.jpgmdt-20230127_g8.jpg
Cardiac Rhythm & Heart Failure (CRHF) net sales for the three and nine months ended January 27, 2023 increased 2 percent and decreased 2 percent, respectively, as compared to the corresponding periods in the prior fiscal year. For the three months ended January 27, 2023 the net sales increase was driven by continued adoption of Micra AV, TYRX antibacterial envelopes, LINQ II implants, and growth from Arctic Front cryoablation catheters in the U.S. The net sales declines for the nine months ended January 27, 2023 were driven by unfavorable currency partially offset by increases from continued adoption of Micra AV, TYRX antibacterial envelopes, and LINQ II implants. Additionally, Cardiac Ablation Solutions net sales for the nine months ended January 27, 2023 were negatively impacted by competitive pressures in Western Europe, as well as the pending volume-based procurement (VBP) in China.

Structural Heart & Aortic (SHA) net sales for the three and nine months ended January 27, 2023 increased 3 percent and decreased 1 percent, respectively, as compared to the corresponding periods in the prior fiscal year. The net sales for the three and nine months ended January 27, 2023 were driven by growth in transcatheter aortic valve replacement (TAVR), including the U.S. launch of Evolut FX TAVR system. Net sales for the nine months ended January 27, 2023 were negatively impacted by a field corrective action with the Harmony Transcatheter Pulmonary Valve and Delivery Catheter System, currency impacts, staffing shortages, and supply shortages of contrast.

Coronary & Peripheral Vascular (CPV) net sales for the three and nine months ended January 27, 2023 decreased 4 percent and 5 percent, respectively, as compared to the corresponding periods in the prior fiscal year. The net sales declines were driven by unfavorable currency, partially offset by strong demand combined with improved product availability of the SpiderFX embolic protection device (EPD) and strong
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performance of our superficial venous product portfolio, including the VenaSeal system. Net sales for the nine months ended January 27, 2023 were also impacted by market procedural volumes in Coronary remaining below pre-COVID levels in several major markets, headwinds related to U.S. hospital contrast shortages early in the first quarter of fiscal year 2023, and declines in Peripheral Vascular Health due to competitors re-entering the market and supply chain challenges.
In addition to the macro-economic and geopolitical factors described in the Executive Level Overview, looking ahead, we expect Cardiovascular could be affected by the following:
Continued growth of our Micra transcatheter pacing system. Micra AV launched in Japan in November 2021 and China in August 2022. Micra AV expands the Micra target population from 15 percent to 45 percent of pacemaker patients.
Continued acceptance and growth from the Azure XT and S SureScan pacing systems and the 3830 lead. Azure pacemakers feature Medtronic-exclusive BlueSync technology, which enables automatic, secure wireless remote monitoring with increased device longevity. The 3830 lead, previously labeled for His-bundle pacing, has now been expanded to include left bundle branch area pacing.
Growth of the Cobalt and Crome portfolio of ICDs and CRT-Ds.
Growth of the CRT-P quadripolar pacing system.
Continued growth, adoption, and utilization of the TYRX Envelope for implantable devices.
Continued acceptance and expansion of the LINQ II cardiac monitor. During the third quarter of fiscal year 2022, we launched two AccuRhythm AI algorithms on the LINQ II platform to significantly reduce false positive alerts for Atrial Fibrillation and pause episodes while retaining sensitivity for true positive detection and reduce clinic workload and burden. AccuRhythm AI launched in Europe during the first quarter of fiscal year 2023.
Continued growth of Arctic Front cryoablation for treatment of atrial fibrillation.
Continued acceptance and growth of the self-expanding CoreValve Evolut transcatheter aortic valve replacement platform. This includes Evolut PRO which provides enhanced hemodynamics, reliable delivery, enhanced durability, advanced sealing, and Evolut FX, a system designed to improve the overall procedural experience through enhancements in deliverability, implant visibility, and deployment stability.
Continued expansion and training of field support to increase coverage in the U.S. centers performing TAVR procedures.
Continued acceptance and growth of the Onyx Frontier DES platform. The platform launched in the U.S. in the first quarter of fiscal year 2023 and in select international countries in the second quarter of fiscal year 2023. Onyx Frontier is a drug-eluding stent (DES) that introduces an enhanced delivery system and is used for complex percutaneous coronary intervention (PCI).
Continued acceptance and growth from the VenaSeal Closure System in the U.S. The VenaSeal Closure System is a unique non-thermal solution to address superficial venous disease that provides improved patient comfort, reduces the recovery time, and eliminates the risk of thermal nerve injury.
Acceptance and growth of IN.PACT 018 drug-coated balloons (DCB). The product was launched under limited market release in the first quarter of fiscal year 2023 with full market release in the third quarter of fiscal year 2023. IN.PACT 018 is used in endovascular therapies to treat femoropopliteal disease.
Pressure from competitors re-entering the market contributing to the decline in sales of the Abre venous self-expanding stent system. Abre is designed for the unique challenges of venous disease. It offers easy deployment and delivers demonstrated endurance, to give patients freedom of movement.
Strengthening our position in the cardiac ablation technologies market as a result of the August 2022 acquisition of Affera, Inc. The acquisition expands the Cardiovascular segment portfolio of advanced cardiac ablation products and accessories to include its first cardiac mapping and navigation platform to meet physician needs within a growing patient population.
Our ability to successfully develop, obtain regulatory approval of and commercialize the products within our pipeline, which include, but not limited to, the Symplicity Spyral Multi-Electrode Renal Denervation Catheter, Pulse Field Ablation, a novel energy source that is non-thermal and Aurora Extravascular ICD.
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Medical Surgical
Medical Surgical’s products span the entire continuum of patient care from diagnosis to recovery, with a focus on diseases of the gastrointestinal tract, lungs, pelvic region, kidneys, obesity, and preventable complications. The products include those for advanced and general surgical products, surgical stapling devices, vessel sealing instruments, wound closure, electrosurgery products, hernia mechanical devices, mesh implants, advanced ablation, interventional lung, ventilators, airway products, renal care products, and sensors and monitors for pulse oximetry, capnography, level of consciousness and cerebral oximetry. Medical Surgical's net sales for the three and nine months ended January 27, 2023 were $2.1 billion and $6.2 billion, respectively, a decrease of 7 percent and 10 percent, respectively, compared to the corresponding periods in the prior fiscal year. Currency had an unfavorable impact of $117 million and $380 million on net sales for the three and nine months ended January 27, 2023, respectively. The net sales decrease for both periods was primarily driven by unfavorable currency impact, provincial volume-based procurement (VBP) stapling tenders in China, and a decline in ventilator sales due to the high COVID-19 demand in the corresponding period in the prior fiscal year. Supply chain disruptions, particularly in Surgical Innovations, also contributed to the net sales decrease for the nine months ended January 27, 2023.
The graphs below illustrate the percent of Medical Surgical net sales by division for the three months ended January 27, 2023 and January 28, 2022:
mdt-20230127_g9.jpgmdt-20230127_g10.jpg
Surgical Innovations (SI) net sales for the three and nine months ended January 27, 2023 decreased 6 percent and 9 percent, respectively, as compared to the corresponding periods in the prior fiscal year. The decrease for the three months ended January 27, 2023 was predominantly attributable to declines in Advanced Stapling primarily driven by provincial VBP stapling tenders in China. The decrease for the nine months ended January 27, 2023 was led by Advanced Surgical Instruments, driven by global supply chain challenges, including resins, semiconductors, and packaging trays, which impacted energy and stapling products, and provincial VBP stapling tenders and COVID-19 lockdowns in China. Global product availability has improved during the most recent quarter.
Respiratory, Gastrointestinal, & Renal (RGR) net sales for the three and nine months ended January 27, 2023 decreased 8 percent and 13 percent, respectively, as compared to the corresponding periods in the prior fiscal year. The decrease for three and nine months ended January 27, 2023 was largely due to declines in ventilator demand when compared to the corresponding period in the prior fiscal year as demand dropped below pre-pandemic levels, as well as declines in RCS driven by product availability challenges. These declines were partially offset by growth in Gastrointestinal driven by strength in sales of GI Genius.
In addition to the macro-economic and geopolitical factors described in the Executive Level Overview, looking ahead we expect Medical Surgical could be affected by the following:
The pending separation of the combined Patient Monitoring and Respiratory Interventions businesses from the Medical Surgical Portfolio. The Company announced its intention to pursue a separation in October 2022 and expects to complete the separation 12 to 18 months from the announcement date.
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The pending contribution of our Renal Care Solutions business as a result of the May 25, 2022 definitive agreement with DaVita Inc.
Acceptance and continued growth of Open-to-MIS (minimally invasive surgery) techniques and tools through our efforts to transition open surgery to MIS. Open-to-MIS initiative focuses on capturing the market opportunity that exists in transitioning open procedures to MIS, whether through traditional MIS, advanced instrumentation, or robotics. Through our approach, in parallel, we also expand our presence and optimize open surgery in current open surgery markets.
Continued global acceptance and future growth of powered stapling and energy platform.
Our ability to execute ongoing strategies addressing the competitive pressure of reprocessing vessel sealing disposables and growth of our surgical soft tissue robotics procedures in the U.S.
Our ability to create markets and drive products and procedures into emerging markets with our high quality and cost-effective surgical products designed for customers in emerging markets. An example is our ValleyLab LS10 single channel vessel sealing generator, which is compatible with our line of LigaSure instruments and designed for simplified use and affordability.
Acceptance of less invasive standards of care in gastrointestinal and hepatology products, including products that span the care continuum from diagnostics to therapeutics. Recently launched products include GI Genius and PillCam capsule endoscopy.
Expanding the use of less invasive treatments and furthering our commitment to improving options for women with abnormal uterine bleeding. Our expanded and strengthened surgical offerings complement our global gynecology business.
Global adoption of robotic-assisted surgery and installations of Hugo robotic assisted surgery (RAS) system for urologic, bariatric, gynecologic, and general surgery procedures. This includes continued integration and adoption of Touch Surgery Enterprise with the first artificial intelligence powered surgical videos and analytics platform to make it easier to train and discover new techniques within the robotics platform. The Hugo RAS system, which received CE Mark in October 2021, as well as secured additional regulatory approvals outside the U.S., is designed to help reduce unwanted variability, improve patient outcomes, and, by extension, lower per procedure cost.
Our ability to successfully develop, obtain regulatory approval of and commercialize the products within our pipeline, which include, but are not limited to, our Hugo RAS system in the U.S., Signia power stapling devices, and our Ligasure and Sonicision vessel sealing devices.
Neuroscience
Neuroscience's products include various spinal implants, bone graft substitutes, biologic products, image-guided surgery and intra-operative imaging systems, robotic guidance systems used in robot-assisted spine procedures, and systems that incorporate advanced energy surgical instruments. Neuroscience's products also focus on the treatment of overactive bladder, urinary retention, fecal incontinence, as well as products to treat ear, nose, and throat (ENT), and therapies to treat the diseases of the vasculature in and around the brain, including coils, neurovascular stents and flow diversion products. Neuroscience also manufactures products related to implantable neurostimulation therapies and drug delivery systems for the treatment of chronic pain, movement disorders, and epilepsy. Neuroscience’s net sales for the three and nine months ended January 27, 2023 were $2.2 billion and $6.5 billion, respectively, an increase of 5 percent and 1 percent, respectively, compared to the corresponding periods in the prior fiscal year. Currency had an unfavorable impact of $78 million and $227 million on net sales for the three and nine months ended January 27, 2023, respectively. The net sales increase for the three and nine months ended January 27, 2023, was primarily due to growth in U.S. Core Spine, Neurovascular, ENT, and continued supply risk mitigation, partially offset by unfavorable currency impact and supply chain challenges in certain businesses.
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The graphs below illustrate the percent of Neuroscience net sales by division for the three months ended January 27, 2023 and January 28, 2022:
mdt-20230127_g11.jpgmdt-20230127_g12.jpg
Cranial and Spinal Technologies (CST) net sales for the three and nine months ended January 27, 2023 increased 2 percent and decreased 1 percent, respectively, as compared to the corresponding periods in the prior fiscal year. For the three months ended January 27, 2023, the growth was driven by increased sales of Core Spine products in the U.S. including the Aible ecosystem of spine products, with a partial offset due to supply constraints within Biologics. The net sales increase was also attributable to strong sales of StealthStation Navigation and Midas Rex powered surgical instruments. For the nine months ended January 27, 2023, the net sales decrease was driven by unfavorable currency impact and Biologics, which experienced supply chain challenges.
Specialty Therapies (Specialty) net sales for the three and nine months ended January 27, 2023 increased 10 percent and 8 percent, respectively, as compared to the corresponding periods in the prior fiscal year. The increase for both periods was driven by growth in hemorrhagic and ischemic stroke, flow diversion and access delivery products. The net sales increase was also driven by benefits from the recent May 2022 acquisition of Intersect ENT. For the nine months ended January 27, 2023, the growth in ENT was partially offset by supply chain disruption in disposables.
Neuromodulation (NM) net sales for the three and nine months ended January 27, 2023 increased 3 percent and decreased 3 percent, respectively, as compared to the corresponding periods in the prior fiscal year. For the three months ended January 27, 2023, the net sales increase was driven by growth within Pain Stim and, to a lesser extent, Targeted Drug Delivery. For the nine months ended January 27, 2023, declines were largely due to declines of Brain Modulation replacement devices and supply chain challenges in Interventional which has recently seen improvements in product availability.
In addition to the macro-economic and geopolitical factors described in the Executive Level Overview, looking ahead we expect Neuroscience could be affected by the following:
Continued adoption and growth of our integrated solutions through the Aible offering, which integrates spinal implants with enabling technologies (StealthStation, O-arm Imaging Systems, and Midas), Mazor robotics, and AI-driven technology acquired from Medicrea for surgical planning and personalized spinal implants.
Market acceptance and continued global adoption of innovative new spine products and procedural solutions within our CST operating unit, such as our Infinity OCT System and Prestige LP cervical disc system, as well as continued growth from spine titanium interbody implants.
Continued acceptance and growth of our ENT and Pelvic Health therapies, including our InterStim therapy with InterStim X, InterStim II, and InterStim Micro and neurostimulators for the treatment of the symptoms of overactive bladder, urinary retention, and bowel incontinence, and capital equipment sales of the Stealth Station ENT surgical navigation system and intraoperative NIM nerve monitoring system.
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Strengthening our position in the ENT market as a result of the May 2022 acquisition of Intersect ENT, a global ENT medical technology leader. The acquisition expands Neuroscience's portfolio of products used during ENT procedures and combined with the Company's navigation, powered instruments, and existing tissue health products, offers a broader suite of solutions to assist surgeons treating patients who suffer from chronic rhinosinusitis (CRS).
Continued acceptance and growth of the Solitaire FR revascularization device for treatment of acute ischemic stroke and our React Catheter and Riptide aspiration system.
Continued growth of Pipeline Embolization Devices, endovascular treatments for large or giant wide-necked brain aneurysms.
Market acceptance and continued global adoption of our Intellis spinal cord stimulator and DTM proprietary waveform to treat chronic pain in major markets around the world.
Continued acceptance and growth of our Percept PC DBS device with BrainSense technology, including its treatment of Parkinson's Disease, epilepsy, and other movement disorders.
Market acceptance and growth from SCS therapy for treating Diabetic Peripheral Neuropathy (DPN) on Intellis rechargeable neurostimulator and Vanta recharge-free neurostimulator which received U.S. FDA approval in January 2022.
Ongoing obligations under the U.S. FDA consent decree entered in April 2015 relating to the SynchroMed drug infusion system and the Neuromodulation quality system. The U.S. FDA lifted its distribution requirements on our implantable drug pump in October 2017 and its warning letter in November 2017.
Our ability to successfully develop, obtain regulatory approval of and commercialize the products within our pipeline, which include our closed-loop Percept RC device with adaptive DBS (aDBS) and Inceptiv Neurostimulator, as well as our hemorrhagic stroke intravascular device, and our next-generation spine enabling technologies.
Diabetes
Diabetes' products include insulin pumps, continuous glucose monitoring (CGM) systems, consumables, and smart insulin pen systems. Diabetes' net sales for the three and nine months ended January 27, 2023 were $570 million and $1.7 billion, a decrease of 2 percent and 4 percent, respectively, as compared to the corresponding periods in the prior fiscal year. Currency had an unfavorable impact of $33 million and $113 million on net sales for the three and nine months ended January 27, 2023, respectively. The decrease in net sales for both periods was primarily driven by unfavorable currency impacts and declines in the U.S. The net sales declines were partially offset by strong international growth primarily driven by the continued international expansion of the MiniMed 780G insulin pump system and integrated CGM.
In addition to the macro-economic and geopolitical factors described in the Executive Level Overview, looking ahead we expect Diabetes could be affected by the following:
Continued patient demand for the MiniMed 770G insulin pump system, which is powered by SmartGuard technology and features the added benefits of smartphone connectivity and an expanded age indication to children as young as age two.
Continued acceptance and growth internationally for the MiniMed 780G insulin pump system. The global adoption of sensor-augmented insulin pump systems has resulted in strong sensor attachment rates.
Continued acceptance and growth of the Guardian Connect CGM system, which displays glucose information directly to a smartphone to help ensure patients have access to their glucose levels seamlessly and discretely. The Guardian Connect CGM system is available on both Apple iOS and Android devices.
Market acceptance and growth of our InPen smart pen system, which allows users to have their Medtronic CGM readings in real-time alongside insulin dose information, all in one view.
Continued pump, CGM, and consumable competition in an expanding global market.
Changes in medical reimbursement policies and programs, along with additional payor coverage on insulin pumps.
Resolution of findings contained in a December 2021 U.S. FDA warning letter relating to the MiniMed 600 series insulin pump and a remote controller device for MiniMed 508 and Paradigm pumps. We are currently working with the U.S. FDA to resolve the findings. The existence of the warning letter may limit our ability to launch certain new Diabetes products in the U.S. prior to resolution of the findings.
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Our ability to successfully develop, obtain regulatory approval of and commercialize the products within our pipeline, which include, but are not limited to, our MiniMed 780G insulin pump, the Guardian 4 sensor, and our next-generation sensor Simplera, which have been submitted to the U.S. FDA.
COSTS AND EXPENSES
The following is a summary of cost of products sold, research and development, and selling, general, and administrative expenses as a percent of net sales for the three and nine months ended January 27, 2023 and January 28, 2022:
mdt-20230127_g13.jpg
Cost of Products Sold We continue to focus on reducing our costs of production through supplier management, manufacturing improvements, and optimizing our manufacturing network. Cost of products sold for the three and nine months ended January 27, 2023 was $2.7 billion and $7.7 billion, respectively, as compared to $2.5 billion and $7.6 billion for the corresponding periods in the prior fiscal year. The increase in cost of products sold as a percentage of net sales was primarily attributable to increased labor and direct material manufacturing costs, predominantly due to inflationary pressures and supply chain challenges as well as increased freight due to higher fuel costs and expedited shipments for backorders resulting from supply chain challenges. The nine months ended January 28, 2022 included $58 million of inventory write-downs associated with our June 2021 decision to stop the distribution and sale of Medtronic's HVAD System (MCS charges). Looking forward, our cost of products sold likely will be further negatively impacted by inflation, supply chain challenges, and higher labor and direct material costs.
Research and Development Expense We remain committed to deliver the best possible experiences for patients, physicians, and caregivers we serve; to create technologies that expand what’s possible across the entire human body to transform lives; to turn data and insights into real action to serve patient needs to improve care; and to expand healthcare access and deliver positive outcomes. Research and development expense for the three and nine months ended January 27, 2023 was $688 million and $2.1 billion, respectively, as compared to $668 million and $2.1 billion for the corresponding periods in the prior fiscal year. The nine months ended January 28, 2022 included $101 million of acquisitions of, and license payments for, technology not yet approved by regulators, primarily in our Diabetes segment.
Selling, General, and Administrative Expense Our goal is to continue to leverage selling, general, and administrative expense initiatives. Selling, general, and administrative expense primarily consists of salaries and wages, other administrative costs, such as professional fees and marketing expenses, and certain acquisition and restructuring expenses. Selling, general, and administrative expense for the three and nine months ended January 27, 2023 was $2.6 billion and $7.8 billion, respectively as compared to $2.6 billion and $7.7 billion for the corresponding periods in the prior fiscal year. The increase in selling, general, and administrative expense as a percentage of net sales was primarily driven by increased sales incentives, employee travel as compared to the corresponding period in the prior fiscal year when travel was limited, and to a lesser extent by net sales declines.
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The following is a summary of other costs and expenses (income):
Three months endedNine months ended
(in millions)January 27, 2023January 28, 2022January 27, 2023January 28, 2022
Amortization of intangible assets$431 $432 $1,275 $1,298 
Restructuring charges, net38 12 81 32 
Certain litigation charges, net— 35 — 95 
Other operating (income) expense, net(125)(63)(187)719 
Other non-operating income, net(149)(67)(342)(244)
Interest expense, net167 137 449 410 
Amortization of Intangible Assets Amortization of intangible assets includes the amortization expense of our definite-lived intangible assets, consisting of purchased patents, trademarks, tradenames, customer relationships, purchased technology, and other intangible assets.
Restructuring Charges, Net For the three and nine months ended January 27, 2023 and January 28, 2022, restructuring costs primarily related to Enterprise Excellence and Simplification restructuring programs, both of which the Company expects to be substantially completed by the end of this fiscal year. Further program details are described in Note 4 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended April 29, 2022. In total, the Company expects it will recognize charges of approximately $1.8 billion for Enterprise Excellence and approximately $450 million for Simplification. Charges recognized within restructuring charges, net primarily comprise of employee termination benefits for the referenced programs.
For additional information about our restructuring programs, refer to Note 5 to the current period's consolidated financial statements.
Certain Litigation Charges, Net We classify specified certain litigation charges and gains related to significant legal matters as certain litigation charges, net in the consolidated statements of income. For additional information, refer to Note 16 in the current period's consolidated financial statements.
Other Operating (Income) Expense, Net Other operating (income) expense, net primarily includes royalty income and expense, currency remeasurement and derivative gains and losses, Puerto Rico excise taxes, changes in the fair value of contingent consideration, MCS charges, RCS charges, impairment charges, and income from funded research and development arrangements.
For the three months ended January 27, 2023, the change in other operating (income) expense, net was primarily driven by the net currency impact of remeasurement expense and our hedging programs, which resulted in a net gain of $134 million as compared to a net gain of $42 million for the corresponding period in the prior year. The three months ended January 28, 2022 also included $81 million of income related to changes in the fair value of contingent consideration.
For the nine months ended January 27, 2023, the change in other operating (income) expense, net was primarily driven by MCS charges recorded during nine months ended January 28, 2022. The charges of $668 million primarily included $409 million of intangible asset impairments and $211 million for commitments and obligations, including customer support obligations, restructuring, and other associated costs. Additionally, the change was driven by the net currency impact of remeasurement expense and our hedging programs, which resulted in a net gain of $353 million combined for the nine months ended January 27, 2023 as compared to a net gain of $6 million for the corresponding period in the prior year. During the nine months ended January 27, 2023, the Company also recorded non-cash pre-tax charges of $81 million, primarily related to impairment of goodwill, as a result of the anticipated sale of half of the Company's RCS business, related to the May 25, 2022 agreement with DaVita Inc.
Other Non-Operating Income, Net Other non-operating income, net includes the non-service component of net periodic pension and postretirement benefit cost, investment gains and losses, and interest income.
For the three and nine months ended January 27, 2023, the increase in other non-operating income, net is primarily attributable to an increase in interest income, partially offset by reduced gains on our equity method and minority investment portfolios. Interest income was $118 million and $246 million for the three and nine months ended January 27, 2023, respectively, and $45 million and $134 million for the three and nine months ended January 28, 2022, respectively. Gains on equity method and minority investments were $7 million and $22 million for the three and nine months ended January 27, 2023, respectively, compared to a loss of $3 million and gain of $36 million for the three and nine months ended January 28, 2022, respectively.
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Interest Expense, Net Interest expense, net includes interest incurred on our outstanding borrowings, amortization of debt issuance costs and debt premiums or discounts, amortization of amounts excluded from the effectiveness assessment of certain net investment hedges, and charges recognized in connection with the early redemption of senior notes.
For the three and nine months ended January 27, 2023, the increase in interest expense, net was primarily due to the Company's outstanding commercial paper balance and the issuance of four tranches of Euro-denominated Senior Notes with an aggregate principal of €3.5 billion in September 2022. Additionally, for the nine months ended January 27, 2023, the increase is due to the $53 million charge incurred as a result of the early redemption of approximately $2.3 billion of senior notes, during the three months ended July 29, 2022. Partially offsetting the increase for the three and nine months was $26 million and $74 million, respectively, in after-tax unrealized gains representing amounts excluded from the effectiveness assessment of certain net investment hedges.
INCOME TAXES
Three months endedNine months ended
(in millions)January 27, 2023January 28, 2022January 27, 2023January 28, 2022
Income tax provision$146 $106 $1,218 $346 
Income before income taxes1,375 1,589 3,813 3,915 
Effective tax rate10.6 %6.7 %31.9 %8.8 %
Non-GAAP income tax provision$239 $260 $736 $782 
Non-GAAP income before income taxes1,973 2,101 5,706 6,264 
Non-GAAP Nominal Tax Rate12.1 %12.4 %12.9 %12.5 %
Difference between the effective tax rate and Non-GAAP Nominal Tax Rate1.5 %5.7 %(19.0)%3.7 %
On August 18, 2022, the U.S. Tax Court (Tax Court) issued its opinion on the previously disclosed litigation regarding the allocation of income between Medtronic, Inc. and its wholly-owned subsidiary operating in Puerto Rico for fiscal years 2005 and 2006 (Opinion). While the Opinion rejected the IRS’s position and the Tax Court determined the methodology advanced by Medtronic was appropriate for purposes of determining the intercompany royalty rate between Puerto Rico and the U.S., it determined that the royalty rate should be higher, thereby increasing income allocated to the U.S. and consequently subject to U.S. tax. This case relates only to fiscal years 2005 and 2006. The Opinion remains subject to finalization by the Tax Court and to appeal by either or both parties. We have assumed the Tax Court findings will be applied for all years following fiscal year 2006. As a result, the Company recorded a $764 million net tax charge during the three months ended October 28, 2022 to recognize the estimated tax impact of the Tax Court Opinion.
Our effective tax rate for the three and nine months ended January 27, 2023 was 10.6% and 31.9%, respectively, as compared to 6.7% and 8.8% for the three and nine months ended January 28, 2022, respectively. The increase in our effective tax rate for the three months ended January 27, 2023, as compared to the three months ended January 28, 2022, primarily relates to the deferred tax impact associated with a step up in tax basis for Swiss Cantonal purposes recorded during the three months ended January 28, 2022. The increase in our effective tax rate for the nine months ended January 27, 2023 as compared to the nine months ended January 28, 2022, primarily relates to the $764 million net tax charge referenced above, and the deferred tax impact associated with a step up in tax basis for Swiss Cantonal purposes recorded during the prior fiscal year.
Our Non-GAAP Nominal Tax Rate for the three and nine months ended January 27, 2023 was 12.1% and 12.9%, as compared to 12.4% and 12.5% for the three and nine months ended January 28, 2022, respectively. The change in our Non-GAAP Nominal Tax Rate was primarily due to year-over-year changes in operational results by jurisdiction, and the year-over-year decrease in stock based compensation benefits, which were offset by the benefits from the finalization of certain income tax returns and statute of limitation lapses. An increase in our Non-GAAP Nominal Tax Rate of 1 percent would result in an additional income tax provision for the three and nine months ended January 27, 2023 of approximately $20 million and $57 million, respectively.

LIQUIDITY AND CAPITAL RESOURCES
We are currently in a strong financial position, and we believe our balance sheet and liquidity as of January 27, 2023 provide us with flexibility, and our cash, cash equivalents, and current investments, along with our credit facility and related commercial paper programs will satisfy our foreseeable operating needs.
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Our liquidity and capital structure are evaluated regularly within the context of our annual operating and strategic planning processes. We consider the liquidity necessary to fund our operations, which includes working capital needs, investments in research and development, property, plant, and equipment, and other operating costs. We also consider capital allocation alternatives that balance returning value to shareholders through dividends and share repurchases, satisfying maturing debt, and acquiring businesses and technology.
Summary of Cash Flows
The following is a summary of cash provided by (used in) operating, investing, and financing activities, the effect of exchange rate changes on cash and cash equivalents, and the net change in cash and cash equivalents:
 Nine months ended
(in millions)January 27, 2023January 28, 2022
Cash provided by (used in):  
Operating activities$3,579 $5,289 
Investing activities(3,018)(1,930)
Financing activities(70)(3,387)
Effect of exchange rate changes on cash and cash equivalents317 (87)
Net change in cash and cash equivalents$808 $(114)
Operating Activities The $1.7 billion decrease in net cash provided was primarily driven by a decrease in cash collected from customers, an increase in cash paid for income taxes and an increase in spend on inventory. The decrease in net cash was partially offset by a decrease in cash paid to employees. The decrease in cash collected from customers was primarily related to timing of sales, slower collections and supply chain challenges, as compared to the corresponding period in the prior fiscal year. The increase in cash paid for income taxes in the nine months ended January 27, 2023, was due to estimated income tax payments including a cash deposit associated with the Tax Court Opinion, and the increase in spend for inventory was due to inflationary impacts to direct labor and material costs. Cash paid to employees decreased due to lower annual incentive plan payouts for prior year performance compared to the corresponding period in the prior fiscal year. For more information about the tax cash deposit paid, refer to Note 11 to the current period's consolidated financial statements.
Investing Activities The $1.1 billion increase in cash used was primarily attributable to an increase in cash paid for acquisitions of $1.8 billion, partially offset by a decrease in net purchases of investments of $704 million, as compared to the corresponding period in the prior fiscal year. For more information on the aforementioned acquisitions, refer to Note 4 to the current's period's consolidated financial statements.
Financing Activities There was a $3.3 billion decrease in net cash used during the nine months ended January 27, 2023, as compared to the corresponding period in the prior fiscal year. In the second quarter of fiscal year 2023, the Company issued four tranches of Euro-denominated Senior Notes of approximately $3.4 billion. The Company used a portion of the net proceeds to repay at maturity €750 million of Medtronic Luxco Senior Notes for $772 million of total consideration in December 2022. Additionally, the Company had $625 million of commercial paper that was issued and outstanding at the end of the current period. In the first quarter of fiscal year 2023, the Company issued short-term borrowings of approximately $2.3 billion under the Fiscal 2023 Loan Agreement and used the proceeds to fund the early redemption of senior notes for total consideration of $2.3 billion. For more information on the issuance and payment of the senior notes, commercial paper, and Term Loan and redemption of senior notes, refer to the Debt and Capital section.
Debt and Capital
Our capital structure consists of equity and interest-bearing debt. We primarily utilize unsecured senior debt obligations to meet our financing needs and, to a lesser extent, bank borrowings. From time to time, we may repurchase our outstanding debt obligations in the open market or through privately negotiated transactions.
Total debt at January 27, 2023 was $28.1 billion as compared to $24.1 billion at April 29, 2022. The increase in total debt was driven by issuance of Euro-denominated Senior Notes of $3.4 billion and commercial paper outstanding of $625 million, offset by fluctuations in exchange rates and repayment of Euro-denominated Senior Notes of $772 million.
In May 2022, we entered into a term loan agreement (Fiscal 2023 Loan Agreement) with Mizuho Bank, Ltd. for an aggregate principal amount of up to ¥300 billion with a term of 364 days. In May and June 2022, Medtronic Luxco borrowed an aggregate of ¥297 billion, or approximately $2.3 billion, of the term loan, under the Fiscal 2023 Loan Agreement. The Company used the net proceeds of the borrowings to fund the early redemption of $1.9 billion of Medtronic Inc. Senior Notes for $1.9 billion of total consideration, and $368 million of Medtronic Luxco Senior Notes for $376 million of total consideration. The Company recognized a total loss on debt extinguishment of $53 million in the quarter ended July 29, 2022, which primarily included cash premiums and accelerated amortization of deferred financing costs and debt discounts and premiums. The loss was recognized in interest expense, net in the consolidated statements of income.
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In September 2022, we issued four tranches of Euro-denominated Senior Notes with an aggregate principal of €3.5 billion, with maturities ranging from fiscal year 2026 to 2035, resulting in cash proceeds of approximately €3.5 billion, net of discounts and issuance costs. The Company used a portion of the net proceeds to repay at maturity €750 million of 0.000% Medtronic Luxco Senior Notes for $772 million of total consideration in December 2022. The Company intends to use the remaining proceeds to repay at maturity €1.5 billion of 0.375% Medtronic Luxco Senior Notes and €1.25 billion of 0.000% Medtronic Luxco Senior Notes in March 2023.

We repurchase our ordinary shares on occasion as part of our focus on returning value to our shareholders. In March 2019, the Company's Board of Directors authorized the repurchase of $6.0 billion of the Company's ordinary shares. There is no specific time period associated with these repurchase authorizations. During the nine months ended January 27, 2023, the Company repurchased a total of 5 million shares under this program at an average price of $93.24. At January 27, 2023, we had approximately $2.5 billion remaining under the share repurchase program authorized by our Board of Directors.
For more information on credit arrangements, refer to Note 7 to the current period's consolidated financial statements and Note 6 to the consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended April 29, 2022.
Liquidity
Our liquidity sources at January 27, 2023 included $4.5 billion of cash and cash equivalents and $6.6 billion of current investments. Additionally, we maintain commercial paper programs and a Credit Facility.
Our investments primarily include available-for-sale debt securities, including U.S. and non-U.S. government and agency securities, corporate debt securities, mortgage-backed securities, certificates of deposits, and other asset-backed securities. Refer to Note 6 to the current period's consolidated financial statements for additional information regarding fair value measurements.
We maintain multicurrency commercial paper programs for short-term financing, which allow us to issue unsecured commercial paper notes on a private placement basis up to a maximum aggregate amount outstanding at any time of $3.5 billion. At January 27, 2023 and April 29, 2022, we had $625 million and no commercial paper outstanding, respectively. The issuance of commercial paper reduces the amount of credit available under our existing line of credit, as explained below.
We also have a $3.5 billion five-year syndicated credit facility (Credit Facility), which expires in December 2027. At each anniversary date of the Credit Facility we can request a one-year extension of the maturity date. The Credit Facility provides backup funding for the commercial paper programs and may also be used for general corporate purposes. The Credit Facility provides us with the ability to increase our borrowing capacity by an additional $1.0 billion at any time during the term of the agreement. At January 27, 2023 and April 29, 2022, no amounts were outstanding under the Credit Facility.
Interest rates on advances of our Credit Facility are determined by a pricing matrix based on our long-term debt ratings assigned by Standard & Poor's Ratings Services (S&P) and Moody's Investors Service (Moody’s). Facility fees are payable on the Credit Facility and are determined in the same manner as the interest rates. We are in compliance with all covenants related to the Credit Facility.
The following table is a summary of our S&P and Moody's long-term debt ratings and short-term debt ratings:
Agency Rating(1)
January 27, 2023April 29, 2022
Standard & Poor's Ratings Services
   Long-term debtAA
   Short-term debtA-1A-1
Moody's Investors Service
   Long-term debtA3A3
   Short-term debtP-2P-2
(1) Agency ratings are subject to change, and there may be no assurance that an agency will continue to provide ratings and/or maintain its current ratings. A security rating is not a recommendation to buy, sell or hold securities, and may be subject to revision or withdrawal at any time by the rating agency, and each rating should be evaluated independently of any other rating.
S&P and Moody's long-term debt ratings and short-term debt ratings at January 27, 2023 were unchanged as compared to the ratings at April 29, 2022. We do not expect the S&P and Moody's ratings to have a significant impact on our liquidity or future flexibility to access additional liquidity given our balance sheet, Credit Facility, and related commercial paper programs.
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We have future contractual obligations and other minimum commercial commitments that are entered into in the normal course of business. We believe our off-balance sheet arrangements do not have a material current or anticipated future effect on our consolidated earnings, financial position, and/or cash flows. Refer to the Debt and Capital section above for changes in debt obligations during the second quarter of fiscal year 2023; there have been no other material changes to our long-term contractual obligations as reported in our most recent Annual Report filed on Form 10-K for the fiscal year ended April 29, 2022.
ACQUISITIONS
Information regarding acquisitions is included in Note 4 to the current period's consolidated financial statements.
GOODWILL
We assess goodwill and indefinite-lived intangible assets for impairment annually in the third quarter of the fiscal year and whenever an event occurs or circumstances change that would indicate the carrying amount may be impaired. There were no impairments of goodwill in the current period as a result of the annual impairment test. Definite-lived intangible assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount of an intangible asset (asset group) may not be recoverable. Refer to our Other Operating (Income) Expense, Net section for further details on impairment charges in the current fiscal year. Further adverse changes to macroeconomic conditions or significant changes to our current and future expected financial performance could lead to goodwill or intangible asset impairment charges in future periods, and such charges could be material to our results of operations.
CRITICAL ACCOUNTING ESTIMATES
We have used various accounting policies to prepare the consolidated financial statements in accordance with U.S. GAAP. Our significant accounting policies are disclosed in Note 1 to the consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended April 29, 2022.
The preparation of the consolidated financial statements, in conformity with U.S. GAAP, requires us to use judgment in making estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. These estimates reflect our best judgment about economic and market conditions and the potential effects on the valuation and/or carrying value of assets and liabilities based upon relevant information available. We base our estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
As of January 27, 2023, there were no material changes to our critical accounting estimates.
NEW ACCOUNTING PRONOUNCEMENTS
Information regarding new accounting pronouncements is included in Note 2 to the current period's consolidated financial statements.
SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION
Medtronic plc and Medtronic Global Holdings S.C.A. (Medtronic Luxco), a wholly-owned subsidiary guarantor, each have provided full and unconditional guarantees of the obligations of Medtronic, Inc., a wholly-owned subsidiary issuer, under the Senior Notes (Medtronic Senior Notes) and full and unconditional guarantees of the obligations of Covidien International Finance S.A. (CIFSA), a wholly-owned subsidiary issuer, under the Senior Notes (CIFSA Senior Notes). The guarantees of the CIFSA Senior Notes are in addition to the guarantees of the CIFSA Senior Notes by Covidien Ltd. and Covidien Group Holdings Ltd., both of which are wholly-owned subsidiary guarantors of the CIFSA Senior Notes. Medtronic plc and Medtronic, Inc. each have provided a full and unconditional guarantee of the obligations of Medtronic Luxco under the Senior Notes (Medtronic Luxco Senior Notes). The following is a summary of these guarantees:
Guarantees of Medtronic Senior Notes
Parent Company Guarantor – Medtronic plc
Subsidiary Issuer – Medtronic, Inc.
Subsidiary Guarantor – Medtronic Luxco
Guarantees of Medtronic Luxco Senior Notes
Parent Company Guarantor – Medtronic plc
Subsidiary Issuer – Medtronic Luxco
Subsidiary Guarantor – Medtronic, Inc.
Guarantees of CIFSA Senior Notes
Parent Company Guarantor – Medtronic plc
Subsidiary Issuer – CIFSA
Subsidiary Guarantors – Medtronic Luxco, Covidien Ltd., and Covidien Group Holdings Ltd. (CIFSA Subsidiary Guarantors)
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The following tables present summarized results of operations for the nine months ended January 27, 2023 and summarized balance sheet information at January 27, 2023 and April 29, 2022 for the obligor groups of Medtronic and Medtronic Luxco Senior Notes, and CIFSA Senior Notes. The obligor group consists of the parent company guarantor, subsidiary issuer, and subsidiary guarantors for the applicable senior notes. The summarized financial information is presented after elimination of (i) intercompany transactions and balances among the guarantors and issuers and (ii) equity in earnings from and investments in any subsidiary that is a non-guarantor or issuer.
The summarized results of operations information for the nine months ended January 27, 2023 was as follows:
(in millions)
Medtronic & Medtronic Luxco Senior Notes (1)
CIFSA Senior Notes (2)
Net sales$1,852 $— 
Operating profit (loss)702 (74)
Loss before income taxes(272)(994)
Net loss attributable to Medtronic(836)(986)
The summarized balance sheet information at January 27, 2023 was as follows:
(in millions)
Medtronic & Medtronic Luxco Senior Notes (1)
CIFSA Senior Notes (2)
Total current assets(3)
$23,665 $9,981 
Total noncurrent assets(4)
5,857 1,999 
Total current liabilities(5)
36,531 28,072 
Total noncurrent liabilities(6)
57,260 64,101 
Noncontrolling interests177 177 
(1)The Medtronic Senior Notes and Medtronic Luxco Senior Notes obligor group consists of the following entities: Medtronic plc, Medtronic Luxco, and Medtronic, Inc. Refer to the guarantee summary above for further details.
(2)The CIFSA Senior Notes obligor group consists of the following entities: Medtronic plc, Medtronic Luxco, CIFSA, and CIFSA Subsidiary Guarantors. Refer to the guarantee summary above for further details.
(3)Includes receivables due from non-guarantor subsidiaries of $20.1 billion and $7.0 billion for Medtronic & Medtronic Luxco Senior Notes, and CIFSA Senior Notes, respectively.
(4)Includes loans receivable due from non-guarantor subsidiaries of $21 million and $2.0 billion for Medtronic & Medtronic Luxco Senior Notes, and CIFSA Senior Notes, respectively.
(5)Includes payables due to non-guarantor subsidiaries of $28.5 billion and $21.9 billion for Medtronic & Medtronic Luxco Senior Notes, and CIFSA Senior Notes, respectively.
(6)Includes loans payable due to non-guarantor subsidiaries of $33.0 billion and $46.5 billion for Medtronic & Medtronic Luxco Senior Notes, and CIFSA Senior Notes, respectively.
The summarized balance sheet information at April 29, 2022 was as follows:
(in millions)
Medtronic & Medtronic Luxco Senior Notes (1)
CIFSA Senior Notes (2)
Total current assets(3)
$20,767 $6,881 
Total noncurrent assets(4)
12,099 8,293 
Total current liabilities(5)
32,647 24,302 
Total noncurrent liabilities(6)
50,542 60,292 
Noncontrolling interests171 171 
(1)The Medtronic Senior Notes and Medtronic Luxco Senior Notes obligor group consists of the following entities: Medtronic plc, Medtronic Luxco, and Medtronic, Inc. Refer to the guarantee summary above for further details.
(2)The CIFSA Senior Notes obligor group consists of the following entities: Medtronic plc, Medtronic Luxco, CIFSA, and CIFSA Subsidiary Guarantors. Refer to the guarantee summary above for further details.
(3)Includes receivables due from non-guarantor subsidiaries of $20.2 billion and $6.9 billion for Medtronic & Medtronic Luxco Senior Notes, and CIFSA Senior Notes, respectively.
(4)Includes loans receivable due from non-guarantor subsidiaries of $6.5 billion and $8.3 billion for Medtronic & Medtronic Luxco Senior Notes, and CIFSA Senior Notes, respectively.
(5)Includes payables due to non-guarantor subsidiaries of $26.4 billion and $20.2 billion for Medtronic & Medtronic Luxco Senior Notes, and CIFSA Senior Notes, respectively.
(6)Includes loans payable due to non-guarantor subsidiaries of $29.0 billion and $46.4 billion for Medtronic & Medtronic Luxco Senior Notes, and CIFSA Senior Notes, respectively.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, and other written reports and oral statements made by or with the approval of one of the Company’s executive officers from time to time, may include “forward-looking” statements. All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, business strategy and plans, objectives of management for future operations and current expectations or forecasts of future results, are forward-looking statements. These statements involve known and unknown risks, uncertainties, and other important factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. Our forward-looking statements may include statements related to our growth and growth strategies, developments in the markets for our products, therapies and services, financial results, product development launches and effectiveness, research and development strategy, regulatory approvals, competitive strengths, the potential or anticipated direct or indirect impact of COVID-19 on our business, results of operations, and/or financial condition, restructuring and cost-saving initiatives, intellectual property rights, litigation and tax matters, governmental proceedings and investigations, mergers and acquisitions, divestitures, market acceptance of our products, therapies and services, accounting estimates, financing activities, ongoing contractual obligations, working capital adequacy, value of our investments, our effective tax rate, our expected returns to shareholders, and sales efforts. In some cases, such statements may be identified by the use of terminology such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “intend,” “looking ahead,” “may,” “plan,” “possible,” “potential,” “project,” “should,” “will,” and similar words or expressions. Forward-looking statements in this Quarterly Report include, but are not limited to, statements regarding our ability to drive long-term shareholder value, development and future launches of products and continued or future acceptance of products, therapies and services in our segments; expected timing for completion of research studies relating to our products; market positioning and performance of our products, including stabilization of certain product markets; divestitures and the potential benefits thereof; the costs and benefits of integrating previous acquisitions; anticipated timing for United States (U.S.) Food and Drug Administration (U.S. FDA) and non-U.S. regulatory approval of new products; increased presence in new markets, including markets outside the U.S.; changes in the market and our market share; acquisitions and investment initiatives, including the timing of regulatory approvals as well as integration of acquired companies into our operations; the resolution of tax matters; the effectiveness of our development activities in reducing patient care costs and hospital stay lengths; our approach towards cost containment; our expectations regarding healthcare costs, including potential changes to reimbursement policies and pricing pressures; our expectations regarding changes to patient standards of care; our ability to identify and maintain successful business partnerships; the elimination of certain positions or costs related to restructuring initiatives; outcomes in our litigation matters and governmental proceedings and investigations; general economic conditions; the adequacy of available working capital and our working capital needs; our payment of dividends and redemption of shares; the continued strength of our balance sheet and liquidity; our accounts receivable exposure; and the potential impact of our compliance with governmental regulations and accounting guidance.

We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, results of operations, financial condition, and/or cash flows. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of risks, uncertainties and assumptions described in the “Risk Factors” section and elsewhere in our Annual Report on Form 10-K. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. One must carefully consider forward-looking statements and understand that such forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, and involve a variety of risks and uncertainties, known and unknown, including, among others, those discussed in the sections entitled “Government Regulation” within “Item 1. Business” and “Item 1A. Risk Factors” in our Annual Report on Form 10-K, as well as those related to:

competition in the medical device industry;
delays in regulatory approvals;
the global COVID-19 pandemic, including new COVID-19 variants that may emerge, as well as impacts of the pandemic on healthcare staffing levels;
reduction or interruption in our supply;
failure to complete or achieve the intended benefits of acquisitions or divestitures;
adverse regulatory action;
laws and governmental regulations;
litigation results;
quality problems;
healthcare policy changes;
cybersecurity incidents;
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international operations, including the impact of armed conflicts;
self-insurance;
commercial insurance;
changes in applicable tax rates;
positions taken by taxing authorities;
decreasing selling prices and pricing pressure;
liquidity shortfalls;
fluctuations in currency exchange rates;
inflation; or
disruption of our current plans and operations.
Consequently, no forward-looking statement may be guaranteed, and actual results may vary materially from those projected in the forward-looking statements. We intend to take advantage of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 regarding our forward-looking statements and are including this sentence for the express purpose of enabling us to use the protections of the safe harbor with respect to all forward-looking statements. While we may elect to update these forward-looking statements at some point in the future, whether as a result of any new information, future events, or otherwise, we have no current intention of doing so except to the extent required by applicable law.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
CURRENCY EXCHANGE RATE RISK
Due to the global nature of our operations, we are exposed to currency exchange rate changes, which may cause fluctuations in earnings and cash flows. Fluctuations in the currency exchange rates of currency exposures that are unhedged, such as in certain emerging markets, may result in future earnings and cash flow volatility. The gross notional amount of all currency exchange rate derivative instruments outstanding at January 27, 2023 and April 29, 2022 was $19.6 billion and $13.8 billion, respectively. At January 27, 2023, these contracts were in a net unrealized gain position of $58 million. Additional information regarding our currency exchange rate derivative instruments is included in Note 8 to the current period's consolidated financial statements.

A sensitivity analysis of changes in the fair value of all currency exchange rate derivative contracts at January 27, 2023 indicates that, if the U.S. dollar uniformly strengthened/weakened by 10 percent against all currencies, it would have the following impact on the fair value of these contracts:
Increase (decrease)
(in millions)January 27, 2023
10% appreciation in the U.S. dollar$1,384 
10% depreciation in the U.S. dollar(1,384)
Any gains and losses on the fair value of derivative contracts would generally be offset by gains and losses on the underlying transactions. These offsetting gains and losses are not reflected in the above analysis.
INTEREST RATE RISK
We are subject to interest rate risk on our short-term investments and our borrowings. We manage interest rate risk in the aggregate, while focusing on our immediate and intermediate liquidity needs. Our debt portfolio at January 27, 2023 was comprised of debt predominantly denominated in U.S. dollars, Euros, and Yen, of which substantially all is fixed rate debt. We are also exposed to interest rate changes affecting our investments in interest rate sensitive instruments, which include our marketable debt securities.
A sensitivity analysis of the impact on our interest rate-sensitive financial instruments of a hypothetical 10 basis point change in interest rates, as compared to interest rates at January 27, 2023, would have the following impact on the fair value of these instruments:
Increase (decrease)
(in millions)January 27, 2023
10 basis point increase in interest rates$66 
10 basis point decrease in interest rates(66)
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For a discussion of current market conditions and the impact on our financial condition and results of operations, please see the “Liquidity” section of the current period's Management's Discussion and Analysis. For additional discussion of market risk, refer to Notes 6 and 8 to the current period's consolidated financial statements.
Item 4. Controls and Procedures
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) and changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this quarterly report, our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) are effective.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) under the Exchange Act) during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
PART II — OTHER INFORMATION
Item 1. Legal Proceedings
In accordance with Item 103 of Regulation S-K, we have adopted a $1 million disclosure threshold for proceedings under environmental laws to which a governmental authority is a party, as we believe matters under this threshold are not material to the Company. A discussion of the Company’s legal proceedings and other loss contingencies are described in Note 16 to the current period's consolidated financial statements.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
The following table provides information about the shares repurchased by the Company during the third quarter of fiscal year 2023:
Fiscal PeriodTotal Number of
Shares Purchased
Average Price
Paid per Share
Total Number of Shares
Purchased as a Part of
Publicly Announced
Program
Maximum Approximate Dollar Value of Shares that may yet be Purchased Under the Program
10/29/2022-11/25/2022116,800 $85.25 116,800 $2,521,478,383 
11/26/2022-12/30/2022359,025 78.02 359,025 2,493,468,242 
12/31/2022-1/27/2023317,725 79.57 317,725 2,468,187,908 
Total793,550 $79.70 793,550 $2,468,187,908 
In March 2019, the Company's Board of Directors authorized the repurchase of $6.0 billion of the Company's ordinary shares. There is no specific time period associated with these repurchase authorizations.
Item 5. Other Information
Medtronic has engaged in certain activities that it is required to disclose pursuant to Section 13(r)(1)(D)(ii) of the Securities Exchange Act of 1934, as amended. In particular, during the third quarter of fiscal year 2023, Medtronic engaged in certain regulatory activities involving Russia’s Federal Security Service (“FSB”) related to its medical devices that were expressly authorized by the U.S. Government under applicable economic sanctions regulations.
During the third quarter of fiscal year 2023 ending January 27, 2023, in the normal course of business and consistent with Office of Foreign Assets Control authorizations as in effect at the time, Medtronic Russia filed one notification with the FSB, as required under local Russian law for the import of medical devices that make use of encryption functionality. This activity did not directly result in any revenues or profits for Medtronic. To the extent that notifications with the FSB remain permissible under U.S. law, Medtronic may decide to continue engaging in such activities for the limited purposes of complying with local law requirements in Russia.
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Item 6. Exhibits
(a)Exhibits 
 
 
 
 
 101.SCHInline XBRL Schema Document.
 101.CALInline XBRL Calculation Linkbase Document.
 101.DEFInline XBRL Definition Linkbase Document.
 101.LABInline XBRL Label Linkbase Document.
 101.PREInline XBRL Presentation Linkbase Document.
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned authorized officer.
  Medtronic plc
  (Registrant)
   
Date:March 1, 2023/s/ Jennifer M. Kirk
Jennifer M. Kirk
Senior Vice President, Global Controller and Chief Accounting Officer (Principal Accounting Officer)

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