Document

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	October 25, 2019

☐	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


MEDTRONIC PUBLIC LIMITED COMPANY
(Exact name of registrant as specified in its charter)

Ireland			98-1183488
(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 class	Trading Symbol	Name of each exchange on which registered
Ordinary shares, par value $0.0001 per share	MDT	New York Stock Exchange
Floating Rate Notes due 2021	MDT/21	New York Stock Exchange
0.000% Senior Notes due 2021	MDT/21A	New York Stock Exchange
0.000% Senior Notes due 2022	MDT/22B	New York Stock Exchange
0.375% Senior Notes due 2023	MDT/23B	New York Stock Exchange
0.25% Senior Notes due 2025	MDT/25	New York Stock Exchange
1.125% Notes due 2027	MDT/27	New York Stock Exchange
1.625% Notes due 2031	MDT/31	New York Stock Exchange
1.00% Senior Notes due 2031	MDT/31A	New York Stock Exchange
2.250% Notes due 2039	MDT/39A	New York Stock Exchange
1.50% Senior Notes due 2039	MDT/39B	New York Stock Exchange
1.75% Senior Notes due 2049	MDT/49	New 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 filer

☒

Accelerated filer

☐

Emerging growth company

☐

Non-accelerated filer

☐

Smaller 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 November 27, 2019, 1,340,377,511 ordinary shares, par value $0.0001, and 1,872 A preferred shares, par value $1.00, of the registrant were outstanding.

TABLE OF CONTENTS


Item	Description	Page

	PART I
1.	Financial Statements (unaudited)	1
2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	52
3.	Quantitative and Qualitative Disclosures About Market Risk	72
4.	Controls and Procedures	73
	PART II
1.	Legal Proceedings	73

2.	Unregistered Sales of Equity Securities and Use of Proceeds	73
6.	Exhibits	74
	Signatures	75

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

Medtronic plc

Consolidated Statements of Income

(Unaudited)


	Three months ended						Six months ended
(in millions, except per share data)	October 25, 2019		October 26, 2018		October 25, 2019		October 26, 2018
Net sales	$	7,706	$	7,481	$	15,199	$	14,865
Costs and expenses:
Cost of products sold	2,394		2,203		4,760		4,407
Research and development expense	603		590		1,190		1,175
Selling, general, and administrative expense	2,620		2,605		5,163		5,202
Amortization of intangible assets	441		445		881		891
Restructuring charges, net	27		24		74		86
Certain litigation charges	121		—		168		103

Other operating expense, net	149		70		127		221
Operating profit	1,351		1,544		2,836		2,780
Other non-operating income, net	(108)		(52)		(209)		(238)
Interest expense	165		241		774		483
Income before income taxes	1,294		1,355		2,271		2,535
Income tax provision	(77)		235		23		338
Net income	1,371		1,120		2,248		2,197
Net income attributable to noncontrolling interests	(7)		(5)		(20)		(7)
Net income attributable to Medtronic	$	1,364	$	1,115	$	2,228	$	2,190
Basic earnings per share	$	1.02	$	0.83	$	1.66	$	1.62
Diluted earnings per share	$	1.01	$	0.82	$	1.65	$	1.61
Basic weighted average shares outstanding	1,340.8		1,349.2		1,340.8		1,350.9
Diluted weighted average shares outstanding	1,351.4		1,360.9		1,351.6		1,363.0

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

Medtronic plc

Consolidated Statements of Comprehensive Income

(Unaudited)


	Three months ended						Six months ended
(in millions)	October 25, 2019		October 26, 2018		October 25, 2019		October 26, 2018
Net income	$	1,371	$	1,120	$	2,248	$	2,197

Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on investment securities	17		(9)		73		(9)
Translation adjustment	(214)		(431)		(148)		(1,255)
Net investment hedge	53		—		152		—
Net change in retirement obligations	12		21		25		48
Unrealized gain (loss) on cash flow hedges	5		127		(2)		340
Other comprehensive (loss) income	(127)		(292)		100		(876)
Comprehensive income including noncontrolling interests	1,244		828		2,348		1,321
Comprehensive income attributable to noncontrolling interests	(7)		(2)		(20)		(4)
Comprehensive income attributable to Medtronic	$	1,237	$	826	$	2,328	$	1,317

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

Medtronic plc

Consolidated Balance Sheets

(Unaudited)


(in millions)	October 25, 2019		April 26, 2019
ASSETS

Current assets:
Cash and cash equivalents	$	3,962	$	4,393
Investments	6,436		5,455
Accounts receivable, less allowances of $198 and $190, respectively	6,118		6,222
Inventories, net	4,042		3,753
Other current assets	2,095		2,144

Total current assets	22,653		21,967

Property, plant, and equipment	11,364		10,920
Accumulated depreciation	(6,608)		(6,245)
Property, plant, and equipment, net	4,756		4,675
Goodwill	39,952		39,959
Other intangible assets, net	19,775		20,560
Tax assets	1,804		1,519
Other assets	2,113		1,014

Total assets	$	91,053	$	89,694

LIABILITIES AND EQUITY

Current liabilities:
Current debt obligations	$	875	$	838
Accounts payable	1,965		1,953
Accrued compensation	1,773		2,189
Accrued income taxes	442		567
Other accrued expenses	3,115		2,925

Total current liabilities	8,170		8,472

Long-term debt	24,752		24,486
Accrued compensation and retirement benefits	1,573		1,651
Accrued income taxes	2,705		2,838
Deferred tax liabilities	1,376		1,278
Other liabilities	1,758		757

Total liabilities	40,334		39,482

Commitments and contingencies (Note 17)

Shareholders’ equity:
Ordinary shares— par value $0.0001, 2.6 billion shares authorized, 1,340,375,745 and 1,340,697,595 shares issued and outstanding, respectively	—		—
Additional paid-in capital	26,171		26,532
Retained earnings	27,018		26,270
Accumulated other comprehensive loss	(2,611)		(2,711)
Total shareholders’ equity	50,578		50,091
Noncontrolling interests	141		121
Total equity	50,719		50,212
Total liabilities and equity	$	91,053	$	89,694

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

Medtronic plc

Consolidated Statements of Equity

(Unaudited)


	Ordinary Shares					Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Shareholders’ Equity		Noncontrolling Interests		Total Equity
(in millions)	Number	Par Value
April 26, 2019	1,341	$	—	$	26,532	$	26,270	$	(2,711)	$	50,091	$	121	$	50,212
Net income	—	—		—		864		—		864		13		877
Other comprehensive income	—	—		—		—		227		227		—		227
Dividends to shareholders ($0.54 per ordinary share)	—	—		—		(724)		—		(724)		—		(724)
Issuance of shares under stock purchase and award plans	3	—		205		—		—		205		—		205
Repurchase of ordinary shares	(3)	—		(328)		—		—		(328)		—		(328)
Stock-based compensation	—	—		61		—		—		61		—		61
Cumulative effect of change in accounting principle⁽¹⁾	—	—		—		(33)		—		(33)		—		(33)
July 26, 2019	1,341	$	—	$	26,470	$	26,377	$	(2,484)	$	50,363	$	134	$	50,497
Net income	—	—		—		1,364		—		1,364		7		1,371
Other comprehensive (loss)	—	—		—		—		(127)		(127)		—		(127)
Dividends to shareholders ($$0.54 per ordinary share)	—	—		—		(723)		—		(723)		—		(723)
Issuance of shares under stock purchase and award plans	4	—		145		—		—		145		—		145
Repurchase of ordinary shares	(5)	—		(552)		—		—		(552)		—		(552)
Stock-based compensation		—		108		—		—		108		—		108


October 25, 2019	1,340	$	—	$	26,171	$	27,018	$	(2,611)	$	50,578	$	141	$	50,719

(1) See Note 2 to the consolidated financial statements for discussion regarding the adoption of accounting standards during the first quarter fiscal year 2020. 

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

Medtronic plc

Consolidated Statements of Equity

(Unaudited)


	Ordinary Shares					Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Shareholders’ Equity		Noncontrolling Interests		Total Equity
(in millions)	Number	Par Value
April 27, 2018	1,354	$	—	$	28,127	$	24,379	$	(1,786)	$	50,720	$	102	$	50,822
Net income	—	—		—		1,075		—		1,075		2		1,077
Other comprehensive (loss)	—	—		—		—		(584)		(584)		—		(584)
Dividends to shareholders ($0.50 per ordinary share)	—	—		—		(677)		—		(677)		—		(677)
Issuance of shares under stock purchase and award plans	7	—		446		—		—		446		—		446
Repurchase of ordinary shares	(9)	—		(820)		—		—		(820)		—		(820)
Stock-based compensation	—	—		64		—		—		64