mdt-20200124

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 24, 2020

☐	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 February 25, 2020, 1,340,166,137 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	54
3.	Quantitative and Qualitative Disclosures About Market Risk	75
4.	Controls and Procedures	76
	PART II
1.	Legal Proceedings	76

2.	Unregistered Sales of Equity Securities and Use of Proceeds	76
6.	Exhibits	77
	Signatures	78

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

Medtronic plc

Consolidated Statements of Income

(Unaudited)


	Three months ended						Nine months ended
(in millions, except per share data)	January 24, 2020		January 25, 2019		January 24, 2020		January 25, 2019
Net sales	$	7,717	$	7,546	$	22,916	$	22,411
Costs and expenses:
Cost of products sold	2,400		2,265		7,160		6,672
Research and development expense	573		561		1,763		1,736
Selling, general, and administrative expense	2,587		2,596		7,750		7,798
Amortization of intangible assets	436		436		1,317		1,327
Restructuring charges, net	13		26		87		112
Certain litigation charges	108		63		276		166

Other operating (income) expense, net	(39)		57		88		278
Operating profit	1,639		1,542		4,475		4,322
Other non-operating income, net	(96)		(71)		(305)		(309)
Interest expense	156		243		930		726
Income before income taxes	1,579		1,370		3,850		3,905
Income tax provision	(340)		99		(317)		437
Net income	1,919		1,271		4,167		3,468
Net income attributable to noncontrolling interests	(4)		(2)		(24)		(9)
Net income attributable to Medtronic	$	1,915	$	1,269	$	4,143	$	3,459
Basic earnings per share	$	1.43	$	0.95	$	3.09	$	2.57
Diluted earnings per share	$	1.42	$	0.94	$	3.07	$	2.54
Basic weighted average shares outstanding	1,340.5		1,342.8		1,340.7		1,348.1
Diluted weighted average shares outstanding	1,351.5		1,352.7		1,351.6		1,359.5

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

Medtronic plc

Consolidated Statements of Comprehensive Income

(Unaudited)


	Three months ended						Nine months ended
(in millions)	January 24, 2020		January 25, 2019		January 24, 2020		January 25, 2019
Net income	$	1,919	$	1,271	$	4,167	$	3,468

Other comprehensive income (loss), net of tax:
Unrealized gain on investment securities	20		32		93		23
Translation adjustment	32		128		(116)		(1,127)
Net investment hedge	35		—		187		—
Net change in retirement obligations	13		17		38		65
Unrealized (loss) gain on cash flow hedges	(35)		(23)		(37)		317
Other comprehensive income (loss)	65		154		165		(722)
Comprehensive income including noncontrolling interests	1,984		1,425		4,332		2,746
Comprehensive income attributable to noncontrolling interests	(4)		(2)		(24)		(6)
Comprehensive income attributable to Medtronic	$	1,980	$	1,423	$	4,308	$	2,740

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

Medtronic plc

Consolidated Balance Sheets

(Unaudited)


(in millions)	January 24, 2020		April 26, 2019
ASSETS

Current assets:
Cash and cash equivalents	$	3,709	$	4,393
Investments	7,919		5,455
Accounts receivable, less allowances of $205 and $190, respectively	6,248		6,222
Inventories, net	4,122		3,753
Other current assets	2,045		2,144
Total current assets	24,043		21,967

Property, plant, and equipment	11,507		10,920
Accumulated depreciation	(6,743)		(6,245)
Property, plant, and equipment, net	4,764		4,675
Goodwill	40,091		39,959
Other intangible assets, net	19,456		20,560
Tax assets	2,272		1,519
Other assets	2,196		1,014
Total assets	$	92,822	$	89,694

LIABILITIES AND EQUITY

Current liabilities:
Current debt obligations	$	844	$	838
Accounts payable	1,945		1,953
Accrued compensation	1,909		2,189
Accrued income taxes	457		567
Other accrued expenses	3,580		2,925
Total current liabilities	8,735		8,472

Long-term debt	24,732		24,486
Accrued compensation and retirement benefits	1,598		1,651
Accrued income taxes	2,738		2,838
Deferred tax liabilities	1,282		1,278
Other liabilities	1,784		757
Total liabilities	40,869		39,482

Commitments and contingencies (Note 17)

Shareholders’ equity:
Ordinary shares— par value $0.0001, 2.6 billion shares authorized, 1,340,786,042 and 1,340,697,595 shares issued and outstanding, respectively	—		—
Additional paid-in capital	26,144		26,532
Retained earnings	28,210		26,270
Accumulated other comprehensive loss	(2,546)		(2,711)
Total shareholders’ equity	51,808		50,091
Noncontrolling interests	145		121
Total equity	51,953		50,212
Total liabilities and equity	$	92,822	$	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
Net income	—	—		—		1,915		—		1,915		4		1,919
Other comprehensive income	—	—		—		—		65		65		—		65
Dividends to shareholders ($0.54 per ordinary share)	—	—		—		(723)		—		(723)		—		(723)
Issuance of shares under stock purchase and award plans	3	—		143		—		—		143		—		143
Repurchase of ordinary shares	(2)	—		(236)		—		—		(236)