2018 Q4 Form 10-Q Financial Statement

#000161310318000044 Filed on November 29, 2018

View on sec.gov

Income Statement

Concept 2018 Q4 2017 Q4
Revenue $7.481B $7.050B
YoY Change 6.11% -4.02%
Cost Of Revenue $2.203B $2.123B
YoY Change 3.77% -8.73%
Gross Profit $5.278B $4.927B
YoY Change 7.12% -1.83%
Gross Profit Margin 70.55% 69.89%
Selling, General & Admin $2.605B $2.539B
YoY Change 2.6% 5.09%
% of Gross Profit 49.36% 51.53%
Research & Development $590.0M $556.0M
YoY Change 6.12% 0.36%
% of Gross Profit 11.18% 11.28%
Depreciation & Amortization $651.0M $678.0M
YoY Change -3.98% -7.38%
% of Gross Profit 12.33% 13.76%
Operating Expenses $3.195B $3.095B
YoY Change 3.23% 4.21%
Operating Profit $1.544B $1.894B
YoY Change -18.48% 36.75%
Interest Expense $241.0M $273.0M
YoY Change -11.72% 3.41%
% of Operating Profit 15.61% 14.41%
Other Income/Expense, Net $52.00M -$111.0M
YoY Change -146.85% 24.72%
Pretax Income $1.355B $1.728B
YoY Change -21.59% 42.57%
Income Tax $235.0M -$285.0M
% Of Pretax Income 17.34% -16.49%
Net Earnings $1.115B $2.017B
YoY Change -44.72% 80.9%
Net Earnings / Revenue 14.9% 28.61%
Basic Earnings Per Share $0.83 $1.49
Diluted Earnings Per Share $0.82 $1.48
COMMON SHARES
Basic Shares Outstanding 1.349B shares 1.355B shares
Diluted Shares Outstanding 1.361B shares 1.366B shares

Balance Sheet

Concept 2018 Q4 2017 Q4
SHORT-TERM ASSETS
Cash & Short-Term Investments $10.13B $13.53B
YoY Change -25.09% 20.16%
Cash & Equivalents $3.911B $5.529B
Short-Term Investments $6.222B $7.997B
Other Short-Term Assets $2.014B $2.246B
YoY Change -10.33% 18.77%
Inventory $3.763B $3.638B
Prepaid Expenses
Receivables $5.743B $5.752B
Other Receivables $0.00 $0.00
Total Short-Term Assets $21.65B $25.16B
YoY Change -13.95% 11.7%
LONG-TERM ASSETS
Property, Plant & Equipment $4.536B $4.441B
YoY Change 2.14% -9.2%
Goodwill $38.61B $39.08B
YoY Change -1.21% -6.31%
Intangibles $20.82B $22.63B
YoY Change -7.98% -15.39%
Long-Term Investments $511.0M $824.0M
YoY Change -37.99%
Other Assets $1.123B $1.404B
YoY Change -20.01% 8.58%
Total Long-Term Assets $66.50B $69.30B
YoY Change -4.04% -8.68%
TOTAL ASSETS
Total Short-Term Assets $21.65B $25.16B
Total Long-Term Assets $66.50B $69.30B
Total Assets $88.15B $94.46B
YoY Change -6.68% -4.01%
SHORT-TERM LIABILITIES
YoY Change
Accounts Payable $1.742B $1.718B
YoY Change 1.4% 3.56%
Accrued Expenses $4.606B $4.635B
YoY Change -0.63% 4.6%
Deferred Revenue
YoY Change
Short-Term Debt $0.00 $0.00
YoY Change
Long-Term Debt Due $1.343B $3.131B
YoY Change -57.11% -7.01%
Total Short-Term Liabilities $8.463B $10.50B
YoY Change -19.37% 9.32%
LONG-TERM LIABILITIES
Long-Term Debt $23.67B $25.94B
YoY Change -8.74% -10.58%
Other Long-Term Liabilities $724.0M $933.0M
YoY Change -22.4% -41.65%
Total Long-Term Liabilities $724.0M $933.0M
YoY Change -22.4% -41.65%
TOTAL LIABILITIES
Total Short-Term Liabilities $8.463B $10.50B
Total Long-Term Liabilities $724.0M $933.0M
Total Liabilities $38.44B $42.88B
YoY Change -10.36% -10.88%
SHAREHOLDERS EQUITY
Retained Earnings $25.17B $25.44B
YoY Change -1.05% -51.56%
Common Stock $0.00 $0.00
YoY Change
Preferred Stock
YoY Change
Treasury Stock (at cost)
YoY Change
Treasury Stock Shares
Shareholders Equity $49.61B $51.47B
YoY Change
Total Liabilities & Shareholders Equity $88.15B $94.46B
YoY Change -6.68% -4.01%

Cashflow Statement

Concept 2018 Q4 2017 Q4
OPERATING ACTIVITIES
Net Income $1.115B $2.017B
YoY Change -44.72% 80.9%
Depreciation, Depletion And Amortization $651.0M $678.0M
YoY Change -3.98% -7.38%
Cash From Operating Activities $1.163B $907.0M
YoY Change 28.22% -38.38%
INVESTING ACTIVITIES
Capital Expenditures -$206.0M -$246.0M
YoY Change -16.26% -8.21%
Acquisitions
YoY Change
Other Investing Activities $327.0M $6.288B
YoY Change -94.8% 3124.62%
Cash From Investing Activities $121.0M $6.042B
YoY Change -98.0% -8376.71%
FINANCING ACTIVITIES
Cash Dividend Paid
YoY Change
Common Stock Issuance & Retirement, Net
YoY Change
Debt Paid & Issued, Net
YoY Change
Cash From Financing Activities -1.730B -6.136B
YoY Change -71.81% 311.54%
NET CHANGE
Cash From Operating Activities 1.163B 907.0M
Cash From Investing Activities 121.0M 6.042B
Cash From Financing Activities -1.730B -6.136B
Net Change In Cash -446.0M 813.0M
YoY Change -154.86% -983.7%
FREE CASH FLOW
Cash From Operating Activities $1.163B $907.0M
Capital Expenditures -$206.0M -$246.0M
Free Cash Flow $1.369B $1.153B
YoY Change 18.73% -33.74%

Facts In Submission

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us-gaap Other Than Temporary Impairment Credit Losses Recognized In Earnings Reductions Securities Sold
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us-gaap Payments For Proceeds From Other Investing Activities
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us-gaap Payments For Repurchase Of Common Stock
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us-gaap Payments To Acquire Businesses Net Of Cash Acquired
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us-gaap Payments To Acquire Investments
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us-gaap Payments To Acquire Property Plant And Equipment
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us-gaap Payments To Acquire Property Plant And Equipment
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us-gaap Proceeds From Divestiture Of Businesses
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us-gaap Proceeds From Issuance Of Long Term Debt
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us-gaap Proceeds From Repayments Of Short Term Debt Maturing In Three Months Or Less
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us-gaap Proceeds From Sale Maturity And Collections Of Investments
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us-gaap Proceeds From Sale Of Available For Sale Securities Debt
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1105000000 USD
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CY2018Q4 us-gaap Selling General And Administrative Expense
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us-gaap Selling General And Administrative Expense
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us-gaap Share Based Compensation
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us-gaap Tax Adjustments Settlements And Unusual Provisions
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us-gaap Tax Adjustments Settlements And Unusual Provisions
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CY2017Q4 us-gaap Weighted Average Number Of Diluted Shares Outstanding
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us-gaap Weighted Average Number Of Diluted Shares Outstanding
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CY2018Q4 us-gaap Weighted Average Number Of Diluted Shares Outstanding
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us-gaap Weighted Average Number Of Diluted Shares Outstanding
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CY2017Q4 us-gaap Weighted Average Number Of Shares Outstanding Basic
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us-gaap Weighted Average Number Of Shares Outstanding Basic
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CY2018Q4 us-gaap Weighted Average Number Of Shares Outstanding Basic
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us-gaap Basis Of Accounting
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<div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;padding-bottom:10px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-weight:bold;"></font><font style="font-family:inherit;font-size:10pt;font-weight:bold;">Basis of Presentation</font><font style="font-family:inherit;font-size:10pt;font-weight:bold;"> </font></div><div style="line-height:120%;padding-bottom:10px;padding-top:10px;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">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 of 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. For the purpose of providing more concise consolidated statements of income, amounts previously reported in </font><font style="font-family:inherit;font-size:10pt;font-style:italic;">acquisition-related items</font><font style="font-family:inherit;font-size:10pt;"> were reclassified to</font><font style="font-family:inherit;font-size:10pt;font-style:italic;"> selling, general, and administrative expense</font><font style="font-family:inherit;font-size:10pt;"> and </font><font style="font-family:inherit;font-size:10pt;font-style:italic;">other operating expense, net;</font><font style="font-family:inherit;font-size:10pt;"> amounts previously reported in </font><font style="font-family:inherit;font-size:10pt;font-style:italic;">divestiture-related items</font><font style="font-family:inherit;font-size:10pt;"> were reclassified to </font><font style="font-family:inherit;font-size:10pt;font-style:italic;">selling, general, and administrative expense;</font><font style="font-family:inherit;font-size:10pt;"> and amounts previously reported in </font><font style="font-family:inherit;font-size:10pt;font-style:italic;">interest income</font><font style="font-family:inherit;font-size:10pt;"> were reclassified to </font><font style="font-family:inherit;font-size:10pt;font-style:italic;">other non-operating income, net</font><font style="font-family:inherit;font-size:10pt;">. </font></div><div style="line-height:120%;padding-bottom:10px;padding-top:10px;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">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. </font></div><div style="line-height:120%;padding-bottom:10px;padding-top:10px;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">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 fully eliminated in consolidation. </font></div><div style="line-height:120%;padding-bottom:10px;padding-top:10px;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">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&#8217;s Annual Report on Form 10-K for the fiscal year ended </font><font style="font-family:inherit;font-size:10pt;">April&#160;27, 2018</font><font style="font-family:inherit;font-size:10pt;">. The Company&#8217;s fiscal years </font><font style="font-family:inherit;font-size:10pt;">2019</font><font style="font-family:inherit;font-size:10pt;">, </font><font style="font-family:inherit;font-size:10pt;">2018</font><font style="font-family:inherit;font-size:10pt;">, and </font><font style="font-family:inherit;font-size:10pt;">2017</font><font style="font-family:inherit;font-size:10pt;"> will end or ended on </font><font style="font-family:inherit;font-size:10pt;">April&#160;26, 2019</font><font style="font-family:inherit;font-size:10pt;">, </font><font style="font-family:inherit;font-size:10pt;">April&#160;27, 2018</font><font style="font-family:inherit;font-size:10pt;">, and </font><font style="font-family:inherit;font-size:10pt;">April&#160;28, 2017</font><font style="font-family:inherit;font-size:10pt;">, respectively.</font></div></div>
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<div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;padding-bottom:10px;padding-top:10px;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">The Company&#8217;s fiscal years </font><font style="font-family:inherit;font-size:10pt;">2019</font><font style="font-family:inherit;font-size:10pt;">, </font><font style="font-family:inherit;font-size:10pt;">2018</font><font style="font-family:inherit;font-size:10pt;">, and </font><font style="font-family:inherit;font-size:10pt;">2017</font><font style="font-family:inherit;font-size:10pt;"> will end or ended on </font><font style="font-family:inherit;font-size:10pt;">April&#160;26, 2019</font><font style="font-family:inherit;font-size:10pt;">, </font><font style="font-family:inherit;font-size:10pt;">April&#160;27, 2018</font><font style="font-family:inherit;font-size:10pt;">, and </font><font style="font-family:inherit;font-size:10pt;">April&#160;28, 2017</font><font style="font-family:inherit;font-size:10pt;">, respectively. </font></div></div>
us-gaap Loss Contingency Disclosures
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<div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;padding-bottom:10px;padding-top:10px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-weight:bold;"></font><font style="font-family:inherit;font-size:10pt;font-weight:bold;"> Commitments and Contingencies</font><font style="font-family:inherit;font-size:10pt;font-weight:bold;"> </font></div><div style="line-height:120%;padding-bottom:10px;padding-top:10px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-weight:bold;">Legal Matters</font></div><div style="line-height:120%;padding-top:10px;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">The Company and its affiliates are involved in a number of legal actions involving product liability, intellectual property and commercial disputes, shareholder related matters, environmental proceedings, income 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&#8217;s standard practice is to cooperate with regulators and investigators in responding to inquiries. The outcomes of legal actions are not within the Company&#8217;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. </font></div><div style="line-height:120%;padding-top:10px;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">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. At </font><font style="font-family:inherit;font-size:10pt;">October&#160;26, 2018</font><font style="font-family:inherit;font-size:10pt;"> and </font><font style="font-family:inherit;font-size:10pt;">April&#160;27, 2018</font><font style="font-family:inherit;font-size:10pt;">, accrued litigation was approximately </font><font style="font-family:inherit;font-size:10pt;">$0.9 billion</font><font style="font-family:inherit;font-size:10pt;">. 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&#8217;s consolidated earnings, financial position, and/or cash flows. The Company includes accrued litigation in </font><font style="font-family:inherit;font-size:10pt;font-style:italic;">other accrued expenses</font><font style="font-family:inherit;font-size:10pt;"> and </font><font style="font-family:inherit;font-size:10pt;font-style:italic;">other liabilities</font><font style="font-family:inherit;font-size:10pt;"> 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&#8217;s consolidated earnings, financial position, and/or cash flows.</font></div><div style="line-height:120%;padding-bottom:10px;padding-top:10px;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-style:italic;">Product Liability Matters</font></div><div style="line-height:120%;padding-bottom:10px;padding-top:10px;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;text-decoration:underline;">Sprint Fidelis</font></div><div style="line-height:120%;padding-top:10px;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">In 2007, a putative class action was filed in the Ontario Superior Court of Justice in Canada seeking damages for personal injuries allegedly related to the Company's Sprint Fidelis family of defibrillation leads. On October 20, 2009, the court certified a class proceeding but denied class certification on plaintiffs' claim for punitive damages. Pretrial proceedings are underway. The Company has recognized an expense for probable and estimable damages related to this matter, and accrued expenses for this matter are included within accrued litigation as discussed above. </font></div><div style="line-height:120%;padding-bottom:10px;padding-top:10px;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;text-decoration:underline;">INFUSE Litigation</font></div><div style="line-height:120%;padding-bottom:10px;padding-top:10px;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">The Company estimated law firms representing approximately </font><font style="font-family:inherit;font-size:10pt;">6,000</font><font style="font-family:inherit;font-size:10pt;"> claimants asserted or intended to assert personal injury claims against Medtronic in the U.S. state and federal courts involving the INFUSE bone graft product. As of June 1, 2017, the Company had reached agreements to settle substantially all of these claims, resolving this litigation. The Company's accrued expenses for this matter are included within accrued litigation as discussed above. </font></div><div style="line-height:120%;padding-bottom:10px;padding-top:10px;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;text-decoration:underline;">Pelvic Mesh Litigation</font></div><div style="line-height:120%;padding-top:10px;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">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. </font><font style="font-family:inherit;font-size:10pt;">Two</font><font style="font-family:inherit;font-size:10pt;"> subsidiaries of Covidien supplied pelvic mesh products to </font><font style="font-family:inherit;font-size:10pt;">one</font><font style="font-family:inherit;font-size:10pt;"> 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 </font><font style="font-family:inherit;font-size:10pt;">$121 million</font><font style="font-family:inherit;font-size:10pt;"> towards the settlement of </font><font style="font-family:inherit;font-size:10pt;">11,000</font><font style="font-family:inherit;font-size:10pt;"> of these claims. In May 2017, the agreement with Bard was amended to extend the terms to apply to up to an additional </font><font style="font-family:inherit;font-size:10pt;">5,000</font><font style="font-family:inherit;font-size:10pt;"> 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&#8217;s obligation to defend and indemnify the Company. The Company estimates law firms representing approximately </font><font style="font-family:inherit;font-size:10pt;">15,800</font><font style="font-family:inherit;font-size:10pt;"> claimants have asserted or may assert claims involving products manufactured by Covidien&#8217;s subsidiaries. As of November 1, 2018, the Company had reached agreements to settle approximately </font><font style="font-family:inherit;font-size:10pt;">15,100</font><font style="font-family:inherit;font-size:10pt;"> of these claims. The Company's accrued expenses for this matter are included within accrued litigation as discussed above. </font></div><div style="line-height:120%;padding-bottom:10px;padding-top:10px;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-style:italic;">Patent Litigation</font></div><div style="line-height:120%;padding-top:10px;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;text-decoration:underline;">Ethicon</font></div><div style="line-height:120%;padding-top:10px;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">On December 14, 2011, Ethicon filed an action against Covidien in the U.S. District Court for the Southern District of Ohio, alleging patent infringement and seeking monetary damages and injunctive relief. On January 22, 2014, the district court entered summary judgment in Covidien's favor, and the majority of this ruling was affirmed by the Federal Circuit on August 7, 2015. Following appeal, the case was remanded back to the District Court with respect to </font><font style="font-family:inherit;font-size:10pt;">one</font><font style="font-family:inherit;font-size:10pt;"> patent. On January 21, 2016, Covidien filed a second action in the U.S. District Court for the Southern District of Ohio, seeking a declaration of non-infringement with respect to a second set of patents held by Ethicon. The court consolidated this second action with the remaining patent issues from the first action. Following consolidation of the cases, Ethicon dismissed </font><font style="font-family:inherit;font-size:10pt;">six</font><font style="font-family:inherit;font-size:10pt;"> of the asserted patents, leaving a single asserted patent. In addition to claims of non-infringement, the Company asserts an affirmative defense of invalidity. The Company has not recognized an expense related to damages in connection with this matter, because any potential loss is not currently probable or reasonably estimable under U.S. GAAP. Additionally, the Company is unable to reasonably estimate the range of loss, if any, that may result from this matter. </font></div><div style="line-height:120%;padding-top:10px;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;text-decoration:underline;">Sasso</font></div><div style="line-height:120%;padding-top:10px;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">The Company is involved in litigation in Indiana relating to certain patent and royalty disputes with Dr. Sasso under agreements originally entered into in 1999 and 2001. On November 28, 2018, a jury in Indiana state court returned a verdict against the Company for approximately </font><font style="font-family:inherit;font-size:10pt;">$112 million</font><font style="font-family:inherit;font-size:10pt;">. 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 under U.S. GAAP. </font></div><div style="line-height:120%;padding-bottom:10px;padding-top:10px;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-style:italic;">Shareholder Related Matters</font></div><div style="line-height:120%;padding-top:10px;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;text-decoration:underline;">INFUSE</font></div><div style="line-height:120%;padding-top:10px;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">West Virginia Pipe Trades and Phil Pace, on June 27, 2013 and July 3, 2013, respectively, filed putative class action complaints against Medtronic, Inc. and certain of its officers in the U.S. District Court for the District of Minnesota, alleging that the defendants made false and misleading public statements and engaged in a scheme to defraud regarding the INFUSE Bone Graft product during the period of December 8, 2010 through August 3, 2011. The matters were consolidated in September 2013, and in the consolidated complaint plaintiffs alleged a class period of September 28, 2010 through August 3, 2011. On September 30, 2015, the District Court granted defendants&#8217; motion for summary judgment in the consolidated matters. Plaintiffs appealed the dismissal to the U.S. Court of Appeals for the Eighth Circuit, and in December of 2016 the Eighth Circuit Court reversed and remanded the case to the District Court for further proceedings. On January 30, 2018, the District Court issued an order certifying a class for the period of September 8, 2010 through June 28, 2011. In July of 2018, the parties reached an agreement to settle this matter, and in September of 2018, the Company paid the settlement amount into a qualified settlement fund to be distributed following final court approval.</font></div><div style="line-height:120%;padding-bottom:10px;padding-top:10px;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;text-decoration:underline;">COVIDIEN ACQUISITION</font></div><div style="line-height:120%;padding-top:10px;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">On July 2, 2014, Lewis Merenstein filed a putative shareholder class action in Hennepin County, Minnesota, District Court seeking to enjoin the then-potential acquisition of Covidien. The lawsuit named Medtronic, Inc., Covidien, and each member of the Medtronic, Inc. Board of Directors at the time as defendants, and alleged that the directors breached their fiduciary duties to shareholders with regard to the then-potential acquisition. On August 21, 2014, Kenneth Steiner filed a putative shareholder class action in Hennepin County, Minnesota, District Court, also seeking an injunction to prevent the potential Covidien acquisition. In September 2014, the </font><font style="font-family:inherit;font-size:10pt;font-style:italic;">Merenstein</font><font style="font-family:inherit;font-size:10pt;"> and </font><font style="font-family:inherit;font-size:10pt;font-style:italic;">Steiner</font><font style="font-family:inherit;font-size:10pt;"> matters were consolidated and in December 2014, the plaintiffs filed a preliminary injunction motion seeking to enjoin the Covidien transaction. On March 20, 2015, the District Court issued an order and opinion granting Medtronic&#8217;s motion to dismiss the case. In May of 2015, the plaintiffs filed an appeal, and, in January of 2016, the Minnesota State Court of Appeals affirmed in part, and reversed in part. On April 19, 2016 the Minnesota Supreme Court granted the Company&#8217;s petition to review the issue of whether most of the original claims are properly characterized as direct or derivative under Minnesota law. In August of 2017, the Minnesota Supreme Court affirmed the decision of the Minnesota State Court of Appeals, sending the matter back to the trial court for further proceedings, which are ongoing. The Company has not recognized an expense related to damages in connection with this matter, because any potential loss is not currently probable or reasonably estimable under U.S. GAAP. Additionally, the Company is unable to reasonably estimate the range of loss, if any, that may result from these matters.</font></div><div style="line-height:120%;padding-bottom:10px;padding-top:10px;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;text-decoration:underline;">HEARTWARE</font></div><div style="line-height:120%;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">On January 22, 2016, the St. Paul Teachers&#8217; Retirement Fund Association filed a putative class action complaint (the &#8220;Complaint&#8221;) in the United States District Court for the Southern District of New York against HeartWare on behalf of all persons and entities who purchased or otherwise acquired shares of HeartWare from June 10, 2014 through January 11, 2016 (the &#8220;Class Period&#8221;). The Complaint was amended on June 29, 2016 and claims HeartWare and one of its executives violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by making false and misleading statements about, among other things, HeartWare&#8217;s response to a June 2014 U.S. FDA warning letter, the development of the Miniaturized Ventricular Assist Device (MVAD) System and the proposed acquisition of Valtech Cardio Ltd. The Complaint seeks to recover damages on behalf of all purchasers or acquirers of HeartWare&#8217;s stock during the Class Period. In August of 2016, the Company acquired HeartWare. In October of 2018, the parties reached an agreement to settle this matter. The Company's accrued expenses for this matter are included within accrued litigation as discussed above.</font></div><div style="line-height:120%;padding-bottom:10px;padding-top:10px;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-style:italic;">Environmental Proceedings</font></div><div style="line-height:120%;padding-top:10px;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">The Company is involved in various stages of investigation and cleanup related to environmental remediation matters at a number of sites. 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.</font></div><div style="line-height:120%;padding-top:10px;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">The Company is a successor to a company which owned and operated a chemical manufacturing facility in Orrington, Maine from 1967 until 1982, and is responsible for the costs of completing an environmental site investigation as required by the Maine Department of Environmental Protection (MDEP). MDEP served a compliance order on Mallinckrodt LLC and U.S. Surgical Corporation, subsidiaries of Covidien, in December 2008, which included a directive to remove a significant volume of soils at the site. After a hearing on the compliance order before the Maine Board of Environmental Protection (Maine Board) to challenge the terms of the compliance order, the Maine Board modified the MDEP order and issued a final order requiring removal of </font><font style="font-family:inherit;font-size:10pt;">two</font><font style="font-family:inherit;font-size:10pt;"> landfills, capping of the remaining </font><font style="font-family:inherit;font-size:10pt;">three</font><font style="font-family:inherit;font-size:10pt;"> landfills, installation of a groundwater extraction system and long-term monitoring of the site and the </font><font style="font-family:inherit;font-size:10pt;">three</font><font style="font-family:inherit;font-size:10pt;"> remaining landfills.</font></div><div style="line-height:120%;padding-top:10px;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">The Company has proceeded with implementation of the investigation and remediation at the site in accordance with the MDEP order as modified by the Maine Board order. </font></div><div style="line-height:120%;padding-top:10px;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Since the early 2000s, the Company or its predecessors have also been involved in a lawsuit filed in the U.S. District Court for the District of Maine by the Natural Resources Defense Council and the Maine People&#8217;s Alliance. Plaintiffs sought an injunction requiring the Company's predecessor to conduct extensive studies of mercury contamination of the Penobscot River and Bay and options for remediating such contamination, and to perform appropriate remedial activities, if necessary.</font></div><div style="line-height:120%;padding-top:10px;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Following a trial in March 2002, the Court held that conditions in the Penobscot River and Bay may pose an imminent and substantial endangerment and that the Company&#8217;s predecessor was liable for the cost of performing a study of the River and Bay. Following a second trial in June 2014, the Court ordered that further engineering study and engineering design work was needed to determine the nature and extent of remediation in the Penobscot River and Bay. The Court also appointed an engineering firm to conduct such studies and issue a report on potential remediation alternatives. In connection with these proceedings, reports have been produced including a variety of cost estimates for a variety of potential remedial options. A third trial to determine the course of remediation to be pursued is scheduled to occur in October of 2019.</font></div><div style="line-height:120%;padding-top:10px;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">The Company's accrued expenses for environmental proceedings are included within accrued litigation as discussed above. </font></div><div style="line-height:120%;padding-bottom:10px;padding-top:10px;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-style:italic;">Government Matters</font></div><div style="line-height:120%;padding-top:10px;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Since 2011, the Company or one of its predecessors, including ev3, Inc. (&#8220;ev3&#8221;), has been responding to requests from the Department of Justice and U.S. Department of Health and Human Services for information about business practices dating back to 2005 relating to several neurovascular and peripheral vascular products developed and first marketed by those predecessors. The Company has provided information in response to these requests, and in November of 2018, the Company reached agreements to resolve certain of these matters through </font><font style="font-family:inherit;font-size:10pt;">two</font><font style="font-family:inherit;font-size:10pt;"> separate civil settlements and, in the case of sales of </font><font style="font-family:inherit;font-size:10pt;">one</font><font style="font-family:inherit;font-size:10pt;"> product, a misdemeanor plea agreement by ev3 for conduct between October 2005 and December 2009. The misdemeanor conduct ended prior to the Covidien acquisition of ev3 in 2010 and many years before the Medtronic acquisition of Covidien. The Company&#8217;s accrued expenses for the resolved matters are included within accrued litigation as discussed above. The Company continues to provide information to the Department of Justice in responding to requests that were not subject to the resolutions described above. The Company has not recognized an expense in connection with any ongoing investigation, because any such potential loss is not currently probable or reasonably estimable under U.S. GAAP. Additionally, the Company is unable to reasonably estimate the range of loss, if any, that may result from the ongoing information requests. </font></div><div style="line-height:120%;padding-bottom:10px;padding-top:10px;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-weight:bold;">Income Taxes</font></div><div style="line-height:120%;padding-bottom:12px;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">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 reviewed this dispute, and on June 9, 2016, issued its opinion with respect to the allocation of income between the parties for fiscal years 2005 and 2006. The U.S. Tax Court generally rejected the IRS&#8217;s position, but also made certain modifications to the Medtronic, Inc. tax returns as filed. On April 21, 2017, the IRS filed their Notice of Appeal to the U.S. Court of Appeals for the 8th Circuit regarding the Tax Court Opinion.&#160;Oral argument for the Appeal occurred on March 14, 2018. The 8th Circuit Court of Appeals issued their opinion on August 16, 2018, and remanded the case back to the U.S. Tax Court for additional factual findings.</font></div><div style="line-height:120%;padding-bottom:12px;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">In October 2011, the IRS issued its audit report on Medtronic, Inc. for fiscal years 2007 and 2008. 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 2007 and 2008 relates to 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 Case for fiscal years 2005 and 2006. </font></div><div style="line-height:120%;padding-bottom:8px;padding-top:8px;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">In April 2014, the IRS issued its audit report on Medtronic, Inc. for fiscal years 2009, 2010, and 2011. 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 2009, 2010, and 2011 relates to 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 Case for fiscal years 2005 and 2006. </font></div><div style="line-height:120%;padding-bottom:8px;padding-top:8px;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">In May 2017, the IRS issued its audit report on Medtronic, Inc. for fiscal years 2012, 2013, and 2014. Medtronic, Inc. reached agreement with the IRS on some but not all matters related to these fiscal years. The significant issues that remain unresolved relate to the allocation of income between Medtronic, Inc. and its wholly-owned subsidiary operating in Puerto Rico, and proposed adjustments associated with the utilization of certain net operating losses. The Company disagrees with the IRS and will attempt to resolve these matters at the IRS Appellate level.</font></div><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Medtronic, Inc.&#8217;s fiscal years 2015 and 2016 U.S. federal income tax returns are currently being audited by the IRS.</font></div><div style="line-height:120%;padding-bottom:8px;padding-top:8px;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Covidien and the IRS have concluded and reached agreement on its audit of Covidien&#8217;s U.S. federal income tax returns for all tax years through 2012. The statute of limitations for Covidien&#8217;s 2013 and 2014 U.S. federal income tax returns lapsed during the first quarter of fiscal years 2018 and 2019, respectively. Covidien's fiscal year 2015 U.S. federal income tax returns are currently being audited by the IRS.</font></div><div style="line-height:120%;padding-bottom:8px;padding-top:8px;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">While 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&#8217;s consolidated earnings, financial position, and/or cash flows.</font></div><div style="line-height:120%;padding-bottom:12px;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Refer to Note </font><font style="font-family:inherit;font-size:10pt;">12</font><font style="font-family:inherit;font-size:10pt;"> for additional discussion of income taxes.</font></div><div style="line-height:120%;padding-bottom:12px;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-weight:bold;">Guarantees</font></div><div style="line-height:120%;padding-top:12px;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">As a result of the acquisition of Covidien, the Company has a guarantee commitment related to certain contingent tax liabilities as a party to the Tax Sharing Agreement that was entered into on June 29, 2007, between Covidien, Tyco International (now Johnson Controls), and Tyco Electronics (now TE Connectivity), associated with the spin-off from Tyco. The Tax Sharing Agreement covers certain income tax liabilities for periods prior to and including the spin-off. Medtronic&#8217;s share of the income tax liabilities for these periods is </font><font style="font-family:inherit;font-size:10pt;">42 percent</font><font style="font-family:inherit;font-size:10pt;">, with Johnson Controls and TE Connectivity share being </font><font style="font-family:inherit;font-size:10pt;">27 percent</font><font style="font-family:inherit;font-size:10pt;">, and </font><font style="font-family:inherit;font-size:10pt;">31 percent</font><font style="font-family:inherit;font-size:10pt;">, respectively. If Johnson Controls and TE Connectivity default on their obligations to the Company under the Tax Sharing Agreement, the Company would be liable for the entire amount of these liabilities. All costs and expenses associated with the management of these tax liabilities are being shared equally among the parties. The most significant amounts at risk under this Tax Sharing Agreement were resolved with the U.S. Tax Court and IRS Appeals resolutions reached in May 2016. However, the Tax Sharing Agreement remains in place with respect to income tax liabilities that are not the subject of such resolution, including certain state and international tax matters that remain open.</font></div><div style="line-height:120%;padding-top:12px;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">The Company has used available information to develop its best estimates for certain assets and liabilities related to periods prior to the 2007 separation, including amounts subject to or impacted by the provisions of the Tax Sharing Agreement. The actual amounts that the Company may be required to ultimately accrue or pay under the Tax Sharing Agreement, however, could vary depending upon the outcome of the unresolved tax matters. Final determination of the balances will be made in subsequent periods, primarily related to tax years that remain open for examination. These balances will also be impacted by the filing of final or amended income tax returns in certain jurisdictions where those returns include a combination of Tyco International, Covidien and/or Tyco Electronics legal entities for periods prior to the 2007 separation.</font></div><div style="line-height:120%;padding-top:12px;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Refer to Note 1 </font><font style="font-family:inherit;font-size:10pt;">to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended April 27, 2018</font><font style="font-family:inherit;font-size:10pt;"> for additional information.</font></div><div style="line-height:120%;padding-top:12px;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">As part of the Company&#8217;s Minimally Invasive Therapies Group sale of the Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency businesses to Cardinal on July 29, 2017, the Company has indemnified Cardinal for certain contingent tax liabilities related to the divested businesses that existed prior to the date of divestiture. The actual amounts that the Company may be required to ultimately accrue or pay could vary depending upon the outcome of the unresolved tax matters.</font></div><div style="line-height:120%;padding-top:12px;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">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&#8217; 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&#8217;s maximum exposure under these guarantees is unable to be estimated. Historically, the Company has not experienced significant losses on these types of guarantees.</font></div><div style="line-height:120%;padding-top:12px;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">The Company believes the ultimate resolution of the above guarantees is not expected to have a material effect on the Company&#8217;s consolidated earnings, financial position, or cash flows.</font></div></div>

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