2020 Q2 Form 10-K Financial Statement

#000161310320000021 Filed on June 19, 2020

View on sec.gov

Income Statement

Concept 2020 Q2 2020 Q1 2019 Q4
Revenue $5.998B $7.717B $7.706B
YoY Change -26.37% 2.27% 3.01%
Cost Of Revenue $2.232B $2.400B $2.394B
YoY Change -8.9% 5.96% 8.67%
Gross Profit $3.734B $5.317B $5.312B
YoY Change -34.06% 0.68% 0.64%
Gross Profit Margin 62.25% 68.9% 68.93%
Selling, General & Admin $2.310B $2.587B $2.620B
YoY Change -12.5% -0.35% 0.58%
% of Gross Profit 61.86% 48.66% 49.32%
Research & Development $568.0M $573.0M $603.0M
YoY Change -4.38% 2.14% 2.2%
% of Gross Profit 15.21% 10.78% 11.35%
Depreciation & Amortization $672.0M $663.0M $671.0M
YoY Change 0.75% -1.78% 3.07%
% of Gross Profit 18.0% 12.47% 12.63%
Operating Expenses $3.307B $3.160B $3.223B
YoY Change -5.19% 0.1% 0.88%
Operating Profit $427.0M $1.639B $1.351B
YoY Change -80.37% 6.29% -12.5%
Interest Expense -$16.00M $156.0M $165.0M
YoY Change -83.84% -35.8% -31.54%
% of Operating Profit -3.75% 9.52% 12.21%
Other Income/Expense, Net -$11.00M $96.00M $108.0M
YoY Change -35.29% 35.21% 107.69%
Pretax Income $205.0M $1.579B $1.294B
YoY Change -84.13% 15.26% -4.5%
Income Tax -$401.0M -$340.0M -$77.00M
% Of Pretax Income -195.61% -21.53% -5.95%
Net Earnings $646.0M $1.915B $1.364B
YoY Change -44.88% 50.91% 22.33%
Net Earnings / Revenue 10.77% 24.82% 17.7%
Basic Earnings Per Share $0.48 $1.43 $1.02
Diluted Earnings Per Share $0.48 $1.42 $1.01
COMMON SHARES
Basic Shares Outstanding 1.341B shares 1.341B shares 1.341B shares
Diluted Shares Outstanding 1.352B shares 1.351B shares

Balance Sheet

Concept 2020 Q2 2020 Q1 2019 Q4
SHORT-TERM ASSETS
Cash & Short-Term Investments $10.95B $11.63B $10.40B
YoY Change 11.17% 27.19% 2.62%
Cash & Equivalents $4.140B $3.709B $3.962B
Short-Term Investments $6.808B $7.919B $6.436B
Other Short-Term Assets $2.209B $2.045B $2.095B
YoY Change 3.03% 1.49% 4.02%
Inventory $4.229B $4.122B $4.042B
Prepaid Expenses
Receivables $4.645B $6.248B $6.118B
Other Receivables $0.00 $0.00 $0.00
Total Short-Term Assets $22.03B $24.04B $22.65B
YoY Change 0.29% 15.17% 4.62%
LONG-TERM ASSETS
Property, Plant & Equipment $4.828B $4.764B $4.756B
YoY Change 3.27% 3.72% 4.85%
Goodwill $39.84B $40.09B $39.95B
YoY Change -0.3% 0.22% 3.49%
Intangibles $19.06B $19.46B $19.78B
YoY Change -7.28% -6.62% -5.01%
Long-Term Investments $480.0M $480.0M $432.0M
YoY Change 29.03% 45.45% -15.46%
Other Assets $2.094B $2.196B $2.113B
YoY Change 106.51% 137.15% 88.16%
Total Long-Term Assets $68.66B $68.78B $68.40B
YoY Change 1.37% 1.36% 2.86%
TOTAL ASSETS
Total Short-Term Assets $22.03B $24.04B $22.65B
Total Long-Term Assets $68.66B $68.78B $68.40B
Total Assets $90.69B $92.82B $91.05B
YoY Change 1.11% 4.61% 3.29%
SHORT-TERM LIABILITIES
YoY Change
Accounts Payable $1.996B $1.945B $1.965B
YoY Change 2.2% 14.01% 12.8%
Accrued Expenses $4.839B $5.256B $4.672B
YoY Change -0.94% 9.59% 1.43%
Deferred Revenue
YoY Change
Short-Term Debt $0.00 $0.00 $0.00
YoY Change
Long-Term Debt Due $2.776B $844.0M $875.0M
YoY Change 231.26% -37.76% -34.85%
Total Short-Term Liabilities $10.37B $8.735B $8.170B
YoY Change 22.36% -1.33% -3.46%
LONG-TERM LIABILITIES
Long-Term Debt $22.14B $24.73B $24.75B
YoY Change -9.82% 4.47% 4.56%
Other Long-Term Liabilities $1.664B $1.784B $1.758B
YoY Change 119.82% 148.12% 142.82%
Total Long-Term Liabilities $23.80B $1.784B $1.758B
YoY Change -5.95% 148.12% 142.82%
TOTAL LIABILITIES
Total Short-Term Liabilities $10.37B $8.735B $8.170B
Total Long-Term Liabilities $23.80B $1.784B $1.758B
Total Liabilities $39.82B $40.87B $40.33B
YoY Change 0.85% 5.36% 4.94%
SHAREHOLDERS EQUITY
Retained Earnings $28.13B $28.21B $27.02B
YoY Change 7.09% 9.47% 7.34%
Common Stock $0.00 $0.00 $0.00
YoY Change
Preferred Stock
YoY Change
Treasury Stock (at cost)
YoY Change
Treasury Stock Shares
Shareholders Equity $50.74B $51.81B $50.58B
YoY Change
Total Liabilities & Shareholders Equity $90.69B $92.82B $91.05B
YoY Change 1.11% 4.61% 3.29%

Cashflow Statement

Concept 2020 Q2 2020 Q1 2019 Q4
OPERATING ACTIVITIES
Net Income $646.0M $1.915B $1.364B
YoY Change -44.88% 50.91% 22.33%
Depreciation, Depletion And Amortization $672.0M $663.0M $671.0M
YoY Change 0.75% -1.78% 3.07%
Cash From Operating Activities $1.450B $2.407B $1.867B
YoY Change -30.52% 17.13% 60.53%
INVESTING ACTIVITIES
Capital Expenditures -$336.0M -$293.0M -$283.0M
YoY Change 0.3% -2.98% 37.38%
Acquisitions
YoY Change
Other Investing Activities $701.0M -$1.508B -$933.0M
YoY Change -461.34% 113.3% -385.32%
Cash From Investing Activities $365.0M -$1.801B -$1.216B
YoY Change -169.0% 78.49% -1104.96%
FINANCING ACTIVITIES
Cash Dividend Paid
YoY Change
Common Stock Issuance & Retirement, Net
YoY Change
Debt Paid & Issued, Net
YoY Change
Cash From Financing Activities -1.310B -873.0M -1.741B
YoY Change 52.33% -31.15% 0.64%
NET CHANGE
Cash From Operating Activities 1.450B 2.407B 1.867B
Cash From Investing Activities 365.0M -1.801B -1.216B
Cash From Financing Activities -1.310B -873.0M -1.741B
Net Change In Cash 505.0M -267.0M -1.090B
YoY Change -27.65% 20.27% 144.39%
FREE CASH FLOW
Cash From Operating Activities $1.450B $2.407B $1.867B
Capital Expenditures -$336.0M -$293.0M -$283.0M
Free Cash Flow $1.786B $2.700B $2.150B
YoY Change -26.26% 14.55% 57.05%

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CY2020 us-gaap Prior Period Reclassification Adjustment Description
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Certain reclassifications have been made to prior year financial statements to conform to classifications used in the current year.
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The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States (U.S.) (U.S. GAAP) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Estimates are used when accounting for items such as income taxes, contingencies, intangible asset, and liability valuations. Actual results may or may not differ from those estimates.
CY2020 us-gaap Fiscal Period
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The Company utilizes a 52/53-week fiscal year, ending the last Friday in April, for the presentation of its consolidated financial statements and related notes thereto at April 24, 2020 and April 26, 2019 and for each of the three fiscal years ended April 24, 2020 (fiscal year 2020), April 26, 2019 (fiscal year 2019), and April 27, 2018 (fiscal year 2018). Fiscal years 2020, 2019, 2018 were 52-week years. The Company's fiscal year 2021 is a 53-week year, with the extra week occurring during the first quarter, and will end on April 30, 2021.
CY2020 us-gaap Effect Of Exchange Rate On Cash Cash Equivalents Restricted Cash And Restricted Cash Equivalents
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114000000 USD
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CY2020 mdt Business Acquisition Contingent Consideration Milestone Payment
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CY2019Q2 us-gaap Business Combination Contingent Consideration Liability
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135000000 USD
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141000000 USD
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CY2019 us-gaap Other Than Temporary Impairment Credit Losses Recognized In Earnings Reductions Securities Sold
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0 USD
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20000000 USD
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1453000000 USD
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6000000 USD
CY2020Q2 us-gaap Debt Securities Available For Sale Continuous Unrealized Loss Position12 Months Or Longer
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4019000000 USD
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135000000 USD
CY2019Q2 us-gaap Debt Securities Available For Sale Continuous Unrealized Loss Position Less Than12 Months
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1075000000 USD
CY2019Q2 us-gaap Debt Securities Available For Sale Continuous Unrealized Loss Position Less Than12 Months Accumulated Loss
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9000000 USD
CY2019Q2 us-gaap Debt Securities Available For Sale Continuous Unrealized Loss Position12 Months Or Longer
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2181000000 USD
CY2019Q2 us-gaap Debt Securities Available For Sale Continuous Unrealized Loss Position12 Months Or Longer Accumulated Loss
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52000000 USD
CY2020 us-gaap Proceeds From Sale Of Available For Sale Securities Debt
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CY2019 us-gaap Proceeds From Sale Of Available For Sale Securities Debt
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CY2018 us-gaap Effective Income Tax Rate Reconciliation Tax Credits Research
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CY2020 mdt Effective Income Tax Rate Reconciliation Puerto Rico Excise Tax
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CY2020 us-gaap Effective Income Tax Rate Reconciliation Change In Enacted Tax Rate
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CY2019 us-gaap Effective Income Tax Rate Reconciliation Change In Enacted Tax Rate
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CY2018 us-gaap Effective Income Tax Rate Reconciliation Change In Enacted Tax Rate
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CY2020 mdt Effective Income Tax Rate Reconciliation Base Erosion And Anti Abuse Tax Percent
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CY2019 mdt Effective Income Tax Rate Reconciliation Base Erosion And Anti Abuse Tax Percent
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CY2020 mdt Effective Income Tax Rate Reconciliation Deduction Foreign Derived Intangible Income Percent
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CY2019 mdt Effective Income Tax Rate Reconciliation Deduction Foreign Derived Intangible Income Percent
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CY2018 mdt Effective Income Tax Rate Reconciliation Deduction Foreign Derived Intangible Income Percent
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CY2020 us-gaap Effective Income Tax Rate Reconciliation Disposition Of Business
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CY2019 us-gaap Effective Income Tax Rate Reconciliation Disposition Of Business
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CY2020 us-gaap Effective Income Tax Rate Reconciliation Repatriation Of Foreign Earnings
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CY2018 us-gaap Effective Income Tax Rate Reconciliation Repatriation Of Foreign Earnings
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CY2020 us-gaap Income Tax Reconciliation Tax Contingencies Foreign
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CY2020 us-gaap Income Tax Reconciliation Change In Deferred Tax Assets Valuation Allowance
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CY2018 mdt Tax Expense Benefit Associated With Saleof Intellectual Property
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CY2020 us-gaap Income Tax Reconciliation Tax Holidays
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CY2020 mdt Cash Advance Paidin Connection With Proposed Settlements
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CY2020 us-gaap Unrecognized Tax Benefits Decreases Resulting From Settlements With Taxing Authorities
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CY2020Q2 us-gaap Unrecognized Tax Benefits That Would Impact Effective Tax Rate
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CY2020 us-gaap Incremental Common Shares Attributable To Nonvested Shares With Forfeitable Dividends
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2800000 shares
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3200000 shares
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3300000 shares
CY2020 mdt Incremental Common Shares Attributableto Dilutive Effectof Other Shares
IncrementalCommonSharesAttributabletoDilutiveEffectofOtherShares
400000 shares
CY2019 mdt Incremental Common Shares Attributableto Dilutive Effectof Other Shares
IncrementalCommonSharesAttributabletoDilutiveEffectofOtherShares
300000 shares
CY2018 mdt Incremental Common Shares Attributableto Dilutive Effectof Other Shares
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300000 shares
CY2020 us-gaap Weighted Average Number Of Diluted Shares Outstanding
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CY2019 us-gaap Weighted Average Number Of Diluted Shares Outstanding
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3.57
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2.29
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3.54
CY2019 us-gaap Earnings Per Share Diluted
EarningsPerShareDiluted
3.41
CY2018 us-gaap Earnings Per Share Diluted
EarningsPerShareDiluted
2.27
CY2020 us-gaap Pension And Other Postretirement Benefit Expense
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467000000 USD
CY2019 us-gaap Pension And Other Postretirement Benefit Expense
PensionAndOtherPostretirementBenefitExpense
539000000 USD
CY2018 us-gaap Pension And Other Postretirement Benefit Expense
PensionAndOtherPostretirementBenefitExpense
552000000 USD
CY2020Q2 us-gaap Defined Benefit Plan Funded Status Of Plan
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-1400000000 USD
CY2019Q2 us-gaap Defined Benefit Plan Funded Status Of Plan
DefinedBenefitPlanFundedStatusOfPlan
-1100000000 USD
CY2020Q2 mdt Investments Numberof Investments In Processof Liquidation
InvestmentsNumberofInvestmentsInProcessofLiquidation
0 fund
CY2020 us-gaap Defined Contribution Plan Cost Recognized
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376000000 USD
CY2019 us-gaap Defined Contribution Plan Cost Recognized
DefinedContributionPlanCostRecognized
415000000 USD
CY2018 us-gaap Defined Contribution Plan Cost Recognized
DefinedContributionPlanCostRecognized
374000000 USD
CY2020Q2 us-gaap Operating Lease Right Of Use Asset
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927000000 USD
CY2020Q2 us-gaap Operating Lease Weighted Average Remaining Lease Term1
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P7Y2M12D
CY2020Q2 us-gaap Operating Lease Liability Current
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171000000 USD
CY2020Q2 us-gaap Operating Lease Liability Noncurrent
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774000000 USD
CY2020Q2 us-gaap Operating Lease Weighted Average Discount Rate Percent
OperatingLeaseWeightedAverageDiscountRatePercent
0.030
CY2020 us-gaap Operating Lease Cost
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223000000 USD
CY2020 us-gaap Short Term Lease Cost
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46000000 USD
CY2020 us-gaap Lease Cost
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269000000 USD
CY2020 us-gaap Operating Lease Payments
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221000000 USD
CY2020 us-gaap Right Of Use Asset Obtained In Exchange For Operating Lease Liability
RightOfUseAssetObtainedInExchangeForOperatingLeaseLiability
174000000 USD
CY2020Q2 us-gaap Lessee Operating Lease Liability Payments Due Next Twelve Months
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218000000 USD
CY2020Q2 us-gaap Lessee Operating Lease Liability Payments Due Year Two
LesseeOperatingLeaseLiabilityPaymentsDueYearTwo
175000000 USD
CY2020Q2 us-gaap Lessee Operating Lease Liability Payments Due Year Three
LesseeOperatingLeaseLiabilityPaymentsDueYearThree
144000000 USD
CY2020Q2 us-gaap Lessee Operating Lease Liability Payments Due Year Four
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118000000 USD
CY2020Q2 us-gaap Lessee Operating Lease Liability Payments Due Year Five
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102000000 USD
CY2020Q2 us-gaap Lessee Operating Lease Liability Payments Due After Year Five
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277000000 USD
CY2020Q2 us-gaap Lessee Operating Lease Liability Payments Due
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1034000000 USD
CY2020Q2 us-gaap Lessee Operating Lease Liability Undiscounted Excess Amount
LesseeOperatingLeaseLiabilityUndiscountedExcessAmount
89000000 USD
CY2020Q2 us-gaap Operating Lease Liability
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945000000 USD
CY2019Q2 us-gaap Operating Leases Future Minimum Payments Due Current
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216000000 USD
CY2019Q2 us-gaap Operating Leases Future Minimum Payments Due In Two Years
OperatingLeasesFutureMinimumPaymentsDueInTwoYears
157000000 USD
CY2019Q2 us-gaap Operating Leases Future Minimum Payments Due In Three Years
OperatingLeasesFutureMinimumPaymentsDueInThreeYears
103000000 USD
CY2019Q2 us-gaap Operating Leases Future Minimum Payments Due In Four Years
OperatingLeasesFutureMinimumPaymentsDueInFourYears
61000000 USD
CY2019Q2 us-gaap Operating Leases Future Minimum Payments Due In Five Years
OperatingLeasesFutureMinimumPaymentsDueInFiveYears
34000000 USD
CY2019Q2 us-gaap Operating Leases Future Minimum Payments Due Thereafter
OperatingLeasesFutureMinimumPaymentsDueThereafter
81000000 USD
CY2019Q2 us-gaap Operating Leases Future Minimum Payments Due
OperatingLeasesFutureMinimumPaymentsDue
652000000 USD
CY2019 us-gaap Lease And Rental Expense
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305000000 USD
CY2018 us-gaap Lease And Rental Expense
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319000000 USD
CY2020 us-gaap Loss Contingency Disclosures
LossContingencyDisclosures
Commitments and Contingencies <div style="text-align:justify;margin-top:8pt;margin-bottom:8pt;"><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:700;line-height:120%;">Legal Matters</span></div><div style="text-align:justify;margin-top:8pt;margin-bottom:8pt;"><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;">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, 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.</span></div><div style="text-align:justify;"><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:115%;">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 litigation charges and gains related to significant legal matters as certain litigation charges. During fiscal years 2020, 2019, and 2018, the Company recognized $313 million, $166 million, and $61 million, respectively, of certain litigation charges. At both April 24, 2020 and April 26, 2019, accrued litigation was approximately $0.5 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 </span><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-style:italic;font-weight:400;line-height:115%;">other accrued expenses</span><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:115%;"> and </span><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-style:italic;font-weight:400;line-height:115%;">other liabilities</span><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:115%;"> 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.</span></div><div style="text-align:justify;"><span><br/></span></div><div style="text-align:justify;"><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-style:italic;font-weight:400;line-height:115%;">Product Liability Matters</span></div><div style="text-align:justify;margin-top:9pt;margin-bottom:6pt;"><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;text-decoration: underline;">Pelvic Mesh Litigation</span></div><div style="text-align:justify;"><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;">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 June 3, 2020, the Company had reached agreements to settle </span></div><div style="text-align:justify;"><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;">approximately 15,900 of these claims. The Company's accrued expenses for this matter are included within accrued litigation as discussed above.</span></div><div style="text-align:justify;margin-top:8pt;margin-bottom:8pt;"><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;text-decoration: underline;">Hernia Mesh Litigation</span></div><div style="text-align:justify;"><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;">During fiscal year 2020, plaintiffs filed lawsuits against certain subsidiaries of the Company in U.S. state and federal courts alleging personal injury from hernia mesh products sold by those subsidiaries. The majority of the pending cases are in Massachusetts state court, and a motion for consolidation of those cases was filed during the fourth quarter of fiscal year 2020. Certain plaintiffs law firms have advised the Company that they may file additional cases in the future. The pending lawsuits relate 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 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.</span></div><div style="text-align:justify;margin-top:8pt;margin-bottom:8pt;"><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-style:italic;font-weight:400;line-height:120%;">Patent Litigation</span></div><div style="text-align:justify;margin-top:8pt;margin-bottom:8pt;"><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;text-decoration: underline;">Ethicon</span></div><div style="text-align:justify;margin-top:8pt;margin-bottom:8pt;"><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;">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 one 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 six 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.</span></div><div style="text-align:justify;margin-top:8pt;margin-bottom:8pt;"><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;text-decoration: underline;">Sasso</span></div><div style="text-align:justify;"><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:115%;">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 $112 million. The Company has strong arguments to appeal the verdict and has filed post-trial motions and appeals with the appropriate appellate courts. The Company's accrued expenses for this matter are included within accrued litigation as discussed above.</span></div><div style="text-align:justify;"><span><br/></span></div><div><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-style:italic;font-weight:400;line-height:115%;">Shareholder Related Matters</span></div><div style="text-align:justify;margin-top:8pt;margin-bottom:8pt;"><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;text-decoration: underline;">Covidien Acquisition</span></div><div style="text-align:justify;margin-top:8pt;margin-bottom:8pt;"><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;">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 </span><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-style:italic;font-weight:400;line-height:120%;">Merenstein</span><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;"> and </span><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-style:italic;font-weight:400;line-height:120%;">Steiner</span><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;"> 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’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’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. In April of 2020, the District Court issued an order and opinion denying the plaintiffs' motion for class certification. 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.</span></div><div style="text-align:justify;margin-top:8pt;margin-bottom:8pt;"><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-style:italic;font-weight:400;line-height:120%;">Environmental Proceedings</span></div><div style="text-align:justify;margin-top:8pt;margin-bottom:8pt;"><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;">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.</span></div><div style="text-align:justify;margin-top:8pt;margin-bottom:8pt;"><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;">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 two landfills, capping of the remaining three landfills, installation of a groundwater extraction system and long-term monitoring of the site and the three remaining landfills.</span></div><div style="text-align:justify;margin-top:8pt;margin-bottom:8pt;"><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;">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.</span></div><div style="text-align:justify;margin-top:8pt;margin-bottom:8pt;"><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;">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’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.</span></div><div style="text-align:justify;margin-top:8pt;margin-bottom:8pt;"><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;">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’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 fiscal year 2021.</span></div><div style="text-align:justify;margin-top:8pt;margin-bottom:8pt;"><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;">The Company's accrued expenses for environmental proceedings are included within accrued litigation as discussed above.</span></div><div style="text-align:justify;margin-top:8pt;margin-bottom:8pt;"><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-style:italic;font-weight:400;line-height:120%;">Government Matters</span></div><div style="text-align:justify;margin-top:8pt;margin-bottom:8pt;"><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;">Since 2017, the Company has been responding to requests from the Department of Justice and U.S. Department of Health and Human Services for information about business practices relating to a neurovascular product developed and first marketed by ev3 and Covidien. The Company has provided information in response to these requests and is cooperating with the inquiry. 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.</span></div><div style="text-align:justify;margin-top:9pt;margin-bottom:9pt;"><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:700;line-height:120%;">Income Taxes </span></div><div style="text-align:justify;margin-top:8pt;margin-bottom:8pt;"><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;">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’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. 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. The U.S. Tax Court scheduled for April of 2020 was postponed due to the challenges of COVID-19. The new trial date has not been re-scheduled.</span></div><div style="text-align:justify;margin-top:8pt;margin-bottom:8pt;"><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;">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. </span></div><div style="text-align:justify;margin-top:8pt;margin-bottom:8pt;"><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;">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. </span></div><div style="text-align:justify;margin-top:8pt;margin-bottom:8pt;"><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;">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.</span></div><div style="margin-top:8pt;margin-bottom:8pt;"><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;">Medtronic, Inc.’s fiscal years 2015 and 2016 U.S. federal income tax returns are currently being audited by the IRS.</span></div><div style="text-align:justify;margin-top:8pt;margin-bottom:8pt;"><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;">Covidien and the IRS have concluded and reached agreement on its audit of Covidien’s U.S. federal income tax returns for all tax years through 2012. The statute of limitations for Covidien’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. The statute of limitations for Covidien's 2016 U.S. federal income tax return lapsed during the third quarter of fiscal year 2020.</span></div><div style="text-align:justify;margin-top:8pt;margin-bottom:8pt;"><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;">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’s consolidated earnings, financial position, and/or cash flows.</span></div><div style="text-align:justify;margin-top:6pt;margin-bottom:9pt;"><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;">See Note 14 for additional discussion of income taxes.</span></div><div style="text-align:justify;margin-top:6pt;margin-bottom:9pt;"><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:700;line-height:120%;">Guarantees</span></div><div style="text-align:justify;margin-top:8pt;margin-bottom:8pt;"><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;">As a result of the acquisition of Covidien, the Company had 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 covered certain income tax liabilities for periods prior to and including the spin-off. Medtronic’s share of the income tax liabilities for these periods was 42 percent, with Johnson Controls and TE Connectivity share being 27 percent, and 31 percent, 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 were 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. The parties terminated the Tax Sharing Agreement during the fourth quarter of fiscal year 2020.</span></div><div style="text-align:justify;margin-top:8pt;margin-bottom:8pt;"><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;">As part of the Company’s 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.</span></div><div style="text-align:justify;margin-top:8pt;margin-bottom:8pt;"><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;">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.</span></div><div style="text-align:justify;margin-top:8pt;margin-bottom:8pt;"><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;">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, or cash flows.</span></div>
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