What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-03-01 compared with 2022-12-01 · 157 added, 176 removed, 503 unchanged (40% of the section changed)

3 unchanged sentences

For a full understanding of financial condition and results of operations, you should read this discussion along with Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended April 29, 2022.

In addition, you should read this discussion along with our consolidated financial statements and related notes thereto at and for the three and six months ended October 28, 2022.

In addition, you should read this discussion along with our consolidated financial statements and related notes thereto at and for the three and nine months ended January 27, 2023.

Amounts reported in millions within this quarterly report are computed based on the amounts in thousands, and therefore, the sum of the components may not equal the total amount reported in millions due to rounding.

14 unchanged sentences

Our primary products include those for cardiac rhythm disorders, cardiovascular disease, advanced and general surgical care, respiratory and monitoring solutions, renal care, neurological disorders, spinal conditions and musculoskeletal trauma, urological and digestive disorders, and ear, nose, and throat, and diabetes conditions.

The global healthcare system is continuing to respond to the challenges posed by the COVID-19 pandemic ("COVID-19" or the "pandemic").

The global healthcare system is continuing to respond to the challenges posed by the COVID-19 pandemic ("COVID-19" or the "pandemic"), including the impact on China and Japan in the third quarter of fiscal year 2023.

Several of our businesses continued to be affected by the pandemic, including the impacts of healthcare system staffing shortages on procedural volumes, and, in the first quarter of fiscal year 2023, the COVID-19 lockdowns in China, which continued through the end of May.

2 unchanged sentences

We expect medical procedure rates may continue to vary by therapy and country and to be impacted by regional COVID-19 case volumes, vaccine and booster immunization rates, and new COVID-19 variants.

Additionally, we cannot predict the impact further healthcare system staffing shortages will have on procedural volumes, and the continued impact certain supply chain disruptions will have on the business.

The following is a summary of revenue and diluted earnings per share for the three months ended October 28, 2022 and October 29, 2021, and operating cash flow for the six months ended October 28, 2022 and October 29, 2021:

Additionally, we cannot predict the impact further healthcare system staffing shortages will have on procedural volumes, and the impact certain supply chain disruptions will have on the business.

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

GAAP to Non-GAAP Reconciliations

2 unchanged sentences

Historical non-GAAP financial measures presented in this quarterly report have been recast for comparability.

The tables below present our GAAP to Non-GAAP reconciliations for the three months ended October 28, 2022 and October 29, 2021:

Three months ended October 28, 2022

The tables below present our GAAP to Non-GAAP reconciliations for the three months ended January 27, 2023 and January 28, 2022:

Three months ended January 27, 2023

(in millions, except per share data) Income Before Income Taxes Income

14 unchanged sentences

10 1 9 0.01 10.0

Exit of business (6)

37 — 37 0.03 —

Certain tax adjustments, net

— (793) 793 0.60 —

Non-GAAP $ 1,973 $ 239 $ 1,727 $ 1.30 12.1 %

Three months ended October 29, 2021

Three months ended January 28, 2022

(in millions, except per share data) Income Before Income Taxes Income

8 unchanged sentences

(Gain)/loss on minority investments (3)

2 (1) 3 — (50.0)

Medical device regulations (4)

9 unchanged sentences

We consider these costs to be duplicative of previously incurred costs and/or one-time costs, which are limited to a specific time period.

(5) The charges predominantly relate to changes in the carrying amount of the disposal group and other associated costs, as a result of the anticipated sale of half of the Company's Renal Care Solutions (RCS) business related to the May 25, 2022 agreement with DaVita Inc.

(6) The charges relate to the exit of a business and are primarily comprised of inventory write-downs.

(7) The charge primarily relates to a $764 million reserve adjustment that was a direct result of the U.S.

Tax Court opinion, issued on August 18, 2022, on the previously disclosed litigation regarding the allocation of income between Medtronic, Inc.

and its wholly owned subsidiary operating in Puerto Rico.

(8) The charge includes the amortization on previously established deferred tax assets from intercompany intellectual property transactions.

The tables below present our GAAP to Non-GAAP reconciliations for the six months ended October 28, 2022 and October 29, 2021:

Six months ended October 28, 2022

(5) Associated costs as a result of the anticipated sale of half of the Company's Renal Care Solutions (RCS) business related to the May 25, 2022 agreement with DaVita Inc.

(6) The tax benefit primarily relates to the deferred tax impact associated with a step up in tax basis for Swiss Cantonal purposes which is partially offset by the amortization on previously established deferred tax assets from intercompany intellectual property transactions.

The tables below present our GAAP to Non-GAAP reconciliations for the nine months ended January 27, 2023 and January 28, 2022:

Nine months ended January 27, 2023

(in millions, except per share data) Income Before Income Taxes Income

21 unchanged sentences

Non-GAAP $ 5,706 $ 736 $ 4,953 $ 3.72 12.9 %

Six months ended October 29, 2021

Nine months ended January 28, 2022

(in millions, except per share data) Income Before Income Taxes Income

5 unchanged sentences

Acquisition-related items (2)

(54) 3 (57) (0.04) (5.6)

Certain litigation charges 95 17 78 0.06 17.9

15 unchanged sentences

(5) The charges predominantly include non-cash pre-tax impairments, primarily related to goodwill, and other associated costs, as a result of the anticipated sale of half of the Company's Renal Care Solutions (RCS) business related to the May 25, 2022 agreement with DaVita Inc.

(6) The charges relate to the early redemption of approximately $2.3 billion of debt and were recorded within interest expense within the consolidated statements of income.

(6) The charges relate to the early redemption of approximately $2.3 billion of debt and were recorded within interest expense, net within the consolidated statements of income.

(7) The charges relate to the exit of a business and are primarily comprised of inventory write-downs.

5 unchanged sentences

obligations, restructuring, and other associated costs.

Medtronic is committed to serving the needs of the patients currently implanted with the HVAD System.

(10) The charge is associated with a change in the company’s permanently reinvestment assertion on certain historical earnings and the amortization on previously established deferred tax assets from intercompany intellectual property transactions.

Medtronic is committed to serving the needs of patients currently implanted with the HVAD System.

(10) The charge primarily relates to the amortization on previously established deferred tax assets from intercompany intellectual property transactions and a charge related to a change in the Company's permanent reinvestment assertion on certain historical earnings, which are partially offset by the deferred tax impact associated with a step up in tax basis for Swiss Cantonal purposes.

Free Cash Flow

5 unchanged sentences

GAAP measure) and free cash flow are as follows:

Six months ended

(in millions) October 28, 2022 October 29, 2021

Nine months ended

(in millions) January 27, 2023 January 28, 2022

Net cash provided by operating activities $ 3,579 $ 5,289

3 unchanged sentences

Segment and Division

The charts below illustrate the percent of net sales by segment for the three months ended October 28, 2022 and October 29, 2021:

The table below illustrates net sales by segment and division for the three and six months ended October 28, 2022 and October 29, 2021:

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

The table below illustrates net sales by segment and division for the three and nine months ended January 27, 2023 and January 28, 2022:

Three months ended

Six months ended

(in millions) October 28, 2022 October 29, 2021 % Change October 28, 2022 October 29, 2021 % Change

Nine months ended

(in millions) January 27, 2023 January 28, 2022 % Change January 27, 2023 January 28, 2022 % Change

Cardiac Rhythm & Heart Failure $ 1,431 $ 1,402 2 % $ 4,255 $ 4,356 (2) %

12 unchanged sentences

Segment and Market Geography

The charts below illustrate the percent of net sales by market geography for the three months ended October 28, 2022 and October 29, 2021:

The table below includes net sales by market geography for each of our segments for the three and six months ended October 28, 2022 and October 29, 2021:

The charts below illustrate the percent of net sales by market geography for the three months ended January 27, 2023 and January 28, 2022:

The table below includes net sales by market geography for each of our segments for the three and nine months ended January 27, 2023 and January 28, 2022:

Developed Markets (2)

1 unchanged sentence

Three months ended Three months ended Three months ended

(in millions) October 28, 2022 October 29, 2021 % Change October 28, 2022 October 29, 2021 % Change October 28, 2022 October 29, 2021 % Change

(in millions) January 27, 2023 January 28, 2022 % Change January 27, 2023 January 28, 2022 % Change January 27, 2023 January 28, 2022 % Change

Cardiovascular $ 1,375 $ 1,297 6 % $ 859 $ 935 (8) % $ 538 $ 513 5 %

5 unchanged sentences

Emerging Markets (3)

Six months ended Six months ended Six months ended

(in millions) October 28, 2022 October 29, 2021 % Change October 28, 2022 October 29, 2021 % Change October 28, 2022 October 29, 2021 % Change

Nine months ended Nine months ended Nine months ended

(in millions) January 27, 2023 January 28, 2022 % Change January 27, 2023 January 28, 2022 % Change January 27, 2023 January 28, 2022 % Change

Cardiovascular $ 4,097 $ 4,090 — % $ 2,553 $ 2,886 (12) % $ 1,607 $ 1,486 8 %

7 unchanged sentences

developed markets, as defined above.

The decline in net sales for three and six months ended October 28, 2022, as compared to the corresponding period in the prior fiscal year, was driven primarily by unfavorable currency impact and supply chain challenges in certain businesses, particularly in the first quarter of fiscal year 2023.

For the three months ended October 28, 2022, currency had an unfavorable impact on emerging markets and non-U.S.

The decline in net sales for three and nine months ended January 27, 2023, as compared to the corresponding period in the prior fiscal year, was driven primarily by unfavorable currency impact, sales in China due to volume-based procurement tenders and the impact of COVID-19 resurgence, as well as supply chain challenges in certain businesses, particularly in the first quarter of fiscal year 2023.

For the three months ended January 27, 2023, currency had an unfavorable impact on emerging markets and non-U.S.

developed markets of $89 million and $290 million, respectively.

For the six months ended October 28, 2022, currency had an unfavorable impact on emerging markets and non-U.S.

For the nine months ended January 27, 2023, currency had an unfavorable impact on emerging markets and non-U.S.

developed markets of $190 million and $995 million, respectively.

The decline in net sales for the three and six months ended October 28, 2022 was partially offset by growth in certain product lines, including Transcatheter Aortic Valve replacements (TAVR), Core Spine in the U.S., and Diabetes in international markets.

The decline in net sales for the three and nine months ended January 27, 2023 was partially offset by growth in certain product lines and businesses, including Micra, Transcatheter Aortic Valve replacements (TAVR), Core Spine in the U.S., and Diabetes in international markets.

Looking ahead, a number of macro-economic and geopolitical factors could negatively impact our business, including without limitation:

1 unchanged sentence

• National and provincial tender pricing for certain products, particularly in China;

• The uncertain and uneven impact of COVID-19 on future procedural volumes, supply constraints including certain electronic components and semiconductors, healthcare staffing, and resulting impacts on demand for our products and therapies;

• The uncertain and uneven impact of COVID-19 on future procedural volumes, supply constraints including certain electronic components and semiconductors, healthcare staffing in certain regions, and resulting impacts on demand for our products and therapies;

• The potential impact that sanctions and other measures being imposed in response to the Russia-Ukraine conflict could have on revenue and supply chain.

The financial impact of the conflict in the second quarter of fiscal year 2023, including on accounts receivable and inventory reserves, was not material, and for the three and six months ended October 28, 2022, the business of the Company in these countries represented less than 1% of the Company's consolidated revenues and assets.

The financial impact of the conflict in the third quarter of fiscal year 2023, including on accounts receivable and inventory reserves, was not material, and for the three and nine months ended January 27, 2023, the business of the Company in these countries represented less than 1% of the Company's consolidated revenues and assets.

Although the implications of this conflict are difficult to predict at this time, the ongoing conflict may increase pressure on the global economy and supply chains, resulting in increased future volatility risk for our business operations and performance.

2 unchanged sentences

Cardiovascular also includes Care Management Services and Cath Lab Managed Services (CLMS) within the Cardiac Rhythm & Heart Failure division.

Cardiovascular's net sales for the three and six months ended October 28, 2022 were $2.8 billion and $5.5 billion, respectively, a decrease of 2 percent and 4 percent, respectively, compared to the corresponding periods in the prior fiscal year.

Currency had an unfavorable impact of $177 million and $315 million on net sales for the three and six months ended October 28, 2022.

The net sales decrease for both periods was primarily driven by unfavorable currency impact and supply chain challenges in certain businesses.

The graphs below illustrate the percent of Cardiovascular net sales by division for the three months ended October 28, 2022 and October 29, 2021:

Cardiac Rhythm & Heart Failure (CRHF) net sales for the three and six months ended October 28, 2022 decreased 3 percent and 4 percent, respectively, as compared to the corresponding periods in the prior fiscal year.

The net sales declines were driven by unfavorable currency partially offset by increases from continued adoption of Micra AV, TYRX antibacterial envelopes, and LINQ II implants.

Additionally, Cardiac Ablation Solutions net sales for the six months ended October 28, 2022 were negatively impacted by competitive pressures in Western Europe and Japan, as well as the pending volume-based procurement (VBP) in China.

Structural Heart & Aortic (SHA) net sales for the three and six months ended October 28, 2022 increased 1 percent and decreased 3 percent, respectively, as compared to the corresponding periods in the prior fiscal year.

The net sales for both periods were impacted by unfavorable currency.

The net sales for both periods were also impacted by growth in transcatheter aortic valve replacement (TAVR), surgical valves therapies, and perfusion systems.

For the three months ended October 28, 2022, Aortic experienced growth due to lessening impacts from previous supply chain challenges.

Net sales for the six months ended October 28, 2022 were also impacted by a field corrective action with the Harmony Transcatheter Pulmonary Valve and Delivery Catheter System, staffing shortages, and supply shortages of contrast.

Coronary & Peripheral Vascular (CPV) net sales for the three and six months ended October 28, 2022 decreased 4 percent and 5 percent, respectively, as compared to the corresponding periods in the prior fiscal year.

The net sales declines were driven by unfavorable currency, partially offset by strong demand combined with improved product availability of the SpiderFX embolic protection device (EPD) and strong performance of our superficial venous product portfolio, including the VenaSeal system.

Coronary & Renal Denervation also experienced growth driven by Coronary Balloons and the launch of the Onyx Frontier DES platform in the U.S.

Net sales for the six months ended October 28, 2022 were also impacted by market procedural volumes in Coronary remaining below pre-COVID levels in several major

markets, headwinds related to U.S.

Cardiovascular's net sales for the three and nine months ended January 27, 2023 were $2.8 billion and $8.3 billion, respectively, an increase of 1 percent and decrease of 2 percent, respectively, compared to the corresponding periods in the prior fiscal year.

Currency had an unfavorable impact of $152 million and $467 million on net sales for the three and nine months ended January 27, 2023.

The net sales increase for the three months ended January 27, 2023 was primarily due to strong performance of Micra, TAVR and Diagnostics, partially offset by unfavorable currency impact.

The net sales decrease for the nine months ended January 27, 2023 was primarily driven by unfavorable currency impact and supply chain challenges in certain businesses.

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

Cardiac Rhythm & Heart Failure (CRHF) net sales for the three and nine months ended January 27, 2023 increased 2 percent and decreased 2 percent, respectively, as compared to the corresponding periods in the prior fiscal year.

For the three months ended January 27, 2023 the net sales increase was driven by continued adoption of Micra AV, TYRX antibacterial envelopes, LINQ II implants, and growth from Arctic Front cryoablation catheters in the U.S.

The net sales declines for the nine months ended January 27, 2023 were driven by unfavorable currency partially offset by increases from continued adoption of Micra AV, TYRX antibacterial envelopes, and LINQ II implants.

Additionally, Cardiac Ablation Solutions net sales for the nine months ended January 27, 2023 were negatively impacted by competitive pressures in Western Europe, as well as the pending volume-based procurement (VBP) in China.

Structural Heart & Aortic (SHA) net sales for the three and nine months ended January 27, 2023 increased 3 percent and decreased 1 percent, respectively, as compared to the corresponding periods in the prior fiscal year.

The net sales for the three and nine months ended January 27, 2023 were driven by growth in transcatheter aortic valve replacement (TAVR), including the U.S.

launch of Evolut FX TAVR system.

Net sales for the nine months ended January 27, 2023 were negatively impacted by a field corrective action with the Harmony Transcatheter Pulmonary Valve and Delivery Catheter System, currency impacts, staffing shortages, and supply shortages of contrast.

Coronary & Peripheral Vascular (CPV) net sales for the three and nine months ended January 27, 2023 decreased 4 percent and 5 percent, respectively, as compared to the corresponding periods in the prior fiscal year.

The net sales declines were driven by unfavorable currency, partially offset by strong demand combined with improved product availability of the SpiderFX embolic protection device (EPD) and strong

performance of our superficial venous product portfolio, including the VenaSeal system.

Net sales for the nine months ended January 27, 2023 were also impacted by market procedural volumes in Coronary remaining below pre-COVID levels in several major markets, headwinds related to U.S.

hospital contrast shortages early in the first quarter of fiscal year 2023, and declines in Peripheral Vascular Health due to competitors re-entering the market and supply chain challenges.

1 unchanged sentence

• Continued growth of our Micra transcatheter pacing system.

The Micra AV launched in Japan in November 2021 and China in August 2022.

Micra AV launched in Japan in November 2021 and China in August 2022.

Micra AV expands the Micra target population from 15 percent to 45 percent of pacemaker patients.

3 unchanged sentences

• Growth of the Cobalt and Crome portfolio of ICDs and CRT-Ds.

• Continued acceptance and expansion of the Claria MRI CRT-D system with AdaptivCRT and compatibility with TriageHF technology.

• Continued acceptance and expansion of the LINQ II cardiac monitor.

During the third quarter of fiscal year 2022, we launched two AccuRhythm AI algorithms on the LINQ II platform to significantly reduce false positive alerts for Atrial Fibrillation and Pause while retaining sensitivity for true positive detection and reduce clinic workload and burden.

AccuRhythm AI launched in Europe during the first quarter of fiscal year 2023.

• Growth of the CRT-P quadripolar pacing system.

• Continued growth, adoption, and utilization of the TYRX Envelope for implantable devices.

• Continued acceptance and expansion of the LINQ II cardiac monitor.

During the third quarter of fiscal year 2022, we launched two AccuRhythm AI algorithms on the LINQ II platform to significantly reduce false positive alerts for Atrial Fibrillation and pause episodes while retaining sensitivity for true positive detection and reduce clinic workload and burden.

AccuRhythm AI launched in Europe during the first quarter of fiscal year 2023.

• Continued growth of Arctic Front cryoablation for treatment of atrial fibrillation.

10 unchanged sentences

• Acceptance and growth of IN.PACT 018 drug-coated balloons (DCB).

The product was launched under limited market release in the first quarter of fiscal year 2023 with full market release expected in the third quarter of fiscal year 2023.

The product was launched under limited market release in the first quarter of fiscal year 2023 with full market release in the third quarter of fiscal year 2023.

IN.PACT 018 is used in endovascular therapies to treat femoropopliteal disease.

8 unchanged sentences

The products include those for advanced and general surgical products, surgical stapling devices, vessel sealing instruments, wound closure, electrosurgery products, hernia mechanical devices, mesh implants, advanced ablation, interventional lung, ventilators, airway products, renal care products, and sensors and monitors for pulse oximetry, capnography, level of consciousness and cerebral oximetry.

Medical Surgical's net sales for the three and six months ended October 28, 2022 were $2.1 billion and $4.1 billion, respectively, a decrease of 10 percent and 12 percent, respectively, compared to the corresponding periods in the prior fiscal year.

Currency had an unfavorable impact of $149 million and $264 million on net sales for the three and six months ended October 28, 2022, respectively.

The net sales decrease for both periods was primarily driven by unfavorable currency impact, supply chain disruptions particularly in Surgical Innovations, provincial volume-based procurement (VBP) stapling tenders in China, and a decline in ventilator sales due to the high COVID-19 demand in the corresponding period in the prior fiscal year.

The graphs below illustrate the percent of Medical Surgical net sales by division for the three months ended October 28, 2022 and October 29, 2021:

Surgical Innovations (SI) net sales for the three and six months ended October 28, 2022 decreased 7 percent and 10 percent, respectively, as compared to the corresponding periods in the prior fiscal year.

The decrease for the three months ended October 28, 2022 was attributable to slower than expected procedure volumes, and declines in Advanced Stapling primarily driven by provincial VBP stapling tenders in China, partially offset by growth in Hernia and Wound Management due to supply chain recoveries.

The decrease for the six months ended October 28, 2022 was led by Advanced Surgical Instruments, driven by global supply chain challenges, including resins, semiconductors, and packaging trays, which impacted energy and stapling products, and provincial VBP stapling tenders and COVID-19 lockdowns in China.

Respiratory, Gastrointestinal, & Renal (RGR) net sales for the three and six months ended October 28, 2022 decreased 16 percent and 15 percent, respectively, as compared to the corresponding periods in the prior fiscal year.

The decrease for three and six months ended October 28, 2022 was largely due to declines in ventilator demand when compared to the corresponding period in the prior fiscal year as demand dropped below pre-pandemic levels.

Pulse oximetry products also contributed to the decrease, driven by lower COVID-19 related utilization compared to the prior period.

Medical Surgical's net sales for the three and nine months ended January 27, 2023 were $2.1 billion and $6.2 billion, respectively, a decrease of 7 percent and 10 percent, respectively, compared to the corresponding periods in the prior fiscal year.

Currency had an unfavorable impact of $117 million and $380 million on net sales for the three and nine months ended January 27, 2023, respectively.

The net sales decrease for both periods was primarily driven by unfavorable currency impact, provincial volume-based procurement (VBP) stapling tenders in China, and a decline in ventilator sales due to the high COVID-19 demand in the corresponding period in the prior fiscal year.

Supply chain disruptions, particularly in Surgical Innovations, also contributed to the net sales decrease for the nine months ended January 27, 2023.

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

Surgical Innovations (SI) net sales for the three and nine months ended January 27, 2023 decreased 6 percent and 9 percent, respectively, as compared to the corresponding periods in the prior fiscal year.

The decrease for the three months ended January 27, 2023 was predominantly attributable to declines in Advanced Stapling primarily driven by provincial VBP stapling tenders in China.

The decrease for the nine months ended January 27, 2023 was led by Advanced Surgical Instruments, driven by global supply chain challenges, including resins, semiconductors, and packaging trays, which impacted energy and stapling products, and provincial VBP stapling tenders and COVID-19 lockdowns in China.

Global product availability has improved during the most recent quarter.

Respiratory, Gastrointestinal, & Renal (RGR) net sales for the three and nine months ended January 27, 2023 decreased 8 percent and 13 percent, respectively, as compared to the corresponding periods in the prior fiscal year.

The decrease for three and nine months ended January 27, 2023 was largely due to declines in ventilator demand when compared to the corresponding period in the prior fiscal year as demand dropped below pre-pandemic levels, as well as declines in RCS driven by product availability challenges.

These declines were partially offset by growth in Gastrointestinal driven by strength in sales of GI Genius.

In addition to the macro-economic and geopolitical factors described in the Executive Level Overview, looking ahead we expect Medical Surgical could be affected by the following:

20 unchanged sentences

Neuroscience also manufactures products related to implantable neurostimulation therapies and drug delivery systems for the treatment of chronic pain, movement disorders, and epilepsy.

Neuroscience’s net sales for the three and six months ended October 28, 2022 were $2.2 billion and $4.3 billion, respectively, an increase of 2 percent and a decrease of 1 percent, respectively, compared to the corresponding periods in the prior fiscal year.

Currency had an unfavorable impact of $85 million and $149 million on net sales for the three and six months ended October 28, 2022, respectively.

The net sales increase for the three months ended October 28, 2022, was primarily due to growth in U.S.

Core Spine, ENT, and continued supply risk mitigation, partially offset by unfavorable currency impact.

The net sales decrease for the six months ended October 28, 2022, was driven by unfavorable currency impact, supply chain challenges in certain businesses, and prolonged purchasing timelines for large capital.

The graphs below illustrate the percent of Neuroscience net sales by division for the three months ended October 28, 2022 and October 29, 2021:

Cranial and Spinal Technologies (CST) net sales for the three and six months ended October 28, 2022 increased 1 percent and decreased 3 percent, respectively, as compared to the corresponding periods in the prior fiscal year.

For the three months ended October 28, 2022, the growth was driven by increased sales in Core Spine products and strong sales of the Infuse Bone Graft in the U.S.

Neuroscience’s net sales for the three and nine months ended January 27, 2023 were $2.2 billion and $6.5 billion, respectively, an increase of 5 percent and 1 percent, respectively, compared to the corresponding periods in the prior fiscal year.

Currency had an unfavorable impact of $78 million and $227 million on net sales for the three and nine months ended January 27, 2023, respectively.

The net sales increase for the three and nine months ended January 27, 2023, was primarily due to growth in U.S.

Core Spine, Neurovascular, ENT, and continued supply risk mitigation, partially offset by unfavorable currency impact and supply chain challenges in certain businesses.

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

Cranial and Spinal Technologies (CST) net sales for the three and nine months ended January 27, 2023 increased 2 percent and decreased 1 percent, respectively, as compared to the corresponding periods in the prior fiscal year.

For the three months ended January 27, 2023, the growth was driven by increased sales of Core Spine products in the U.S.

including the Aible ecosystem of spine products, with a partial offset due to supply constraints within Biologics.

The net sales increase was also attributable to strong sales of StealthStation Navigation and Midas Rex powered surgical instruments.

For the six months ended October 28, 2022, the net sales decrease was driven by prolonged customer capital purchasing timelines and Biologics, which experienced decreases in customer ordering patterns, when compared to the corresponding period in the prior fiscal year.

Specialty Therapies (Specialty) net sales for the three and six months ended October 28, 2022 increased 8 percent and 6 percent, respectively, as compared to the corresponding periods in the prior fiscal year.

For the nine months ended January 27, 2023, the net sales decrease was driven by unfavorable currency impact and Biologics, which experienced supply chain challenges.

Specialty Therapies (Specialty) net sales for the three and nine months ended January 27, 2023 increased 10 percent and 8 percent, respectively, as compared to the corresponding periods in the prior fiscal year.

The increase for both periods was driven by growth in hemorrhagic and ischemic stroke, flow diversion and access delivery products.

The net sales increase was also driven by benefits from the recent May 2022 acquisition of Intersect ENT.

For the six months ended October 28, 2022, the growth in ENT growth was partially offset by supply chain disruption in disposables.

Neuromodulation (NM) net sales for the three and six months ended October 28, 2022 decreased 4 percent and 6 percent, respectively, as compared to the corresponding periods in the prior fiscal year.

For both periods, declines were largely due to unfavorable currency impacts, healthcare staffing challenges impacting spinal cord stimulation implant volumes and continued supply chain challenges in Interventional.

For the three months ended October 28, 2022, there was growth driven by Pain Stim and Targeted Drug Delivery.

For the nine months ended January 27, 2023, the growth in ENT was partially offset by supply chain disruption in disposables.

Neuromodulation (NM) net sales for the three and nine months ended January 27, 2023 increased 3 percent and decreased 3 percent, respectively, as compared to the corresponding periods in the prior fiscal year.

For the three months ended January 27, 2023, the net sales increase was driven by growth within Pain Stim and, to a lesser extent, Targeted Drug Delivery.

For the nine months ended January 27, 2023, declines were largely due to declines of Brain Modulation replacement devices and supply chain challenges in Interventional which has recently seen improvements in product availability.

In addition to the macro-economic and geopolitical factors described in the Executive Level Overview, looking ahead we expect Neuroscience could be affected by the following:

• Continued growth from enabling technologies, including StealthStation and O-arm Imaging Systems, Midas, and ENT Navigation and Power Systems, as well as acceptance of the Stealth Autoguide cranial robotic guidance platform.

• Continued sales of Mazor robotic units and associated market adoption of robot-assisted spine procedures, including the Mazor X Stealth, our integrated robotics and navigation platform.

• Continued growth from spine titanium interbody implants.

• Continued adoption of our integrated solutions through the Aible offering (formerly Surgical Synergy strategy) which integrates our spinal implants with enabling technologies such as imaging, navigation, power instruments, nerve monitoring, and Mazor robotics, as well as AI-driven surgical planning, personalized spinal implants, and robot-assisted surgery due to the acquired Medicrea technologies.

• Market acceptance and continued global adoption of innovative new spine products and procedural solutions within our CST division, such as our Infinity OCT System and Prestige LP cervical disc system.

• Growth in the broader vertebral compression fracture (VCF) and adjacent markets as we continue to pursue the development of other therapies to treat more patients with VCF, including continued success of both the Kyphon V vertebroplasty system and the Osteocool RF Spinal Tumor ablation system.

• Continued acceptance and growth of our ENT and Pelvic Health therapies, including our InterStim therapy with InterStim II, InterStim Micro and InterStim X neurostimulators for the treatment of the symptoms of overactive bladder, urinary retention, and bowel incontinence, and capital equipment sales of the Stealth Station ENT surgical navigation system and intraoperative NIM nerve monitoring system.

• Continued acceptance and growth of the Solitaire FR revascularization device for treatment of acute ischemic stroke and the Pipeline Embolization Devices, endovascular treatments for large or giant wide-necked brain aneurysms.

• Continued acceptance of our React Catheter and Riptide aspiration system, along with our next-generation Solitaire revascularization device.

• Market acceptance and continued global adoption of our Intellis spinal cord stimulator, DTM proprietary waveform, Evolve workflow algorithm, and Snapshot reporting to treat chronic pain in major markets around the world.

• Continued adoption and growth of our integrated solutions through the Aible offering, which integrates spinal implants with enabling technologies (StealthStation, O-arm Imaging Systems, and Midas), Mazor robotics, and AI-driven technology acquired from Medicrea for surgical planning and personalized spinal implants.

• Market acceptance and continued global adoption of innovative new spine products and procedural solutions within our CST operating unit, such as our Infinity OCT System and Prestige LP cervical disc system, as well as continued growth from spine titanium interbody implants.

• Continued acceptance and growth of our ENT and Pelvic Health therapies, including our InterStim therapy with InterStim X, InterStim II, and InterStim Micro and neurostimulators for the treatment of the symptoms of overactive bladder, urinary retention, and bowel incontinence, and capital equipment sales of the Stealth Station ENT surgical navigation system and intraoperative NIM nerve monitoring system.

• Strengthening our position in the ENT market as a result of the May 2022 acquisition of Intersect ENT, a global ENT medical technology leader.

The acquisition expands Neuroscience's portfolio of products used during ENT procedures and combined with the Company's navigation, powered instruments, and existing tissue health products, offers a broader suite of solutions to assist surgeons treating patients who suffer from chronic rhinosinusitis (CRS).

• Continued acceptance and growth of the Solitaire FR revascularization device for treatment of acute ischemic stroke and our React Catheter and Riptide aspiration system.

• Continued growth of Pipeline Embolization Devices, endovascular treatments for large or giant wide-necked brain aneurysms.

• Market acceptance and continued global adoption of our Intellis spinal cord stimulator and DTM proprietary waveform to treat chronic pain in major markets around the world.

• Continued acceptance and growth of our Percept PC DBS device with BrainSense technology, including its treatment of Parkinson's Disease, epilepsy, and other movement disorders.

4 unchanged sentences

FDA lifted its distribution requirements on our implantable drug pump in October 2017 and its warning letter in November 2017.

• Strengthening our position in the ear, nose and throat market as a result of the May 2022 acquisition of Intersect ENT, a global ear, nose and throat medical technology leader.

The acquisition expands Neuroscience's portfolio of products used during ENT procedures and, combined with the Company's navigation, powered instruments, and existing tissue health products, will offer a broader suite of solutions to assist surgeons treating patients who suffer from chronic rhinosinusitis (CRS).

• Our ability to successfully develop, obtain regulatory approval of and commercialize the products within our pipeline, which include our closed-loop Percept PC and RC devices with adaptive DBS (aDBS) and Inceptiv Neurostimulator, as well as our hemorrhagic stroke intravascular device, and our next-generation spine enabling technologies.

• Our ability to successfully develop, obtain regulatory approval of and commercialize the products within our pipeline, which include our closed-loop Percept RC device with adaptive DBS (aDBS) and Inceptiv Neurostimulator, as well as our hemorrhagic stroke intravascular device, and our next-generation spine enabling technologies.

Diabetes' products include insulin pumps, continuous glucose monitoring (CGM) systems, consumables, and smart insulin pen systems.

Diabetes' net sales for the three and six months ended October 28, 2022 were $556 million and $1.1 billion, a decrease of 5 percent as compared to the corresponding periods in the prior fiscal year.

Currency had an unfavorable impact of $47 million and $80 million on net sales for the three and six months ended October 28, 2022, respectively.

Diabetes' net sales for the three and nine months ended January 27, 2023 were $570 million and $1.7 billion, a decrease of 2 percent and 4 percent, respectively, as compared to the corresponding periods in the prior fiscal year.

Currency had an unfavorable impact of $33 million and $113 million on net sales for the three and nine months ended January 27, 2023, respectively.

The decrease in net sales for both periods was primarily driven by unfavorable currency impacts and declines in the U.S.

across most product lines.

The net sales declines were partially offset by strong international growth primarily driven by the continued international expansion of the MiniMed 780G insulin pump system and integrated CGM.

14 unchanged sentences

prior to resolution of the findings.

• Our ability to successfully develop, obtain regulatory approval of and commercialize the products within our pipeline, which include, but are not limited to, our MiniMed 780G insulin pump and the Guardian 4 sensor, which have been submitted to the U.S.

FDA, and our next-generation sensor Simplera.

• Our ability to successfully develop, obtain regulatory approval of and commercialize the products within our pipeline, which include, but are not limited to, our MiniMed 780G insulin pump, the Guardian 4 sensor, and our next-generation sensor Simplera, which have been submitted to the U.S.

COSTS AND EXPENSES

The following is a summary of cost of products sold, research and development, and selling, general, and administrative expenses as a percent of net sales for the three and six months ended October 28, 2022 and October 29, 2021:

The following is a summary of cost of products sold, research and development, and selling, general, and administrative expenses as a percent of net sales for the three and nine months ended January 27, 2023 and January 28, 2022:

Cost of Products Sold We continue to focus on reducing our costs of production through supplier management, manufacturing improvements, and optimizing our manufacturing network.

Cost of products sold for the three months ended October 28, 2022 and October 29, 2021 was $2.5 billion and for the six months ended October 28, 2022 and October 29, 2021 was $5.1 billion.

Cost of products sold for the three and nine months ended January 27, 2023 was $2.7 billion and $7.7 billion, respectively, as compared to $2.5 billion and $7.6 billion for the corresponding periods in the prior fiscal year.

The increase in cost of products sold as a percentage of net sales was primarily attributable to increased labor and direct material manufacturing costs, predominantly due to inflationary pressures and supply chain challenges as well as increased freight due to higher fuel costs and expedited shipments for backorders resulting from supply chain challenges.

The six months ended October 29, 2021 included $58 million of inventory write-downs associated with our June 2021 decision to stop the distribution and sale of Medtronic's HVAD System (MCS charges).

The nine months ended January 28, 2022 included $58 million of inventory write-downs associated with our June 2021 decision to stop the distribution and sale of Medtronic's HVAD System (MCS charges).

Looking forward, our cost of products sold likely will be further negatively impacted by inflation, supply chain challenges, and higher labor and direct material costs.

3 unchanged sentences

and to expand healthcare access and deliver positive outcomes.

Research and development expense for the three months ended October 28, 2022 and October 29, 2021 was $676 million and for the six months ended October 28, 2022 and October 29, 2021 was $1.4 billion.

The six months ended October 29, 2021 included $90 million of acquisitions of, and license payments for, technology not yet approved by regulators, primarily in our Diabetes segment.

Research and development expense for the three and nine months ended January 27, 2023 was $688 million and $2.1 billion, respectively, as compared to $668 million and $2.1 billion for the corresponding periods in the prior fiscal year.

The nine months ended January 28, 2022 included $101 million of acquisitions of, and license payments for, technology not yet approved by regulators, primarily in our Diabetes segment.

Selling, General, and Administrative Expense Our goal is to continue to leverage selling, general, and administrative expense initiatives.

Selling, general, and administrative expense primarily consists of salaries and wages, other administrative costs, such as professional fees and marketing expenses, and certain acquisition and restructuring expenses.

Selling, general, and administrative expense for the three months ended October 28, 2022 and October 29, 2021 was $2.6 billion and for the six months ended October 28, 2022 and October 29, 2021 was $5.2 billion.

The increase in selling, general, and administrative expense as a percentage of net sales was primarily driven by net sales declines and increased employee travel as compared to the corresponding period in the prior fiscal year when travel was limited, partially offset by reduced incentive accruals.

Selling, general, and administrative expense for the three and nine months ended January 27, 2023 was $2.6 billion and $7.8 billion, respectively as compared to $2.6 billion and $7.7 billion for the corresponding periods in the prior fiscal year.

The increase in selling, general, and administrative expense as a percentage of net sales was primarily driven by increased sales incentives, employee travel as compared to the corresponding period in the prior fiscal year when travel was limited, and to a lesser extent by net sales declines.

The following is a summary of other costs and expenses (income):

Three months ended Six months ended

(in millions) October 28, 2022 October 29, 2021 October 28, 2022 October 29, 2021

Three months ended Nine months ended

(in millions) January 27, 2023 January 28, 2022 January 27, 2023 January 28, 2022

Amortization of intangible assets $ 431 $ 432 $ 1,275 $ 1,298

3 unchanged sentences

Other non-operating income, net (149) (67) (342) (244)

Interest expense 118 136 282 273

Interest expense, net 167 137 449 410

Amortization of Intangible Assets Amortization of intangible assets includes the amortization expense of our definite-lived intangible assets, consisting of purchased patents, trademarks, tradenames, customer relationships, purchased technology, and other intangible assets.

Restructuring Charges, Net

Enterprise Excellence

In the third quarter of fiscal year 2018, we announced a multi-year global Enterprise Excellence Program designed to drive long-term business growth and sustainable efficiency.

Further program details are described in Note 4 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended April 29, 2022.

Since inception, the Company has incurred pre-tax exit and disposal costs and other costs, across all segments, of $1.7 billion in connection with the Enterprise Excellence program.

In total, the Company estimates it will recognize approximately $1.8 billion of exit and disposal costs and other costs related to the Enterprise Excellence program, the majority of which are expected to be incurred by the end of this fiscal year.

For the three and six months ended October 28, 2022, we recognized net charges of $53 million and $93 million, respectively, associated with our Enterprise Excellence Program .

Net charges for the three and six months ended October 28, 2022 included costs incurred as a direct result of the restructuring program, such as salaries for employees supporting the program and consulting expenses, including $19 million and $38 million, respectively, recognized within cost of products sold and $27 million and $55 million, respectively, recognized within selling, general, and administrative expense in the consolidated statements of income.

Charges recognized within restructuring charges, net for the period were not significant.

For the three and six months ended October 29, 2021, we recognized net charges of $62 million and $136 million, respectively, associated with our Enterprise Excellence Program, including $4 million and $15 million, respectively, recognized within restructuring charges, net in the consolidated statements of income primarily comprised of employee termination benefits.

Net charges for the three and six months ended October 29, 2021 also included costs incurred as a direct result of the restructuring program, such as salaries for employees supporting the program and consulting expenses, including $31 million and $64 million, respectively, recognized within cost of products sold, and $27 million and $57 million, respectively, recognized within selling, general and administrative expense in the consolidated statements of income.

Simplification

In the first quarter of fiscal year 2021, we initiated our Simplification restructuring program, designed to make the Company a more nimble and competitive organization.

Restructuring Charges, Net For the three and nine months ended January 27, 2023 and January 28, 2022, restructuring costs primarily related to Enterprise Excellence and Simplification restructuring programs, both of which the Company expects to be substantially completed by the end of this fiscal year.

Further program details are described in Note 4 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended April 29, 2022.

Since inception, the Company has incurred pre-tax exit and disposal costs and other costs, across all segments, of $427 million in connection with the Simplification program.

In total, the Company estimates it will recognize approximately $450 million of exit and

disposal costs and other costs related to the Simplification program, the majority of which are expected to be incurred by the end of this fiscal year.

For the three and six months ended October 28, 2022, we recognized net charges of $43 million and $78 million, respectively, including $23 million and $44 million, respectively, recognized within restructuring charges, net in the consolidated statements of income primarily comprised of employee termination benefits.

Net charges for the three and six months ended October 28, 2022 also included costs incurred as a direct result of the restructuring program, such as salaries for employees supporting the program and consulting expenses, including $18 million and $31 million, respectively, recognized within selling, general and administrative expense in the consolidated statements of income.

For the three and six months ended October 29, 2021, we recognized net charges of $18 million and $25 million, respectively, including $9 million recognized within restructuring charges, net in the consolidated statements of income for both periods primarily comprised of employee termination benefits.

Net charges for the three and six months ended October 29, 2021 also included costs incurred as a direct result of the restructuring program, such as salaries for employees supporting the program and consulting expenses, including $9 million and $16 million, respectively, recognized within selling, general and administrative expense in the consolidated statements of income.

In total, the Company expects it will recognize charges of approximately $1.8 billion for Enterprise Excellence and approximately $450 million for Simplification.

Charges recognized within restructuring charges, net primarily comprise of employee termination benefits for the referenced programs.

For additional information about our restructuring programs, refer to Note 5 to the current period's consolidated financial statements.

2 unchanged sentences

Other Operating (Income) Expense, Net Other operating (income) expense, net primarily includes royalty income and expense, currency remeasurement and derivative gains and losses, Puerto Rico excise taxes, changes in the fair value of contingent consideration, MCS charges, RCS charges, impairment charges, and income from funded research and development arrangements.

For the three months ended October 28, 2022, the change in other operating (income) expense, net was primarily driven by the net currency impact of remeasurement expense and our hedging programs, which resulted in a net gain of $138 million as compared to a net loss of $3 million for the corresponding period in the prior year.

For the six months ended October 28, 2022, the change in other operating (income) expense, net was primarily driven by MCS charges recorded during three months ended July 30, 2021.

For the three months ended January 27, 2023, the change in other operating (income) expense, net was primarily driven by the net currency impact of remeasurement expense and our hedging programs, which resulted in a net gain of $134 million as compared to a net gain of $42 million for the corresponding period in the prior year.

The three months ended January 28, 2022 also included $81 million of income related to changes in the fair value of contingent consideration.

For the nine months ended January 27, 2023, the change in other operating (income) expense, net was primarily driven by MCS charges recorded during nine months ended January 28, 2022.

The charges of $668 million primarily included $409 million of intangible asset impairments and $211 million for commitments and obligations, including customer support obligations, restructuring, and other associated costs.

Additionally, the change is driven by the net currency impact of remeasurement expense and our hedging programs, which resulted in a net gain of $219 million combined for the six months ended October 28, 2022 as compared to a net loss of $36 million for the corresponding period in the prior year.

During the six months ended October 28, 2022, the Company also recorded non-cash pre-tax charges of $81 million, primarily related to impairment of goodwill, as a result of the anticipated sale of half of the Company's RCS business, related to the May 25, 2022 agreement with DaVita Inc.

Additionally, the change was driven by the net currency impact of remeasurement expense and our hedging programs, which resulted in a net gain of $353 million combined for the nine months ended January 27, 2023 as compared to a net gain of $6 million for the corresponding period in the prior year.

During the nine months ended January 27, 2023, the Company also recorded non-cash pre-tax charges of $81 million, primarily related to impairment of goodwill, as a result of the anticipated sale of half of the Company's RCS business, related to the May 25, 2022 agreement with DaVita Inc.

Other Non-Operating Income, Net Other non-operating income, net includes the non-service component of net periodic pension and postretirement benefit cost, investment gains and losses, and interest income.

For the three and six months ended October 28, 2022, the increase in other non-operating income, net is primarily attributable to an increase in interest income, partially offset by reduced gains on our equity method and minority investment portfolios for the six months ended.

Interest income was $73 million and $128 million for the three and six months ended October 28, 2022, respectively, and $46 million and $89 million for the three and six months ended October 29, 2021, respectively.

Gains on equity method and minority investments were $12 million and $15 million for the three and six months ended October 28, 2022, respectively, compared to a loss of $5 million and gain of $38 million for the three and six months ended October 29, 2021, respectively.

Interest Expense Interest expense includes interest incurred on our outstanding borrowings, amortization of debt issuance costs and debt premiums or discounts, amortization of amounts excluded from the effectiveness assessment of certain net investment hedges, and charges recognized in connection with the early redemption of senior notes.

For the three months ended October 28, 2022, the decrease in interest expense was primarily due to $27 million in after-tax unrealized gains representing amounts excluded from the effectiveness assessment of certain net investment hedges.

For the six months ended October 28, 2022, the increase in interest expense was primarily due to the $53 million charge incurred as a result of the early redemption of approximately $2.3 billion of senior notes, during the three months ended July 29, 2022, partially offset by $47 million in after-tax unrealized gains representing amounts excluded from the effectiveness assessment of certain net investment hedges during the six months ended October 28, 2022.

Three months ended Six months ended

(in millions) October 28, 2022 October 29, 2021 October 28, 2022 October 29, 2021

For the three and nine months ended January 27, 2023, the increase in other non-operating income, net is primarily attributable to an increase in interest income, partially offset by reduced gains on our equity method and minority investment portfolios.

Interest income was $118 million and $246 million for the three and nine months ended January 27, 2023, respectively, and $45 million and $134 million for the three and nine months ended January 28, 2022, respectively.

Gains on equity method and minority investments were $7 million and $22 million for the three and nine months ended January 27, 2023, respectively, compared to a loss of $3 million and gain of $36 million for the three and nine months ended January 28, 2022, respectively.

Interest Expense, Net Interest expense, net includes interest incurred on our outstanding borrowings, amortization of debt issuance costs and debt premiums or discounts, amortization of amounts excluded from the effectiveness assessment of certain net investment hedges, and charges recognized in connection with the early redemption of senior notes.

For the three and nine months ended January 27, 2023, the increase in interest expense, net was primarily due to the Company's outstanding commercial paper balance and the issuance of four tranches of Euro-denominated Senior Notes with an aggregate principal of €3.5 billion in September 2022.

Additionally, for the nine months ended January 27, 2023, the increase is due to the $53 million charge incurred as a result of the early redemption of approximately $2.3 billion of senior notes, during the three months ended July 29, 2022.

Partially offsetting the increase for the three and nine months was $26 million and $74 million, respectively, in after-tax unrealized gains representing amounts excluded from the effectiveness assessment of certain net investment hedges.

Three months ended Nine months ended

(in millions) January 27, 2023 January 28, 2022 January 27, 2023 January 28, 2022

Income tax provision $ 146 $ 106 $ 1,218 $ 346

13 unchanged sentences

We have assumed the Tax Court findings will be applied for all years following fiscal year 2006.

As a result, we have recorded a $764 million net tax charge during the current quarter to recognize the estimated tax impact of the Tax Court Opinion.

Our effective tax rate for the three and six months ended October 28, 2022 was 68.7% and 44.0%, respectively, as compared to 11.8% and 10.3% for the three and six months ended October 29, 2021, respectively.

The increase in our effective tax rate for the three and six months ended October 28, 2022, as compared to the corresponding periods in the prior fiscal year, was primarily due to the $764 million net tax charge referenced above.

Our Non-GAAP Nominal Tax Rate for both the three and six months ended October 28, 2022 was 13.3%, as compared to 12.4% and 12.6% for the three and six months ended October 29, 2021, respectively.

The change in our Non-GAAP Nominal Tax Rate was primarily due to the decrease in the stock-based compensation benefit and the impact of year-over-year changes in operational results by jurisdiction.

An increase in our Non-GAAP Nominal Tax Rate of 1 percent would result in an additional income tax provision for the three and six months ended October 28, 2022 of approximately $20 million and $37 million, respectively.

As a result, the Company recorded a $764 million net tax charge during the three months ended October 28, 2022 to recognize the estimated tax impact of the Tax Court Opinion.

Our effective tax rate for the three and nine months ended January 27, 2023 was 10.6% and 31.9%, respectively, as compared to 6.7% and 8.8% for the three and nine months ended January 28, 2022, respectively.

The increase in our effective tax rate for the three months ended January 27, 2023, as compared to the three months ended January 28, 2022, primarily relates to the deferred tax impact associated with a step up in tax basis for Swiss Cantonal purposes recorded during the three months ended January 28, 2022.

The increase in our effective tax rate for the nine months ended January 27, 2023 as compared to the nine months ended January 28, 2022, primarily relates to the $764 million net tax charge referenced above, and the deferred tax impact associated with a step up in tax basis for Swiss Cantonal purposes recorded during the prior fiscal year.

Our Non-GAAP Nominal Tax Rate for the three and nine months ended January 27, 2023 was 12.1% and 12.9%, as compared to 12.4% and 12.5% for the three and nine months ended January 28, 2022, respectively.

The change in our Non-GAAP Nominal Tax Rate was primarily due to year-over-year changes in operational results by jurisdiction, and the year-over-year decrease in stock based compensation benefits, which were offset by the benefits from the finalization of certain income tax returns and statute of limitation lapses.

An increase in our Non-GAAP Nominal Tax Rate of 1 percent would result in an additional income tax provision for the three and nine months ended January 27, 2023 of approximately $20 million and $57 million, respectively.

LIQUIDITY AND CAPITAL RESOURCES

We are currently in a strong financial position, and we believe our balance sheet and liquidity as of October 28, 2022 provide us with flexibility, and our cash, cash equivalents, and current investments, along with our credit facility and related commercial paper programs will satisfy our foreseeable operating needs.

We are currently in a strong financial position, and we believe our balance sheet and liquidity as of January 27, 2023 provide us with flexibility, and our cash, cash equivalents, and current investments, along with our credit facility and related commercial paper programs will satisfy our foreseeable operating needs.

Our liquidity and capital structure are evaluated regularly within the context of our annual operating and strategic planning processes.

3 unchanged sentences

The following is a summary of cash provided by (used in) operating, investing, and financing activities, the effect of exchange rate changes on cash and cash equivalents, and the net change in cash and cash equivalents:

Six months ended

(in millions) October 28, 2022 October 29, 2021

Nine months ended

(in millions) January 27, 2023 January 28, 2022

Cash provided by (used in):

7 unchanged sentences

The decrease in cash collected from customers was primarily related to timing of sales, slower collections and supply chain challenges, as compared to the corresponding period in the prior fiscal year.

The increase in cash paid for income taxes in the six months ended October 28, 2022, is due to estimated income tax payments, and the increase in spend for inventory is due to inflationary impacts to direct labor and material costs.

The increase in cash paid for income taxes in the nine months ended January 27, 2023, was due to estimated income tax payments including a cash deposit associated with the Tax Court Opinion, and the increase in spend for inventory was due to inflationary impacts to direct labor and material costs.

Cash paid to employees decreased due to lower annual incentive plan payouts for prior year performance compared to the corresponding period in the prior fiscal year.

Investing Activities The $1.2 billion increase in cash used was primarily attributable to cash paid for acquisitions of $1.8 billion, partially offset by a decrease in net purchases of investments of $540 million, as compared to the corresponding period in the prior fiscal year.

For more information about the tax cash deposit paid, refer to Note 11 to the current period's consolidated financial statements.

Investing Activities The $1.1 billion increase in cash used was primarily attributable to an increase in cash paid for acquisitions of $1.8 billion, partially offset by a decrease in net purchases of investments of $704 million, as compared to the corresponding period in the prior fiscal year.

For more information on the aforementioned acquisitions, refer to Note 4 to the current's period's consolidated financial statements.

Financing Activities There was a $4.3 billion increase in net cash provided during the six months ended October 28, 2022, as compared to the corresponding period in the prior fiscal year.

In the current period, the Company issued four tranches of Euro-denominated Senior Notes of approximately $3.4 billion, as well as had $349 million of commercial paper that was issued and outstanding at quarter end.

Financing Activities There was a $3.3 billion decrease in net cash used during the nine months ended January 27, 2023, as compared to the corresponding period in the prior fiscal year.

In the second quarter of fiscal year 2023, the Company issued four tranches of Euro-denominated Senior Notes of approximately $3.4 billion.

The Company used a portion of the net proceeds to repay at maturity €750 million of Medtronic Luxco Senior Notes for $772 million of total consideration in December 2022.

Additionally, the Company had $625 million of commercial paper that was issued and outstanding at the end of the current period.

In the first quarter of fiscal year 2023, the Company issued short-term borrowings of approximately $2.3 billion under the Fiscal 2023 Loan Agreement and used the proceeds to fund the early redemption of senior notes for total consideration of $2.3 billion.

For more information on the issuance of the senior notes, commercial paper, and Term Loan and redemption of senior notes, refer to the Debt and Capital section.

For more information on the issuance and payment of the senior notes, commercial paper, and Term Loan and redemption of senior notes, refer to the Debt and Capital section.

Debt and Capital

2 unchanged sentences

From time to time, we may repurchase our outstanding debt obligations in the open market or through privately negotiated transactions.

Total debt at October 28, 2022 was $26.6 billion as compared to $24.1 billion at April 29, 2022.

The increase in total debt was driven by issuance of Euro-denominated Senior Notes of $3.4 billion, offset by fluctuations in exchange rates.

Total debt at January 27, 2023 was $28.1 billion as compared to $24.1 billion at April 29, 2022.

The increase in total debt was driven by issuance of Euro-denominated Senior Notes of $3.4 billion and commercial paper outstanding of $625 million, offset by fluctuations in exchange rates and repayment of Euro-denominated Senior Notes of $772 million.

In May 2022, we entered into a term loan agreement (Fiscal 2023 Loan Agreement) with Mizuho Bank, Ltd.

4 unchanged sentences

The Company recognized a total loss on debt extinguishment of $53 million in the quarter ended July 29, 2022, which primarily included cash premiums and accelerated amortization of deferred financing costs and debt discounts and premiums.

The loss was recognized in interest expense in the consolidated statements of income.

The loss was recognized in interest expense, net in the consolidated statements of income.

In September 2022, we issued four tranches of Euro-denominated Senior Notes with an aggregate principal of €3.5 billion, with maturities ranging from fiscal year 2026 to 2035, resulting in cash proceeds of approximately €3.5 billion, net of discounts and issuance costs.

The Company intends to use the proceeds to repay at maturity €750 million of 0.000% Medtronic Luxco Senior Notes in December 2022 and €1.5 billion of 0.375% Medtronic Luxco Senior Notes and €1.25 billion of 0.000% Medtronic Luxco Senior Notes in March 2023.

The Company used a portion of the net proceeds to repay at maturity €750 million of 0.000% Medtronic Luxco Senior Notes for $772 million of total consideration in December 2022.

The Company intends to use the remaining proceeds to repay at maturity €1.5 billion of 0.375% Medtronic Luxco Senior Notes and €1.25 billion of 0.000% Medtronic Luxco Senior Notes in March 2023.

We repurchase our ordinary shares on occasion as part of our focus on returning value to our shareholders.

1 unchanged sentence

There is no specific time period associated with these repurchase authorizations.

During the six months ended October 28, 2022, the Company repurchased a total of 4 million shares under this program at an average price of $95.69.

At October 28, 2022, we had approximately $2.5 billion remaining under the share repurchase program authorized by our Board of Directors.

During the nine months ended January 27, 2023, the Company repurchased a total of 5 million shares under this program at an average price of $93.24.

At January 27, 2023, we had approximately $2.5 billion remaining under the share repurchase program authorized by our Board of Directors.

For more information on credit arrangements, refer to Note 7 to the current period's consolidated financial statements and Note 6 to the consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended April 29, 2022.

Our liquidity sources at October 28, 2022 included $4.8 billion of cash and cash equivalents and $6.6 billion of current investments.

Our liquidity sources at January 27, 2023 included $4.5 billion of cash and cash equivalents and $6.6 billion of current investments.

Additionally, we maintain commercial paper programs and a Credit Facility.

3 unchanged sentences

We maintain multicurrency commercial paper programs for short-term financing, which allow us to issue unsecured commercial paper notes on a private placement basis up to a maximum aggregate amount outstanding at any time of $3.5 billion.

At October 28, 2022 and April 29, 2022, we had $349 million and no commercial paper outstanding, respectively.

At January 27, 2023 and April 29, 2022, we had $625 million and no commercial paper outstanding, respectively.

The issuance of commercial paper reduces the amount of credit available under our existing line of credit, as explained below.

3 unchanged sentences

The Credit Facility provides us with the ability to increase our borrowing capacity by an additional $1.0 billion at any time during the term of the agreement.

At October 28, 2022 and April 29, 2022, no amounts were outstanding under the Credit Facility.

At January 27, 2023 and April 29, 2022, no amounts were outstanding under the Credit Facility.

Interest rates on advances of our Credit Facility are determined by a pricing matrix based on our long-term debt ratings assigned by Standard & Poor's Ratings Services (S&P) and Moody's Investors Service (Moody’s).

3 unchanged sentences

Agency Rating (1)

October 28, 2022 April 29, 2022

January 27, 2023 April 29, 2022

Standard & Poor's Ratings Services

6 unchanged sentences

A security rating is not a recommendation to buy, sell or hold securities, and may be subject to revision or withdrawal at any time by the rating agency, and each rating should be evaluated independently of any other rating.

S&P and Moody's long-term debt ratings and short-term debt ratings at October 28, 2022 were unchanged as compared to the ratings at April 29, 2022.

S&P and Moody's long-term debt ratings and short-term debt ratings at January 27, 2023 were unchanged as compared to the ratings at April 29, 2022.

We do not expect the S&P and Moody's ratings to have a significant impact on our liquidity or future flexibility to access additional liquidity given our balance sheet, Credit Facility, and related commercial paper programs.

5 unchanged sentences

We assess goodwill and indefinite-lived intangible assets for impairment annually in the third quarter of the fiscal year and whenever an event occurs or circumstances change that would indicate the carrying amount may be impaired.

There were no impairments of goodwill in the current period as a result of the annual impairment test.

Definite-lived intangible assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount of an intangible asset (asset group) may not be recoverable.

8 unchanged sentences

We base our estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

As of October 28, 2022, there were no material changes to our critical accounting estimates.

As of January 27, 2023, there were no material changes to our critical accounting estimates.

NEW ACCOUNTING PRONOUNCEMENTS

22 unchanged sentences

(CIFSA Subsidiary Guarantors)

The following tables present summarized results of operations for the six months ended October 28, 2022 and summarized balance sheet information at October 28, 2022 and April 29, 2022 for the obligor groups of Medtronic and Medtronic Luxco Senior Notes, and CIFSA Senior Notes.

The following tables present summarized results of operations for the nine months ended January 27, 2023 and summarized balance sheet information at January 27, 2023 and April 29, 2022 for the obligor groups of Medtronic and Medtronic Luxco Senior Notes, and CIFSA Senior Notes.

The obligor group consists of the parent company guarantor, subsidiary issuer, and subsidiary guarantors for the applicable senior notes.

The summarized financial information is presented after elimination of (i) intercompany transactions and balances among the guarantors and issuers and (ii) equity in earnings from and investments in any subsidiary that is a non-guarantor or issuer.

The summarized results of operations information for the six months ended October 28, 2022 was as follows:

The summarized results of operations information for the nine months ended January 27, 2023 was as follows:

(in millions) Medtronic & Medtronic Luxco Senior Notes (1)

4 unchanged sentences

Net loss attributable to Medtronic (836) (986)

The summarized balance sheet information at October 28, 2022 was as follows:

The summarized balance sheet information at January 27, 2023 was as follows:

(in millions) Medtronic & Medtronic Luxco Senior Notes (1)

15 unchanged sentences

(3) Includes receivables due from non-guarantor subsidiaries of $20.1 billion and $7.0 billion for Medtronic & Medtronic Luxco Senior Notes, and CIFSA Senior Notes, respectively.

(4) Includes loans receivable due from non-guarantor subsidiaries of $6.5 billion and $8.4 billion for Medtronic & Medtronic Luxco Senior Notes, and CIFSA Senior Notes, respectively.

(4) Includes loans receivable due from non-guarantor subsidiaries of $21 million and $2.0 billion for Medtronic & Medtronic Luxco Senior Notes, and CIFSA Senior Notes, respectively.

(5) Includes payables due to non-guarantor subsidiaries of $28.5 billion and $21.9 billion for Medtronic & Medtronic Luxco Senior Notes, and CIFSA Senior Notes, respectively.

82 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis