What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-06-22 compared with 2022-06-23 · 416 added, 382 removed, 1518 unchanged (34% of the section changed)

1 unchanged sentence

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of Medtronic plc

To the Board of Directors and Shareholders of Medtronic plc

Opinions on the Financial Statements and Internal Control over Financial Reporting

3 unchanged sentences

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of April 28, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in fiscal year 2020.

Basis for Opinions

14 unchanged sentences

A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Table of C ontents

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

8 unchanged sentences

These reserves are subject to a high degree of estimation and management judgment.

During fiscal year 2023, management recognized an increase of $764 million associated with the August 18, 2022 U.S.

Tax Court (Tax Court) Opinion on the previously disclosed litigation related to the allocation of income between Medtronic, Inc.

and its wholly-owned subsidiary operating in Puerto Rico for fiscal years 2005 and 2006 (Opinion).

While the Opinion rejected the IRS’s position and the Tax Court determined the methodology advanced by Medtronic was appropriate for purposes of determining the intercompany royalty rate between Puerto Rico and the U.S., the Tax Court determined that the royalty rate should be higher, thereby increasing income allocated to the U.S.

and consequently subject to U.S.

This case relates only to fiscal years 2005 and 2006.

The Opinion remains subject to appeal by either or both parties.

The Company has assumed the Tax Court findings will be applied for all years following fiscal year 2006.

Total reserves relating to uncertain tax positions as of April 28, 2023 were $2.682 billion, of which the Puerto Rico manufacturing reserve makes up a significant portion.

The principal considerations for our determination that performing procedures relating to the income tax reserve for the uncertain tax position related to Puerto Rico manufacturing is a critical audit matter are the significant judgment by management when determining the reserve, including a high degree of estimation uncertainty relative to the unresolved issue with the IRS involving one of the Company’s manufacturing sites.

This in turn led to a high degree of auditor judgment, effort, and subjectivity in performing procedures and evaluating audit evidence to support management’s accurate measurement of the income tax reserve for the uncertain tax position related to Puerto Rico manufacturing, as the nature of the evidence is often highly subjective.

The principal considerations for our determination that performing procedures relating to the income tax reserve for the uncertain tax position related to Puerto Rico manufacturing is a critical audit matter are (i) the significant judgment by management when determining the reserve, including a high degree of estimation uncertainty relative to the unresolved issue with the IRS involving one of the Company’s manufacturing sites;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to management’s measurement of the income tax reserve for the uncertain tax position related to Puerto Rico manufacturing, as the nature of the evidence is often highly subjective;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the recognition of the income tax reserves for uncertain tax positions, as well as controls over measurement of the reserves.

These procedures also included, among others (i) testing management’s process for determining the reserve for the uncertain tax position, (ii) evaluating the status and results of the related U.

Tax Court case, and (iii) evaluating the consistency of the reserve calculation with the relevant documents related to the tax court case.

These procedures also included, among others (i) testing management’s process for determining the reserve and (ii) evaluating the reasonableness of the measurement of the reserve, including underlying assumptions used in management’s calculations.

Evaluating the reasonableness of the measurement of the reserve included evaluating whether the methodology and assumptions used by the Company were consistent with the Tax Court’s ruling.

Professionals with specialized skill and knowledge were used to assist in evaluating the application of tax laws related to the ruling and the underlying assumptions used in management’s calculations.

/s/ PricewaterhouseCoopers LLP

2 unchanged sentences

We have served as the Company’s auditor since 1963.

Table of C ontents

Medtronic plc

8 unchanged sentences

Restructuring charges, net 375 60 293

Certain litigation charges 95 118 313

Other operating expense, net 862 315 71

Certain litigation charges, net ( 30 ) 95 118

Other operating (income) expense, net ( 131 ) 862 315

Operating profit 5,485 5,752 4,484

Other non-operating income, net ( 515 ) ( 318 ) ( 336 )

Interest expense 553 925 1,092

Interest expense, net 636 553 925

Income before income taxes 5,364 5,517 3,895

Income tax provision (benefit) 456 265 ( 751 )

Income tax provision 1,580 456 265

Net income 3,784 5,062 3,630

6 unchanged sentences

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

Table of C ontents

Medtronic plc

2 unchanged sentences

Net income $ 3,784 $ 5,062 $ 3,630

Other comprehensive income (loss), net of tax:

Other comprehensive (loss) income, net of tax:

Unrealized (loss) gain on investment securities ( 49 ) ( 301 ) 92

3 unchanged sentences

Unrealized (loss) gain on cash flow hedges ( 381 ) 727 ( 519 )

Other comprehensive income (loss) 1,213 83 ( 851 )

Other comprehensive (loss) income ( 1,234 ) 1,213 83

Comprehensive income including noncontrolling interests 2,549 6,274 3,713

2 unchanged sentences

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

Table of C ontents

Medtronic plc

39 unchanged sentences

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

Table of C ontents

Medtronic plc

8 unchanged sentences

Net income — — — 3,606 — 3,606 24 3,630

Other comprehensive loss — — — — ( 849 ) ( 849 ) ( 2 ) ( 851 )

Other comprehensive income — — — — 75 75 8 83

Dividends to shareholders ($ 2.32 per ordinary share)

5 unchanged sentences

Cumulative effect of change in accounting principle — — — ( 24 ) — ( 24 ) — ( 24 )

— — — ( 33 ) — ( 33 ) — ( 33 )

April 30, 2021 1,345 $ — $ 26,319 $ 28,594 $ ( 3,485 ) $ 51,428 $ 174 $ 51,602

Net income — — — 5,039 — 5,039 22 5,062

Other comprehensive income — — — — 75 75 8 83

Other comprehensive income (loss) — — — — 1,219 1,219 ( 6 ) 1,213

Dividends to shareholders ($ 2.52 per ordinary share)

4 unchanged sentences

Changes to noncontrolling ownership interests — — 1 — — 1 ( 19 ) ( 18 )

Cumulative effect of change in accounting principle (1)

— — — ( 24 ) — ( 24 ) — ( 24 )

April 29, 2022 1,331 $ — $ 24,566 $ 30,250 $ ( 2,265 ) $ 52,551 $ 171 $ 52,722

Net income — — — 3,758 — 3,758 26 3,784

Other comprehensive income — — — — 1,219 1,219 ( 6 ) 1,213

Other comprehensive (loss) income — — — — ( 1,234 ) ( 1,234 ) — ( 1,234 )

Dividends to shareholders ($ 2.72 per ordinary share)

5 unchanged sentences

April 28, 2023 1,331 $ — $ 24,590 $ 30,392 $ ( 3,499 ) $ 51,483 $ 182 $ 51,665

(1) See Note 1 to the consolidated financial statements for discussion regarding the adoption of accounting standards during fiscal year 2021 and fiscal year 2020.

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

Table of C ontents

Medtronic plc

52 unchanged sentences

Intercompany transactions and balances have been fully eliminated in consolidation.

Certain reclassifications have been made to prior year financial statements to conform to classifications used in the current year.

Amounts reported in millions within this annual 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.

4 unchanged sentences

Actual results may or may not differ from those estimates.

COVID-19 has had, and may continue to have, an adverse effect on our business, results of operations, financial condition, and cash flows, and its future impacts remain uncertain and unpredictable.

The Company has considered the disruptions caused by COVID-19 and has assessed the potential impact on certain accounting estimates including, but not limited to, the allowance for doubtful accounts, inventory reserves, return reserves, the valuation of goodwill, intangible assets, other long-lived assets, investments and contingent consideration, as of April 29, 2022 and through the date of this report.

There was not a material impact to accounting estimates associated with the Company’s consolidated financial statements as of and for each of the three fiscal years ended April 29, 2022, April 30, 2021, and April 24, 2020.

Fiscal Year-End 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 28, 2023 and April 29, 2022 and for each of the three fiscal years ended April 28, 2023 (fiscal year 2023), April 29, 2022 (fiscal year 2022), and April 30, 2021 (fiscal year 2021).

2 unchanged sentences

These investments are carried at cost, which approximates fair value.

Investments The Company invests in marketable debt and equity securities, investments that do not have readily determinable fair values, and investments accounted for under the equity method.

Investments The Company invests in marketable debt and equity securities, investments for which the Company has elected the fair value option, investments that do not have readily determinable fair values, and investments accounted for under the equity method.

Marketable debt securities are classified and accounted for as available-for-sale.

7 unchanged sentences

At each reporting period, the Company makes a qualitative assessment considering impairment indicators to evaluate whether the investment is impaired.

Equity method investments for which the Company has elected the fair value option are valued using a discounted cash flow methodology, taking into consideration various assumptions including discount rate and all pertinent financial information available related to the investees, including historical financial statements and projected future cash flows.

Equity investments that do not have readily determinable fair values are measured using the measurement alternative at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer.

Equity securities accounted for under the equity method are initially recorded at the amount of the Company’s investment and are adjusted each period for the Company’s share of the investee’s income or loss and dividends paid.

3 unchanged sentences

Uncollectible accounts are written-off against the allowance when it is deemed that a customer account is uncollectible.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Inventories Inventories are stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis.

The Company reduces the carrying value of inventories for items that are potentially excess, obsolete, or slow-moving based on changes in customer demand, technology developments, or other economic factors.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Property, Plant, and Equipment Property, plant, and equipment is stated at cost and depreciated over the useful lives of the assets using the straight-line method.

13 unchanged sentences

The discount rate applied to the cash flow analysis is based on the weighted average cost of capital (“WACC”) for each reporting unit.

An impairment is recognized when the carrying amount of the reporting unit’s net assets exceeds the estimated fair value of the reporting unit.

An impairment loss is recognized when the carrying amount of the reporting unit’s net assets exceeds the estimated fair value of the reporting unit.

Intangible assets include patents, trademarks, tradenames, customer relationships, purchased technology, and in-process research and development (IPR&D).

1 unchanged sentence

Amortization is recognized within amortization of intangible assets in the consolidated statements of income.

Intangible assets with a definite life 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.

When events or changes in circumstances indicate that the carrying amount of an intangible asset may not be recoverable, the Company calculates the excess of an intangible asset's carrying value over its undiscounted future cash flows.

If the carrying value is not recoverable, an impairment is recognized based on the amount by which the carrying value exceeds the fair value.

The fair value of an intangible asset (asset group) is estimated by utilizing a discounted cash flow analysis.

Intangible assets with a definite life are tested for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group, which includes intangible assets, may not be recoverable.

When events or changes in circumstances indicate that the carrying amount of an asset group, which includes intangible assets, may not be recoverable, the Company calculates the excess of an asset group's carrying value over its undiscounted future cash flows.

If the carrying value is not recoverable, an impairment loss is recognized based on the amount by which the carrying value exceeds the fair value.

The fair value of an asset group, which includes intangible assets, is estimated by utilizing a discounted cash flow analysis.

Acquired IPR&D represents the fair value assigned to those research and development projects that were acquired in a business combination for which the related products have not received regulatory approval and have no alternative future use.

7 unchanged sentences

IPR&D with no alternative future use acquired outside of a business combination is expensed immediately.

Contingent Consideration Certain of the Company’s business combinations involve potential payment of future consideration that is contingent upon the achievement of certain product development milestones and/or contingent on the acquired business reaching certain performance milestones.

The Company records contingent consideration at fair value at the date of acquisition based on the consideration expected to be transferred, estimated as the probability-weighted future cash flows, discounted back to present value.

Contingent Consideration Certain of the Company’s business combinations involve potential payment or receipt of future consideration that is contingent upon the achievement of certain product development milestones and/or contingent on the acquired business reaching certain performance milestones.

The Company records contingent consideration at fair value at the date of acquisition or divestiture based on the consideration expected to be transferred, estimated as the probability-weighted future cash flows, discounted back to present value.

The fair value of contingent consideration is measured using projected payment dates, discount rates, probabilities of payment, and projected revenues (for revenue-based considerations).

2 unchanged sentences

Changes in projected revenues, probabilities of payment, discount rates, and projected payment dates may result in adjustments to the fair value measurements.

Contingent consideration is remeasured each reporting period using Level 3 inputs, and the change in fair value, including accretion for the passage of time, is recognized as income or expense within other operating expense, net in the consolidated statements of income.

Contingent consideration payments made soon after the acquisition date are classified as investing activities in the

Contingent consideration is remeasured each reporting period using Level 3 inputs, and the change in fair value, including accretion for the passage of time, is recognized as income or expense within other operating (income) expense, net in the consolidated statements of income.

Contingent consideration payments made or received soon after the acquisition date are classified as investing activities in the consolidated statements of cash flows.

Contingent consideration payments not made or received soon after the acquisition date that are related to the acquisition date fair value are reported as financing activities in the consolidated statements of cash flows, and amounts paid or received in excess of the original acquisition date fair value are reported as operating activities in the consolidated statements of cash flows.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

consolidated statements of cash flows.

Contingent consideration payments not made soon after the acquisition date that are related to the acquisition date fair value are reported as financing activities in the consolidated statements of cash flows, and amounts paid in excess of the original acquisition date fair value are reported as operating activities in the consolidated statements of cash flows.

Self-Insurance The Company self-insures the majority of its insurable risks, including medical and dental costs, disability coverage, physical loss to property, business interruptions, workers’ compensation, comprehensive general, and product liability.

5 unchanged sentences

Derivatives The Company recognizes all derivative financial instruments in its consolidated financial statements at fair value in accordance with authoritative guidance on derivatives and hedging, and presents assets and liabilities associated with derivative financial instruments on a gross basis in the consolidated financial statements.

For derivative instruments that are designated and qualify as hedging instruments, the hedging instrument must be designated as a fair value hedge or a cash flow hedge, based upon the exposure being hedged.

For derivative instruments that are designated and qualify as hedging instruments, the hedging instrument must be designated as a cash flow hedge or hedges of net investments, based upon the exposure being hedged.

See Note 7 for more information on the Company's derivative instruments and hedging programs.

13 unchanged sentences

The valuation for most fixed maturity securities are classified as Level 2.

Financial assets that are classified as Level 2 include corporate debt securities, government and agency securities, other asset-backed securities, certificate of deposits, debt funds, and mortgage-backed securities whose value is determined using inputs that are observable in the market or may be derived principally from, or corroborated by, observable market data such as pricing for similar securities, recently executed transactions, cash flow models with yield curves, and benchmark securities.

Financial assets that are classified as Level 2 include corporate debt securities, government and agency securities, other asset-backed securities, certificate of deposits, and mortgage-backed securities whose value is determined using inputs that are observable in the market or may be derived principally from, or corroborated by, observable market data such as pricing for similar securities, recently executed transactions, cash flow models with yield curves, and benchmark securities.

In addition, total return swaps are included in Level 2 as the Company uses inputs other than quoted prices that are observable for the asset.

1 unchanged sentence

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies, or similar techniques, and at least one significant model assumption or input is unobservable.

Financial assets that are classified as Level 3 include certain investment securities for which there is limited market activity such that the determination of fair value requires significant judgment or estimation, and auction rate securities.

With the exception of auction rate securities, these securities are valued using third-party pricing sources that incorporate transaction details such as contractual terms, maturity, timing, and amount of expected future cash flows, as well as assumptions about liquidity and credit valuation adjustments by market participants.

The investment securities with limited market activity are valued using third-party pricing sources that incorporate transaction details such as contractual terms, maturity, timing, and amount of expected future cash flows, as well as assumptions about liquidity and credit valuation adjustments by market participants.

The fair value of auction rate securities is estimated by the Company using a discounted cash flow model, which incorporates significant unobservable inputs.

The significant unobservable inputs used in the fair value measurement of the Company’s auction rate securities are years to principal recovery and the

The significant unobservable inputs used in the fair value measurement of the Company’s auction rate securities are years to principal recovery and the illiquidity premium that is incorporated into the discount rate.

Valuation techniques for investments valued using the fair value option are included in the "Investments" section above.

For goodwill, other intangible assets, and IPR&D, inputs used in the fair value analysis fall within Level 3 of the fair value hierarchy due to the use of significant unobservable inputs to determine fair value.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

illiquidity premium that is incorporated into the discount rate.

Certain investments for which the fair value is measured using the net asset value per share (or its equivalent) practical expedient are excluded from the fair value hierarchy.

1 unchanged sentence

Revenue Recognition The Company sells its products through direct sales representatives and independent distributors.

Additionally, a portion of the Company's revenue is generated from consignment inventory maintained at hospitals.

Additionally, a portion of the Company's revenue is generated from consignment inventory maintained at hospitals and royalty and intellectual property arrangements.

The Company recognizes revenue when control is transferred to the customer.

9 unchanged sentences

The Company records adjustments to rebates and returns reserves as increases or decreases of revenue.

The Company records a deferred revenue liability if a customer pays consideration before the Company transfers a good or service to the customer.

The Company records a deferred revenue liability if a customer pays consideration, or the Company has the right to invoice, before the Company transfers a good or service to the customer.

Deferred revenue primarily represents remote monitoring services and equipment maintenance, for which consideration is received at the same time as consideration for the device or equipment.

4 unchanged sentences

Research and development costs include costs of research, engineering, and technical activities to develop a new product or service or make significant improvement to an existing product or manufacturing process.

Research and development costs also include pre-approval regulatory and clinical trial expenses.

Research and development costs also include pre-approval regulatory and clinical trial expenses and license payments for technology not yet approved by regulators.

Contingencies The Company records a liability in the consolidated financial statements for loss contingencies when a loss is known or considered probable, and the amount may be reasonably estimated.

8 unchanged sentences

See Footnote 13 for more information on the Company's uncertain tax positions and tax policies.

Other Operating Expense, Net Other operating expense, net primarily includes royalty income and expense, currency remeasurement and derivative gains and losses, Puerto Rico excise taxes, changes in fair value of contingent consideration, changes in amounts accrued for certain contingent liabilities for a past acquisition, charges related to the June 2021 decision to stop the distribution and sale of Medtronic's HVAD System within the Mechanical Circulatory Support Operating Unit (MCS) (MCS charges), impairment charges, and income from funded research and development arrangements.

Other Operating (Income) Expense, Net Other operating (income) expense, net primarily includes royalty expense, currency remeasurement and derivative gains and losses, Puerto Rico excise taxes, changes in fair value of contingent consideration, changes in amounts accrued for certain contingent liabilities for a past acquisition, MCS charges, RCS charges, impairment charges, income from funded research and development arrangements, and commitments to the Medtronic Foundation and Medtronic LABS.

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

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Currency Translation Assets and liabilities of non-U.S.

2 unchanged sentences

Elements of the consolidated statements of income are translated at the average monthly currency exchange rates in effect during the period.

Currency transaction gains and losses are included in other operating expense, net in the consolidated statements of income.

Currency transaction gains and losses are included in other operating (income) expense, net in the consolidated statements of income.

Stock-Based Compensation The Company measures stock-based compensation expense at the grant date based on the fair value of the award and recognizes the compensation expense over the requisite service period, which is generally the vesting period.

2 unchanged sentences

Recently Adopted Accounting Standards

Current Expected Credit Losses

In June 2016, the Financial Accounting Standards Board (FASB) issued guidance changing the methodology to be used to measure credit losses for certain financial instruments and financial assets, including trade receivables.

The new methodology requires the recognition of an allowance that reflects the current estimate of credit losses expected to be incurred over the life of the financial asset.

The Company adopted this guidance using the modified retrospective method in the first quarter of fiscal year 2021.

The adoption of this guidance did not have a material impact to the Company’s consolidated financial statements.

In February 2016, the FASB issued guidance which requires lessees to recognize right-of-use assets and lease liabilities on the balance sheet.

This guidance also requires additional qualitative and quantitative lease related disclosures in the notes to the consolidated financial statements.

The Company adopted this guidance using the modified retrospective method in the first quarter of fiscal year 2020.

During the implementation, the Company elected the package of practical expedients available under the transition guidance that allowed an entity not to reassess whether any expired or existing contracts are or contain leases, the classification for any expired or existing leases or any initial direct costs for existing leases.

Further, the Company made accounting policy elections to not apply the recognition requirements to short-term leases and to account for lease and nonlease components as a single lease component.

The adoption of this guidance resulted in the recognition of right-of-use assets and lease liabilities in an amount of approximately $ 1.0 billion, an immaterial cumulative-effect adjustment to retained earnings as of April 27, 2019, and expansion of lease related disclosures .

The adoption of this guidance did not have a material impact on the Company's consolidated statements of income or consolidated statements of cash flows.

For fiscal year 2023, there were no newly adopted accounting standards that had a material impact to our consolidated financial statements.

The Company's revenues are principally derived from device-based medical therapies and services related to cardiac rhythm disorders, cardiovascular disease, renal disease, neurological disorders and diseases, spinal conditions and musculoskeletal trauma, chronic pain, urological and digestive disorders, ear, nose, and throat conditions, and diabetes conditions as well as advanced and general surgical care products, respiratory and monitoring solutions, and neurological surgery technologies.

The Company's primary customers include healthcare systems, clinics, third-party healthcare providers, distributors, and other institutions, including governmental healthcare programs and group purchasing organizations.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

The table below illustrates net sales by segment and division for fiscal years 2023, 2022, and 2021:

14 unchanged sentences

Total $ 31,227 $ 31,686 $ 30,117

The table below includes net sales by market geography and segment for fiscal years 2022, 2021, and 2020:

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

The table below illustrates net sales by market geography and segment for fiscal years 2023, 2022, and 2021:

Developed Markets (2)

15 unchanged sentences

includes the United States and U.S.

developed markets include Japan, Australia, New Zealand, Korea, Canada, and the countries of Western Europe.

developed markets include Japan, Australia, New Zealand, Korea, Canada, and the countries within Western Europe.

(3) Emerging markets include the countries of the Middle East, Africa, Latin America, Eastern Europe, and the countries of Asia that are not included in the non-U.S.

developed markets, as defined above.

At April 29, 2022, $ 981 million of rebates were classified as other accrued expenses, and $ 548 million of rebates were classified as a reduction of accounts receivable in the consolidated balance sheet.

At April 28, 2023, $ 1.1 billion of rebates were classified as other accrued expenses, and $ 555 million of rebates were classified as a reduction of accounts receivable in the consolidated balance sheet.

5 unchanged sentences

Remaining performance obligations include goods and services that have not yet been delivered or provided under existing, noncancellable contracts with minimum purchase commitments.

At April 29, 2022, the estimated revenue expected to be recognized in future periods related to unsatisfied performance obligations for executed contracts with an original duration of one year or more was approximately $ 925 million.

At April 28, 2023, the estimated revenue expected to be recognized in future periods related to unsatisfied performance obligations for executed contracts with an original duration of one year or more was approximately $ 0.6 billion.

The Company expects to recognize revenue on the majority of these remaining performance obligations over the next three years .

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Acquisitions and Dispositions

The Company had acquisitions during fiscal years 2023 and 2022 that were accounted for as business combinations.

4 unchanged sentences

Purchase price allocation adjustments for fiscal years 2023 and 2022 business combinations were not significant.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Fiscal Year 2023

The acquisition date fair value of net assets acquired during fiscal year 2022 was $ 125 million, consisting of $ 154 million of assets acquired and $ 29 million of liabilities assumed.

Based upon preliminary valuations, assets acquired were primarily comprised of $ 50 million of technology-based intangible assets with estimated useful lives ranging from 15 to 16 years, and $ 80 million of goodwill.

Intersect ENT

On May 13, 2022, the Company acquired Intersect ENT, a global ear, nose, and throat (ENT) medical technology leader.

The acquisition expands the Neuroscience segment 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).

Total consideration, net of cash acquired, for the transaction, in which the Company acquired all outstanding shares of Intersect ENT for $ 28.25 per share, was $ 1.2 billion consisting of $ 1.1 billion of cash and $ 98 million previously held investments in Intersect ENT.

Based upon a preliminary acquisition valuation, the Company acquired $ 615 million of goodwill, $ 635 million of technology-based intangible assets, $ 35 million of customer-related intangible assets, and $ 13 million of tradenames with estimated useful lives of 20 years.

The goodwill is not deductible for tax purposes.

The Company recognized $ 31 million of contingent consideration liabilities in connection with business combinations during fiscal year 2022, which are comprised of revenue and regulatory milestone-based payments.

Revenue and net loss attributable to Intersect ENT since the date of acquisition as well as costs incurred in connection with the acquisition included in the consolidated statements of income were not significant for fiscal year 2023.

On August 30, 2022, the Company acquired Affera, Inc.

(Affera) a privately-held company focused on the development of cardiac mapping and navigation systems and catheter-based cardiac ablation technologies.

The acquisition expands the Cardiovascular segment suite of advanced cardiac ablation products and accessories, including its first cardiac mapping and navigation platform.

Total consideration, net of cash acquired for the transaction, was $ 904 million.

Based upon a preliminary acquisition valuation, the Company acquired $ 660 million of goodwill and $ 300 million of in-process research and development, which was capitalized into intangible assets during the fourth quarter of fiscal year 2023.

The goodwill is not deductible for tax purposes.

The Company recognized $ 201 million of non-cash contingent consideration liabilities in connection with the acquisition, which are comprised of product development milestone-based payments.

Revenue and net loss attributable to Affera since the date of acquisition as well as costs incurred in connection with the acquisition included in the consolidated statements of income were not significant for fiscal year 2023.

The acquisition date fair values of the assets acquired and liabilities assumed were as follows:

(in millions) Intersect ENT Affera

Cash and cash equivalents $ 39 $ 66

Inventory 32 —

Goodwill 615 660

Other intangible assets 683 300

Other assets 40 1

Total assets acquired 1,408 1,027

Current liabilities 63 2

Deferred tax liabilities 51 53

Other liabilities 18 1

Total liabilities assumed 131 56

Net assets acquired $ 1,277 $ 970

Other acquisitions

For acquisitions other than Intersect ENT and Affera, the acquisition date fair value of net assets acquired during fiscal year 2023 was $ 123 million.

Based upon preliminary valuations, assets acquired were primarily comprised of $ 66 million of goodwill and $ 57 million of technology-based intangible assets with estimated useful lives of 16 years.

The goodwill is deductible for tax purposes.

The Company recognized $ 73 million of non-cash contingent consideration liabilities in connection with these acquisitions during fiscal year 2023, which are comprised of revenue and product development milestone-based payments.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Fiscal Year 2022

The acquisition date fair value of net assets acquired during fiscal year 2021 was $ 1.2 billion, consisting of $ 1.4 billion of assets acquired and $ 161 million of liabilities assumed.

Based upon final valuations, assets acquired were primarily comprised of $ 417 million of technology-based intangible assets and $ 13 million of customer-related intangible assets with estimated useful lives ranging from 8 to 15 years, and $ 816 million of goodwill.

The acquisition date fair value of net assets acquired during fiscal year 2022 was $ 125 million, consisting of $ 154 million of assets acquired and $ 29 million of liabilities assumed.

Assets acquired were primarily comprised of $ 50 million of technology-based intangible assets with estimated useful lives ranging from 15 to 16 years, and $ 80 million of goodwill.

The goodwill is not deductible for tax purposes.

The Company recognized $ 253 million of contingent consideration liabilities in connection with business combinations during fiscal year 2021, which are comprised of revenue and regulatory milestone-based payments.

Additionally, the Company recognized a gain of $ 132 million related to a change in amounts accrued for certain contingent liabilities from a past acquisition.

The benefit was recognized in other operating expense, net in the consolidated statements of income as the purchase accounting was finalized in fiscal year 2020.

Subsequent Acquisitions

Subsequent to fiscal year 2022, on May 13, 2022, the Company's Neuroscience segment acquired Intersect ENT, a global ear, nose, and throat (ENT) medical technology leader.

The acquisition expands Medtronic'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).

Total consideration for the transaction, in which the Company acquired all outstanding shares of Intersect ENT for $ 28.25 per share, was approximately $ 1.2 billion.

The transaction will be accounted for as a business combination using the acquisition method of accounting.

This requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date.

Due to the limited amount of time since the acquisition date and the significant limitations on access to Intersect ENT information prior to the acquisition date the preliminary acquisition valuation for the business combination is incomplete at this time.

As a result, the Company is unable to provide the amounts recognized as of the acquisition date for the major classes of assets acquired and liabilities assumed, including the information required for valuation of intangible assets and goodwill.

We will include such disclosures in our Form 10-Q for the quarter ending July 29, 2022.

The Company recognized $ 31 million of non-cash contingent consideration liabilities in connection with business combinations during fiscal year 2022, which are comprised of revenue and product development milestone-based payments.

Acquired In-Process Research & Development (IPR&D)

IPR&D with no alternative future use acquired outside of a business combination is expensed immediately.

During fiscal year 2022, the Company acquired $ 101 million of IPR&D in connection with asset acquisitions of technology not approved by regulators, which was recognized in research and development expense in the consolidated statements of income.

During fiscal year 2023, IPR&D acquired in connection with asset acquisitions was not significant.

During fiscal year 2022, the Company acquired $ 101 million of IPR&D in connection with asset acquisitions of technology not yet approved by regulators, which was recognized in research and development expense in the consolidated statements of income.

Contingent Consideration

1 unchanged sentence

A liability is recorded for the estimated fair value of the contingent consideration on the acquisition date.

The fair value of the contingent consideration is remeasured at each reporting period, and the change in fair value is recognized within other operating expense, net in the consolidated statements of income.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

The fair value of the contingent consideration is remeasured at each reporting period, and the change in fair value is recognized within other operating (income) expense, net in the consolidated statements of income.

The fair value of contingent consideration at April 28, 2023 and April 29, 2022 was $ 206 million and $ 119 million, respectively.

8 unchanged sentences

Change in fair value ( 24 ) ( 103 )

Divestiture-related and other ( 8 ) —

Ending Balance $ 206 $ 119

1 unchanged sentence

(in millions) Fair Value at April 28, 2023 Unobservable Input Range Weighted Average (1)

Discount rate 11.2 % - 27.2 %

Revenue and other performance-based payments $ 104 Probability of payment 100 % 100 %

Revenue and other performance-based payments $ 80 Discount rate 11.2 % - 27.2 %

Projected fiscal year of payment 2024 - 2027 2025

Discount rate 5.5 % 5.5 %

Product development and other milestone-based payments $ 15 Probability of payment 100 % 100 %

Product development and other milestone-based payments $ 126 Discount rate 3.9 % - 5.5 %

Projected fiscal year of payment 2024 - 2027 2026

1 unchanged sentence

For projected fiscal year of payment, the amount represents the median of the inputs and is not a weighted average.

Renal Care Solutions disposition

On May 25, 2022, the Company and DaVita Inc.

(“DaVita”) entered into a definitive agreement for the Company to sell half of its Renal Care Solutions (RCS) business, and on April 1, 2023, completed the transaction.

This sale is part of an agreement between Medtronic and DaVita to form a new, independent kidney care-focused medical device company (“Mozarc Medical” or "Mozarc") with equal equity

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

RCS was part of the Company’s Medical Surgical portfolio.

At closing, the Company received $ 45 million cash consideration, recorded non-cash contingent consideration receivables valued at $ 195 million due based on the achievement of certain revenue, regulatory, and profitability milestones, and retained a 50 % non-controlling equity interest in Mozarc valued at $ 307 million.

For the contingent consideration receivables, the maximum consideration the Company could receive in the future is $ 300 million based on the achievement of the aforementioned milestones, with potential payouts starting in fiscal year 2025 through 2029.

The Company recorded total non-cash pre-tax charges of $ 136 million in fiscal year 2023, primarily related to impairment of goodwill and changes in the carrying amount of the disposal group, recognized in other operating (income) expense, net in the consolidated statements of income.

Refer to Note 9 to the consolidated financial statements for additional information on the goodwill impairment.

Refer to Note 5 to the consolidated financial statements for additional information on the Company’s retained 50 % equity investment in Mozarc as a result of this transaction.

The Company determined that the sale of the RCS business did not meet the criteria to be classified as discontinued operations.

Restructuring Charges

Enterprise Excellence

In the third quarter of fiscal year 2018, the Company announced its Enterprise Excellence restructuring program, which was designed to leverage the Company's global size and scale, as well as enhance the customer and employee experience, with a focus on three objectives:

global operations, functional optimization, and commercial optimization.

Since inception, the Company has incurred pre-tax exit and disposal costs and other costs, across all segments, of $ 1.6 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 program by the end of fiscal year 2023.

The remaining charges are costs associated with the restructuring program, such as salaries and benefits for employees supporting the program, including program management and transition teams, and strategic and operational consulting services related to the three objectives of the program.

These charges are recognized within restructuring charges, net, cost of products sold, and selling, general, and administrative expense in the consolidated statements of income.

For fiscal years 2022, 2021 and 2020, the Company recognized net charges of $ 259 million, $ 349 million, and $ 441 million, respectively, of which $ 116 million, $ 128 million, and $ 155 million, respectively, were recognized within cost of products sold, and $ 112 million, $ 169 million, and $ 168 million, respectively, were recognized within selling, general, and administrative expense in the consolidated statements of income.

Simplification

In the first quarter of fiscal year 2021, the Company initiated the Simplification restructuring program, designed to make the Company a more nimble and competitive organization focused on accelerating innovation, enhancing the customer experience, driving revenue growth, and winning market share, while also more efficiently and effectively leveraging the enterprise scale.

In fiscal years 2023, 2022 and 2021, restructuring costs primarily related to Enterprise Excellence and Simplification restructuring programs, both of which were substantially completed as of the end of this fiscal year.

Enterprise Excellence was designed to leverage the company’s global size and scale to focus on global operations, and functional and commercial optimization, and had total pre-tax charges of $ 1.8 billion.

Simplification was designed to focus the organization on accelerating innovation, enhancing customer experience, driving revenue growth and winning market share, and had total pre-tax charges of $ 0.5 billion.

In addition, in the fourth quarter of fiscal year 2023, we incurred $ 0.3 billion of restructuring charges primarily related to employee termination benefits to support cost reduction initiatives.

These charges were incremental to charges incurred under our Enterprise Excellence and Simplification programs noted above.

For all programs, employee-related costs primarily consist of termination benefits provided to employees who have been involuntarily terminated and voluntary early retirement benefits.

Associated costs primarily include salaries and wages of employees that are fully-dedicated to restructuring programs and consulting fees.

The following table presents the classification of restructuring costs in the consolidated statements of income:

(in millions) 2023 2022 2021

Cost of products sold $ 97 $ 117 $ 128

Selling, general, and administrative expenses 173 158 196

Restructuring charges, net 375 60 293

Total restructuring and associated costs $ 647 $ 335 $ 617

(1) In fiscal years 2023 and 2021, restructuring charges, net included $ 94 million and $ 97 million, respectively, of incremental defined benefit, defined contribution, and post-retirement related expenses for employees that accepted voluntary early retirement packages.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Since inception, the Company has incurred pre-tax exit and disposal costs and other costs, across all segments, of $ 349 million in connection with the 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 by the end of fiscal year 2023.

The remaining charges are costs associated with the restructuring program, such as salaries for employees supporting the program and consulting expenses.

These charges are recognized within restructuring charges, net , cost of products sold , and selling, general, and administrative expense in the consolidated statements of income.

For fiscal years 2022 and 2021, the Company recognized net charges of $ 82 million and $ 268 million, respectively, of which $ 45 million and $ 27 million were recognized within selling, general, and administrative expense in the consolidated statements of income.

The net charges for fiscal year 2021 included $ 97 million of incremental defined benefit pension and post-retirement related expenses for employees that accepted voluntary early retirement packages and are not included in the table below, as they are associated with costs that are accounted for under the pension and post-retirement rules.

See Note 15 for further discussion on these charges.

The following table summarizes the activity related to the restructuring programs noted above for fiscal years 2022, 2021, and 2020:

(in millions) Employee Termination Benefits Associated Costs (1)

The following table summarizes the activity related to restructuring programs for fiscal years 2023 and 2022:

(in millions) Employee Termination Benefits (1)

Associated Costs (2)

Write-downs Other

2 unchanged sentences

Cash payments ( 109 ) ( 269 ) — — ( 378 )

Settled non-cash — — ( 24 ) — ( 24 )

Accrual adjustments (3)

6 unchanged sentences

April 28, 2023 $ 204 $ 23 $ — $ 1 $ 230

Charges 80 274 — — 354

Cash payments ( 109 ) ( 269 ) — — ( 378 )

Accrual adjustments (2)

( 13 ) — — — ( 13 )

April 29, 2022 $ 81 $ 27 $ — $ 1 $ 110

(1) In fiscal years 2023, restructuring charges, net included $ 94 million of incremental defined benefit, defined contribution, and post-retirement related expenses for employees that accepted voluntary early retirement packages.

These costs are not included in the table summarizing restructuring charges above, as they are associated with costs that are accounted for under the pension and post-retirement rules.

(2) Associated costs include costs incurred as a direct result of the restructuring program, such as salaries for employees supporting the program and consulting expenses.

1 unchanged sentence

Mechanical Circulatory Support (MCS)

On June 3, 2021, the Company announced the decision to stop the distribution and sale of the Medtronic HVAD System in light of a growing body of observational clinical comparisons indicating a lower frequency of neurological adverse events and mortality with another circulatory support device available to patients compared to the HVAD system.

In connection with this decision, the Company recorded charges of $ 726 million (MCS charges) within the Cardiovascular segment during the first quarter of fiscal year 2022, including $ 58 million recognized in costs of products sold and $ 668 million recognized within other operating expense, net in the consolidated statement of income .

In June 2021, the Company announced the decision to stop the distribution and sale of the Medtronic HVAD System in light of a growing body of observational clinical comparisons indicating a lower frequency of neurological adverse events and mortality with another circulatory support device available to patients compared to the HVAD system.

In connection with this decision, the Company recorded charges of $ 726 million (MCS charges) within the Cardiovascular segment during the first quarter of fiscal year 2022, including $ 58 million recognized in costs of products sold and $ 668 million recognized within other operating (income) expense, net in the consolidated statement of income .

The charges included $ 515 million of non-cash impairments and write-downs primarily related to $ 409 million of intangible asset impairments and $ 58 million of inventory write-downs.

The Company also recorded charges of $ 211 million for commitments and obligations associated with the decision, which included charges for patient support obligations, restructuring, and other associated costs.

During the fourth quarter of fiscal year 2022, the Company recorded additional charges of $ 155 million within other operating expense, net primarily related to incremental commitments and obligations associated with the exit of the business.

During the fourth quarter of fiscal year 2022, the Company recorded additional charges of $ 155 million within other operating (income) expense, net primarily related to incremental commitments and obligations associated with the exit of the business.

As of April 28, 2023, accruals were recorded in the consolidated balance sheet for these obligations, with $ 84 million reflected in other accrued expenses and $ 88 million recorded in other liabilities .

Medtronic remains committed to serving the needs of the approximately 3,500 patients currently implanted with the HVAD system.

Medtronic plc

31 unchanged sentences

Other asset-backed securities 567 — ( 11 ) 556 556 —

Debt funds 7 — — 7 7 —

Total Level 2 6,563 4 ( 227 ) 6,341 6,341 —

9 unchanged sentences

Losses Fair Value Unrealized

government and agency securities $ — $ — $ 945 $ ( 56 )

Corporate debt securities $ 286 $ ( 4 ) $ 2,901 $ ( 158 )

government and agency securities 89 ( 3 ) 821 ( 64 )

Mortgage-backed securities 26 ( 1 ) 460 ( 53 )

6 unchanged sentences

Losses Fair Value Unrealized

government and agency securities $ 946 $ ( 10 ) $ — $ —

Corporate debt securities $ 222 $ ( 1 ) $ 2,993 $ ( 139 )

government and agency securities — — 945 ( 56 )

Mortgage-backed securities — — 507 ( 35 )

24 unchanged sentences

Equity Securities, Equity Method Investments, and Other Investments

The Company holds investments in equity securities with readily determinable fair values, equity investments without readily determinable fair values, investments accounted for under the equity method, and other investments.

The Company holds investments in equity securities with readily determinable fair values, equity method investments for which the Company has elected the fair value option, equity investments without readily determinable fair values, investments accounted for under the equity method, and other investments.

Equity securities with readily determinable fair values are included in Level 1 of the fair value hierarchy, as they are measured using quoted market prices.

Equity method investments and investments without readily determinable fair values are included within Level 3 of the fair value hierarchy due to the use of significant unobservable inputs to determine fair value.

To determine the fair value of these investments, the Company uses all pertinent financial information available related to the investees, including financial statements, market participant valuations from recent and proposed equity offerings, and other third-party data.

Equity method investments for which the Company has elected the fair value option are included within Level 3 of the fair value hierarchy due to the use of significant unobservable inputs to determine fair value.

To determine the fair value of these investments, the Company uses a discounted cash flow methodology, taking into consideration various assumptions including discount rate, and all pertinent financial information available related to the investees, including historical financial statements and projected future cash flows.

Equity investments that do not have readily determinable fair values, and that are not accounted for via the fair value option, are included within Level 3 of the fair value hierarchy, as they are measured using the measurement alternative at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer.

The following table summarizes the Company's equity and other investments at April 28, 2023 and April 29, 2022, which are classified as other assets in the consolidated balance sheets:

1 unchanged sentence

Investments with readily determinable fair value (marketable equity securities) $ 115 $ 64

Investments for which the fair value option has been elected 531 —

Investments without readily determinable fair values 872 732

1 unchanged sentence

Total equity and other investments $ 1,607 $ 881

The table below includes activity related to the Company’s portfolio of equity and other investments.

Gains and losses on equity and other investments are recognized in other non-operating income, net in the consolidated statements of income.

(in millions) April 29, 2022 April 30, 2021 April 24, 2020

Proceeds from sales $ 81 $ 13 $ 15

Gross gains 99 68 17

Gross losses ( 52 ) ( 3 ) ( 30 )

Impairment losses recognized ( 17 ) ( 4 ) ( 4 )

Gains and losses on the Company's portfolio of equity and other investment are recognized in other non-operating income , net in the consolidated statements of income.

During the fiscal year ended April 28, 2023, there were $ 56 million of net unrealized gains on equity securities and other investments still held at April 28, 2023.

During the fiscal year ended April 29, 2022, there were $ 8 million of net unrealized gains on equity securities and other investments still held at April 29, 2022.

Interest income is recognized in other non-operating income, net , in the consolidated statements of income.

During the fiscal year ended April 28, 2023, there was $ 386 million of interest income.

During the fiscal year ended April 29, 2022, there was $ 186 million of interest income.

Mozarc Medical Investment

On April 1, 2023 the Company sold half of its RCS business to Mozarc, and as a result of the transaction the Company retained a 50 % equity interest in Mozarc.

Please refer to Note 3 to the consolidated financial statements for additional information on this transaction.

Although the equity investment provides the Company with the ability to exercise significant influence over Mozarc, the Company has elected the fair value option to account for this equity investment.

The Company believes the fair value option best reflects the economics of the underlying transaction.

Under the fair value option, changes in the fair value of the investment are recognized through earnings each reporting period in other non-operating income, net in the consolidated statements of income.

The following table provides a reconciliation of the beginning and ending balances of the Mozarc investment for which the Fair Value Option has been elected:

(in millions) Fiscal Year 2023

Beginning Balance $ —

Initial valuation 307

Additional cash investment 224

Ending Balance $ 531

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Financing Arrangements

13 unchanged sentences

have guaranteed the obligations of Medtronic Luxco under the 2015 CP Program and the 2020 CP Program.

There was no commercial paper outstanding at April 29, 2022 and April 30, 2021, or during fiscal year 2021.

During fiscal year 2022, the weighted average original maturity of the commercial paper outstanding was approximately fifteen days and the weighted average interest

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

rate was 0.70 percent.

There was no commercial paper outstanding at April 28, 2023 and April 29, 2022.

During fiscal year 2023, the weighted average original maturity of the commercial paper outstanding was approximately 22 days and the weighted average interest rate was 4.34 percent.

During fiscal year 2022, the weighted average original maturity of the commercial paper outstanding was approximately 15 days and the weighted average interest rate was 0.70 percent.

The issuance of commercial paper reduces the amount of credit available under the Company's existing credit facility, defined below.

Line of Credit On December 12, 2021, Medtronic Luxco, as borrower, entered into an amendment to its amended and restated credit agreement (Credit Facility), by and among Medtronic, Medtronic, Inc., Medtronic Luxco, the lenders from time to time party thereto, and Bank of America, N.A., as administrative agent and issuing bank, extending the maturity date of the Credit Facility to December 2026 and removing the cap on the number of extension options available.

Line of Credit On December 12, 2022, Medtronic Luxco, as borrower, entered into an amendment to its amended and restated credit agreement (Credit Facility), by and among Medtronic, Medtronic, Inc., Medtronic Luxco, the lenders from time to time party thereto, and Bank of America, N.A., as administrative agent and issuing bank, extending the maturity date of the Credit Facility to December 2027.

The Credit Facility provides for a $ 3.5 billion five-year unsecured revolving credit facility (Credit Facility).

13 unchanged sentences

(in millions, except interest rates) Maturity by Fiscal Year Amount Effective Interest Rate Amount Effective Interest Rate

0.000 percent three -year 2019 senior notes

2023 $ — — % $ 907 0.08 %

0.375 percent four -year 2019 senior notes

2023 — — 1,813 0.55

0.000 percent two -year 2020 senior notes

2023 — — 1,511 0.12

3.500 percent ten -year 2015 senior notes

2 unchanged sentences

2026 1,097 0.44 1,064 0.45

2.625 percent three -year 2022 senior notes

2026 549 2.86 — —

0.000 percent five -year 2020 senior notes

4 unchanged sentences

2027 — — 368 3.53

4.250 percent five -year 2023 senior notes

2028 1,000 4.42 — —

3.000 percent six -year 2022 senior notes

2029 1,097 3.09 — —

0.375 percent eight -year 2020 senior notes

4 unchanged sentences

2032 1,097 1.06 1,064 1.06

3.125 percent nine -year 2022 senior notes

2032 1,097 3.25 — —

0.750 percent twelve -year 2020 senior notes

2033 1,097 0.81 1,064 0.81

4.500 percent ten -year 2023 senior notes

2033 1,000 4.62 — —

3.375 percent twelve -year 2022 senior notes

2035 1,097 3.44 — —

4.375 percent twenty -year 2015 senior notes

31 unchanged sentences

The Company is in compliance with all covenants related to the Seniors Notes.

In June 2019, Medtronic Luxco issued six tranches of Euro-denominated Senior Notes with an aggregate principal of € 5.0 billion, with maturities ranging from fiscal year 2021 to fiscal year 2050, resulting in cash proceeds of approximately $ 5.6 billion, net of discounts and issuance costs.

The Company used the net proceeds of the offering to fund the cash tender offer and early redemption of $ 5.2 billion of Medtronic Inc., CIFSA, and Medtronic Luxco Senior Notes for $ 5.6 billion of total consideration.

The Company recognized a loss on debt extinguishment of $ 413 million in fiscal year 2020, 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 statement of income.

In September 2020, Medtronic Global Holdings S.C.A.

(Medtronic Luxco) issued an additional six tranches of Euro-denominated Senior Notes with an aggregate principal of € 6.3 billion, with maturities ranging from fiscal year 2023 to fiscal year 2051, resulting in cash proceeds of approximately $ 7.2 billion, net of discounts and issuance costs.

The Company used the net proceeds of the offering to fund the

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

early redemption of $ 4.3 billion of Medtronic Inc.

(Medtronic Luxco) issued six tranches of Euro-denominated Senior Notes with an aggregate principal of € 6.3 billion, with maturities ranging from fiscal year 2023 to fiscal year 2051, resulting in cash proceeds of approximately $ 7.2 billion, net of discounts and issuance costs.

The Company used the net proceeds of the offering to fund the early redemption of $ 4.3 billion of Medtronic Inc.

and CIFSA Senior Notes and € 1.5 billion of Medtronic Luxco Senior Notes for $ 6.3 billion of total consideration in October 2020.

Additionally, the Company used the proceeds to repay its € 750 million floating rate senior notes at maturity in March 2021.

The Company recognized a loss on debt extinguishment of $ 308 million in fiscal year 2021, 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 statement of income.

The Euro-denominated debt issued in June 2019 and September 2020 is designated as a net investment hedge of certain of the Company's European operations.

The Company recognized a loss on debt extinguishment of $ 308 million in fiscal year 2021, which primarily

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

included cash premiums and accelerated amortization of deferred financing costs and debt discounts and premiums.

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

In September 2022, Medtronic Luxco 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 $ 3.4 billion, net of discounts and issuance costs.

The Company used the net proceeds to repay at maturity € 750 million of Medtronic Luxco Senior Notes for $ 772 million of total consideration in December 2022 and € 2.8 billion of Medtronic Luxco Senior Notes for $ 2.9 billion of total consideration in March 2023.

In March 2023, Medtronic Luxco issued two tranches of USD-denominated Senior Notes with an aggregate principal of $ 2.0 billion, with maturities ranging from fiscal year 2028 to 2033, resulting in cash proceeds of approximately $ 2.0 billion, net of discounts and issuance costs.

The Company used the net proceeds supplemented by additional cash to repay the ¥ 297 billion Fiscal 2023 Loan Agreement discussed below for $ 2.3 billion of total consideration.

The Euro-denominated debt issued in September 2020 and September 2022 is designated as a net investment hedge of certain of the Company's European operations.

Refer to Note 7 for additional information regarding the net investment hedge.

Term Loan Agreements On May 12, 2020, Medtronic Luxco entered into a term loan agreement (Fiscal 2021 Loan Agreement) by and among Medtronic Luxco, Medtronic plc, Medtronic, Inc., and Mizuho Bank, Ltd.

as administrative agent and as lender.

The Fiscal 2021 Loan Agreement provided an unsecured term loan in an aggregate principal amount of up to ¥ 300 billion, with a term of six months and the option to extend for an additional six months at Medtronic Luxco’s option.

On May 13, 2020, Medtronic Luxco borrowed the entire amount of the term loan under the Fiscal 2021 Loan Agreement.

The Japanese Yen-denominated debt was designated as a net investment hedge for certain of the Company's Japanese operations.

Borrowings under the Fiscal 2021 Loan Agreement carried interest at the TIBOR Rate (as defined in the Fiscal 2021 Loan Agreement) plus a margin of 0.50 % per annum.

Medtronic plc and Medtronic, Inc.

guaranteed the obligations of Medtronic Luxco under the Fiscal 2021 Loan Agreement.

On November 12, 2020, the Company exercised its option to extend the term loan for an additional six months .

During the fourth quarter of fiscal year 2021, the Company de-designated the Yen-denominated debt as a net investment hedge and repaid the term loan in full, including interest.

Subsequent to fiscal year 2022, on May 2, 2022, Medtronic Luxco entered into a term loan agreement (Fiscal 2023 Loan Agreement) by and among Medtronic Luxco, Medtronic plc, Medtronic, Inc., and Mizuho Bank, Ltd.

Term Loan Agreements In May 2022, Medtronic Luxco entered into a term loan agreement (Fiscal 2023 Loan Agreement) by and among Medtronic Luxco, Medtronic plc, Medtronic, Inc., and Mizuho Bank, Ltd.

as administrative agent and as lender.

2 unchanged sentences

Medtronic plc and Medtronic, Inc.

have guaranteed the obligations of Medtronic Luxco under the Fiscal 2023 Loan Agreement.

guaranteed the obligations of Medtronic Luxco under the Fiscal 2023 Loan Agreement.

In May and June 2022, Medtronic Luxco borrowed an aggregate of ¥ 297 billion, or approximately $ 2.3 billion, of the term loan, under the Fiscal 2023 Loan Agreement.

The Company used the net proceeds of the borrowings to fund the early redemption of $ 1.9 billion of Medtronic Inc.'s 3.500 % Senior Notes due 2025 for $ 1.9 billion of total consideration, and $ 368 million of Medtronic Luxco's 3.350 % Senior Notes due 2027 for $ 376 million of total consideration.

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

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

The Company recognized a total loss on debt extinguishment of $ 53 million within interest expense, net in the consolidated statements of income during fiscal year 2023, which primarily includes cash premiums and accelerated amortization of deferred financing costs and debt discounts and premiums.

During the fourth quarter of fiscal year 2023, the Company repaid the term loan in full, including interest.

Contractual maturities of debt for the next five fiscal years and thereafter, excluding deferred financing costs and debt discount, net, are as follows:

8 unchanged sentences

Derivatives and Currency Exchange Risk Management

The Company uses operational and economic hedges, including currency exchange rate derivative contracts and interest rate derivative instruments, to manage the impact of currency exchange and interest rate changes on earnings and cash flows.

In addition, the Company uses cross currency interest rate swaps to manage currency risk related to certain debt.

In order to minimize earnings and cash flow volatility resulting from currency exchange rate changes, the Company enters into derivative instruments, principally forward currency exchange rate

The Company uses derivative instruments and foreign currency denominated debt to manage the impact that currency exchange rate and interest rate changes have on reported financial statements.

The Company does not enter into derivative contracts for speculative purposes.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

These contracts are designed to hedge anticipated foreign currency transactions and changes in the value of specific assets and liabilities.

At inception of the contract, the derivative is designated as either a freestanding derivative or a cash flow hedge.

Currencies of our derivative instruments include the Euro, Japanese Yen, Chinese Yuan, and others.

The Company does not enter into currency exchange rate derivative contracts for speculative purposes.

The gross notional amount of all currency exchange rate derivative instruments outstanding was $ 13.8 billion and $ 14.7 billion at April 29, 2022 and April 30, 2021, respectively.

The Company also uses derivative and non-derivative instruments to manage the impact of currency exchange rate changes on net investments in foreign currency-denominated operations.

The information that follows explains the various types of derivatives and financial instruments used by the Company, reasons the Company uses such instruments, and the impact such instruments have on the Company’s consolidated balance sheets and statements of income.

Freestanding Derivative Contracts

Freestanding derivative contracts are primarily used to offset the Company’s exposure to the change in value of specific foreign-currency-denominated assets and liabilities, and to offset variability of cash flows associated with forecasted transactions denominated in foreign currencies.

The gross notional amount of the Company's freestanding currency exchange rate contracts outstanding at April 29, 2022 and April 30, 2021 was $ 4.9 billion and $ 5.7 billion, respectively.

The Company's freestanding currency exchange rate contracts are not designated as hedges, and therefore, changes in the value of these contracts are recognized in earnings, thereby offsetting the current earnings effect of the related change in value of foreign-currency-denominated assets, liabilities, and cash flows.

The Company also uses total return swaps to hedge the liability of a non-qualified, deferred compensation plan.

The gross notional amount of the Company's total return swaps outstanding at April 29, 2022 and April 30, 2021 was $ 226 million and $ 243 million, respectively.

The Company's total return swaps are not designated as hedges, and therefore, changes in the value of these instruments are recognized in earnings.

The cash flows related to the Company's freestanding derivative contracts are reported as operating or financing activities, depending on the nature of the underlying hedged item, in the consolidated statements of cash flows.

Cash Flow Hedges

Forward contracts designated as cash flow hedges are designed to hedge the variability of cash flows associated with forecasted transactions denominated in a foreign currency that will take place in the future.

The gross notional amount of these contracts, designated as cash flow hedges, outstanding at April 29, 2022 and April 30, 2021 was $ 8.8 billion and $ 9.0 billion, respectively, and will mature within the subsequent three-year period.

For derivative instruments that are designated and qualify as a cash flow hedge, the gain or loss on the derivative instrument is reported as a component of accumulated other comprehensive loss .

The gain or loss on the derivative instrument is reclassified into earnings and is included in other operating expense, net or cost of products sold in the consolidated statements of income in the same period or periods during which the hedged transaction affects earnings.

Amounts excluded from the measurement of hedge effectiveness are recognized in earnings in the current period.

The cash flows related to all of the Company's derivative instruments designated as cash flow hedges are reported as operating activities in the consolidated statements of cash flows.

No components of the hedge contracts were excluded in the measurement of hedge effectiveness, and no forward contracts designated as cash flow hedges were derecognized or discontinued during fiscal years 2022, 2021, or 2020.

At April 29, 2022 and April 30, 2021, the Company had $ 474 million in after-tax unrealized gains and $ 253 million in after-tax unrealized losses, respectively, associated with cash flow hedging instruments recorded in accumulated other comprehensive loss .

The Company uses foreign currency forward exchange contracts designated as cash flow hedges to manage its exposure to the variability of future cash flows that are denominated in a foreign currency.

At inception, foreign currency forward contracts are designated as a cash flow hedge.

Changes in the fair value of these derivatives are reported as a component of accumulated other comprehensive loss until the hedged transaction affects earnings.

When the hedged transaction affects earnings, the gain or loss on the derivative is reclassified to earnings.

Amounts excluded from the measurement of hedge effectiveness are recognized in earnings on a straight-line basis over the term of the hedge.

Cash flows are reported as operating activities in the consolidated statements of cash flows.

The Company's cash flow hedges will mature within the subsequent three-year period.

At April 28, 2023 and April 29, 2022, the Company had $ 93 million and $ 474 million in after-tax unrealized gains, respectively, associated with cash flow hedging instruments recorded in accumulated other comprehensive loss.

The Company expects that $ 140 million of after-tax net unrealized gains at April 28, 2023 will be recognized in the consolidated statements of income over the next 12 months.

Net Investment Hedges

The Company has designated Euro-denominated debt as a net investment hedge of certain of its European operations to manage the exposure to currency and exchange rate movements for foreign currency-denominated net investments in foreign operations.

At April 29, 2022, the Company had € 16.0 billion, or $ 17.0 billion, of outstanding Euro-denominated debt designated as a hedge of its net investment in certain of its European operations, which will mature in fiscal year 2023 through fiscal year 2051.

In February 2021, the Company de-designated ¥ 300 billion of outstanding Yen-denominated debt previously designated as a net investment hedge and concurrently entered into freestanding forward derivative contracts with a total notional value of ¥ 300 billion, or approximately $ 2.9 billion.

These forward contracts were not designated as hedges.

The Company used the proceeds from these forward derivative contracts to repay the ¥ 300 billion of Yen-denominated debt in conjunction with the maturity of these forward contracts in March and April of 2021.

For instruments that are designated and qualify as net investment hedges, the gains or losses are reported as a component of accumulated other comprehensive loss .

The gains or losses are reclassified into earnings upon a liquidation event or deconsolidation of the foreign

The Company uses derivative instruments and foreign currency denominated debt to manage foreign currency risk associated with its net investment in foreign operations.

The derivative instruments that the Company uses for this purpose may include foreign currency forward exchange contracts used on a standalone basis or in combination with option collars and standalone cross currency interest rate contracts.

For instruments that are designated as net investment hedges, the gains or losses are reported as a component of accumulated other comprehensive loss .

The gains or losses are reclassified into earnings upon a liquidation event or deconsolidation of the foreign subsidiary.

Amounts excluded from the assessment of effectiveness are recognized in interest expense, net on a straight-line basis over the term of the hedge.

During the twelve months ended April 28, 2023, the Company recognized $ 107 million of after-tax unrealized gains related to excluded components in interest expense , net .

The cash flows related to the Company’s derivative instruments designated as net investment hedges are reported as investing activities in the consolidated statements of cash flows.

Cash flows attributable to amounts excluded from the assessment of effectiveness are reported as operating activities in the consolidated statements of cash flows.

Undesignated Derivatives

The Company uses foreign currency forward exchange contracts to offset the Company’s exposure to the change in the value of non-functional currency denominated assets, liabilities, and cash flows.

These foreign currency forward exchange rate contracts are not designated as hedges at inception, and therefore, changes in the fair value of these contracts are recognized in the consolidated statements of income.

Cash flows related to the Company’s undesignated derivative contracts are reported in the consolidated statements of cash flows based on the nature of the derivative instrument.

Outstanding Instruments

The following table presents the contractual amounts of the Company's outstanding instruments:

(in billions) Designation April 28, 2023 April 29, 2022

Currency exchange rate contracts Cash flow hedge $ 9.1 $ 8.8

Currency exchange rate contracts (1)

Net investment hedge 7.2 —

Foreign currency-denominated debt (2)

Net investment hedge 17.6 17.0

Currency exchange rate contracts Undesignated 5.8 4.9

(1) At April 28, 2023, includes derivative contracts with a notional value of € 4.5 billion, or $ 4.9 billion, designated as hedges of a portion of our net investment in certain European operations and derivative contracts with a notional value of ¥ 297 billion, or $ 2.2 billion, designated as hedges of a portion of our net investment in certain Japanese operations.

These derivative contracts mature in fiscal years 2024 through 2033.

(2) At April 28, 2023, includes € 16.0 billion, or $ 17.6 billion, of outstanding Euro-denominated debt as hedges of a portion our net investment in foreign operations.

This debt matures in fiscal years 2026 through 2051.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Amounts excluded from the assessment of effectiveness are recognized in other operating expense, net .

The cash flows related to the Company's derivative instruments designated as net investment hedges are reported as investing activities in the consolidated statements of cash flows.

At April 29, 2022 and April 30, 2021, the Company had $ 841 million in after-tax unrealized gains and $ 1.5 billion in after-tax unrealized losses associated with net investment hedges recorded in accumulated other comprehensive loss, respectively.

The Company does no t expect any of the after-tax unrealized gains at April 29, 2022 to be recognized in the consolidated statements of income over the next 12 months.

The Company did no t recognize any gains or losses during fiscal years 2022, 2021, or 2020 on instruments that no longer qualify as net investment hedges.

Gains and Losses on Hedging Instruments and Derivatives not Designated as Hedging Instruments

4 unchanged sentences

Cash flow hedges

Currency exchange rate contracts $ ( 953 ) $ 519 $ ( 397 ) $ ( 144 ) $ ( 17 ) $ ( 335 ) Other operating expense, net

Currency exchange rate contracts $ ( 161 ) $ ( 953 ) $ 519 $ ( 703 ) $ ( 144 ) $ ( 17 ) Other operating (income) expense, net

Currency exchange rate contracts ( 79 ) 18 108 ( 3 ) 61 15 Cost of products sold

Net investment hedges ( 2,299 ) 1,694 ( 405 ) — — ( 9 ) Other operating expense, net

Net investment hedges

Foreign currency-denominated debt 524 ( 2,299 ) 1,694 — — — N/A

Currency exchange rate contracts 73 — — — — — N/A

Total $ 356 $ ( 3,234 ) $ 2,321 $ ( 706 ) $ ( 83 ) $ ( 2 )

4 unchanged sentences

Derivatives not designated as hedging instruments

Currency exchange rate contracts $ ( 54 ) $ 247 $ ( 133 ) Other operating expense, net

Total return swaps 1 ( 81 ) 7 Other operating expense, net

Currency exchange rate contracts $ 31 $ ( 54 ) $ 247 Other operating (income) expense, net

Total return swaps 1 1 ( 81 ) Other operating (income) expense, net

Total $ 32 $ ( 53 ) $ 166

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Balance Sheet Presentation

12 unchanged sentences

Total derivatives $ 368 $ 695 $ 236 $ 129

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

The following table provides information by level for the derivative assets and liabilities that are measured at fair value on a recurring basis:

April 28, 2023 April 29, 2022

(in millions) Level 1 Level 2 Level 1 Level 2

Derivative assets $ 695 $ 109 $ 85 $ 18

Derivative liabilities — 20 296 —

(in millions) Derivative Assets Derivative Liabilities Derivative Assets Derivative Liabilities

Level 1 $ 368 $ 236 $ 695 $ 109

Level 2 — — — 20

Total $ 368 $ 236 $ 695 $ 129

The Company has elected to present the fair value of derivative assets and liabilities within the consolidated balance sheets on a gross basis, even when derivative transactions are subject to master netting arrangements and may otherwise qualify for net presentation.

The cash flows related to collateral posted and received are reported gross as investing and financing activities, respectively, in the consolidated statements of cash flows.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

The following tables provide information as if the Company had elected to offset the asset and liability balances of derivative instruments, netted in accordance with various criteria as stipulated by the terms of the master netting arrangements with each of the counterparties.

7 unchanged sentences

Currency exchange rate contracts ( 236 ) 189 — ( 48 )

Total return swaps ( 20 ) — — ( 20 )

( 129 ) 109 — ( 20 )

Total $ 132 $ — $ ( 11 ) $ 121

4 unchanged sentences

Currency exchange rate contracts $ 695 $ ( 109 ) $ ( 254 ) $ 332

Total return swaps 18 — — 18

102 ( 83 ) — 19

Derivative liabilities:

Currency exchange rate contracts ( 109 ) 109 — —

Total return swaps ( 20 ) — — ( 20 )

( 129 ) 109 — ( 20 )

Total $ 566 $ — $ ( 254 ) $ 312

Concentrations of Credit Risk

Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist principally of interest-bearing investments, forward exchange derivative contracts, and trade accounts receivable.

Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist principally of interest-bearing investments, derivative contracts, and trade accounts receivable.

Global concentrations of credit risk with respect to trade accounts receivable are limited due to the large number of customers and their dispersion across many geographic areas.

The Company monitors the creditworthiness of its customers to which it grants credit terms in the normal course of business.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

The Company maintains cash and cash equivalents, investments, and certain other financial instruments (including currency exchange rate and interest rate derivative contracts) with various major financial institutions.

2 unchanged sentences

Under these agreements, either party is required to post eligible collateral when the market value of transactions covered by the agreement exceeds specific thresholds, thus limiting credit exposure for both parties.

As of April 29, 2022, the Company received net cash collateral of $ 254 million from its counterparties.

As of April 30, 2021, the Company posted net cash collateral of $ 46 million to its counterparties.

As of April 28, 2023 and April 29, 2022, the Company received net cash collateral of $ 11 million and $ 254 million, respectively, from its counterparties.

Cash collateral posted is recorded as a reduction in cash and cash equivalents , with the offset recorded as an increase in other current assets in the consolidated balance sheets.

Cash collateral received is recorded as an increase in cash and cash equivalents with the offset recorded in other accrued expenses in the consolidated balance sheets.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Inventory balances, net of reserves, were as follows:

14 unchanged sentences

Purchase accounting adjustments ( 6 ) — 2 — ( 5 )

Sale of RCS business — ( 208 ) — — ( 208 )

Currency translation and other ( 6 ) ( 170 ) ( 30 ) 1 ( 204 )

April 28, 2023 $ 7,873 $ 19,579 $ 11,718 $ 2,255 $ 41,425

The Company did no t recognize any goodwill impairments during fiscal years 2022, 2021, or 2020.

As a result of the agreement with DaVita, as disclosed in Note 3, the Company allocated $ 208 million of goodwill to the RCS business that met the criteria to be classified as held for sale during the first quarter of fiscal year 2023 and was subsequently sold on April 1, 2023.

Upon allocation, a goodwill impairment test was performed for the RCS business, and the Company recognized $ 61 million of goodwill impairment charges during fiscal year 2023.

The goodwill impairment charges are recognized in other operating (income) expense, net in the consolidated statements of income.

The Company did no t recognize any goodwill impairment charges during fiscal years 2022 or 2021.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Intangible Assets

10 unchanged sentences

IPR&D $ 232 $ — $ 293 $ —

The Company did no t recognize any definite-lived intangible asset impairment charges during fiscal year 2023.

During fiscal year 2022, the Company recognized $ 409 million of definite-lived intangible asset impairment charges in connection with MCS within the Cardiovascular Portfolio.

1 unchanged sentence

Refer to Note 4 Restructuring Charges for additional information on what led to the impairment.

During fiscal year 2021, the Company recognized $ 30 million of definite-lived intangible asset charges in connection with the abandonment of certain intangible assets within the Neuroscience segment.

During fiscal year 2020, the Company recognized $ 37 million of definite-lived intangible asset charges, including $ 33 million and $ 4 million recognized in connection with business exits in the Neuroscience and Cardiovascular segments, respectively.

Definite-lived intangible asset charges are recognized in other operating expense, net in the consolidated statements of income.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Indefinite-lived intangible asset impairment charges were no t significant for fiscal year 2022.

During fiscal year 2021, the Company recognized $ 30 million of definite-lived intangible asset impairment charges in connection with the abandonment of certain intangible assets within the Neuroscience segment.

Definite-lived intangible asset impairment charges are recognized in other operating (income) expense, net in the consolidated statements of income.

Indefinite-lived intangible asset impairment charges were not significant for fiscal year 2023 or 2022.

During fiscal year 2021, the Company recognized $ 45 million of indefinite-lived intangible asset impairment charges related to the abandonment of certain IPR&D projects in the Neuroscience segment.

During fiscal year 2020, the Company recognized $ 35 million of indefinite-lived intangible asset impairment charges, including $ 25 million relating to a partial impairment of an IPR&D project within the Neuroscience segment and $ 10 million in connection with the discontinuation of an IPR&D project within the Cardiovascular segment.

Indefinite-lived intangible asset impairment charges are recognized in other operating expense, net in the consolidated statements of income.

Indefinite-lived intangible asset impairment charges are recognized in other operating (income) expense, net in the consolidated statements of income.

Due to the nature of IPR&D projects, the Company may experience future delays or failures to obtain regulatory approvals to conduct clinical trials, failures of such clinical trials, delays or failures to obtain required market clearances, other failures to achieve a commercially viable product, or the discontinuation of certain projects, and as a result, may recognize impairment losses in the future.

Amortization Expense

Intangible asset amortization expense was $ 1.7 billion for fiscal year 2022 and $ 1.8 billion for fiscal years 2021 and 2020.

Intangible asset amortization expense was $ 1.7 billion for fiscal years 2023 and 2022 and $ 1.8 billion for fiscal year 2021.

Estimated aggregate amortization expense by fiscal year based on the current carrying value and remaining estimated useful lives of definite-lived intangible assets at April 28, 2023, excluding any possible future amortization associated with acquired IPR&D which has not met technological feasibility, is as follows:

(in millions) Amortization

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Property, Plant, and Equipment

20 unchanged sentences

A Preferred Shares The authorized share capital of the Company includes 500 thousand A Preferred Shares, with a par value of $ 1.00 per share.

During the third quarter of fiscal year 2022 the Company redeemed the previously outstanding 1,872 A Preferred Shares for $ 0.075 million.

At April 28, 2023, no A Preferred Shares were outstanding.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Dividends The timing, declaration, and payment of future dividends to holders of the Company's ordinary shares falls within the discretion of the Company's Board of Directors and depends upon many factors, including the statutory requirements of Irish law, the Company's earnings and financial condition, the capital requirements of the Company's businesses, industry practice and any other factors the Board of Directors deems relevant.

6 unchanged sentences

Stock Purchase and Award Plans

In fiscal year 2022, the Company granted stock awards under the Medtronic plc 2013 Plan (2013 Plan) and the 2021 Medtronic plc Long Term Incentive Plan (2021 Plan).

The 2021 Plan was approved by the Company's shareholders on December 9, 2021, and provides for a maximum of 115 million ordinary shares to be issued, in addition to the 14 million ordinary shares previously approved for issuance under the 2013 Plan.

In fiscal year 2023, the Company granted stock awards under the 2021 Medtronic plc Long Term Incentive Plan (2021 Plan).

The 2021 Plan provides for the grant of non-qualified and incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, and other stock and cash-based awards.

At April 28, 2023, there were approximately 108 million shares available for future grants under the 2021 Plan.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Stock-Based Compensation Expense The following table presents the components and classification of stock-based compensation expense recognized for stock options, restricted stock, performance share units, and employee stock purchase plan (ESPP) in fiscal years 2023, 2022, and 2021:

12 unchanged sentences

Stock Options Options are granted at the exercise price, which is equal to the closing price of the Company’s ordinary shares on the grant date.

The majority of the Company’s options are non-qualified options with a 10 -year life and a 4 -year ratable vesting term.

The majority of the Company’s options are non-qualified options with a ten -year life and a four -year ratable vesting term.

The Company uses the Black-Scholes option pricing model (Black-Scholes model) to determine the fair value of stock options at the grant date.

The fair value of stock options under the Black-Scholes model requires management to make assumptions regarding projected employee stock option exercise behaviors, risk-free interest rates, volatility of the Company’s stock price, and expected dividends.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

The following table provides the weighted average fair value of options granted to employees and the related assumptions used in the Black-Scholes model:

13 unchanged sentences

Exercised ( 1,513 ) 59.15

Expired/Forfeited ( 641 ) 107.42

Expired/Forfeited/Cancelled ( 1,354 ) 102.93

Outstanding at April 28, 2023

4 unchanged sentences

21,468 88.90 3.7 153

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

The following table summarizes the total cash received from the issuance of new shares upon stock option award exercises, the total intrinsic value of options exercised, and the related tax benefit during fiscal years 2023, 2022, and 2021:

6 unchanged sentences

The expense recognized for restricted stock units is equal to the grant date fair value, which is equal to the closing stock price on the date of grant.

Restricted stock units either have a 4-year ratable vesting term or cliff vest after three years .

The Company also grants shares of performance-based restricted stock units that typically cliff vest after three years only if the Company has also achieved certain performance objectives.

Performance awards are expensed over the performance period based on the probability of achieving the performance objectives.

Restricted stock units either have a four-year ratable vesting term or cliff vest after three years .

Restricted stock units are not considered issued or outstanding ordinary shares of the Company.

Dividend equivalent units are accumulated on restricted stock units during the vesting period.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

The following table summarizes restricted stock activity during fiscal year 2023:

4 unchanged sentences

Vested ( 2,471 ) 103.75

Forfeited ( 456 ) 107.53

Forfeited/Cancelled ( 572 ) 105.33

Nonvested at April 28, 2023

18 unchanged sentences

The fair value of the revenue growth and ROIC metrics are equal to the closing stock price on the grant date.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

The following table summarizes performance share unit activity during fiscal year 2023:

1 unchanged sentence

Nonvested at April 29, 2022

1,581 $ 138.95

Granted 1,204 98.17

Forfeited ( 78 ) 138.31

Performance adjustments (1)

( 515 ) 129.58

Forfeited/Cancelled ( 227 ) 124.53

Nonvested at April 28, 2023

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

(1) Performance adjustments are adjustments to grants where the performance period has ended and actual performance is known.

The following table summarizes the weighted-average grant date fair value of performance share units granted, total fair value of performance share units vested and related tax benefit during fiscal year 2023, 2022, and 2021:

8 unchanged sentences

At April 28, 2023, approximately 4 million ordinary shares were available for future purchase under the ESPP.

The income tax provision (benefit) is based on income before income taxes reported for financial statement purposes.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

The income tax provision is based on income before income taxes reported for financial statement purposes.

The components of income before income taxes, based on tax jurisdiction, are as follows:

3 unchanged sentences

Income before income taxes $ 5,364 $ 5,517 $ 3,895

The income tax provision (benefit) consists of the following:

The income tax provision consists of the following:

(in millions) 2023 2022 2021

7 unchanged sentences

Net deferred tax benefit ( 253 ) ( 611 ) ( 461 )

Income tax provision (benefit)

Income tax provision

$ 1,580 $ 456 $ 265

15 unchanged sentences

Interest limitation 377 386

Unrealized gain on available-for-sale securities and derivative financial instruments 39 —

Other 277 374

6 unchanged sentences

Right of use leases ( 147 ) ( 89 )

Unrealized gain on available-for-sale securities and derivative financial instruments — ( 16 )

Accumulated depreciation ( 109 ) ( 121 )

10 unchanged sentences

Tax assets, net $ 3,654 $ 3,284

(1) Certain prior year amounts have been reclassified to conform to current year presentation

No deferred taxes have been provided on the approximately $ 83.7 billion and $ 79.3 billion of undistributed earnings of the Company’s subsidiaries at April 28, 2023 and April 29, 2022, respectively, since these earnings have been, and under current plans will continue to be, permanently reinvested in these subsidiaries.

2 unchanged sentences

jurisdictions, of which $ 20.3 billion have no expiration, and the remaining $ 23.1 billion will expire during fiscal years 2024 through 2040.

Included in these net operating loss carryforwards are $ 18.6 billion of net operating losses related to a subsidiary of the Company, substantially all of which

Included in these net operating loss carryforwards are $ 16.2 billion of net operating losses generated in fiscal year 2008 as a result of the receipt of a favorable tax ruling from certain non-U.S.

taxing authorities;

and $ 17 billion of net operating losses generated during fiscal year 2023 as a result of an intercompany reorganization.

The Company has recorded a full valuation allowance against these net operating losses, as

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

were recorded in fiscal year 2008 as a result of the receipt of a favorable tax ruling from certain non-U.S.

taxing authorities.

The Company has recorded a full valuation allowance against these net operating losses, as management does not believe that it is more likely than not that these net operating losses will be utilized.

management does not believe that it is more likely than not that these net operating losses will be utilized.

Certain of the remaining non-U.S.

9 unchanged sentences

The Company has established valuation allowances of $ 11.3 billion and $ 6.6 billion at April 28, 2023 and April 29, 2022, respectively, primarily related to the uncertainty of the utilization of certain deferred tax assets which are primarily comprised of tax loss and credit carryforwards in various jurisdictions.

The increase in the valuation allowance during fiscal year 2022 is primarily related to the step up in tax basis for Swiss Cantonal purposes, the generation of certain net operating losses and the effects of currency fluctuations.

The increase in the valuation allowance during fiscal year 2023 is primarily related to the generation of certain net losses resulting from an intercompany reorganization.

These valuation allowances would result in a reduction to the income tax provision in the consolidated statements of income if they are ultimately not required.

17 unchanged sentences

Effective tax rate 29.5 % 8.3 % 6.8 %

During fiscal year 2022, the net benefit from certain tax adjustments of $ 50 million, recognized in income tax provision (benefit) in the consolidated statement of income, included the following:

During fiscal year 2023, the net cost from certain tax adjustments of $ 910 million, recognized in income tax provision in the consolidated statement of income, included the following:

• A net cost of $ 764 million associated with the August 18, 2022 U.S.

Tax Court (Tax Court) Opinion on the previously disclosed litigation regarding the allocation of income between Medtronic, Inc.

and its wholly-owned subsidiary operating in Puerto Rico for fiscal years 2005 and 2006 (Opinion).

While the Opinion rejected the IRS’s position and the Tax Court determined the methodology advanced by Medtronic was appropriate for purposes of determining the intercompany royalty rate between Puerto Rico and the U.S., it determined that the royalty rate should be higher, thereby increasing income allocated to the U.S.

and consequently subject to U.S.

This case relates only to fiscal years 2005 and 2006.

The Opinion remains subject to appeal by either or both parties.

The Company has assumed the Tax Court findings will be applied for all years following fiscal year 2006.

• A cost of $ 55 million related to the disallowance of certain interest deductions.

• A cost of $ 30 million related to the change in reporting currency for certain carryover attributes.

• A cost of $ 28 million associated with the amortization of the previously established deferred tax assets from intercompany intellectual property transactions.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

• A net cost of $ 33 million primarily associated with the sale of half of the Company’s RCS business.

During fiscal year 2022, the net benefit from certain tax adjustments of $ 50 million, recognized in income tax provision in the consolidated statement of income, included the following:

• A benefit of $ 82 million associated with a step up in tax basis for Swiss Cantonal purposes.

3 unchanged sentences

• A net cost of $ 26 million primarily associated with an intercompany sale of assets.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

During fiscal year 2021, the net benefit from certain tax adjustments of $ 41 million, recognized in income tax provision (benefit) in the consolidated statement of income, included the following:

During fiscal year 2021, the net benefit from certain tax adjustments of $ 41 million, recognized in income tax provision in the consolidated statement of income, included the following:

• A net benefit of $ 106 million associated with the resolution of an audit at the IRS Appellate level for fiscal years 2012, 2013, and 2014.

10 unchanged sentences

federal statutory tax rate.

During fiscal year 2020, the net benefit from certain tax adjustments of $ 1.2 billion, recognized in income tax provision (benefit) in the consolidated statement of income, included the following:

• A net benefit of $ 63 million related to the finalization of certain state tax impacts from U.S.

Tax Reform, and the issuance of certain final U.S.

Treasury Regulations associated with U.S.

The primary impact of these regulations resulted in the Company re-establishing its permanently reinvested assertion on certain foreign earnings and reversing the previously accrued tax liability.

This benefit was partially offset by additional tax associated with a previously executed internal reorganization of certain foreign subsidiaries.

• A benefit of $ 252 million related to tax legislative changes in Switzerland, which abolished certain preferential tax regimes the Company benefited from and replaced them with a new set of internationally accepted measures.

The legislation provided for higher effective tax rates but allowed for a transitional period whereby an amortizable asset was created for Swiss federal income tax purposes that will be amortized and deducted over a 10 -year period.

• A benefit of $ 658 million related to the release of a valuation allowance previously recorded against certain net operating losses.

Luxembourg enacted tax legislation during the year requiring the Company to reassess the realizability of certain net operating losses.

The Company evaluated both the positive and negative evidence and released valuation allowance equal to the expected benefit from the utilization of certain net operating losses in connection with a planned intercompany sale of intellectual property.

• A benefit of $ 269 million associated with the intercompany sale of intellectual property and the establishment of a deferred tax asset.

Subsequent to year-end, on June 1, 2023 the Israeli Central-Lod District Court issued its decision in Medtronic Ventor Technologies Ltd v.

Kfar Saba Assessing Office.

The court determined that there was a deemed taxable transfer of intellectual property.

At this time, the Company is evaluating the impact of the decision and whether or not it will appeal.

The Company has currently estimated a potential income tax charge, including interest, of approximately $ 200 million.

Currently, the Company’s operations in Puerto Rico, Singapore, Dominican Republic, Costa Rica, and China have various tax holidays and tax incentive grants.

22 unchanged sentences

If all of the Company’s unrecognized tax benefits at April 28, 2023, April 29, 2022, and April 30, 2021 were recognized, $ 2.5 billion, $ 1.6 billion, and $ 1.6 billion would impact the Company’s effective tax rate, respectively.

Although the Company believes that it has adequately provided for liabilities resulting from tax assessments by taxing authorities, positions taken by these tax authorities could have a material impact on the Company’s effective tax rate in future periods.

The Company has recorded gross unrecognized tax benefits, net of cash advance, of $ 787 million as a noncurrent liability.

Although the Company believes that it has adequately reserved for liabilities resulting from tax assessments by taxing authorities, positions taken by these tax authorities could have a material impact on the Company’s effective tax rate in future periods.

The Company has recorded gross unrecognized tax benefits, net of cash advance, of $ 1.8 billion as a noncurrent liability.

The Company estimates that within the next 12 months it is reasonably possible that its uncertain tax positions, excluding interest, could decrease by as much as $ 10 million, net as a result of statute of limitation lapses.

The Company recognizes interest and penalties related to income tax matters in income tax provision (benefit) in the consolidated statements of income and records the liability in the current or noncurrent accrued income taxes in the consolidated balance sheets, as appropriate.

The Company recognizes interest and penalties related to income tax matters in income tax provision in the consolidated statements of income and records the liability in the current or noncurrent accrued income taxes in the consolidated balance sheets, as appropriate.

The Company had $ 61 million, $ 117 million, and $ 99 million of accrued gross interest and penalties at April 28, 2023, April 29, 2022, and April 30, 2021, respectively.

During fiscal years 2022, 2021, and 2020, the Company recognized gross interest expense of $ 17 million, income of $ 44 million, and expense of $ 53 million, respectively, in income tax provision (benefit) in the consolidated statements of income.

During fiscal years 2023, 2022, and 2021, the Company recognized gross interest income of $ 55 million, expense of $ 17 million, and income of $ 44 million, respectively, in income tax provision in the consolidated statements of income.

The Company reserves for uncertain tax positions related to unresolved matters with the IRS and other taxing authorities.

29 unchanged sentences

Employee restricted stock units 1.0 1.6 2.1

Other 0.8 0.5 0.4

Employee performance share units 0.5 0.8 0.5

Diluted – weighted average shares outstanding 1,332.8 1,351.4 1,354.0

1 unchanged sentence

Diluted earnings per share $ 2.82 $ 3.73 $ 2.66

The calculation of weighted average diluted shares outstanding excludes options to purchase approximately 5 million ordinary shares in fiscal year 2022 and 4 million ordinary shares in fiscal years 2021 and 2020 because their effect would have been anti-dilutive on the Company’s earnings per share.

The calculation of weighted average diluted shares outstanding excludes options to purchase approximately 23 million, 5 million, and 4 million ordinary shares in fiscal year 2023, 2022, and 2021, respectively because their effect would have been anti-dilutive on the Company’s earnings per share.

Retirement Benefit Plans

8 unchanged sentences

and Puerto Rico employees are also eligible to receive a medical benefit component, in addition to normal retirement benefits, through the Company’s post-retirement benefits.

At April 29, 2022 and April 30, 2021, the funded status of the Company’s benefit plans was $ 74 million overfunded and $ 705 million underfunded, respectively.

During fiscal year 2021, as part of the Simplification restructuring program, the Company offered certain eligible U.S.

employees voluntary early retirement packages, resulting in incremental expense of $ 97 million recognized.

Of this amount, $ 73 million related to U.S.

pension benefits, $ 11 million related to defined contribution plans, $ 11 million related to U.S.

post-retirement benefits, and $ 2 million related to cash payments and administrative fees.

See Note 4 for additional information on the Simplification restructuring program.

As of April 24, 2020, the Company announced the freezing of U.S.

pension benefits beginning in 2027.

Employees will continue to earn benefits as required by the plan until April 30, 2027, after which date benefits will no longer be earned and employees will earn benefits under a new defined contribution structure.

The Company recognized curtailment benefits of $ 94 million in fiscal year 2020 as a result of this change.

At April 28, 2023 and April 29, 2022, the funded status of the Company’s benefit plans was $ 103 million overfunded and $ 74 million overfunded, respectively.

During fiscal years 2023 and 2021, the Company offered certain eligible U.S.

employees voluntary early retirement packages, resulting in charges of $ 94 million and $ 97 million, respectively, primarily related to U.S.

pension benefits.

The charges were recognized in restructuring charges, net in the consolidated statements of income.

See Note 4 for additional information on restructuring charges.

Medtronic plc

2 unchanged sentences

pension benefits are as follows:

Pension Benefits Non-U.S.

Pension Benefits (2)

Pension Benefits

Fiscal Year Fiscal Year

7 unchanged sentences

Employee contributions — — 9 12

Plan curtailments and settlements — — ( 11 ) ( 4 )

Plan curtailments, settlements, and amendments ( 19 ) — ( 8 ) ( 11 )

Actuarial (gain) loss (1)

30 unchanged sentences

(1) Actuarial gains and losses result from changes in actuarial assumptions (such as changes in the discount rate and revised mortality rates).

The actuarial gain in fiscal year 2022 was primarily related to increases in discount rates.

The actuarial loss in fiscal year 2021 was primarily related to decreases in discount rates.

The actuarial gain in fiscal year 2023 and 2022 was primarily related to increases in discount rates.

(2) As of April 24, 2020, the Company announced the freezing of the U.S.

pension benefits beginning Plan year 2028.

Employees will continue to earn benefits as required by the Medtronic Retirement Plan until April 30, 2027, after which date benefits will no longer be earned and employees will earn benefits through the Medtronic Savings and Investment Plan.

(3) This represents a portion of the total voluntary early retirement package charges for fiscal year 2023.

Medtronic plc

27 unchanged sentences

Benefits Non-U.S.

Net actuarial gain $ ( 303 ) $ ( 317 )

Net actuarial loss (gain) $ 58 $ ( 82 )

Prior service cost (credit) ( 19 ) —

Amortization of prior service credit — 1

42 unchanged sentences

5.60 % - 7.40 %

7.50 % 3.48 % 3.67 % 3.78 %

Rate of compensation increase 3.90 % 3.90 % - 4.83 %

63 unchanged sentences

Quoted market prices are used to value the underlying investments of the partnerships, where the partnerships consist of the investment pools which invest primarily in common stocks.

Partnership units include partnerships, private equity investments, and real asset investments.

Partnership units include partnerships, private equity investments, and real estate investments.

Partnerships primarily include long/short equity and absolute return strategies.

3 unchanged sentences

For private equity funds, the sum of the unfunded commitments at April 28, 2023 is $ 233 million, and the estimated liquidation period of these funds is expected to be one to 15 years.

Real asset investments consist of commodities, derivatives, Real Estate Investment Trusts, and illiquid real estate holdings.

These investments have redemption and liquidation periods ranging from 30 days to 10 years.

Real estate investments consist of illiquid real estate holdings.

These investments have investment and liquidation periods expected to total 3 years to 10 years in aggregate.

At April 28, 2023, there are no real estate investments in the process of liquidation.

83 unchanged sentences

2029 – 2033 1,171 411

Total $ 1,966 $ 666

Post-retirement Benefit Plans The net periodic benefit cost associated with the Company’s post-retirement benefit plans was income of $ 11 million, $ 20 million, and $ 6 million in fiscal years 2023, 2022, and 2021, respectively.

6 unchanged sentences

The general purpose of these plans is to provide additional financial security during retirement by providing employees with an incentive to make regular savings.

Company contributions to the plans are based on employee contributions

Company contributions to the plans are based on employee contributions and Company performance.

Expense recognized under these plans was $ 390 million, $ 403 million, and $ 495 million in fiscal years 2023, 2022, and 2021, respectively.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

and Company performance.

Expense recognized under these plans was $ 403 million, $ 495 million, and $ 376 million in fiscal years 2022, 2021, and 2020, respectively.

Effective May 1, 2005, the Company froze participation in the original defined benefit pension plan in the U.S.

31 unchanged sentences

Finance lease right-of-use assets are included in property, plant, and equipment, net , and finance lease liabilities are included in current debt obligations and long-term debt on the consolidated balance sheets.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

The following table summarizes the balance sheet classification of the Company's operating leases and amounts of the right-of-use assets and lease liabilities at April 28, 2023 and April 29, 2022:

7 unchanged sentences

Weighted-average discount rate 2.4 % 2.0 % 2.3 %

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

The following table summarizes the components of total operating lease cost for fiscal year 2023, 2022, and 2021:

7 unchanged sentences

Right-of-use assets obtained in exchange for operating lease liabilities 417 78 230

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

The following table summarizes the maturities of the Company's operating leases at April 28, 2023:

11 unchanged sentences

Accumulated Other Comprehensive Loss

The following table provides changes in AOCI, net of tax and by component:

The following table provides changes in accumulated other comprehensive loss (AOCI), net of tax, and by component:

(in millions) Unrealized (Loss) Gain on Investment Securities Cumulative Translation Adjustments Net Investment Hedges Net Change in Retirement Obligations Unrealized (Loss) Gain on Cash Flow Hedges Total Accumulated Other Comprehensive (Loss) Income

12 unchanged sentences

April 28, 2023 $ ( 258 ) $ ( 2,839 ) $ 245 $ ( 741 ) $ 93 $ ( 3,499 )

The income tax on gains and losses on investment securities in other comprehensive income before reclassifications during fiscal years 2022, 2021, and 2020 was a benefit of $ 51 million, an expense of $ 31 million and a benefit of $ 13 million, respectively.

The income tax on gains and losses on investment securities in other comprehensive income before reclassifications during fiscal years 2023, 2022, and 2021 was a benefit of $ 21 million, a benefit of $ 51 million, and an expense of $ 31 million, respectively.

During fiscal years 2023, 2022, and 2021, realized gains and losses on investment securities reclassified from AOCI were reduced by income taxes of $ 9 million, $ 1 million and $ 2 million, respectively.

1 unchanged sentence

Refer to Note 5 for additional information.

During fiscal years 2022, 2021, and 2020, the income tax on cumulative translation adjustment was a benefit of $ 8 million, an expense of $ 7 million, and a benefit of $ 9 million, respectively.

During fiscal years 2023, 2022, and 2021, the income tax on cumulative translation adjustment was a benefit of $ 5 million, a benefit of $ 8 million, and an expense of $ 7 million, respectively.

During fiscal years 2023, 2022, and 2021, there were no tax impacts on net investment hedges.

1 unchanged sentence

The net change in retirement obligations in other comprehensive income includes amortization of net actuarial losses included in net periodic benefit cost.

The income tax on the net change in retirement obligations in other comprehensive income before reclassifications during fiscal years 2022, 2021, and 2020 resulted in an expense of $ 134 million and $ 115 million, and a benefit of $ 159 million, respectively.

The income tax on the net change in retirement obligations in other comprehensive income before reclassifications during fiscal years 2023, 2022, and 2021 resulted in an expense of $ 6 million, $ 134 million, and $ 115 million, respectively.

During fiscal years 2023, 2022, and 2021, the gains and losses on defined benefit and pension items reclassified from AOCI were reduced by income taxes of $ 9 million, $ 20 million, and $ 16 million, respectively.

1 unchanged sentence

Refer to Note 15 for additional information.

The income tax on unrealized gains and losses on cash flow hedges in other comprehensive income before reclassifications during fiscal years 2022, 2021, and 2020 was an expense of $ 152 million, a benefit of $ 87 million, and an expense of $ 88 million, respectively.

The income tax on unrealized gains and losses on cash flow hedges in other comprehensive income before reclassifications during fiscal years 2023, 2022, and 2021 was an expense of $ 56 million, an expense of $ 152 million, and a benefit of $ 87 million, respectively.

Amounts reclassified from AOCI related to cash flow hedges included income taxes of $ 133 million, $ 26 million, and $ 14 million for fiscal years 2023, 2022, and 2021, respectively.

When realized, gains and losses on currency exchange rate contracts reclassified from AOCI are recognized within other operating expense, net or cost of products sold.

When realized, gains and losses on currency exchange rate contracts reclassified from AOCI are recognized within other operating (income) expense, net or cost of products sold.

Refer to Note 7 for additional information.

2 unchanged sentences

The Company and its affiliates are involved in a number of legal actions from time to time involving product liability, employment, 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

As a result, interaction with governmental agencies is

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

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.

6 unchanged sentences

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 certain specified litigation charges and gains related to significant legal matters as certain litigation charges in the consolidated statements of income.

During fiscal years 2022, 2021, and 2020, the Company recognized $ 95 million, $ 118 million, and $ 313 million, respectively, of additional certain litigation charges.

At April 29, 2022 and April 30, 2021, total accrued litigation charges were approximately $ 0.3 billion and $ 0.4 billion, respectively.

The Company classifies certain specified litigation charges and gains related to significant legal matters as certain litigation charges, net in the consolidated statements of income.

During fiscal years 2023, 2022, and 2021, the Company recognized a net $ 30 million of certain litigation income and $ 95 million and $ 188 million of certain litigation charges, respectively.

At April 28, 2023 and April 29, 2022, accrued litigation was approximately $ 0.3 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.

1 unchanged sentence

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.

Intellectual Property Matters

At any given time, the Company is involved in litigation relating to patents, trademarks, copyrights, trade secrets, and other intellectual property (IP) rights, and licenses, acquisitions or other agreements relating to such rights.

This litigation includes, but is not limited to, alleged infringement or misappropriation of IP rights, or breach of obligations related to IP rights, or other claims asserted by competitors, individuals, or, consistent with a growing trend across technology-intensive industries, other entities created specifically to fund IP litigation.

While the outcome of these litigation matters is inherently uncertain, it is possible that the results of such litigation could require the Company to pay significant monetary damages and/or royalty payments, and negatively impact the Company's ability to sell current or future products, which could have a material adverse impact on the Company's business, results of operations, financial condition, and cash flows.

The Company is a defendant in patent litigation brought by Colibri Heart Valve LLC (Colibri) in the U.S.

District Court for the Central District of California.

Colibri alleges infringement of one patent by the Company’s Evolut family of transcatheter aortic valve replacement devices.

The patent asserted by Colibri has expired.

On February 8, 2023, a jury returned a verdict against the Company for approximately $ 106 million.

The Company has strong arguments to appeal the verdict and is pursuing its appeal.

The Company has not recognized an expense in connection with this matter because it does not currently believe a loss is probable.

Product Liability Matters

10 unchanged sentences

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.

The Company estimates law firms representing approximately 16,200 claimants have asserted or may assert claims involving products

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

manufactured by Covidien’s subsidiaries.

As of June 7, 2023, the Company had reached agreements to settle approximately 15,900 of these claims.

2 unchanged sentences

Starting in fiscal year 2020, plaintiffs began filing 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, where they have been consolidated before a single judge.

As of June 6, 2022, subsidiaries of the Company have been named as defendants in lawsuits filed on behalf of approximately 5,900 individual plaintiffs, and certain plaintiffs’ law firms have advised the Company that they may file additional cases in the future.

On June 6, 2022, the Judicial Panel on Multidistrict Litigation transferred 83 actions involving the Company’s hernia mesh to a federal Multidistrict Litigation in the U.S.

District Court for the District of Massachusetts for pretrial proceedings.

state and federal courts that allege personal injury from hernia mesh products sold by those subsidiaries.

As of June 7, 2023, the Company and certain of its subsidiaries have been named as defendants in lawsuits filed on behalf of approximately 7,240 individual plaintiffs, and certain plaintiffs’ law firms have advised the Company that they may file additional cases in the future.

Approximately 6,284 plaintiffs have filed lawsuits in a coordinated proceeding in Massachusetts state court, where they have been consolidated before a single judge.

Approximately 476 plaintiffs have filed lawsuits in a coordinated action in Minnesota state court, and there are approximately 445 actions coordinated in a federal Multidistrict Litigation in the U.S.

District Court for the District of Massachusetts.

The pending lawsuits relate almost entirely to hernia mesh products that have not been subject to recalls, withdrawals, or other adverse regulatory action.

1 unchanged sentence

Additionally, the Company is unable to reasonably estimate the range of loss, if any, that may result from these matters.

Diabetes Pump Retainer Ring Litigation

Starting in fiscal year 2021, plaintiffs began filing lawsuits against the Diabetes Operating Unit in U.S.

state and federal courts alleging personal injury from Series 600 insulin pumps with allegedly defective clear retainer rings that were subject to field corrective actions in 2019 and 2021.

As of May 30, 2023, 64 individual plaintiffs have filed lawsuits, and certain plaintiffs’ law firms have notified the Company that they may file additional lawsuits in the future on behalf of thousands of additional claimants.

Most of the filed suits are coordinated in California state court.

The Company has not recorded an expense related to damages in connection with these matters because any potential loss is not currently probable and reasonably estimable.

Additionally, the Company is unable to reasonably estimate the range of loss, if any, that may result from these matters.

Environmental Proceedings

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

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

The Company is a successor to several investigation and cleanup actions at various stages related to environmental remediation matters at a number of sites, including in Orrington, Maine.

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.

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.

The Company has proceeded with remediation in accordance with the MDEP order as modified by the Maine Board order.

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.

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.

In March 2021, the parties notified the court that they had agreed on a settlement in principle of all issues in this matter.

Finalization of the proposed settlement remains subject to court approval.

The Company's accrued expenses for environmental proceedings are included within accrued litigation as discussed above.

The Company is also a successor to a party named in a lawsuit filed in the U.S.

District Court for the District of Maine in the early 2000's by the Natural Resources Defense Council and the Maine People's Alliance relating to mercury contamination of the Penobscot River and Bay and options for remediating such contamination.

In March 2021, the parties notified the court that they had agreed on a settlement in principle of all issues in this matter, and in September 2022 the parties filed a joint motion for final approval by the court.

In October 2022, the court issued a final order approving the settlement and the parties are working with consultants on implementation of remedial activities.

The final court order did not result in a change to the Company's previous accrual for this matter.

The Company's accrued expenses for these various environmental proceedings are included within accrued litigation as discussed above.

In March 2009, the IRS issued its audit report on Medtronic, Inc.

4 unchanged sentences

and its wholly-owned subsidiary operating in Puerto Rico, which is one of the Company's key manufacturing sites.

Tax Court reviewed this dispute, and in June 2016, issued an opinion with respect to the allocation of income between the parties for fiscal years 2005 and 2006.

The Tax Court generally rejected the IRS’s position, but also made certain modifications to the Medtronic, Inc.

Tax Court (Tax Court) reviewed this dispute, and in June 2016, issued an opinion with respect to the allocation of income between the parties for fiscal years 2005 and 2006 whereby it generally rejected the IRS’s position, but also made certain modifications to the Medtronic, Inc.

tax returns as filed.

2 unchanged sentences

Oral argument for the Appeal occurred in March 2018.

The Court of Appeals issued its opinion in August 2018 and remanded the case back to the Tax Court for additional factual findings.

The Tax Court trial relating to the issues remanded by the Court of Appeals concluded during June 2021.

The parties are awaiting the Tax Court decision, which will remain subject to appeal by either party upon its issuance.

Court of Appeals issued its opinion in August 2018 and remanded the case back to the Tax Court for additional factual findings, which it concluded in June 2021.

The Tax Court issued its opinion on August 18, 2022, and it remains subject to appeal by either or both parties.

At this time, the Company is evaluating whether to file an appeal.

The IRS has issued its audit reports on Medtronic, Inc.

4 unchanged sentences

Tax Court matter for fiscal years 2005 and 2006.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Medtronic, Inc.’s fiscal years 2017, 2018, and 2019 U.S.

4 unchanged sentences

Refer to Note 13 for additional discussion of income taxes.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

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.

6 unchanged sentences

The Company's four principal operating and reportable segments are as follows:

Cardiovascular Portfolio, Neuroscience Portfolio, Medical Surgical Portfolio, and Diabetes Operating Unit.

Cardiovascular Portfolio, Medical Surgical Portfolio, Neuroscience Portfolio, and Diabetes Operating Unit.

The Company's management has chosen to organize the entity based upon therapy solutions provided by each segment.

1 unchanged sentence

The primary products and services from which the Cardiovascular Portfolio segment derives its revenues include products for the diagnosis, treatment, and management of cardiac rhythm disorders and cardiovascular disease, as well as services to diagnose, treat, and manage heart and vascular-related disorders and diseases.

The primary products and services from which the Medical Surgical Portfolio segment derives its revenues include those focused on diseases of the respiratory system, gastrointestinal tract, renal system, lungs, pelvic region, kidneys, obesity, and other preventable complications.

The primary products and services from which the Medical Surgical Portfolio segment derives its revenues include those focused on diseases of the respiratory system, gastrointestinal tract, lungs, pelvic region, kidneys, obesity, and other preventable complications.

The primary products and services from which the Neuroscience Portfolio segment derives its revenues include those focused on neurostimulation therapies and drug delivery systems for the treatment of chronic pain, as well as various areas of the spine and brain, along with pelvic health and conditions of the ear, nose, and throat.

The primary products from which the Diabetes Operating Unit segment derives its revenues include those focused on diabetes management, including insulin pumps, continuous glucose monitoring systems, smart insulin pens, and insulin pump consumables.

As of the beginning of fiscal year 2024, the Company realigned the operating segment structure as a result of changes in segment leadership and how the Company makes operating decisions and assesses business performance.

We continue to have four reportable segments:

Cardiovascular Portfolio, Medical Surgical Portfolio, Neuroscience Portfolio, and Diabetes Operating Unit;

however, the transition activities from the previously divested businesses in the Medical Surgical Portfolio segment are now in an all other reporting segment.

Segment disclosures are on a performance basis, consistent with internal management reporting.

3 unchanged sentences

The Company's management evaluates the performance of the segments and allocates resources based on net sales and segment operating profit.

Segment operating profit represents income before income taxes, excluding interest expense, amortization of intangible assets, centralized distribution costs, non-operating income or expense items, certain corporate charges, and other items not allocated to the segments.

Segment operating profit represents income before income taxes, excluding interest income or expense, amortization of intangible assets, centralized distribution costs, non-operating income or expense items, certain corporate charges, and other items not allocated to the segments.

Medtronic plc

14 unchanged sentences

Corporate ( 1,763 ) ( 1,724 ) ( 1,577 )

Currency 465 70 ( 47 )

Centralized distribution costs ( 1,624 ) ( 1,822 ) ( 1,830 )

1 unchanged sentence

Acquisition-related items ( 110 ) 43 15

Certain litigation charges ( 95 ) ( 118 ) ( 313 )

Impairment charges — ( 76 ) —

Divestiture and separation-related items ( 235 ) — —

Certain litigation charges, net 30 ( 95 ) ( 118 )

Impairment of abandoned intangible assets — — ( 76 )

MCS impairment / costs — ( 881 ) —

IPR&D charges — ( 101 ) ( 31 )

Exit of businesses — — ( 52 )

Debt tender premium and other charges — — 7

Medical device regulations ( 150 ) ( 102 ) ( 83 )

Contribution to Medtronic Foundation — — ( 80 )

Commitments to the Medtronic Foundation and Medtronic LABS ( 70 ) — —

Income before income taxes $ 5,364 $ 5,517 $ 3,895

23 unchanged sentences

No single customer represented over 10 percent of the Company’s consolidated net sales in fiscal years 2023, 2022, or 2021.

Subsequent Events

On May 25, 2022, the Company and DaVita Inc.

(“DaVita”) entered into a definitive agreement with the intent to form a new, independent kidney care-focused medical device company (“NewCo”) with equal equity ownership.

The transaction is expected to close in calendar year 2023, subject to customary regulatory approvals and closing conditions.

Medtronic is contributing its entire Renal Care Solutions business (“RCS”) to NewCo.

RCS is part of the Respiratory, Gastrointestinal, and Renal division in the Company’s Medical Surgical portfolio, and had revenue of $ 325 million in fiscal year 2022.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

1 unchanged sentence

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-K

Item 8. Financial Statements and Supplementary Data