What changed in this filing

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Item 1. Financial Statements

2023-11-30 compared with 2023-08-31 · 249 added, 186 removed, 778 unchanged (36% of the section changed)

2 unchanged sentences

Consolidated Statements of Income

Three months ended

(in millions, except per share data) July 28, 2023 July 29, 2022

Three months ended Six months ended

(in millions, except per share data) October 27, 2023 October 28, 2022 October 27, 2023 October 28, 2022

Net sales $ 7,984 $ 7,585 $ 15,686 $ 14,955

6 unchanged sentences

Certain litigation charges 65 — 105 —

Other operating expense, net 1 35

Other operating income, net ( 31 ) ( 97 ) ( 30 ) ( 62 )

Operating profit 1,340 1,404 2,608 2,528

13 unchanged sentences

Consolidated Statements of Comprehensive Income

Three months ended

(in millions) July 28, 2023 July 29, 2022

Three months ended Six months ended

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

Net income $ 911 $ 435 $ 1,708 $ 1,367

4 unchanged sentences

Net change in retirement obligations 1 3 4 4

Unrealized (loss) gain on cash flow hedges ( 30 ) 220

Other comprehensive (loss) income ( 175 ) 324

Unrealized gain on cash flow hedges 324 158 294 378

Other comprehensive income (loss) 295 ( 424 ) 120 ( 100 )

Comprehensive income including noncontrolling interests 1,206 11 1,828 1,266

4 unchanged sentences

Consolidated Balance Sheets

(in millions) July 28, 2023 April 28, 2023

(in millions) October 27, 2023 April 28, 2023

Current assets:

53 unchanged sentences

July 28, 2023 1,330 $ — $ 24,587 $ 30,265 $ ( 3,674 ) $ 51,178 $ 188 $ 51,366

Net income — — — 909 — 909 2 911

Other comprehensive income (loss) — — — — 297 297 ( 2 ) 295

Dividends to shareholders ($ 0.69 per ordinary share)

— — — ( 918 ) — ( 918 ) — ( 918 )

Issuance of shares under stock purchase and award plans 2 — 35 — — 35 — 35

Repurchase of ordinary shares ( 2 ) — ( 189 ) — — ( 189 ) — ( 189 )

Stock-based compensation — — 146 — — 146 — 146

October 27, 2023 1,330 $ — $ 24,580 $ 30,256 $ ( 3,377 ) $ 51,460 $ 187 $ 51,647

Ordinary Shares Additional Paid-in Capital Retained

13 unchanged sentences

July 29, 2022 1,329 $ — $ 24,335 $ 30,276 $ ( 1,939 ) $ 52,672 $ 170 $ 52,843

Net income — — — 427 — 427 8 435

Other comprehensive loss — — — — ( 422 ) ( 422 ) ( 2 ) ( 424 )

Dividends to shareholders ($ 0.68 per ordinary share)

— — — ( 904 ) — ( 904 ) — ( 904 )

Issuance of shares under stock purchase and award plans 2 — 55 — — 55 — 55

Repurchase of ordinary shares ( 1 ) — ( 85 ) — — ( 85 ) — ( 85 )

Stock-based compensation — — 137 — — 137 — 137

October 28, 2022 1,330 $ — $ 24,442 $ 29,799 $ ( 2,361 ) $ 51,880 $ 177 $ 52,057

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

1 unchanged sentence

Consolidated Statements of Cash Flows

Three months ended

(in millions) July 28, 2023 July 29, 2022

Six months ended

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

Operating Activities:

23 unchanged sentences

Proceeds from short-term borrowings (maturities greater than 90 days) — 2,284

Issuance of long-term debt — 3,430

Payments on long-term debt — ( 2,311 )

3 unchanged sentences

Other financing activities 153 443

Net cash used in financing activities ( 501 ) ( 950 )

Net cash (used in) provided by financing activities ( 591 ) 2,064

Effect of exchange rate changes on cash and cash equivalents ( 214 ) ( 223 )

29 unchanged sentences

The Company adopted this guidance on April 29, 2023.

The adoption of this standard does not have a material impact on the Company’s Consolidated Financial Statements.

As of July 28, 2023, there are no recently issued but not yet adopted accounting pronouncements that are expected to materially impact our consolidated financial statements .

The adoption of this standard did not have a material impact on the Company’s Consolidated Financial Statements.

As of October 27, 2023, there are no recently issued but not yet adopted accounting pronouncements that are expected to materially impact 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, 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.

4 unchanged sentences

Notes to Consolidated Financial Statements

The table below illustrates net sales by segment and division for the three months ended July 28, 2023 and July 29, 2022:

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

Three months ended

(in millions) July 28, 2023 July 29, 2022

Six months ended

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

Cardiac Rhythm & Heart Failure $ 1,492 $ 1,417 $ 2,938 $ 2,798

12 unchanged sentences

(1) Includes revenue from the divested Renal Care Solutions business and Transition Manufacturing Agreements from previously divested businesses.

The table below illustrates net sales by market geography for each segment for the three months ended July 28, 2023 and July 29, 2022:

The table below illustrates net sales by market geography for each segment for the three and six months ended October 27, 2023 and October 28, 2022:

Developed Markets (2)

1 unchanged sentence

Three months ended Three months ended Three months ended

(in millions) July 28, 2023 July 29, 2022 July 28, 2023 July 29, 2022 July 28, 2023 July 29, 2022

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

Cardiovascular $ 1,427 $ 1,410 $ 912 $ 802 $ 584 $ 546

4 unchanged sentences

Total $ 4,175 $ 4,069 $ 2,368 $ 2,157 $ 1,441 $ 1,359

Developed Markets (2)

Emerging Markets (3)

Six months ended Six months ended Six months ended

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

Cardiovascular $ 2,776 $ 2,696 $ 1,869 $ 1,694 $ 1,128 $ 1,070

Neuroscience 3,057 2,931 815 788 634 582

Medical Surgical 1,845 1,726 1,512 1,420 824 789

Diabetes 405 434 625 518 159 145

16 49 12 65 10 48

Total $ 8,099 $ 7,835 $ 4,831 $ 4,485 $ 2,755 $ 2,635

includes the United States and U.S.

3 unchanged sentences

(4) Includes revenue from the divested Renal Care Solutions (RCS) business and Transition Manufacturing Agreements from previously divested businesses.

Medtronic plc

Notes to Consolidated Financial Statements

The amount of revenue recognized is reduced by sales rebates and returns.

Adjustments to rebates and returns reserves are recorded as increases or decreases to revenue.

At July 28, 2023, $ 1.1 billion of rebates were classified as other accrued expenses , and $ 602 million of rebates were classified as a reduction of accounts receivable in the consolidated balance sheet.

At October 27, 2023, $ 1.1 billion of rebates were classified as other accrued expenses , and $ 605 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.

Deferred Revenue and Remaining Performance Obligations

Deferred revenue at July 28, 2023 and April 28, 2023 was $ 425 million and $ 405 million, respectively.

At July 28, 2023 and April 28, 2023, $ 334 million and $ 314 million was included in other accrued expenses, respectively, and $ 90 million and $ 91 million was included in other liabilities, respectively.

During the three months ended July 28, 2023, the Company recognized $ 124 million of revenue that was included in deferred revenue as of April 28, 2023.

Medtronic plc

Notes to Consolidated Financial Statements

Deferred revenue at October 27, 2023 and April 28, 2023 was $ 435 million and $ 405 million, respectively.

At October 27, 2023 and April 28, 2023, $ 336 million and $ 314 million was included in other accrued expenses, respectively, and $ 99 million and $ 91 million was included in other liabilities, respectively.

During the six months ended October 27, 2023, the Company recognized $ 216 million of revenue that was included in deferred revenue as of April 28, 2023.

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

At July 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.

At October 27, 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 $ 0.5 billion.

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

Acquisitions and Dispositions

Fiscal Year 2024

The Company had no acquisitions that were accounted for as business combinations during the three months ended July 28, 2023.

For the three months ended July 28, 2023, purchase price allocation adjustments were not significant.

Fiscal Year 2023

The Company had acquisitions that were accounted for as business combinations during the three months ended July 29, 2022.

During the three and six months ended October 27, 2023 and October 28, 2022 the Company had acquisitions that were accounted for as business combinations.

The assets and liabilities of the businesses acquired were recorded and consolidated on the acquisition date at their respective fair values.

Goodwill resulting from business combinations is largely attributable to future, yet to be defined technologies, new customer relationships, existing workforce of the acquired businesses, and synergies expected to arise after the Company's acquisition of these businesses.

The pro forma impact of these acquisitions was not significant, either individually or in the aggregate, to the consolidated results of the Company for the three months ended July 29, 2022.

The pro forma impact of these acquisitions was not significant, either individually or in the aggregate, to the consolidated results of the Company for the three and six months ended October 27, 2023 and October 28, 2022.

The results of operations of acquired businesses have been included in the Company's consolidated statements of income since the date each business was acquired.

For the three months ended July 29, 2022, purchase price allocation adjustments were not significant.

For the three and six months ended October 27, 2023 and October 28, 2022, purchase price allocation adjustments were not significant.

Fiscal Year 2024

During the three and six months ended October 27, 2023, acquisitions that were accounted for as business combinations were not significant.

Fiscal Year 2023

Intersect ENT

On May 13, 2022, the Company acquired Intersect ENT, a global ear, nose, and throat (ENT) medical technology leader which offers a broad suite of solutions to assist surgeons treating patients who suffer from chronic rhinosinusitis (CRS).

Total consideration, net of cash acquired, for the transaction, was $ 1.2 billion consisting of $ 1.1 billion of cash and $ 98 million previously held investments in 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.

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.

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 the three months ended July 29, 2022.

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.

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 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 the three months ended October 28, 2022.

Medtronic plc

Notes to Consolidated Financial Statements

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

(in millions) Intersect ENT

(in millions) Intersect ENT Affera

Cash and cash equivalents $ 39 $ 66

Inventory 32 —

Goodwill 615 660

Other intangible assets 683 300

6 unchanged sentences

Net assets acquired $ 1,277 $ 970

Medtronic plc

Notes to Consolidated Financial Statements

Other acquisitions

For acquisitions, other than Intersect ENT, the acquisition date fair value of net assets acquired during the three months ended July 29, 2022, was $ 123 million.

For acquisitions, other than Intersect ENT and Affera, the acquisition date fair value of net assets acquired during the six months ended October 28, 2022, was $ 123 million.

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, which are comprised of revenue and product development milestone-based payments.

The Company recognized $ 73 million of non-cash contingent consideration liabilities in connection with these acquisitions during the six months ended October 28, 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 the three months ended July 28, 2023, the Company did not acquire any IPR&D in connection with asset acquisitions of technology not yet approved.

During the three months ended July 29, 2022, IPR&D acquired in connection with asset acquisitions of technology not yet approved by regulators was not significant.

During the three and six months ended October 27, 2023, and the six months ended October 28, 2022, IPR&D acquired in connection with asset acquisitions of technology not yet approved was not significant.

The Company did not acquire any IPR&D in connection with asset acquisitions of technology not yet approved during the three months ended October 28, 2022.

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.

The fair value of contingent consideration liabilities at July 28, 2023 and April 28, 2023 was $ 206 million.

At July 28, 2023, $ 33 million was recorded in other accrued expenses , and $ 173 million was recorded in other liabilities in the consolidated balance sheet.

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, net in the consolidated statements of income.

The fair value of contingent consideration liabilities at October 27, 2023 and April 28, 2023 was $ 220 million and $ 206 million, respectively.

At October 27, 2023, $ 30 million was recorded in other accrued expenses , and $ 190 million was recorded in other liabilities in the consolidated balance sheet.

At April 28, 2023, $ 34 million was recorded in other accrued expenses , and $ 171 million was recorded in other liabilities in the consolidated balance sheet.

The following table provides a reconciliation of the beginning and ending balances of contingent consideration liabilities:

Three months ended

(in millions) July 28, 2023 July 29, 2022

Three months ended Six months ended

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

Beginning balance $ 206 $ 193 $ 206 $ 119

3 unchanged sentences

Ending balance $ 220 $ 349 $ 220 $ 349

Medtronic plc

Notes to Consolidated Financial Statements

The recurring Level 3 fair value measurements of contingent consideration for which a liability is recorded include the following significant unobservable inputs:

Fair Value at

(in millions) July 28, 2023 Unobservable Input Range Weighted Average (1)

(in millions) October 27, 2023 Unobservable Input Range Weighted Average (1)

Revenue and other performance-based payments $ 94 Discount rate 11.2 % - 31.0 %

4 unchanged sentences

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

Medtronic plc

Notes to Consolidated Financial Statements

On April 1, 2023, the Company and DaVita Inc.

1 unchanged sentence

In connection with the sale, the Company may be entitled to receive additional consideration based on the achievement of certain revenue, regulatory, and profitability milestones, with potential payouts starting in fiscal year 2025 through 2029.

The fair value of the contingent consideration receivable at July 28, 2023 and April 28, 2023 was $ 152 million and $ 195 million, respectively, and was recorded in other assets in the consolidated balance sheet.

The fair value of the contingent consideration receivable at October 27, 2023 and April 28, 2023 was $ 152 million and $ 195 million, respectively, and was recorded in other assets in the consolidated balance sheet.

The following table provides a reconciliation of the beginning and ending balances of the Level 3 measurement of contingent consideration receivable:

(in millions) July 28, 2023

October 27, 2023

(in millions) Three months ended Six months ended

Beginning balance $ 152 $ 195

6 unchanged sentences

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.

The Company recorded a non-cash pre-tax impairment of $ 67 million in the three months ended July 29, 2022, primarily related to goodwill, recognized in other operating expense, net in the consolidated statements of income.

The Company recorded non-cash pre-tax charges of $ 14 million and $ 81 million, primarily related to impairment of goodwill and changes in the carrying amount of the disposal group, in the three and six months ended October 28, 2022, respectively, recognized in o ther operating income, net in the consolidated statements of income.

Refer to Note 10 to the consolidated financial statements for additional information on the goodwill impairment.

2 unchanged sentences

Restructuring and Other Costs

For the three months ended July 28, 2023, the Company incurred $ 91 million of restructuring and associated costs related to employee termination benefits and facility consolidations to support cost reduction initiatives.

For the three months ended July 29, 2022, restructuring charges primarily related to the Enterprise Excellence and Simplification restructuring programs, both of which were substantially completed as of the end of fiscal year 2023.

For the three and six months ended October 27, 2023, the Company incurred $ 91 million and $ 182 million of restructuring and associated costs primarily related to employee termination benefits and facility consolidations to support cost reduction initiatives.

For the three and six months ended October 28, 2022, restructuring charges primarily related to the Enterprise Excellence and Simplification restructuring programs, both of which were substantially completed as of the end of fiscal year 2023.

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.

1 unchanged sentence

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 expenses.

Associated and other costs primarily include salaries and wages of employees that are fully-dedicated to restructuring programs, consulting expenses, and asset write-offs.

Medtronic plc

1 unchanged sentence

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

Three months ended

(in millions) July 28, 2023 July 29, 2022

Three months ended Six months ended

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

Cost of products sold $ 15 $ 21 $ 30 $ 41

2 unchanged sentences

Total restructuring and associated costs $ 91 $ 95 $ 182 $ 171

The following table summarizes the activity related to restructuring programs for the three months ended July 28, 2023:

(in millions) Employee Termination Benefits Associated Costs Other

The following table summarizes the activity related to restructuring programs for the six months ended October 27, 2023:

(in millions) Employee Termination Benefits Associated and Other Costs Total

April 28, 2023 $ 204 $ 25 $ 230

1 unchanged sentence

Cash payments ( 225 ) ( 97 ) ( 325 )

Settled non-cash — ( 10 ) ( 10 )

Accrual adjustments (1)

( 1 ) — ( 1 )

July 28, 2023 $ 110 $ 7 $ 1 $ 119

October 27, 2023 $ 72 $ 5 $ 76

(1) Accrual adjustments primarily relate to certain employees identified for termination, finding other positions within the Company.

4 unchanged sentences

The Company holds investments in marketable debt securities that are classified and accounted for as available-for-sale and are remeasured on a recurring basis.

The following tables summarize the Company's investments in available-for-sale debt securities by significant investment category and the related consolidated balance sheet classification at July 28, 2023 and April 28, 2023:

July 28, 2023

October 27, 2023

Valuation Balance Sheet Classification

29 unchanged sentences

Notes to Consolidated Financial Statements

The following tables present the gross unrealized losses and fair values of the Company’s available-for-sale debt securities that have been in a continuous unrealized loss position deemed to be temporary, aggregated by investment category at July 28, 2023 and April 28, 2023:

July 28, 2023

October 27, 2023

Less than 12 months More than 12 months

19 unchanged sentences

Changes in the ability to observe valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy.

There were no transfers into or out of Level 3 during the three months ended July 28, 2023 and July 29, 2022.

There were no transfers into or out of Level 3 during the three and six months ended October 27, 2023 and October 28, 2022.

When a determination is made to classify an asset or liability within Level 3, the determination is based upon the significance of the unobservable inputs to the overall fair value measurement.

Activity related to the Company’s available-for-sale debt securities portfolio is as follows:

Three months ended

(in millions) July 28, 2023 July 29, 2022

Three months ended Six months ended

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

Proceeds from sales $ 1,573 $ 1,723 $ 3,320 $ 3,587

1 unchanged sentence

Gross realized losses ( 3 ) ( 10 ) ( 15 ) ( 19 )

The July 28, 2023 balance of available-for-sale debt securities by contractual maturity is shown in the following table.

The October 27, 2023 balance of available-for-sale debt securities by contractual maturity is shown in the following table.

Within the table, maturities of mortgage-backed securities have been allocated based upon timing of estimated cash flows assuming no change in the current interest rate environment.

Actual maturities may differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties.

(in millions) July 28, 2023

(in millions) October 27, 2023

Due in one year or less $ 1,360

4 unchanged sentences

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

During the three months ended July 28, 2023 and July 29, 2022, there was $ 111 million and $ 55 million of interest income, respectively.

During the three and six months ended October 27, 2023, there was $ 148 million and $ 259 million of interest income, respectively.

During the three and six months ended October 28, 2022, there was $ 73 million and $ 128 million of interest income, respectively.

Medtronic plc

6 unchanged sentences

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 July 28, 2023 and April 28, 2023, which are classified as other assets in the consolidated balance sheets:

(in millions) July 28, 2023 April 28, 2023

The following table summarizes the Company's equity and other investments at October 27, 2023 and April 28, 2023, which are classified as other assets in the consolidated balance sheets:

(in millions) October 27, 2023 April 28, 2023

Investments with readily determinable fair value (marketable equity securities) $ 32 $ 115

4 unchanged sentences

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

During the three months ended July 28, 2023, there were $ 64 million of net unrealized losses on equity securities and other investments still held at July 28, 2023.

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

During the three and six months ended October 27, 2023, there were $ 7 million and $ 70 million of net unrealized losses, respectively, on equity securities and other investments still held at October 27, 2023.

During the three and six months ended October 28, 2022, there were $ 7 million of net unrealized losses and $ 1 million of net unrealized gains, respectively, on equity securities and other investments still held at October 28, 2022.

Mozarc Medical Investment

4 unchanged sentences

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.

During the three months ended July 28, 2023, the change in fair value was insignificant.

During the three and six months ended October 27, 2023, the change in fair value was insignificant.

Financing Arrangements

3 unchanged sentences

The aggregate amount outstanding at any time under the commercial paper programs may not exceed the equivalent of $ 3.5 billion.

Commercial paper outstanding at July 28, 2023 was $ 500 million.

During the three months ended July 28, 2023, the commercial paper outstanding had a weighted average original maturity of 14 days and a weighted average interest rate of 5.262 percent.

Commercial paper outstanding at October 27, 2023 was $ 1.3 billion.

During the three months ended October 27, 2023, the commercial paper outstanding had a weighted average original maturity of 21 days and a weighted average interest rate of 5.476 percent.

During the six months ended October 27, 2023, the commercial paper outstanding had a weighted average original maturity of 18 days and a weighted average interest rate of 5.400 percent.

No commercial paper was outstanding at April 28, 2023.

3 unchanged sentences

The Credit Facility includes a multi-currency borrowing feature for certain specified foreign currencies.

At July 28, 2023 and April 28, 2023, no amounts were outstanding under the Credit Facility.

At October 27, 2023 and April 28, 2023, no amounts were outstanding under the Credit Facility.

Medtronic plc

Notes to Consolidated Financial Statements

Interest rates on advances on the Credit Facility are determined by a pricing matrix, based on the Company’s long-term debt ratings, assigned by Standard & Poor’s Ratings Services and Moody’s Investors Service.

1 unchanged sentence

The Company is in compliance with the covenants under the Credit Facility.

Medtronic plc

Notes to Consolidated Financial Statements

Debt Obligations

1 unchanged sentence

(in millions) Maturity by

Fiscal Year July 28, 2023 April 28, 2023

Fiscal Year October 27, 2023 April 28, 2023

Current debt obligations 2024 - 2025 $ 1,339 $ 20

52 unchanged sentences

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

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.

Medtronic plc

Notes to Consolidated Financial Statements

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.

12 unchanged sentences

The Company recognized a total loss on debt extinguishment of $ 53 million in the three months ended July 29, 2022, which primarily includes 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 statements of income.

The loss was recognized in interest expense, net in the consolidated statements of income during the six months ended October 28, 2022.

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

Financial Instruments Not Measured at Fair Value

At July 28, 2023, the estimated fair value of the Company’s Senior Notes was $ 21.4 billion compared to a principal value of $ 24.6 billion.

At October 27, 2023, the estimated fair value of the Company’s Senior Notes was $ 20.8 billion compared to a principal value of $ 23.9 billion.

At April 28, 2023, the estimated fair value was $ 21.7 billion compared to a principal value of $ 24.5 billion.

12 unchanged sentences

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

At July 28, 2023 and April 28, 2023, the Company had $ 63 million and $ 93 million in after-tax unrealized gains, respectively, associated with cash flow hedging instruments recorded in accumulated other comprehensive loss.

The Company expects that $ 122 million of after-tax net unrealized gains at July 28, 2023 will be recognized in the consolidated statements of income over the next 12 months.

At October 27, 2023 and April 28, 2023, the Company had $ 387 million and $ 93 million in after-tax unrealized gains, respectively, associated with cash flow hedging instruments recorded in accumulated other comprehensive loss.

The Company expects that $ 279 million of after-tax net unrealized gains at October 27, 2023 will be recognized in the consolidated statements of income over the next 12 months.

Medtronic plc

Notes to Consolidated Financial Statements

Net Investment Hedges

4 unchanged sentences

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 three months ended July 28, 2023 and July 29, 2022, the Company recognized $ 49 million and $ 21 million, respectively, in after-tax gains representing excluded components in interest expense, net .

The cash flows related to the Company's derivative instruments

Medtronic plc

Notes to Consolidated Financial Statements

designated as net investment hedges are reported as investing activities in the consolidated statements of cash flows.

During the three and six months ended October 27, 2023, the Company recognized $ 50 million and $ 99 million, respectively, in after-tax gains representing excluded components in interest expense, net .

During the three and six months ended October 28, 2022, the Company recognized $ 27 million and $ 47 million in after-tax unrealized gains representing 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.

5 unchanged sentences

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

(in billions) Designation July 28, 2023 April 28, 2023

(in billions) Designation October 27, 2023 April 28, 2023

Currency exchange rate contracts Cash flow hedge $ 9.2 $ 9.1

4 unchanged sentences

Currency exchange rate contracts Undesignated 5.2 5.8

(1) At July 28, 2023, includes derivative contracts with a notional value of € 4.5 billion, or $ 5.0 billion, designated as hedges of a portion of our net investment in certain European operations and derivative contracts with a notional value of ¥ 322.2 billion, or $ 2.3 billion, designated as hedges of a portion of our net investment in certain Japanese operations.

(1) At October 27, 2023, includes derivative contracts with a notional value of € 4.5 billion, or $ 4.8 billion, designated as hedges of a portion of our net investment in certain European operations and derivative contracts with a notional value of ¥ 322.2 billion, or $ 2.1 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 July 28, 2023, includes € 16.0 billion, or $ 17.7 billion, of outstanding Euro-denominated debt as hedges of a portion our net investment in foreign operations.

(2) At October 27, 2023, includes € 16.0 billion, or $ 16.9 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

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

The amount of the gains and losses on our hedging instruments and the classification of those gains and losses within our consolidated financial statements for the three months ended July 28, 2023 and July 29, 2022 were as follows:

The amount of the gains and losses on hedging instruments and the classification of those gains and losses within our consolidated financial statements for the three and six months ended October 27, 2023 and October 28, 2022 were as follows:

(Gain) Loss Recognized in Accumulated Other Comprehensive Loss (Gain) Loss Reclassified into Income

Three months ended Three months ended Location of (Gain) Loss in Income Statement

(in millions) July 28, 2023 July 29, 2022 July 28, 2023 July 29, 2022

Three months ended Six months ended Three months ended Six months ended Location of (Gain) Loss in Income Statement

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

Cash flow hedges

Currency exchange rate contracts $ ( 4 ) $ ( 342 ) $ ( 51 ) $ ( 137 ) Other operating expense, net

Currency exchange rate contracts $ ( 394 ) $ ( 266 ) $ ( 398 ) $ ( 608 ) $ ( 75 ) $ ( 205 ) $ ( 125 ) $ ( 343 ) Other operating income, net

Currency exchange rate contracts ( 75 ) ( 133 ) ( 109 ) ( 167 ) ( 15 ) 3 ( 19 ) 21 Cost of products sold

3 unchanged sentences

Total $ ( 1,384 ) $ ( 806 ) $ ( 1,278 ) $ ( 2,184 ) $ ( 89 ) $ ( 202 ) $ ( 145 ) $ ( 322 )

The amount of the gains and losses on our derivative instruments not designated as hedging instruments and the classification of those gains and losses within our consolidated financial statements during the three and six months ended October 27, 2023 and October 28, 2022 were as follows:

(Gain) Loss Recognized in Income

Three months ended Six months ended Location of (Gain) Loss in Income Statement

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

Currency exchange rate contracts $ 94 $ 21 $ 92 $ 47 Other operating income, net

Medtronic plc

Notes to Consolidated Financial Statements

The amount of the gains and losses on our derivative instruments not designated as hedging instruments and the classification of those gains and losses within our consolidated financial statements during the three months ended July 28, 2023 and July 29, 2022 were as follows:

(Gain) Loss Recognized in Income

Three months ended Location of (Gain) Loss in Income Statement

(in millions) July 28, 2023 July 29, 2022

Derivatives not designated as hedging instruments

Currency exchange rate contracts $ ( 2 ) $ 26 Other operating expense, net

Total return swaps ( 19 ) ( 1 ) Other operating expense, net

Total $ ( 21 ) $ 25

Balance Sheet Presentation

The following tables summarize the balance sheet classification and fair value of derivative instruments included in the consolidated balance sheets at July 28, 2023 and April 28, 2023.

The following tables summarize the balance sheet classification and fair value of derivative instruments included in the consolidated balance sheets at October 27, 2023 and April 28, 2023.

The fair value amounts are presented on a gross basis, and are segregated between derivatives that are designated and qualify as hedging instruments and those that are not designated and do not qualify as hedging instruments, and are further segregated by type of contract within those two categories.

Fair Value - Assets Fair Value - Liabilities

(in millions) July 28, 2023 April 28, 2023 Balance Sheet Classification July 28, 2023 April 28, 2023 Balance Sheet Classification

(in millions) October 27, 2023 April 28, 2023 Balance Sheet Classification October 27, 2023 April 28, 2023 Balance Sheet Classification

Derivatives designated as hedging instruments

8 unchanged sentences

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

July 28, 2023 April 28, 2023

October 27, 2023 April 28, 2023

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

8 unchanged sentences

Derivatives not subject to master netting arrangements are not eligible for net presentation.

July 28, 2023

October 27, 2023

Gross Amount Not Offset on the Balance Sheet

2 unchanged sentences

Currency exchange rate contracts $ 720 $ ( 58 ) $ ( 170 ) $ 492

Total return swaps 24 — — 24

421 ( 223 ) ( 6 ) 192

Derivative liabilities:

Currency exchange rate contracts ( 59 ) 58 — —

Total return swaps ( 24 ) — — ( 24 )

( 82 ) 58 — ( 24 )

Total $ 638 $ — $ ( 170 ) $ 468

8 unchanged sentences

Inventory balances, net of reserves, were as follows:

(in millions) July 28, 2023 April 28, 2023

(in millions) October 27, 2023 April 28, 2023

Finished goods $ 3,775 $ 3,440

4 unchanged sentences

The following table presents the changes in the carrying amount of goodwill by segment:

(in millions) Cardiovascular Medical Surgical Neuroscience Diabetes Total

(in millions) Cardiovascular Neuroscience Medical Surgical Diabetes Total

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

Goodwill as a result of acquisitions 24 — — — 24

Purchase accounting adjustments ( 6 ) — — — ( 6 )

Currency translation and other ( 42 ) ( 84 ) ( 495 ) — ( 622 )

July 28, 2023 $ 7,880 $ 19,590 $ 11,711 $ 2,255 $ 41,436

October 27, 2023 $ 7,849 $ 11,634 $ 19,084 $ 2,255 $ 40,821

Medtronic plc

4 unchanged sentences

Reporting units were tested for impairment before and after the alignment.

No goodwill impairment was identified in either test;

No goodwill impairment was identified in either test as of the beginning of the fiscal year 2024;

however, the Patient Monitoring & Respiratory Interventions reporting unit had an estimated fair value that exceeded its carrying value by less than 10 percent.

As of July 28, 2023, $ 3.0 billion of goodwill was allocated to the Patient Monitoring & Respiratory Interventions reporting unit.

As of October 27, 2023, no events or circumstances indicate it is more likely than not that the fair value of a reporting unit is less than its carrying value, including the Patient Monitoring & Respiratory Interventions reporting unit.

The Patient Monitoring & Respiratory Interventions reporting unit had $ 3.0 billion of goodwill as of October 27, 2023.

The goodwill allocation and the tests for impairment of goodwill require the Company to make several estimates related to projected future cash flows to determine the fair value of the goodwill reporting units.

5 unchanged sentences

As a result of the agreement with DaVita, as disclosed in Note 4 to the consolidated financial statements, 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 during the three months ended July 29, 2022.

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

Upon allocation, a goodwill impairment test was performed for the RCS business, and the Company recognized $ 61 million of goodwill impairment during the six months ended October 28, 2022.

The goodwill impairment charges were recognized in other operating income, net in the consolidated statements of income.

The Company did not recognize any goodwill impairment during the three and six months ended October 27, 2023 and the three months ended October 28, 2022.

Intangible Assets

The following table presents the gross carrying amount and accumulated amortization of intangible assets:

July 28, 2023 April 28, 2023

October 27, 2023 April 28, 2023

(in millions) Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization

7 unchanged sentences

IPR&D $ 236 $ — $ 232 $ —

The Company did no t recognize any definite-lived or indefinite-lived intangible asset charges during the three months ended July 28, 2023 and July 29, 2022.

The Company did not recognize any definite-lived intangible asset impairment charges during the three and six months ended October 27, 2023 and October 28, 2022.

Indefinite-lived intangible asset impairments were not significant for the three and six months ended October 27, 2023.

The Company did not recognize any indefinite-lived intangible asset impairment charges during the three and six months ended October 28, 2022.

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 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.

2 unchanged sentences

Amortization Expense

Intangible asset amortization expense for the three months ended July 28, 2023 and July 29, 2022 was $ 429 million and $ 423 million, respectively.

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

Intangible asset amortization expense for the three months ended October 27, 2023 and October 28, 2022 was $ 425 million and $ 421 million, respectively.

Intangible asset amortization expense for the six months ended October 27, 2023 and October 28, 2022 was $ 855 million and $ 844 million, respectively.

Estimated aggregate amortization expense by fiscal year based on the carrying value of definite-lived intangible assets at October 27, 2023, excluding any possible future amortization associated with acquired IPR&D which has not yet met technological feasibility, is as follows:

(in millions) Amortization Expense

3 unchanged sentences

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

As a result, the Company has recorded a $ 187 million income tax charge during the three months ended July 28, 2023.

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

The Company's effective tax rate for the three months ended July 28, 2023 was 33.4 %, as compared to 10.7 % for the three months ended July 29, 2022.

The increase in our effective tax rate primarily relates to an income tax reserve adjustment associated with the Ventor court decision discussed above, an increase in Puerto Rico withholding tax rates, and the benefit from the release of a valuation allowance during the three months ended July 29, 2022.

At July 28, 2023 and April 28, 2023, the Company's gross unrecognized tax benefits were $ 2.8 billion and $ 2.7 billion, respectively.

In addition, the Company had accrued gross interest and penalties of $ 154 million at July 28, 2023.

As a result, the Company recorded a $ 187 million income tax charge during the six months ended October 27, 2023.

Subsequent to October 27, 2023, the Company filed an appeal with the Supreme Court of Israel.

Our effective tax rate for the three and six months ended October 27, 2023 was 30.6 % and 32.0 %, respectively, as compared to 68.7 % and 44.0 % for the three and six months ended October 28, 2022, respectively.

The decrease in our effective tax rate for the three months ended October 27, 2023 primarily relates to the $ 764 million income tax charge recorded during the three months ended October 28, 2022 related to the U.S.

Tax Court decision, which was partially offset by an increase in Puerto Rico withholding tax rates and the establishment of a valuation allowance on certain net operating losses recorded during the three months ended October 27, 2023.

In addition to the items discussed in the current quarter, the decrease in the effective tax rate for the six months ended October 27, 2023 was also attributable to the Ventor court decision noted above.

At October 27, 2023 and April 28, 2023, the Company's gross unrecognized tax benefits were $ 2.8 billion and $ 2.7 billion, respectively.

During the three months ended October 27, 2023, the Company made a $ 193 million payment to the Internal Revenue Service.

After considering advance payments and deposits, the Company had no accrued gross interest and penalties at October 27, 2023.

If all of the Company’s unrecognized tax benefits were recognized, approximately $ 2.6 billion would impact the Company’s effective tax rate.

At both July 28, 2023 and April 28, 2023, the amount of the Company's gross unrecognized tax benefits, net of cash advance, recorded as a noncurrent liability within accrued income taxes on the consolidated balance sheets was $ 1.8 billion.

At both October 27, 2023 and April 28, 2023, the amount of the Company's gross unrecognized tax benefits, net of cash advance, recorded as a noncurrent liability within accrued income taxes on the consolidated balance sheets was $ 1.8 billion.

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

7 unchanged sentences

The table below sets forth the computation of basic and diluted earnings per share:

Three months ended

(in millions, except per share data) July 28, 2023 July 29, 2022

Three months ended Six months ended

(in millions, except per share data) October 27, 2023 October 28, 2022 October 27, 2023 October 28, 2022

Net income attributable to ordinary shareholders $ 909 $ 427 $ 1,700 $ 1,356

7 unchanged sentences

Diluted earnings per share $ 0.68 $ 0.32 $ 1.28 $ 1.02

The calculation of weighted average diluted shares outstanding excludes options to purchase approximately 22 million and 14 million ordinary shares for the three months ended July 28, 2023 and July 29, 2022, respectively, 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 31 million and 27 million ordinary shares for the three and six months ended October 27, 2023, respectively, and 25 million and 20 million ordinary shares for the three and six months ended October 28, 2022, respectively, because their effect would have been anti-dilutive on the Company’s earnings per share.

Stock-Based Compensation

The following table presents the components and classification of stock-based compensation expense for stock options, restricted stock, performance share units, and employee stock purchase plan shares recognized for the three months ended July 28, 2023 and July 29, 2022:

Three months ended

(in millions) July 28, 2023 July 29, 2022

Three months ended Six months ended

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

Stock options $ 35 $ 38 $ 46 $ 50

14 unchanged sentences

employees and many employees outside the U.S.

The net periodic benefit cost of the defined benefit pension plans included the following components for the three months ended July 28, 2023 and July 29, 2022:

The net periodic benefit cost of the defined benefit pension plans included the following components for the three and six months ended October 27, 2023 and October 28, 2022:

Three months ended Three months ended

(in millions) July 28, 2023 July 29, 2022 July 28, 2023 July 29, 2022

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

Service cost $ 15 $ 19 $ 10 $ 12

4 unchanged sentences

Net periodic benefit (credit) cost $ ( 6 ) $ 4 $ 5 $ 7

Six months ended Six months ended

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

Service cost $ 30 $ 38 $ 20 $ 24

Interest cost 80 72 24 20

Expected return on plan assets ( 130 ) ( 112 ) ( 34 ) ( 32 )

Amortization of prior service cost ( 2 ) — — —

Amortization of net actuarial loss 10 10 — 2

Net periodic benefit (credit) cost $ ( 12 ) $ 8 $ 10 $ 14

Components of net periodic benefit cost other than the service component are recognized in other non-operating income, net in the consolidated statements of income.

Medtronic plc

Notes to Consolidated Financial Statements

Accumulated Other Comprehensive Loss

2 unchanged sentences

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

Other comprehensive (loss) income before reclassifications ( 28 ) 14 ( 143 ) 1 12 ( 144 )

Other comprehensive income (loss) before reclassifications ( 49 ) ( 909 ) 771 — 404 217

Reclassifications 11 — — 4 ( 110 ) ( 95 )

Other comprehensive (loss) income ( 19 ) 14 ( 143 ) 3 ( 30 ) ( 175 )

July 28, 2023 $ ( 277 ) $ ( 2,825 ) $ 102 $ ( 738 ) $ 63 $ ( 3,674 )

Other comprehensive income (loss) ( 38 ) ( 909 ) 771 4 294 122

October 27, 2023 $ ( 296 ) $ ( 3,748 ) $ 1,016 $ ( 737 ) $ 387 $ ( 3,377 )

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

2 unchanged sentences

Reclassifications 12 — — 1 ( 256 ) ( 243 )

Other comprehensive income (loss) ( 16 ) ( 881 ) 1,002 1 220 326

July 29, 2022 $ ( 225 ) $ ( 3,480 ) $ 1,843 $ ( 772 ) $ 694 $ ( 1,939 )

The income tax on gains and losses on investment securities in other comprehensive income before reclassifications during the three months ended July 28, 2023 and July 29, 2022 was a benefit of $ 3 million and $ 9 million, respectively.

During the three months ended July 28, 2023 and July 29, 2022, realized gains and losses on investment securities reclassified from AOCI were reduced by income taxes of $ 3 million and $ 2 million, respectively.

Other comprehensive (loss) income ( 183 ) ( 1,705 ) 1,409 4 378 ( 97 )

October 28, 2022 $ ( 392 ) $ ( 4,304 ) $ 2,250 $ ( 769 ) $ 852 $ ( 2,361 )

The income tax on gains and losses on investment securities in other comprehensive income before reclassifications during the six months ended October 27, 2023 and October 28, 2022, was a benefit of $ 8 million and $ 41 million, respectively.

During the six months ended October 27, 2023 and October 28, 2022, realized gains and losses on investment securities reclassified from AOCI were reduced by income taxes of $ 3 million and $ 4 million, respectively.

When realized, gains and losses on investment securities reclassified from AOCI are recognized within other non-operating income, net .

Refer to Note 6 to the consolidated financial statements for additional information.

For the three months ended July 28, 2023, there was no income tax on cumulative translation adjustment.

For the three months ended July 29, 2022, the income tax on cumulative translation adjustment was a benefit of $ 3 million.

Medtronic plc

Notes to Consolidated Financial Statements

During the three months ended July 28, 2023 and July 29, 2022, there were no tax impacts on net investment hedges.

For the six months ended October 27, 2023, there was no income tax on cumulative translation adjustment.

For the six months ended October 28, 2022, the income tax on cumulative translation adjustment was a benefit of $ 3 million.

During the six months ended October 27, 2023 and October 28, 2022, there were no tax impacts on net investment hedges.

Refer to Note 8 to the consolidated financial statements for additional information.

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

During the three months ended July 28, 2023, there were no tax impacts on retirement obligations.

During the three months ended July 29, 2022, the net change in retirement obligations in other comprehensive income before reclassifications resulted in income tax expense of $ 1 million.

During the three months ended July 28, 2023 and July 29, 2022, the gains and losses on defined benefit and pension items reclassified from AOCI were reduced by income taxes of $ 1 million and $ 6 million, respectively.

During the six months ended October 27, 2023, there were no tax impacts on retirement obligations.

During the six months ended October 28, 2022, the net change in retirement obligations in other comprehensive income before reclassifications resulted in income tax expense of $ 1 million.

During the six months ended October 27, 2023 and October 28, 2022, the gains and losses on defined benefit and pension items reclassified from AOCI were reduced by income taxes of $ 2 million and $ 7 million, respectively.

When realized, net gains and losses on defined benefit and pension items reclassified from AOCI are recognized within other non-operating income, net .

Refer to Note 14 to the consolidated financial statements for additional information.

The income tax on unrealized gains and losses on cash flow hedges in other comprehensive income before reclassifications during the three months ended July 28, 2023 and July 29, 2022, was an expense of $ 25 million and $ 64 million, respectively.

During the three months ended July 28, 2023 and July 29, 2022, gains and losses on cash flow hedges reclassified from AOCI were reduced by income taxes of $ 13 million and $ 22 million, 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.

The income tax on unrealized gains and losses on cash flow hedges in other comprehensive income before reclassifications during the six months ended October 27, 2023 and October 28, 2022, was an expense of $ 103 million and $ 141 million, respectively.

During the six months ended October 27, 2023 and October 28, 2022, gains and losses on cash flow hedges reclassified from AOCI were reduced by income taxes of $ 34 million and $ 59 million, respectively.

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

Refer to Note 8 to the consolidated financial statements 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 States and in other jurisdictions in which the Company and its affiliates operate.

With respect to governmental proceedings and investigations, like other

Medtronic plc

Notes to Consolidated Financial Statements

companies in our industry, the Company is subject to extensive regulation by national, state, and local governmental agencies in the United States and in other jurisdictions in which the Company and its affiliates operate.

As a result, interaction with governmental agencies is ongoing.

8 unchanged sentences

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

The Company recognized $ 40 million of certain litigation charges during the three months ended July 28, 2023, whereas the Company recognized no certain litigation charges during the three months ended July 29, 2022.

At July 28, 2023 and April 28, 2023, accrued litigation was approximately $ 0.3 billion.

The Company recognized $ 65 million and $ 105 million of certain litigation charges during the three and six months ended October 27, 2023, respectively, whereas the Company recognized no certain litigation charges during the three and six months ended October 28, 2022.

At October 27, 2023 and April 28, 2023, 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.

4 unchanged sentences

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.

Medtronic plc

Notes to Consolidated Financial Statements

future products, which could have a material adverse impact on the Company's business, results of operations, financial condition, and cash flows.

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.

11 unchanged sentences

Bard (Bard), named in the litigation.

The litigation includes a federal multi-district litigation in the U.S.

District Court for the Northern District of West Virginia and cases in various state courts and jurisdictions outside the U.S.

The litigation included a federal multi-district litigation in the U.S.

District Court for the Northern District of West Virginia (now closed) and cases in various state courts and jurisdictions outside the U.S.

Generally, complaints allege design and manufacturing claims, failure to warn, breach of warranty, fraud, violations of state consumer protection laws and loss of consortium claims.

3 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.

As of August 2, 2023, the Company had reached agreements to settle approximately 15,900 of these claims.

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

Medtronic plc

Notes to Consolidated Financial Statements

products manufactured by Covidien’s subsidiaries.

As of November 1, 2023, the Company had reached agreements to settle nearly all of these claims.

The Company's accrued expenses for this matter are included within accrued litigation as discussed above.

2 unchanged sentences

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

As of August 2, 2023, the Company and certain of its subsidiaries have been named as defendants in lawsuits filed on behalf of approximately 7,450 individual plaintiffs, and certain plaintiffs’ law firms have advised the Company that they may file additional cases in the future.

Approximately 6,400 plaintiffs have filed lawsuits in a coordinated proceeding in Massachusetts state court, where they have been consolidated before a single judge.

Approximately 500 plaintiffs have filed lawsuits in a coordinated action in Minnesota state court, and there are approximately 550 actions coordinated in a federal Multidistrict Litigation in the U.S.

As of November 1, 2023, the Company and certain of its subsidiaries have been named as defendants in lawsuits filed on behalf of approximately 7,600 individual plaintiffs, and certain plaintiffs’ law firms have advised the Company that they may file additional cases in the future.

Approximately 6,350 plaintiffs have pending lawsuits in a coordinated proceeding in Massachusetts state court, where they have been consolidated before a single judge.

Approximately 500 plaintiffs have pending lawsuits in a coordinated action in Minnesota state court, and there are approximately 750 actions coordinated in a federal Multidistrict Litigation in the U.S.

District Court for the District of Massachusetts.

5 unchanged sentences

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 August 3, 2023, 63 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.

As of November 1, 2023, 63 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.

5 unchanged sentences

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.

Medtronic plc

Notes to Consolidated Financial Statements

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

14 unchanged sentences

Court of Appeals for the Eighth Circuit regarding the Tax Court opinion.

Oral argument for the Appeal occurred in March 2018.

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.

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 issued its second opinion in August 2022, the IRS filed a Notice of Appeal to the U.S.

Court of Appeals for the Eights Circuit in September 2023, and Medtronic subsequently filed a cross-appeal in October 2023.

A hearing date for the Appeal has not been set.

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

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

17 unchanged sentences

The allocation of depreciation expense is based on the proportion of the assets used by each segment.

Medtronic plc

Notes to Consolidated Financial Statements

As of the beginning of fiscal year 2024, the Company realigned the operating segment structure as a result of how the Chief Operating Decision Maker assesses business performance.

4 unchanged sentences

Prior period amounts have also been recast to reallocate certain expenses from segment operating profit to centralized distribution costs to conform to classifications used in the current year.

Medtronic plc

Notes to Consolidated Financial Statements

The following tables present reconciliations of financial information from the segments to the applicable line items in the Company's consolidated financial statements:

Segment Operating Profit

Three months ended

(in millions) July 28, 2023 July 29, 2022

Three months ended Six months ended

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

Cardiovascular $ 1,117 $ 1,071 $ 2,208 $ 2,049

2 unchanged sentences

Diabetes 101 97 186 176

9 ( 21 ) 12 ( 45 )

Segment operating profit 2,946 2,809 5,774 5,376

5 unchanged sentences

Centralized distribution costs ( 391 ) ( 388 ) ( 786 ) ( 794 )

32 138 29 219

Restructuring and associated costs ( 91 ) ( 95 ) ( 182 ) ( 171 )

4 unchanged sentences

(1) Includes the operations from the Renal Care Solutions business contributed to Mozarc Medical on April 1, 2023 and Transition Manufacturing and Service Agreements for previously divested businesses.

(2) Includes the net impact of remeasurement and the Company's hedging programs recorded in other operating expense, net.

(2) Includes the net impact of remeasurement and the Company's hedging programs recorded in other operating income, net.

Geographic Information

Net sales are attributed to the country based on the location of the customer taking possession of the products or in which the services are rendered.

The following table presents net sales for the three months ended July 28, 2023 and July 29, 2022 for the Company's country of domicile, countries with significant concentrations, and all other countries:

Three months ended

(in millions) July 28, 2023 July 29, 2022

The following table presents net sales for the three and six months ended October 27, 2023 and October 28, 2022 for the Company's country of domicile, countries with significant concentrations, and all other countries:

Three months ended Six months ended

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

Ireland $ 29 $ 25 $ 58 $ 47

4 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements