What changed in this filing

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Item 1. Financial Statements

2024-08-27 compared with 2024-02-27 · 232 added, 364 removed, 691 unchanged (46% of the section changed)

2 unchanged sentences

Consolidated Statements of Income

Three months ended Nine months ended

(in millions, except per share data) January 26, 2024 January 27, 2023 January 26, 2024 January 27, 2023

Three months ended

(in millions, except per share data) July 26, 2024 July 28, 2023

Net sales $ 7,915 $ 7,702

5 unchanged sentences

Restructuring charges, net 47 54

Certain litigation charges — — 105 —

Other operating expense (income), net 17 ( 125 ) ( 13 ) ( 187 )

Certain litigation charges, net 81 40

Other operating expense, net 1 1

Operating profit 1,278 1,268

13 unchanged sentences

Consolidated Statements of Comprehensive Income

Three months ended Nine months ended

(in millions) January 26, 2024 January 27, 2023 January 26, 2024 January 27, 2023

Three months ended

(in millions) July 26, 2024 July 28, 2023

Net income $ 1,049 $ 797

4 unchanged sentences

Net change in retirement obligations 1 3

Unrealized (loss) gain on cash flow hedges ( 220 ) ( 760 ) 74 ( 382 )

Other comprehensive (loss) income ( 81 ) ( 824 ) 39 ( 924 )

Unrealized loss on cash flow hedges ( 66 ) ( 30 )

Other comprehensive loss ( 92 ) ( 175 )

Comprehensive income including noncontrolling interests 957 622

4 unchanged sentences

Consolidated Balance Sheets

(in millions) January 26, 2024 April 28, 2023

(in millions) July 26, 2024 April 26, 2024

Current assets:

2 unchanged sentences

Accounts receivable, less allowances and credit losses of $ 170 and $ 173 , respectively

Inventories, net 5,726 5,293

Inventories 5,414 5,217

Other current assets 2,679 2,584

48 unchanged sentences

July 26, 2024 1,282 $ — $ 20,810 $ 30,547 $ ( 3,410 ) $ 47,947 $ 213 $ 48,160

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

Net income — — — 1,322 — 1,322 15 1,337

Other comprehensive (loss) income — — — — ( 82 ) ( 82 ) 1 ( 81 )

Dividends to shareholders ($ 0.69 per ordinary share)

— — — ( 917 ) — ( 917 ) — ( 917 )

Issuance of shares under stock purchase and award plans 1 — 49 — — 49 — 49

Repurchase of ordinary shares ( 2 ) — ( 124 ) — — ( 124 ) — ( 124 )

Stock-based compensation — — 85 — — 85 — 85

January 26, 2024 1,330 $ — $ 24,589 $ 30,661 $ ( 3,459 ) $ 51,792 $ 204 $ 51,996

Ordinary Shares Additional Paid-in Capital Retained

6 unchanged sentences

Net income — — — 791 — 791 6 797

Other comprehensive income (loss) — — — — 326 326 ( 2 ) 324

Dividends to shareholders ($ 0.68 per ordinary share)

— — — ( 903 ) — ( 903 ) — ( 903 )

Issuance of shares under stock purchase and award plans 2 — 41 — — 41 — 41

Repurchase of ordinary shares ( 3 ) — ( 333 ) — — ( 333 ) — ( 333 )

Stock-based compensation — — 62 — — 62 — 62

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 — — — — ( 175 ) ( 175 ) — ( 175 )

4 unchanged sentences

Stock-based compensation — — 73 — — 73 — 73

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

Net income — — — 1,222 — 1,222 6 1,229

Other comprehensive (loss) income — — — — ( 828 ) ( 828 ) 4 ( 824 )

Dividends to shareholders ($ 0.68 per ordinary share)

— — — ( 904 ) — ( 904 ) — ( 904 )

Issuance of shares under stock purchase and award plans 1 — 48 — — 48 — 48

Repurchase of ordinary shares ( 1 ) — ( 63 ) — — ( 63 ) — ( 63 )

Stock-based compensation — — 81 — — 81 — 81

Changes to noncontrolling ownership interests — — 5 — — 5 ( 11 ) ( 6 )

January 27, 2023 1,330 $ — $ 24,513 $ 30,117 $ ( 3,189 ) $ 51,441 $ 177 $ 51,618

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

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

1 unchanged sentence

Consolidated Statements of Cash Flows

Nine months ended

(in millions) January 26, 2024 January 27, 2023

Three months ended

(in millions) July 26, 2024 July 28, 2023

Operating Activities:

5 unchanged sentences

Stock-based compensation 83 73

Loss on debt extinguishment — 53

Other, net ( 9 ) 135

1 unchanged sentence

Accounts receivable, net 110 164

Inventories, net ( 530 ) ( 936 )

Inventories ( 217 ) ( 410 )

Accounts payable and accrued liabilities ( 604 ) ( 673 )

2 unchanged sentences

Investing Activities:

Acquisitions, net of cash acquired ( 74 ) ( 1,867 )

Additions to property, plant, and equipment ( 520 ) ( 354 )

5 unchanged sentences

Change in current debt obligations, net ( 624 ) 500

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

Issuance of long-term debt 3,209 —

Payments on long-term debt — ( 3,083 )

Dividends to shareholders ( 898 ) ( 918 )

30 unchanged sentences

New Accounting Pronouncements

Recently Adopted

Supplier Finance Programs

In September 2022, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2022-04, Liabilities— Supplier Finance Programs (Subtopic 405-50), which requires that a buyer in a supplier finance program disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period, and potential magnitude.

The Company adopted this guidance on April 29, 2023.

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

Not Yet Adopted

Recently Adopted Accounting Standards

For the three months ended July 26, 2024, there have been no newly adopted accounting pronouncements that materially impact our consolidated financial statements .

Refer to the Company's Annual Report on Form 10-K for the fiscal year ended April 26, 2024 for pronouncements recently adopted.

Not Yet Adopted Accounting Standards

Segment Reporting

7 unchanged sentences

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.

Prior period revenue has been recast to reflect the new reporting structure, which primarily includes allocating certain prior Medical Surgical businesses to the Other line.

Certain prior period revenue has been recast to conform to the new operating segment structure in the fourth quarter of fiscal year 2024.

Refer to Note 17 to the consolidated financial statements for additional information regarding the Company's reporting structure.

In addition, starting in the first quarter of fiscal year 2025, the Company combined the non-U.S.

developed markets and the emerging markets into an international market geography.

Prior period revenue has been recast to conform to the new presentation.

Medtronic plc

Notes to Consolidated Financial Statements

The table below illustrates net sales by segment and division for the three and nine months ended January 26, 2024 and January 27, 2023:

The table below illustrates net sales by segment and division and by market geography for the three months ended July 26, 2024 and July 28, 2023.

revenue includes United States and U.S.

territories, and the international revenue includes all other non-U.S.

Three months ended

Nine months ended

(in millions) January 26, 2024 January 27, 2023 January 26, 2024 January 27, 2023

(in millions) July 26, 2024 July 28, 2023

Cardiac Rhythm & Heart Failure $ 1,535 $ 1,446

7 unchanged sentences

Surgical & Endoscopy 1,544 1,546

Patient Monitoring & Respiratory Interventions 532 522 1,526 1,489

Medical Surgical 2,148 2,068 6,329 6,003

Diabetes 640 570 1,829 1,667

Total $ 8,089 $ 7,727 $ 23,775 $ 22,682

(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 and nine months ended January 26, 2024 and January 27, 2023:

Developed Markets (2)

Emerging Markets (3)

Three months ended Three months ended Three months ended

(in millions) January 26, 2024 January 27, 2023 January 26, 2024 January 27, 2023 January 26, 2024 January 27, 2023

Cardiovascular $ 1,373 $ 1,363 $ 950 $ 859 $ 607 $ 538

Neuroscience 1,556 1,507 442 401 357 341

Acute Care & Monitoring 452 459

Medical Surgical 1,996 2,005

Diabetes 647 578

7 17 2 36 8 28

Total $ 4,120 $ 4,062 $ 2,473 $ 2,294 $ 1,495 $ 1,371

Developed Markets (2)

Emerging Markets (3)

Nine months ended Nine months ended Nine months ended

(in millions) January 26, 2024 January 27, 2023 January 26, 2024 January 27, 2023 January 26, 2024 January 27, 2023

Total reportable segment net sales 7,967 7,652

Other operating segment (1)

Other adjustments (2)

Total net sales $ 7,915 $ 7,702

International

Three months ended Three months ended

(in millions) July 26, 2024 July 28, 2023 July 26, 2024 July 28, 2023

Cardiovascular $ 1,403 $ 1,350 $ 1,604 $ 1,500

2 unchanged sentences

Diabetes 215 188 432 390

23 66 14 101 18 76

Reportable segment net sales 4,064 3,903 3,903 3,749

Other operating segment (1)

Other adjustments (2)

Total $ 4,082 $ 3,924 $ 3,832 $ 3,777

includes the United States and U.S.

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.

(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

(1) Includes the historical operations and ongoing transition agreements from businesses the Company has exited or divested.

(2) Incremental Italian payback accruals resulting from the two July 22, 2024 rulings by the Constitutional Court of Italy relating to certain prior years since 2015.

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 January 26, 2024, $ 1.1 billion of rebates were classified as other accrued expenses , and $ 575 million of rebates were classified as a reduction of accounts receivable in the consolidated balance sheet.

At July 26, 2024, $ 1.0 billion of rebates were classified as other accrued expenses , and $ 591 million of rebates were classified as a reduction of accounts receivable in the consolidated balance sheet.

At April 26, 2024, $ 1.0 billion of rebates were classified as other accrued expenses, and $ 574 million of rebates were classified as a reduction of accounts receivable in the consolidated balance sheet.

Medtronic plc

Notes to Consolidated Financial Statements

Deferred Revenue and Remaining Performance Obligations

Deferred revenue at January 26, 2024 and April 28, 2023 was $ 447 million and $ 405 million, respectively.

At January 26, 2024 and April 28, 2023, $ 350 million and $ 314 million was included in other accrued expenses, respectively, and $ 97 million and $ 91 million was included in other liabilities, respectively.

During the nine months ended January 26, 2024, the Company recognized $ 274 million of revenue that was included in deferred revenue as of April 28, 2023.

Deferred revenue at July 26, 2024 and April 26, 2024 was $ 461 million and $ 453 million, respectively.

At July 26, 2024 and April 26, 2024, $ 362 million and $ 352 million was included in other accrued expenses, respectively, and $ 99 million and $ 101 million was included in other liabilities, respectively.

During the three months ended July 26, 2024, the Company recognized $ 108 million of revenue that was included in deferred revenue as of April 26, 2024.

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.

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

At January 26, 2024, 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 .

At July 26, 2024, 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 $ 0.4 billion.

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

Acquisitions and Dispositions

During the nine months ended January 26, 2024 and January 27, 2023, 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 and nine months ended January 26, 2024 and January 27, 2023.

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 and nine months ended January 26, 2024 and January 27, 2023, purchase price allocation adjustments were not significant.

Fiscal Year 2024

The acquisition date fair value of net assets acquired during the nine months ended January 26, 2024 was $ 107 million.

Based on preliminary valuations, assets acquired were primarily comprised of $ 51 million of goodwill and $ 29 million of technology-based intangible assets with estimated useful lives of 10 years.

The goodwill is deductible for tax purposes.

The Company recognized $ 25 million of non-cash contingent consideration liabilities in connection with these business combinations during the nine months ended January 26, 2024, which are comprised of revenue and product development milestone-based payments.

Acquisition Activity

During the three months ended July 26, 2024, the Company had no acquisitions that were accounted for as business combinations.

During the fiscal year ended April 26, 2024, the Company had acquisitions that were accounted for as business combinations.

For the three months ended July 26, 2024 and the fiscal year ended April 26, 2024, purchase price allocation adjustments were not significant.

Fiscal year 2024

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 and nine months ended January 27, 2023.

Medtronic plc

Notes to Consolidated Financial Statements

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 and nine months ended January 27, 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 the nine months ended January 27, 2023 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 during the nine months ended January 27, 2023, 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.

The Company did not acquire any IPR&D in connection with asset acquisitions of technology not yet approved during the three months ended January 26, 2024 and January 27, 2023.

During the nine months ended January 26, 2024 and January 27, 2023, IPR&D acquired in connection with asset acquisitions of technology not yet approved was not significant.

The acquisition date fair value of net assets acquired during the fiscal year ended April 26, 2024 was $ 335 million.

Based on preliminary valuations, assets acquired were primarily comprised of $ 131 million of goodwill, $ 150 million of IPR&D, and $ 29 million of technology-based intangible assets with estimated useful lives of 10 years.

For tax purposes, $ 51 million of goodwill is deductible while $ 80 million is not deductible.

The Company recognized $ 30 million of non-cash contingent consideration liabilities in connection with these business combinations during the fiscal year ended April 26, 2024, which are comprised of revenue and product development milestone-based payments.

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 (income), net in the consolidated statements of income.

The fair value of contingent consideration liabilities at January 26, 2024 and April 28, 2023 was $ 172 million and $ 206 million, respectively.

At January 26, 2024, $ 118 million was recorded in other accrued expenses , and $ 55 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 expense, net in the consolidated statements of income.

The fair value of contingent consideration liabilities at July 26, 2024 and April 26, 2024 was $ 128 million and $ 149 million, respectively.

At July 26, 2024, $ 85 million was recorded in other accrued expenses , and $ 43 million was recorded in other liabilities in the consolidated balance sheet.

At April 26, 2024, $ 96 million was recorded in other accrued expenses , and $ 53 million was recorded in other liabilities in the consolidated balance sheet.

Medtronic plc

Notes to Consolidated Financial Statements

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

Three months ended Nine months ended

(in millions) January 26, 2024 January 27, 2023 January 26, 2024 January 27, 2023

Three months ended

(in millions) July 26, 2024 July 28, 2023

Beginning balance $ 149 $ 206

Purchase price contingent consideration — — 25 274

Payments ( 6 ) ( 3 )

1 unchanged sentence

Ending balance $ 128 $ 206

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) January 26, 2024 Unobservable Input Range Weighted Average (1)

(in millions) July 26, 2024 Unobservable Input Range Weighted Average (1)

Revenue and other performance-based payments $ 61 Discount rate 16.5 % - 28.2 %

7 unchanged sentences

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 2026 through 2029.

The fair value of the contingent consideration receivable at January, 26, 2024 and April 28, 2023 was $ 150 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 July 26, 2024 and April 26, 2024 was $ 58 million, 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:

January 26, 2024

(in millions) Three months ended Nine months ended

Three months ended

(in millions) July 26, 2024 July 28, 2023

Beginning balance $ 58 $ 195

1 unchanged sentence

Ending balance $ 58 $ 152

Renal Care Solutions Disposition

On May 25, 2022, the Company and DaVita entered into a definitive agreement for the Company to sell half of its RCS business, and on April 1, 2023, completed the transaction, as further discussed above.

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 ownership.

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, made an additional cash investment of $ 224 million, 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.

The Company recorded non-cash pre-tax charges of $ 81 million, primarily related to impairment of goodwill and changes in the carrying amount of the disposal group, in the nine months ended January 27, 2023, recognized in o ther operating expense (income), net in the consolidated statements of income.

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

Refer to Note 6 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.

Medtronic plc

Notes to Consolidated Financial Statements

Restructuring and Other Costs

For the three and nine months ended January 26, 2024, the Company incurred $ 55 million and $ 237 million, respectively, of restructuring and associated costs primarily related to employee termination benefits and facility consolidations to support cost reduction initiatives.

For the three and nine months ended January 27, 2023, 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 cumulative 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 cumulative pre-tax charges of $ 0.5 billion.

Employee-related costs primarily consist of termination benefits provided to employees who have been involuntarily terminated and voluntary early retirement benefits.

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

For the three months ended July 26, 2024 and July 28, 2023, the Company incurred $ 62 million and $ 91 million, respectively, of restructuring and associated costs primarily related to employee termination benefits and facility consolidations to support cost reduction initiatives.

Employee-related costs primarily consist of termination benefits provided to employees who have been involuntarily terminated.

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

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

Three months ended Nine months ended

(in millions) January 26, 2024 January 27, 2023 January 26, 2024 January 27, 2023

Three months ended

(in millions) July 26, 2024 July 28, 2023

Cost of products sold $ 9 $ 16

2 unchanged sentences

Total restructuring and associated costs $ 62 $ 91

The following table summarizes the activity related to restructuring programs for the nine months ended January 26, 2024:

Medtronic plc

Notes to Consolidated Financial Statements

The following table summarizes the activity for the three months ended July 26, 2024:

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

5 unchanged sentences

( 9 ) — ( 9 )

January 26, 2024 $ 54 $ 9 $ 63

July 26, 2024 $ 113 $ 6 $ 119

(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 January 26, 2024 and April 28, 2023:

January 26, 2024

July 26, 2024

Valuation Balance Sheet Classification

21 unchanged sentences

government and agency securities 5 — — 5 5 —

Certificates of deposit 10 — — 10 10 —

Other asset-backed securities 941 2 ( 9 ) 934 934 —

5 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 January 26, 2024 and April 28, 2023:

January 26, 2024

July 26, 2024

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 and nine months ended January 26, 2024 and January 27, 2023.

There were no transfers into or out of Level 3 during the three months ended July 26, 2024 and July 28, 2023.

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 Nine months ended

(in millions) January 26, 2024 January 27, 2023 January 26, 2024 January 27, 2023

Three months ended

(in millions) July 26, 2024 July 28, 2023

Proceeds from sales $ 2,157 $ 1,747

1 unchanged sentence

Gross realized losses ( 7 ) ( 12 )

The January 26, 2024 balance of available-for-sale debt securities by contractual maturity is shown in the following table.

The contractual maturities of available-for-sale debt securities at July 26, 2024 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) January 26, 2024

(in millions) Amortized Cost Fair Value

Due in one year or less $ 1,462 $ 1,450

4 unchanged sentences

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

During the three and nine months ended January 26, 2024, there was $ 170 million and $ 429 million of interest income, respectively.

During the three and nine months ended January 27, 2023, there was $ 118 million and $ 246 million of interest income, respectively.

During the three months ended July 26, 2024 and July 28, 2023, there was $ 112 million and $ 111 million of interest income, respectively.

Medtronic plc

4 unchanged sentences

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.

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 the timing of anticipated product launches, historical financial results, and projections of 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 January 26, 2024 and April 28, 2023, which are classified as primarily other assets in the consolidated balance sheets:

(in millions) January 26, 2024 April 28, 2023

The following table summarizes the Company's equity and other investments at July 26, 2024 and April 26, 2024, which are classified as primarily other assets in the consolidated balance sheets:

(in millions) July 26, 2024 April 26, 2024

Investments with readily determinable fair value (marketable equity securities) $ 45 $ 28

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 and nine months ended January 26, 2024, there were $ 25 million and $ 95 million of net unrealized losses, respectively, on equity securities and other investments still held at January 26, 2024.

During the three and nine months ended January 27, 2023, there were $ 10 million and $ 15 million of net unrealized gains, respectively, on equity securities and other investments still held at January 27, 2023.

During the three months ended July 26, 2024, there were $ 17 million of net unrealized gains on equity securities and other investments still held at July 26, 2024.

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.

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.

Refer to Note 4 for additional information on this transaction.

As further described in Note 4, 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 percent equity interest in Mozarc.

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.

1 unchanged sentence

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 and nine months ended January 26, 2024, the Company recognized a loss of $ 39 million.

During the three months ended July 26, 2024 and July 28, 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 January 26, 2024 was $ 1.0 billion.

During the three months ended January 26, 2024, the commercial paper outstanding had a weighted average original maturity of 23 days and a weighted average interest rate of 5.508 percent.

During the nine months ended January 26, 2024, the commercial paper outstanding had a weighted average original maturity of 20 days and a weighted average interest rate of 5.443 percent.

No commercial paper was outstanding at April 28, 2023.

Commercial paper outstanding at July 26, 2024 was $ 449 million.

During the three months ended July 26, 2024, the commercial paper outstanding had a weighted average original maturity of 16 days and a weighted average interest rate of 5.50 percent.

Commercial paper outstanding at April 26, 2024 was $ 1.1 billion.

During fiscal year 2024, the weighted average original maturity of the commercial paper outstanding was approximately 20 days and the weighted average interest rate was 5.45 percent.

The issuance of commercial paper reduces the amount of credit available under the Company’s existing Credit Facility, as defined below.

2 unchanged sentences

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

At January 26, 2024 and April 28, 2023, no amounts were outstanding under the Credit Facility.

At July 26, 2024 and April 26, 2024, no amounts were outstanding under the Credit Facility.

Medtronic plc

6 unchanged sentences

(in millions) Maturity by

Fiscal Year January 26, 2024 April 28, 2023

Fiscal Year July 26, 2024 April 26, 2024

Current debt obligations 2025 - 2026 $ 1,553 $ 1,092

1 unchanged sentence

0.250 percent six -year 2019 senior notes

2026 1,085 1,097

2.625 percent three -year 2022 senior notes

9 unchanged sentences

2029 1,085 1,070

3.650 percent five -year 2024 senior notes

1.625 percent twelve -year 2019 senior notes

12 unchanged sentences

2035 1,932 1,932

3.875 percent twelve -year 2024 senior notes

6.550 percent thirty -year 2007 CIFSA senior notes

9 unchanged sentences

4.000 percent thirty -year 2013 senior notes

4.150 percent nineteen -year 2024 senior notes

4.625 percent thirty -year 2014 senior notes

5 unchanged sentences

2051 1,085 1,070

4.150 percent twenty-nine -year 2024 senior notes

Finance lease obligations 2026 - 2036 52 55

2 unchanged sentences

Total long-term debt $ 26,312 $ 23,932

Medtronic plc

Notes to Consolidated Financial Statements

During the three months ended July 26, 2024 and July 28, 2023, there was $ 217 million and $ 197 million, respectively, of interest expense on outstanding borrowings, including amortization of debt issuance costs and debt discounts and premiums, recognized in interest expense, net in the consolidated statements of income.

The Company has outstanding unsecured senior obligations, described as senior notes in the tables above (collectively, the Senior Notes).

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

Medtronic plc

Notes to Consolidated Financial Statements

In September 2022, Medtronic Global Holdings S.C.A.

(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 2022 is designated as a net investment hedge of certain of the Company's European operations.

Refer to Note 8 for additional information regarding the net investment hedge.

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.

The Fiscal 2023 Loan Agreement provides an unsecured term loan in an aggregate principal amount of up to ¥ 300 billion with a term of 364 days.

Borrowings under the Fiscal 2023 Loan Agreement bear interest at the TIBOR Rate (as defined in the Fiscal 2023 Loan Agreement) plus a margin of 0.40 % per annum.

Medtronic plc and Medtronic, Inc.

have 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 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 during the nine months ended January 27, 2023.

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

On June 3, 2024, Medtronic Inc.

issued four tranches of EUR-denominated Senior Notes with an aggregate principal of € 3.0 billion, with maturities ranging from fiscal year 2030 to 2054, resulting in cash proceeds of approximately $ 3.2 billion, net of discounts and issuance costs.

In anticipation of the Euro-denominated debt issuance, the Company entered into forward currency exchange rate contracts to manage the exposure to exchange rate movements.

These contracts were settled in conjunction with the issuance of the June 2024 Notes.

Financial Instruments Not Measured at Fair Value

At January 26, 2024, the estimated fair value of the Company’s Senior Notes was $ 21.8 billion compared to a principal value of $ 24.3 billion.

At July 26, 2024, the estimated fair value of the Company’s Senior Notes was $ 25.1 billion compared to a principal value of $ 27.5 billion.

At April 26, 2024, the estimated fair value was $ 21.2 billion compared to a principal value of $ 24.0 billion.

4 unchanged sentences

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

Fair Value Hedges

Beginning in the first quarter of fiscal year 2025, the Company began using foreign currency forward contracts designated as fair value hedges to manage its exposure to changes in the fair value of its fixed-rate debt obligation.

At inception, foreign currency forward contracts are designated as fair value hedges.

Changes in the fair value of these derivatives are reported as a component of other operating expense, net .

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 26, 2024, after-tax unrealized gains related to included components in other operating expense, net were not significant .

During the three months ended July 26, 2024, amounts related to excluded components that are amortized in interest expense, net over the life of the hedging instrument were not significant.

Cash flows related to the Company's derivative instruments designated as fair value hedges are reported as financing activities in the consolidated statements of cash flows.

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

Cash Flow Hedges

6 unchanged sentences

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

At January 26, 2024 and April 28, 2023, the Company had $ 167 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 $ 140 million of after-tax net unrealized gains at January 26, 2024 will be recognized in the consolidated statements of income over the next 12 months.

Medtronic plc

Notes to Consolidated Financial Statements

At July 26, 2024 and April 26, 2024, the Company had $ 165 million and $ 229 million in after-tax unrealized gains, respectively, associated with cash flow hedging instruments recorded in accumulated other comprehensive loss .

The Company expects that $ 121 million of after-tax net unrealized gains at July 26, 2024 will be recognized in the consolidated statements of income over the next 12 months.

Net Investment Hedges

1 unchanged sentence

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.

Medtronic plc

Notes to Consolidated Financial Statements

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

1 unchanged sentence

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 and nine months ended January 26, 2024, the Company recognized $ 49 million and $ 148 million, respectively, in gains representing excluded components in interest expense, net .

During the three and nine months ended January 27, 2023, the Company recognized $ 26 million and $ 74 million in unrealized gains representing excluded components in interest expense, net .

During the three months ended July 26, 2024 and July 28, 2023, the Company recognized $ 50 million and $ 49 million, respectively, 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.

6 unchanged sentences

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

(in billions) Designation January 26, 2024 April 28, 2023

(in billions)

July 26, 2024 April 26, 2024

Currency exchange rate contracts (1)

Fair value hedge $ 1.1 $ —

Currency exchange rate contracts Cash flow hedge 11.3 10.4

4 unchanged sentences

Currency exchange rate contracts Undesignated 5.0 5.9

(1) At January 26, 2024, includes derivative contracts with a notional value of € 5.0 billion, or $ 5.4 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 $ 2.2 billion, designated as hedges of a portion of our net investment in certain Japanese operations.

(1) At July 26, 2024, includes derivative contracts with a notional value of € 1.0 billion, or $ 1.1 billion, designated as hedges of a portion of our fixed-rate debt obligations.

(2) At July 26, 2024, includes derivative contracts with a notional value of € 5.0 billion, or $ 5.4 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 2025 through 2033.

(2) At January 26, 2024, includes € 16.0 billion, or $ 17.4 billion, of outstanding Euro-denominated debt as hedges of a portion our net investment in foreign operations.

(3) At July 26, 2024, includes € 18.0 billion, or $ 19.5 billion, of outstanding Euro-denominated debt designated as hedges of a portion our net investment in foreign operations.

This debt matures in fiscal years 2026 through 2054.

2 unchanged sentences

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

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 nine months ended January 26, 2024 and January 27, 2023 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 months ended July 26, 2024 and July 28, 2023 were as follows:

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

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

(in millions) January 26, 2024 January 27, 2023 January 26, 2024 January 27, 2023 January 26, 2024 January 27, 2023 January 26, 2024 January 27, 2023

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

(in millions) July 26, 2024 July 28, 2023 July 26, 2024 July 28, 2023

Fair value hedges

Currency exchange rate contracts $ — $ — $ ( 1 ) $ — Other operating expense, net

Cash flow hedges

Currency exchange rate contracts $ 136 $ 557 $ ( 263 ) $ ( 51 ) $ ( 83 ) $ ( 199 ) $ ( 209 ) $ ( 542 ) Other operating expense (income), net

Currency exchange rate contracts 43 ( 4 ) ( 36 ) ( 51 ) Other operating expense, net

Currency exchange rate contracts ( 20 ) ( 33 ) ( 17 ) ( 5 ) Cost of products sold

3 unchanged sentences

Total $ 229 $ 106 $ ( 55 ) $ ( 56 )

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 nine months ended January 26, 2024 and January 27, 2023 were as follows:

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 26, 2024 and July 28, 2023 were as follows:

(Gain) Loss Recognized in Income

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

(in millions) January 26, 2024 January 27, 2023 January 26, 2024 January 27, 2023

Currency exchange rate contracts $ ( 9 ) $ ( 1 ) $ 83 $ 46 Other operating expense (income), net

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

(in millions) July 26, 2024 July 28, 2023

Currency exchange rate contracts $ ( 8 ) $ ( 2 ) Other operating expense, net

Balance Sheet Presentation

The following tables summarize the balance sheet classification and fair value of derivative instruments included in the consolidated balance sheets at January 26, 2024 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 July 26, 2024 and April 26, 2024.

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) January 26, 2024 April 28, 2023 Balance Sheet Classification January 26, 2024 April 28, 2023 Balance Sheet Classification

(in millions) July 26, 2024 April 26, 2024 Balance Sheet Classification July 26, 2024 April 26, 2024 Balance Sheet Classification

Derivatives designated as hedging instruments

10 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.

January 26, 2024 April 28, 2023

July 26, 2024 April 26, 2024

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

6 unchanged sentences

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

January 26, 2024

July 26, 2024

Gross Amount Not Offset on the Balance Sheet

15 unchanged sentences

Total $ 593 $ — $ ( 101 ) $ 492

Inventory balances, net of reserves, were as follows:

(in millions) January 26, 2024 April 28, 2023

Inventory balances were as follows:

(in millions) July 26, 2024 April 26, 2024

Finished goods $ 3,732 $ 3,668

8 unchanged sentences

April 26, 2024 $ 7,966 $ 11,644 $ 19,121 $ 2,255 $ 40,986

Goodwill as a result of acquisitions 51 — — — 51

Purchase accounting adjustments ( 5 ) — — — ( 5 )

Currency translation and other 11 10 77 — 99

January 26, 2024 $ 7,906 $ 11,674 $ 19,325 $ 2,255 $ 41,160

As further described in Note 17, the Company has certain new operating segments as of the beginning of fiscal year 2024.

Each new operating segment is considered a standalone reporting unit as of the beginning of fiscal year 2024.

As a result of the realignment of the operating segment structure, the Company allocated all goodwill that was previously assigned to the Medical Surgical reporting unit to the new reporting units using a relative fair value allocation approach.

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

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.

The Company assesses goodwill for impairment annually as of the first day of the third quarter of the fiscal year and whenever an event occurs or circumstances change that would indicate that the carrying amount may be impaired.

Impairment testing for goodwill is performed at the reporting unit level.

The Company calculates the excess of each reporting unit's fair value over its carrying amount, including goodwill, utilizing a discounted cash flow analysis and revenue and earnings multiples using comparable public company information.

Significant assumptions used in reporting unit fair value measurements include forecasted cash flows, including revenue and expense growth rates, discount rates, and revenue and earnings multiples.

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.

A change in any of these estimates and assumptions could produce a different fair value, which could have a material impact on the Company's results of operations.

No goodwill impairment was recognized during the three and nine months ended January 26, 2024 and the three months ended January 27, 2023.

As of January 26, 2024, the Patient Monitoring & Respiratory Interventions reporting unit had an estimated fair value that exceeded its carrying value by greater than 10 percent.

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 nine months ended January 27, 2023.

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

July 26, 2024 $ 7,977 $ 11,654 $ 19,198 $ 2,255 $ 41,084

As further described in Note 19, the Company had changes to the operating segments and goodwill reporting units during the fourth quarter of fiscal year 2024.

For further information on the reporting unit changes, refer to Note 9 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended April 26, 2024.

No goodwill impairment was recognized during the three months ended July 26, 2024 and July 28, 2023.

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

January 26, 2024 April 28, 2023

July 26, 2024 April 26, 2024

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

7 unchanged sentences

IPR&D $ 385 $ — $ 385 $ —

The Company did not recognize any definite-lived intangible asset impairment charges during the three and nine months ended January 26, 2024 and January 27, 2023.

Medtronic plc

Notes to Consolidated Financial Statements

The Company did not recognize any indefinite-lived intangible asset impairments during the three months ended January 26, 2024.

Indefinite-lived intangible asset impairments were not significant for the nine months ended January 26, 2024 and the three and nine months ended January 27, 2023.

The Company did not recognize any definite-lived or indefinite-lived intangible asset impairment charges during the three months ended July 26, 2024 and July 28, 2023.

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.

Amortization Expense

Intangible asset amortization expense for the three months ended January 26, 2024 and January 27, 2023 was $ 419 million and $ 431 million, respectively.

Intangible asset amortization expense for the nine months ended January 26, 2024 and January 27, 2023 was $ 1.3 billion.

Estimated aggregate amortization expense by fiscal year based on the carrying value of definite-lived intangible assets at January 26, 2024, 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 July 26, 2024 and July 28, 2023 was $ 414 million and $ 429 million, respectively.

Estimated aggregate amortization expense by fiscal year based on the carrying value of definite-lived intangible assets at July 26, 2024, excluding any possible future amortization associated with acquired IPR&D which has not yet met technological feasibility, is as follows:

(in millions) Amortization Expense

Remaining 2025 $ 1,227

The Organization for Economic Co-operation and Development (OECD) published Pillar Two Model Rules defining the global minimum tax, which calls for the taxation of large multinational corporations at a minimum rate of 15% in each jurisdiction in which the group

Medtronic plc

Notes to Consolidated Financial Statements

The OECD has since issued administrative guidance providing transition and safe harbor rules around the implementation of the Pillar Two global minimum tax.

A number of countries, including Ireland, have enacted legislation to implement the core elements of Pillar Two, which are effective for the Company in fiscal year 2025.

We will continue to monitor the impacts of further legislation, regulatory guidance, and regulations issued in the countries in which we do business.

The Israeli Central-Lod District Court issued its decision in Medtronic Ventor Technologies Ltd (Ventor) v.

1 unchanged sentence

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

As a result, the Company recorded a $ 187 million income tax charge during the nine months ended January 26, 2024.

During the three months ended January 26, 2024, the Company filed an appeal with the Supreme Court of Israel.

The Company's effective tax rate for the three and nine months ended January 26, 2024 was 9.2 % and 23.5 %, respectively, as compared to 10.6 % and 31.9 % for the three and nine months ended January 27, 2023, respectively.

The decrease in the effective tax rate for the three months ended January 26, 2024 primarily relates to a Swiss Cantonal tax rate change on previously recorded deferred tax assets, which was partially offset by an increase in Puerto Rico withholding tax rates and finalization of certain tax returns and statute of limitation lapses for the quarter ended January 27, 2023.

The decrease in the effective tax rate for the nine months ended January 26, 2024 was attributable to the previously highlighted items and the $ 764 million income tax charge recorded during the nine months ended January 27, 2023 related to the U.S.

Tax Court decision partially offset by the Ventor court decision noted above and the establishment of a valuation allowance against certain net operating losses.

At January 26, 2024 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 that were not significant at January 26, 2024.

As a result, the Company recorded a $ 187 million income tax charge during the first quarter of fiscal year 2024 and has filed an appeal with the Supreme Court of Israel.

The Company's effective tax rate for the three months ended July 26, 2024 was 17.4 %, as compared to 33.4 % for the three months ended July 28, 2023.

The decrease in the effective tax rate primarily relates to an income tax reserve adjustment made during the three months ended July 28, 2023 associated with the Medtronic Ventor Technologies Ltd court decision and year-over-year changes in operational results by jurisdiction, which were partially offset by the impact of the Pillar Two global minimum tax for the three months ended July 26, 2024.

At both July 26, 2024 and April 26, 2024, the Company's gross unrecognized tax benefits were $ 2.8 billion.

In addition, the Company had accrued gross interest and penalties that were not significant at July 26, 2024.

If all of the Company’s unrecognized tax benefits were recognized, approximately $ 2.7 billion would impact the Company’s effective tax rate.

At both January 26, 2024 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 July 26, 2024 and April 26, 2024, 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.

4 unchanged sentences

Potentially dilutive ordinary shares include stock-based awards granted under stock-based compensation plans and shares committed to be purchased under the employee stock purchase plan.

Medtronic plc

Notes to Consolidated Financial Statements

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

Three months ended Nine months ended

(in millions, except per share data) January 26, 2024 January 27, 2023 January 26, 2024 January 27, 2023

Three months ended

(in millions, except per share data) July 26, 2024 July 28, 2023

Net income attributable to ordinary shareholders $ 1,042 $ 791

7 unchanged sentences

Diluted earnings per share $ 0.80 $ 0.59

The calculation of weighted average diluted shares outstanding excludes options to purchase approximately 29 million and 28 million ordinary shares for the three and nine months ended January 26, 2024, respectively, and 28 million and 23 million ordinary shares for the three and nine months ended January 27, 2023, 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 27 million and 22 million ordinary shares for the three months ended July 26, 2024 and July 28, 2023, respectively, because their effect would have been anti-dilutive on the Company’s earnings per share.

Medtronic plc

Notes to Consolidated Financial Statements

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 and nine months ended January 26, 2024 and January 27, 2023:

Three months ended Nine months ended

(in millions) January 26, 2024 January 27, 2023 January 26, 2024 January 27, 2023

Three months ended

(in millions) July 26, 2024 July 28, 2023

Stock options $ 13 $ 12

9 unchanged sentences

Total stock-based compensation expense, net of tax $ 70 $ 62

Medtronic plc

Notes to Consolidated Financial Statements

Retirement Benefit Plans

1 unchanged sentence

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 and nine months ended January 26, 2024 and January 27, 2023:

The net periodic benefit cost of the defined benefit pension plans included the following components for the three months ended July 26, 2024 and July 28, 2023:

Three months ended Three months ended

(in millions) January 26, 2024 January 27, 2023 January 26, 2024 January 27, 2023

Service cost $ 15 $ 19 $ 10 $ 12

Interest cost 40 36 12 10

Expected return on plan assets ( 65 ) ( 56 ) ( 17 ) ( 16 )

Amortization of prior service cost ( 1 ) — — —

Amortization of net actuarial loss 5 5 — 1

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

Nine months ended Nine months ended

(in millions) January 26, 2024 January 27, 2023 January 26, 2024 January 27, 2023

(in millions) July 26, 2024 July 28, 2023 July 26, 2024 July 28, 2023

Service cost $ 13 $ 15 $ 11 $ 10

4 unchanged sentences

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

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.

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

Medtronic plc

7 unchanged sentences

Other comprehensive income (loss) 76 102 ( 206 ) 1 ( 66 ) ( 92 )

January 26, 2024 $ ( 185 ) $ ( 3,300 ) $ 593 $ ( 735 ) $ 167 $ ( 3,459 )

July 26, 2024 $ ( 136 ) $ ( 3,584 ) $ 672 $ ( 529 ) $ 165 $ ( 3,410 )

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

3 unchanged sentences

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

January 27, 2023 $ ( 285 ) $ ( 2,619 ) $ 392 $ ( 771 ) $ 92 $ ( 3,189 )

The income tax on gains and losses on investment securities in other comprehensive income before reclassifications during the nine months ended January 26, 2024 and January 27, 2023, was an expense of $ 9 million and a benefit of $ 22 million, respectively.

During the nine months ended January 26, 2024 and January 27, 2023, realized gains and losses on investment securities reclassified from AOCI were reduced by income taxes of $ 4 million and $ 6 million, respectively.

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

The income tax on gains and losses on investment securities in other comprehensive income before reclassifications during the three months ended July 26, 2024 and July 28, 2023, was an expense of $ 14 million and a benefit of $ 3 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 nine months ended January 26, 2024, there was no income tax on cumulative translation adjustment.

For the nine months ended January 27, 2023, the income tax on cumulative translation adjustment was a benefit of $ 4 million.

During the nine months ended January 26, 2024 and January 27, 2023, there were no tax impacts on net investment hedges.

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

For the three months ended July 26, 2024 and July 28, 2023, there was no income tax on cumulative translation adjustment.

The income tax on net investment hedges in other comprehensive income before reclassifications during the three months ended July 26, 2024 was a benefit of $ 4 million.

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

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

During the nine months ended January 26, 2024, there were no tax impacts on retirement obligations.

During the nine months ended January 27, 2023, the net change in retirement obligations in other comprehensive income before reclassifications resulted in income tax benefit of $ 1 million.

During the nine months ended January 26, 2024 and January 27, 2023, the gains and losses on defined benefit and pension items reclassified from AOCI were reduced by income taxes of $ 2 million and $ 8 million, respectively.

During the three months ended July 26, 2024 and July 28, 2023, there were no tax impacts on retirement obligations.

During the three months ended July 26, 2024, the gains and losses on defined benefit and pension items reclassified from AOCI were reduced by an insignificant amount of income taxes.

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

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 nine months ended January 26, 2024 and January 27, 2023, was an expense of $ 75 million and $ 20 million, respectively.

During the nine months ended January 26, 2024 and January 27, 2023, gains and losses on cash flow hedges reclassified from AOCI were reduced by income taxes of $ 48 million and $ 98 million, respectively.

When realized, gains and losses on currency exchange rate contracts reclassified from AOCI are recognized within other operating expense (income), 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 three months ended July 26, 2024 and July 28, 2023, was an expense of $ 3 million and $ 25 million, respectively.

During the three months ended July 26, 2024 and July 28, 2023, gains and losses on cash flow hedges reclassified from AOCI were reduced by income taxes of $ 14 million and $ 13 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.

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

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Legal Matters

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

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

As a result, interaction with governmental agencies is

Medtronic plc

Notes to Consolidated Financial Statements

proceedings and investigations, including those described below.

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.

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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.

The Company recognized no certain litigation charges during the three months ended January 26, 2024 and the three and nine months ended January 27, 2023.

The Company recognized $ 105 million of certain litigation charges during the nine months ended January 26, 2024.

At January 26, 2024 and April 28, 2023, accrued litigation was approximately $ 0.2 billion and $ 0.3 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.

The Company recognized $ 81 million and $ 40 million of certain litigation charges during the three months ended July 26, 2024, and July 28, 2023, respectively.

At July 26, 2024 and April 26, 2024, accrued litigation was approximately $ 0.3 billion and $ 0.2 billion, respectively.

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.

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

As of January 31, 2024, the Company and certain of its subsidiaries have been named as defendants in lawsuits filed on behalf of approximately 7,950 individual plaintiffs, and certain plaintiffs’ law firms have advised the Company that they may file additional cases in the future.

As of August 1, 2024, the Company and certain of its subsidiaries have been named as defendants in lawsuits filed on behalf of approximately 8,600 individual plaintiffs, and certain plaintiffs’ law firms have advised the Company that they may file additional cases in the future.

Approximately 6,800 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 1,350 actions coordinated in a federal Multidistrict Litigation in the U.S.

District Court for the District of Massachusetts plus seven one-off cases filed in other courts.

District Court for the District of Massachusetts plus six one-off cases filed in other courts.

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

The Company has not recorded an expense related to damages in connection with these matters because any potential loss

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.

Medtronic plc

Notes to Consolidated Financial Statements

is not currently probable and reasonably estimable.

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

Diabetes Pump Retainer Ring Litigation

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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 February 5, 2024, 23 lawsuits have been filed on behalf of a total of 86 individual plaintiffs, 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 July 26, 2024, 26 lawsuits have been filed on behalf of a total of 106 individual plaintiffs, 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.

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Securities and Exchange Commission, U.S.

Department of Justice, and various authorities in China regarding certain activities, largely involving historical conduct of third-party distributors, primarily in China.

Department of Justice, and various authorities in China regarding certain activities, including in China.

The Company is committed to regularly evaluating and, as appropriate, strengthening its anti-corruption compliance programs and practices.

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

Other Matters

Italian Payback

In 2015, “payback” legislation was enacted in Italy requiring companies selling medical devices to make payments to the Italian state if Italy’s medical device expenditures exceed annual regional maximum ceilings.

The payment amounts are calculated based upon the amount by which the regional ceilings were exceeded for any given year.

There has been significant scrutiny on the legality and enforceability of the payback law since its inception, and litigation challenging the law has been proceeding through the Italian Courts.

Since the law was enacted, the Company has recognized an estimate for the amount of variable consideration but has not made any payments under the payback law.

In July 2024, two rulings by the Constitutional Court of Italy found that the medical device payback law is constitutional.

Therefore, the Company increased its liability pertaining primarily to certain prior years since 2015 by $ 90 million during the three months ended July 26, 2024, as a reduction to net sales in the consolidated statements of income.

As litigation before Italian Courts is still pending, final resolution is unknown at this time, and it is possible that the amount of the Company’s liability could differ from the amount currently accrued.

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

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

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.

Medtronic plc

Notes to Consolidated Financial Statements

certain modifications to the Medtronic, Inc.

tax returns as filed.

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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.

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

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.

There have been no changes to reportable segments during the quarter ended July 26, 2024.

We continue to have four reportable segments:

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

The Medical Surgical Portfolio now consists of two operating segments which have been aggregated based upon similar economic and operating characteristics.

Prior period segment operating profit has been recast to reflect the new reporting structure, which primarily includes allocating certain prior Medical Surgical businesses to the Other line.

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.

Prior period amounts have been recast to conform to the new operating segment structure in the fourth quarter of fiscal year 2024.

For further information on the operating segment structure changes, refer to Note 19 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended April 26, 2024.

Medtronic plc

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Segment Operating Profit

Three months ended Nine months ended

(in millions) January 26, 2024 January 27, 2023 January 26, 2024 January 27, 2023

Three months ended

(in millions) July 26, 2024 July 28, 2023

Cardiovascular $ 1,125 $ 1,092

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Diabetes 102 84

12 ( 25 ) 24 ( 70 )

Segment operating profit 3,021 2,853 8,795 8,228

Reportable segment operating profit 2,878 2,831

Other operating segment (1)

Corporate ( 455 ) ( 447 )

Interest expense, net ( 167 ) ( 148 )

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Amortization of intangible assets ( 414 ) ( 429 )

Corporate ( 466 ) ( 523 ) ( 1,345 ) ( 1,339 )

Stock-based compensation ( 83 ) ( 73 )

Centralized distribution costs ( 394 ) ( 395 )

( 12 ) 132 16 351

Restructuring and associated costs ( 62 ) ( 91 )

Acquisition and divestiture-related items ( 12 ) ( 50 )

Certain litigation charges — — ( 105 ) —

Certain litigation charges, net ( 81 ) ( 40 )

Medical device regulations ( 14 ) ( 31 )

Other adjustments (3)

Income before income taxes $ 1,268 $ 1,196

(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 (income), net.

(1) Includes the historical operations and ongoing transition agreements from businesses the Company has exited or divested.

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

(3) Incremental Italian payback accruals resulting from the two July 22, 2024 rulings by the Constitutional Court of Italy relating to certain prior years since 2015.

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 and nine months ended January 26, 2024 and January 27, 2023 for the Company's country of domicile, countries with significant concentrations, and all other countries:

Three months ended Nine months ended

(in millions) January 26, 2024 January 27, 2023 January 26, 2024 January 27, 2023

The following table presents net sales for the three months ended July 26, 2024 and July 28, 2023 for the Company's country of domicile, countries with significant concentrations, and all other countries:

Three months ended

(in millions) July 26, 2024 July 28, 2023

Ireland $ 30 $ 29

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Total $ 7,915 $ 7,702

Medtronic plc

Notes to Consolidated Financial Statements

Subsequent Events

On February 20, 2024, the Company announced the decision to exit its ventilator product line and retain and combine the remaining Patient Monitoring and Respiratory Interventions (PMRI) businesses into one business unit called Acute Care and Monitoring (ACM).

For the nine months ended January 26, 2024, ventilator product line revenue was $ 111 million and is included in our Medical Surgical reportable segment.

The Company expects to record an estimated pre-tax charge of $ 350 million to $ 425 million, the majority of which is expected to be recorded in the quarter ending April 26, 2024, primarily related to non-cash impairment of long-lived intangible assets.

The Company will continue to honor existing ventilator contracts to serve the needs of its customers and their patients.

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