Exhibit 99.1
 | ||
| NEWS RELEASE | ||
| Contacts: | ||||
| Fernando Vivanco | Ryan Weispfenning | |||
| Public Relations | Investor Relations | |||
| +1-763-505-3780 | +1-763-505-4626 | |||
FOR IMMEDIATE RELEASE
MEDTRONIC REPORTS FIRST QUARTER FINANCIAL RESULTS
| ▪ | Revenue of $7.4 Billion Decreased 0.1% Reported; Increased 6.8% Organic |
| ▪ | GAAP Diluted EPS of $0.79; Non-GAAP Diluted EPS of $1.17 |
| ▪ | Company Updates FY19 Revenue and EPS Guidance |
DUBLIN - August 21, 2018 - Medtronic plc (NYSE: MDT) today announced financial results for its first quarter of fiscal year 2019, which ended July 27, 2018.
The company reported first quarter worldwide revenue of $7.384 billion, a decrease of 0.1 percent as reported, or an increase of 6.8 percent on an organic basis, which adjusts for the divestiture of its Patient Care, Deep Vein Thrombosis (Compression), and Nutritional Insufficiency businesses to Cardinal Health that occurred in the second quarter of fiscal year 2018, and a $78 million positive impact from foreign currency. As reported, first quarter GAAP net income and diluted earnings per share (EPS) were $1.075 billion and $0.79, respectively. As detailed in the financial schedules included through the link at the end of this release, first quarter non-GAAP net income and diluted EPS were $1.601 billion and $1.17, respectively, both increases of 4 percent. Adjusting for the divestiture and a positive 5 cent impact from foreign currency, first quarter non-GAAP diluted EPS increased 9 percent.
First quarter U.S. revenue of $3.864 billion represented 52 percent of company revenue and decreased 4.4 percent as reported, while it increased 6.4 percent on a comparable basis, which adjusts for the divestiture. Non-U.S. developed market revenue of $2.406 billion represented 33 percent of company revenue and increased 4.0 percent as reported and 5.5 percent on a comparable, constant currency basis. Emerging market revenue of $1.114 billion represented 15 percent of company revenue and increased 7.6 percent as reported and 11.2 percent on a comparable, constant currency basis.
“We are executing against our plan, growing our markets and driving share gains across multiple businesses and geographies,” said Omar Ishrak, Medtronic chairman and chief executive officer. “Our execution is not only on the top line, but also down the P&L, as we delivered margin expansion through our Enterprise Excellence program while increasing our investment in R&D.”
1
Cardiac and Vascular Group
The Cardiac and Vascular Group (CVG) includes the Cardiac Rhythm & Heart Failure (CRHF), Coronary & Structural Heart (CSH), and Aortic, Peripheral & Venous (APV) divisions. CVG worldwide first quarter revenue of $2.811 billion increased 6.2 percent, or 5.0 percent on a constant currency basis. CVG revenue performance was driven by strong, low-double digit growth in CSH, mid-single digit growth in APV, and low-single digit growth in CRHF, all on a constant currency basis.
| ▪ | CRHF first quarter revenue of $1.426 billion increased 2.6 percent, or 1.4 percent on a constant currency basis. Arrhythmia Management grew in the low-single digits on a constant currency basis, driven by high-teens constant currency growth in AF Solutions and the high-thirties constant currency growth of TYRX® in Infection Control. Results were also driven by mid-single digit growth in Pacing, led by the adoption of the Micra® Transcatheter Pacing System and the Azure® wireless pacemaker. |
| ▪ | CSH first quarter revenue of $917 million increased 12.2 percent, or 10.9 percent on a constant currency basis, led by high-teens constant currency growth in transcatheter aortic valves on the global strength of the CoreValve® Evolut® PRO. Coronary grew in the high-single digits on a constant currency basis, driven by double digit constant currency growth of drug-eluting stents and guide catheters. |
| ▪ | APV first quarter revenue of $468 million increased 6.6 percent, or 5.2 percent on a constant currency basis, led by mid-teens constant currency growth in endoVenous on strong demand for the VenaSeal™ closure system. Peripheral Vascular grew in the mid-single digits on a constant currency basis, driven by strong PTA balloon growth globally and drug-coated balloon growth in international markets. Aortic grew in the low-single digits on a constant currency basis, driven by growth in thoracic stent grafts. |
Minimally Invasive Therapies Group
The Minimally Invasive Therapies Group (MITG) includes the Surgical Innovations (SI) and the Respiratory, Gastrointestinal & Renal (RGR) divisions. MITG worldwide first quarter revenue of $2.052 billion decreased 17.5 percent as reported, or increased 4.9 percent on a comparable, constant currency basis. MITG revenue performance included mid-single digit growth in SI and low-single digit growth in RGR, both on a comparable, constant currency basis.
| ▪ | SI first quarter revenue of $1.397 billion increased 5.8 percent on a comparable, constant currency basis, driven by low-double digit constant currency growth in Advanced Energy on the strength of the LigaSure™ vessel sealing instruments with innovative nano-coating. Advanced Stapling grew in the mid-single digits, driven by strong demand for Tri-Staple™ 2.0 endo stapling specialty reloads and the Signia™ powered stapler. |
| ▪ | RGR first quarter revenue of $655 million increased 2.9 percent on a comparable, constant currency basis. GI grew in the mid-single digits on a comparable, constant currency basis. Respiratory and Patient Monitoring grew in the low-single digits on a comparable, constant currency basis, with high-single digit constant currency growth in capnography and ventilation. |
Restorative Therapies Group
The Restorative Therapies Group (RTG) includes the Spine, Brain Therapies, Specialty Therapies, and Pain Therapies divisions. RTG worldwide first quarter revenue of $1.949 billion increased 7.7 percent, or 6.8 percent on a constant currency basis. Group results were driven by mid-teens growth in Brain Therapies and Pain Therapies, with low-single digit growth in Specialty Therapies and flat results in Spine, all on a constant currency basis.
| ▪ | Spine first quarter revenue of $652 million increased 0.5 percent, or decreased 0.3 percent on a constant currency basis. When combined with the company’s sales of enabling technology used in spine surgeries, which is recognized in the Brain Therapies division, global Spine revenue increased in the mid-single digits on a constant currency basis, driven by the success of the company’s Surgical Synergy strategy. |
| ▪ | Brain Therapies first quarter revenue of $599 million increased 14.8 percent, or 13.6 percent on a constant currency basis, driven by high-teens constant currency growth in Neurovascular and Neurosurgery. Neurovascular had strong growth in stents, flow diversion, and access products. Neurosurgery growth was led by strong capital equipment sales of the O-arm®2 surgical imaging system, StealthStation® S8 surgical navigation system, Mazor X™ robotic guidance system, and Visualase® MRI-guided laser ablation system. |
| ▪ | Specialty Therapies first quarter revenue of $384 million increased 4.1 percent, or 3.3 percent on a constant currency basis. Results were led by mid-single digit constant currency growth in ENT. |
| ▪ | Pain Therapies first quarter revenue of $314 million increased 16.7 percent, or 15.6 percent on a constant currency basis. The division had strong, low-twenties growth in Pain Stimulation on the strength of the recently launched Intellis™ platform for spinal cord stimulation, as well as low-double digit growth in Targeted Drug Delivery and high-single digit growth in Interventional Pain, all on a constant currency basis. |
2
Diabetes Group
The Diabetes Group is now organized into the Advanced Insulin Management (AIM) and Emerging Technologies divisions. Diabetes Group worldwide first quarter revenue of $572 million increased 27.4 percent, or 26.3 percent on a constant currency basis. The group is experiencing strong global demand for its new sensor-augmented insulin pump systems.
| ▪ | AIM first quarter revenue grew in the mid-twenties on a constant currency basis, driven by the ongoing U.S. launch of the MiniMed® 670G hybrid closed loop insulin pump system with the Guardian® sensor 3 continuous glucose monitor (CGM). In international markets, AIM delivered high-teens constant currency growth on the continued strength of the MiniMed® 640G system. |
| ▪ | Emerging Technologies first quarter revenue grew in the high-sixties on a constant currency basis, driven by the U.S. launch of the Guardian® Connect CGM system with Sugar.IQ™ personal diabetes assistant. |
Guidance
The company today updated its fiscal year 2019 revenue growth and EPS guidance.
For fiscal year 2019, the company is increasing its organic revenue growth guidance from a range of 4.0 to 4.5 percent to a range of 4.5 to 5.0 percent. If recent exchange rates hold for the remainder of the fiscal year, the company’s fiscal year 2019 revenue would be negatively affected by approximately $420 million to $520 million.
For fiscal year 2019, the company is increasing its implied constant currency non-GAAP diluted EPS growth forecast from a range of 8 to 9 percent to a range of 9 to 10 percent. At recent rates, foreign exchange is expected to be neutral to fiscal year 2019 EPS versus a 5 cent benefit prior. As such, despite the increased constant currency EPS growth outlook, the company is maintaining its diluted non-GAAP EPS guidance in the range of $5.10 to $5.15.
“We are excited about the growth opportunities in our end markets, and we are bullish about our competitive position,” said Ishrak. “Our pipeline of innovation, invention, and disruption has never been stronger. We are also putting the pieces in place to improve free cash flow conversion, creating additional capital that can be returned to shareholders and reinvested to drive future growth, all with a goal of creating long-term shareholder value.”
Webcast Information
Medtronic will host a webcast today, August 21, at 8:00 a.m. EDT (7:00 a.m. CDT) to provide information about its businesses for the public, analysts, and news media. This quarterly webcast can be accessed by clicking on the Investor Events link at investorrelations.medtronic.com and this earnings release will be archived at newsroom.medtronic.com. Medtronic will be live tweeting during the webcast on our Newsroom Twitter account, @Medtronic. Within 24 hours of the webcast, a replay of the webcast and transcript of the company’s prepared remarks will be available by clicking on the Investor Events link at investorrelations.medtronic.com.
Financial Schedules
To view the first quarter financial schedules and non-GAAP reconciliations, click here. To view the first quarter earnings presentation, click here. Both documents can also be accessed by visiting newsroom.medtronic.com.
About Medtronic
Medtronic plc (www.medtronic.com), headquartered in Dublin, Ireland, is among the world’s largest medical technology, services and solutions companies - alleviating pain, restoring health and extending life for millions of people around the world. Medtronic employs more than 86,000 people worldwide, serving physicians, hospitals and patients in more than 150 countries. The company is focused on collaborating with stakeholders around the world to take healthcare Further, Together.
3
FORWARD LOOKING STATEMENTS
This press release contains forward-looking statements, which are subject to risks and uncertainties, including those described in Medtronic’s periodic reports and other filings with the U.S. Securities and Exchange Commission (the “SEC”). Anticipated results only reflect information available to Medtronic at this time and may differ from actual results. Medtronic does not undertake to update its forward-looking statements or any of the information contained in this press release. Certain information in this press release includes calculations or figures that have been prepared internally and have not been reviewed or audited by our independent registered public accounting firm, including but not limited to, certain information in the financial schedules accompanying this press release. Use of different methods for preparing, calculating or presenting information may lead to differences and such differences may be material.
NON-GAAP FINANCIAL MEASURES
This press release contains financial measures and guidance, including adjusted net income and adjusted diluted EPS, which are considered “non-GAAP” financial measures under applicable SEC rules and regulations. References to quarterly figures increasing, decreasing or remaining flat are in comparison to the first quarter of fiscal year 2018.
Medtronic management believes that non-GAAP financial measures provide information useful to investors in understanding the company’s underlying operational performance and trends and to facilitate comparisons with the performance of other companies in the med tech industry. Non-GAAP net income and diluted EPS exclude the effect of certain charges or gains that contribute to or reduce earnings but that result from transactions or events that management believes may or may not recur with similar materiality or impact to operations in future periods (Non-GAAP Adjustments). Medtronic generally uses non-GAAP financial measures to facilitate management’s review of the operational performance of the company and as a basis for strategic planning. Non-GAAP financial measures should be considered supplemental to and not a substitute for financial information prepared in accordance with U.S. generally accepted accounting principles (GAAP), and investors are cautioned that Medtronic may calculate non-GAAP financial measures in a way that is different from other companies. Management strongly encourages investors to review the company’s consolidated financial statements and publicly filed reports in their entirety. Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the financial schedules accompanying this press release.
Medtronic calculates forward-looking non-GAAP financial measures based on internal forecasts that omit certain amounts that would be included in GAAP financial measures. For instance, forward-looking revenue growth projections exclude the impact of foreign currency fluctuations. Forward-looking non-GAAP EPS guidance also excludes other potential charges or gains that would be recorded as Non-GAAP Adjustments to earnings during the fiscal year. Medtronic does not attempt to provide reconciliations of forward-looking non-GAAP EPS guidance to projected GAAP EPS guidance because the combined impact and timing of recognition of these potential charges or gains is inherently uncertain and difficult to predict and is unavailable without unreasonable efforts. In addition, we believe such reconciliations would imply a degree of precision and certainty that could be confusing to investors. Such items could have a substantial impact on GAAP measures of financial performance.
Mazor X is a trademark of Mazor Robotics.
-end-
View FY19 First Quarter Financial Schedules & Non-GAAP Reconciliations
View FY19 First Quarter Earnings Presentation
4
5
MEDTRONIC PLC
WORLD WIDE REVENUE
(Unaudited)
| FIRST QUARTER | |||||||||||||||||||||
| REPORTED | COMPARABLE CONSTANT CURRENCY | ||||||||||||||||||||
| (in millions) | FY19 | FY18 | Growth | Currency Impact (2) | Revised(3) FY18 | Growth | |||||||||||||||
| Cardiac & Vascular Group | $ | 2,811 | $ | 2,646 | 6 | % | $ | 34 | $ | 2,646 | 5 | % | |||||||||
| Cardiac Rhythm & Heart Failure | 1,426 | 1,390 | 3 | 17 | 1,390 | 1 | |||||||||||||||
| Coronary & Structural Heart | 917 | 817 | 12 | 11 | 817 | 11 | |||||||||||||||
| Aortic, Peripheral & Venous | 468 | 439 | 7 | 6 | 439 | 5 | |||||||||||||||
Minimally Invasive Therapies Group(1) | 2,052 | 2,486 | (17 | ) | 22 | 1,936 | 5 | ||||||||||||||
| Surgical Innovations | 1,397 | — | — | 15 | 1,306 | 6 | |||||||||||||||
| Respiratory, Gastrointestinal, & Renal | 655 | — | — | 7 | 630 | 3 | |||||||||||||||
| Restorative Therapies Group | 1,949 | 1,809 | 8 | 17 | 1,809 | 7 | |||||||||||||||
| Spine | 652 | 649 | — | 5 | 649 | — | |||||||||||||||
| Brain Therapies | 599 | 522 | 15 | 6 | 522 | 14 | |||||||||||||||
| Specialty Therapies | 384 | 369 | 4 | 3 | 369 | 3 | |||||||||||||||
| Pain Therapies | 314 | 269 | 17 | 3 | 269 | 16 | |||||||||||||||
| Diabetes Group | 572 | 449 | 27 | 5 | 449 | 26 | |||||||||||||||
| TOTAL | $ | 7,384 | $ | 7,390 | — | % | $ | 78 | $ | 6,840 | 7 | % | |||||||||
(1) In the second quarter of fiscal year 2018, the Company realigned its divisions within the Minimally Invasive Therapies Group, which included a movement of revenue from certain product lines within Surgical Innovations to Respiratory Gastrointestinal & Renal. As a result, first quarter fiscal year 2018 results have been recast to adjust for this realignment.
(2) The currency impact to revenue measures the change in revenue between current and prior year periods using constant exchange rates.
(3) Revised revenue excludes revenue related to the divested Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency businesses for the first quarter of fiscal year 2018.
6
MEDTRONIC PLC
U.S.(1) REVENUE
(Unaudited)
| FIRST QUARTER | |||||||||||||||||
| REPORTED | COMPARABLE | ||||||||||||||||
| (in millions) | FY19 | FY18 | Growth | Revised(3) FY18 | Growth | ||||||||||||
| Cardiac & Vascular Group | $ | 1,389 | $ | 1,333 | 4 | % | $ | 1,333 | 4 | % | |||||||
| Cardiac Rhythm & Heart Failure | 764 | 765 | — | 765 | — | ||||||||||||
| Coronary & Structural Heart | 362 | 316 | 15 | 316 | 15 | ||||||||||||
| Aortic, Peripheral & Venous | 263 | 252 | 4 | 252 | 4 | ||||||||||||
Minimally Invasive Therapies Group(2) | 857 | 1,245 | (31 | ) | 835 | 3 | |||||||||||
| Surgical Innovations | 556 | — | — | 531 | 5 | ||||||||||||
| Respiratory, Gastrointestinal, & Renal | 301 | — | — | 304 | (1 | ) | |||||||||||
| Restorative Therapies Group | 1,294 | 1,221 | 6 | 1,221 | 6 | ||||||||||||
| Spine | 444 | 454 | (2 | ) | 454 | (2 | ) | ||||||||||
| Brain Therapies | 336 | 294 | 14 | 294 | 14 | ||||||||||||
| Specialty Therapies | 285 | 280 | 2 | 280 | 2 | ||||||||||||
| Pain Therapies | 229 | 193 | 19 | 193 | 19 | ||||||||||||
| Diabetes Group | 324 | 243 | 33 | 243 | 33 | ||||||||||||
| TOTAL | $ | 3,864 | $ | 4,042 | (4 | )% | $ | 3,632 | 6 | % | |||||||
(1) U.S. includes the United States and U.S. territories.
(2) In the second quarter of fiscal year 2018, the Company realigned its divisions within the Minimally Invasive Therapies Group, which included a movement of revenue from certain product lines within Surgical Innovations to Respiratory Gastrointestinal & Renal. As a result, first quarter fiscal year 2018 results have been recast to adjust for this realignment.
(3) Revised revenue excludes revenue related to the divested Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency businesses for the first quarter of fiscal year 2018.
7
MEDTRONIC PLC
WORLD WIDE REVENUE: GEOGRAPHIC(1)
(Unaudited)
| FIRST QUARTER | |||||||||||||||||||||
| REPORTED | COMPARABLE CONSTANT CURRENCY | ||||||||||||||||||||
| (in millions) | FY19 | FY18 | Growth | Currency Impact(2) | Revised(3) FY18 | Growth | |||||||||||||||
| U.S. | $ | 1,389 | $ | 1,333 | 4 | % | $ | — | $ | 1,333 | 4 | % | |||||||||
| Non-U.S. Developed | 947 | 887 | 7 | 35 | 887 | 3 | |||||||||||||||
| Emerging Markets | 475 | 426 | 12 | (1 | ) | 426 | 12 | ||||||||||||||
| Cardiac & Vascular Group | 2,811 | 2,646 | 6 | 34 | 2,646 | 5 | |||||||||||||||
| U.S. | 857 | 1,245 | (31 | ) | — | 835 | 3 | ||||||||||||||
| Non-U.S. Developed | 828 | 865 | (4 | ) | 27 | 754 | 6 | ||||||||||||||
| Emerging Markets | 367 | 376 | (2 | ) | (5 | ) | 347 | 7 | |||||||||||||
| Minimally Invasive Therapies Group | 2,052 | 2,486 | (17 | ) | 22 | 1,936 | 5 | ||||||||||||||
| U.S. | 1,294 | 1,221 | 6 | — | 1,221 | 6 | |||||||||||||||
| Non-U.S. Developed | 428 | 394 | 9 | 14 | 394 | 5 | |||||||||||||||
| Emerging Markets | 227 | 194 | 17 | 3 | 194 | 15 | |||||||||||||||
| Restorative Therapies Group | 1,949 | 1,809 | 8 | 17 | 1,809 | 7 | |||||||||||||||
| U.S. | 324 | 243 | 33 | — | 243 | 33 | |||||||||||||||
| Non-U.S. Developed | 203 | 167 | 22 | 7 | 167 | 17 | |||||||||||||||
| Emerging Markets | 45 | 39 | 15 | (2 | ) | 39 | 21 | ||||||||||||||
| Diabetes Group | 572 | 449 | 27 | 5 | 449 | 26 | |||||||||||||||
| U.S. | 3,864 | 4,042 | (4 | ) | — | 3,632 | 6 | ||||||||||||||
| Non-U.S. Developed | 2,406 | 2,313 | 4 | 83 | 2,202 | 5 | |||||||||||||||
| Emerging Markets | 1,114 | 1,035 | 8 | (5 | ) | 1,006 | 11 | ||||||||||||||
| TOTAL | $ | 7,384 | $ | 7,390 | — | % | $ | 78 | $ | 6,840 | 7 | % | |||||||||
(1) U.S. includes the United States and U.S. territories. Non-U.S. developed markets include Japan, Australia, New Zealand, Korea, Canada, and the countries of Western Europe. 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 previously defined.
(2) The currency impact to revenue measures the change in revenue between current and prior year periods using constant exchange rates.
(3) Revised revenue excludes revenue related to the divested Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency businesses for the first quarter of fiscal year 2018.
8
MEDTRONIC PLC
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
| Three months ended | |||||||
| (in millions, except per share data) | July 27, 2018 | July 28, 2017 | |||||
| Net sales | $ | 7,384 | $ | 7,390 | |||
| Costs and expenses: | |||||||
| Cost of products sold | 2,204 | 2,352 | |||||
| Research and development expense | 585 | 549 | |||||
| Selling, general, and administrative expense | 2,597 | 2,580 | |||||
| Amortization of intangible assets | 446 | 454 | |||||
| Restructuring charges, net | 62 | 8 | |||||
| Certain litigation charges | 103 | — | |||||
| Other operating expense, net | 151 | 65 | |||||
| Operating profit | 1,236 | 1,382 | |||||
| Other non-operating income, net | (186 | ) | (99 | ) | |||
| Interest expense | 242 | 286 | |||||
| Income before income taxes | 1,180 | 1,195 | |||||
| Income tax provision | 103 | 186 | |||||
| Net income | 1,077 | 1,009 | |||||
| Net (income) loss attributable to noncontrolling interests | (2 | ) | 7 | ||||
| Net income attributable to Medtronic | $ | 1,075 | $ | 1,016 | |||
| Basic earnings per share | $ | 0.79 | $ | 0.75 | |||
| Diluted earnings per share | $ | 0.79 | $ | 0.74 | |||
| Basic weighted average shares outstanding | 1,352.7 | 1,361.9 | |||||
| Diluted weighted average shares outstanding | 1,365.4 | 1,375.6 | |||||
| Cash dividends declared per ordinary share | $ | 0.50 | $ | 0.46 | |||
9
MEDTRONIC PLC
GAAP TO NON-GAAP RECONCILIATIONS
(Unaudited)
| Three months ended July 27, 2018 | ||||||||||||||||||||||||||||||||
| (in millions, except per share data) | Net Sales | Cost of Products Sold | Gross Margin Percent | Operating Profit | Operating Profit Percent | Income Before Income Taxes | Net Income attributable to Medtronic | Diluted EPS (1) | Effective Tax Rate | |||||||||||||||||||||||
| GAAP | $ | 7,384 | $ | 2,204 | 70.2 | % | $ | 1,236 | 16.7 | % | $ | 1,180 | $ | 1,075 | $ | 0.79 | 8.7 | % | ||||||||||||||
| Non-GAAP Adjustments: | ||||||||||||||||||||||||||||||||
| Restructuring and associated costs (2) | — | (15 | ) | 0.2 | 113 | 1.5 | 113 | 97 | 0.07 | 14.2 | ||||||||||||||||||||||
| Acquisition-related items | — | (2 | ) | — | 36 | 0.5 | 36 | 29 | 0.02 | 19.4 | ||||||||||||||||||||||
| Certain litigation charges | — | — | — | 103 | 1.4 | 103 | 91 | 0.07 | 11.7 | |||||||||||||||||||||||
| (Gain)/loss on minority investments (3) | — | — | — | — | — | (110 | ) | (103 | ) | (0.08 | ) | 6.4 | ||||||||||||||||||||
| Exit of business (4) | — | — | — | 80 | 1.1 | 80 | 62 | 0.05 | 22.5 | |||||||||||||||||||||||
| Amortization of intangible assets | — | — | — | 446 | 6.1 | 446 | 379 | 0.28 | 15.0 | |||||||||||||||||||||||
| Certain tax adjustments, net (5) | — | — | — | — | — | — | (29 | ) | (0.02 | ) | — | |||||||||||||||||||||
| Non-GAAP | $ | 7,384 | $ | 2,187 | 70.4 | % | $ | 2,014 | 27.3 | % | $ | 1,848 | $ | 1,601 | $ | 1.17 | 13.3 | % | ||||||||||||||
| Currency impact | (78 | ) | 27 | (0.7 | ) | (76 | ) | (0.8 | ) | (0.05 | ) | |||||||||||||||||||||
| Currency Adjusted | $ | 7,306 | $ | 2,214 | 69.7 | % | $ | 1,938 | 26.5 | % | $ | 1.12 | ||||||||||||||||||||
| Three months ended July 28, 2017 | ||||||||||||||||||||||||||||||||
| (in millions, except per share data) | Net Sales | Cost of Products Sold | Gross Margin Percent | Operating Profit | Operating Profit Percent | Income Before Income Taxes | Net Income attributable to Medtronic | Diluted EPS (1) | Effective Tax Rate | |||||||||||||||||||||||
| GAAP | $ | 7,390 | $ | 2,352 | 68.2 | % | $ | 1,382 | 18.7 | % | $ | 1,195 | $ | 1,016 | $ | 0.74 | 15.6 | % | ||||||||||||||
| Non-GAAP Adjustments: | ||||||||||||||||||||||||||||||||
| Restructuring charges, net | — | (5 | ) | 0.1 | 14 | 0.2 | 14 | 12 | 0.01 | 14.3 | ||||||||||||||||||||||
| Acquisition-related items | — | (9 | ) | 0.1 | 53 | 0.7 | 53 | 39 | 0.03 | 26.4 | ||||||||||||||||||||||
| Divestiture-related items (6) | — | — | — | 48 | 0.6 | 48 | 40 | 0.03 | 16.7 | |||||||||||||||||||||||
| Amortization of intangible assets | — | — | — | 454 | 6.2 | 454 | 374 | 0.27 | 17.6 | |||||||||||||||||||||||
| Certain tax adjustment (7) | — | — | — | — | — | — | 60 | 0.04 | — | |||||||||||||||||||||||
| Non-GAAP | $ | 7,390 | $ | 2,338 | 68.4 | % | $ | 1,951 | 26.4 | % | $ | 1,764 | $ | 1,541 | $ | 1.12 | 13.0 | % | ||||||||||||||
See description of non-GAAP financial measures at the end of the earnings press release.
| (1) | The data in this schedule has been intentionally rounded to the nearest $0.01 and, therefore, may not sum. |
| (2) | Associated costs include costs incurred as a direct result of the restructuring program, such as salaries for employees supporting the program and consulting expenses. |
| (3) | Effective in fiscal year 2019, we exclude unrealized and realized gains and losses on our minority investments as we do not believe that these components of income or expense have a direct correlation to our ongoing or future business operations. |
| (4) | The net charge relates to the exit of a business and is primarily comprised of intangible asset impairments. |
| (5) | The net charge relates to the impact of U.S. tax reform. |
| (6) | The transaction expenses incurred in connection with the divestiture of our Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency businesses. |
| (7) | The net benefit in certain tax adjustments relates to the resolution of various tax positions from prior years and other certain tax charges recorded in connection with the redemption of an intercompany minority interest. |
10
MEDTRONIC PLC
GAAP TO NON-GAAP RECONCILIATIONS
(Unaudited)
| Three months ended July 27, 2018 | ||||||||||||||||||||||||||||
| (in millions) | Net Sales | SG&A Expense | SG&A Expense as a % of Net Sales | R&D Expense | R&D Expense as a % of Net Sales | Other Operating Expense, net | Other Operating Expense, net as a % of Net Sales | Other Non-Operating Income, net | ||||||||||||||||||||
| GAAP | $ | 7,384 | $ | 2,597 | 35.2 | % | $ | 585 | 7.9 | % | $ | 151 | 2.0 | % | $ | (186 | ) | |||||||||||
| Non-GAAP Adjustments: | ||||||||||||||||||||||||||||
| Restructuring and associated costs (1) | — | (36 | ) | (0.5 | ) | — | — | — | — | — | ||||||||||||||||||
| Acquisition-related items | — | (23 | ) | (0.3 | ) | — | — | (11 | ) | (0.1 | ) | — | ||||||||||||||||
| (Gain)/loss on minority investments (2) | — | — | — | — | — | — | — | 110 | ||||||||||||||||||||
| Exit of business (3) | — | — | — | — | — | (80 | ) | (1.1 | ) | — | ||||||||||||||||||
| Non-GAAP | $ | 7,384 | $ | 2,538 | 34.4 | $ | 585 | 7.9 | $ | 60 | 0.8 | $ | (76 | ) | ||||||||||||||
| Currency impact | (78 | ) | (13 | ) | 0.2 | (3 | ) | 0.1 | (13 | ) | (0.2 | ) | — | |||||||||||||||
| Currency Adjusted | $ | 7,306 | $ | 2,525 | 34.6 | % | $ | 582 | 8.0 | % | $ | 47 | 0.6 | % | $ | (76 | ) | |||||||||||
See description of non-GAAP financial measures at the end of the earnings press release.
| (1) | Associated costs include costs incurred as a direct result of the restructuring program, such as salaries for employees supporting the program and consulting expenses. |
| (2) | Effective in fiscal year 2019, we exclude unrealized and realized gains and losses on our minority investments as we do not believe that these components of income or expense have a direct correlation to our ongoing or future business operations. |
| (3) | The net charge relates to the exit of a business and is primarily comprised of intangible asset impairments. |
11
MEDTRONIC PLC
GAAP TO NON-GAAP RECONCILIATIONS
(Unaudited)
| Three months ended | Fiscal year | Fiscal year | |||||||||
| (in millions) | July 27, 2018 | 2018 | 2017 | ||||||||
| Net cash provided by operating activities | $ | 1,702 | $ | 4,684 | $ | 6,880 | |||||
| Additions to property, plant, and equipment | (291 | ) | (1,068 | ) | (1,254 | ) | |||||
| Free Cash Flow (1) | $ | 1,411 | $ | 3,616 | $ | 5,626 | |||||
See description of non-GAAP financial measures at the end of the earnings press release.
| (1) | Free cash flow represents operating cash flows less property, plant, and equipment additions. |
12
MEDTRONIC PLC
CONSOLIDATED BALANCE SHEETS
(Unaudited)
| (in millions) | July 27, 2018 | April 27, 2018 | ||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 4,380 | $ | 3,669 | ||||
| Investments | 6,624 | 7,558 | ||||||
| Accounts receivable, less allowances of $184 and $193, respectively | 5,674 | 5,987 | ||||||
| Inventories, net | 3,681 | 3,579 | ||||||
| Other current assets | 2,101 | 2,187 | ||||||
| Total current assets | 22,460 | 22,980 | ||||||
| Property, plant, and equipment | 10,336 | 10,259 | ||||||
| Accumulated depreciation | (5,812 | ) | (5,655 | ) | ||||
| Property, plant, and equipment, net | 4,524 | 4,604 | ||||||
| Goodwill | 38,955 | 39,543 | ||||||
| Other intangible assets, net | 21,270 | 21,723 | ||||||
| Tax assets | 1,413 | 1,465 | ||||||
| Other assets | 1,099 | 1,078 | ||||||
| Total assets | $ | 89,721 | $ | 91,393 | ||||
| LIABILITIES AND EQUITY | ||||||||
| Current liabilities: | ||||||||
| Current debt obligations | $ | 1,545 | $ | 2,058 | ||||
| Accounts payable | 1,789 | 1,628 | ||||||
| Accrued compensation | 1,371 | 1,988 | ||||||
| Accrued income taxes | 784 | 979 | ||||||
| Other accrued expenses | 3,623 | 3,431 | ||||||
| Total current liabilities | 9,112 | 10,084 | ||||||
| Long-term debt | 23,678 | 23,699 | ||||||
| Accrued compensation and retirement benefits | 1,412 | 1,425 | ||||||
| Accrued income taxes | 3,042 | 3,051 | ||||||
| Deferred tax liabilities | 1,347 | 1,423 | ||||||
| Other liabilities | 801 | 889 | ||||||
| Total liabilities | 39,392 | 40,571 | ||||||
| Commitments and contingencies | ||||||||
| Shareholders’ equity: | ||||||||
| Ordinary shares— par value $0.0001, 2.6 billion shares authorized, 1,351,728,548 and 1,354,218,154 shares issued and outstanding, respectively | — | — | ||||||
| Additional paid-in capital | 27,817 | 28,127 | ||||||
| Retained earnings | 24,730 | 24,379 | ||||||
| Accumulated other comprehensive loss | (2,323 | ) | (1,786 | ) | ||||
| Total shareholders’ equity | 50,224 | 50,720 | ||||||
| Noncontrolling interests | 105 | 102 | ||||||
| Total equity | 50,329 | 50,822 | ||||||
| Total liabilities and equity | $ | 89,721 | $ | 91,393 | ||||
13
MEDTRONIC PLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Three months ended | ||||||||
| (in millions) | July 27, 2018 | July 28, 2017 | ||||||
| Operating Activities: | ||||||||
| Net income | $ | 1,077 | $ | 1,009 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 666 | 636 | ||||||
| Provision for doubtful accounts | 15 | 10 | ||||||
| Deferred income taxes | 3 | 58 | ||||||
| Stock-based compensation | 64 | 92 | ||||||
| Other, net | 3 | (5 | ) | |||||
| Change in operating assets and liabilities, net of acquisitions: | ||||||||
| Accounts receivable, net | 138 | (88 | ) | |||||
| Inventories, net | (180 | ) | (164 | ) | ||||
| Accounts payable and accrued liabilities | 85 | (392 | ) | |||||
| Other operating assets and liabilities | (169 | ) | (419 | ) | ||||
| Net cash provided by operating activities | 1,702 | 737 | ||||||
| Investing Activities: | ||||||||
| Acquisitions, net of cash acquired | (104 | ) | — | |||||
| Additions to property, plant, and equipment | (291 | ) | (278 | ) | ||||
| Purchases of investments | (982 | ) | (615 | ) | ||||
| Sales and maturities of investments | 2,020 | 971 | ||||||
| Other investing activities, net | — | 5 | ||||||
| Net cash provided by investing activities | 643 | 83 | ||||||
| Financing Activities: | ||||||||
| Change in current debt obligations, net | (505 | ) | 569 | |||||
| Issuance of long-term debt | — | 18 | ||||||
| Payments on long-term debt | (12 | ) | (8 | ) | ||||
| Dividends to shareholders | (677 | ) | (625 | ) | ||||
| Issuance of ordinary shares | 450 | 143 | ||||||
| Repurchase of ordinary shares | (824 | ) | (1,233 | ) | ||||
| Other financing activities | (5 | ) | (5 | ) | ||||
| Net cash used in financing activities | (1,573 | ) | (1,141 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents | (61 | ) | 45 | |||||
| Net change in cash and cash equivalents | 711 | (276 | ) | |||||
| Cash and cash equivalents at beginning of period | 3,669 | 4,967 | ||||||
| Cash and cash equivalents at end of period | $ | 4,380 | $ | 4,691 | ||||
| Supplemental Cash Flow Information | ||||||||
| Cash paid for: | ||||||||
| Income taxes | $ | 348 | $ | 417 | ||||
| Interest | 55 | 68 | ||||||
14