Medtronic(MDT) - 2024 Q1 - Quarterly Report

Financial Performance - Net income for the three months ended July 28, 2023, was $797 million, compared to $931 million in the same period last year[7] - Comprehensive income attributable to Medtronic for the three months ended July 28, 2023, was $616 million, down from $1,255 million in the same period last year[7] - Net income for the three months ended July 28, 2023, was $797 million, compared to $931 million in the same period last year[14] - Net cash provided by operating activities was $875 million, down from $1,083 million in the prior year period[14] - Total revenue for the three months ended July 28, 2023, was $7,702 million, up from $7,371 million in the same period last year[23] - Total revenue for the three months ended July 28, 2023 was $7.702 billion, up from $7.371 billion in the same period last year[23] - Net income attributable to ordinary shareholders was $791 million for the three months ended July 28, 2023, down from $929 million in the same period last year[107] - Basic and diluted earnings per share were $0.59 for the three months ended July 28, 2023, compared to $0.70 in the same period last year[107] - Total revenue for the three months ended July 28, 2023, was $7,702 million, compared to $7,371 million in the same period last year, representing a 4.5% increase[139] - Net income for the three months ended July 28, 2023, was $797 million, down from $931 million in the same period last year, a decrease of 14.4%[7] - Comprehensive income attributable to Medtronic for the three months ended July 28, 2023, was $616 million, compared to $1,255 million in the same period last year, a decrease of 50.9%[7] Segment Performance - Cardiovascular segment revenue increased to $2,850 million from $2,701 million year-over-year[23] - Neuroscience segment revenue rose to $2,219 million from $2,115 million in the prior year period[23] - Medical Surgical segment revenue grew to $2,039 million from $1,933 million year-over-year[23] - Cardiovascular segment revenue increased to $2.850 billion from $2.701 billion year-over-year[23] - Neuroscience segment revenue grew to $2.219 billion from $2.115 billion in the prior year period[23] - Medical Surgical segment revenue rose to $2.039 billion from $1.933 billion year-over-year[23] - The company's Cardiovascular segment operating profit was $1,092 million for the three months ended July 28, 2023, up from $979 million in the same period in 2022[137] - The company's Neuroscience segment operating profit was $929 million for the three months ended July 28, 2023, up from $841 million in the same period in 2022[137] Geographic Revenue - U.S. market revenue was $3,924 million, up from $3,766 million in the prior year period[24] - Non-U.S. developed markets revenue increased to $2,463 million from $2,328 million year-over-year[24] - Emerging markets revenue rose to $1,314 million from $1,276 million in the same period last year[24] - U.S. revenue was $3.924 billion, up from $3.766 billion in the same period last year[24] - Non-U.S. developed markets revenue increased to $2.463 billion from $2.328 billion year-over-year[24] - Emerging markets revenue grew to $1.314 billion from $1.276 billion in the prior year period[24] Balance Sheet - Total assets as of July 28, 2023, were $90.776 billion, slightly down from $90.948 billion as of April 28, 2023[9] - Total liabilities as of July 28, 2023, were $39.410 billion, up from $39.283 billion as of April 28, 2023[9] - Total shareholders' equity as of July 28, 2023, was $51.178 billion, down from $51.483 billion as of April 28, 2023[9] - Total equity as of July 28, 2023, was $51.366 billion, down from $51.665 billion as of April 28, 2023[9] - Noncontrolling interests as of July 28, 2023, were $188 million, up from $182 million as of April 28, 2023[9] - Total current assets as of July 28, 2023, were $21,869 million, slightly up from $21,675 million as of April 28, 2023[9] - Retained earnings as of July 28, 2023, were $30,265 million, down from $30,392 million as of April 28, 2023[9] Shareholder Returns - Dividends to shareholders for the three months ended July 28, 2023, were $0.69 per ordinary share, totaling $918 million[11] - Repurchase of ordinary shares during the three months ended July 28, 2023, amounted to $148 million[11] - Stock-based compensation for the three months ended July 28, 2023, was $73 million[11] - Dividends to shareholders for the three months ended July 28, 2023, were $0.69 per ordinary share, totaling $918 million[11] - Repurchase of ordinary shares during the three months ended July 28, 2023, amounted to $148 million[11] - Stock-based compensation for the three months ended July 28, 2023, was $73 million[11] - Total stock-based compensation expense was $73 million for the three months ended July 28, 2023, up from $62 million in the same period last year[109] Acquisitions and Divestitures - The company acquired Intersect ENT for a total consideration of $1.2 billion, including $1.1 billion in cash and $98 million in previously held investments[29] - Intersect ENT acquisition resulted in $615 million of goodwill, $635 million of technology-based intangible assets, and $35 million of customer-related intangible assets[29] - Other acquisitions during the three months ended July 29, 2022, had a fair value of net assets acquired of $123 million, including $66 million of goodwill and $57 million of technology-based intangible assets[32] - The company sold half of its Renal Care Solutions (RCS) business, receiving $45 million in cash consideration and recording $195 million in non-cash contingent consideration receivables[40] - The company acquired Intersect ENT for a total consideration of $1.2 billion, including $1.1 billion in cash and $98 million in previously held investments, resulting in $615 million of goodwill and $683 million of other intangible assets[29] - The fair value of net assets acquired from other acquisitions (excluding Intersect ENT) during the three months ended July 29, 2022, was $123 million, primarily consisting of $66 million in goodwill and $57 million in technology-based intangible assets[32] - The company sold half of its Renal Care Solutions (RCS) business, receiving $45 million in cash consideration and recording $195 million in non-cash contingent consideration receivables, with potential future payouts of up to $300 million based on milestones[38][40] Restructuring and Impairment - Restructuring and associated costs for the three months ended July 28, 2023, totaled $91 million, including $54 million in restructuring charges[46] - The company incurred $1.8 billion in pre-tax charges for the Enterprise Excellence restructuring program and $0.5 billion for the Simplification program[42] - The company recorded a non-cash pre-tax impairment of $67 million in the three months ended July 29, 2022, primarily related to goodwill[40] - The company recognized $61 million of goodwill impairment during the three months ended July 29, 2022, related to the RCS business[95] - The company incurred $91 million in restructuring and associated costs for the three months ended July 28, 2023, primarily related to employee termination benefits and facility consolidations[42][46] Investments and Securities - Investments in available-for-sale debt securities were remeasured on a recurring basis, with details provided in the consolidated balance sheet at July 28, 2023[50] - Total available-for-sale debt securities increased to $6,570 million as of July 28, 2023, up from $6,449 million as of April 28, 2023[51] - Corporate debt securities accounted for $4,053 million of the total available-for-sale debt securities as of July 28, 2023, with unrealized losses of $171 million[51] - U.S. government and agency securities totaled $845 million as of July 28, 2023, with unrealized losses of $52 million[51] - Mortgage-backed securities amounted to $518 million as of July 28, 2023, with unrealized losses of $56 million[51] - Interest income from available-for-sale debt securities was $111 million for the three months ended July 28, 2023, compared to $55 million for the same period in 2022[55] - Total equity and other investments decreased to $1,569 million as of July 28, 2023, from $1,607 million as of April 28, 2023[58] - Net unrealized losses on equity securities and other investments were $64 million for the three months ended July 28, 2023[58] - Proceeds from sales of available-for-sale debt securities were $1,747 million for the three months ended July 28, 2023, compared to $1,864 million for the same period in 2022[54] - Total unrealized losses on corporate debt securities held for more than 12 months were $165 million as of July 28, 2023[53] - Total available-for-sale debt securities as of July 28, 2023, amounted to $6,570 million, with unrealized losses of $326 million[51] - Corporate debt securities had unrealized losses of $165 million for positions held more than 12 months as of July 28, 2023[53] - Proceeds from sales of available-for-sale debt securities for the three months ended July 28, 2023, were $1,747 million, with gross realized losses of $12 million[54] - Interest income for the three months ended July 28, 2023, was $111 million, compared to $55 million for the same period in 2022[55] - Total equity and other investments as of July 28, 2023, were $1,569 million, with $64 million in net unrealized losses during the quarter[58] Debt and Financing - Commercial paper outstanding as of July 28, 2023 was $500 million, with a weighted average interest rate of 5.262%[60] - The company has a $3.5 billion five-year unsecured revolving credit facility, with no amounts outstanding as of July 28, 2023 and April 28, 2023[61] - Total long-term debt as of July 28, 2023 is $24.463 billion, compared to $24.344 billion as of April 28, 2023[63] - In September 2022, the company issued €3.5 billion in Euro-denominated Senior Notes, resulting in $3.4 billion in net proceeds[64] - In March 2023, the company issued $2.0 billion in USD-denominated Senior Notes, resulting in $2.0 billion in net proceeds[65] - The company borrowed ¥297 billion (approximately $2.3 billion) under a term loan agreement in May and June 2022, which was fully repaid by the end of fiscal year 2023[66] - The estimated fair value of the company's Senior Notes was $21.4 billion as of July 28, 2023, compared to a principal value of $24.6 billion[67] - Current debt obligations as of July 28, 2023 were $519 million, compared to $20 million as of April 28, 2023[63] - Total long-term debt as of July 28, 2023 was $24.463 billion, compared to $24.344 billion as of April 28, 2023[63] - In September 2022, the company issued €3.5 billion of Euro-denominated Senior Notes, with maturities ranging from 2026 to 2035, resulting in $3.4 billion in net proceeds[64] - In March 2023, the company issued $2.0 billion of USD-denominated Senior Notes, with maturities ranging from 2028 to 2033, resulting in $2.0 billion in net proceeds[65] - In May 2022, the company entered into a ¥300 billion term loan agreement, borrowing ¥297 billion (approximately $2.3 billion) to fund early redemptions of senior notes[66] - The estimated fair value of the company's Senior Notes was $21.4 billion as of July 28, 2023, compared to a principal value of $24.6 billion[67] - The company uses derivative instruments and foreign currency denominated debt to manage currency exchange rate and interest rate risks[68] Derivatives and Hedging - The company had $63 million in after-tax unrealized gains from cash flow hedging instruments as of July 28, 2023, with $122 million expected to be recognized in the next 12 months[70] - The company recognized $49 million in after-tax gains from net investment hedges in the three months ended July 28, 2023[71] - The company had $10.0 billion in currency exchange rate contracts designated as cash flow hedges as of July 28, 2023, compared to $9.1 billion as of April 28, 2023[76] - The company had $17.7 billion in foreign currency-denominated debt designated as net investment hedges as of July 28, 2023, compared to $17.6 billion as of April 28, 2023[76] - Currency exchange rate contracts resulted in a gain of $4 million in July 2023, compared to a loss of $342 million in July 2022[78] - Total derivatives designated as hedging instruments had a fair value of $353 million in July 2023, slightly up from $351 million in April 2023[83] - Net investment hedges for foreign currency-denominated debt showed a gain of $114 million in July 2023, compared to a loss of $945 million in July 2022[78] - Total return swaps resulted in a loss of $19 million in July 2023, compared to a loss of $1 million in July 2022[81] - Derivative assets measured at fair value on a recurring basis totaled $421 million in July 2023, up from $368 million in April 2023[84] Intangible Assets and Goodwill - Goodwill for the Cardiovascular segment increased to $7,880 million in July 2023 from $7,873 million in April 2023, with a $13 million increase due to currency translation[91] - The Patient Monitoring & Respiratory Interventions reporting unit had $3.0 billion of goodwill allocated as of July 28, 2023[93] - Intangible assets totaled $29,229 million in July 2023, with accumulated amortization of $15,027 million[97] - Intangible asset amortization expense for the three months ended July 28, 2023 was $429 million, compared to $423 million in the same period last year[99] - Estimated aggregate amortization expense for fiscal year 2024 is $1.256 billion, increasing to $1.654 billion in 2025[100] Taxes - The company recorded a $187 million income tax charge due to a court decision regarding intellectual property transfer[101] - The effective tax rate for the three months ended July 28, 2023 was 33.4%, up from 10.7% in the same period last year[101] - Gross unrecognized tax benefits were $2.8 billion at July 28, 2023, up from $2.7 billion at April 28, 2023[102] - The company is evaluating whether to appeal a U.S. Tax Court opinion related to income allocation between Medtronic, Inc. and its Puerto Rico subsidiary for fiscal years 2005 and 2006[129] Litigation and Contingencies - The company recognized $40 million in litigation charges during the three months ended July 28, 2023, compared to no charges in the same period in 2022[119] - Accrued litigation was approximately $0.3 billion as of July 28, 2023 and April 28, 2023[119] - The company is involved in patent litigation with Colibri Heart Valve LLC, with a jury verdict of approximately $106 million against the company in February 2023[122] - The company has settled approximately 15,900 out of 16,200 claims related to pelvic mesh litigation, with $121 million received from Bard in fiscal year 2016[123] - The company is named in lawsuits filed by approximately 7,450 individual plaintiffs related to hernia mesh products, with 6,400 cases consolidated in Massachusetts state court[124] - 63 individual plaintiffs have filed lawsuits related to defective insulin pump retainer rings, with potential for thousands of additional claims[125] - The company is involved in environmental remediation projects, including a settlement related to mercury contamination in the Penobscot River and Bay[127] Other Financial Metrics - Deferred revenue at July 28, 2023, was $425 million, up from $405 million at April 28, 2023[25] - The fair value of contingent consideration liabilities at July 28, 2023, was $206 million, with $33 million recorded in other accrued expenses and $173 million in other liabilities[35] - The fair value of contingent consideration receivable related to the RCS sale was $152 million at July 28, 2023, down from $195 million at April 28, 2023[39] - Inventory balances increased to $5,668 million in July 2023 from $5,293 million in April 2023, with finished goods accounting for $3,723 million[89] - Net periodic benefit cost for U.S. defined benefit pension plans was a credit of $6 million for the three months ended July 28,