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Medtronic(MDT) - 2024 Q1 - Quarterly Report
MDTMedtronic(MDT)2023-08-30 16:00
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Financial Performance - Net income for the three months ended July 28, 2023, was 797million,comparedto797 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 616million,downfrom616 million, down from 1,255 million in the same period last year[7] - Net income for the three months ended July 28, 2023, was 797million,comparedto797 million, compared to 931 million in the same period last year[14] - Net cash provided by operating activities was 875million,downfrom875 million, down from 1,083 million in the prior year period[14] - Total revenue for the three months ended July 28, 2023, was 7,702million,upfrom7,702 million, up from 7,371 million in the same period last year[23] - Total revenue for the three months ended July 28, 2023 was 7.702billion,upfrom7.702 billion, up from 7.371 billion in the same period last year[23] - Net income attributable to ordinary shareholders was 791millionforthethreemonthsendedJuly28,2023,downfrom791 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 0.59forthethreemonthsendedJuly28,2023,comparedto0.59 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 7,702million,comparedto7,702 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 797million,downfrom797 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 616million,comparedto616 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 2,850millionfrom2,850 million from 2,701 million year-over-year[23] - Neuroscience segment revenue rose to 2,219millionfrom2,219 million from 2,115 million in the prior year period[23] - Medical Surgical segment revenue grew to 2,039millionfrom2,039 million from 1,933 million year-over-year[23] - Cardiovascular segment revenue increased to 2.850billionfrom2.850 billion from 2.701 billion year-over-year[23] - Neuroscience segment revenue grew to 2.219billionfrom2.219 billion from 2.115 billion in the prior year period[23] - Medical Surgical segment revenue rose to 2.039billionfrom2.039 billion from 1.933 billion year-over-year[23] - The company's Cardiovascular segment operating profit was 1,092millionforthethreemonthsendedJuly28,2023,upfrom1,092 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 929millionforthethreemonthsendedJuly28,2023,upfrom929 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 3,924million,upfrom3,924 million, up from 3,766 million in the prior year period[24] - Non-U.S. developed markets revenue increased to 2,463millionfrom2,463 million from 2,328 million year-over-year[24] - Emerging markets revenue rose to 1,314millionfrom1,314 million from 1,276 million in the same period last year[24] - U.S. revenue was 3.924billion,upfrom3.924 billion, up from 3.766 billion in the same period last year[24] - Non-U.S. developed markets revenue increased to 2.463billionfrom2.463 billion from 2.328 billion year-over-year[24] - Emerging markets revenue grew to 1.314billionfrom1.314 billion from 1.276 billion in the prior year period[24] Balance Sheet - Total assets as of July 28, 2023, were 90.776billion,slightlydownfrom90.776 billion, slightly down from 90.948 billion as of April 28, 2023[9] - Total liabilities as of July 28, 2023, were 39.410billion,upfrom39.410 billion, up from 39.283 billion as of April 28, 2023[9] - Total shareholders' equity as of July 28, 2023, was 51.178billion,downfrom51.178 billion, down from 51.483 billion as of April 28, 2023[9] - Total equity as of July 28, 2023, was 51.366billion,downfrom51.366 billion, down from 51.665 billion as of April 28, 2023[9] - Noncontrolling interests as of July 28, 2023, were 188million,upfrom188 million, up from 182 million as of April 28, 2023[9] - Total current assets as of July 28, 2023, were 21,869million,slightlyupfrom21,869 million, slightly up from 21,675 million as of April 28, 2023[9] - Retained earnings as of July 28, 2023, were 30,265million,downfrom30,265 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 0.69perordinaryshare,totaling0.69 per ordinary share, totaling 918 million[11] - Repurchase of ordinary shares during the three months ended July 28, 2023, amounted to 148million[11]−Stock−basedcompensationforthethreemonthsendedJuly28,2023,was148 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 0.69perordinaryshare,totaling0.69 per ordinary share, totaling 918 million[11] - Repurchase of ordinary shares during the three months ended July 28, 2023, amounted to 148million[11]−Stock−basedcompensationforthethreemonthsendedJuly28,2023,was148 million[11] - Stock-based compensation for the three months ended July 28, 2023, was 73 million[11] - Total stock-based compensation expense was 73millionforthethreemonthsendedJuly28,2023,upfrom73 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 1.2billion,including1.2 billion, including 1.1 billion in cash and 98millioninpreviouslyheldinvestments[29]−IntersectENTacquisitionresultedin98 million in previously held investments[29] - Intersect ENT acquisition resulted in 615 million of goodwill, 635millionoftechnology−basedintangibleassets,and635 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 123million,including123 million, including 66 million of goodwill and 57millionoftechnology−basedintangibleassets[32]−ThecompanysoldhalfofitsRenalCareSolutions(RCS)business,receiving57 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 195millioninnon−cashcontingentconsiderationreceivables[40]−ThecompanyacquiredIntersectENTforatotalconsiderationof195 million in non-cash contingent consideration receivables[40] - The company acquired Intersect ENT for a total consideration of 1.2 billion, including 1.1billionincashand1.1 billion in cash and 98 million in previously held investments, resulting in 615millionofgoodwilland615 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 123million,primarilyconsistingof123 million, primarily consisting of 66 million in goodwill and 57millionintechnology−basedintangibleassets[32]−ThecompanysoldhalfofitsRenalCareSolutions(RCS)business,receiving57 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 195millioninnon−cashcontingentconsiderationreceivables,withpotentialfuturepayoutsofupto195 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 91million,including91 million, including 54 million in restructuring charges[46] - The company incurred 1.8billioninpre−taxchargesfortheEnterpriseExcellencerestructuringprogramand1.8 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 67millioninthethreemonthsendedJuly29,2022,primarilyrelatedtogoodwill[40]−Thecompanyrecognized67 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 91millioninrestructuringandassociatedcostsforthethreemonthsendedJuly28,2023,primarilyrelatedtoemployeeterminationbenefitsandfacilityconsolidations[42][46]InvestmentsandSecurities−Investmentsinavailable−for−saledebtsecuritieswereremeasuredonarecurringbasis,withdetailsprovidedintheconsolidatedbalancesheetatJuly28,2023[50]−Totalavailable−for−saledebtsecuritiesincreasedto91 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 6,449millionasofApril28,2023[51]−Corporatedebtsecuritiesaccountedfor6,449 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 171million[51]−U.S.governmentandagencysecuritiestotaled171 million[51] - U.S. government and agency securities totaled 845 million as of July 28, 2023, with unrealized losses of 52million[51]−Mortgage−backedsecuritiesamountedto52 million[51] - Mortgage-backed securities amounted to 518 million as of July 28, 2023, with unrealized losses of 56million[51]−Interestincomefromavailable−for−saledebtsecuritieswas56 million[51] - Interest income from available-for-sale debt securities was 111 million for the three months ended July 28, 2023, compared to 55millionforthesameperiodin2022[55]−Totalequityandotherinvestmentsdecreasedto55 million for the same period in 2022[55] - Total equity and other investments decreased to 1,569 million as of July 28, 2023, from 1,607millionasofApril28,2023[58]−Netunrealizedlossesonequitysecuritiesandotherinvestmentswere1,607 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 1,747millionforthethreemonthsendedJuly28,2023,comparedto1,747 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 165millionasofJuly28,2023[53]−Totalavailable−for−saledebtsecuritiesasofJuly28,2023,amountedto165 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 326million[51]−Corporatedebtsecuritieshadunrealizedlossesof326 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 1,747million,withgrossrealizedlossesof1,747 million, with gross realized losses of 12 million[54] - Interest income for the three months ended July 28, 2023, was 111million,comparedto111 million, compared to 55 million for the same period in 2022[55] - Total equity and other investments as of July 28, 2023, were 1,569million,with1,569 million, with 64 million in net unrealized losses during the quarter[58] Debt and Financing - Commercial paper outstanding as of July 28, 2023 was 500million,withaweightedaverageinterestrateof5.262500 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 24.463billion,comparedto24.463 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 3.4billioninnetproceeds[64]−InMarch2023,thecompanyissued3.4 billion in net proceeds[64] - In March 2023, the company issued 2.0 billion in USD-denominated Senior Notes, resulting in 2.0billioninnetproceeds[65]−Thecompanyborrowed¥297billion(approximately2.0 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 21.4billionasofJuly28,2023,comparedtoaprincipalvalueof21.4 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 519million,comparedto519 million, compared to 20 million as of April 28, 2023[63] - Total long-term debt as of July 28, 2023 was 24.463billion,comparedto24.463 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 3.4billioninnetproceeds[64]−InMarch2023,thecompanyissued3.4 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 2.0billioninnetproceeds[65]−InMay2022,thecompanyenteredintoa¥300billiontermloanagreement,borrowing¥297billion(approximately2.0 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 21.4billionasofJuly28,2023,comparedtoaprincipalvalueof21.4 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 63millioninafter−taxunrealizedgainsfromcashflowhedginginstrumentsasofJuly28,2023,with63 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 49millioninafter−taxgainsfromnetinvestmenthedgesinthethreemonthsendedJuly28,2023[71]−Thecompanyhad49 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 9.1billionasofApril28,2023[76]−Thecompanyhad9.1 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 17.6billionasofApril28,2023[76]−Currencyexchangeratecontractsresultedinagainof17.6 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 342millioninJuly2022[78]−Totalderivativesdesignatedashedginginstrumentshadafairvalueof342 million in July 2022[78] - Total derivatives designated as hedging instruments had a fair value of 353 million in July 2023, slightly up from 351millioninApril2023[83]−Netinvestmenthedgesforforeigncurrency−denominateddebtshowedagainof351 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 945millioninJuly2022[78]−Totalreturnswapsresultedinalossof945 million in July 2022[78] - Total return swaps resulted in a loss of 19 million in July 2023, compared to a loss of 1millioninJuly2022[81]−Derivativeassetsmeasuredatfairvalueonarecurringbasistotaled1 million in July 2022[81] - Derivative assets measured at fair value on a recurring basis totaled 421 million in July 2023, up from 368millioninApril2023[84]IntangibleAssetsandGoodwill−GoodwillfortheCardiovascularsegmentincreasedto368 million in April 2023[84] Intangible Assets and Goodwill - Goodwill for the Cardiovascular segment increased to 7,880 million in July 2023 from 7,873millioninApril2023,witha7,873 million in April 2023, with a 13 million increase due to currency translation[91] - The Patient Monitoring & Respiratory Interventions reporting unit had 3.0billionofgoodwillallocatedasofJuly28,2023[93]−Intangibleassetstotaled3.0 billion of goodwill allocated as of July 28, 2023[93] - Intangible assets totaled 29,229 million in July 2023, with accumulated amortization of 15,027million[97]−IntangibleassetamortizationexpenseforthethreemonthsendedJuly28,2023was15,027 million[97] - Intangible asset amortization expense for the three months ended July 28, 2023 was 429 million, compared to 423millioninthesameperiodlastyear[99]−Estimatedaggregateamortizationexpenseforfiscalyear2024is423 million in the same period last year[99] - Estimated aggregate amortization expense for fiscal year 2024 is 1.256 billion, increasing to 1.654billionin2025[100]Taxes−Thecompanyrecordeda1.654 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 2.8billionatJuly28,2023,upfrom2.8 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 40millioninlitigationchargesduringthethreemonthsendedJuly28,2023,comparedtonochargesinthesameperiodin2022[119]−Accruedlitigationwasapproximately40 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 106millionagainstthecompanyinFebruary2023[122]−Thecompanyhassettledapproximately15,900outof16,200claimsrelatedtopelvicmeshlitigation,with106 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 425million,upfrom425 million, up from 405 million at April 28, 2023[25] - The fair value of contingent consideration liabilities at July 28, 2023, was 206million,with206 million, with 33 million recorded in other accrued expenses and 173millioninotherliabilities[35]−ThefairvalueofcontingentconsiderationreceivablerelatedtotheRCSsalewas173 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 195millionatApril28,2023[39]−Inventorybalancesincreasedto195 million at April 28, 2023[39] - Inventory balances increased to 5,668 million in July 2023 from 5,293millioninApril2023,withfinishedgoodsaccountingfor5,293 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,