Form 8-K Medtronic plc For: May 25
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E-mailUNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________
FORM 8-K
_____________________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 25, 2017
_____________________________
Medtronic Public Limited Company
(Exact name of Registrant as Specified in its Charter)
_____________________________
Ireland | 1-36820 | 98-1183488 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||
20 On Hatch, Lower Hatch Street Dublin 2, Ireland |
(Address of principal executive offices) |
(Registrant’s telephone number, including area code): +353 1 438-1700
_____________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Item 2.02. | Results of Operations and Financial Condition |
On May 25, 2017, Medtronic plc, a public limited company organized under the laws of Ireland, issued a press release announcing its fourth quarter and fiscal year 2017 financial results and posted a related earnings presentation to the Investors section of its website. A copy of the press release and related earnings presentation are furnished as Exhibits 99.1 and 99.2 to this report.
Item 9.01. | Exhibits. |
(d) List of Exhibits
Exhibit Number | Description | |
99.1 | Press release of Medtronic plc, dated May 25, 2017 | |
99.2 | Earnings presentation, dated May 25, 2017 | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
MEDTRONIC PUBLIC LIMITED COMPANY | ||||||
By | /s/ Karen L. Parkhill | |||||
Date: May 25, 2017 | Karen L. Parkhill | |||||
Executive Vice President and Chief Financial Officer | ||||||
EXHIBIT INDEX
Exhibit Number | Description | |
99.1 | Press release of Medtronic plc, dated May 25, 2017 | |
99.2 | Earnings presentation, dated May 25, 2017 | |
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 FOURTH QUARTER AND
FISCAL YEAR 2017 FINANCIAL RESULTS
▪ | Q4 Revenue of $7.9 Billion Grew 5% as Reported; 5% at Constant Currency |
▪ | Q4 GAAP Diluted EPS of $0.84; Q4 Non-GAAP Diluted EPS of $1.33 |
▪ | FY17 Revenue of $29.7 Billion Grew 3% as Reported; Approximately 5% on a Constant Currency, Constant Week Basis |
▪ | FY17 GAAP Diluted EPS of $2.89; FY17 Non-GAAP Diluted EPS of $4.60 |
▪ | FY17 Cash Flow from Operations of $6.9 Billion; FY17 Free Cash Flow of $5.6 Billion |
DUBLIN - May 25, 2017 - Medtronic plc (NYSE: MDT) today announced financial results for its fourth quarter and fiscal year 2017, which ended April 28, 2017.
The company reported fourth quarter worldwide revenue of $7.916 billion, compared to the $7.567 billion reported in the fourth quarter of fiscal year 2016, an increase of 5 percent on both a reported and constant currency basis. Foreign currency translation had a negative $37 million impact on fourth quarter revenue. As reported, fourth quarter GAAP net income and diluted earnings per share (EPS) were $1.163 billion and $0.84, respectively. As detailed in the financial schedules included through the link at the end of this release, fourth quarter non-GAAP net income and diluted earnings per share (EPS) were $1.836 billion and $1.33, an increase of 2 percent and 5 percent, respectively.
Fourth quarter U.S. revenue of $4.403 billion represented 56 percent of company revenue and increased 4 percent. Non-U.S. developed market revenue of $2.452 billion represented 31 percent of company revenue and increased 2 percent, or 4 percent on a constant currency basis. Emerging market revenue of $1.061 billion represented 13 percent of company revenue and increased 11 percent, or 10 percent on a constant currency basis.
Medtronic’s fiscal year 2017 revenue of $29.710 billion increased 3 percent, or approximately 5 percent on a constant currency, constant week basis. Foreign currency translation had a negative $34 million impact on fiscal year 2017 revenue. The first quarter of fiscal year 2017 contained 13 weeks, one less week than the first quarter of fiscal year 2016. The extra week occurs every six years as a result of the company’s 52-53 week fiscal year calendar. While it is difficult to calculate an exact impact from the extra week, the company estimates that it resulted in an approximate $450 million benefit to revenue and $0.08 to $0.10 benefit to non-GAAP diluted earnings per share (EPS) in the first quarter of the prior fiscal year. As reported, fiscal year 2017 net earnings were $4.028 billion or $2.89 per diluted share. As detailed in the link at the end of this release, fiscal year 2017 non-GAAP earnings and diluted EPS were $6.395 billion and $4.60, representing increases of approximately 8 to 9 percent and approximately 11 to 12 percent, respectively, on a constant currency, constant week basis.
“Our fourth quarter results were a strong finish to the fiscal year, with balanced, diversified growth across our groups and regions,” said Omar Ishrak, Medtronic chairman and chief executive officer. “Fiscal year 2017 was a solid year overall for Medtronic. We delivered record revenue, made progress in each of our growth strategies, executed on our Covidien cost synergy
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commitments, generated strong free cash flow growth, and deployed our capital in line with our stated priorities, balancing the return of cash to our shareholders together with disciplined reinvestment in our businesses.”
Cardiac and Vascular Group
The Cardiac and Vascular Group (CVG) includes the Cardiac Rhythm & Heart Failure (CRHF), Coronary & Structural Heart (CSH), and Aortic & Peripheral Vascular (APV) divisions. CVG worldwide fourth quarter revenue of $2.848 billion increased 4 percent, or 5 percent on a constant currency basis. CVG revenue performance was driven by strong, balanced growth across all three divisions.
▪ | CRHF fourth quarter revenue of $1.544 billion increased 3 percent, or 4 percent on a constant currency basis, with mid-single digit growth on a constant currency basis in Arrhythmia Management driven by the continued global adoption of the Reveal LINQ® insertable cardiac monitor, as well as high-teens growth in AF Solutions on a constant currency basis. Heart Failure growth was driven in part by the company’s first quarter acquisition of HeartWare International, Inc. |
▪ | CSH fourth quarter revenue of $847 million increased 4 percent on both a reported and constant currency basis, led by mid-thirties growth on a constant currency basis in transcatheter aortic valves as a result of strong customer adoption of the CoreValve® Evolut® R platform, including the 34mm launch in the U.S. and Europe. |
▪ | APV fourth quarter revenue of $457 million increased 5 percent, or 6 percent on a constant currency basis, driven by mid-single digit growth in Aortic and high-single digit growth in Peripheral, both on a constant currency basis. Aortic growth was led by the continued strength of the Endurant® IIs aortic stent graft and solid adoption of the Heli-FX® EndoAnchor® System. Peripheral was driven by low-twenties growth of the clinically differentiated IN.PACT® Admiral® drug-coated balloon and high-single digit growth in atherectomy. |
Minimally Invasive Therapies Group
The Minimally Invasive Therapies Group (MITG) includes the Surgical Solutions and the Patient Monitoring & Recovery (PMR) divisions. MITG worldwide fourth quarter revenue of $2.605 billion increased 6 percent on both a reported and constant currency basis. MITG had a strong quarter with high-single digit growth in Surgical Solutions and mid-single digit growth in PMR.
▪ | Surgical Solutions fourth quarter revenue of $1.459 billion increased 7 percent, or 8 percent on a constant currency basis, driven by new products in Advanced Stapling and Advanced Energy, including endo stapling specialty reloads, the Valleylab™ FT10 energy platform, and LigaSure™ vessel sealing instruments. The division also benefitted from the second quarter acquisition of Smith & Nephew’s gynecology business. |
▪ | PMR fourth quarter revenue of $1.146 billion increased 4 percent on both a reported and constant currency basis, with the above market growth driven by the re-commercialization of the Puritan Bennett™ 980 ventilator and the Capnostream™ 20 capnography monitor, growth in capnography disposables, as well as strength in Nellcor™ pulse oximetry products. |
Restorative Therapies Group
The Restorative Therapies Group (RTG) includes the Spine, Brain Therapies, Specialty Therapies, and Pain Therapies divisions. RTG worldwide fourth quarter revenue of $1.951 billion increased 4 percent, or 5 percent on a constant currency basis. Group results were driven by high-single digit growth in Brain Therapies and Specialty Therapies and low-single digit growth in Spine, offsetting declines in Pain Therapies.
▪ | Spine fourth quarter revenue of $676 million increased 3 percent on both a reported and constant currency basis, demonstrating sustained improvement. Bone Morphogenetic Protein (BMP) grew in the low-double digits on a constant currency basis. Core Spine grew in the low-single digits on a constant currency basis, driven in part by the focus on “Speed-to-Scale” new product launches and strength in Other Biologics. |
▪ | Brain Therapies revenue of $585 million increased 9 percent on both a reported and constant currency basis, with strength in Neurovascular and Neurosurgery. Neurovascular grew in the mid-teens on a constant currency basis, driven by strength in sales of the Axium™ Prime Extra Soft detachable coils and Solitaire™ revascularization devices. Neurosurgery grew in the low-double digits on a constant currency basis, driven by strong sales of the O-arm® O2 surgical imaging system. Brain Modulation grew in the low-single digits on a constant currency basis on sales of the company’s market-leading MR conditional Activa® DBS portfolio. |
▪ | Specialty Therapies revenue of $396 million increased 7 percent on both a reported and constant currency basis. All three businesses contributed to growth, with Advanced Energy growing in the low-double digits, Pelvic Health growing in the high-single digits, and ENT growing in the mid-single digits, all on a constant currency basis. |
▪ | Pain Therapies revenue of $294 million decreased 2 percent on both a reported and constant currency basis. Pain Therapies had mid-single digit constant currency declines in Spinal Cord Stimulation, as the business faced competitive pressures, partially offset by low-single digit constant currency growth in Drug Pumps and Interventional. |
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Diabetes Group
The Diabetes Group includes the Intensive Insulin Management (IIM), Diabetes Service & Solutions (DSS), and Non-Intensive Diabetes Therapies (NDT) divisions. Diabetes Group worldwide fourth quarter revenue of $512 million increased 3 percent, or 4 percent on a constant currency basis.
▪ | IIM grew in the high-single digits on a constant currency basis, with low-double digit growth in the U.S. driven by strong interest in the MiniMed® 630G system and the Priority Access Program for the MiniMed® 670G system, the world’s first hybrid closed loop insulin delivery system. In addition, the division delivered high-single digit constant currency growth in international markets due to strong growth of continuous glucose monitor (CGM) sensors and the continued strength of the MiniMed® 640G system. |
▪ | NDT declined in the low-single digits on a constant currency basis. The division grew in the mid-single digits in the U.S. on sales to primary care physicians of the iPro®2 Professional CGM technology with Pattern Snapshot. |
▪ | DSS declined in the low-single digits on a constant currency basis. While results were flat on a constant currency basis in international markets, the business did see strong adoption of the Guardian® Connect mobile CGM system. In the U.S., the division had mid-single digit declines due to more stringent payer requirements and lower order sizes. |
Guidance
The company today provided its initial fiscal year 2018 revenue and EPS growth guidance.
In fiscal year 2018, the company expects constant currency revenue growth to be in the range of 4 to 5 percent. While the impact of foreign currency is fluid, if current exchange rates remain similar for the remainder of the fiscal year, the company’s revenue would be positively affected by approximately $75 million to $175 million for the fiscal year, including an approximate negative $10 to negative $60 million impact in the first fiscal quarter.
In fiscal year 2018, the company expects diluted non-GAAP EPS growth to be in the range of 9 to 10 percent on a constant currency basis. Assuming current exchange rates remain similar for the rest of the year, the company’s non-GAAP EPS would be negatively affected by approximately $0.05 to $0.10, including an approximate $0.03 to $0.05 impact in the first fiscal quarter.
The company reiterated its long-term expectation of mid-single digit revenue growth and double digit EPS growth, both on a constant currency basis. In addition, the company noted that the fiscal year 2018 outlook and guidance does not include the impact of the previously announced divestiture of a portion of its Patient Monitoring and Recovery division to Cardinal Health, which the company continues to expect to close in the second fiscal quarter. The company intends to update its guidance upon close of the transaction.
“We are creating distinct competitive advantages and capitalizing on the long-term trends in healthcare: namely, the desire to improve clinical outcomes; the growing demand for expanded access to care; and the optimization of cost and efficiency within healthcare systems. These trends, along with an aging population in most countries, produce secular growth tailwinds that we believe represent sustainable, long-term opportunities for Medtronic,” said Ishrak. “As we look forward, we have a number of catalysts that make us optimistic about our ability to deliver on our commitments and expand patient access around the world to our products and services. Our leadership team and employees continue to focus on driving excellence and impact in all that we do, and we look forward to the fiscal year ahead.”
Webcast Information
Medtronic will host a webcast today, May 25, 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 fourth quarter financial schedules and non-GAAP reconciliations, click here. To view the fourth 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 88,000 people worldwide, serving physicians, hospitals and patients in approximately 160 countries. The company is focused on collaborating with stakeholders around the world to take healthcare Further, Together.
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FORWARD LOOKING STATEMENTS
This press release contains forward-looking statements related to product and service growth drivers, market position and opportunities, the transforming healthcare environment, strategies for and sustainability of growth, benefits from collaborations and acquisitions, availability of and plans for cash, the creation of shareholder value and shareholder returns, product launches, and Medtronic’s future results of operations, which are subject to risks and uncertainties, such as competitive factors, difficulties and delays inherent in the development, manufacturing, marketing and sale of medical products, challenges with respect to third-party collaborations and integration of acquired businesses, effectiveness of growth and restructuring strategies, challenges relating to our worldwide operations, challenges or unforeseen risks in implementing our growth strategies, government regulation, fluctuations in foreign currency exchange rates, future revenue and earnings growth, and general economic conditions and other risks and uncertainties 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 free cash flow figures (defined as operating cash flows less property, plant and equipment additions), revenue and growth rates on a constant currency and constant week basis, net income, and diluted EPS, all of which are considered “non-GAAP” financial measures under applicable SEC rules and regulations. Unless otherwise noted, all revenue amounts given in this press release are stated in accordance with U.S. generally accepted accounting principles (GAAP). References to quarterly or annual figures increasing or decreasing are in comparison to the fourth quarter of fiscal year 2016 and full fiscal year 2016, respectively.
Medtronic management believes that in order to properly understand its short-term and long-term financial trends, including period over period comparisons of the company’s operations, investors may find it useful to 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 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 and EPS projections exclude the impact of foreign currency exchange 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, such as amortization of intangible assets and acquisition-related, certain tax and litigation, and restructuring charges or gains. 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.
-end-
View FY17 Fourth Quarter Financial Schedules & Non-GAAP Reconciliations
View FY17 Fourth Quarter Earnings Presentation
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MEDTRONIC PLC
WORLD WIDE REVENUE
(Unaudited)
FOURTH QUARTER AS REPORTED | FOURTH QUARTER CONSTANT CURRENCY ADJUSTED | FISCAL YEAR AS REPORTED | FISCAL YEAR CONSTANT CURRENCY ADJUSTED | |||||||||||||||||||||||||||||||||||||||||||
(in millions) | FY17 Q4 | FY16 Q4 | Reported Growth | Currency Impact on Revenue | FY17 Q4 | Constant Currency Growth (2) | FY17 Total | FY16 Total | Reported Growth (3) | Currency Impact on Revenue | FY17 Total | Constant Currency Growth (2)(3) | ||||||||||||||||||||||||||||||||||
Cardiac & Vascular Group | $ | 2,848 | $ | 2,742 | 4 | % | $ | (19 | ) | $ | 2,867 | 5 | % | $ | 10,498 | $ | 10,218 | 3 | % | $ | (37 | ) | $ | 10,535 | 3 | % | ||||||||||||||||||||
Cardiac Rhythm & Heart Failure | 1,544 | 1,492 | 3 | (11 | ) | 1,555 | 4 | 5,649 | 5,465 | 3 | (14 | ) | 5,663 | 4 | ||||||||||||||||||||||||||||||||
Coronary & Structural Heart | 847 | 816 | 4 | (5 | ) | 852 | 4 | 3,113 | 3,093 | 1 | (21 | ) | 3,134 | 1 | ||||||||||||||||||||||||||||||||
Aortic & Peripheral Vascular (1) | 457 | 434 | 5 | (3 | ) | 460 | 6 | 1,736 | 1,660 | 5 | (2 | ) | 1,738 | 5 | ||||||||||||||||||||||||||||||||
Minimally Invasive Therapies Group | 2,605 | 2,460 | 6 | (10 | ) | 2,615 | 6 | 9,919 | 9,563 | 4 | 17 | 9,902 | 4 | |||||||||||||||||||||||||||||||||
Surgical Solutions | 1,459 | 1,358 | 7 | (8 | ) | 1,467 | 8 | 5,511 | 5,265 | 5 | (1 | ) | 5,512 | 5 | ||||||||||||||||||||||||||||||||
Patient Monitoring & Recovery | 1,146 | 1,102 | 4 | (2 | ) | 1,148 | 4 | 4,408 | 4,298 | 3 | 18 | 4,390 | 2 | |||||||||||||||||||||||||||||||||
Restorative Therapies Group (1) | 1,951 | 1,869 | 4 | (4 | ) | 1,955 | 5 | 7,366 | 7,188 | 2 | (1 | ) | 7,367 | 2 | ||||||||||||||||||||||||||||||||
Spine | 676 | 659 | 3 | (1 | ) | 677 | 3 | 2,641 | 2,629 | — | 5 | 2,636 | — | |||||||||||||||||||||||||||||||||
Brain Therapies | 585 | 538 | 9 | (1 | ) | 586 | 9 | 2,098 | 1,958 | 7 | (2 | ) | 2,100 | 7 | ||||||||||||||||||||||||||||||||
Specialty Therapies | 396 | 371 | 7 | (1 | ) | 397 | 7 | 1,491 | 1,419 | 5 | (2 | ) | 1,493 | 5 | ||||||||||||||||||||||||||||||||
Pain Therapies | 294 | 301 | (2 | ) | (1 | ) | 295 | (2 | ) | 1,136 | 1,182 | (4 | ) | (2 | ) | 1,138 | (4 | ) | ||||||||||||||||||||||||||||
Diabetes Group | 512 | 496 | 3 | (4 | ) | 516 | 4 | 1,927 | 1,864 | 3 | (13 | ) | 1,940 | 4 | ||||||||||||||||||||||||||||||||
TOTAL | $ | 7,916 | $ | 7,567 | 5 | % | $ | (37 | ) | $ | 7,953 | 5 | % | $ | 29,710 | $ | 28,833 | 3 | % | $ | (34 | ) | $ | 29,744 | 3 | % | ||||||||||||||||||||
See description of non-GAAP financial measures at the end of the earnings press release.
(1) In fiscal year 2017, the Company realigned its divisions within the Restorative Therapies Group, which included a movement of revenue from certain product lines in Restorative Therapies Group to Cardiac & Vascular Group's Aortic & Peripheral Vascular division. As a result, fiscal year 2016 results have been recast to adjust for this realignment.
(2) Constant currency growth, a non-GAAP financial measure, measures the change in revenue between current and prior year periods using average exchange rates in effect during the applicable prior year period.
(3) Fiscal year 2016 was a 53-week year, with the extra week included in the first quarter results. While it is difficult to calculate the impact of the extra week, the Company estimates that the extra week impact on worldwide, fiscal year 2016 first quarter revenue was approximately $450 million. Excluding the approximately $450 million from fiscal year 2016 total revenue would result in approximately 5 percent growth on a constant currency, constant week basis.
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MEDTRONIC PLC
U.S.(1) REVENUE
(Unaudited)
FOURTH QUARTER AS REPORTED | FISCAL YEAR AS REPORTED | |||||||||||||||||||||
(in millions) | FY17 Q4 | FY16 Q4 | Reported Growth | FY17 Total | FY16 Total | Reported Growth (3) | ||||||||||||||||
Cardiac & Vascular Group | $ | 1,484 | $ | 1,417 | 5 | % | $ | 5,454 | $ | 5,369 | 2 | % | ||||||||||
Cardiac Rhythm & Heart Failure | 888 | 844 | 5 | 3,234 | 3,126 | 3 | ||||||||||||||||
Coronary & Structural Heart | 331 | 322 | 3 | 1,203 | 1,264 | (5 | ) | |||||||||||||||
Aortic & Peripheral Vascular (2) | 265 | 251 | 6 | 1,017 | 979 | 4 | ||||||||||||||||
Minimally Invasive Therapies Group | 1,314 | 1,252 | 5 | 5,049 | 5,014 | 1 | ||||||||||||||||
Surgical Solutions | 618 | 577 | 7 | 2,363 | 2,283 | 4 | ||||||||||||||||
Patient Monitoring & Recovery | 696 | 675 | 3 | 2,686 | 2,731 | (2 | ) | |||||||||||||||
Restorative Therapies Group (2) | 1,302 | 1,255 | 4 | 5,012 | 4,899 | 2 | ||||||||||||||||
Spine | 471 | 463 | 2 | 1,858 | 1,836 | 1 | ||||||||||||||||
Brain Therapies | 324 | 294 | 10 | 1,191 | 1,104 | 8 | ||||||||||||||||
Specialty Therapies | 297 | 283 | 5 | 1,138 | 1,085 | 5 | ||||||||||||||||
Pain Therapies | 210 | 215 | (2 | ) | 825 | 874 | (6 | ) | ||||||||||||||
Diabetes Group | 303 | 293 | 3 | 1,148 | 1,140 | 1 | ||||||||||||||||
TOTAL | $ | 4,403 | $ | 4,217 | 4 | % | $ | 16,663 | $ | 16,422 | 1 | % | ||||||||||
(1) U.S. includes the United States and U.S. territories.
(2) In fiscal year 2017, the Company realigned its divisions within the Restorative Therapies Group, which included a movement of revenue from certain product lines in Restorative Therapies Group to Cardiac & Vascular Group's Aortic & Peripheral Vascular division. As a result, fiscal year 2016 results have been recast to adjust for this realignment.
(3) Fiscal year 2016 was a 53-week year, with the extra week included in the first quarter results. While it is difficult to calculate the impact of the extra week, the Company estimates that the extra week impact on worldwide, fiscal year 2016 first quarter revenue was approximately $450 million.
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MEDTRONIC PLC
WORLD WIDE REVENUE: GEOGRAPHIC(1)
(Unaudited)
FOURTH QUARTER AS REPORTED | FOURTH QUARTER CONSTANT CURRENCY ADJUSTED | FISCAL YEAR AS REPORTED | FISCAL YEAR CONSTANT CURRENCY ADJUSTED | |||||||||||||||||||||||||||||||||||||||||
(in millions) | FY17 Q4 | FY16 Q4 | Reported Growth | Currency Impact on Revenue | FY17 Q4 | Constant Currency Growth (3) | FY17 Total | FY16 Total | Reported Growth (4) | Currency Impact on Revenue | FY17 Total | Constant Currency Growth (3)(4) | ||||||||||||||||||||||||||||||||
U.S. | $ | 1,484 | $ | 1,417 | 5 | % | $ | — | $ | 1,484 | 5 | % | $ | 5,454 | $ | 5,369 | 2 | % | $ | — | $ | 5,454 | 2 | % | ||||||||||||||||||||
Non-U.S. Developed | 926 | 905 | 2 | (21 | ) | 947 | 5 | 3,393 | 3,283 | 3 | (3 | ) | 3,396 | 3 | ||||||||||||||||||||||||||||||
Emerging Markets | 438 | 420 | 4 | 2 | 436 | 4 | 1,651 | 1,566 | 5 | (34 | ) | 1,685 | 8 | |||||||||||||||||||||||||||||||
Cardiac & Vascular Group (2) | 2,848 | 2,742 | 4 | (19 | ) | 2,867 | 5 | 10,498 | 10,218 | 3 | (37 | ) | 10,535 | 3 | ||||||||||||||||||||||||||||||
U.S. | 1,314 | 1,252 | 5 | — | 1,314 | 5 | 5,049 | 5,014 | 1 | — | 5,049 | 1 | ||||||||||||||||||||||||||||||||
Non-U.S. Developed | 921 | 901 | 2 | (13 | ) | 934 | 4 | 3,479 | 3,299 | 5 | 45 | 3,434 | 4 | |||||||||||||||||||||||||||||||
Emerging Markets | 370 | 307 | 21 | 3 | 367 | 20 | 1,391 | 1,250 | 11 | (28 | ) | 1,419 | 14 | |||||||||||||||||||||||||||||||
Minimally Invasive Therapies Group | 2,605 | 2,460 | 6 | (10 | ) | 2,615 | 6 | 9,919 | 9,563 | 4 | 17 | 9,902 | 4 | |||||||||||||||||||||||||||||||
U.S. | 1,302 | 1,255 | 4 | — | 1,302 | 4 | 5,012 | 4,899 | 2 | — | 5,012 | 2 | ||||||||||||||||||||||||||||||||
Non-U.S. Developed | 437 | 421 | 4 | (7 | ) | 444 | 5 | 1,588 | 1,542 | 3 | 14 | 1,574 | 2 | |||||||||||||||||||||||||||||||
Emerging Markets | 212 | 193 | 10 | 3 | 209 | 8 | 766 | 747 | 3 | (15 | ) | 781 | 5 | |||||||||||||||||||||||||||||||
Restorative Therapies Group (2) | 1,951 | 1,869 | 4 | (4 | ) | 1,955 | 5 | 7,366 | 7,188 | 2 | (1 | ) | 7,367 | 2 | ||||||||||||||||||||||||||||||
U.S. | 303 | 293 | 3 | — | 303 | 3 | 1,148 | 1,140 | 1 | — | 1,148 | 1 | ||||||||||||||||||||||||||||||||
Non-U.S. Developed | 168 | 166 | 1 | (5 | ) | 173 | 4 | 625 | 584 | 7 | (12 | ) | 637 | 9 | ||||||||||||||||||||||||||||||
Emerging Markets | 41 | 37 | 11 | 1 | 40 | 8 | 154 | 140 | 10 | (1 | ) | 155 | 11 | |||||||||||||||||||||||||||||||
Diabetes Group | 512 | 496 | 3 | (4 | ) | 516 | 4 | 1,927 | 1,864 | 3 | (13 | ) | 1,940 | 4 | ||||||||||||||||||||||||||||||
U.S. | 4,403 | 4,217 | 4 | — | 4,403 | 4 | 16,663 | 16,422 | 1 | — | 16,663 | 1 | ||||||||||||||||||||||||||||||||
Non-U.S. Developed | 2,452 | 2,393 | 2 | (46 | ) | 2,498 | 4 | 9,085 | 8,708 | 4 | 44 | 9,041 | 4 | |||||||||||||||||||||||||||||||
Emerging Markets | 1,061 | 957 | 11 | 9 | 1,052 | 10 | 3,962 | 3,703 | 7 | (78 | ) | 4,040 | 9 | |||||||||||||||||||||||||||||||
TOTAL | $ | 7,916 | $ | 7,567 | 5 | % | $ | (37 | ) | $ | 7,953 | 5 | % | $ | 29,710 | $ | 28,833 | 3 | % | $ | (34 | ) | $ | 29,744 | 3 | % | ||||||||||||||||||
See description of non-GAAP financial measures at the end of the earnings press release.
(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) In fiscal year 2017, the Company realigned its divisions within the Restorative Therapies Group, which included a movement of revenue from certain product lines in Restorative Therapies Group to Cardiac & Vascular Group's Aortic & Peripheral Vascular division. As a result, fiscal year 2016 results have been recast to adjust for this realignment.
(3) Constant currency growth, a non-GAAP financial measure, measures the change in revenue between current and prior year periods using average exchange rates in effect during the applicable prior year period.
(4) Fiscal year 2016 was a 53-week year, with the extra week included in the first quarter results. While it is difficult to calculate the impact of the extra week, the Company estimates that the extra week impact on worldwide, fiscal year 2016 first quarter revenue was approximately $450 million. Excluding the approximately $450 million from fiscal year 2016 total revenue would result in approximately 5 percent growth on a constant currency, constant week basis.
8
MEDTRONIC PLC
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three months ended | Fiscal year ended | |||||||||||||||
(in millions, except per share data) | April 28, 2017 | April 29, 2016 | April 28, 2017 | April 29, 2016 | ||||||||||||
Net sales | $ | 7,916 | $ | 7,567 | $ | 29,710 | $ | 28,833 | ||||||||
Costs and expenses: | ||||||||||||||||
Cost of products sold | 2,436 | 2,363 | 9,291 | 9,142 | ||||||||||||
Research and development expense | 553 | 575 | 2,193 | 2,224 | ||||||||||||
Selling, general, and administrative expense | 2,479 | 2,360 | 9,711 | 9,469 | ||||||||||||
Special charge | — | 70 | 100 | 70 | ||||||||||||
Restructuring charges, net | 201 | 131 | 363 | 290 | ||||||||||||
Certain litigation charges | — | — | 300 | 26 | ||||||||||||
Acquisition-related items | 72 | 100 | 220 | 283 | ||||||||||||
Amortization of intangible assets | 496 | 483 | 1,980 | 1,931 | ||||||||||||
Other expense (income), net | 48 | (21 | ) | 222 | 107 | |||||||||||
Operating profit | 1,631 | 1,506 | 5,330 | 5,291 | ||||||||||||
Interest income | (94 | ) | (110 | ) | (366 | ) | (431 | ) | ||||||||
Interest expense | 290 | 481 | 1,094 | 1,386 | ||||||||||||
Interest expense, net | 196 | 371 | 728 | 955 | ||||||||||||
Income before provision for income taxes | 1,435 | 1,135 | 4,602 | 4,336 | ||||||||||||
Provision for income taxes | 271 | 31 | 578 | 798 | ||||||||||||
Net income | 1,164 | 1,104 | 4,024 | 3,538 | ||||||||||||
Net (income) loss attributable to noncontrolling interests | (1 | ) | — | 4 | — | |||||||||||
Net income attributable to Medtronic | $ | 1,163 | $ | 1,104 | $ | 4,028 | $ | 3,538 | ||||||||
Basic earnings per share | $ | 0.85 | $ | 0.79 | $ | 2.92 | $ | 2.51 | ||||||||
Diluted earnings per share | $ | 0.84 | $ | 0.78 | $ | 2.89 | $ | 2.48 | ||||||||
Basic weighted average shares outstanding | 1,369.0 | 1,400.7 | 1,378.9 | 1,409.6 | ||||||||||||
Diluted weighted average shares outstanding | 1,380.6 | 1,416.3 | 1,391.4 | 1,425.9 | ||||||||||||
Cash dividends declared per ordinary share | $ | 0.43 | $ | 0.38 | $ | 1.72 | $ | 1.52 | ||||||||
9
MEDTRONIC PLC
NET INCOME AND DILUTED EPS GAAP TO NON-GAAP RECONCILIATIONS
(Unaudited)
Three months ended April 28, 2017 | ||||||||||||||||||||||||||||||||
(in millions, except per share data) | Net Sales | Cost of Products Sold | Gross Margin Percent | Operating Profit | Operating Profit Percent | Income Before Provision for Income Taxes | Net Income attributable to Medtronic | Diluted EPS (1) | Effective Tax Rate | |||||||||||||||||||||||
GAAP | $ | 7,916 | $ | 2,436 | 69.2 | % | $ | 1,631 | 20.6 | % | $ | 1,435 | $ | 1,163 | $ | 0.84 | 18.9 | % | ||||||||||||||
Non-GAAP Adjustments: (2) | ||||||||||||||||||||||||||||||||
Restructuring charges, net | — | — | 201 | 201 | 139 | 0.10 | 30.8 | |||||||||||||||||||||||||
Acquisition-related items (a) | — | (10 | ) | 82 | 82 | 62 | 0.04 | 24.4 | ||||||||||||||||||||||||
Amortization of intangible assets | — | — | 496 | 496 | 325 | 0.24 | 34.5 | |||||||||||||||||||||||||
Certain tax adjustments, net (b) | — | — | — | — | 147 | 0.11 | — | |||||||||||||||||||||||||
Non-GAAP | $ | 7,916 | $ | 2,426 | 69.4 | % | $ | 2,410 | 30.4 | % | $ | 2,214 | $ | 1,836 | $ | 1.33 | 17.0 | % | ||||||||||||||
Foreign currency impact | 37 | 22 | (0.2 | ) | 33 | 0.3 | 0.02 | |||||||||||||||||||||||||
Constant Currency Adjusted | $ | 7,953 | $ | 2,448 | 69.2 | % | $ | 2,443 | 30.7 | % | $ | 1.35 | ||||||||||||||||||||
Three months ended April 29, 2016 | ||||||||||||||||||||||||||||||||
(in millions, except per share data) | Net Sales | Cost of Products Sold | Gross Margin Percent | Operating Profit | Operating Profit Percent | Income Before Provision for Income Taxes | Net Income attributable to Medtronic | Diluted EPS (1) | Effective Tax Rate | |||||||||||||||||||||||
GAAP | $ | 7,567 | $ | 2,363 | 68.8 | % | $ | 1,506 | 19.9 | % | $ | 1,135 | $ | 1,104 | $ | 0.78 | 2.7 | % | ||||||||||||||
Non-GAAP Adjustments: (2) | ||||||||||||||||||||||||||||||||
Special charge (c) | — | — | 70 | 70 | 44 | 0.03 | 24.0 | |||||||||||||||||||||||||
Restructuring charges, net | — | — | 131 | 131 | 97 | 0.07 | 26.0 | |||||||||||||||||||||||||
Acquisition-related items | — | — | 100 | 100 | 85 | 0.06 | 15.0 | |||||||||||||||||||||||||
Amortization of intangible assets | — | — | 483 | 483 | 348 | 0.25 | 28.0 | |||||||||||||||||||||||||
Debt tender premium | — | — | — | 183 | 118 | 0.08 | — | |||||||||||||||||||||||||
Non-GAAP | $ | 7,567 | $ | 2,363 | 68.8 | % | $ | 2,290 | 30.3 | % | $ | 2,102 | $ | 1,796 | $ | 1.27 | 14.6 | % | ||||||||||||||
Year over year percent change: | Net Income | Diluted EPS | ||||||||||||||||||||||||||||||
GAAP | 5% | 8% | ||||||||||||||||||||||||||||||
Non-GAAP | 2% | 5% | ||||||||||||||||||||||||||||||
Constant Currency Adjusted Non-GAAP | 6% | |||||||||||||||||||||||||||||||
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) | Non-GAAP adjustments relate to charges or benefits that management believes may or may not recur with similar materiality or impact on results in future periods. |
(a) | Integration-related costs incurred in connection with the Covidien acquisition, and charges incurred in connection with the pending divestiture of a portion of our Patient Monitoring & Recovery division to Cardinal Health. |
(b) | The net charge primarily relates to the tax effect from the recognition of the outside basis difference of certain subsidiaries which are included in the expected divestiture of a portion of our Patient Monitoring & Recovery division to Cardinal Health, and the resolution of various tax matters from prior periods. |
(c) | The impairment of a debt investment. |
10
MEDTRONIC PLC
NET INCOME AND DILUTED EPS GAAP TO NON-GAAP RECONCILIATIONS
(Unaudited)
Fiscal year ended April 28, 2017 | ||||||||||||||||||||||||||||||||
(in millions, except per share data) | Net Sales | Cost of Products Sold | Gross Margin Percent | Operating Profit | Operating Profit Percent | Income Before Provision for Income Taxes | Net Income attributable to Medtronic | Diluted EPS (1) | Effective Tax Rate | |||||||||||||||||||||||
GAAP | $ | 29,710 | $ | 9,291 | 68.7 | % | $ | 5,330 | 17.9 | % | $ | 4,602 | $ | 4,028 | $ | 2.89 | 12.6 | % | ||||||||||||||
Non-GAAP Adjustments: (2) | ||||||||||||||||||||||||||||||||
Impact of inventory step-up (a) | — | (38 | ) | 38 | 38 | 24 | 0.02 | 36.8 | ||||||||||||||||||||||||
Special charge (b) | — | — | 100 | 100 | 63 | 0.05 | 37.0 | |||||||||||||||||||||||||
Restructuring charges, net | — | (10 | ) | 373 | 373 | 272 | 0.20 | 27.1 | ||||||||||||||||||||||||
Certain litigation charges | — | — | 300 | 300 | 190 | 0.14 | 36.7 | |||||||||||||||||||||||||
Acquisition-related items (c) | — | (10 | ) | 230 | 230 | 156 | 0.11 | 32.2 | ||||||||||||||||||||||||
Amortization of intangible assets | — | — | 1,980 | 1,980 | 1,460 | 1.05 | 26.3 | |||||||||||||||||||||||||
Certain tax adjustments, net (d) | — | — | — | — | 202 | 0.15 | — | |||||||||||||||||||||||||
Non-GAAP | $ | 29,710 | $ | 9,233 | 68.9 | % | $ | 8,351 | 28.1 | % | $ | 7,623 | $ | 6,395 | $ | 4.60 | 16.2 | % | ||||||||||||||
Foreign currency impact | 34 | (65 | ) | 0.3 | 289 | 0.9 | 0.17 | |||||||||||||||||||||||||
Constant Currency Adjusted | $ | 29,744 | $ | 9,168 | 69.2 | % | $ | 8,640 | 29.0 | % | $ | 4.77 | ||||||||||||||||||||
Fiscal year ended April 29, 2016 | ||||||||||||||||||||||||||||||||
(in millions, except per share data) | Net Sales | Cost of Products Sold | Gross Margin Percent | Operating Profit | Operating Profit Percent | Income Before Provision for Income Taxes | Net Income attributable to Medtronic | Diluted EPS (1) | Effective Tax Rate | |||||||||||||||||||||||
GAAP | $ | 28,833 | $ | 9,142 | 68.3 | % | $ | 5,291 | 18.4 | % | $ | 4,336 | $ | 3,538 | $ | 2.48 | 18.4 | % | ||||||||||||||
Non-GAAP Adjustments: (2) | ||||||||||||||||||||||||||||||||
Impact of inventory step-up (e) | — | (226 | ) | 226 | 226 | 165 | 0.12 | 27.0 | ||||||||||||||||||||||||
Special charge (f) | — | — | 70 | 70 | 44 | 0.03 | 37.1 | |||||||||||||||||||||||||
Restructuring charges, net | — | (9 | ) | 299 | 299 | 221 | 0.15 | 26.1 | ||||||||||||||||||||||||
Certain litigation charges | — | — | 26 | 26 | 17 | 0.01 | 34.6 | |||||||||||||||||||||||||
Acquisition-related items | — | — | 283 | 283 | 212 | 0.15 | 25.1 | |||||||||||||||||||||||||
Amortization of intangible assets | — | — | 1,931 | 1,931 | 1,467 | 1.03 | 24.0 | |||||||||||||||||||||||||
Loss on previously held forward starting interest rate swaps | — | — | — | 45 | 29 | 0.02 | 35.6 | |||||||||||||||||||||||||
Debt tender premium | — | — | — | 183 | 118 | 0.08 | 35.5 | |||||||||||||||||||||||||
Certain tax adjustments, net (g) | — | — | — | — | 417 | 0.29 | — | |||||||||||||||||||||||||
Non-GAAP | $ | 28,833 | $ | 8,907 | 69.1 | % | $ | 8,126 | 28.2 | % | $ | 7,399 | $ | 6,228 | $ | 4.37 | 15.8 | % | ||||||||||||||
Year over year percent change: | Net Income | Diluted EPS | ||||||||||||||||||||||||||||||
GAAP | 14% | 17% | ||||||||||||||||||||||||||||||
Non-GAAP | 3% | 5% | ||||||||||||||||||||||||||||||
Constant Currency Adjusted Non-GAAP (3) | 9% | |||||||||||||||||||||||||||||||
See description of non-GAAP financial measures contained in this release.
(1) | The data in this schedule has been intentionally rounded to the nearest $0.01 and, therefore, may not sum. |
(2) | Non-GAAP adjustments relate to charges or benefits that management believes may or may not recur with similar materiality or impact on results in future periods. |
(a) | Represents amortization of step-up in fair value of inventory acquired in connection with the HeartWare acquisition. |
(b) | The charge represents a contribution to the Medtronic Foundation. |
11
(c) | Integration-related costs incurred in connection with the Covidien acquisition, and charges incurred in connection with the pending divestiture of a portion of our Patient Monitoring & Recovery division to Cardinal Health. |
(d) | The net charge primarily relates to the tax effect from the recognition of the outside basis difference of certain subsidiaries which are included in the expected divestiture of a portion of our Patient Monitoring & Recovery division to Cardinal Health, certain tax charges recorded in connection with the redemption of an intercompany minority interest, and the resolution of various tax matters from prior periods. |
(e) | Represents amortization of step-up in fair value of inventory acquired in connection with the Covidien acquisition. |
(f) | The impairment of a debt investment. |
(g) | Primarily relates to U.S. income tax expense resulting from the Company's completion of an internal reorganization of the ownership of certain legacy Covidien businesses that reduced the cash and investments held by Medtronic’s U.S.- controlled non-U.S. subsidiaries. Also includes a benefit related to the establishment of a deferred tax asset on the tax basis in excess of book basis of a wholly owned U.S. subsidiary of which the Company disposed. |
(3) | Due to its 52/53 week fiscal year calendar, the Company had an additional selling week in the first quarter of fiscal year 2016. While it is difficult to calculate an exact impact from the extra week, the Company estimates an $0.08 to $0.10 benefit to non-GAAP diluted earnings per share (EPS) in the first quarter of fiscal year 2016. The Company estimates that, adjusting for the extra week, non-GAAP earnings and diluted EPS increases were approximately 8 to 9 percent and approximately 11 to 12 percent, respectively, on a constant currency, constant week basis when compared to the prior fiscal year. |
12
MEDTRONIC PLC
RECONCILIATION OF OPERATING CASH FLOW TO FREE CASH FLOW
(Unaudited)
Fiscal Year | |||||||||||
(in millions) | 2017 | 2016 | 2015 | ||||||||
Net cash provided by operating activities | $ | 6,880 | $ | 5,218 | $ | 4,902 | |||||
Additions to property, plant, and equipment | (1,254 | ) | (1,046 | ) | (571 | ) | |||||
Free Cash Flow (1) | $ | 5,626 | $ | 4,172 | $ | 4,331 | |||||
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. |
13
MEDTRONIC PLC
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSE (SG&A), RESEARCH AND DEVELOPMENT EXPENSE (R&D), AND OTHER EXPENSE (INCOME), NET ON AN ADJUSTED BASIS
(Unaudited)
Three months ended April 28, 2017 | ||||||||||||||||||||||||
(in millions) | Net Sales | SG&A Expense | SG&A Expense as a Percent of Net Sales | R&D Expense | R&D Expense as a Percent of Net Sales | Other Expense (Income), net | Other Expense (Income), net as a Percent of Net Sales | |||||||||||||||||
As reported | $ | 7,916 | $ | 2,479 | 31.3 | % | $ | 553 | 7.0 | % | $ | 48 | 0.6 | % | ||||||||||
Foreign currency impact | 37 | 9 | 3 | (30 | ) | |||||||||||||||||||
Adjusted | $ | 7,953 | $ | 2,488 | 31.3 | % | $ | 556 | 7.0 | % | $ | 18 | 0.2 | % | ||||||||||
Fiscal year ended April 28, 2017 | ||||||||||||||||||||||||
(in millions) | Net Sales | SG&A Expense | SG&A Expense as a Percent of Net Sales | R&D Expense | R&D Expense as a Percent of Net Sales | Other Expense (Income), net | Other Expense (Income), net as a Percent of Net Sales | |||||||||||||||||
As reported | $ | 29,710 | $ | 9,711 | 32.7 | % | $ | 2,193 | 7.4 | % | $ | 222 | 0.7 | % | ||||||||||
Foreign currency impact | 34 | 19 | 4 | (213 | ) | |||||||||||||||||||
Adjusted | $ | 29,744 | $ | 9,730 | 32.7 | % | $ | 2,197 | 7.4 | % | $ | 9 | — | % | ||||||||||
See description of non-GAAP financial measures at the end of the earnings press release.
14
MEDTRONIC PLC
REVENUE AND OPERATING PROFIT PERCENT GAAP TO NON-GAAP RECONCILIATIONS
(Unaudited)
Three months ended April 28, 2017 | Fiscal year ended April 28, 2017 | |||||||
Revenue | Operating Profit Percent | Operating Profit Percent | ||||||
Reported | 4.6 | % | 20.6 | % | 17.9 | % | ||
Non-GAAP adjustments (1) | — | 9.8 | 10.2 | |||||
Foreign currency impact | 0.5 | 0.3 | 0.9 | |||||
Non-GAAP constant currency adjusted | 5.1 | % | 30.7 | % | 29.0 | % | ||
Impact from acquisitions and divestitures | (1.1 | ) | 0.3 | 0.4 | ||||
Adjusted | 4.0 | % | 31.0 | % | 29.4 | % | ||
See description of non-GAAP financial measures at the end of the earnings press release.
(1) | Non-GAAP adjustments relate to charges or gains that management believes may or may not recur with similar materiality or impact on results in future periods. |
15
MEDTRONIC PLC
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in millions) | April 28, 2017 | April 29, 2016 | ||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 4,967 | $ | 2,876 | ||||
Investments | 8,741 | 9,758 | ||||||
Accounts receivable, less allowances of $155 and $161, respectively | 5,591 | 5,562 | ||||||
Inventories | 3,338 | 3,473 | ||||||
Other current assets | 1,865 | 1,931 | ||||||
Current assets held for sale | 371 | — | ||||||
Total current assets | 24,873 | 23,600 | ||||||
Property, plant, and equipment, net | 4,361 | 4,841 | ||||||
Goodwill | 38,515 | 41,500 | ||||||
Other intangible assets, net | 23,407 | 26,899 | ||||||
Tax assets | 1,509 | 1,383 | ||||||
Other assets | 1,232 | 1,421 | ||||||
Noncurrent assets held for sale | 5,919 | — | ||||||
Total assets | $ | 99,816 | $ | 99,644 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Current debt obligations | $ | 7,520 | $ | 993 | ||||
Accounts payable | 1,731 | 1,709 | ||||||
Accrued compensation | 1,860 | 1,712 | ||||||
Accrued income taxes | 633 | 566 | ||||||
Other accrued expenses | 2,442 | 2,185 | ||||||
Current liabilities held for sale | 34 | — | ||||||
Total current liabilities | 14,220 | 7,165 | ||||||
Long-term debt | 25,921 | 30,109 | ||||||
Accrued compensation and retirement benefits | 1,641 | 1,759 | ||||||
Accrued income taxes | 2,405 | 2,903 | ||||||
Deferred tax liabilities | 2,978 | 3,729 | ||||||
Other liabilities | 1,515 | 1,916 | ||||||
Noncurrent liabilities held for sale | 720 | — | ||||||
Total liabilities | 49,400 | 47,581 | ||||||
Commitments and contingencies | ||||||||
Shareholders’ equity: | ||||||||
Ordinary shares — par value $0.0001 | — | — | ||||||
Additional paid-in capital | 29,551 | 32,227 | ||||||
Retained earnings | 23,356 | 21,704 | ||||||
Accumulated other comprehensive loss | (2,613 | ) | (1,868 | ) | ||||
Total shareholders’ equity | 50,294 | 52,063 | ||||||
Noncontrolling interests | 122 | — | ||||||
Total equity | 50,416 | 52,063 | ||||||
Total liabilities and equity | $ | 99,816 | $ | 99,644 | ||||
16
MEDTRONIC PLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Fiscal Year | ||||||||||||
(in millions) | 2017 | 2016 | 2015 | |||||||||
Operating Activities: | ||||||||||||
Net income | $ | 4,024 | $ | 3,538 | $ | 2,675 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 2,917 | 2,820 | 1,306 | |||||||||
Amortization of debt discount and issuance costs | 11 | 29 | 76 | |||||||||
Acquisition-related items | (46 | ) | 218 | 634 | ||||||||
Provision for doubtful accounts | 39 | 49 | 35 | |||||||||
Deferred income taxes | (459 | ) | (460 | ) | (926 | ) | ||||||
Stock-based compensation | 348 | 375 | 439 | |||||||||
Loss on debt extinguishment | — | 163 | — | |||||||||
Other, net | (93 | ) | (111 | ) | (134 | ) | ||||||
Change in operating assets and liabilities, net of acquisitions: | ||||||||||||
Accounts receivable, net | (75 | ) | (435 | ) | (413 | ) | ||||||
Inventories | (227 | ) | (186 | ) | (282 | ) | ||||||
Accounts payable and accrued liabilities | 356 | (379 | ) | 849 | ||||||||
Other assets and liabilities | 85 | (403 | ) | 643 | ||||||||
Net cash provided by operating activities | 6,880 | 5,218 | 4,902 | |||||||||
Investing Activities: | ||||||||||||
Acquisitions, net of cash acquired | (1,324 | ) | (1,213 | ) | (14,884 | ) | ||||||
Additions to property, plant, and equipment | (1,254 | ) | (1,046 | ) | (571 | ) | ||||||
Purchases of investments | (4,371 | ) | (5,406 | ) | (7,582 | ) | ||||||
Sales and maturities of investments | 5,356 | 9,924 | 5,890 | |||||||||
Other investing activities, net | 22 | (14 | ) | 89 | ||||||||
Net cash (used in) provided by investing activities | (1,571 | ) | 2,245 | (17,058 | ) | |||||||
Financing Activities: | ||||||||||||
Acquisition-related contingent consideration | (69 | ) | (22 | ) | (85 | ) | ||||||
Change in current debt obligations, net | 906 | 7 | (1 | ) | ||||||||
Repayment of short-term borrowings (maturities greater than 90 days) | (2 | ) | (139 | ) | (150 | ) | ||||||
Proceeds from short-term borrowings (maturities greater than 90 days) | 12 | 139 | 150 | |||||||||
Issuance of long-term debt | 2,140 | — | 19,942 | |||||||||
Payments on long-term debt | (863 | ) | (5,132 | ) | (1,268 | ) | ||||||
Dividends to shareholders | (2,376 | ) | (2,139 | ) | (1,337 | ) | ||||||
Issuance of ordinary shares | 428 | 491 | 649 | |||||||||
Repurchase of ordinary shares | (3,544 | ) | (2,830 | ) | (1,920 | ) | ||||||
Other financing activities | 85 | 82 | (31 | ) | ||||||||
Net cash (used in) provided by financing activities | (3,283 | ) | (9,543 | ) | 15,949 | |||||||
Effect of exchange rate changes on cash and cash equivalents | 65 | 113 | (353 | ) | ||||||||
Net change in cash and cash equivalents | 2,091 | (1,967 | ) | 3,440 | ||||||||
Cash and cash equivalents at beginning of period | 2,876 | 4,843 | 1,403 | |||||||||
Cash and cash equivalents at end of period | $ | 4,967 | $ | 2,876 | $ | 4,843 | ||||||
Supplemental Cash Flow Information | ||||||||||||
Cash paid for: | ||||||||||||
Income taxes | $ | 1,029 | $ | 1,379 | $ | 632 | ||||||
Interest | 1,134 | 1,266 | 578 | |||||||||
17
MEDTRONIC PLC
Q4 FY17
EARNINGS PRESENTATION
MAY 25, 2017
• FY17 FINANCIAL HIGHLIGHTS
• Q4 FY17 CONSOLIDATED RESULTS &
GROUP REVENUE HIGHLIGHTS
• REVENUE / EPS GUIDANCE & OTHER
ASSUMPTIONS
Exhibit 99.2
Q4 FY17 Earnings Results | May 25, 2017 | 2
FORWARD LOOKING STATEMENTS
This presentation contains forward-looking statements which provide current expectations or forecasts, including those
relating to market and sales growth, growth strategies, changes to the healthcare system, financial results, use of capital,
balance sheet changes, the creation of shareholder value and shareholder returns, product and service development,
introduction, and adoption, partnerships, regulatory matters, restructuring initiatives, mergers/acquisitions/divestitures and
related effects, accounting estimates, working capital adequacy, currency exchange rates, competitive strengths and sales
efforts. They are based on current assumptions and expectations that involve uncertainties or risks. These uncertainties and
risks include, but are not limited to, those described in the filings we make with the U.S. Securities and Exchange Commission
(SEC). Actual results may differ materially from anticipated results. Forward-looking statements are made as of today's date,
and we undertake no duty to update them or any of the information contained in this presentation.
Financial Data
Certain information in this presentation includes calculations or figures that have been prepared internally and have not been
reviewed or audited by our independent registered public accounting firm. Use of different methods for preparing, calculating
or presenting information may lead to differences and such differences may be material. This presentation contains financial
measures and guidance, including free cash flow figures (defined as operating cash flows less property, plant and equipment
additions), revenue, margin and growth rates on a constant currency and constant week basis, and adjusted EPS, all of which are
considered “non-GAAP” financial measures under applicable SEC rules and regulations. We believe these non-GAAP measures
provide a useful way to evaluate our underlying performance. 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 and EPS projections exclude the impact of foreign currency exchange 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, such as amortization of intangible assets and acquisition-related, certain tax and
litigation, and restructuring charges or gains. 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. Detail concerning how all non-GAAP
measures are calculated, including all GAAP to non-GAAP reconciliations, are provided on our website and can be accessed
using this link.
Q4 FY17 Earnings Results | May 25, 2017 | 3
Executed steady cadence of meaningful product launches,
expanded our global footprint, and extended our leadership in
value-based healthcare offerings
• Mid-Single Digit Organic Growth2: ~4%
• Acquisitions contributed ~100 – 110 bps
• Foreign currency had a negative ~10 – 20 bps impact
• New product launches driving growth:
• Evolut® R 34mm, LigaSure™ instruments, Signia™ powered stapler, Solera®
Voyager®, and MiniMed® 6 series
• Double-digit Emerging Market revenue growth2
Solid operating margin improvement; double-digit EPS2 growth
• EPS: ~11 - 12%2 growth; EPS leverage ~650 bps2
• Operating Margin: ~100 bps improvement Y/Y2; ~140bps improvement Y/Y
on organic basis2; Operating leverage ~400 bps2
• Covidien synergies: on track for a minimum of $850M in cost savings by FY18
• Delivered more than $600M in synergy savings to-date through FY17
Outlook: Reiterate long-term expectation of mid-single digit
revenue growth and double-digit EPS growth2
• FY18 Revenue1 growth: 4 – 5%
• FY18 EPS1 growth: 9 – 10%
Balanced return to shareholders with disciplined reinvestment
• FY17: 86% Payout Ratio4; $2,376M in dividends and $3,116M in net share
repurchases
• Closed five tuck-in acquisitions and several strategic investments, totaling
approximately $1.5B
• Announced strategic sale of a portion of our PMR division to Cardinal Health
MDT
FY17 HIGHLIGHTS
1 Figures represent comparison to prior year on a constant currency basis (non-GAAP).
2 Figures represent comparison to prior year on a constant currency, constant week basis (non-GAAP).
3 Operating cash flows less property, plant and equipment additions (non-GAAP)
4 Dividends plus net share repurchases divided by adjusted net income (non-GAAP)
SOLID YEAR OVERALL; FIFTH CONSECTUTIVE YEAR
OF MID-SINGLE DIGIT REVENUE GROWTH
Revenue:
Other Financial Highlights:
U.S.
56%
Non-
U.S.
Dev
31%
EM
13%
1
Diluted
EPS
Y/Y
CC1
Y/Y%
CCCW2
Y/Y %
GAAP $2.89 17% NC NC
Non-GAAP $4.60 5% 9% ~11 - 12%
Cash Flow
from Ops $6.9B
Free Cash
Flow3 $5.6B
CVG
35%
MITG
33%
RTG
25%
DIAB
7%
Revenue
$M
As Rep
Y/Y %
CC1
Y/Y %
CCCW2
Y/Y %
CVG 10,498 3 3 MSD
MITG 9,919 4 4 MSD
RTG 7,366 2 2 MSD
Diabetes 1,927 3 4 MSD
Total $29,710 3% 3% ~5%
U.S. 16,663 1 1 LSD
Non-U.S. Dev 9,085 4 4 MSD
EM 3,962 7 9 DD
Total $29,710 3% 3% ~5%
Q4 FY17 Earnings Results | May 25, 2017 | 4
MDT
FY17 GAAP SELECT FINANCIAL INFORMATION
FY17
FY16
Y/Y Growth /
Y/Y Change
Net Sales ($M) 29,710 28,833 3%
Cost of Products Sold 9,291 9,142 2%
Gross Margin 68.7% 68.3% 40 bps
SG&A ($M) 9,711 9,469 3%
% of Sales 32.7% 32.8% 10 bps
R&D ($M) 2,193 2,224 (1%)
% of Sales 7.4% 7.7% 30 bps
Other Expense, Net ($M) 222 107 107%
Operating Profit 5,330 5,291 1%
Operating Margin 17.9% 18.4% (50) bps
Diluted EPS ($) 2.89 2.48 17%
Q4 FY17 Earnings Results | May 25, 2017 | 5
MDT
FY17 Y/Y EPS WALK
0.00
1.00
2.00
3.00
4.00
5.00
6.00
FY16,
GAAP
Non-GAAP
Adjustments
FY16,
Non-GAAP
Extra Week
Impact
FY16,
Non-GAAP
Adj.
Performance FY17
CC
FX FY17,
Non-GAAP
Non-GAAP
Adjustments
FY17,
GAAP
EPS Growth1: Double Digits; EPS Leverage1: ~650 bps EPS
$2.48
$1.89 $4.37
~($0.08)-
($0.10)
1 Comparison to FY16 on a constant currency, extra-week adjusted basis
Note: See FY17 Financial Schedules & Non-GAAP Reconciliations tables for additional information on reconciliations of non-GAAP information.
$4.29-
4.27
~$0.48-
$0.50 $4.77 ($0.17) $4.60 ($1.71)
$2.89
~11%-12% Y/Y1
FY16 FY17
Q4 FY17 Earnings Results | May 25, 2017 | 6
MDT
FY17 Y/Y OPERATING MARGIN CHANGES
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
FY16,
GAAP
Non-GAAP
Adjustments
FY16,
Non-GAAP
Extra Week
Impact
FY16,
Non-GAAP
Adj.
Performance FY17
CC
FX FY17,
Non-GAAP
Non-GAAP
Adjustments
FY17,
GAAP
~100 bps Operational Improvement1; 140 bps Organic Improvement1 Operating Margin
18.4%
9.8% 28.2% ~(0.2%) 29.0% (0.9%) 28.1% (10.2%)
17.9%
1 Comparison to FY16 on a constant currency, extra-week adjusted basis
Note: See FY17 Financial Schedules & Non-GAAP Reconciliations tables for additional information on reconciliations of non-GAAP information.
~28.0% ~1.0%
FY16 FY17
Q4 FY17 Earnings Results | May 25, 2017 | 7
MDT
FY17 NON-GAAP SELECT FINANCIAL INFORMATION
FY16
FY16
Estimated
Extra week
Impact
FY16
Adj for extra
week
FY17
FX
Impact
$M / Change
FY17
Constant
Currency1
FY17
CC Adj2
Growth
/Change
Net Sales ($M) 28,833 ~($450) -- 29,710 (34) -- ~5%
Gross Margin1 69.1%
~(0)-(20)
bps
~69.0%-
69.2%
68.9% (30) bps 69.2%
~(0)- (20)
bps
SG&A ($M) 9,469 -- -- 9,711 (19) -- --
% of Sales 32.8% ~20-30 bps
33.0%-
33.1%
32.7% Flat 32.7% ~30-40 bps
R&D ($M) 2,224 -- -- 2,193 (4) -- --
% of Sales 7.7% ~0 bps ~7.7% 7.4% Flat 7.4% ~(30) bps
Other Expense, Net
($M)
107 -- -- 222 213 -- --
Operating Profit1 8,126 -- -- 8,351 (289) -- HSD
Operating Margin 1 28.2% ~(20) bps ~28.0% 28.1% (90) bps 29.0% ~100 bps
Diluted EPS1 ($) 4.37
~$0.08 –
0.10
~$4.29–
4.27
4.60 (0.17) -- ~11-12%
1 Non-GAAP measure – see FY17 Financial Schedules & Non-GAAP Reconciliations tables for additional information on reconciliations of non-GAAP information
2 Figures represent comparison to FY16 on a constant currency, extra-week adjusted basis
Operating
Leverage
~+400 bps
EPS
Leverage
~+650 bps
Q4 FY17 CONSOLIDATED
RESULTS & GROUP
REVENUE HIGHLIGHTS
Q4 FY17 Earnings Results | May 25, 2017 | 9
Balanced, diversified growth across groups and geographies
• CVG, MITG, RTG and Diabetes all MSD growth1
• US MSD growth1; Non-US Developed MSD growth1; Emerging Markets DD
growth1
• Korea and Japan: HSD growth1
• Strong DD growth1 in China, Latin America, and Southeast Asia; HSD growth1
in Eastern Europe
• Growth Vector Performance:
• New Therapies: above our 200 to 350 bps goal, contributing ~370 bps
• Emerging Markets: below our 150 to 200 bps goal, contributing ~125 bps
• Services & Solutions: below our 40 to 60 bps goal, contributing ~15 bps
• Mid-Single Digit Organic Growth1: 4%
• Acquisitions contributed 110 bps
• Foreign currency had a negative 50 bps impact
Solid organic operating margin improvement
• Operating Margin: ~40 bps improvement Y/Y1; ~70bps improvement Y/Y1
on organic basis2; Operating leverage ~160 bps1
• Continued to cover dilution from acquisitions while investing in future
product launches
Capital allocation: Strategically deploying capital against priorities
• Q4: 33% Payout Ratio4; $594M in dividends and $16M in net share
repurchases
MDT
Q4 FY17 HIGHLIGHTS
1 Figures represent comparison to Q4 FY16 on a constant currency basis (non-GAAP).
2 Non-GAAP measure
3 Operating cash flows less property, plant and equipment additions (non-GAAP)
4 Dividends plus net share repurchases divided by adjusted net income (non-GAAP)
STRONG FINISH; SOLID YEAR OVERALL
Revenue:
Other Financial Highlights:
U.S.
56%
Non-
U.S.
Dev
31%
EM
13%
1
Diluted
EPS
Y/Y
CC1
Y/Y%
GAAP $0.84 8% NC
Non-GAAP $1.33 5% 6%
Cash Flow
from Ops $1.8B
Free Cash
Flow3 $1.4B
CVG
36%
MITG
33%
RTG
25%
DIAB
6%
Revenue
$M
As Rep
Y/Y %
CC1
Y/Y %
CVG 2,848 4 5
MITG 2,605 6 6
RTG 1,951 4 5
Diabetes 512 3 4
Total $7,916 5% 5%
U.S. 4,403 4 4
Non-U.S. Dev 2,452 2 4
EM 1,061 11 10
Total $7,916 5% 5%
Q4 FY17 Earnings Results | May 25, 2017 | 10
MDT
Q4 FY17 GAAP SELECT FINANCIAL INFORMATION
Q4
FY17
Q4
FY16
Y/Y Growth /
Y/Y Change
Net Sales ($M) 7,916 7,567 5%
Cost of Products Sold 2,436 2,363 3%
Gross Margin 69.2% 68.8% 40 bps
SG&A ($M) 2,479 2,360 5%
% of Sales 31.3% 31.2% 10 bps
R&D ($M) 553 575 (4%)
% of Sales 7.0% 7.6% 60 bps
Other Expense, Net ($M) 48 (21) 329%
Operating Profit 1,631 1,506 8%
Operating Margin 20.6% 19.9% 70 bps
Diluted EPS ($) 0.84 0.78 8%
Q4 FY17 Earnings Results | May 25, 2017 | 11
MDT
Q4 FY17 Y/Y EPS WALK
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
Q4 FY16,
GAAP
Q4 FY16,
Non-GAAP
Adjustments
Q4 FY16,
Non-GAAP
Performance Q4 FY17
CC
FX Q4 FY17,
Non-GAAP
Q4 FY17,
Non-GAAP
Adjustments
Q4 FY17,
GAAP
EPS Growth1: Mid-Single Digit; EPS Leverage1: ~120 bps EPS
$0.78
$0.49 $1.27
1 Figures represent comparison to Q4 FY16 on a constant currency basis (Non-GAAP).
$1.35 ($0.02) $1.33 ($0.49)
$0.84
6% Y/Y1
$0.08
FY16 FY17
Q4 FY17 Earnings Results | May 25, 2017 | 12
MDT
Q4 FY17 Y/Y OPERATING MARGIN CHANGES
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
Q4 FY16,
GAAP
Q4 FY16,
Non-GAAP
Adjustments
Q4 FY16,
Non-GAAP
Performance Q4 FY17
CC
FX Q4 FY17,
Non-GAAP
Q4 FY17,
Non-GAAP
Adjustments
Q4 FY17,
GAAP
~40 bps Operational Improvement1; 70 bps Organic Improvement1 Operating Margin
19.9%
10.4% 30.3% 0.4% 30.7% (0.3%) 30.4% (9.8%)
20.6%
FY16 FY17
1 Figures represent comparison to Q4 FY16 on a constant currency basis (Non-GAAP).
Q4 FY17 Earnings Results | May 25, 2017 | 13
MDT
Q4 FY17 NON-GAAP SELECT FINANCIAL INFORMATION
Q4
FY17
Q4
FY16
FX
Impact
$M / Change
Q4 FY17
Constant
Currency1
Q4 FY17
CC Growth /
Change2
Net Sales ($M) 7,916 7,567 (37) -- 5%
Cost of Products Sold1 2,426 2,363 (22) -- 4%
Gross Margin1 69.4% 68.8% 20 bps 69.2% 40 bps
SG&A ($M) 2,479 2,360 (9) -- 5%
% of Sales 31.3% 31.2% Flat 31.3% (10) bps
R&D ($M) 553 575 (3) -- (3%)
% of Sales 7.0% 7.6% Flat 7.0% 60 bps
Other (Income) Expense, Net ($M) 48 (21) 30 -- (186%)
Operating Profit1 2,410 2,290 (33) -- 7%
Operating Margin1 30.4% 30.3% (30) bps 30.7% 40 bps
Diluted EPS1 ($) 1.33 1.27 (0.02) -- 6%
1 Non-GAAP
2 Figures represent comparison to Q4 FY16 on a constant currency basis (Non-GAAP).
Operating
Leverage2
+160bps
EPS
Leverage2
+120bps
Q4 FY17 Earnings Results | May 25, 2017 | 14
CVG
Q4 FY17 HIGHLIGHTS
CRHF
54%
CSH
30%
APV
16%
U.S.
52%
Non-
U.S.
Dev
33%
EM
15%
Cardiac Rhythm & Heart Failure (CRHF)
KEY PERFORMANCE DRIVERS1
Heart Failure: +MSD
• Driven by HeartWare acquisition
• CRT-D: highest CRT-D share in 7
years in the US initial market
• Japan: continued share gains from
Compia MRI™ and Amplia MRI™
• CRT-P: above-market growth from
Quad
Arrhythmia Mgmt: +MSD
• WW Tachy: LSD decline; strength in US
• WW Brady: LSD decline
• Strength across several OUS
geographies offset by US decline
• CMS coverage approval of Micra®
• Diagnostics: Low-20s – Launched Reveal
LINQ® with TruRhythm™ detection
• AF Solutions: High-teens – Continued
share gain WW; strong growth in Japan
Coronary & Structural Heart (CSH)
Aortic & Peripheral Vascular (APV)
Services & Solutions: +MSD
Heart Valve Therapies:
+Low-Twenties
• WW TAVR market growing ~30%; MDT
above WW market growth
•US and EU: continued share gain from
Evolut® R 34mm expanded adoption
•SURTAVI intermediate risk data
submitted to FDA in March; expect H1
FY18 approval
•Evolut® PRO US Launch Q4; CE Mark/EU
launch anticipated late summer
Coronary: -MSD
• DES: LDD decline driven by market
pricing and US share loss
• Received US approval of Resolute
Onyx™ post-Q4 and Japan approval
expected H1 FY18; expected to
drive growth in FY18
Aortic: +MSD
• US: LSD growth led by Endurant® IIs
penetration, stable pricing, and Heli-FX®
EndoAnchor® adoption
• OUS: MSD growth
• AAA: LSD growth with recent Endurant®
ChEVAR CE Mark
• TAA: Above-market WW growth
Peripheral & endoVenous:
+HSD
• DCB: SFA US, EU & WW share leader
• IN.PACT® Admiral® DCB low-20s
• Price uplift from 150mm length
• Maintained market leadership in EU
• Atherectomy: HSD growth on strong
adoption of HawkOne™ 6F
Balanced MSD Growth across
CRHF, CSH and APV
Extracorp. Therapies: -LSD
• Cannulae and Revasc growth offset
by Surgical Ablation decline
Compia
MRI™
SureScan®
CRT-D
CoreValve®
Evolut® R
34mm
Resolute
Onyx™
IN.PACT®
Admiral®
Heli-FX®
EndoAnchor®
Revenue
$M
As Rep
Y/Y %
CC1
Y/Y %
CRHF 1,544 3 4
CSH 847 4 4
APV 457 5 6
Total $2,848 4% 5%
U.S. 1,484 5 5
Non-U.S. Dev 926 2 5
EM 438 4 4
Total $2,848 4% 5%
Arctic Front
Advance®
1 Figures represent comparison to Q4 FY16 on a constant currency basis (Non-GAAP).
FY18 Growth Outlook: 5 - 6%
Q4 FY17 Earnings Results | May 25, 2017 | 15
MITG
Q4 FY17 HIGHLIGHTS
Surgical Solutions
KEY PERFORMANCE DRIVERS1
HSD Growth in Surgical Solutions
and MSD Growth in PMR
Patient Monitoring & Recovery (PMR)
Early Technologies: +MSD
• Growth in GI Therapeutics driven
by products including PillCam™ SB
and Barrx™ 360 Express
General Surgical: +MSD
• Sutures growth and solid US
performance in Access and
Instruments, as well as
Electrosurgery
Patient Care/ DVT/ NI: -LSD
• Growth in Nutritional Insufficiency;
offset by service level challenges in
Patient Care
• Recently announced divestiture on
track
Endo GIA™
Renal Care Solutions: +MSD
• Growth from renal access business,
dialyzers and other consumables
Revenue
$M
As Rep
Y/Y %
CC1
Y/Y %
Surg. Sol. 1,459 7 8
PMR 1,146 4 4
Total $2,605 6% 6%
U.S. 1,314 5 5
Non-U.S. Dev 921 2 4
EM 370 21 20
Total $2,605 6% 6%
Signia™
Stapling
System
PMR
44% Surg.
Sol.
56%
U.S.
51%
Non-
U.S.
Dev
35%
EM
14%
Capnostream
™ 20
1 Figures represent comparison to Q4 FY16 on a constant currency basis (Non-GAAP).
LigaSure™
Vessel
Sealing
TRUCLEAR™
Advanced Surgical: +HSD
• Advanced Stapling: Growth driven by
Tri-Staple™ specialty reloads
penetration in the US, EMEA and
China
• Launched Signia™ powered stapler
• Advanced Energy: Growth driven by
LigaSure™ vessel sealing and
ValleyLab™ FT10
• Hernia: Performance driven by
growth in synthetic mesh
• TRUCLEAR™ (Smith & Nephew
gynecology acquisition) also bolstered
growth
Respiratory and Monitoring
Solutions: +LDD
• Airways and Ventilation: Growth
driven by the re-commercialization
of Puritan Bennett™ 980 ventilator
• Patient Monitoring: Growth from re-
commercialization of the
Capnostream™ 20, general strength
in capnography disposables, as well
as strength in Nellcor™ Pulse
Oximetry from strong flu season
FY18 Growth Outlook: 3 – 4%
Puritan
Bennett™
980
Q4 FY17 Earnings Results | May 25, 2017 | 16
RTG
Q4 FY17 HIGHLIGHTS
Spine
35%
Brain
30%
Specialty
20%
Pain
15%
[CATE
GORY
NAME]
[VALU
E]
[CATEG
ORY
NAME]
[VALUE]
[CATEG
ORY
NAME]
[VALUE
]
KEY PERFORMANCE DRIVERS1
Sustained Improvement in Spine;
Solid Brain & Specialty Therapies
Growth Offsets Declines in Pain
Neurosurgery: +LDD
• Growth driven by strong O-arm® O2 sales
• StealthStation® S8 approved late Q4
Core Spine: +LSD
• Continued success of new product
launches: Solera® Voyager® and
Elevate™ from Speed to Scale
initiative
• Strong growth in Other Biologics
• Surgical SynergySM initiative driving
implant growth
BMP: +LDD
• US: Strong growth (+LDD)
• OUS: InductOs™ return to market
expected mid-FY18
Brain Modulation: +LSD
• Growth driven by strength in the US
• Maintaining significant share despite
new competitive entrants
ENT: +MSD
• Continued strong growth in NuVent®
balloons and Fusion® Compact
navigation
Advanced Energy: +LDD
• Ortho / spine penetration driving
Aquamantys® growth
• Strong PEAK PlasmaBlade® growth in
breast oncology market
InterStim® II
StealthStationTM
S8
Infuse®
Bone Graft
Spine
Brain Therapies
Specialty Therapies
Pain Therapies
Pelvic Health: +HSD
• US growth driven by new InterStim® II
implants
Neurovascular: +Mid-Teens
• Strong growth driven by coils (Axium™
Prime) and stents (Solitaire™)
Revenue
$M
As Rep
Y/Y %
CC1
Y/Y %
Spine 676 3 3
Brain 585 9 9
Specialty 396 7 7
Pain 294 (2) (2)
Total $1,951 4% 5%
U.S. 1,302 4 4
Non-U.S. Dev 437 4 5
EM 212 10 8
Total $1,951 4% 5%
Kanghui: +HSD
• Continued market penetration driving
growth in Latin America and SE Asia
SCS/Pumps: -MSD
• EvolveSM Workflow launch in Q4; implant
impact beginning in Q1
• Ongoing SCS competitive pressure
leading to share loss
• Intellis™ approval expected late CY17
Interventional: +LSD
• Strong BKP performance in the US
driven by pull-through from
OsteoCool®
• Double-digit growth in Japan despite
competitive headwinds
OsteoCool®
1 Figures represent comparison to Q4 FY16 on a constant currency basis (Non-GAAP).
FY18 Growth Outlook: ~4%
Q4 FY17 Earnings Results | May 25, 2017 | 17
DIABETES
Q4 FY17 HIGHLIGHTS
US
59%
Non-US
Dev
33%
EM
8%
KEY PERFORMANCE DRIVERS1
Intensive Insulin Management (IIM)
Continued Growth In Pumps &
CGM; Robust Pipeline
Throughout FY18
MiniMed®
630G
Guardian®
Connect
17
Total Group
Revenue
$512M
Revenue
$M
As Rep
Y/Y %
CC1
Y/Y %
IIM ND HSD HSD
NDT ND Flat (LSD)
DSS ND (MSD) (LSD)
Total $512 3% 4%
U.S. 303 3 3
Non-U.S. Dev 168 1 4
EM 41 11 8
Total $512 3% 4%
FY18 Growth Outlook: 10 – 12%
(Ramp H1 to H2)
MiniMed®
670G
Non-Intensive Diabetes Therapies (NDT)
iPro®2 CGM
w/ Pattern
Snapshot
Diabetes Service & Solutions (DSS)
CGM Retention:
• Improved sensor accuracy
• Excellent Guardian® Sensor 3 feedback
MiniMed® 640G System:
• Continues to launch throughout Latin
America and APAC
MiniMed® 670G System:
• Completed enrollment in Priority
Access Program
• Strong feedback received during the
Customer Training Phase
• Coverage confirmed with majority of
large commercial payers
• On track for launch to Priority Access
Program participants in June; results
in only minor revenue recognition
• Broad launch to follow later in FY18
CGM Adoption:
• Strong iPro® 2 growth in China following
Q2 launch
• Next generation iPro® product slated
for FY18 OUS launch
i-Port Advance® Technology:
• Solid growth in OUS markets
Consumables:
• Unit growth affected by ASP declines
and more stringent payer requirements
• Installed base continues to grow;
anticipated to offset price and order
sizes following 670G commercial launch
Guardian® Connect:
• Solid adoption in EMEA and APAC
• Features predictive alerts
IBM Watson Partnership:
• Positive feedback from Sugar.IQ™
patient preview
MiniMed® 630G System:
• Solid US sales, excellent feedback from
patients and providers
• Opportunity for use by intensive insulin
Type 2 patients
1 Figures represent comparison to Q4 FY16 on a constant currency basis (Non-GAAP).
Diabeter Clinics:
• Opened 5th clinic in the Netherlands
• Funnel of expansion opportunities
growing
Henry Schein :
• Increasing sales through PCP channel
Growth Initiatives:
• Expanded dedicated Type 2 salesforce
during the quarter
• Initiated development of program to
drive US awareness of i-Port Advance®
FY18 EPS GUIDANCE,
REVENUE OUTLOOK, &
OTHER ASSUMPTIONS
Q4 FY17 Earnings Results | May 25, 2017 | 19
MDT
FY18 REVENUE / EPS GUIDANCE & OTHER ASSUMPTIONS
FY18
Revenue Growth – CC 4 - 5%
CVG Growth – CC 5 - 6%
MITG Growth – CC 3 - 4%
RTG Growth – CC ~4%
Diabetes Growth – CC 10-12% (Ramp H1 to H2)
COV Synergies ~$250 - $275M
EPS Growth1 – CC 9 - 10%
Other than noted, revenue and EPS growth guidance do not include any charges or gains that would be recorded as non-GAAP adjustments to earnings during the fiscal year
1 Figures represent comparison to prior year on a constant currency basis (non-GAAP).
Guidance
FX Assumptions
FY18 Q1FY18
Revenue ~$75M – $175M
(Headwind in H1; Tailwind in H2)
~($10M) – ($60M)
EPS ~($0.05) – ($0.10) ~(0.03) - ($0.05)
Note: While FX rates are fluid, assumptions above are based on current rates.
Q4 FY17 Earnings Results | May 25, 2017 | 20
APPENDIX
ACRONYMS / ABBREVIATIONS
1
Other
Adj Adjusted FCF Free Cash Flow
APAC Asia Pacific FDA
Food and Drug
Administration
ASEAN
Association of
Southeast Asian
Nations
FX Foreign Exchange
ASP Average Selling Price FY Fiscal Year
Bps Basis Points GAAP
Generally Accepted
Accounting Principles
CC Constant Currency NC Not Comparable
CCCW
Constant Currency
Constant Weeks
Ops Operations
CMS
Centers for Medicare
and Medicaid Services
OM Operating Margins
Dev Developed OUS
Outside the United
States
EM Emerging Markets R&D
Research &
Development
EMEA
Europe, Middle East &
Africa
Rep Reported
EPS Earnings Per Share SG&A
Selling, General &
Administrative
EU European Union WW Worldwide
Y/Y Year-over-Year
Business Specific
AAA Abdominal Aortic Aneurysm DSS Diabetes Services & Solutions
AF Atrial Fibrillation IIM Intensive Insulin Management
APV Aortic & Peripheral Vascular MDT Medtronic
BKP Balloon Kyphoplasty MITG Minimally Invasive Therapies Group
BMP Bone Morphogenetic Protein MRI Magnetic Resonance Imaging
Brady Bradycardia NDT Non-Intensive Diabetes Therapies
CGM
Continuous Glucose
Monitoring
NI Nutritional Insufficiency
CRHF
Cardiac Rhythm & Heart
Failure PCP Primary Care Providers
CRT-D
Cardiac Resynchronization
Therapy – Defibrillator PMR Patient Monitoring & Recovery
CRT-P
Cardiac Resynchronization
Therapy – Pacemakers RTG Restorative Therapies Group
CSH Coronary & Structural Heart SCS Spinal Cord Stimulation
CVG Cardiac & Vascular Group
SFA Superficial Femoropopliteal Artery
DVT Deep Vein Thrombosis Surg Sol Surgical Solutions
DCB Drug Coated Balloon TAVR
Transcatheter Aortic Valve
Replacement
DES Drug Eluting Stent Tachy Tachycardia
Growth
DD Double Digits
HSD High-Single Digit
LDD Low-Double Digits
LSD Low-Single Digit
MSD Mid-Single Digit
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