Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

UNDERSTANDING OUR FINANCIAL INFORMATION

The following discussion and analysis provides information management believes to be relevant to understanding the financial condition and results of operations of the Company. You should read this discussion and analysis along with our consolidated financial statements and related notes thereto at April 28, 2017 and April 29, 2016 and for each of the three fiscal years ended April 28, 2017 (fiscal year 2017), April 29, 2016 (fiscal year 2016), and April 24, 2015 (fiscal year 2015). Our fiscal year-end is the last Friday in April, and therefore, the total weeks in a fiscal year may fluctuate between 52 and 53 weeks. Fiscal years 2017 and 2015 were 52-week years. Fiscal year 2016 was a 53-week year, with the additional week occurring in the first quarter.

Early in the week of June 19, 2017, we experienced a global information technology systems interruption that affected our ability to manufacture devices and fulfill orders from customers in a large portion of our business. Our systems have now been fully restored. At this time, we do not believe our fiscal year 2018 results of operations or financial condition will be materially affected by this incident.

On January 26, 2015, the Company acquired Covidien and Medtronic, Inc. (collectively, the Transactions). Following the consummation of the Transactions, Medtronic, Inc. and Covidien became subsidiaries of the Company. In connection with the Transactions, the Company became the successor registrant to Medtronic, Inc. and re-registered as a public limited company organized under the laws of Ireland. For fiscal year 2015, the results of operations of Covidien are reflected in the Company's results of operations for only the fourth quarter due to the timing of the acquisition of Covidien, which affects comparability throughout this Annual Report on Form 10-K.

Organization of Financial Information

Management’s Discussion and Analysis provides material historical and prospective disclosures designed to enable investors and other users to assess our financial condition and results of operations.

Statements that are forward-looking and not historical in nature are subject to risks and uncertainties. See "Item 1A. Risk Factors" in this Annual Report on Form 10-K and "Cautionary Factors That May Affect Future Results" in this Management's Discussion and Analysis for more information.

The consolidated financial statements are presented within "Item 8. Financial Statements and Supplementary Data" in this Annual Report on Form 10-K and include the consolidated statements of income, consolidated statements of comprehensive income, consolidated balance sheets, consolidated statements of equity, consolidated statements of cash flows, and the related notes, which are an integral part of the consolidated financial statements.

Financial Trends

Throughout this Management’s Discussion and Analysis, we present certain financial measures that management uses to evaluate the operational performance of the Company and as a basis for strategic planning; however, such financial measures are not presented in our financial statements prepared in accordance with generally accepted accounting principles in the United States (U.S.) (U.S. GAAP). These financial measures are considered "non-GAAP financial measures."

Management uses non-GAAP financial measures to facilitate management’s review of the operational performance of the Company and as a basis for strategic planning. Management believes that non-GAAP financial measures provide useful information to investors regarding the underlying business trends and performance of the Company’s ongoing operations and are useful for period over period comparisons of such operations. The non-GAAP financial measures reflect an additional way of viewing aspects of the Company’s operations. Investors should not consider results reflecting non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with U.S. GAAP and are cautioned that Medtronic may calculate results reflecting non-GAAP financial measures in a manner that is different from other companies.

The GAAP to Non-GAAP Reconciliation presents non-GAAP financial measures that exclude the impact of charges or gains that contribute to or reduce earnings and that may affect financial trends, but which include charges or benefits that result from transactions or events that management believes may or may not recur with similar materiality or impact to our operations in future periods (Non-GAAP Adjustments).

In the event there is a Non-GAAP Adjustment recognized in our operating results, the tax cost or benefit attributable to that item is separately calculated. Because the effective rate may be significantly affected by the Non-GAAP Adjustments that take place during the period, we often refer to our tax rate using both the effective rate and the non-GAAP nominal tax rate (Non-GAAP Nominal Tax Rate). The Non-GAAP Nominal Tax Rate is calculated as the provision for income taxes, adjusted for the impact of Non-GAAP Adjustments, as a percentage of income from operations before income taxes, excluding Non-GAAP Adjustments.

Free cash flow is a non-GAAP financial measure calculated by subtracting additions to property, plant, and equipment from net cash provided by operating activities.

Refer to the “GAAP to Non-GAAP Reconciliation," "Income Taxes," and "Summary of Cash Flows" sections for reconciliations of our results of operations prepared in accordance with U.S. GAAP to the adjusted non-GAAP financial measures considered by management.

EXECUTIVE LEVEL OVERVIEW

Medtronic 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. We employ more than 91,000 full-time employees worldwide, serving physicians, hospitals, and patients in approximately 160 countries. Our primary products include those for cardiac rhythm disorders, cardiovascular disease, advanced and general surgical care, respiratory and monitoring solutions, neurological disorders, spinal conditions and musculoskeletal trauma, urological and digestive disorders, and ear, nose, and throat and diabetes conditions.

Net income attributable to Medtronic for fiscal year 2017 was $4.0 billion, $2.89 per diluted share, as compared to net income attributable to Medtronic of $3.5 billion, $2.48 per diluted share, for fiscal year 2016, representing an increase of 14 percent and 17 percent, respectively.

The table below illustrates net sales by operating segment for fiscal years 2017, 2016, and 2015:

		Net Sales											Net Sales
		Fiscal Year											Fiscal Year
(in millions)		2017				2016				% Change			2016				2015				% Change
Cardiac and Vascular Group		$	10,498			$	10,196			3	%		$	10,196			$	9,361			9	%
Minimally Invasive Therapies Group (1)		9,919				9,563				4			9,563				2,387				301
Restorative Therapies Group		7,366				7,210				2			7,210				6,751				7
Diabetes Group		1,927				1,864				3			1,864				1,762				6
Total Net Sales		$	29,710			$	28,833			3	%		$	28,833			$	20,261			42	%

(1)	The Minimally Invasive Therapies Group was a new group in the fourth quarter of fiscal year 2015 that contains the majority of Covidien's former operations. Revenue growth is compared to a full year of operations in fiscal year 2016.

Currency translation had an unfavorable impact of $34 million on net sales for fiscal year 2017, as compared to fiscal year 2016 when using the average exchange rates in effect during fiscal year 2016. Net sales growth for fiscal year 2017 was also unfavorably affected by an additional selling week during the first quarter of fiscal year 2016, resulting from our 52/53 week fiscal year calendar. In addition, the fiscal year 2017 acquisitions of HeartWare and Smith & Nephew's gynecology business contributed $200 million to our total net sales growth.

Our performance continues to be fueled by our three growth strategies: therapy innovation, globalization, and economic value. We are creating 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. In our therapy innovation growth strategy, we continue to see strong adoption of our products across all our operating segments. Further discussion about our products is included within the operating segment sections below. In globalization, net sales in emerging markets and non-U.S. developed markets grew 7 percent and 4 percent, respectively, in fiscal year 2017 compared to fiscal year 2016. In our third growth strategy, economic value, we continue to execute our value-based healthcare signature programs and remain focused on leading the shift to healthcare payment systems that reward value and improved patient outcomes over volume. See our discussion in the “Net Sales” section of this Management's Discussion and Analysis for more information on the results of our operating segments.

GAAP to Non-GAAP Reconciliation We have provided non-GAAP financial measures, because we believe they provide meaningful information regarding our results on a consistent and comparable basis for the periods presented. Management uses these non-GAAP financial measures to facilitate its review of our operational performance and as a basis for strategic planning. Management believes that non-GAAP financial measures provide useful information to investors regarding the underlying business trends and performance of our ongoing operations and are useful for period over period comparisons of such operations. Refer to our discussion in the "Costs and Expenses" and "Income Taxes" sections of this Management's Discussion and Analysis for more information on the Non-GAAP Adjustments. Investors should not consider results reflecting non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with U.S. GAAP, and should be cautioned that we may calculate results reflecting non-GAAP financial measures in a manner that is different from other companies.

	Fiscal year ended April 28, 2017
(in millions)	Income Before Provision for Income Taxes				Diluted EPS (2)				Provision for Income Taxes (1)				Effective Tax Rate
GAAP	$	4,602			$	2.89			$	578			12.6	%
Non-GAAP Adjustments:
Impact of inventory step-up	38				0.02				14				36.8
Special charge	100				0.05				37				37.0
Restructuring charges, net	373				0.20				101				27.1
Certain litigation charges	300				0.14				110				36.7
Acquisition-related items	230				0.11				74				32.2
Amortization of intangible assets	1,980				1.05				520				26.3
Certain tax adjustments, net	—				0.15				(202		)		—
Non-GAAP	$	7,623			$	4.60			$	1,232			16.2	%

(1)	The tax effect of each Non-GAAP Adjustment is based on the jurisdictions in which the expense (income) is incurred and the tax laws in effect for each such jurisdiction.

(2)	The data in this schedule has been intentionally rounded to the nearest $0.01 and, therefore, may not sum.

	Fiscal year ended April 29, 2016
(in millions)	Income Before Provision for Income Taxes				Diluted EPS (2)				Provision for Income Taxes (1)				Effective Tax Rate
GAAP	$	4,336			$	2.48			$	798			18.4	%
Non-GAAP Adjustments:
Impact of inventory step-up	226				0.12				61				27.0
Special charge	70				0.03				26				37.1
Restructuring charges, net	299				0.15				78				26.1
Certain litigation charges	26				0.01				9				34.6
Acquisition-related items	283				0.15				71				25.1
Amortization of intangible assets	1,931				1.03				464				24.0
Loss on previously held forward starting interest rate swaps	45				0.02				16				35.6
Debt tender premium	183				0.08				65				35.5
Certain tax adjustments, net	—				0.29				(417		)		—
Non-GAAP	$	7,399			$	4.37			$	1,171			15.8	%

(1)	The tax effect of each Non-GAAP Adjustment is based on the jurisdictions in which the expense (income) is incurred and the tax laws in effect for each such jurisdiction.

(2)	The data in this schedule has been intentionally rounded to the nearest $0.01 and, therefore, may not sum.

	Fiscal year ended April 24, 2015
(in millions)	Income Before Provision for Income Taxes				Diluted EPS (2)				Provision for Income Taxes (1)				Effective Tax Rate
GAAP	$	3,486			$	2.41			$	811			23.3	%
Non-GAAP Adjustments:
Impact of inventory step-up	623				0.41				168				27.0
Impact of product technology upgrade commitment	74				0.06				13				17.6
Special gain, net	(38		)		(0.02		)		(15		)		39.5
Restructuring charges, net	252				0.16				72				28.6
Certain litigation charges	42				0.02				15				35.7
Acquisition-related items	550				0.39				117				21.3
Amortization of intangible assets	733				0.49				195				26.6
Impact of acquisition on interest expense	77				0.04				28				36.4
Certain tax adjustments	—				0.31				(349		)		—
Non-GAAP	$	5,799			$	4.28			$	1,055			18.2	%

(1)	The tax effect of each Non-GAAP Adjustment is based on the jurisdictions in which the expense (income) is incurred and the tax laws in effect for each such jurisdiction.

(2)	The data in this schedule has been intentionally rounded to the nearest $0.01 and, therefore, may not sum.

GAAP diluted EPS and Non-GAAP diluted EPS for fiscal year 2017 were $2.89 and $4.60 per diluted share, respectively, as compared to $2.48 and $4.37 per diluted share, respectively, for fiscal year 2016, representing an increase of 17% and 5%, respectively. GAAP diluted EPS and Non-GAAP diluted EPS growth key contributors included realization of over $600 million in synergy savings since the acquisition of Covidien, coupled with our revenue growth.

CRITICAL ACCOUNTING ESTIMATES

We have used various accounting policies to prepare the consolidated financial statements in accordance with U.S. GAAP. Our most significant accounting policies are disclosed in Note 1 to the consolidated financial statements in "Item 8. Financial Statements and Supplementary Data" in this Annual Report on Form 10-K.

The preparation of the consolidated financial statements, in conformity with U.S. GAAP, requires management to use judgment in making estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. These estimates reflect management's best judgment about economic and market conditions and the potential effects on the valuation and/or carrying value of assets and liabilities based upon relevant information available. We base our estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Our critical accounting estimates include the following:

Revenue Recognition Rebates are estimated based on sales terms, historical experience, and trend analysis. In estimating rebates, we consider the lag time between the point of sale and the payment of the rebate claim, contractual commitments, including stated rebate rates, and other relevant information. We adjust reserves to reflect differences between estimated and actual experience and recognize such adjustment as a reduction of sales in the period of adjustment. Adjustments to recorded reserves have not been significant. Price adjustment rebates charged against gross sales were $3.0 billion and $2.9 billion in fiscal years 2017 and 2016, respectively, and $679 million for the fourth quarter of fiscal year 2015.

Litigation Contingencies We are involved in a number of legal actions involving product liability, intellectual property disputes, shareholder related matters, environmental proceedings, income tax disputes, and governmental proceedings and investigations in the U.S. and around the world. The outcomes of these legal actions are not within our complete control and may not be known for prolonged periods of time. In some actions, the enforcement agencies or private claimants seek damages, as well as other civil or criminal remedies (including injunctions barring the sale of products that are the subject of the proceeding), that could require significant expenditures or result in lost revenues or limit our ability to conduct business in the applicable jurisdictions. Estimates of probable losses resulting from litigation and governmental proceedings involving us are inherently difficult to predict, particularly when the matters are in early procedural stages, with incomplete scientific facts or legal discovery; involve unsubstantiated or indeterminate claims for damages; potentially involve penalties, fines, or punitive damages; or could result in a change in business practice. Our significant legal proceedings are discussed in Note 20 to the consolidated financial statements in "Item 8. Financial Statements and Supplementary Data" in this Annual Report on Form 10-K and while it is not possible to predict the outcome for

most of the matters discussed, we believe it is possible that costs associated with these matters could have a material adverse impact on our consolidated earnings, financial position, and/or cash flows.

Income Tax Reserves We establish reserves when, despite our belief that our tax return positions are fully supportable, we believe that certain positions are likely to be challenged and that we may or may not prevail. Under U.S. GAAP, if we determine that a tax position is more likely than not of being sustained upon audit, based solely on the technical merits of the position, we recognize the benefit. We measure the benefit by determining the amount that is greater than 50 percent likely of being realized upon settlement. We presume that all tax positions will be examined by a taxing authority with full knowledge of all relevant information. The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations in a multitude of jurisdictions across our global operations. We regularly monitor our tax positions and tax liabilities. We reevaluate the technical merits of our tax positions and recognize an uncertain tax benefit, or derecognize a previously recorded tax benefit, when there is (i) a completion of a tax audit, (ii) effective settlement of an issue (iii) a change in applicable tax law including a tax case or legislative guidance, or (iv) an expiration of the statute of limitations. Significant judgment is required in accounting for tax reserves. Although we believe that we have adequately provided for liabilities resulting from tax assessments by taxing authorities, positions taken by these tax authorities could have a material impact on our effective tax rate, consolidated earnings, financial position and/or cash flows.

Valuation of Intangible Assets and Goodwill When we acquire a business, the assets acquired and liabilities assumed are recorded at their respective fair values at the acquisition date. Goodwill is the excess of the purchase price consideration over the estimated fair value of net assets of acquired businesses. Intangible assets include patents, trademarks, tradenames, customer relationships, purchased technology, and IPR&D. Determining the fair value of intangible assets acquired as part of a business combination requires us to make significant estimates. These estimates include the amount and timing of projected future cash flows of each project or technology, the discount rate used to discount those cash flows to present value, the assessment of the asset’s life cycle, and the consideration of legal, technical, regulatory, economic, and competitive risks.

The test for goodwill impairment requires us to make several estimates about fair value, most of which are based on projected future cash flows. Our estimates associated with the goodwill impairment test are considered critical due to the amount of goodwill recorded on our consolidated balance sheets and the judgment required in determining fair value, including projected future cash flows. We assess the impairment of goodwill at the reporting unit level annually in the third quarter and whenever an event occurs or circumstances change that would indicate that the carrying amount may be impaired. Goodwill was $38.5 billion and $41.5 billion at April 28, 2017 and April 29, 2016, respectively.

We test definite-lived intangible assets for impairment when an event occurs or circumstances change that would indicate the carrying amount of the assets or asset group may be impaired. Our tests are based on future cash flows that require significant judgment with respect to future revenue and expense growth rates, appropriate discount rates, asset groupings, and other assumptions and estimates. We use estimates that are consistent with our business plans and a market participant view of the assets being evaluated. Actual results may differ from our estimates due to a number of factors including, among others, changes in competitive conditions, timing of regulatory approval, results of clinical trials, changes in worldwide economic conditions, and fluctuations in currency exchange rates. Definite-lived intangible assets, net of accumulated amortization, were $22.8 billion and $26.2 billion at April 28, 2017 and April 29, 2016, respectively.

We assess the impairment of indefinite-lived intangibles annually in the third quarter and whenever an event occurs or circumstances change that would indicate that the carrying amount may be impaired. Our impairment tests of indefinite-lived intangibles require us to make several estimates about fair value, including projected future cash flows and the appropriate discount rates. Indefinite-lived intangible assets were $594 million and $721 million at April 28, 2017 and April 29, 2016, respectively.

Contingent Consideration Contingent consideration is recorded at the acquisition date at estimated fair value and is remeasured each reporting period with the change in fair value recognized within acquisition-related items in our consolidated statements of income. Changes to the fair value of contingent consideration may result from changes in the estimated timing and amount of revenue, in the timing or probability of achieving the milestones which trigger payment, or in discount rates. The fair value of contingent consideration was $246 million and $377 million at April 28, 2017 and April 29, 2016, respectively.

NET SALES

In the fourth quarter of fiscal year 2015, we amended the way in which we evaluate performance and allocate resources with the acquisition of Covidien. As a result, we began to operate under four reportable segments and four operating segments, the Cardiac and Vascular Group (composed of Cardiac Rhythm & Heart Failure, Coronary & Structural Heart, and Aortic & Peripheral Vascular divisions), the Minimally Invasive Therapies Group (composed of Surgical Solutions and Patient Monitoring & Recovery divisions), the Restorative Therapies Group, and the Diabetes Group.

In the first quarter of fiscal year 2017, we realigned the divisions within the Restorative Therapies Group. The Restorative Therapies Group consists of the following divisions: Spine, Brain Therapies, Pain Therapies, and Specialty Therapies. See Note 22 to the consolidated financial statements in “Item 8. Financial Statements and Supplementary Data” in this Annual Report on Form 10-K for additional discussion related to our segment reporting.

The table below illustrates net sales by operating segment and division for fiscal years 2017, 2016, and 2015:

	Net Sales											Net Sales
	Fiscal Year											Fiscal Year
(dollars in millions)	2017				2016				% Change			2016				2015				% Change
Cardiac Rhythm & Heart Failure	$	5,649			$	5,465			3	%		$	5,465			$	5,245			4	%
Coronary & Structural Heart	3,113				3,093				1			3,093				3,038				2
Aortic & Peripheral Vascular (1)	1,736				1,638				6			1,638				1,078				52
Cardiac and Vascular Group	10,498				10,196				3			10,196				9,361				9
Surgical Solutions (1)	5,511				5,265				5			5,265				1,293				307
Patient Monitoring & Recovery (1)	4,408				4,298				3			4,298				1,094				293
Minimally Invasive Therapies Group (1)	9,919				9,563				4			9,563				2,387				301
Spine	2,641				2,629				—			2,629				2,663				(1	)
Brain Therapies (1)	2,098				1,980				6			1,980				1,483				34
Specialty Therapies	1,491				1,419				5			1,419				1,342				6
Pain Therapies	1,136				1,182				(4	)		1,182				1,263				(6	)
Restorative Therapies Group	7,366				7,210				2			7,210				6,751				7
Diabetes Group	1,927				1,864				3			1,864				1,762				6
Total (1)	$	29,710			$	28,833			3	%		$	28,833			$	20,261			42	%

(1)	Growth rates are affected by the acquisition of Covidien in the fourth quarter of fiscal year 2015. Revenue growth is compared to a full year of operations in fiscal year 2016.

Cardiac and Vascular Group

The Cardiac and Vascular Group’s products include pacemakers, insertable and external cardiac monitors, cardiac resynchronization therapy devices (CRT-D), implantable cardioverter defibrillators (ICD), leads and delivery systems, ventricular assist systems, ablation products, electrophysiology catheters, products for the treatment of atrial fibrillation, information systems for the management of patients with Cardiac Rhythm & Heart Failure devices, products designed to reduce surgical site infections, coronary and peripheral stents, balloons, and related delivery systems, endovascular stent graft systems, heart valve replacement technologies, cardiac tissue ablation systems, and open heart and coronary bypass grafting surgical products. The Cardiac and Vascular Group also includes Care Management Services and Cath Lab Managed Services (CLMS) within the Cardiac Rhythm & Heart Failure division. The Cardiac and Vascular Group's net sales for fiscal year 2017 were $10.5 billion, an increase of 3 percent compared to fiscal year 2016. Currency translation had an unfavorable impact on net sales of $37 million as a result of the change in exchange rates from the prior year. The Cardiac and Vascular Group’s net sales for fiscal year 2017 were unfavorably affected by an additional selling week during the first quarter of fiscal year 2016. The Cardiac and Vascular Group's net sales for fiscal year 2017, as compared to the same period in fiscal year 2016, benefited from strong net sales in Arrhythmia Management within Cardiac Rhythm & Heart Failure, largely due to growth in AF Solutions and Diagnostics, Coronary & Structural Heart, largely due to transcatheter aortic heart valve in the U.S. and Europe, and in Aortic & Peripheral Vascular, as well as the acquisition of HeartWare in the second quarter of fiscal year 2017. See the more detailed discussion of each division's performance below.

Cardiac Rhythm & Heart Failure net sales for fiscal year 2017 were $5.6 billion, an increase of 3 percent compared to fiscal year 2016. Cardiac Rhythm & Heart Failure net sales growth for fiscal year 2017 was driven by strong growth in Arrhythmia Management, largely due to growth in AF Solutions and Diagnostics. The strong growth in AF Solutions was driven by the continued global acceptance of our Arctic Front Advance Cardiac CryoAblation Catheter (Arctic Front) system, including strong growth in Japan. The strong growth in Diagnostics was driven by the continued adoption of the Reveal LINQ insertable cardiac monitor. Cardiac Rhythm & Heart Failure also benefited from the acquisition of HeartWare, which was acquired during the second quarter of fiscal year 2017.

Coronary & Structural Heart net sales for fiscal year 2017 were $3.1 billion, an increase of 1 percent compared to fiscal year 2016. Coronary & Structural Heart net sales growth for fiscal year 2017 was largely driven by the continued launch of the Evolut R

34mm transcatheter aortic heart valve in the U.S. and Europe. Net sales growth was partially offset by challenges with drug-eluting stents in both the U.S. and Japan due to competitive pressures related to the anticipated approval of the Resolute Onyx drug-eluting stents in these countries, which received U.S. FDA approval during the first quarter of fiscal year 2018 and is expected to receive approval in Japan during the summer of fiscal year 2018. Net sales growth was also partially offset by continued pricing pressures and competition worldwide in our Coronary business.

Aortic & Peripheral Vascular net sales for fiscal year 2017 were $1.7 billion, an increase of 6 percent compared to fiscal year 2016. Aortic & Peripheral Vascular net sales growth for fiscal year 2017 was driven by the continued strong worldwide growth of the IN.PACT Admiral drug-coated balloon as well as success of the Heli-FX EndoAnchor System and the Endurant IIs aortic stent graft. Net sales growth as compared to fiscal year 2016 was also driven by the launch of the HawkOne 6 French directional atherectomy system in the third quarter of fiscal year 2017.

The Cardiac and Vascular Group's net sales for fiscal year 2016 were $10.2 billion, an increase of 9 percent compared to fiscal year 2015. The Cardiac and Vascular Group’s fiscal year 2016 performance was favorably affected by an additional selling week during the first quarter of fiscal year 2016. The Cardiac and Vascular Group’s performance for fiscal year 2016 also benefited from the addition of the Covidien Peripheral business into the Aortic & Peripheral Vascular division in the fourth quarter of fiscal year 2015 and strong net sales across all three divisions.

Cardiac Rhythm & Heart Failure net sales for fiscal year 2016 were $5.5 billion, an increase of 4 percent compared to fiscal year 2015. The increase in Cardiac Rhythm & Heart Failure net sales was driven by strong growth in AF Solutions, with the continued global acceptance of our Arctic Front system. Additionally, net sales were driven by the continued adoption of the Reveal LINQ insertable cardiac monitor, and the launch of the Evera MRI SureScan ICD in the U.S. during the second quarter of fiscal year 2016, with continued strong adoption through the fourth quarter of fiscal year 2016. Net sales for the Cardiac Rhythm & Heart Failure division were also affected by continued pricing pressures.

Coronary & Structural Heart net sales for fiscal year 2016 were $3.1 billion, an increase of 2 percent compared to fiscal year 2015. Net sales were driven by the CoreValve Evolut R recapturable system in the U.S., which was launched late in the first quarter of fiscal year 2016, and a strong CoreValve launch in Japan in the fourth quarter of fiscal year 2016. In addition, net sales of Coronary & Structural Heart division were driven by drug-eluting stents, including the Resolute Onyx drug-eluting stent in Europe and the Resolute Integrity drug-eluting stent in the U.S., and the recent launches of the NC Euphora and SC Euphora balloon dilatation catheters. Net sales were partially offset by continued pricing pressures in our Coronary business.

Aortic & Peripheral Vascular net sales for fiscal year 2016 were $1.6 billion, an increase of 52 percent compared to fiscal year 2015. The Aortic & Peripheral Vascular division net sales performance benefited from the addition of the Covidien Peripheral business in the fourth quarter of fiscal year 2015. The increase in Aortic & Peripheral Vascular net sales was driven by strong growth of the IN.PACT Admiral drug-coated balloon in the U.S. and globally, continued strength in Valiant Captiva TAA stent graft sales, continued solid adoption of our Aptus Heli-FX endoanchor, and continued adoption of the Endurant IIs Abdominal Aortic Aneurysm (AAA) 3-piece system in the U.S. Net sales for the Aortic & Peripheral Vascular division were affected by increased competition in international markets and reimbursement cuts in Japan.

Looking ahead, we expect our Cardiac and Vascular Group could be affected by the following:

•	Changes in procedural volumes, competitive and pricing pressure, geographic macro-economic risks, reimbursement challenges, impacts from changes in the mix of our product offerings, the timing of product registration approvals, replacement cycle challenges, and fluctuations in currency exchange rates.

•

Integration of our acquisition of HeartWare, a leading innovator of the HeartWare Ventricular Assist System (HVAD System), to treat patients around the world suffering from advanced heart failure. The acquisition of HeartWare in August 2016 broadened the Medtronic portfolio of therapies, diagnostic tools and services for patients suffering from heart failure and is part of our therapy innovation strategy to surround the physician with innovative products while focusing on patients and disease states.

•	Acceptance and future growth of the CRT-P quadripolar pacing system, which received CE Mark approval in February 2017 and launched in Europe during the fourth quarter of fiscal year 2017. In the U.S., we received FDA approval in May 2017, and launched in the first quarter of fiscal year 2018.

•	Acceptance and future growth of the Claria MRI CRT-D system with EffectivCRT Diagnostic and Effective CRT during AF algorithm, which launched in the U.S. late in the third quarter of fiscal year 2017 and is expected to launch in Japan in fiscal year 2018.

•	Continued future growth from the Reveal LINQ insertable cardiac monitor, which launched in Japan in the second quarter of fiscal year 2017.

•

Continued future growth of our Micra transcatheter pacing system, which we started shipping and physician training in the U.S. in the first quarter of fiscal year 2017. Micra is a miniaturized single chamber pacemaker system that is delivered through the femoral vein and is implanted in the right ventricle of the heart. The system does not use a lead and does not have a subcutaneous device pocket underneath the skin as with conventional pacemaker systems. During the fourth quarter of fiscal year 2017, we received final approval for reimbursement in the U.S. from the Centers for Medicare & Medicaid Services for this transformative therapy, which we expect will accelerate sales in the U.S.

•	Continued acceptance and future growth from Care Management Services as post-acute care services become even more critical in bundled payment models for different interventions or therapies.

•	Continued acceptance and future growth from Evolut R 34mm transcatheter aortic heart valve, our next-generation recapturable system with differentiated 16 French equivalent delivery system, which was launched in the U.S. in the third quarter of fiscal year 2017.

•

Acceptance and future growth from Evolut PRO Transcatheter Aortic Valve system (Evolut PRO), which provides control during deployment to assist with accurate positioning with the ability to recapture and reposition the valve. Evolut PRO received U.S. FDA approval and launched in the fourth quarter of fiscal year 2017. Evolut PRO is expected to receive CE Mark approval and launch in Europe late summer 2017.

•

Acceptance and future growth from the market release of Resolute Onyx, which received U.S. FDA approval early in the first quarter of fiscal year 2018 and is expected to receive approval in Japan during the summer of fiscal year 2018. Resolute Onyx builds on the Resolute Integrity drug-eluting coronary stent with thinner struts to improve deliverability and is the first stent to feature our CoreWire technology, allowing greater visibility during procedures.

•	Continued acceptance and future growth of the IN.PACT Admiral drug-coated balloon, including the longer length 150mm sizes, for the treatment of peripheral artery disease in the upper leg.

•

Continued acceptance and future growth from the HawkOne 6 French (6F) for treating patients with peripheral artery disease (PAD), which launched in the U.S. in the third quarter of fiscal year 2017. The HawkOne system is designed to remove plaque from the vessel wall and restore blood flow. The new HawkOne 6F provides an effective and easy-to-use treatment option for patients with PAD both above and below the knee with a single device at a lower profile.

Minimally Invasive Therapies Group

The Minimally Invasive Therapies Group’s products span the entire continuum of care with a focus on diseases of the gastrointestinal tract, lungs, pelvic region, kidneys, obesity, and preventable complications. The products include those for advanced and general surgical care, wound closure, electrosurgery products, hernia mechanical devices, mesh implants, advanced ablation, interventional lung, ventilators, capnography, airway products, sensors, monitors, compression, dialysis, enteral feeding, wound care, and medical surgical products. The Minimally Invasive Therapies Group’s net sales for fiscal year 2017 were $9.9 billion, an increase of 4 percent compared to fiscal year 2016. Currency translation had a favorable impact on net sales of $17 million as a result of the change in exchange rates from the prior year. The Minimally Invasive Therapies Group's net sales growth in fiscal year 2017 was unfavorably affected by an additional selling week during the first quarter of fiscal year 2016. The Minimally Invasive Therapies Group's net sales for fiscal year 2017, as compared to the same period in fiscal year 2016, benefited from strong net sales in Surgical Solutions, largely due to growth in Advanced Stapling and Advanced Energy, and Patient Monitoring & Recovery, largely due to Airways and Ventilation Management, as well as the acquisition of Smith & Nephew's gynecology business in the second quarter of fiscal year 2017 and Bellco in the fourth quarter of fiscal year 2016. See the more detailed discussion of each division's performance below.

Surgical Solutions net sales for fiscal year 2017 were $5.5 billion, an increase of 5 percent compared to fiscal year 2016. Surgical Solutions net sales growth was driven by Advanced Stapling and Advanced Energy. Advanced Stapling growth resulted from strong adoption of endo stapling specialty reloads with Tri-Staple technology, growth in emerging markets and the release of the Signia power stapling system. Advanced Energy growth resulted from the launch of the LigaSure vessel sealing instruments and continued adoption of the Valleylab FT10 energy platform. The launch of new LigaSure vessel sealing instruments along with the

Valleylab FT10 energy platform helped mitigate the negative impact of reprocessing. Surgical Solutions also benefited from the acquisition of Smith & Nephew's gynecology business, which was acquired during the second quarter of fiscal year 2017.

Patient Monitoring & Recovery net sales for fiscal year 2017 were $4.4 billion, an increase of 3 percent compared to fiscal year 2016. Patient Monitoring & Recovery net sales growth was driven by strong Airways and Ventilation Management sales of the Puritan Bennett 980, strength in Patient Monitoring Nellcor pulse oximetry products, and growth in emerging markets. Patient Monitoring & Recovery also benefited from the acquisition of Bellco, which was acquired during the fourth quarter of fiscal year 2016.

Surgical Solutions net sales for fiscal year 2016 were $5.3 billion. The net sales performance in Surgical Solutions was mainly attributable to Advanced Stapling and Advanced Energy. Advanced Stapling products benefited from continued worldwide market adoption of the Endo GIA Reinforced Reload. Advanced Energy products benefited from continued strong adoption of the LigaSure Maryland Jaw and Valleylab FT10 energy platform. Further, Early Technologies product performance was driven primarily by our gastrointestinal product line.

Patient Monitoring & Recovery net sales for fiscal year 2016 were $4.3 billion. Net sales contributions in Patient Monitoring & Recovery were driven mainly by U.S. sales within Airways and Ventilation Management, Patient Monitoring, Patient Care, Nutritional Insufficiency, Deep Vein Thrombosis, and Renal Care Solutions. Airways and Ventilation Management and Patient Monitoring performance was attributable to airway products, acute ventilator sales, and sensors. Patient Care net sales results were primarily due to sales of incontinence, wound care and SharpSafety product lines and sales within our electrode products. The Nutritional Insufficiency and Deep Vein Thrombosis net sales were largely driven by sales of enteral feeding, and compression product lines. Renal Care Solutions results were primarily due to sales of dialysis products.

Looking ahead, we expect our Minimally Invasive Therapies Group could be affected by the following:

•

The planned divestiture of the Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency businesses within the Patient Monitoring & Recovery division. The transaction is expected to close in the second quarter of fiscal year 2018, subject to receipt of customary regulatory approvals and satisfaction of other customary closing conditions. Clearance from the U.S. Federal Trade Commission was obtained in May 2017. Net sales of the businesses included in the planned divestiture were $2.4 billion in fiscal years 2017 and 2016.

•	Changes in procedural volumes, competitive and pricing pressure, geographic macro-economic risks, reprocessing of our products, reimbursement challenges, impacts from changes in the mix of our product offerings, the timing of product registration approvals, and fluctuations in currency exchange rates.

•

Continued acceptance and future growth of Open-to-Minimally Invasive Surgery (MIS) techniques and tools supported by our efforts to transition open surgery to MIS. The Open to MIS initiative focuses on establishing our presence in and working to optimize open surgery globally, while capturing the market opportunity that exists in transitioning open procedures to MIS, whether through traditional MIS, or advanced technologies including robotics. To achieve this transition, we are focused on product training, surgical skill training and continued therapy innovation to advance MIS.

•	Continued acceptance and future growth of the powered stapling and energy platform.

•	Our ability to execute ongoing strategies in order to address the competitive pressure of reprocessing of our vessel sealing disposables in the U.S.

•	Our ability to create markets and drive product and procedures into emerging markets. We have high quality and cost-effective surgical products designed for customers in emerging markets such as the ValleyLab LS10 single channel vessel sealing generator, which is compatible with our line of LigaSure instruments and designed for simplified use and affordability.

•

Continued acceptance and future growth within the end stage renal disease market. The population of patients treated for end stage renal disease globally is expected to double over the next decade. We will grow our therapy innovation with scalable and affordable dialysis delivery while investing in vascular creation and maintenance technologies. Our efforts around end stage renal disease benefited from the fiscal year 2016 acquisition of Bellco, a pioneer in hemodialysis treatment solutions. In addition, the HD multi-pass system, expected to launch in fiscal year 2019, reduces infrastructure by requiring less water, less start-up costs, and offers high quality ultrapure dialysate treatment.

•	Continued elevation of the standard of care for respiratory compromise, a progressive condition impacting a patient’s ability to breathe effectively.

•

Continued acceptance and growth in Respiratory Care, Airway and Ventilation Management, Patient Monitoring, and Homecare. Key products in this area include the Puritan Bennett 980 ventilator, Microstream Capnography bedside capnography monitor, portable monitor with Nellcor pulse oximetry system with OxiMax technology and the Nellcor Respiratory Compromise monitor with vital signs of SpO2, pulse rate, End-Tidal CO2, and Respiratory Rate.

•

Continued and future acceptance of Early Technologies and creation of less invasive standards of care, including the areas of GI solutions, advanced ablation, and interventional lung solutions. Recently launched products include the PillCam COLON capsule endoscopy, the Barrx platform through ablation with the Barrx 360 Express catheter, the Emprint ablation system with Thermosphere Technology which maintains predictable spherical ablation zones throughout procedures reducing procedure time and cost, the superDimension GenCut core biopsy system and the Triple Needle Cytology Brush, a lung tissue biopsy tool for use with the superDimension navigation system. The superDimension system enables a minimally invasive approach to accessing difficult-to-reach areas of the lung, which may aid in the diagnosis of lung cancer.

•	Expanding the use of less invasive treatments and furthering our commitment to improving options for women with abnormal uterine bleeding with our fiscal year 2017 acquisition of Smith and Nephew's gynecology business. The addition expands and strengthens the surgical offerings and complements the existing global gynecology business.

Restorative Therapies Group

The Restorative Therapies Group's products focus on various areas of the spine, bone graft substitutes, biologic products, trauma, implantable neurostimulation therapies and drug delivery systems for the treatment of chronic pain, movement disorders, obsessive-compulsive disorder (OCD), overactive bladder, urinary retention, fecal incontinence and gastroparesis, as well as products to treat conditions of the ear, nose, and throat, and systems that incorporate advanced energy surgical instruments. The Restorative Therapies Group also manufactures and sells image-guided surgery and intra-operative imaging systems and therapies to treat diseases of the vasculature in and around the brain including coils, neurovascular stents and flow diversion products. The Restorative Therapies Group’s net sales for fiscal year 2017 were $7.4 billion, an increase of 2 percent as compared to fiscal year 2016. Currency translation had an unfavorable impact on net sales of approximately $1 million as a result of the change in exchange rates from the prior year. The Restorative Therapies Group's net sales were unfavorably affected by an additional selling week during the first quarter of fiscal year 2016. The Restorative Therapies Group’s performance for fiscal year 2017 was driven by solid growth in Brain and Specialty Therapies, partially offset by declines in Pain Therapies. See the more detailed discussion of each division's performance below.

Spine net sales for fiscal year 2017 were $2.6 billion, flat compared to fiscal year 2016. Spine net sales were driven by growth in BMP due to strong U.S. sales, offset by declines in Europe due to the InductOs stop shipment due to suspension in the E.U. Core Spine had net sales growth in the U.S due to new product launches including the Solera Voyager and Elevate expandable cage in conjunction with the "Speed to Scale" initiative, which involves faster innovation cycles and launching a steady cadence of new products at scale with sets immediately available for the entire market, and growth in implants due to the success of our Surgical Synergy strategy, offset by market softness in Europe and the Middle East driven by the macro-economic conditions. InductOs returned to the European market in the first quarter of fiscal year 2018.

Brain Therapies net sales for fiscal year 2017 were $2.1 billion, an increase of 6 percent as compared to fiscal year 2016. The increase in net sales was driven by strong growth in both Neurovascular and Neurosurgery. Neurovascular net sales growth was driven by growth in coils from the Axium Prime Extra Soft detachable coil, growth in flow diversion from the Pipeline Flex embolization device, and growth in stents due to the Solitaire revascularization device, partially offset by declines due to a voluntary recall of certain product lines in the second quarter. Neurosurgery net sales growth was driven by strong sales of navigation capital equipment, disposables, and the O-arm O2 surgical imaging system. Despite competitive pressure, Brain Modulation drove net sales growth with U.S. sales of the MR Conditional Activa DBS portfolio and through updated Parkinson’s Disease labeling for patients with Recent Onset of Motor Complications.

Specialty Therapies net sales for fiscal year 2017 were $1.5 billion, an increase of 5 percent as compared to fiscal year 2016. The increase in net sales was driven by strong growth in Advanced Energy and Pelvic Health and growth in ENT. Net sales growth in Advanced Energy was driven by the sales of the Aquamantys Transcollation and PEAK PlasmaBlade products. Net sales growth in Pelvic Health was driven by strong InterStim implant growth in the U.S. Net sales growth in ENT continues to benefit from strong adoption of new products, including NuVent balloons and Fusion Compact navigation.

Pain Therapies net sales for fiscal year 2017 were $1.1 billion, a decrease of 4 percent as compared to fiscal year 2016. The decrease in net sales was driven by declines in sales of spinal cord stimulation products due to competitive pressures in the U.S., partially offset by growth in Interventional from the OsteoCool RF Spinal Tumor ablation system.

Spine net sales for fiscal year 2016 were $2.6 billion, a decrease of 1 percent compared to fiscal year 2015. The decrease in Spine net sales was driven by declines in Core Spine partially offset by growth in BMP (composed of INFUSE bone graft (InductOs in the E.U.)) in the U.S. The U.S. Core Spine market grew in the low-single digits, with modest procedural growth offset by continued pricing pressures. During fiscal year 2016, new product introductions across several procedures resulted in a sequential improvement in the Core Spine growth rate. We saw incremental revenue from our differentiated OLIF procedures, as well as from the recent Solera, Voyager, Elevate, and PTC Interbody launches for TLIF and MIDLF procedures. In Core Spine, we are realized some early benefits from our "Speed to Scale" initiative, which accelerates innovation and enables rapid deployment of these products and procedures to the market. In BMP, strong growth in the U.S. was offset by declines in international BMP due to the InductOs stop shipment in Europe.

Brain Therapies net sales for fiscal year 2016 were $2.0 billion, an increase of 34 percent compared to fiscal year 2015. The growth rate reflected the addition of the Neurovascular division as a result of the Covidien acquisition in the fourth quarter of fiscal year 2015. Neurovascular contributed revenue from the strength of its coils, stents, flow diversion, and access product lines and the Solitaire FR mechanical thrombectomy device delivered strong results, solidifying our leadership position in the rapidly expanding ischemic stroke market. Additionally, our flow diversion products for the treatment of intracranial aneurysms, Pipeline Flex in the U.S. and Japan and Pipeline Shield in Europe, continued to lead the market. Neurosurgery contributed revenue from growth of the O-arm imaging systems. Growth in Neurovascular and Neurosurgery was partially offset by declines in DBS due to competitive headwinds.

Specialty Therapies net sales for fiscal year 2016 were $1.4 billion, an increase of 6 percent compared to fiscal year 2015. The increase in net sales was driven by continued worldwide net sales growth across the portfolio of Advanced Energy, Pelvic Health, and ENT. Performance was driven by strong growth of power systems, Aquamantys Transcollation, and PEAK PlasmaBlade technologies, as well as solid implant growth of our InterStim therapy for overactive bladder, urinary retention, and bowel incontinence.

Pain Therapies net sales for fiscal year 2016 were $1.2 billion, a decrease of 6 percent compared to fiscal year 2015. Net sales declined for Drug Pumps and Pain Stimulation. In Drug Pumps, the business was negatively affected by challenges related to its April 2015 U.S. FDA consent decree, as well as the January divestiture of its intrathecal baclofen drug. In Pain Stimulation, declines were driven by increased competition in the market. Interventional spine net sales also declined driven by continued pricing pressures.

Looking ahead, we expect our Restorative Therapies Group could be affected by the following:

•	Changes in procedural volumes, competitive and pricing pressure, geographic macro-economic risks, reimbursement challenges, impacts from changes in the mix of our product offerings, the timing of product registration approvals, and fluctuations in currency exchange rates.

•	Continued market acceptance of our new integrated solutions through the Surgical Synergy program, which integrates our spinal implants and imaging and navigation equipment.

•	Continued success of "Speed to Scale" program product launches, which involves faster innovation cycles and launching a steady cadence of new products at scale with sets immediately available for the entire market.

•	Market acceptance and continued global adoption of innovative new Spine products, such as our CD Horizon Solera Voyager system, our ELEVATE expandable interbody cages, and our OLIF25 and OLIF51 procedural solutions and the return of the InductOs products to European markets in the first quarter of fiscal year 2018.

•	Growth in the broader vertebral compression fracture (VCF) and adjacent markets, as we continue to pursue the development of other therapies to treat more patients with VCF, including continued success of both the Kyphon V vertebroplasty system and the OsteoCool RF Spinal Tumor ablation system.

•	Acceptance of Kanghui's broad portfolio of trauma, spine, and large-joint reconstruction products focused on the growing global value segment.

•	Continued acceptance and adoption rates of stimulators and leads approved to treat chronic pain in major markets around the world.

•	Ongoing obligations under the U.S. FDA consent decree entered in April 2015 relating to the SynchroMed drug infusion system and the Neuromodulation quality system.

•	Continued and future acceptance of our current indications for Medtronic DBS Therapy for the treatment of movement disorders, epilepsy (approved in Europe), and OCD. The DBS Therapy portfolio includes Activa

PC, our small and advanced primary cell battery, and Activa RC, a rechargeable DBS device. We anticipate continued competitive pressures in Europe and the U.S.

•	Continued acceptance and growth of our Specialty Therapies, including InterStim therapy for the treatment of the symptoms of overactive bladder, urinary retention, and bowel incontinence, and Advanced Energy products and strategies to focus on its four core markets of orthopedic, spine, breast surgery, and Cardiac Rhythm Disease Management device replacements.

•

Continued growth from Neurosurgery StealthStation and O-Arm Imaging Systems, Midas and ENT power systems, and intraoperative nerve monitoring during surgical procedures utilizing the NIM-Response 3.0 during head and neck surgical procedures, including launch of the StealthStation S8 surgical navigation system. Additionally, continued growth in nerve monitoring utilizing the NIM Eclipse system during spinal surgical procedures.

•	Continued acceptance and growth of the Solitare FR revascularization device for treatment of acute ischemic stroke and the Pipeline Flex Embolization Devices, endovascular treatments for large or giant wide-necked brain aneurysms.

•	Continued successful placement of robotic units and associated market adoption of robot-assisted spine procedures, under a co-promotion agreement with Mazor Robotics.

Diabetes Group

The Diabetes Group's products include insulin pumps, continuous glucose monitoring (CGM) systems, insulin pump consumables, and therapy management software. The Diabetes Group’s net sales for fiscal year 2017 were $1.9 billion, an increase of 3 percent as compared to fiscal year 2016, and were unfavorably affected by an additional selling week during the first quarter of fiscal year 2016. Currency translation had an unfavorable impact on net sales for fiscal year 2017 of $13 million as a result of the change in exchange rates from the prior year. The Diabetes Group's net sales for fiscal year 2017 benefited from growth in both the U.S. and international markets due to strong U.S. sales of the MiniMed 630G system and interest in the Priority Access Program for the MiniMed 670G hybrid closed loop system, as well as strong international sales in Europe, Latin America, and Asia Pacific of the MiniMed 640G system with the Enhanced Enlite sensor.

The Diabetes Group’s net sales for fiscal year 2016 were $1.9 billion, an increase of 6 percent over fiscal year 2015, and were favorably affected by the additional selling week during the first quarter of fiscal year 2016. The increase in net sales was primarily driven by the MiniMed 530G system with Enlite sensor, along with strong performance in international markets by the MiniMed 640G.

Looking ahead, we expect our Diabetes Group could be affected by the following:

•	Competitive and pricing pressure, reimbursement challenges, impacts from changes in the mix of our product offerings, the timing of product registration approvals, and fluctuations in currency exchange rates.

•	Continued acceptance and growth in international markets of the MiniMed 630G system, which includes the insulin pump and Enlite CGM sensor. This system launched in the U.S. in August 2016 and combines proprietary SmartGuard technology featured in the MiniMed 530G system with a brand new hardware platform and user-friendly design.

•	Acceptance and future growth of the MiniMed 670G system, the first hybrid closed loop system in the world. The system features our most advanced SmartGuard HCL algorithm, which enables improved glucose control with reduced user input. The MiniMed 670G system received U.S. FDA approval during the second quarter of fiscal year 2017 and launched in the U.S. in June 2017.

•	Changes in medical reimbursement policies and programs, along with payor coverage of the MiniMed 670G system.

•	Continued acceptance and future growth of the MiniMed 640G with SmartGuard predictive low-glucose management, which has launched in Europe, Australia, and select Latin America countries, and the MiniMed 620G, the first integrated system customized for the Japanese market.

•	Continued acceptance and future growth of Guardian Connect continuous glucose monitoring (CGM) system which displays information directly to a smartphone, and received CE mark in 2016 and has launched internationally, with an expected U.S. launch in the second half of fiscal year 2018.

•	Continued partnership with UnitedHealthcare as the preferred in-network provider of insulin pumps, giving their members access to our advanced diabetes technology and comprehensive support services.

OPERATIONS BY MARKET GEOGRAPHY

The charts below illustrate net sales by market geography for fiscal years 2017, 2016, and 2015:

The table below illustrates net sales by market geography for each of our operating segments for fiscal years 2017, 2016, and 2015:

	Fiscal Year 2017												Fiscal Year 2016												Fiscal Year 2015
(in millions)	U.S.(1)				Non-U.S. Developed Markets(2)				Emerging Markets(3)				U.S.(1)				Non-U.S. Developed Markets(2)				Emerging Markets(3)				U.S.(1)				Non-U.S. Developed Markets(2)				Emerging Markets(3)
Cardiac and Vascular Group	$	5,454			$	3,393			$	1,651			$	5,347			$	3,283			$	1,566			$	4,435			$	3,412			$	1,514
Minimally Invasive Therapies Group	5,049				3,479				1,391				5,014				3,299				1,250				1,230				856				301
Restorative Therapies Group	5,012				1,588				766				4,921				1,542				747				4,569				1,556				626
Diabetes Group	1,148				625				154				1,140				584				140				1,071				548				143
Total	$	16,663			$	9,085			$	3,962			$	16,422			$	8,708			$	3,703			$	11,305			$	6,372			$	2,584

(1)	U.S. includes the United States and U.S. territories

(2)	Non-U.S. developed markets include Japan, Australia, New Zealand, Korea, Canada, and the countries of Western Europe

(3)	Emerging markets include the countries of the Middle East, Africa, Latin America, Eastern Europe, and the countries of Asia that are not included in the non-U.S. developed markets, as defined above

For fiscal year 2017, net sales for the U.S. increased 1 percent, developed markets outside the U.S. increased 4 percent, and emerging markets increased 7 percent compared to fiscal year 2016. Net sales growth across all markets was driven by meaningful product launches and introduction of groundbreaking new technologies, partially offset by an unfavorable impact of an additional selling week during the first quarter of fiscal year 2016. Net sales growth in the U.S. was led by strong growth in the Cardiac and Vascular Group and Minimally Invasive Therapies Group and solid growth in the Restorative Therapies Group and Diabetes. In Emerging Markets, net sales growth was also attributable to the expansion of access to our therapies.

For fiscal year 2016, net sales for the U.S increased 45 percent, non-U.S. developed markets increased 37 percent, and emerging markets increased 43 percent over fiscal year 2015. The growth in all markets was primarily driven by the addition of Minimally Invasive Therapies Group net sales totaling $9.6 billion for fiscal year 2016 and was also favorably affected by an additional selling week during the first quarter of fiscal year 2016. Net sales growth in the U.S. was led by strong growth in the Cardiac and Vascular Group and solid growth in the Restorative Therapies Group and Diabetes.

Net sales in non-U.S. developed and emerging markets are accompanied by certain financial risks, such as changes in currency exchange rates and collection of receivables, which typically have longer payment terms. We monitor the creditworthiness of our customers to which we grant credit terms in the normal course of business. However, a significant amount of our outstanding

accounts receivable are with international customers. We continue to monitor the economic conditions and the average length of time it takes to collect our outstanding accounts receivable from our international customers. Although we do not currently foresee a significant credit risk associated with a material portion of these receivables, repayment is dependent upon the financial stability of the economies of the countries we serve.

COSTS AND EXPENSES

Cost of Products Sold

	Fiscal Year
(in millions)	2017				2016				2015
Net sales	$	29,710			$	28,833			$	20,261
Cost of products sold	9,291				9,142				6,309
Gross profit	$	20,419			$	19,691			$	13,952
Gross margin percent	68.7		%		68.3		%		68.9		%

We continue to focus on reducing our costs of products sold, thus increasing gross profit, through supply chain management and changes to our manufacturing network. Gross margin percent was 68.7 percent, 68.3 percent, and 68.9 percent in fiscal years 2017, 2016, and 2015, respectively. Gross margin percent in fiscal years 2017 and 2016 decreased as compared to the same period in fiscal year 2015 largely due to the change in product mix as a result of the Covidien acquisition in the fourth quarter of fiscal year 2015. Gross margin percent changes in fiscal years 2017 and 2016 as compared to the same periods in the respective prior fiscal year were also affected by a $38 million charge during fiscal year 2017 related to the recognition of the fair value step-up of acquired Heartware inventory, as compared to a $226 million charge and $623 million charge during fiscal years 2016 and 2015, respectively, related to the recognition of the fair value step-up of acquired Covidien inventory.

Research and Development & Selling, General, and Administrative Expense

The following is a summary of research and development and selling, general, and administrative expenses as a percent of net sales:

	Fiscal Year
	2017			2016			2015
Research and development expense	7.4	%		7.7	%		8.1	%
Selling, general, and administrative expense	32.7	%		32.8	%		34.1	%

Research and Development We remain committed to accelerating the development of meaningful innovations to deliver better patient outcomes at appropriate costs, that lead to enhanced quality of life, and may be validated by clinical and economic evidence. We are also focused on expanding access to quality healthcare.

Research and development expense for both fiscal years 2017 and 2016 was $2.2 billion, as compared to $1.6 billion in fiscal year 2015. Research and development expense decreased slightly as a percentage of net sales over the three-year period due, in part, to the timing of clinical trials and product approvals. During fiscal year 2017, we continued to invest in new technologies to support our mission through continued product growth.

Selling, General, and Administrative Our goal is to continue to leverage selling, general, and administrative expense initiatives and to continue to realize cost synergies expected from our acquisitions. Selling, general, and administrative expense primarily consist of salaries and wages, as well as other administrative costs such as professional fees and marketing expenses.

Selling, general, and administrative expense was $9.7 billion, $9.5 billion, and $6.9 billion during fiscal years 2017, 2016, and 2015, respectively. Selling, general, and administrative expense remained fairly flat as a percentage of net sales from fiscal year 2016 to 2017, with a slight decrease due to cost savings associated with selling, general, and administrative expense initiatives. We continue to execute on our cost synergies from the Covidien acquisition and transition to centers of excellence in our enabling functions.

Other Costs and Expenses

	Fiscal Year
(in millions)	2017				2016				2015
Special charge (gain), net	$	100			$	70			$	(38	)
Restructuring charges, net	363				290				237
Certain litigation charges	300				26				42
Acquisition-related items	220				283				550
Amortization of intangible assets	1,980				1,931				733
Other expense, net	222				107				118
Interest expense, net	728				955				280

Special Charge During fiscal year 2017, in continuing our commitment to improve the health of people and communities throughout the world, we made a $100 million charitable cash contribution to meet the multi-year funding needs of the Medtronic Foundation, a related party non-profit organization.

During fiscal year 2016, we recognized special charges of $70 million in connection with the impairment of a debt investment.

During fiscal year 2015, we recognized special gains of $138 million, which consisted of a $41 million gain on the sale of a product line in the ENT division and a $97 million gain on the sale of an equity method investment. These special gains were partially offset by a $100 million charitable contribution that we made to the Medtronic Foundation.

Restructuring Charges We incur restructuring charges in connection with our cost-reduction and productivity initiatives or with acquisitions when we implement plans to restructure and integrate the acquired operations. Amounts recognized as restructuring charges result from a series of judgments and estimates about future events and uncertainties and rely heavily on assumptions upon implementation of the initiative programs.

We began our restructuring program related to the acquisition of Covidien, the cost synergies initiative, in the fourth quarter of fiscal year 2015. We anticipate approximately $850 million in cost synergies to be achieved as a result of the Covidien acquisition through fiscal year 2018, including administrative office optimization, manufacturing and supply chain infrastructure, and certain general and administrative savings. Restructuring charges are expected to be incurred in future fiscal years as cost synergy initiatives are finalized. Restructuring charges are expected to be primarily related to employee termination costs and costs related to manufacturing and facility closures.

Our restructuring reserve balances at April 28, 2017, April 29, 2016, and April 24, 2015 were $291 million, $250 million, and $143 million, respectively. During fiscal years 2017, 2016, and 2015, we recognized restructuring charges of $441 million, $332 million, and $248 million, respectively. For fiscal year 2017, the restructuring charges included $73 million of incremental defined benefit pension and post-retirement related expenses for employees that accepted voluntary early retirement packages. For further discussion on the incremental defined benefit pension and post-retirement related expenses, see Note 17 to the consolidated financial statements in “Item 8. Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.

The restructuring charges during fiscal years 2017 and 2016 were partially offset by reversals of excess restructuring reserves of $68 million and $18 million, respectively. Reversals of restructuring reserves relate to certain employees identified for termination finding other positions within the Company, cancellations of employee terminations, and employee termination costs being less than initially estimated. For fiscal years 2017, 2016, and 2015, restructuring charges of $10 million, $9 million, and $15 million, respectively, were recognized within cost of products sold in the consolidated statements of income.

For additional information, see Note 4 to the consolidated financial statements in “Item 8. Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.

Certain Litigation Charges We classify litigation charges and gains related to significant legal proceedings as certain litigation charges. During the fiscal years 2017, 2016, and 2015, we recognized $300 million, $26 million, and $42 million, respectively, of certain litigation charges related to probable and estimable damages.

For additional information, see Note 20 to the consolidated financial statements in “Item 8. Financial Statements and Supplementary Data” in this Annual Report on Form 10-K for additional information.

Acquisition-Related Items During fiscal year 2017, we recognized acquisition-related items expense of $230 million, including $10 million recognized within cost of products sold in the consolidated statements of income. Acquisition-related items expenses

primarily include integration-related expenses incurred in connection with the Covidien acquisition. The expenses incurred in connection with the Covidien acquisition include $225 million of professional services and integration expenses and $23 million of accelerated or incremental stock compensation expense. Acquisition-related items expense also includes expenses incurred in connection with the HeartWare acquisition and planned divestiture of a portion of the Patient Monitoring and Recovery business, partially offset by the change in fair value of contingent consideration as a result of revised revenue forecasts and the timing of anticipated regulatory milestones.

During fiscal year 2016, we recognized acquisition-related items expense of $283 million, primarily related to expenses incurred in connection with the Covidien acquisition. The expenses incurred in connection with the Covidien acquisition include $219 million of professional services and integration expenses and $58 million of accelerated or incremental stock compensation expense.

During fiscal year 2015, we recognized charges from acquisition-related items of $550 million, primarily related to expenses incurred in connection with the Covidien acquisition. The expenses incurred in connection with the Covidien acquisition include $275 million of professional services and integration expenses, $189 million of accelerated or incremental stock compensation expense, and $69 million of incremental officer and director excise tax.

Amortization of Intangible Assets Amortization of intangible assets includes the amortization expense of our definite-lived intangible assets, consisting of purchased patents, trademarks, tradenames, customer relationships, and purchased technology. Amortization expense was $2.0 billion, $1.9 billion, and $733 million in fiscal years 2017, 2016, and 2015, respectively. The increase in amortization expense from fiscal year 2016 to fiscal year 2017 is primarily due to the acquisition of amortizable intangible assets as a result of the acquisition of HeartWare. The increase in amortization expense from fiscal year 2015 to fiscal year 2016 is primarily due to recognizing a full year of amortization of the intangible assets acquired with Covidien in the fourth quarter of fiscal year 2015.

Other Expense, Net Other expense, net includes royalty income and expense, realized equity security gains and losses, currency transaction and derivative gains and losses, impairment charges on equity securities, Puerto Rico excise tax, and U.S. medical device excise tax. In fiscal year 2017, other expense, net was $222 million as compared to $107 million in fiscal year 2016. The largest contributor to the change in other expense, net was a decrease in net currency gains, partially offset by the decrease in U.S. medical device tax due to the suspension of the U.S. medical device tax beginning January 1, 2016. Total net currency gains recognized in other expense, net were $81 million in fiscal year 2017 compared to gains of $314 million in fiscal year 2016.

In fiscal year 2016, other expense, net was $107 million, a decrease of $11 million from $118 million in fiscal year 2015. The largest contributor to the change in other expense, net was was an increase in net currency gains, partially offset by increased royalty expense within Minimally Invasive Therapies Group. Total net currency gains recognized in other expense, net were $314 million in fiscal year 2016 compared to gains of $196 million in fiscal year 2015.

Interest Expense, Net Interest expense, net includes interest earned on our cash, cash equivalents and investments, interest incurred on our outstanding borrowings, amortization of debt issuance costs and debt discounts, and ineffectiveness on interest rate derivative instruments. In fiscal year 2017, interest expense, net was $728 million compared to $955 million in fiscal year 2016. The decrease in interest expense, net for fiscal year 2017 was the result of a $183 million charge recorded in connection with the cash tender offer and redemption of certain debt securities in fiscal year 2016 and a $45 million loss on interest rate swaps which were entered into in advance of a planned debt issuance that was no longer anticipated in fiscal year 2016.

In fiscal year fiscal year 2016, interest expense, net was $955 million compared to $280 million in fiscal year 2015. The increase in interest expense, net for fiscal year 2016 was driven by an increase in total debt, primarily resulting from the Covidien acquisition, a $183 million charge recorded in connection with the cash tender offer and redemption of certain debt securities, and a $45 million loss on interest rate swaps which were entered into in advance of a planned debt issuance that was no longer anticipated in fiscal year 2016.

INCOME TAXES

	Fiscal Year
(in millions)	2017				2016				2015
Provision for income taxes	$	578			$	798			$	811
Income from operations before taxes	4,602				4,336				3,486
Effective tax rate	12.6		%		18.4		%		23.3		%
Non-GAAP provision for income taxes	$	1,232			$	1,171			$	1,055
Non-GAAP income from operations before taxes	7,623				7,399				5,799
Non-GAAP Nominal Tax Rate	16.2		%		15.8		%		18.2		%
Difference between the effective tax rate and Non-GAAP Nominal Tax Rate	3.6		%		(2.6		)%		(5.1		)%

Our effective tax rate for fiscal year 2017 was 12.6 percent compared to 18.4 percent in fiscal year 2016. The decrease in our effective tax rate for fiscal year 2017 as compared to fiscal year 2016 was due to the net tax impact of inventory step-up, debt tender premium, certain litigation payments, certain tax adjustments, operational tax benefits described below, and year-over-year changes in operational results by jurisdiction.

Our Non-GAAP Nominal Tax Rate for fiscal year 2017 was 16.2 percent compared to 15.8 percent in fiscal year 2016. The increase in our Non-GAAP Nominal Tax Rate for fiscal year 2017 as compared to fiscal year 2016 was primarily due to operational tax benefits and year-over-year changes in operational results by jurisdiction.

During fiscal year 2017, we recognized $95 million of operational tax benefits. The operational tax benefits included a $44 million benefit from the reversal of a valuation allowance associated with foreign net operating losses and a $51 million net benefit associated with the resolution of certain income tax audits, finalization of certain tax returns, changes to uncertain tax position reserves, and changes to certain deferred income tax balances.

Our effective tax rate for fiscal year 2016 was 18.4 percent compared to 23.3 percent in fiscal year 2015. The decrease in our effective tax rate was due to the net tax impact of inventory step-up, debt tender premium, acquisition-related items, certain tax adjustments, amortization of intangible assets, the impact from the acquisition of Covidien, operational tax benefits described below, and year-over-year changes in operational results by jurisdiction.

Our Non-GAAP Nominal Tax Rate for fiscal year 2016 was 15.8 percent compared to 18.2 percent in fiscal year 2015. The decrease in our Non-GAAP Nominal Tax Rate for fiscal year 2016 as compared to fiscal year 2015 was primarily due to the impact of the Covidien acquisition, operational tax benefits, and year-over-year changes in operational results by jurisdiction.

During fiscal year 2016, we recognized $97 million of operational tax benefits. The retroactive renewal and extension of the U.S. federal research and development tax credit resulted in a $16 million operational tax benefit for fiscal year 2016. In addition, we recognized a $40 million benefit from the reversal of a valuation allowance associated with foreign net operating losses and a $41 million net benefit associated with the resolution of certain income tax audits, finalization of certain tax returns, and changes to uncertain tax position reserves.

An increase in our Non-GAAP Nominal Tax Rate of 1 percent would result in an additional income tax provision for fiscal years 2017, 2016, and 2015 of approximately $76 million, $74 million, and $58 million, respectively.

Certain Tax Adjustments

During fiscal year 2017, we recognized certain tax adjustments of $202 million, which included the following:

•

A charge of $404 million associated with the IRS resolution for the Ardian, CoreValve, Inc., Ablation Frontiers, Inc., PEAK Surgical, Inc. and Salient Surgical Technologies, Inc. acquisition-related issues and the allocation of income between Medtronic, Inc. and its wholly owned subsidiary operating in Puerto Rico for certain businesses. This resolution does not include the businesses that are the subject of the Medtronic, Inc. U.S. Tax Court case for fiscal years 2005 and 2006.

•	A net charge of $125 million associated with the expected divestiture of a portion of our Patient Monitoring & Recovery division to Cardinal Health. 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.

•	A charge of $86 million associated with the IRS’s disallowance of the utilization of certain net operating losses, along with the recognition of a valuation allowance against the net operating loss deferred tax asset, was recognized during the year.

•	A charge of $18 million as a result of the redemption of an intercompany minority interest during the year.

•	A benefit of $431 million as the result of the resolution of Covidien's previously disclosed Tyco International plc intercompany debt issues with the U.S. Tax Court and the Appeals Division of the IRS.

The $202 million net certain tax adjustment was recognized in provision for income taxes in the consolidated statement of income for fiscal year 2017.

During fiscal year 2016, we recognized certain tax adjustments of $417 million, which included the following:

•

A charge of $442 million primarily related to the U.S. income tax expense resulting from our completion of an internal reorganization of the ownership of certain legacy Covidien businesses that reduced the cash and investments held by our U.S.-controlled non-U.S. subsidiaries (the Internal Reorganization). As a result of the Internal Reorganization, approximately $9.7 billion of cash, cash equivalents and investments in marketable debt and equity securities previously held by U.S.-controlled non-U.S. subsidiaries became available for general corporate purposes.

•	A $25 million tax benefit associated with the disposition of a wholly owned U.S. subsidiary.

The $417 million net certain tax adjustment was recognized in provision for income taxes in the consolidated statement of income for fiscal year 2016.

During fiscal year 2015, we recognized certain tax adjustments of $349 million, which included the following:

•	A charge of $329 million related to the resolution of the Kyphon Inc. (Kyphon) acquisition-related issues with the U.S. Internal Revenue Service (IRS).

•	A charge of $20 million related to a taxable gain associated with the Covidien acquisition.

The $349 million certain tax adjustment was recognized in provision for income taxes in the consolidated statement of income for fiscal year 2015.

Certain tax adjustments will affect the comparability of our operating results between periods. Therefore, we consider these Non-GAAP Adjustments. Refer to the "Executive Level Overview" section of this Management's Discussion and Analysis for further analysis related to these adjustments.

LIQUIDITY AND CAPITAL RESOURCES

(in millions)	April 28, 2017				April 29, 2016
Working capital	$	10,316			$	16,435
Current ratio(1)	1.7:1.0				3.3:1.0
Cash, cash equivalents, and current investments	$	13,708			$	12,634
Current debt obligations and long-term debt	33,441				31,102

(1)	The ratio of current assets to current liabilities, excluding current assets and current liabilities held for sale at April 28, 2017.

We believe our balance sheet and liquidity provide us with flexibility in the future. Approximately $6 billion of our cash, cash equivalents, and investments held by certain U.S.-controlled non-U.S. subsidiaries may not represent available liquidity for general corporate purposes. However, we believe our other existing cash, cash equivalents and investments, as well as our $3.5 billion revolving credit facility and related commercial paper program ($901 million outstanding at April 28, 2017), will satisfy our foreseeable operating needs for at least the next 12 months, including repayment of current debt obligations. We regularly review our capital needs and consider various investing and financing alternatives to support our requirements.

In March 2017, Medtronic Luxco issued two tranches of Senior Notes with an aggregate face value of $1.850 billion, resulting in cash proceeds of approximately $1.850 billion, net of premiums, discounts, and issuance costs. The first tranche consisted of $1.0 billion of 1.700 percent Senior Notes due 2019. The second tranche consisted of $850 million of 3.350 percent Senior Notes due 2027. Concurrent with the offering by Medtronic Luxco, Medtronic, Inc. issued $150 million in principal amount of its 4.625 percent Senior Notes due 2045 (the Reopening Notes). The Reopening Notes are a further issuance of, and form a single series

with, the $4.0 billion principal amount of the previously outstanding 4.625 percent Senior Notes due 2045. We intend to use the net proceeds for general corporate purposes.

In April 2016, we completed a cash tender offer and redemption of $2.7 billion of senior notes for $3.0 billion of total consideration. We recognized a loss on debt extinguishment of $163 million, which included cash premiums and accelerated amortization of deferred financing costs and debt discounts and premiums. The loss on debt extinguishment was recognized in interest expense in the consolidated statement of income. In addition to the loss on debt extinguishment, we recognized $20 million of interest expense due to the acceleration of net losses on forward starting interest rate derivatives, which were terminated at the time of original debt issuances, relating to the portion of debt extinguished in the tender offer.

		Agency Rating (1)
		April 28, 2017		April 29, 2016
Standard & Poor's Ratings Services
Long-term debt		A		A
Short-term debt		A-1		A-1
Moody's Investors Service
Long-term debt		A3		A3
Short-term debt		P-2		P-2

(1)	Agency ratings are subject to change, and there may be no assurance that an agency will continue to provide ratings and/or maintain its current ratings. A security rating is not a recommendation to buy, sell or hold securities, and may be subject to revision or withdrawal at any time by the rating agency, and each rating should be evaluated independently of any other rating.

Standard & Poor's Ratings Services (S&P) and Moody's Investors Service (Moody's) long-term debt ratings and short-term debt ratings at April 28, 2017 were unchanged as compared to the ratings at April 29, 2016. We do not expect the S&P and Moody's ratings to have a significant impact on our liquidity or future flexibility to access additional liquidity given our balance sheet and our $3.5 billion revolving credit facility and related commercial paper program, discussed above and within the “Debt and Capital” section of this Management's Discussion and Analysis.

We have future contractual obligations and other minimum commercial commitments that are entered into in the normal course of business. We believe our off-balance sheet arrangements do not have a material current or anticipated future effect on our consolidated earnings, financial position, and/or cash flows.

Note 20 to the consolidated financial statements in “Item 8. Financial Statements and Supplementary Data” in this Annual Report on Form 10-K provides information regarding amounts we have accrued related to significant legal proceedings. In accordance with U.S. GAAP, we record a liability in our consolidated financial statements for these matters when a loss is known or considered probable and the amount may be reasonably estimated. Actual settlements may be different than estimated and could have a material impact on our consolidated earnings, financial position, and/or cash flows.

We record tax liabilities in our consolidated financial statements for amounts that we expect to repatriate from subsidiaries (to the extent the repatriation would be subject to tax); however, no tax liabilities are recorded for amounts that we consider to be permanently reinvested. Our current plans do not foresee a need to repatriate funds that are designated as permanently reinvested in order to fund our operations or meet currently anticipated liquidity and capital investment needs. However, we evaluate our legal entity structure supporting our business operations, and to the extent such evaluation results in a change to our overall business structure, we may be required to accrue for additional tax obligations

We have investments in marketable debt securities that are classified and accounted for as available-for-sale. Our debt securities include U.S. government and agency securities, corporate debt securities, mortgage-backed securities, other asset-backed securities, debt funds, and auction rate securities. Some of our investments may experience reduced liquidity due to changes in market conditions and investor demand. Our auction rate security holdings continue to experience reduced liquidity due to low investor demand. Although our auction rate securities are currently illiquid and other securities could become illiquid, we believe we could liquidate a substantial amount of our portfolio without incurring a material impairment loss.

For fiscal year 2017, the total other-than-temporary impairment losses on available-for-sale debt securities were not significant. Based on our assessment of the credit quality of the underlying collateral and credit support available to each of the remaining securities in which we are invested, we believe we have recognized all necessary other-than-temporary impairments as we do not have the intent to sell, nor is it more likely than not that we will be required to sell, before recovery of the amortized cost. However, at April 28, 2017, we have $242 million of gross unrealized losses on our aggregate current and non-current available-for-sale debt securities of $8.7 billion. If market conditions deteriorate, some of these holdings may experience other-than-temporary

impairment in the future which could adversely impact our financial results. Management is required to use estimates and assumptions in its valuation of our investments, which requires a high degree of judgment, and therefore, actual results could differ materially from those estimates. See Note 6 to the consolidated financial statements in “Item 8. Financial Statements and Supplementary Data” in this Annual Report on Form 10-K for additional information regarding fair value measurements.

Summary of Cash Flows

	Fiscal Year
(in millions)	2017				2016				2015
Cash provided by (used in):
Operating activities	$	6,880			$	5,218			$	4,902
Investing activities	(1,571		)		2,245				(17,058		)
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

Operating Activities The $1.7 billion increase in net cash provided by operating activities in fiscal year 2017 as compared to fiscal year 2016 was primarily attributable to an increase in accounts receivable collections, as well as a decrease in cash paid for income taxes and interest of $350 million and $132 million, respectively, and a $191 million payment in fiscal year 2016 related to the Covidien tax sharing agreement. The increase in cash from accounts receivable was primarily attributable to an increase in revenue. The decrease in cash paid for income taxes was primarily a result of payments made for the resolution of the Kyphon acquisition-related matters, as well as Covidien income tax extension payments in fiscal year 2016. We did not make any significant tax audit settlement payments or significant extension payments in fiscal year 2017. The decrease in cash paid for interest was the result of less debt, on average, in fiscal year 2017 as compared to fiscal year 2016.

The $316 million increase in net cash provided by operating activities in fiscal year 2016 as compared to fiscal year 2015 was primarily attributable to an increase in net income before depreciation and amortization, loss on debt extinguishment, and acquisition-related items of $2.1 billion and a decrease in certain litigation payments of $469 million, partially offset by an increase in cash paid for incomes taxes and interest of $747 million and $688 million, respectively. The increase in cash paid for income taxes was primarily a result of the settlement payments made for the resolution of the Kyphon acquisition-related matters, Covidien income tax extension payments, and the impacts from the full year of Covidien results. The increase in cash paid for interest was primarily the result of a full year of interest payments on the Senior Notes and Term Loan issued in fiscal year 2015 primarily to fund the Covidien acquisition as well as the interest payments on the outstanding debt assumed as part of the Covidien acquisition. The increase in net cash provided by operating activities was also higher due to the impact of a full year of operations post-Covidien acquisition.

Investing Activities The $3.8 billion increase in net cash used in investing activities in fiscal year 2017 as compared to fiscal year 2016 was primarily attributable to a decrease in net proceeds from purchases and sales and maturities of investments in fiscal year 2017.

The $19.3 billion increase in net cash provided by investing activities in fiscal year 2016 as compared to fiscal year 2015 was primarily attributable to the Covidien acquisition in fiscal year 2015, as well as an increase in the net proceeds from purchases and sales of investments in fiscal year 2016.

Financing Activities The $6.3 billion decrease in net cash used in financing activities in fiscal year 2017 as compared to fiscal year 2016 was primarily attributable to the issuance of $2.0 billion of Senior Notes, an increase in commercial paper borrowings, and lower payments on maturing and extinguished debt, partially offset by increases in dividends to shareholders and repurchases of ordinary shares.

The $25.4 billion increase in net cash used in financing activities in fiscal year 2016 as compared to fiscal year 2015 was primarily attributable to higher issuances of debt in fiscal year 2015, primarily related to the Covidien acquisition. Further contributing to the increase in net cash used in financing activities in fiscal year 2016 were higher payments on maturing and extinguished debt, increased dividends to shareholders, and increased repurchases of ordinary shares.

Free Cash Flow

Free cash flow is a non-GAAP financial measure calculated by subtracting additions to property, plant, and equipment from net cash provided by operating activities. Management uses this non-GAAP financial measure, in addition to U.S. GAAP financial measures, to evaluate our operating results. Free cash flow should be considered supplemental to, and not a substitute for, our

reported financial results prepared in accordance with U.S. GAAP. Reconciliations between net cash provided by operating activities (the most comparable U.S. GAAP measure) and free cash flow are as follows:

	Fiscal Year
(in millions)	2017				2016				2015
Net cash provided by operating activities	$	6,880			$	5,218			$	4,902
Net cash (used in) provided by investing activities	(1,571		)		2,245				(17,058		)
Net cash (used in) provided by financing activities	(3,283		)		(9,543		)		15,949
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	$	5,626			$	4,172			$	4,331
Dividends to shareholders	$	2,376			$	2,139			$	1,337
Repurchase of ordinary shares	3,544				2,830				1,920
Issuances of ordinary shares	(428		)		(491		)		(649		)
Return to shareholders	$	5,492			$	4,478			$	2,608
Return of operating cash flow percentage	80		%		86		%		53		%
Return of free cash flow percentage	98		%		107		%		60		%

Debt and Capital

Our capital structure consists of equity and interest-bearing debt. We use a combination of bank borrowings and commercial paper issuances to fund our short-term financing needs. Current debt, including the current portion of our long-term debt and capital lease obligations, at April 28, 2017 was $7.5 billion compared to $993 million at April 29, 2016. We utilize Senior Notes to meet our long-term financing needs. Long-term debt at April 28, 2017 was $25.9 billion compared to $30.1 billion at April 29, 2016.

Total debt at April 28, 2017 was $33.4 billion, compared to $31.1 billion at April 29, 2016. The increase in total debt was primarily driven by the issuance of three tranches of the 2017 Senior Notes with an aggregate face value of $2.0 billion in March 2017. We will use these funds for general corporate purposes.

We maintain a commercial paper program for short-term financing, which allows us to issue unsecured commercial paper notes on a private placement basis up to a maximum aggregate amount outstanding at any time of $3.5 billion. At April 28, 2017, we had $901 million of commercial paper outstanding. No amount of commercial paper was outstanding under this program at April 29, 2016. During fiscal years 2017 and 2016, the weighted average original maturity of the commercial paper outstanding was approximately 39 and 49 days, respectively, and the weighted average interest rate was 0.89 percent and 0.57 percent, respectively. The issuance of commercial paper reduces the amount of credit available under our existing line of credit, as explained below.

We also have a $3.5 billion syndicated line of credit facility ($3.5 Billion Revolving Credit Facility) which expires in January 2020. The $3.5 Billion Revolving Credit Facility provides backup funding for the commercial paper program and may also be used for general corporate purposes. The $3.5 Billion Revolving Credit Facility provides us with the ability to increase our borrowing capacity by an additional $500 million at any time during the term of the agreement. At each anniversary date of the $3.5 Billion Revolving Credit Facility, but not more than twice prior to the maturity date, we could also request a one-year extension of the maturity date. At April 28, 2017 and April 29, 2016, no amounts were outstanding on the committed line of credit.

Interest rates on advances on our $3.5 Billion Revolving Credit Facility are determined by a pricing matrix, based on our long-term debt ratings assigned by S&P and Moody’s. For additional information on our credit ratings status by S&P and Moody's refer to "Liquidity and Capital Resources" section of this Management's Discussion and Analysis. Facility fees are payable on the credit facility and are determined in the same manner as the interest rates. The agreements also contain customary covenants, all of which we remain in compliance with at April 28, 2017.

Interest-bearing debt as a percentage of total interest-bearing debt and equity was 40 percent at April 28, 2017 and 37 percent at April 29, 2016. For further discussion on debt, see the “Liquidity and Capital Resources" section of this Management’s Discussion and Analysis. The indentures under which the Senior Notes have been issued contain customary covenants, all of which we remain in compliance with at April 28, 2017.

We repurchase shares from time to time as part of our focus on returning value to our shareholders. In January 2015, our Board of Directors authorized, subject to the ongoing existence of sufficient distributable reserves, the adoption of the existing Medtronic Inc. share redemption program. At April 29, 2016, we had used all of the 80 million shares authorized under the January 2015 share redemption program. In June 2015, our Board of Directors authorized, subject to the ongoing existence of sufficient distributable reserves, the redemption of an additional 80 million of our ordinary shares. At April 29, 2016, we had used 8 million of the 80 million shares authorized under the June 2015 share redemption program. During fiscal years 2017 and 2016, we repurchased a total of 43 million and 38 million shares, respectively, under these programs at an average price of $83.03 and $74.92, respectively. At April 28, 2017, we had approximately 29 million shares remaining under share repurchase programs authorized by our Board of Directors. In June 2017, our Board of Directors replaced the existing June 2015 authorization to redeem up to an aggregate number of ordinary shares with an authorization to expend up to an aggregate amount of $5 billion beginning June 26, 2017 to redeem ordinary shares.

For more information on credit arrangements, see the "Liquidity and Capital Resources" section of this Management's Discussion and Analysis and Note 8 of the consolidated financial statements in “Item 8. Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.

OFF-BALANCE SHEET ARRANGEMENTS AND LONG-TERM CONTRACTUAL OBLIGATIONS

Presented below is a summary of our off-balance sheet contractual obligations and other minimum commercial commitments at April 28, 2017, as well as long-term contractual obligations reflected in the balance sheet at April 28, 2017.

We acquire assets still in development, enter into research and development arrangements, and sponsor certain clinical trials that often require milestone and/or royalty payments to a third-party, contingent upon the occurrence of certain future events. In situations where we have no ability to influence the achievement of the milestone or otherwise avoid the payment, we have included the milestone or minimum royalty payments in the table below. The majority of the arrangements give us the discretion to unilaterally make the decision to stop development of a product or cease progress of a clinical trial, which would allow us to avoid making the contingent payments. Due to the contingent nature of these payments, they are not included in the table of contractual obligations.

In the normal course of business, we periodically enter into agreements that require us to indemnify customers or suppliers for specific risks, such as claims for injury or property damage arising out of our products or the negligence of our personnel or claims alleging that our products infringe third-party patents or other intellectual property. Our maximum exposure under these indemnification provisions are unable to be estimated, and we have not accrued any liabilities within our consolidated financial statements or included any indemnification provisions in the table below. Historically, we have not experienced significant losses on these types of indemnification agreements.

See Notes 8 and 18 to the consolidated financial statements in “Item 8. Financial Statements and Supplementary Data” in this Annual Report on Form 10-K for additional information regarding long-term debt and lease obligations, respectively. Additionally, see Notes 15 and 17 to the consolidated financial statements in “Item 8. Financial Statements and Supplementary Data” in this Annual Report on Form 10-K for additional information regarding accrued income tax and defined benefit plan obligations, which are not reflected in the table below.

		Maturity by Fiscal Year
(in millions)		Total				2018				2019				2020				2021				2022				Thereafter
Contractual obligations related to off-balance sheet arrangements:
Operating leases		$	646			$	215			$	158			$	110			$	70			$	41			$	52
Commitments to fund minority investments/royalty payments(1)		308				125				50				47				42				42				2
Interest payments(2)		13,488				1,077				967				929				806				772				8,937
Other(3)		513				304				89				50				27				4				39
Contractual obligations related to off-balance sheet arrangements subtotal		$	14,955			$	1,721			$	1,264			$	1,136			$	945			$	859			$	9,030
Contractual obligations reflected in the balance sheet:
Long-term debt, including current portion(4)		$	32,438			$	6,588			$	1,402			$	3,779			$	1,126			$	3,273			$	16,270
Capital leases		23				5				4				2				2				2				8
Contractual obligations reflected in the balance sheet subtotal		$	32,461			$	6,593			$	1,406			$	3,781			$	1,128			$	3,275			$	16,278
Total contractual obligations		$	47,416			$	8,314			$	2,670			$	4,917			$	2,073			$	4,134			$	25,308

(1)	We have included commitments related to the funding of cost or equity method investments, estimated milestone payments and royalty obligations in the table above. While it is not certain if and/or when these payments will be made, the maturity dates included in this table reflect our best estimates.

(2)

Interest payments in the table above reflect the contractual interest payments on our outstanding debt, and exclude the impact of the debt premium and discount amortization and impact of interest rate swap agreements. See Note 8 to the consolidated financial statements in “Item 8. Financial Statements and Supplementary Data” in this Annual Report on Form 10-K for additional information regarding our debt agreements.

(3)

We have included inventory purchase commitments which are legally binding and specify minimum purchase quantities or amounts. These purchase commitments do not exceed our projected requirements and are in the normal course of business. These commitments do not include open purchase orders with a remaining term of less than one year. These obligations also include certain research and development arrangements.

(4)

Long-term debt in the table above includes the $3.0 billion Term Loan Credit Agreement, $3.1 billion of CIFSA Senior Notes, $1.8 billion of 2017 Senior Notes, $17.0 billion of 2015 Senior Notes, $1.5 billion of 2014 Senior Notes, $1.9 billion of 2013 Senior Notes, $1.1 billion of 2012 Senior Notes, $500 million of 2011 Senior Notes, $1.3 billion of 2010 Senior Notes, $700 million of 2009 Senior Notes, $42 million of Heartware Senior Notes, and $535 million of bank borrowings. The table above excludes the debt premium and discount, the fair value impact of outstanding interest rate swap agreements, and the unamortized gains from terminated interest rate swap agreements. See Notes 8 and 9 to the consolidated financial statements in “Item 8. Financial Statements and Supplementary Data” in this Annual Report on Form 10-K for additional information regarding the interest rate swap agreements.

ACQUISITIONS

Information regarding acquisitions is included in Note 2 to the consolidated financial statements in “Item 8. Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.

NEW ACCOUNTING PRONOUNCEMENTS

Information regarding new accounting pronouncements is included in Note 1 to the consolidated financial statements in “Item 8. Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.

CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS

This Annual Report, and other written reports and oral statements made by or with the approval of one of the Company’s executive officers from time to time, may include “forward-looking” statements. Forward-looking statements broadly include our current expectations or forecasts of future results. Our forward-looking statements generally relate to our growth and growth strategies, developments in the markets for our products, therapies and services, financial results, product development launches and effectiveness, research and development strategy, regulatory approvals, competitive strengths, restructuring and cost-saving initiatives, intellectual property rights, litigation and tax matters, government investigations, mergers and acquisitions, divestitures, market acceptance of our products, therapies and services, accounting estimates, financing activities, ongoing contractual obligations, working capital adequacy, value of our investments, our effective tax rate, our expected returns to shareholders, and sales efforts. Such statements may be identified by the use of terminology such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “intend,” “looking ahead,” “may,” “plan,” “possible,” “potential,” “project,” “should,” “will,” and similar words or expressions. Forward-looking statements in this Annual Report include, but are not limited to, statements regarding our ability to drive long-term shareholder value, development and future launches of products and continued or future acceptance of products, therapies and services in our operating segments; expected timing for completion of research studies relating to our products; market positioning and performance of our products, including stabilization of certain product markets; divestitures and the potential benefits thereof; the costs and benefits of integrating previous acquisitions; anticipated timing for U.S. FDA and non-U.S. regulatory approval of new products; increased presence in new markets, including markets outside the U.S.; changes in the market and our market share; acquisitions and investment initiatives, as well as integration of acquired companies into our operations; the resolution of tax matters; the effectiveness of our development activities in reducing patient care costs and hospital stay lengths; our approach towards cost containment; our expectations regarding health care costs, including potential changes to reimbursement policies and pricing pressures; our expectations regarding changes to patient standards of care; our ability to identify and maintain successful business partnerships; the elimination of certain positions or costs related to restructuring initiatives; outcomes in our litigation matters and government investigations; general economic conditions; the adequacy of available working capital and our working capital needs; our payment of dividends and redemption of shares; the continued strength of our balance sheet and liquidity; our accounts receivable exposure; and the potential impact of our compliance with governmental regulations and accounting guidance. One must carefully consider forward-looking statements and understand that such statements may be affected by inaccurate assumptions and may involve a variety of risks and uncertainties, known and unknown, including, among others, those discussed in the sections entitled “Government Regulation and Other Considerations” within “Item 1. Business” and “Item 1A. Risk Factors” in this Annual Report on Form 10-K, as well as those related to competition in the medical device industry, reduction or interruption in our supply, quality problems, liquidity shortfalls, decreasing prices and pricing pressure, fluctuations in currency exchange rates, changes in applicable tax rates, positions taken by taxing authorities, adverse regulatory action, delays in regulatory approvals, litigation results, self-insurance, commercial insurance, health care policy changes, international operations, failure to complete or achieve the intended benefits of acquisitions or divestitures, or disruption of our current plans and operations.

Consequently, no forward-looking statement may be guaranteed and actual results may vary materially. We intend to take advantage of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 regarding our forward-looking statements, and are including this sentence for the express purpose of enabling us to use the protections of the safe harbor with respect to all forward-looking statements.

We undertake no obligation to update any statement we make, but investors are advised to consult all other disclosures by us in our filings with the Securities and Exchange Commission, especially on Forms 10-K, 10-Q, and 8-K, in which we discuss in more detail various important factors that could cause actual results to differ from expected or historical results. In addition, actual results may differ materially from those anticipated due to a number of factors, including, among others, those discussed in the section entitled “Item 1A. Risk Factors” in this Annual Report on Form 10-K. It is not possible to foresee or identify all such factors. As such, investors should not consider any list of such factors to be an exhaustive statement of all risks, uncertainties, or potentially inaccurate assumptions.