Item 8. Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of Medtronic plc:

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Medtronic plc and its subsidiaries (the “Company”) as of April 26, 2019 and April 27, 2018, and the related consolidated statements of income, comprehensive income, equity and cash flows for each of the three years in the period ended April 26, 2019, including the related notes and schedule of valuation and qualifying accounts for each of the three years in the period ended April 26, 2019 appearing under Item 15(a)(1) (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of April 26, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of April 26, 2019 and April 27, 2018**,** and the results of its operations and its cash flows for each of the three years in the period ended April 26, 2019 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of April 26, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 9A . Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP
Minneapolis, Minnesota
June 21, 2019

We have served as the Company’s auditor since 1963.

Medtronic plc

Consolidated Statements of Income

	Fiscal Year
(in millions, except per share data)	2019				2018				2017
Net sales	$	30,557			$	29,953			$	29,710
Costs and expenses:
Cost of products sold	9,155				9,067				9,294
Research and development expense	2,330				2,256				2,193
Selling, general, and administrative expense	10,418				10,238				10,018
Amortization of intangible assets	1,764				1,823				1,980
Restructuring charges, net	198				30				303
Certain litigation charges	166				61				300
Gain on sale of businesses	—				(697		)		—
Other operating expense, net	258				535				239
Operating profit	6,268				6,640				5,383
Other non-operating income, net	(373		)		(181		)		(313		)
Interest expense	1,444				1,146				1,094
Income before income taxes	5,197				5,675				4,602
Income tax provision	547				2,580				578
Net income	4,650				3,095				4,024
Net (income) loss attributable to noncontrolling interests	(19		)		9				4
Net income attributable to Medtronic	$	4,631			$	3,104			$	4,028
Basic earnings per share	$	3.44			$	2.29			$	2.92
Diluted earnings per share	$	3.41			$	2.27			$	2.89
Basic weighted average shares outstanding	1,346.4				1,356.7				1,378.9
Diluted weighted average shares outstanding	1,357.5				1,368.2				1,391.4

The accompanying notes are an integral part of these consolidated financial statements.

Medtronic plc

Consolidated Statements of Comprehensive Income

		Fiscal Year
(in millions)		2019				2018				2017
Net income		$	4,650			$	3,095			$	4,024
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on investment securities		102				(103		)		38
Translation adjustment		(1,375		)		1,184				(977		)
Net investment hedge		88				—				—
Net change in retirement obligations		(191		)		167				68
Unrealized gain (loss) on cash flow hedges		401				(218		)		127
Other comprehensive (loss) income		(975		)		1,030				(744		)
Comprehensive income including noncontrolling interests		3,675				4,125				3,280
Comprehensive (income) loss attributable to noncontrolling interests		(16		)		9				3
Comprehensive income attributable to Medtronic		$	3,659			$	4,134			$	3,283

The accompanying notes are an integral part of these consolidated financial statements.

Medtronic plc

Consolidated Balance Sheets

(in millions)		April 26, 2019				April 27, 2018
ASSETS
Current assets:
Cash and cash equivalents		$	4,393			$	3,669
Investments		5,455				7,558
Accounts receivable, less allowances of $190 and $193, respectively		6,222				5,987
Inventories, net		3,753				3,579
Other current assets		2,144				2,187
Total current assets		21,967				22,980
Property, plant, and equipment, net		4,675				4,604
Goodwill		39,959				39,543
Other intangible assets, net		20,560				21,723
Tax assets		1,519				1,465
Other assets		1,014				1,078
Total assets		$	89,694			$	91,393
LIABILITIES AND EQUITY
Current liabilities:
Current debt obligations		$	838			$	2,058
Accounts payable		1,953				1,628
Accrued compensation		2,189				1,988
Accrued income taxes		567				979
Other accrued expenses		2,925				3,431
Total current liabilities		8,472				10,084
Long-term debt		24,486				23,699
Accrued compensation and retirement benefits		1,651				1,425
Accrued income taxes		2,838				3,051
Deferred tax liabilities		1,278				1,423
Other liabilities		757				889
Total liabilities		39,482				40,571
Commitments and contingencies (Notes 3, 17, and 19)
Shareholders’ equity:
Ordinary shares— par value $0.0001, 2.6 billion shares authorized, 1,340,697,595 and 1,354,218,154 shares issued and outstanding, respectively		—				—
Additional paid-in capital		26,532				28,127
Retained earnings		26,270				24,379
Accumulated other comprehensive loss		(2,711		)		(1,786		)
Total shareholders’ equity		50,091				50,720
Noncontrolling interests		121				102
Total equity		50,212				50,822
Total liabilities and equity		$	89,694			$	91,393

The accompanying notes are an integral part of these consolidated financial statements.

Medtronic plc

Consolidated Statements of Equity

		Ordinary Shares							Additional Paid-in Capital				Retained Earnings				Accumulated Other Comprehensive Loss				Total Shareholders’ Equity				Noncontrolling Interests				Total Equity
(in millions)		Number			Par Value
April 29, 2016		1,399			$	—			$	32,227			$	21,618			$	(1,868	)		$	51,977			$	—			$	51,977
Net income (loss)		—			—				—				4,028				—				4,028				(4		)		4,024
Other comprehensive (loss) income		—			—				—				—				(745		)		(745		)		1				(744		)
Dividends to shareholders ($1.72 per ordinary share)		—			—				—				(2,376		)		—				(2,376		)		—				(2,376		)
Issuance of shares under stock purchase and award plans		13			—				428				—				—				428				—				428
Repurchase of ordinary shares		(43	)		—				(3,544		)		—				—				(3,544		)		—				(3,544		)
Tax benefit from exercise of stock-based awards		—			—				92				—				—				92				—				92
Stock-based compensation					—				348				—				—				348				—				348
Changes to noncontrolling ownership interests		—			—				—				—				—				—				125				125
April 28, 2017		1,369			$	—			$	29,551			$	23,270			$	(2,613	)		$	50,208			$	122			$	50,330
Net income (loss)		—			—				—				3,104				—				3,104				(9		)		3,095
Other comprehensive income		—			—				—				—				1,030				1,030				—				1,030
Dividends to shareholders ($1.84 per ordinary share)		—			—				—				(2,494		)		—				(2,494		)		—				(2,494		)
Issuance of shares under stock purchase and award plans		10			—				329				—				—				329				—				329
Repurchase of ordinary shares		(25	)		—				(2,097		)		—				—				(2,097		)		—				(2,097		)
Stock-based compensation		—			—				344				—				—				344				—				344
Changes to noncontrolling ownership interests		—			—				—				—				—				—				(11		)		(11		)
Cumulative effect of change in accounting principle(1)		—			—				—				499				(203		)		296				—				296
April 27, 2018		1,354			$	—			$	28,127			$	24,379			$	(1,786	)		$	50,720			$	102			$	50,822
Net income		—			—				—				4,631				—				4,631				19				4,650
Other comprehensive loss		—			—				—				—				(972		)		(972		)		(3		)		(975		)
Dividends to shareholders ($2.00 per ordinary share)		—			—				—				(2,693		)		—				(2,693		)		—				(2,693		)
Issuance of shares under stock purchase and award plans		18			—				923				—				—				923				—				923
Repurchase of ordinary shares		(31	)		—				(2,808		)		—				—				(2,808		)		—				(2,808		)
Stock-based compensation		—			—				290				—				—				290				—				290
Changes to noncontrolling ownership interests		—			—				—				—				—				—				3				3
Cumulative effect of change in accounting principle(2)		—			—				—				(47		)		47				—				—				—
April 26, 2019		1,341			$	—			$	26,532			$	26,270			$	(2,711	)		$	50,091			$	121			$	50,212

(1) The cumulative effect of change in accounting principle in fiscal year 2018 resulted from the adoption of accounting guidance that requires the tax effect of intra-entity transactions, other than sales of inventory, to be recognized when the transaction occurs, and accounting guidance which permitted reclassification of stranded tax effects resulting from the enactment of comprehensive U.S. tax legislation from accumulated other comprehensive loss to retained earnings.

(2) See Note 1 to the consolidated financial statements for discussion regarding the adoption of accounting standards during fiscal year 2019.

The accompanying notes are an integral part of these consolidated financial statements.

Medtronic plc

Consolidated Statements of Cash Flows

	Fiscal Year
(in millions)	2019				2018				2017
Operating Activities:
Net income	$	4,650			$	3,095			$	4,024
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	2,659				2,644				2,917
Provision for doubtful accounts	78				52				39
Deferred income taxes	(304		)		(919		)		(459		)
Stock-based compensation	290				344				348
Loss on debt extinguishment	457				38				—
Gain on sale of businesses	—				(697		)		—
Investment loss	—				227				—
Other, net	257				73				(128		)
Change in operating assets and liabilities, net of acquisitions and divestitures:
Accounts receivable, net	(581		)		(275		)		(75		)
Inventories, net	(274		)		(192		)		(227		)
Accounts payable and accrued liabilities	399				65				356
Other operating assets and liabilities	(624		)		229				85
Net cash provided by operating activities	7,007				4,684				6,880
Investing Activities:
Acquisitions, net of cash acquired	(1,827		)		(137		)		(1,324		)
Proceeds from sale of businesses	—				6,058				—
Additions to property, plant, and equipment	(1,134		)		(1,068		)		(1,254		)
Purchases of investments	(2,532		)		(3,200		)		(4,371		)
Sales and maturities of investments	4,683				4,227				5,356
Other investing activities, net	36				(22		)		22
Net cash (used in) provided by investing activities	(774		)		5,858				(1,571		)
Financing Activities:
Change in current debt obligations, net	(713		)		(249		)		906
Issuance of long-term debt	7,794				21				2,140
Payments on long-term debt	(7,948		)		(7,370		)		(863		)
Dividends to shareholders	(2,693		)		(2,494		)		(2,376		)
Issuance of ordinary shares	992				403				428
Repurchase of ordinary shares	(2,877		)		(2,171		)		(3,544		)
Other financing activities	14				(94		)		26
Net cash used in financing activities	(5,431		)		(11,954		)		(3,283		)
Effect of exchange rate changes on cash and cash equivalents	(78		)		114				65
Net change in cash and cash equivalents	724				(1,298		)		2,091
Cash and cash equivalents at beginning of period	3,669				4,967				2,876
Cash and cash equivalents at end of period	$	4,393			$	3,669			$	4,967
Supplemental Cash Flow Information
Cash paid for:
Income taxes	$	1,558			$	2,542			$	1,029
Interest	973				1,147				1,134

The accompanying notes are an integral part of these consolidated financial statements.

Medtronic plc

Notes to Consolidated Financial Statements

1**.** Summary of Significant Accounting Policies

Nature of Operations Medtronic plc (Medtronic or the Company) 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. The Company provides innovative products and therapies to serve hospitals, physicians, clinicians, and patients. Medtronic was founded in 1949 and is headquartered in Dublin, Ireland.

Principles of Consolidation The consolidated financial statements include the accounts of Medtronic plc, its wholly-owned subsidiaries, entities for which the Company has a controlling financial interest, and variable interest entities for which the Company is the primary beneficiary. Intercompany transactions and balances have been fully eliminated in consolidation. Certain reclassifications have been made to prior year financial statements to conform to classifications used in the current year. For the purpose of providing more concise consolidated statements of income, amounts previously reported in acquisition-related items were reclassified to selling, general, and administrative expense and other operating expense, net; amounts previously reported in divestiture-related items were reclassified to selling, general, and administrative expense; amounts previously reported in special charge were reclassified to other operating expense, net, and amounts previously reported in investment loss and interest income were reclassified to other non-operating income, net.

Use of Estimates The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States (U.S.) (U.S. GAAP) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Estimates are used when accounting for items such as income taxes, contingencies, intangible asset, and liability valuations. Actual results may or may not differ from those estimates.

Fiscal Year-End The Company utilizes a 52/53-week fiscal year, ending the last Friday in April, for the presentation of its consolidated financial statements and related notes thereto at April 26, 2019 and April 27, 2018 and for each of the three fiscal years ended April 26, 2019 (fiscal year 2019), April 27, 2018 (fiscal year 2018), and April 28, 2017 (fiscal year 2017). Fiscal years 2019, 2018, 2017 were 52-week years.

Cash Equivalents The Company considers highly liquid investments with maturities of three months or less from the date of purchase to be cash equivalents. These investments are carried at cost, which approximates fair value.

Investments The Company invests in marketable debt and equity securities, investments that do not have readily determinable fair values, and investments accounted for under the equity method.

Marketable debt securities are classified and accounted for as available-for-sale. These investments are recorded at fair value in the consolidated balance sheets. The change in fair value for available-for-sale securities is recorded, net of taxes, as a component of accumulated other comprehensive loss on the consolidated balance sheets. The Company determines the appropriate classification of its investments in marketable debt securities at the time of purchase and reevaluates such determinations at each balance sheet date. The classification of marketable debt securities as current or long-term is based on the nature of the securities and the availability for use in current operations consistent with the Company's management of its capital structure and liquidity.

Certain of the Company’s investments in marketable equity securities and other securities are long-term, strategic investments in companies that are in various stages of development and are included in other assets on the consolidated balance sheets. Marketable equity securities are recorded at fair value in the consolidated balance sheets. The change in fair value of marketable equity securities is recognized within other non-operating income, net in the consolidated statements of income. Investments without readily determinable fair values that do not qualify for the practical expedient to estimate fair value using the net asset value per share or its equivalent are accounted for at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investments of the issuer. This election is made for each investment separately and is reassessed at each reporting period as to whether the investment continues to qualify for this election. At each reporting period, the Company makes a qualitative assessment considering impairment indicators to evaluate whether the investment is impaired. Equity securities accounted for under the equity method are initially recorded at the amount of the Company’s investment and are adjusted each period for the Company’s share of the investee’s income or loss and dividends paid. Securities accounted for under the equity method are reviewed quarterly for changes in circumstance or the occurrence of events that suggest the Company’s investment may not be recoverable.

Accounts Receivable and Allowance for Doubtful Accounts The Company grants credit to customers in the normal course of business and maintains an allowance for doubtful accounts for potential credit losses. When evaluating allowances for doubtful accounts, the Company considers various factors, including historical experience and customer-specific information. Uncollectible accounts are written-off against the allowance when it is deemed that a customer account is uncollectible.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Inventories Inventories are stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis. The Company reduces the carrying value of inventories for items that are potentially excess, obsolete, or slow-moving based on changes in customer demand, technology developments, or other economic factors.

Property, Plant, and Equipment Property, plant, and equipment is stated at cost. Additions and improvements that extend the lives of the assets are capitalized, while expenditures for repairs and maintenance are expensed as incurred. The Company assesses property, plant, and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of property, plant, and equipment asset groupings may not be recoverable. The Company utilizes the straight-line method of depreciation over the estimated useful lives of the various assets. The cost of interest that is incurred in connection with ongoing construction projects is capitalized using a weighted average interest rate. These costs are included in property, plant, and equipment and amortized over the useful life of the related asset. Upon retirement or disposal of property, plant, and equipment, the costs and related amounts of accumulated depreciation or amortization are eliminated from the asset and accumulated depreciation accounts. The difference, if any, between the net asset value and the proceeds, is recognized in earnings.

Goodwill and Intangible Assets Goodwill is the excess of the purchase price over the estimated fair value of net assets of acquired businesses. In accordance with U.S. GAAP, goodwill is not amortized. The Company assesses goodwill for impairment annually in the third quarter of the fiscal year and whenever an event occurs or circumstances change that would indicate the carrying amount may be impaired. Impairment testing for goodwill is performed at a reporting unit level. There were no changes in reporting units during fiscal year 2019. The test for impairment of goodwill requires the Company to make several estimates about fair value, most of which are based on projected future cash flows. The Company calculates the excess of each reporting unit's fair value over its carrying amount, including goodwill, utilizing a discounted cash flow analysis. An impairment loss is recognized when the carrying amount of the reporting unit’s net assets exceeds the estimated fair value of the reporting unit.

Intangible assets include patents, trademarks, tradenames, customer relationships, purchased technology, and in-process research and development (IPR&D). Intangible assets with a definite life are amortized on a straight-line basis with estimated useful lives typically ranging from three to 20 years. Amortization is recognized within amortization of intangible assets in the consolidated statements of income. Intangible assets with a definite life are tested for impairment whenever events or changes in circumstances indicate that the carrying amount of an intangible asset (asset group) may not be recoverable. When events or changes in circumstances indicate that the carrying amount of an intangible asset may not be recoverable, the Company calculates the excess of an intangible asset's carrying value over its undiscounted future cash flows. If the carrying value is not recoverable, an impairment loss is recognized based on the amount by which the carrying value exceeds the fair value. The inputs used in the fair value analysis fall within Level 3 of the fair value hierarchy due to the use of significant unobservable inputs to determine fair value.

Acquired IPR&D represents the fair value assigned to those research and development projects that were acquired in a business combination for which the related products have not received regulatory approval and have no alternative future use. IPR&D is capitalized at its fair value as an indefinite-lived intangible asset, and any development costs incurred after the acquisition are expensed as incurred. The fair value of IPR&D is determined by estimating the future cash flows of each project and discounting the net cash flows back to their present values. Upon achieving regulatory approval or commercial viability for the related product, the indefinite-lived intangible asset is accounted for as a definite-lived asset and is amortized on a straight-line basis over the estimated useful life. If the project is not completed or is terminated or abandoned, the Company may have an impairment related to the IPR&D which is charged to expense. Indefinite-lived intangible assets are tested for impairment annually in the third quarter of the fiscal year and whenever events or changes in circumstances indicate that the carrying amount may be impaired. Impairment is calculated as the excess of the asset’s carrying value over its fair value. Fair value is generally determined using a discounted future cash flow analysis. IPR&D acquired outside of a business combination is expensed immediately.

Contingent Consideration Certain of the Company’s business combinations involve potential payment of future consideration that is contingent upon the achievement of certain product development milestones and/or contingent on the acquired business reaching certain performance milestones. The Company records contingent consideration at fair value at the date of acquisition based on the consideration expected to be transferred, estimated as the probability-weighted future cash flows, discounted back to present value. The fair value of contingent consideration is measured using projected payment dates, discount rates, probabilities of payment, and projected revenues (for revenue-based considerations). Projected revenues are based on the Company’s most recent internal operational budgets and long-range strategic plans. The discount rate used is determined at the time of measurement in accordance with accepted valuation methodologies. Changes in projected revenues, probabilities of payment, discount rates, and projected payment dates may result in adjustments to the fair value measurements. Contingent consideration is remeasured each reporting period using Level 3 inputs, and the change in fair value, including accretion for the passage of time, is recognized as income or expense within other operating expense, net in the consolidated statements of income. Contingent consideration payments made soon after the acquisition date are classified as investing activities in the consolidated statements of cash flows. Contingent consideration payments not made soon after the acquisition date that are related to the acquisition date fair value are

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

reported as financing activities in the consolidated statements of cash flows, and amounts paid in excess of the original acquisition date fair value are reported as operating activities in the consolidated statements of cash flows.

Self-Insurance The Company self-insures the majority of its insurable risks, including medical and dental costs, disability coverage, physical loss to property, business interruptions, workers’ compensation, comprehensive general, and product liability. Insurance coverage is obtained for risks required to be insured by law or contract. The Company uses claims data and historical experience, as applicable, to estimate liabilities associated with the exposures that the Company has self-insured.

Retirement Benefit Plan Assumptions The Company sponsors various retirement benefit plans, including defined benefit pension plans, post-retirement medical plans, defined contribution savings plans, and termination indemnity plans, covering substantially all U.S. employees and many employees outside the U.S. See Note 16 for assumptions used in determining pension and post-retirement benefit costs and liabilities.

Derivatives The Company recognizes all derivative financial instruments in its consolidated financial statements at fair value in accordance with authoritative guidance on derivatives and hedging, and presents assets and liabilities associated with derivative financial instruments on a gross basis in the consolidated financial statements. For derivative instruments that are designated and qualify as hedging instruments, the hedging instrument must be designated, based upon the exposure being hedged, as a fair value hedge or a cash flow hedge. See Note 8 for more information on the Company's derivative instruments and hedging programs.

Fair Value Measurements The Company follows the authoritative guidance on fair value measurements and disclosures with respect to assets and liabilities that are measured at fair value on both a recurring and nonrecurring basis. Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The authoritative guidance also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability, based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available in the circumstances. The categorization of financial assets and financial liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The hierarchy is broken down into three levels defined as follows:

•	Level 1 - Inputs are quoted prices in active markets for identical assets or liabilities.

•	Level 2 - Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs (other than quoted prices) that are observable for the asset or liability, either directly or indirectly.

•	Level 3 - Inputs are unobservable for the asset or liability.

Financial assets that are classified as Level 1 securities include highly liquid government bonds within U.S. government and agency securities and marketable equity securities for which quoted market prices are available. In addition, the Company classifies currency forward contracts as Level 1 since they are valued using quoted market prices in active markets which have identical assets or liabilities.

The valuation for most fixed maturity securities are classified as Level 2. Financial assets that are classified as Level 2 include corporate debt securities, government and agency securities, other asset-backed securities, debt funds, and mortgage-backed securities whose value is determined using inputs that are observable in the market or may be derived principally from, or corroborated by, observable market data such as pricing for similar securities, recently executed transactions, cash flow models with yield curves, and benchmark securities. In addition, interest rate swaps and total return swaps are included in Level 2 as the Company uses inputs other than quoted prices that are observable for the asset. The Level 2 derivative instruments are primarily valued using standard calculations and models that use readily observable market data as their basis.

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies, or similar techniques, and at least one significant model assumption or input is unobservable. Financial assets that are classified as Level 3 include certain investment securities for which there is limited market activity such that the determination of fair value requires significant judgment or estimation, certain corporate debt securities and auction rate securities. With the exception of auction rate securities, these securities are valued using third-party pricing sources that incorporate transaction details such as contractual terms, maturity, timing, and amount of expected future cash flows, as well as assumptions about liquidity and credit valuation adjustments by market participants. The fair value of auction rate securities is estimated by the Company using a discounted cash flow model, which incorporates significant unobservable inputs. The significant unobservable inputs used in the

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

fair value measurement of the Company’s auction rate securities are years to principal recovery and the illiquidity premium that is incorporated into the discount rate.

Certain investments for which the fair value is measured using the net asset value per share (or its equivalent) practical expedient are excluded from the fair value hierarchy. Financial assets for which the fair value is measured using the net asset value per share practical expedient include certain debt funds, equity and fixed income commingled trusts, and registered investment companies.

Revenue Recognition The Company sells its products through direct sales representatives and independent distributors. Additionally, a portion of the Company's revenue is generated from consignment inventory maintained at hospitals. The Company recognizes revenue when control is transferred to the customer. For products sold through direct sales representatives and independent distributors, control is transferred upon shipment or upon delivery, based on the contract terms and legal requirements. For consignment inventory, control is transferred when the product is used or implanted. Payment terms vary depending on the country of sale, type of customer, and type of product.

If a contract contains more than one performance obligation, the transaction price is allocated to each performance obligation based on relative standalone selling price. Shipping and handling is treated as a fulfillment activity rather than a promised service, and therefore, is not considered a performance obligation. Taxes assessed by a governmental authority that are both imposed on, and concurrent with, a specific revenue producing transaction and collected by the Company from customers (for example, sales, use, value added, and some excise taxes) are not included in revenue. For contracts that have an original duration of one year or less, the Company uses the practical expedient applicable to such contracts and does not adjust the transaction price for the time value of money.

The amount of revenue recognized reflects sales rebates and returns, which are estimated based on sales terms, historical experience, and trend analysis. In estimating rebates, the Company considers the lag time between the point of sale and the payment of the rebate claim, the stated rebate rates, and other relevant information. The Company records adjustments to rebates and returns reserves as increases or decreases of revenue.

The Company offers warranties on various products. For standard, assurance-type warranties, the Company estimates the costs that may be incurred under its warranties and records a liability in the amount of such costs at the time the product is sold. The amount of the reserve is equal to the net costs to repair or otherwise satisfy the obligation. The Company includes the warranty obligation in other accrued expenses and other liabilities in the consolidated balance sheets. For extended, service-type warranties, a portion of the transaction price is allocated to the performance obligation. Warranty obligations at April 26, 2019 and April 27, 2018 were not material.

The Company records a deferred revenue liability if a customer pays consideration before the Company transfers a good or service to the customer. Deferred revenue primarily represents remote monitoring services and equipment maintenance, for which consideration is received at the same time as consideration for the device or equipment. Deferred revenue also includes extended, service-type warranties. Revenue related to remote monitoring services, equipment maintenance, and service-type warranties is recognized over the service period as time elapses.

Remaining performance obligations include deferred revenue and amounts the Company expects to receive for goods and services that have not yet been delivered or provided under existing, noncancellable contracts with minimum purchase commitments, primarily related to consumables for previously sold equipment as well as remote monitoring services and equipment maintenance. For contracts that have an original duration of one year or less, the Company has elected the practical expedient applicable to such contracts and does not disclose the transaction price for remaining performance obligations at the end of each reporting period and when the Company expects to recognize this revenue.

Shipping and Handling Shipping and handling costs incurred to physically move product from the Company's premises to the customer's premises are recognized in selling, general, and administrative expense in the consolidated statements of income and were $350 million, $363 million, and $370 million in fiscal years 2019, 2018, and 2017, respectively. Other shipping and handling costs incurred to store, move, and prepare products for shipment are recognized in cost of products sold in the consolidated statements of income.

Research and Development Research and development costs are expensed when incurred. Research and development costs include costs of other research, engineering, and technical activities to develop a new product or service or make significant improvement to an existing product or manufacturing process. Research and development costs also include pre-approval regulatory and clinical trial expenses.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Contingencies The Company records a liability in the consolidated financial statements for loss contingencies when a loss is known or considered probable and the amount may be reasonably estimated. If the reasonable estimate of a known or probable loss is a range, and no amount within the range is a better estimate than any other, the minimum amount of the range is accrued. If a loss is reasonably possible but not known or probable, and may be reasonably estimated, the estimated loss or range of loss is disclosed. Insurance recoveries related to potential claims are recognized up to the amount of the recorded liability when coverage is confirmed and the estimated recoveries are probable of payment. These recoveries are not netted against the related liabilities for financial statement presentation.

Income Taxes The Company has deferred taxes that arise as a result of the different treatment of transactions for U.S. GAAP and income tax accounting, known as temporary differences. The Company records the tax effect of these temporary differences as deferred tax assets and deferred tax liabilities. Deferred tax assets generally represent items that may be used as a tax deduction or credit in a tax return in future years for which the Company has already recognized the tax benefit in the consolidated statements of income. The Company establishes valuation allowances for deferred tax assets when the amount of expected future taxable income is not likely to support the use of the deduction or credit. Deferred tax liabilities generally represent tax expense for which payment has been deferred or expense has already been taken as a deduction on the Company’s tax return but has not yet been recognized as an expense in the consolidated statements of income.

Other Operating Expense, Net Other operating expense, net primarily includes royalty income and expense, Transition Service Agreement income, intangible asset charges, currency transaction and derivative gains and losses, contributions to the Medtronic Foundation, Puerto Rico excise taxes, changes in the fair value of contingent consideration, and charges associated with business exits.

Other Non-Operating Income, Net Other non-operating income, net includes the non-service component of net periodic pension and post-retirement benefit cost, investment gains and losses, and interest income.

Currency Translation Assets and liabilities of non-U.S. dollar functional currency entities are translated to U.S. dollars at period-end exchange rates, and the currency impacts arising from the translation of the assets and liabilities are recorded as a cumulative translation adjustment, a component of accumulated other comprehensive loss, on the consolidated balance sheets. Elements of the consolidated statements of income are translated at the average monthly currency exchange rates in effect during the period. Currency transaction gains and losses are included in other operating expense, net in the consolidated statements of income.

Stock-Based Compensation The Company measures stock-based compensation expense at the grant date based on the fair value of the award and recognizes the compensation expense over the requisite service period, which is generally the vesting period. The amount of stock-based compensation expense recognized during a period is based on the portion of the awards that are expected to vest. The Company estimates pre-vesting forfeitures at the time of grant and revises the estimates in subsequent periods.

New Accounting Standards

Recently Adopted

In May 2014, the Financial Accounting Standards Board (FASB) issued amended revenue recognition guidance to clarify the principles for recognizing revenue from contracts with customers. The guidance requires an entity to recognize revenue in an amount that reflects the consideration to which an entity expects to be entitled in exchange for the transfer of goods or services. The guidance also requires expanded disclosures relating to the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Additionally, qualitative and quantitative disclosures are required about customer contracts, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. The Company adopted this guidance using the modified retrospective method in the first quarter of fiscal year 2019, and elected to apply the guidance only to contracts that were not completed as of the date of initial application. The adoption of this guidance did not have a material impact on the Company's consolidated financial statements.

In January 2016, the FASB issued guidance which requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. The guidance also includes a simplified impairment assessment of equity investments without readily determinable fair values and presentation and disclosure changes. The Company adopted this guidance in the first quarter of fiscal year 2019 on a prospective basis. As a result of the adoption, the Company reclassified $47 million from accumulated other comprehensive loss to the opening balance of retained earnings as of April 28, 2018.

In March 2017, the FASB issued guidance which changes the financial statement presentation requirements for pension and other post-retirement benefit expense. While service cost will continue to be recognized in the same financial statement line items as other current employee compensation costs, the guidance requires all other non-service components of net benefit costs to be

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

classified and presented outside of income from operations. The Company adopted this guidance in the first quarter of fiscal year 2019, and the consolidated statements of income were retrospectively adjusted. For fiscal years 2018 and 2017, the Company reclassified $11 million of income and $53 million of expense, respectively, of non-service components of net periodic benefit costs, which were previously presented as a component of operating profit, to other non-operating income, net.

Not Yet Adopted

In February 2016, the FASB issued guidance which requires lessees to recognize right-of-use assets and lease liabilities on the balance sheet. The guidance will be adopted using the modified retrospective method by applying the new guidance as of the transition date with a cumulative-effect adjustment to the opening balance of retained earnings as of the beginning of the period of adoption. The Company will elect the package of practical expedients upon adoption which allows the Company to not reassess whether any expired or existing contracts are or contain leases, the classification of any expired or existing leases or any initial direct costs for existing leases. Further, the Company will make accounting policy elections to not apply the recognition requirements to short-term leases and to account for lease and nonlease components as a single lease component.

This guidance is effective for the Company beginning in the first quarter of fiscal year 2020. As a result of adopting the guidance, the Company expects to record right-of-use assets and lease liabilities for operating leases in an amount of approximately one percent of total assets on the consolidated balance sheet. The Company expects the adoption to have an immaterial impact on the consolidated statements of income and cash flows. The Company will also make additional lease related disclosures in the footnotes to the Company's consolidated financial statements upon adoption.

2**.** Revenue

The Company's revenues are principally derived from device-based medical therapies and services related to cardiac rhythm disorders, cardiovascular disease, renal disease, neurological disorders and diseases, spinal conditions and musculoskeletal trauma, chronic pain, urological and digestive disorders, ear, nose, and throat conditions, and diabetes conditions as well as advanced and general surgical care products, respiratory and monitoring solutions, and neurological surgery technologies. The Company's primary customers include hospitals, clinics, third-party health care providers, distributors, and other institutions, including governmental health care programs and group purchasing organizations.

The table below illustrates net sales by segment and division for fiscal years 2019, 2018, and 2017:

	Net Sales by Fiscal Year
(in millions)	2019				2018				2017
Cardiac Rhythm & Heart Failure	$	5,849			$	5,947			$	5,649
Coronary & Structural Heart	3,730				3,562				3,113
Aortic, Peripheral & Venous	1,926				1,845				1,736
Cardiac and Vascular Group	11,505				11,354				10,498
Surgical Innovations	5,753				5,537				5,145
Respiratory, Gastrointestinal, & Renal	2,725				3,179				4,774
Minimally Invasive Therapies Group	8,478				8,716				9,919
Spine	2,654				2,668				2,641
Brain Therapies	2,604				2,354				2,098
Specialty Therapies	1,641				1,556				1,491
Pain Therapies	1,284				1,165				1,136
Restorative Therapies Group	8,183				7,743				7,366
Diabetes Group	2,391				2,140				1,927
Total	$	30,557			$	29,953			$	29,710

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

The tables below include net sales by market geography and segment for fiscal years 2019, 2018, and 2017:

	U.S.****(1)								Non-U.S. Developed Markets**(2)**								Emerging Markets**(3)**
(in millions)	Fiscal Year 2019				Fiscal Year 2018				Fiscal Year 2019				Fiscal Year 2018				Fiscal Year 2019				Fiscal Year 2018
Cardiac and Vascular Group	$	5,750			$	5,681			$	3,767			$	3,790			$	1,988			$	1,883
Minimally Invasive Therapies Group	3,630				3,804				3,250				3,378				1,598				1,534
Restorative Therapies Group	5,478				5,164				1,759				1,720				946				859
Diabetes Group	1,336				1,226				855				739				200				175
Total	$	16,194			$	15,875			$	9,631			$	9,627			$	4,732			$	4,451

	U.S.****(1)								Non-U.S. Developed Markets**(2)**								Emerging Markets**(3)**
(in millions)	Fiscal Year 2018				Fiscal Year 2017				Fiscal Year 2018				Fiscal Year 2017				Fiscal Year 2018				Fiscal Year 2017
Cardiac and Vascular Group	$	5,681			$	5,454			$	3,790			$	3,393			$	1,883			$	1,651
Minimally Invasive Therapies Group	3,804				5,049				3,378				3,479				1,534				1,391
Restorative Therapies Group	5,164				5,012				1,720				1,588				859				766
Diabetes Group	1,226				1,148				739				625				175				154
Total	$	15,875			$	16,663			$	9,627			$	9,085			$	4,451			$	3,962

(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 within 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.

At April 26, 2019, $764 million of rebates were classified as other accrued expenses and $432 million of rebates were classified as a reduction of accounts receivable in the consolidated balance sheets. At April 27, 2018, $614 million of rebates were classified as other accrued expenses and $376 million of rebates were classified as a reduction of accounts receivable in the consolidated balance sheets. The Company includes obligations for returns in other accrued expenses in the consolidated balance sheets and the right-of-return asset in other current assets in the consolidated balance sheets. The right-of-return asset and liability at April 26, 2019 and right-of-return liability at April 27, 2018 were not material. There was no right-of-return asset at April 27, 2018 as the liability was recorded net of the asset under previous guidance. During fiscal year 2019, adjustments to rebate and return reserves recognized in revenue that were included in the rebate and return reserves at the beginning of the period were not material.

Deferred Revenue and Remaining Performance Obligations

Deferred revenue at April 26, 2019 and April 27, 2018 was $315 million and $289 million, respectively. At April 26, 2019 and April 27, 2018, $211 million and $196 million was included in other accrued expenses, respectively, and $104 million and $93 million was included in other liabilities, respectively. During the fiscal year ended April 26, 2019, the Company recognized $199 million of revenue that was included in deferred revenue as of April 27, 2018.

At April 26, 2019, the estimated revenue expected to be recognized in future periods related to performance obligations that are unsatisfied for executed contracts with an original duration of one year or more was approximately $900 million. The Company expects to recognize revenue on the majority of these remaining performance obligations over the next four years.

3**.** Acquisitions

The Company had acquisitions during fiscal years 2019 and 2018 that were accounted for as business combinations. The assets and liabilities of businesses acquired were recorded and consolidated on the acquisition date at their respective fair values. Goodwill resulting from business combinations is largely attributable to future yet to be defined technologies, new customer relationships, existing workforce of the acquired businesses, and synergies expected to arise after the Company's acquisition of these businesses. The pro forma impact of acquisitions during fiscal years 2019 and 2018 was not significant, either individually or in the aggregate, to the results of the Company. The results of operations of acquired businesses have been included in the Company’s consolidated statements of income since the date each business was acquired.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Fiscal Year 2019

The acquisition date fair values of the assets acquired and liabilities assumed in fiscal year 2019 were as follows:

(in millions)	Mazor Robotics				EPiX Therapeutics, Inc.				All Other				Total
Cash and cash equivalents	$	109			$	3			$	3			$	115
Investments	52				—				—				52
Accounts receivable	10				—				2				12
Inventory	7				—				27				34
Other current assets	2				1				3				6
Property, plant, and equipment	3				1				29				33
Goodwill	1,197				165				148				1,510
Other intangible assets	399				162				210				771
Tax assets	6				—				7				13
Other assets	1				2				—				3
Total assets acquired	1,786				334				429				2,549
Current liabilities	54				4				45				103
Accrued income taxes	—				—				5				5
Deferred tax liabilities	58				11				—				69
Total liabilities assumed	112				15				50				177
Net assets acquired	$	1,674			$	319			$	379			$	2,372

Mazor Robotics

On December 18, 2018, the Company's Restorative Therapies Group acquired Mazor Robotics (Mazor), a pioneer in the field of robotic guidance systems. The acquisition of Mazor strengthens the Company's position as a global leader in enabling technologies for spine surgery. The Company offers a fully-integrated procedural solution for surgical planning, execution and confirmation by combining the Company's spine implants, navigation, and intra-operative imaging technology with Mazor's robotic-assisted surgery systems. Total consideration for the transaction, net of cash acquired, was $1.6 billion, consisting of $1.3 billion of cash and $246 million of a previously-held equity investment in Mazor. Based upon a preliminary acquisition valuation, the Company acquired $383 million of technology-based intangible assets and $16 million of tradenames with estimated useful lives of 10 years and $1.2 billion of goodwill. The goodwill is primarily attributable to pull-through revenue, future yet to be defined technologies, and an assembled workforce. The goodwill is not deductible for tax purposes.

During fiscal year 2019, the Company recognized $51 million of costs incurred in connection with the acquisition of Mazor, including payouts for unvested stock options and investment banker and other transaction fees, which were recognized in selling, general, and administrative expense in the consolidated statements of income. Revenue and net income (loss) attributable to Mazor since the date of acquisition included in the consolidated statements of income were not significant for fiscal year 2019.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

EPiX Therapeutics, Inc.

On March 8, 2019, the Company's Cardiac and Vascular Group acquired EPiX Therapeutics, Inc. (EPiX), a medical device company that designs and manufactures a novel, catheter-based, temperature-controlled cardiac ablation system for the treatment of patients with cardiac arrhythmias, including atrial fibrillation. This acquisition expands the Company's cardiac ablation portfolio to offer physicians a comprehensive suite of tools to treat patients with cardiac arrhythmias. Total consideration for the transaction, net of cash acquired, was $316 million, consisting of $216 million of cash and $100 million of contingent consideration. Contingent consideration is primarily comprised of a product development-based payment triggered upon a U.S. Federal Drug Administration regulatory approval. Based upon a preliminary acquisition valuation, the Company acquired $162 million of IPR&D related to the DiamondTemp ablation system and $165 million of goodwill. The goodwill is primarily attributable to future yet to be defined technologies and is not deductible for tax purposes. Expenses incurred in connection with the acquisition of EPiX were not significant. Revenue and net income (loss) attributable to EPiX since the date of acquisition included in the consolidated statements of income were not significant for fiscal year 2019.

Fiscal Year 2018

The acquisition date fair value of net assets acquired in fiscal year 2018 was $152 million, consisting of $156 million of assets acquired and $4 million of liabilities assumed. Assets acquired were primarily comprised of $52 million of goodwill, $48 million of customer-related intangible assets with estimated useful lives of 7 years, and $47 million of technology-based intangible assets with estimated useful lives ranging from 10 to 12 years.

Additionally, in the first quarter of fiscal year 2018, adjustments were made to finalize the allocation of purchase price for the Company's acquisition of HeartWare International, Inc., which was acquired on August 23, 2016, related to contingent liabilities and other assets, which resulted in an increase to goodwill of $54 million.

Acquired In-Process Research & Development

IPR&D acquired outside of a business combination is expensed immediately. During fiscal year 2019, the Company acquired $38 million of IPR&D in connection with asset acquisitions, which was recognized in other operating expense, net in the consolidated statements of income. The Company did not acquire any IPR&D in connection with asset acquisitions during fiscal years 2018 and 2017.

Contingent Consideration

The fair value of contingent consideration at April 26, 2019 and April 27, 2018 was $222 million and $173 million, respectively. At April 26, 2019, $73 million was recorded in other accrued expenses and $149 million was recorded in other liabilities on the consolidated balance sheets. At April 27, 2018, $108 million was reflected in other accrued expenses and $65 million was reflected in other liabilities on the consolidated balance sheets.

The following table provides a reconciliation of the beginning and ending balances of contingent consideration:

	Fiscal Year
(in millions)	2019				2018
Beginning Balance	$	173			$	246
Purchase price contingent consideration	151				28
Contingent consideration payments	(36		)		(72		)
Change in fair value of contingent consideration	(66		)		(29		)
Ending Balance	$	222			$	173

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

The recurring Level 3 fair value measurements of contingent consideration include the following significant unobservable inputs:

(in millions)	Fair Value at April 26, 2019				Valuation Technique		Unobservable Input		Range
							Discount rate		11.5% - 32.5%
Revenue-based payments	$	90			Discounted cash flow		Probability of payment		65% - 100%
							Projected fiscal year of payment		2020 - 2025
							Discount rate		5.5%
Product development-based payments	$	132			Discounted cash flow		Probability of payment		75% - 100%
							Projected fiscal year of payment		2020 - 2027

4**.** Divestiture

On July 29, 2017, the Company completed the sale of the Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency businesses within the Minimally Invasive Therapies Group segment to Cardinal Health, Inc. (Cardinal). As a result of the transaction, the Company received proceeds of $6.1 billion, which was recorded in proceeds from sale of businesses in the consolidated statements of cash flows, and recognized a before-tax gain of $697 million, which was recognized within gain on sale of businesses in the consolidated statements of income. Among the product lines included in the divestiture were dental and animal health, chart paper, wound care, incontinence, electrodes, SharpSafety, thermometry, perinatal protection, blood collection, compression, and enteral feeding offerings. The divestiture also included 17 dedicated manufacturing sites.

In fiscal year 2018, the Company recognized expenses incurred in connection with the divestiture of $115 million, primarily comprised of professional services, including banker, legal, tax, and advisory fees, as well as $16 million of accelerated stock compensation expense related to the acceleration of the vesting period for employees that transferred with the divestiture. Expenses incurred in connection with the divestiture were recognized in selling, general, and administrative expense in the consolidated statements of income. There were no divestiture-related expenses during fiscal years 2019 or 2017.

The divestiture of the Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency businesses did not meet the criteria to be classified as discontinued operations, as such, the results of operations of these businesses are included within net income through the date of the divestiture.

5**.** Restructuring Charges

For fiscal year 2019, the Company recognized $407 million in restructuring charges, net of $17 million of accrual adjustments. For fiscal year 2018, the Company recognized $107 million in restructuring charges, net of $34 million of accrual adjustments, including $96 million in restructuring charges related to the Enterprise Excellence restructuring program and $11 million in restructuring charges, net of $34 million of accrual adjustments, related to the Cost Synergies restructuring program. For fiscal year 2017, the Company recognized $300 million in restructuring charges, net of $68 million of accrual adjustments related to the Cost Synergies restructuring program. Accrual adjustments relate to certain employees identified for termination finding other positions within the Company, cancellations of employee terminations, and employee termination benefits being less than initially estimated.

Enterprise Excellence

In the third quarter of fiscal year 2018, the Company announced its Enterprise Excellence restructuring program, which is expected to leverage the Company's global size and scale, as well as enhance the customer and employee experience, with a focus on three objectives: global operations, functional optimization, and commercial optimization. Primary activities of the restructuring program include integrating and enhancing global manufacturing and supply processes, systems and site presence, enhancing and leveraging global operating models across several enabling functions, and optimizing certain commercial processes, systems, and models.

The Company estimates that, in connection with its Enterprise Excellence restructuring program, it will recognize pre-tax exit and disposal costs and other costs associated with the restructuring program across all segments of approximately $1.6 billion to $1.8 billion, the majority of which are expected to be incurred by the end of fiscal year 2022. Approximately half of the estimated charges are related to employee termination benefits. The remaining restructuring charges are costs associated with the restructuring program, such as salaries for employees supporting the program and consulting expenses. These charges are recognized within restructuring charges, net, cost of products sold, and selling, general, and administrative expense in the consolidated statements of income.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

During fiscal year 2019, the Company recognized $424 million in charges, including $91 million recognized within cost of products sold and $118 million recognized within selling, general, and administrative expense in the consolidated statements of income. During fiscal year 2018, the Company recognized $96 million in charges, including $28 million within cost of products sold and $33 million recognized within selling, general, and administrative expense in the consolidated statements of income.

The following table summarizes the activity related to the Enterprise Excellence restructuring program for fiscal years 2019 and 2018:

(in millions)	Employee Termination Benefits				Associated Costs**(1)**				Asset Write-downs**(2)**				Other Costs				Total
April 28, 2017	$	—			$	—			$	—			$	—			$	—
Charges	35				61				—				—				96
Cash payments	(8		)		(59		)		—				—				(67		)
April 27, 2018	27				2				—				—				29
Charges	192				193				17				22				424
Cash payments	(118		)		(186)				—				(10		)		(314		)
Settled non-cash	—				—				(17		)		—				(17		)
April 26, 2019	$	101			$	9			$	—			$	12			$	122

(1)	Associated costs include costs incurred as a direct result of the restructuring program, such as salaries for employees supporting the program and consulting expenses.

(2)	Recognized within selling, general, and administrative expense in the consolidated statements of income.

Cost Synergies

The cost synergies program related to administrative office optimization, manufacturing and supply chain infrastructure, and certain general and administrative savings was achieved as part of the Covidien plc (Covidien) integration and completed in the third quarter of fiscal year 2018. Restructuring charges incurred throughout the life of the initiative affecting all segments were primarily related to employee termination costs and costs related to manufacturing and facility closures.

The following table summarizes the activity related to the Cost Synergies restructuring program for fiscal years 2019, 2018, and 2017:

(in millions)	Employee Termination Benefits				Asset Write-downs				Other Costs				Total
April 29, 2016	$	213			$	—			$	37			$	250
Charges	287				27				54				368
Cash payments	(179		)		—				(53		)		(232		)
Settled non-cash	—				(27		)		—				(27		)
Accrual adjustments	(60		)		—				(8		)		(68		)
April 28, 2017	261				—				30				291
Charges	25				—				20				45
Cash payments	(132		)		—				(32		)		(164		)
Accrual adjustments	(38		)		—				4				(34		)
April 27, 2018	116				—				22				138
Cash payments	(44		)		—				(13		)		(57		)
Accrual adjustments	(13		)		—				(4		)		(17		)
April 26, 2019	$	59			$	—			$	5			$	64

For fiscal year 2019, the Company recognized no charges and accrual adjustments of $17 million. For fiscal year 2018, the Company recognized $45 million in charges, partially offset by accrual adjustments of $34 million, including $12 million recognized within

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

cost of products sold and $4 million recognized within selling, general, and administrative expense in the consolidated statements of income.

For fiscal year 2017, the Company recognized $441 million in charges, which included $73 million of incremental defined pension and post-retirement related expenses for employees that accepted voluntary early retirement packages. These costs are not included in the table summarizing the restructuring above, because they are associated with costs that are accounted for under the pension and post-retirement rules. See Note 16 for further discussion on the incremental defined benefit pension and post-retirement related expenses. The charges recognized during 2017 were partially offset by accrual adjustments of $68 million. For fiscal year 2017, asset write-downs included $17 million of property, plant, and equipment impairments. Fiscal year 2017 assets write-downs also included $10 million of inventory write-offs of discontinued product lines recognized within cost of products sold in the consolidated statements of income.

6**.** Financial Instruments

Debt Securities

The Company holds investments in marketable debt securities that are classified and accounted for as available-for-sale and are remeasured on a recurring basis. Refer to Note 1 for information regarding valuation techniques and inputs used in the fair value measurements.

The following tables summarize the Company's investments in available-for-sale debt securities by significant investment category and the related consolidated balance sheet classification at April 26, 2019 and April 27, 2018:

	April 26, 2019
	Valuation																Balance Sheet Classification
(in millions)	Cost				Unrealized Gains				Unrealized Losses				Fair Value				Investments				Other Assets
Level 1:
U.S. government and agency securities	$	529			$	1			$	(7	)		$	523			$	523			$	—
Level 2:
Corporate debt securities	3,500				14				(21		)		3,493				3,493				—
U.S. government and agency securities	387				1				(7		)		381				381				—
Mortgage-backed securities	537				3				(20		)		520				520				—
Non-U.S. government and agency securities	11				—				—				11				11				—
Other asset-backed securities	529				1				(3		)		527				527				—
Total Level 2	4,964				19				(51		)		4,932				4,932				—
Level 3:
Auction rate securities	47				—				(3		)		44				—				44
Total available-for-sale debt securities	$	5,540			$	20			$	(61	)		$	5,499			$	5,455			$	44

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

	April 27, 2018
	Valuation																Balance Sheet Classification
(in millions)	Cost				Unrealized Gains				Unrealized Losses				Fair Value				Investments				Other Assets
Level 1:
U.S. government and agency securities	$	732			$	—			$	(26	)		$	706			$	706			$	—
Level 2:
Corporate debt securities	4,179				20				(75		)		4,124				4,124				—
U.S. government and agency securities	848				—				(24		)		824				824				—
Mortgage-backed securities	725				2				(34		)		693				693				—
Non-U.S. government and agency securities	74				—				(1		)		73				73				—
Other asset-backed securities	358				—				(2		)		356				356				—
Total Level 2	6,184				22				(136		)		6,070				6,070				—
Level 3:
Auction rate securities	47				—				(3		)		44				—				44
Total available-for-sale debt securities	$	6,963			$	22			$	(165	)		$	6,820			$	6,776			$	44

The following tables present the gross unrealized losses and fair values of the Company’s available-for-sale debt securities that have been in a continuous unrealized loss position deemed to be temporary, aggregated by investment category, at April 26, 2019 and April 27, 2018:

	April 26, 2019
	Less than 12 months								More than 12 months
(in millions)	Fair Value				Unrealized Losses				Fair Value				Unrealized Losses
U.S. government and agency securities	$	130			$	(1	)		$	649			$	(13	)
Corporate debt securities	582				(5		)		1,153				(16		)
Mortgage-backed securities	73				(1		)		250				(19		)
Other asset-backed securities	290				(2		)		85				(1		)
Auction rate securities	—				—				44				(3		)
Total	$	1,075			$	(9	)		$	2,181			$	(52	)

	April 27, 2018
	Less than 12 months								More than 12 months
(in millions)	Fair Value				Unrealized Losses				Fair Value				Unrealized Losses
U.S. government and agency securities	$	762			$	(33	)		$	374			$	(17	)
Corporate debt securities	2,620				(58		)		272				(17		)
Mortgage-backed securities	442				(15		)		102				(19		)
Non-U.S. government and agency securities	32				—				36				(1		)
Other asset-backed securities	238				(1		)		63				(1		)
Auction rate securities	—				—				44				(3		)
Total	$	4,094			$	(107	)		$	891			$	(58	)

The following table presents the unobservable inputs utilized in the fair value measurement of the auction rate securities classified as Level 3 at April 26, 2019:

	Valuation Technique	Unobservable Input	Range (Weighted Average)
Auction rate securities	Discounted cash flow	Years to principal recovery	2 yrs. - 12 yrs. (3 yrs.)
Illiquidity premium	6%

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the ability to observe valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. The Company’s policy is to recognize transfers into and out of levels within the fair value hierarchy at the end of the fiscal quarter in which the actual event or change in circumstances that caused the transfer occurs. There were no transfers between Level 1, Level 2, or Level 3 during fiscal years 2019 or 2018. When a determination is made to classify an asset or liability within Level 3, the determination is based upon the significance of the unobservable inputs to the overall fair value measurement.

The following table provides a reconciliation of the beginning and ending balances of items measured at fair value on a recurring basis that used significant unobservable inputs (Level 3):

(in millions)	Total Level 3 Investments				Corporate Debt Securities				Auction Rate Securities
April 28, 2017	$	45			$	1			$	44
Settlements	(1		)		(1		)		—
April 27, 2018	44				—				44
Settlements	—				—				—
April 26, 2019	$	44			$	—			$	44

Activity related to the Company’s debt securities portfolio is as follows:

(in millions)	April 26, 2019				April 27, 2018				April 28, 2017
Proceeds from sales	$	3,718			$	3,309			$	3,646
Gross realized gains	18				27				49
Gross realized losses	(62		)		(21		)		(14		)

Credit losses represent the difference between the present value of cash flows expected to be collected on certain mortgage-backed securities and auction rate securities and the amortized cost of these securities. Based on the Company’s assessment of the credit quality of the underlying collateral and credit support available to each of the remaining securities in which the Company is invested, the Company believes it has recognized all necessary other-than-temporary impairments, as the Company does not have the intent to sell, nor is it more likely than not that the Company will be required to sell, before recovery of the amortized cost.

At April 26, 2019 and April 27, 2018, the credit loss portion of other-than temporary impairments on debt securities was not significant. The total reductions for available-for-sale debt securities sold during fiscal years 2019 and 2018 were not significant.

The April 26, 2019 balance of available-for-sale debt securities by contractual maturity is shown in the following table. Within the table, maturities of mortgage-backed securities have been allocated based upon timing of estimated cash flows assuming no change in the current interest rate environment. Actual maturities may differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties.

(in millions)	April 26, 2019
Due in one year or less	$	1,022
Due after one year through five years	2,198
Due after five years through ten years	2,244
Due after ten years	35
Total debt securities	$	5,499

Equity Securities, Equity Method Investments, and Other Investments

The Company commonly holds investments in equity securities with readily determinable fair values, equity investments without readily determinable fair values, investments accounted for under the equity method, and other investments.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Effective April 28, 2018, the Company adopted accounting standards update (ASU) 2016-01, which requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. As a result of the adoption, the Company reclassified $47 million from accumulated other comprehensive loss to the opening balance of retained earnings as of April 28, 2018. The Company uses quoted market prices to determine the fair value of equity securities with readily determinable fair values. For equity investments without readily determinable fair values that do not qualify for the practical expedient to estimate fair value using the net asset value per share or its equivalent, the Company has elected to measure these investments at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer. This election is made for each investment separately and is reassessed at each reporting period as to whether the investment continues to qualify for this election. Additionally, at each reporting period, the Company makes a qualitative assessment considering impairment indicators to evaluate whether the investment is impaired.

Equity securities with readily determinable fair values are included within Level 1 of the fair value hierarchy, as they are measured using quoted market prices. Equity method investments and investments without readily determinable fair values, as described above, are included within Level 3 of the fair value hierarchy due to the use of significant unobservable inputs to determine fair value. To determine the fair value of these investments, the Company uses all pertinent financial information available related to the investees, including financial statements, market participant valuations from recent and proposed equity offerings, and other third-party data.

The following table summarizes the Company's equity and other investments at April 26, 2019, which are classified as other assets in the consolidated balance sheets:

(in millions)		April 26, 2019
Investments without readily determinable fair values		$	308
Equity method and other investments		64
Total equity and other investments		$	372

Prior to the adoption of ASU 2016-01, marketable equity securities were classified as available-for-sale and measured at fair value with unrealized changes recognized in accumulated other comprehensive income (AOCI), net of deferred taxes. Gains and losses on available-for-sale marketable equity securities were recognized in net income when realized. The Company also accounted for certain investments without quoted market prices under the cost method of accounting.

The following table summarizes the values of the Company's equity and other investments by significant investment category and the related consolidated balance sheet classification at April 27, 2018:

	Valuation																Balance Sheet Classification
(in millions)	Cost				Unrealized Gains				Unrealized Losses				Fair Value				Investments				Other Assets
Level 1:
Marketable equity securities	$	63			$	99			$	—			$	162			$	—			$	162
Level 2:
Debt funds	739				—				(154		)		585				585				—
Investments measured at net asset value**(1)****:**
Debt funds	199				—				(2		)		197				197				—
Total available-for-sale equity securities	1,001				99				(156		)		944				782				162
Cost method, equity method, and other investments:
Level 3:
Cost method, equity method, and other investments	353				—				—				N/A				—				353
Total equity and other investments	$	1,354			$	99			$	(156	)		$	944			$	782			$	515

(1) Certain investments that are measured at the net asset value per share (or its equivalent) as a practical expedient are excluded from the fair value hierarchy. The fair value amounts presented herein are intended to permit reconciliation to the consolidated balance sheets.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

The table below includes activity related to the Company’s portfolio of equity and other investments. Gains and losses on equity and other investments are recognized in other non-operating income, net in the consolidated statements of income.

(in millions)		April 26, 2019				April 27, 2018				April 28, 2017
Proceeds from sales		$	964			$	918			$	1,710
Gross realized gains		134				18				75
Gross realized losses		(30		)		(4		)		(42		)
Recognized impairment losses		(45		)		(231		)		(30		)

Net gains recognized during fiscal year 2019 were $104 million, comprised of $94 million net realized gains on equity and other investments sold during the period and $10 million of unrealized gains on equity and other investments still held at April 26, 2019. Gross gains and losses for fiscal years 2018 and 2017 represent gains and losses on instruments sold during the period.

During fiscal year 2018, the Company received bids from potential buyers and investors for some or all of its ownership in a portfolio of selected investments, which indicated that the fair values of certain of the underlying cost and equity method investments in the portfolio may be below the respective carrying values. The Company determined that the decline in the fair values was other-than-temporary given the uncertainty regarding the Company’s intent to hold the investments for a period of time that would be sufficient to recover the carrying values. As a result, the Company recognized impairment charges of $227 million during fiscal year 2018, which were recognized in other non-operating income, net in the consolidated statements of income. The fair values of the investments were determined based on Level 3 inputs. The carrying values of the investments prior to recognizing the impairment charges was $317 million. There were no other significant impairment charges recognized during fiscal year 2018 and impairment charges during fiscal years 2019 and 2017 were not significant.

7**.** Financing Arrangements

Current debt obligations consisted of the following:

(in millions)	April 26, 2019				April 27, 2018
Bank borrowings	$	332			$	355
Floating rate five-year 2015 senior notes	500				—
Capital lease obligations	6				5
Commercial paper	—				698
1.700 percent two-year 2017 senior notes	—				1,000
Current debt obligations	$	838			$	2,058

Bank Borrowings Outstanding bank borrowings at April 26, 2019 were short-term advances to certain non-U.S. subsidiaries under credit agreements with various banks. Bank borrowings consist primarily of borrowings in Japanese Yen at an interest rate of 0.18%, and the borrowing is a natural hedge of currency and exchange rate risk.

Commercial Paper On January 26, 2015, Medtronic Global Holdings S.C.A. (Medtronic Luxco), an entity organized under the laws of Luxembourg, entered into various agreements pursuant to which Medtronic Luxco may issue unsecured commercial paper notes (the 2015 Commercial Paper Program) on a private placement basis up to a maximum aggregate amount outstanding at any time of $3.5 billion. The Company and Medtronic, Inc. have guaranteed the obligations of Medtronic Luxco under the 2015 Commercial Paper Program.

There was no commercial paper outstanding at April 26, 2019, as compared to $698 million outstanding at April 27, 2018. During fiscal years 2019 and 2018, the weighted average original maturity of the commercial paper outstanding was approximately 27 days and 28 days, respectively, and the weighted average interest rate was 2.12 percent and 1.46 percent, respectively. The issuance of commercial paper reduces the amount of credit available under the Company's existing Credit Facility, defined below.

Line of Credit On December 12, 2018, Medtronic Luxco, as borrower, entered into an amended and restated credit agreement (Credit Facility), by and among Medtronic, Medtronic, Inc., Medtronic Luxco, the lenders from time to time party thereto, and Bank of America, N.A., as administrative agent and issuing bank, which expires in December 2023. The Credit Facility replaces the previous credit agreement dated November 7, 2014 and effective as of January 26, 2015.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

The Credit Facility provides for a $3.5 billion five-year unsecured revolving credit facility (Credit Facility). At each anniversary date of the Credit Facility, but not more than twice prior to the maturity date, the Company could also request a one-year extension of the maturity date. The Credit Facility provides the Company with the ability to increase its borrowing capacity by an additional $1.0 billion at any time during the term of the agreement. The Company and Medtronic, Inc. have guaranteed the obligations of the borrowers under the Credit Facility, and Medtronic Luxco will also guarantee the obligations of any designated borrower. The Credit Facility includes a multi-currency borrowing feature for certain specified foreign currencies. At April 26, 2019 and April 27, 2018, no amounts were outstanding under the original or amended credit facilities.

Interest rates on advances on the Credit Facility are determined by a pricing matrix, based on the Company’s long-term debt ratings, assigned by Standard & Poor’s Ratings Services and Moody’s Investors Service. 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 the Company remained in compliance with at April 26, 2019.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Long-term debt consisted of the following:

			April 26, 2019							April 27, 2018
(in millions, except interest rates)	Maturity by Fiscal Year		Amount				Effective Interest Rate			Amount				Effective Interest Rate
Floating rate five-year 2015 senior notes	2020		$	—			—	%		$	500			2.92	%
2.500 percent five-year 2015 senior notes	2020		—				—			2,500				2.63
4.200 percent ten-year 2010 CIFSA senior notes	2021		—				—			600				2.33
0.000 percent two-year 2019 senior notes	2021		1,681				0.22			—				—
Floating rate two-year 2019 senior notes	2021		560				0.05			—				—
4.125 percent ten-year 2011 senior notes	2021		500				4.21			500				4.21
3.150 percent seven-year 2015 senior notes	2022		2,500				3.29			2,500				3.29
3.125 percent ten-year 2012 senior notes	2022		675				3.21			675				3.21
3.200 percent ten-year 2012 CIFSA senior notes	2023		650				2.72			650				2.72
0.375 percent four-year 2019 senior notes	2023		1,681				0.56			—				—
2.750 percent ten-year 2013 senior notes	2023		530				3.25			530				3.25
2.950 percent ten-year 2013 CIFSA senior notes	2024		310				2.71			310				2.71
3.625 percent ten-year 2014 senior notes	2024		850				3.61			850				3.61
3.500 percent ten-year 2015 senior notes	2025		4,000				3.74			4,000				3.74
1.125 percent eight-year 2019 senior notes	2027		1,681				1.25			—				—
3.350 percent ten-year 2017 senior notes	2027		850				3.53			850				3.53
1.625 percent twelve-year 2019 senior notes	2031		1,121				1.75			—				—
4.375 percent twenty-year 2015 senior notes	2035		2,382				4.47			2,382				4.47
6.550 percent thirty-year 2007 CIFSA senior notes	2038		284				4.68			374				4.68
2.250 percent twenty-year 2019 senior notes	2039		1,121				2.34			—				—
6.500 percent thirty-year 2009 senior notes	2039		183				6.56			300				6.56
5.550 percent thirty-year 2010 senior notes	2040		306				5.58			500				5.58
4.500 percent thirty-year 2012 senior notes	2042		129				4.54			400				4.54
4.000 percent thirty-year 2013 senior notes	2043		325				4.10			325				4.10
4.625 percent thirty-year 2014 senior notes	2044		177				4.67			650				4.67
4.625 percent thirty-year 2015 senior notes	2045		1,963				4.69			4,150				4.69
Bank borrowings	2021-2022		83				1.94			125				3.99
Debt premium, net	2021-2045		29				—			120				—
Capital lease obligations	2021-2028		10				6.39			21				4.46
Interest rate swaps	2021-2022		9				—			(6		)		—
Deferred financing costs	2021-2045		(104		)		—			(107		)		—
Long-term debt			$	24,486						$	23,699

Senior Notes The Company has outstanding unsecured senior obligations, described as senior notes in the tables above (collectively, the Senior Notes). The Senior Notes rank equally with all other unsecured and unsubordinated indebtedness of the Company. The indentures under which the Senior Notes were issued contain customary covenants, all of which the Company remained in compliance with at April 26, 2019. The Company used the net proceeds from the sale of the Senior Notes primarily for general corporate purposes, which includes the repayment of other indebtedness of the Company.

In March 2019, Medtronic Luxco issued six tranches of Euro-denominated Senior Notes with an aggregate principal of €7.0 billion, with maturities ranging from fiscal year 2021 to fiscal year 2039, resulting in cash proceeds of approximately $7.8 billion, net of

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

discounts and issuance costs (collectively, the 2019 Senior Notes). The issuance included €500 million of floating rate Senior Notes due in fiscal year 2021, €1.5 billion of 0.000 percent Senior Notes due in fiscal year 2021, €1.5 billion of 0.375 percent Senior Notes due in fiscal year 2023, €1.5 billion of 1.125 percent Senior Notes due in fiscal year 2027, €1.0 billion of 1.625 percent Senior Notes due in fiscal year 2031, and €1.0 billion of 2.250 percent Senior Notes due in fiscal year 2039. The Company used a portion of the net proceeds of the offering to fund the previously announced cash tender offers and early redemption, described below. The Euro-denominated debt is designated as a net investment hedge of certain of the Company's European operations. Refer to Note 8 for additional information regarding the net investment hedge.

The Company completed the cash tender offer and early redemption of $6.4 billion of Medtronic Inc. and CIFSA senior notes for $6.9 billion of total consideration in March 2019. The Company recognized a loss on debt extinguishment of $485 million, which primarily 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 statements of income. Also in March 2019, the Company repaid its 1.700 percent two-year 2017 senior notes, including interest, for $1.0 billion.

In April 2018, the Company completed an early redemption of approximately $1.2 billion of Senior Notes for $1.2 billion of total consideration. The Company recognized a loss on the debt redemption of $38 million, which included cash premiums and accelerated amortization of deferred financing costs. The loss was recognized in interest expense in the consolidated statements of income.

At April 26, 2019 and April 27, 2018, the Company had interest rate swap agreements designated as fair value hedges of certain underlying fixed-rate obligations, including the Company’s $500 million 4.125 percent 2011 Senior Notes and $675 million 3.125 percent 2012 Senior Notes. Refer to Note 8 for additional information regarding the interest rate swap agreements.

Contractual maturities of debt for the next five fiscal years and thereafter, excluding deferred financing costs, debt premium, net, and the fair value of outstanding interest rate swap agreements are as follows:

(in millions)
2020	$	838
2021	2,747
2022	3,258
2023	2,862
2024	1,161
Thereafter	14,524
Total debt	25,390
Less: Current debt obligations	838
Long-term debt	$	24,552

Financial Instruments Not Measured at Fair Value

At April 26, 2019, the estimated fair value of the Company’s Senior Notes was $26.2 billion compared to a principal value of $25.0 billion. At April 27, 2018 the estimated fair value was $25.1 billion compared to a principal value of $24.5 billion. The fair value was estimated using quoted market prices for the publicly registered Senior Notes, which are classified as Level 2 within the fair value hierarchy. The fair values and principal values consider the terms of the related debt and exclude the impacts of debt discounts and hedging activity.

8**.** Derivatives and Currency Exchange Risk Management

The Company uses operational and economic hedges, as well as currency exchange rate derivative contracts and interest rate derivative instruments, to manage the impact of currency exchange and interest rate changes on earnings and cash flows. In addition, the Company uses cross-currency interest rate swaps to manage currency risk related to certain debt. In order to minimize earnings and cash flow volatility resulting from currency exchange rate changes, the Company enters into derivative instruments, principally forward currency exchange rate contracts. These contracts are designed to hedge anticipated foreign currency transactions and changes in the value of specific assets and liabilities. At inception of the contract, the derivative is designated as either a freestanding derivative or a cash flow hedge. The primary currencies of the derivative instruments are the Euro, Japanese Yen, and British Pound. The Company does not enter into currency exchange rate derivative contracts for speculative purposes. The gross notional

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

amount of all currency exchange rate derivative instruments outstanding was $11.1 billion and $11.5 billion at April 26, 2019 and April 27, 2018, respectively.

The Company also uses derivative and non-derivative instruments to manage the impact of currency exchange rate changes on net investments in foreign currency-denominated operations. The information that follows explains the various types of derivatives and financial instruments used by the Company, reasons the Company uses such instruments, and the impact such instruments have on the Company’s consolidated balance sheets and statements of income.

Freestanding Derivative Contracts

Freestanding derivative contracts are primarily used to offset the Company’s exposure to the change in value of specific foreign-currency-denominated assets and liabilities and to offset variability of cash flows associated with forecasted transactions denominated in foreign currencies. The gross notional amount of the Company's currency exchange rate contracts outstanding at April 26, 2019 and April 27, 2018 was $4.3 billion and $5.2 billion, respectively. The Company's freestanding currency exchange rate contracts are not designated as hedges, and therefore, changes in the value of these contracts are recognized in earnings, thereby offsetting the current earnings effect of the related change in value of foreign-currency-denominated assets, liabilities, and cash flows.

The Company also entered into total return swaps in fiscal year 2018, which are used to hedge the liability of a non-qualified, deferred compensation plan. The gross notional amount of the Company's total return swaps outstanding at April 26, 2019 and April 27, 2018 was $191 million and $210 million, respectively. The Company's total return swaps are not designated as hedges, and therefore, changes in the value of these instruments are recognized in earnings. The cash flows related to the Company's freestanding derivative contracts are reported as operating activities in the consolidated statements of cash flows.

The amounts and classification of the gains (losses) in the consolidated statements of income related to derivative instruments, not designated as hedging instruments, for fiscal years 2019, 2018, and 2017 are as follows:

				Fiscal Year
(in millions)		Classification		2019				2018				2017
Currency exchange rate contracts		Other operating expense, net		$	218			$	(253	)		$	54
Total return swaps		Other operating expense, net		18				27				—
Total				$	236			$	(226	)		$	54

Cash Flow Hedges

Currency Exchange Rate Risk

Forward contracts designated as cash flow hedges are designed to hedge the variability of cash flows associated with forecasted transactions denominated in a foreign currency that will take place in the future. The gross notional amount of these contracts, designated as cash flow hedges, outstanding at April 26, 2019 and April 27, 2018 was $6.8 billion and $6.3 billion, respectively, and will mature within the subsequent two-year period. For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative instrument is reported as a component of accumulated other comprehensive loss. The effective portion of the gain or loss on the derivative instrument is reclassified into earnings and is included in other operating expense, net in the consolidated statements of income in the same period or periods during which the hedged transaction affects earnings. The cash flows related to all of the Company's derivative instruments designated as cash flow hedges are reported as operating activities in the consolidated statements of cash flows.

No gains or losses relating to ineffectiveness of cash flow hedges were recognized in earnings during fiscal years 2019, 2018, or 2017. No components of the hedge contracts were excluded in the measurement of hedge ineffectiveness, and no hedges were derecognized or discontinued during fiscal years 2019, 2018, or 2017.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

The amount of gross gains (losses) recognized in the consolidated statements of income related to derivative instruments designated as cash flow hedges for fiscal years 2019, 2018, and 2017 were as follows:

				Fiscal Year
(in millions)		Classification		2019				2018				2017
Currency exchange rate contracts		Other operating expense, net		$	108			$	(69	)		$	173

The amount of the gains (losses) recognized in AOCI related to the effective portion of currency exchange rate contract derivative instruments designated as cash flow hedges for fiscal years 2019, 2018, and 2017 were as follows:

	Fiscal Year
(in millions)	2019				2018				2017
Currency exchange rate contracts	$	615			$	(404	)		$	342

Forecasted Debt Issuance Interest Rate Risk

Forward starting interest rate derivative instruments designated as cash flow hedges are designed to manage the exposure to interest rate volatility with regard to future issuances of fixed-rate debt. The effective portion of the gains or losses on forward starting interest rate derivative instruments that are designated and qualify as cash flow hedges are reported as a component of accumulated other comprehensive loss. Beginning in the period in which the planned debt issuance occurs and the related derivative instruments are terminated, the effective portion of the gains or losses are then reclassified into interest expense over the term of the related debt. Any portion of the gains or losses that are determined to be ineffective is immediately recognized in interest expense. For fiscal years 2019 and 2018, the reclassifications of the effective portion of net gains (losses) on forward starting interest rate derivative instruments from accumulated other comprehensive loss to interest expense were not significant.

During fiscal year 2017, in connection with the issuance of the 2017 Senior Notes, the Company terminated $300 million of fixed pay, forward starting interest rate swaps with a weighted average fixed rate of 3.10 percent. During fiscal year 2017, there were $21 million of unrealized gains recorded in accumulated other comprehensive loss.

No gains or losses related to the ineffectiveness of forward starting interest rate derivative instruments were recognized in interest expense during fiscal year 2017. Additionally, during fiscal year 2017, no components of the forward starting interest rate derivative instruments were excluded in the measurement of hedge ineffectiveness and no hedges were derecognized or discontinued. The reclassification of the effective portion of the net losses from accumulated other comprehensive loss to interest expense was not significant.

At April 26, 2019 and April 27, 2018, the Company had $194 million and $(207) million, respectively, in after-tax net unrealized gains (losses) associated with cash flow hedging instruments recorded in accumulated other comprehensive loss. The Company expects that $175 million of after-tax net unrealized gains at April 26, 2019 will be recognized in the consolidated statements of income over the next 12 months.

Net Investment Hedges

The Company has designated Euro-denominated debt as a net investment hedge of certain of its European operations to manage the exposure to currency and exchange rate movements for foreign currency-denominated net investments in foreign operations. At April 26, 2019, the Company had $7.8 billion of outstanding Euro-denominated debt designated as a hedge of its net investment in certain of its European operations. These non-derivative instruments will mature beginning fiscal year 2021 through fiscal year 2039.

Additionally, during the fourth quarter of fiscal year 2019, the Company entered into and settled forward currency exchange rate contracts to manage the exposure to exchange rate movements in anticipation of the issuance of the 2019 Senior Notes. Certain of these forward currency exchange rate contracts were designated as a net investment hedge of certain of the Company's European operations. These contracts were terminated in conjunction with the issuance of the 2019 Senior Notes. Historically, the Company utilized forward currency exchange rate contracts designated as net investment hedges, all of which were terminated effective in fiscal year 2009 or prior.

For instruments that are designated and qualify as net investment hedges, the effective portion of the gains or losses is reported as a component of accumulated other comprehensive loss. The effective portion of the gains or losses is reclassified into earnings in the same period as a liquidation event or upon deconsolidation of the foreign subsidiary. Amounts excluded from the assessment

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

of effectiveness are recognized in other operating expense, net. The cash flows related to the Company's derivative instruments designated as net investment hedges are reported as investing activities in the consolidated statements of cash flows.

At April 26, 2019 and April 27, 2018, the Company had $169 million and $257 million, respectively, in after-tax unrealized losses associated with net investment hedges recorded in accumulated other comprehensive loss. The Company does not expect any of the after-tax unrealized losses at April 26, 2019 to be recognized in the consolidated statements of income over the next 12 months.

No significant hedge ineffectiveness was recognized as a result of these net investment hedges during fiscal years 2019, 2018, or 2017. In addition, the Company did not recognize any gains or losses during fiscal years 2019, 2018, or 2017 on instruments that no longer qualify as net investment hedges.

The amount and classifications of the gains recognized in the consolidated statements of income for the portion of the net investment hedges excluded from the measurement of hedge ineffectiveness were as follows:

				Fiscal Year
(in millions)		Classification		2019				2018				2017
Net investment hedges		Other operating expense, net		$	12			$	—			$	—

The amount of the gains recognized in AOCI related to the effective portion of instruments designated as net investment hedges for fiscal year 2019, 2018, or 2017 were as follows:

	Fiscal Year
(in millions)	2019				2018				2017
Net investment hedges	$	88			$	—			$	—

Fair Value Hedges

Interest rate derivative instruments designated as fair value hedges are designed to manage the exposure to interest rate movements and to reduce borrowing costs by converting fixed-rate debt into floating-rate debt. Under these agreements, the Company agrees to exchange, at specified intervals, the difference between fixed and floating interest amounts calculated by reference to an agreed-upon notional principal amount.

Changes in the fair value of the derivative instrument are recognized in interest expense and are offset by changes in the fair value of the underlying debt instrument. The gains (losses) from terminated interest rate swap agreements are recognized in long-term debt, increasing (decreasing) the outstanding balances of the debt, and amortized as a reduction of (addition to) interest expense over the remaining life of the related debt. The cash flows related to the Company's interest rate derivative instruments designated as fair value hedges are reported as operating activities in the consolidated statements of cash flows.

At both April 26, 2019 and April 27, 2018, the Company had interest rate swaps with gross notional amounts of $1.2 billion, designated as fair value hedges of underlying fixed-rate senior note obligations, including the Company’s $500 million 4.125 percent 2011 Senior Notes due fiscal year 2021 and the $675 million 3.125 percent 2012 Senior Notes due fiscal year 2022.

At April 26, 2019, the market value of outstanding interest rate swap agreements was an unrealized gain of $9 million, as compared to an unrealized loss of $6 million at April 27, 2018. The amounts were recorded in other liabilities and other assets with the offsets recorded in long-term debt on the consolidated balance sheets.

No significant hedge ineffectiveness was recognized as a result of these fair value hedges for fiscal years 2019, 2018, or 2017. In addition, the Company did not recognize any gains or losses during fiscal years 2019, 2018, or 2017 on firm commitments that no longer qualify as fair value hedges.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Balance Sheet Presentation

The following tables summarize the balance sheet classification and fair value of derivative instruments included in the consolidated balance sheets at April 26, 2019 and April 27, 2018. The fair value amounts are presented on a gross basis, and are segregated between derivatives that are designated and qualify as hedging instruments and those that are not designated and do not qualify as hedging instruments, and are further segregated by type of contract within those two categories.

	April 26, 2019
	Derivative Assets						Derivative Liabilities
(in millions)	Balance Sheet Classification		Fair Value				Balance Sheet Classification		Fair Value
Derivatives designated as hedging instruments
Currency exchange rate contracts	Other current assets		$	234			Other accrued expenses		$	1
Interest rate contracts	Other assets		9				Other liabilities		—
Currency exchange rate contracts	Other assets		78				Other liabilities		1
Total derivatives designated as hedging instruments			321						2
Derivatives not designated as hedging instruments
Currency exchange rate contracts	Other current assets		23				Other accrued expenses		17
Total return swaps	Other current assets		15				Other accrued expenses		—
Cross-currency interest rate contracts	Other current assets		6				Other accrued expenses		—
Total derivatives not designated as hedging instruments			44						17
Total derivatives			$	365					$	19
	April 27, 2018
	Derivative Assets						Derivative Liabilities
(in millions)	Balance Sheet Classification		Fair Value				Balance Sheet Classification		Fair Value
Derivatives designated as hedging instruments
Currency exchange rate contracts	Other current assets		$	37			Other accrued expenses		$	162
Interest rate contracts	Other assets		8				Other liabilities		14
Currency exchange rate contracts	Other assets		11				Other liabilities		51
Total derivatives designated as hedging instruments			56						227
Derivatives not designated as hedging instruments
Currency exchange rate contracts	Other current assets		31				Other accrued expenses		25
Total return swaps	Other current assets		4				Other accrued expenses		—
Stock warrants	Other assets		21				Other liabilities		—
Cross-currency interest rate contracts	Other assets		6				Other liabilities		6
Total derivatives not designated as hedging instruments			62						31
Total derivatives			$	118					$	258

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

The following table provides information by level for the derivative assets and liabilities that are measured at fair value on a recurring basis:

	April 26, 2019								April 27, 2018
(in millions)	Level 1				Level 2				Level 1				Level 2
Derivative assets	$	335			$	30			$	79			$	39
Derivative liabilities	19				—				238				20

The Company has elected to present the fair value of derivative assets and liabilities within the consolidated balance sheets on a gross basis, even when derivative transactions are subject to master netting arrangements and may otherwise qualify for net presentation. The cash flows related to collateral posted and received are reported gross as investing and financing activities, respectively, in the consolidated statements of cash flows. The following tables provide information as if the Company had elected to offset the asset and liability balances of derivative instruments, netted in accordance with various criteria as stipulated by the terms of the master netting arrangements with each of the counterparties. Derivatives not subject to master netting arrangements are not eligible for net presentation.

		April 26, 2019
						Gross Amount Not Offset on the Balance Sheet
(in millions)		Gross Amount of Recognized Assets (Liabilities)				Financial Instruments				Cash Collateral (Received) Posted				Securities Collateral (Received) Posted				Net Amount
Derivative assets:
Currency exchange rate contracts		$	335			$	(9	)		$	(43	)		$	—			$	283
Interest rate contracts		9				—				(1		)		—				8
Total return swaps		15				—				—				—				15
Cross-currency interest rate contracts		6				—				—				—				6
		365				(9		)		(44		)		—				312
Derivative liabilities:
Currency exchange rate contracts		(19		)		9				—				—				(10		)
		(19		)		9				—				—				(10		)
Total		$	346			$	—			$	(44	)		$	—			$	302

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

		April 27, 2018
						Gross Amount Not Offset on the Balance Sheet
(in millions)		Gross Amount of Recognized Assets (Liabilities)				Financial Instruments				Cash Collateral (Received) Posted				Securities Collateral (Received) Posted				Net Amount
Derivative assets:
Currency exchange rate contracts		$	79			$	(61	)		$	—			$	—			$	18
Interest rate contracts		8				(6		)		—				—				2
Total return swaps		4				—				—				—				4
Stock warrants		21				—				—				—				21
Cross-currency interest rate contracts		6				(4		)		—				—				2
		118				(71		)		—				—				47
Derivative liabilities:
Currency exchange rate contracts		(238		)		61				—				74				(103		)
Interest rate contracts		(14		)		6				—				2				(6		)
Cross-currency interest rate contracts		(6		)		4				—				—				(2		)
		(258		)		71				—				76				(111		)
Total		$	(140	)		$	—			$	—			$	76			$	(64	)

Concentrations of Credit Risk

Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist principally of interest-bearing investments, forward exchange derivative contracts, and trade accounts receivable. Global concentrations of credit risk with respect to trade accounts receivable are limited due to the large number of customers and their dispersion across many geographic areas. The Company monitors the creditworthiness of its customers to which it grants credit terms in the normal course of business.

The Company maintains cash and cash equivalents, investments, and certain other financial instruments (including currency exchange rate and interest rate derivative contracts) with various major financial institutions. The Company performs periodic evaluations of the relative credit standings of these financial institutions and limits the amount of credit exposure with any one institution. In addition, the Company has collateral credit agreements with its primary derivatives counterparties. Under these agreements, either party is required to post eligible collateral when the market value of transactions covered by the agreement exceeds specific thresholds, thus limiting credit exposure for both parties. At April 26, 2019, the Company received net cash collateral of $44 million from its counterparties. At April 27, 2018, the Company posted net securities collateral of $76 million to its counterparties. The cash collateral received was recorded in cash and cash equivalents, with the offset recorded as an increase in other accrued expenses on the consolidated balance sheets. The securities collateral posted remained in investments on the consolidated balance sheets.

9**.** Inventories

Inventory balances, net of reserves, were as follows:

(in millions)	April 26, 2019				April 27, 2018
Finished goods	$	2,476			$	2,407
Work-in-process	572				496
Raw materials	705				676
Total	$	3,753			$	3,579

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

10**.** Goodwill and Other Intangible Assets

Goodwill

The following table presents the changes in the carrying amount of goodwill by segment:

(in millions)	Cardiac and Vascular Group				Minimally Invasive Therapies Group				Restorative Therapies Group				Diabetes Group				Total
April 28, 2017	$	6,651			$	20,411			$	9,600			$	1,853			$	38,515
Goodwill as a result of acquisitions	6				10				9				27				52
Purchase accounting adjustments	54				—				—				—				54
Currency translation and other	80				734				108				—				922
April 27, 2018	6,791				21,155				9,717				1,880				39,543
Goodwill as a result of acquisitions	165				83				1,238				24				1,510
Currency translation and other	(102		)		(857		)		(134		)		(1		)		(1,094		)
April 26, 2019	$	6,854			$	20,381			$	10,821			$	1,903			$	39,959

The Company did not recognize any goodwill impairments during fiscal years 2019, 2018, or 2017.

Intangible Assets

The following table presents the gross carrying amount and accumulated amortization of intangible assets:

	April 26, 2019								April 27, 2018
(in millions)	Gross Carrying Amount				Accumulated Amortization				Gross Carrying Amount				Accumulated Amortization
Definite-lived:
Customer-related	$	16,944			$	(4,095	)		$	16,949			$	(3,139	)
Purchased technology and patents	11,405				(4,570		)		11,569				(4,441		)
Trademarks and tradenames	570				(324		)		822				(569		)
Other	85				(59		)		94				(52		)
Total	$	29,004			$	(9,048	)		$	29,434			$	(8,201	)
Indefinite-lived:
IPR&D	$	604			$	—			$	490			$	—

During fiscal year 2019, the Company recognized $87 million of definite-lived intangible asset charges, including $61 million and $26 million recognized in connection with business exits in the Cardiac and Vascular Group and Restorative Therapies Group segments, respectively. Definite-lived intangible asset charges are recognized in other operating expense, net in the consolidated statements of income. The Company did not recognize any definite-lived intangible asset impairments during fiscal years 2018 or 2017.

During fiscal year 2019, the Company recognized $30 million of indefinite-lived intangible asset charges, including $11 million in connection with a business exit in the Restorative Therapies Group segment, and $10 million and $9 million in connection with the discontinuation of certain IPR&D projects within the Minimally Invasive Therapies Group and Cardiac and Vascular Group segments, respectively. During fiscal year 2018, the Company recognized impairment losses on indefinite-lived intangibles of $68 million as a result of the discontinuation of certain IPR&D projects within the Restorative Therapies Group segment. Indefinite-lived intangible asset charges are recognized in other operating expense, net in the consolidated statements of income. The Company did not recognize any significant indefinite-lived intangible asset charges during fiscal year 2017. Due to the nature of IPR&D projects, the Company may experience future delays or failures to obtain regulatory approvals to conduct clinical trials, failures of such clinical trials, delays or failures to obtain required market clearances or other failures to achieve a commercially viable product, or the discontinuation of certain projects, and as a result, may recognize impairment losses in the future.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Amortization

Intangible asset amortization expense was $1.8 billion for fiscal years 2019 and 2018 and $2.0 billion for fiscal year 2017. Estimated aggregate amortization expense by fiscal year based on the current carrying value and remaining estimated useful lives of definite-lived intangible assets at April 26, 2019, excluding any possible future amortization associated with acquired IPR&D which has not met technological feasibility, is as follows:

(in millions)	Amortization Expense
2020	$	1,741
2021	1,724
2022	1,684
2023	1,615
2024	1,574

11**.** Property, Plant, and Equipment

Property, plant, and equipment balances and corresponding estimated useful lives were as follows:

(in millions)	April 26, 2019				April 27, 2018				Estimated Useful Lives (in years)
Equipment	$	5,519			$	5,171			Generally 2-7, up to 15
Computer software	1,842				1,578				Up to 5
Land and land improvements	181				187				Up to 20
Buildings and leasehold improvements	2,267				2,265				Up to 40
Construction in progress	1,111				1,058				—
Property, plant, and equipment	10,920				10,259
Less: Accumulated depreciation	(6,245		)		(5,655		)
Property, plant, and equipment, net	$	4,675			$	4,604

Depreciation expense of $895 million, $821 million, and $937 million was recognized in fiscal years 2019, 2018, and 2017, respectively.

12**.** Shareholders’ Equity

Share Capital Medtronic plc is authorized to issue 2.6 billion Ordinary Shares, $0.0001 par value; 40 thousand Euro Deferred Shares, €1.00 par value; 127.5 million Preferred Shares, $0.20 par value; and 500 thousand A Preferred Shares, $1.00 par value.

Euro Deferred Shares The authorized share capital of the Company includes 40 thousand Euro Deferred Shares, with a par value of €1.00 per share. At April 26, 2019, no Euro Deferred Shares were issued or outstanding.

Preferred Shares The authorized share capital of the Company includes 127.5 million of Preferred Shares, with a par value of $0.20 per share. At April 26, 2019, no Preferred Shares were issued or outstanding.

A Preferred Shares The authorized share capital of the Company includes 500 thousand A Preferred Shares, with a par value of $1.00 per share. At April 26, 2019, 1,872 A Preferred Shares were outstanding. The holders of A Preferred Shares are entitled to payment of dividends prior to any other class of shares in the Company equal to twice the dividend to be paid per Company ordinary share. On a return of assets, whether on liquidation or otherwise, the A Preferred Shares are entitled to repayment of the capital paid up thereon in priority to any repayment of capital to the holders of any other shares and the holders of the A Preferred Shares shall not be entitled to any further participation in the assets or profits of the Company. The holders of the A Preferred Shares are not entitled to receive notice of, nor to attend, speak, or vote at any general meeting of the Company.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Dividends The timing, declaration, and payment of future dividends to holders of the Company's ordinary and A Preferred shares falls within the discretion of the Company's Board of Directors and depends upon many factors, including the statutory requirements of Irish law, the Company's earnings and financial condition, the capital requirements of the Company's businesses, industry practice and any other factors the Board of Directors deems relevant.

Ordinary Share Repurchase Program Shares are repurchased from time to time to support the Company’s stock-based compensation programs and to return capital to shareholders. During fiscal years 2019 and 2018, the Company repurchased approximately 31 million and 25 million shares, respectively, at an average price of $91.43 and $83.71, respectively.

In June 2015, the Company's Board of Directors authorized, subject to the ongoing existence of sufficient distributable reserves, the repurchase of 80 million of the Company's ordinary shares. As described below, this authorization was replaced in June 2017. During fiscal year 2018, prior to the June 2017 repurchase program which became effective on June 26, 2017, the Company purchased approximately 13 million shares authorized under the June 2015 repurchase program.

In June 2017, the Company’s Board of Directors replaced the June 2015 authorization to repurchase up to an aggregate number of ordinary shares with an authorization to expend up to an aggregate amount of $5.0 billion beginning June 26, 2017 to repurchase the Company’s ordinary shares. In March 2019, the Company's Board of Directors authorized an incremental $6.0 billion for repurchase of the Company's ordinary shares. There is no specific time-period associated with these repurchase authorizations. At April 26, 2019, the Company had used approximately $3.8 billion of the $11.0 billion authorized under the repurchase program, leaving approximately $7.2 billion available for future repurchases. The Company accounts for repurchases of ordinary shares using the par value method and shares repurchased are canceled.

13**.** Stock Purchase and Award Plans

The Medtronic, Inc. 2013 Stock Award and Incentive Plan was originally approved by the Company's shareholders in August 2013. In January 2015, the Company's Board of Directors approved an amendment to and assumption of the Medtronic, Inc. 2013 Stock Award and Incentive Plan, which created the Medtronic plc 2013 Stock Award and Incentive Plan (2013 Plan). In fiscal year 2019, the Company granted stock awards under the 2013 Plan. The 2013 Plan provides for the grant of non-qualified and incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, and other stock and cash-based awards. At April 26, 2019, there were approximately 51 million shares available for future grants under the 2013 Plan.

Share Options Options are granted at the exercise price, which is equal to the closing price of the Company’s ordinary shares on the grant date. The majority of the Company’s options are non-qualified options with a 10-year life and a 4-year ratable vesting term. The Company also grants shares of performance-based share options that typically cliff vest after three years only if the Company has also achieved certain performance objectives. Performance awards are expensed over the performance period based on the probability of achieving the performance objectives.

Restricted Stock Restricted stock awards and restricted stock units (collectively referred to as restricted stock) are granted to officers and key employees. At April 26, 2019, the Company does not have any outstanding restricted stock awards. Beginning in fiscal year 2018, restricted stock units have a 4-year ratable vesting term. Restricted stock units issued prior to fiscal year 2018 cliff vest after four years. The expense recognized for restricted stock units is equal to the grant date fair value, which is equal to the closing stock price on the date of grant. Restricted stock units are expensed over the vesting period and are subject to forfeiture if employment terminates prior to the lapse of the restrictions. The Company also grants shares of performance-based restricted stock units that typically cliff vest after three years only if the Company has also achieved certain performance objectives. Performance awards are expensed over the performance period based on the probability of achieving the performance objectives.

Restricted stock units are not considered issued or outstanding ordinary shares of the Company. Dividend equivalent units are accumulated on restricted stock units during the vesting period. At April 26, 2019, all restricted stock outstanding were restricted stock units.

Employees Stock Purchase Plan The Medtronic plc Amended and Restated 2014 Employees Stock Purchase Plan (ESPP) allows participating employees to purchase the Company's ordinary shares at a discount through payroll deductions. The expense recognized for shares purchased under the Company’s ESPP is equal to the 15 percent discount the employee receives at the end of the calendar quarter purchase period.

Employees may contribute between 2 percent and 10 percent of their wages or the statutory limit under the U.S. Internal Revenue Code toward the purchase of newly-issued ordinary shares of the Company at 85 percent of its market value at the end of the calendar quarter purchase period. Employees purchased 2 million shares at an average price of $77.74 per share in fiscal year 2019. At April 26, 2019, plan participants had approximately $12 million withheld to purchase the Company's ordinary shares at

85 percent of its market value on June 28, 2019, the last trading day before the end of the calendar quarter purchase period. At April 26, 2019, approximately 13 million ordinary shares were available for future purchase under the ESPP.

Stock Option Valuation Assumptions The Company uses the Black-Scholes option pricing model (Black-Scholes model) to determine the fair value of stock options at the grant date. The fair value of stock options under the Black-Scholes model requires management to make assumptions regarding projected employee stock option exercise behaviors, risk-free interest rates, volatility of the Company’s stock price, and expected dividends.

The following table provides the weighted average fair value of options granted to employees and the related assumptions used in the Black-Scholes model:

	Fiscal Year
	2019				2018				2017
Weighted average fair value of options granted	$	14.77			$	13.71			$	14.70
Assumptions used:
Expected life (years)(1)	6.10				6.16				6.18
Risk-free interest rate(2)	2.90		%		2.00		%		1.26		%
Volatility(3)	17.77		%		19.51		%		21.07		%
Dividend yield(4)	2.25		%		2.19		%		1.97		%

(1)	The Company analyzes historical employee stock option exercise and termination data to estimate the expected life assumption. The Company calculates the expected life assumption using the midpoint scenario, which combines historical exercise data with hypothetical exercise data, as the Company believes this data currently represents the best estimate of the expected life of a new employee option.

(2)	The rate is based on the grant date yield of a zero-coupon U.S. Treasury bond whose maturity period equals the expected term of the option.

(3)	Expected volatility is based on a blend of historical volatility and an implied volatility of the Company’s ordinary shares. Implied volatility is based on market traded options of the Company’s ordinary shares.

(4)	The dividend yield rate is calculated by dividing the Company’s annual dividend, based on the most recent quarterly dividend rate, by the closing stock price on the grant date.

Stock-Based Compensation Expense The following table presents the components and classification of stock-based compensation expense recognized for stock options, restricted stock, and ESPP in fiscal years 2019, 2018, and 2017:

	Fiscal Year
(in millions)	2019				2018				2017
Stock options	$	72			$	132			$	157
Restricted stock	189				185				169
Employee stock purchase plan	29				27				22
Total stock-based compensation expense	$	290			$	344			$	348
Cost of products sold	$	30			$	44			$	49
Research and development expense	36				38				41
Selling, general, and administrative expense	224				262				256
Restructuring charges, net	—				—				2
Total stock-based compensation expense	290				344				348
Income tax benefits	(54		)		(82		)		(98		)
Total stock-based compensation expense, net of tax	$	236			$	262			$	250

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Stock Options The following table summarizes all stock option activity, including activity from options assumed or issued as a result of acquisitions, during fiscal year 2019:

	Options (in thousands)			Wtd. Avg. Exercise Price				Wtd. Avg. Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in millions)
Outstanding at April 27, 2018	41,039			$	66.56
Granted	5,407			89.05
Exercised	(13,767	)		62.76
Expired/Forfeited	(1,002	)		83.17
Outstanding at April 26, 2019	31,677			71.52				5.91		$	512
Vested and expected to vest at April 26, 2019	9,086			86.54				8.46		16
Exercisable at April 26, 2019	22,102			65.01				4.81		495

The following table summarizes the total cash received from the issuance of new shares upon stock option award exercises, the total intrinsic value of options exercised, and the related tax benefit during fiscal years 2019, 2018, and 2017:

	Fiscal Year
(in millions)	2019				2018				2017
Cash proceeds from options exercised	$	825			$	250			$	367
Intrinsic value of options exercised	383				248				403
Tax benefit related to options exercised	78				75				140

Unrecognized compensation expense related to outstanding stock options at April 26, 2019 was $67 million and is expected to be recognized over a weighted average period of 2.5 years.

Restricted Stock The following table summarizes restricted stock activity, including activity from restricted stock assumed or issued as a result of acquisitions, during fiscal year 2019:

	Units (in thousands)			Wtd. Avg. Grant Price
Nonvested at April 27, 2018	8,236			$	83.35
Granted	2,812			88.78
Vested	(2,397	)		72.78
Forfeited	(655	)		83.73
Nonvested at April 26, 2019	7,996			88.40

The following table summarizes the weighted-average grant date fair value of restricted stock granted, total fair value of restricted stock vested and related tax benefit during fiscal years 2019, 2018, and 2017:

	Fiscal Year
(in millions, except per share data)	2019				2018				2017
Weighted-average grant-date fair value per restricted stock	$	88.78			$	83.88			$	85.07
Fair value of restricted stock vested	174				160				131
Tax benefit related to restricted stock vested	45				63				76

Unrecognized compensation expense related to restricted stock as of April 26, 2019 was $353 million and is expected to be recognized over a weighted average period of 2.5 years.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

14**.** Income Taxes

The income tax provision is based on income before income taxes reported for financial statement purposes. The components of income before income taxes, based on tax jurisdiction, are as follows:

	Fiscal Year
(in millions)	2019				2018				2017
U.S.	$	877			$	(958	)		$	(234	)
International	4,320				6,633				4,836
Income before income taxes	$	5,197			$	5,675			$	4,602

The income tax provision consists of the following:

	Fiscal Year
(in millions)	2019				2018				2017
Current tax expense:
U.S.	$	579			$	2,899			$	614
International	406				796				840
Total current tax expense	985				3,695				1,454
Deferred tax expense (benefit):
U.S.	(310		)		45				(399		)
International	(128		)		(1,160		)		(477		)
Net deferred tax benefit	(438		)		(1,115		)		(876		)
Income tax provision	$	547			$	2,580			$	578

On December 22, 2017, the U.S. government enacted comprehensive tax legislation, commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act"), which significantly revises U.S. corporate income taxation by, among other things, lowering the U.S. corporate income tax rate from 35.0 percent to 21.0 percent effective January 1, 2018, broadening the base of taxation, implementing a territorial tax system, and imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries.

The Company has recorded a cumulative income tax charge associated with the Tax Act totaling $2.4 billion. The $2.4 billion charge is made up of the following components:

•	A $2.4 billion charge associated with the one-time repatriation tax based on post-1986 undistributed earnings and profits not previously subject to U.S. income tax and whether such earnings were held in cash or other specified assets.

•	A $118 million charge resulting from the removal of the permanent reinvestment assertion on earnings and profits through April 27, 2018 for entities subject to the one-time repatriation tax.

•	A $75 million net benefit associated with the remeasurement of U.S. Federal deferred tax assets, liabilities, and valuation allowances, and impacts from the decrease in the U.S. statutory tax rate.

The Company made the accounting policy election to treat taxes due on U.S. inclusions in taxable income related to Global Intangible Low-Taxed Income (GILTI) as a current period expense when incurred (the "period cost method").

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Tax assets (liabilities), shown before jurisdictional netting of deferred tax assets (liabilities), are comprised of the following:

(in millions)	April 26, 2019				April 27, 2018
Deferred tax assets:
Net operating loss, capital loss, and credit carryforwards	$	6,574			$	7,463
Other accrued liabilities	389				410
Accrued compensation	315				209
Pension and post-retirement benefits	300				256
Stock-based compensation	162				190
Other	339				332
Inventory	194				207
Federal and state benefit on uncertain tax positions	83				67
Interest limitation	111				—
Unrealized loss on available-for-sale securities and derivative financial instruments	17				93
Gross deferred tax assets	8,484				9,227
Valuation allowance	(6,300		)		(7,166		)
Total deferred tax assets	2,184				2,061
Deferred tax liabilities:
Intangible assets	(1,614		)		(1,697		)
Realized loss on derivative financial instruments	(70		)		(69		)
Other	(152		)		(143		)
Accumulated depreciation	(38		)		(38		)
Outside basis difference of subsidiaries	(119		)		(131		)
Total deferred tax liabilities	(1,993		)		(2,078		)
Prepaid income taxes	363				406
Income tax receivables	335				315
Tax assets, net	$	889			$	704
Reported as (after valuation allowance and jurisdictional netting):
Other current assets	$	648			$	662
Tax assets	1,519				1,465
Deferred tax liabilities	(1,278		)		(1,423		)
Tax assets, net	$	889			$	704

No deferred taxes have been provided on the approximately $64.1 billion and $61.0 billion of undistributed earnings of the Company’s subsidiaries at April 26, 2019 and April 27, 2018, respectively, since these earnings have been, and under current plans will continue to be, permanently reinvested in these subsidiaries. During fiscal year 2018, the Company removed its permanently reinvested assertion on the undistributed earnings of certain foreign subsidiaries with a U.S. parent which were subject to the transition tax. The Company removed the assertion for all earnings of such subsidiaries through April 27, 2018 and reasserted for earnings generated in subsequent fiscal years. Due to the number of legal entities and jurisdictions involved, the complexity of the legal entity structure of the Company, and the complexity of the tax laws in the relevant jurisdictions, the Company believes it is not practicable to estimate, within any reasonable range, the amount of additional taxes which may be payable upon distribution of these undistributed earnings.

At April 26, 2019, the Company had approximately $26.2 billion of net operating loss carryforwards in certain non-U.S. jurisdictions, of which $22.9 billion have no expiration, and the remaining $3.3 billion will expire during fiscal years 2020 through 2039. Included in these net operating loss carryforwards are $18.1 billion of net operating losses related to a subsidiary of the Company, substantially all of which were recorded in fiscal 2008 as a result of the receipt of a favorable tax ruling from certain non-U.S. taxing authorities. The Company has recorded a full valuation allowance against these net operating losses, as management does not believe that it is more likely than not that these net operating losses will be utilized. Certain of the remaining non-U.S.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

net operating loss carryforwards of $8.1 billion have a valuation allowance recorded against the carryforwards, as management does not believe that it is more likely than not that these net operating losses will be utilized.

At April 26, 2019, the Company had $682 million of U.S. federal net operating loss carryforwards, which will expire during fiscal years 2020 through 2036. For U.S. state purposes, the Company had $1.3 billion of net operating loss carryforwards at April 26, 2019, which will expire during fiscal years 2020 through 2039.

At April 26, 2019, the Company also had $178 million of tax credits available to reduce future income taxes payable, of which $66 million have no expiration. The remaining credits expire during fiscal years 2020 through 2039.

The Company has established valuation allowances of $6.3 billion and $7.2 billion at April 26, 2019 and April 27, 2018, respectively, primarily related to the uncertainty of the utilization of certain deferred tax assets which are primarily comprised of tax loss and credit carryforwards in various jurisdictions. The decrease in the valuation allowance during fiscal year 2019 is primarily related to tax rate changes and the effects of currency fluctuations. These valuation allowances would result in a reduction to the income tax provision in the consolidated statements of income if they are ultimately not required.

The Company’s effective income tax rate varied from the U.S. federal statutory tax rate as follows:

	Fiscal Year
	2019			2018			2017
U.S. federal statutory tax rate	21.0	%		30.5	%		35.0	%
Increase (decrease) in tax rate resulting from:
U.S. state taxes, net of federal tax benefit	0.9			0.8			1.0
Research and development credit	(1.2	)		(0.8	)		(0.9	)
Puerto Rico Excise Tax	(1.6	)		(1.1	)		(1.5	)
International	(10.7	)		(18.9	)		(27.9	)
U.S. Tax Reform	0.2			43.0			—
Stock based compensation	(1.0	)		(1.0	)		—
Other, net	(0.2	)		3.0			(1.0	)
Divestiture related	—			(3.8	)		—
Certain tax adjustments	(1.0	)		(8.9	)		4.4
U.S. tax on foreign earnings	4.1			2.7			3.5
Effective tax rate	10.5	%		45.5	%		12.6	%

During fiscal year 2019, certain tax adjustments of $40 million, recognized in income tax provision in the consolidated statements of income, included the following:

•	A net benefit of $30 million associated with the finalization of the transition tax liability and the Tax Act impact to deferred tax assets, liabilities, and valuation allowances.

•	A charge of $42 million related to the recognition of a prepaid tax expense resulting from the reduction in the U.S. statutory tax rate under the Tax Act and the current year sale of U.S. manufactured inventory held as of April 27, 2018.

•	A benefit of $32 million related to intercompany legal entity restructuring.

•	A net benefit of $20 million with the finalization of certain income tax aspects of the divestiture of the Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency businesses.

During fiscal year 2018, certain tax adjustments of $1.9 billion, recognized in income tax provision in the consolidated statements of income, included the following:

•	A net charge of $2.4 billion associated with U.S. tax reform, inclusive of the transition tax, remeasurement of U.S. Federal deferred tax assets and liabilities, and the decrease in the U.S. statutory tax rate.

•	A charge of $73 million associated with an internal reorganization of certain foreign subsidiaries.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

•	A net benefit of $579 million associated with the intercompany sale of intellectual property.

During fiscal year 2017, certain tax adjustments of $202 million, recognized in income tax provision in the consolidated statements of income, 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 divestiture of a portion of the Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency businesses. 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, which were 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.

Currently, the Company’s operations in Puerto Rico, Switzerland, Singapore, Dominican Republic, Costa Rica, China, and Israel have various tax holidays and tax incentive grants. The tax reductions as compared to the local statutory rate favorably impacted earnings by $437 million, $446 million, and $475 million in fiscal years 2019, 2018, and 2017, respectively, and earnings per diluted share by $0.32, $0.33, and $0.34 in fiscal years 2019, 2018, and 2017, respectively. The tax holidays are conditional upon the Company meeting certain thresholds required under statutory law. The tax incentive grants, unless extended, will expire between fiscal years 2020 and 2030. The Company’s historical practice has been to renew, extend, or obtain new tax incentive grants upon expiration of existing tax incentive grants. If the Company is not able to renew, extend, or obtain new tax incentive grants, the expiration of existing tax incentive grants could have a material impact on the Company’s financial results in future periods. The tax incentive grants which expired during fiscal year 2019 did not have a material impact on the Company's consolidated financial statements.

The Company had $1.8 billion, $1.7 billion, and $1.9 billion of gross unrecognized tax benefits at April 26, 2019, April 27, 2018, and April 28, 2017, respectively. A reconciliation of the beginning and ending amount of unrecognized tax benefits for fiscal years 2019, 2018, and 2017 is as follows:

	Fiscal Year
(in millions)	2019				2018				2017
Gross unrecognized tax benefits at beginning of fiscal year	$	1,727			$	1,896			$	2,703
Gross increases:
Prior year tax positions	34				13				147
Current year tax positions	109				63				75
Acquisitions	—				—				4
Gross decreases:
Prior year tax positions	(14		)		(120		)		(538		)
Settlements	—				(80		)		(467		)
Statute of limitation lapses	(20		)		(45		)		(28		)
Gross unrecognized tax benefits at end of fiscal year	1,836				1,727				1,896
Cash advance paid to taxing authorities	(859		)		(859		)		—
Gross unrecognized tax benefits at end of fiscal year, net of cash advance	$	977			$	868			$	1,896

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

If all of the Company’s unrecognized tax benefits at April 26, 2019, April 27, 2018, and April 28, 2017 were recognized, $1.8 billion, $1.7 billion, and $1.8 billion would impact the Company’s effective tax rate, respectively. Although the Company believes that it has adequately provided for liabilities resulting from tax assessments by taxing authorities, positions taken by these tax authorities could have a material impact on the Company’s effective tax rate in future periods. The Company has recorded gross unrecognized tax benefits, net of cash advance, of $977 million as a noncurrent liability which is not expected to decrease within the next 12 months.

The Company recognizes interest and penalties related to income tax matters in income tax provision in the consolidated statements of income and records the liability in the current or noncurrent accrued income taxes in the consolidated balance sheets, as appropriate. The Company had $172 million, $128 million, and $360 million of accrued gross interest and penalties at April 26, 2019, April 27, 2018, and April 28, 2017, respectively. During fiscal years 2019, 2018, and 2017, the Company recognized gross interest expense (income) of approximately $48 million, $84 million, and $(208) million, respectively, in income tax provision in the consolidated statements of income.

During fiscal year 2018, the Company made a $1.1 billion advance payment to the IRS in connection with certain tax matters for fiscal years 2005 through 2014. This payment was comprised of $859 million of tax and $285 million of interest.

The Company’s reserves for uncertain tax positions related to unresolved matters with the IRS and other taxing authorities. These reserves are subject to a high degree of estimation and management judgment. Resolution of these significant unresolved matters, or positions taken by the IRS or other tax authorities during future tax audits, could have a material impact on the Company’s financial results in future periods. The Company continues to believe that its reserves for uncertain tax positions are appropriate and that it has meritorious defenses for its tax filings and will vigorously defend them during the audit process, appellate process, and through litigation in courts, as necessary.

The major tax jurisdictions where the Company conducts business which remain subject to examination are as follows:

Jurisdiction		Earliest Year Open
United States - federal and state		1998
Brazil		2014
Canada		2011
China		2009
Costa Rica		2015
Dominican Republic		2016
Germany		2014
India		2002
Ireland		2012
Israel		2010
Italy		2005
Japan		2017
Luxembourg		2013
Mexico		2005
Puerto Rico		2011
Singapore		2013
Switzerland		2012
United Kingdom		2016

See Note 19 for additional information regarding the status of current tax audits and proceedings.

15**.** Earnings Per Share

Earnings per share is calculated using the two-class method, as the Company's A Preferred Shares are considered participating securities. Accordingly, earnings are allocated to both ordinary shares and participating securities in determining earnings per ordinary share. Due to the limited number of A Preferred Shares outstanding, this allocation had no effect on the ordinary earnings

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

per share; therefore, it is not presented below. Basic earnings per share is computed based on the weighted average number of ordinary shares outstanding. Diluted earnings per share is computed based on the weighted number of ordinary shares outstanding, increased by the number of additional shares that would have been outstanding had the potentially dilutive ordinary shares been issued, and reduced by the number of shares the Company could have repurchased with the proceeds from issuance of the potentially dilutive shares. Potentially dilutive ordinary shares include stock-based awards granted under stock-based compensation plans and shares committed to be purchased under the employee stock purchase plan.

The table below sets forth the computation of basic and diluted earnings per share:

	Fiscal Year
(in millions, except per share data)	2019				2018				2017
Numerator:
Net income attributable to ordinary shareholders	$	4,631			$	3,104			$	4,028
Denominator:
Basic – weighted average shares outstanding	1,346.4				1,356.7				1,378.9
Effect of dilutive securities:
Employee stock options	7.6				7.9				9.0
Employee restricted stock units	3.2				3.3				3.4
Other	0.3				0.3				0.1
Diluted – weighted average shares outstanding	1,357.5				1,368.2				1,391.4
Basic earnings per share	$	3.44			$	2.29			$	2.92
Diluted earnings per share	$	3.41			$	2.27			$	2.89

The calculation of weighted average diluted shares outstanding excludes options to purchase approximately 7 million, 10 million, and 7 million ordinary shares in fiscal years 2019, 2018, and 2017, respectively, because their effect would have been anti-dilutive on the Company’s earnings per share.

16**.** Retirement Benefit Plans

The Company sponsors various retirement benefit plans, including defined benefit pension plans, post-retirement medical plans, defined contribution savings plans, and termination indemnity plans, covering substantially all U.S. employees and many employees outside the U.S. The expense related to these plans was $539 million, $552 million, and $602 million in fiscal years 2019, 2018, and 2017, respectively.

In the U.S., the Company maintains a qualified pension plan designed to provide guaranteed minimum retirement benefits to all eligible U.S. employees. Pension coverage for non-U.S. employees is provided, to the extent deemed appropriate, through separate plans. In addition to the benefits provided under the qualified pension plan, retirement benefits associated with wages in excess of the IRS allowable limits are provided to certain employees under a non-qualified plan. U.S. and Puerto Rico employees are also eligible to receive a medical benefit component, in addition to normal retirement benefits, through the Company’s post-retirement benefits.

At April 26, 2019 and April 27, 2018, the net underfunded status of the Company’s benefit plans was $1.1 billion and $942 million, respectively.

Effective May 1, 2019, the Company split the U.S. Pension Plan (Medtronic Retirement Plan) into two new plans. The plan split has no impact to participant benefits, or to the accumulated benefit obligation as of April 26, 2019.

During fiscal year 2017, the company offered certain eligible U.S. employees voluntary early retirement packages. The acceptance of this offer by eligible U.S. employees caused incremental expenses of $73 million to be recognized during fiscal year 2017. Of this amount, $60 million related to U.S. pension benefits, $7 million related to U.S. post-retirement benefits, $4 million related to defined contribution plans, and $2 million related to cash payments and administrative fees.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Defined Benefit Pension Plans The change in benefit obligation and funded status of the Company’s U.S. and Non-U.S. pension benefits are as follows:

	U.S. Pension Benefits								Non-U.S. Pension Benefits
	Fiscal Year								Fiscal Year
(in millions)	2019				2018				2019				2018
Accumulated benefit obligation at end of year:	$	3,121			$	2,943			$	1,621			$	1,580
Change in projected benefit obligation:
Projected benefit obligation at beginning of year	$	3,202			$	3,232			$	1,791			$	1,734
Service cost	109				116				59				67
Interest cost	129				117				30				28
Employee contributions	—				—				12				12
Plan curtailments and settlements	—				(168		)		(5		)		(8		)
Actuarial loss (gain)	54				12				119				(74		)
Benefits paid	(100		)		(107		)		(49		)		(51		)
Currency exchange rate changes and other	10				—				(125		)		146
Divestiture	—				—				—				(63		)
Projected benefit obligation at end of year	$	3,404			$	3,202			$	1,832			$	1,791
Change in plan assets:
Fair value of plan assets at beginning of year	$	2,661			$	2,479			$	1,404			$	1,235
Actual return on plan assets	64				243				62				67
Employer contributions	93				215				78				90
Employee contributions	—				—				12				13
Plan settlements	—				(168		)		(3		)		(4		)
Benefits paid	(100		)		(108		)		(49		)		(51		)
Currency exchange rate changes and other	10				—				(95		)		108
Divestiture	—				—				—				(54		)
Fair value of plan assets at end of year	$	2,728			$	2,661			$	1,409			$	1,404
Funded status at end of year:
Fair value of plan assets	$	2,728			$	2,661			$	1,409			$	1,404
Benefit obligations	3,404				3,202				1,832				1,791
Underfunded status of the plans	(676		)		(541		)		(423		)		(387		)
Recognized liability	$	(676	)		$	(541	)		$	(423	)		$	(387	)
Amounts recognized on the consolidated balance sheets consist of:
Non-current assets	$	—			$	—			$	31			$	16
Current liabilities	(18		)		(17		)		(8		)		(8		)
Non-current liabilities	(658		)		(524		)		(446		)		(395		)
Recognized liability	$	(676	)		$	(541	)		$	(423	)		$	(387	)
Amounts recognized in accumulated other comprehensive loss:
Prior service cost (benefit)	$	2			$	2			$	(7	)		$	(9	)
Net actuarial loss	1,216				1,088				452				380
Ending balance	$	1,218			$	1,090			$	445			$	371

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

In certain countries outside the U.S., fully funding pension plans is not a common practice, as funding provides no income tax benefit. Consequently, certain pension plans were partially funded at April 26, 2019 and April 27, 2018. U.S. and non-U.S. plans with accumulated benefit obligations in excess of plan assets consist of the following:

	Fiscal Year
(in millions)	2019				2018
Accumulated benefit obligation	$	4,683			$	4,110
Projected benefit obligation	4,822				4,282
Plan assets at fair value	3,829				3,472

Plans with projected benefit obligations in excess of plan assets consist of the following:

	Fiscal Year
(in millions)	2019				2018
Projected benefit obligation	$	4,963			$	4,736
Plan assets at fair value	3,833				3,793

The net periodic benefit cost of the plans include the following components:

	U.S. Pension Benefits												Non-U.S. Pension Benefits
	Fiscal Year												Fiscal Year
(in millions)	2019				2018				2017				2019				2018				2017
Service cost	$	109			$	116			$	117			$	59			$	67			$	70
Interest cost	129				117				109				30				28				26
Expected return on plan assets	(215		)		(205		)		(195		)		(57		)		(53		)		(48		)
Amortization of prior service cost	1				1				1				(1		)		—				(1		)
Amortization of net actuarial loss	76				82				88				12				18				17
Settlement loss (gain)	—				16				—				(2		)		—				—
Special termination benefits	—				—				60				—				—				—
Net periodic benefit cost	$	100			$	127			$	180			$	41			$	60			$	64

The other changes in plan assets and projected benefit obligations recognized in accumulated other comprehensive loss for fiscal year 2019 are as follows:

(in millions)	U.S. Pension Benefits				Non-U.S. Pension Benefits
Net actuarial gain	$	205			$	113
Amortization of prior service cost	(1		)		1
Amortization of net actuarial loss	(76		)		(12		)
Effect of exchange rates	—				(29		)
Total recognized in accumulated other comprehensive loss	$	128			$	73
Total recognized in net periodic benefit cost and accumulated other comprehensive loss	$	228			$	114

The estimated net actuarial loss that will be amortized from accumulated other comprehensive loss into net periodic benefit cost, before tax, in fiscal year 2020 for U.S. and non-U.S. pension benefits is expected to be $57 million and $13 million, respectively.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

The actuarial assumptions are as follows:

	U.S. Pension Benefits									Non-U.S. Pension Benefits
	Fiscal Year									Fiscal Year
	2019			2018			2017			2019			2018			2017
Critical assumptions – projected benefit obligation:
Discount rate	3.90% - 4.20%			4.20% - 4.35%			3.70% - 4.30%			0.40% - 13.90%			0.70% - 11.00%			0.45% - 11.40%
Rate of compensation increase	3.90	%		3.90	%		3.90	%		2.87	%		2.88	%		2.89	%
Critical assumptions – net periodic benefit cost:
Discount rate – benefit obligation	4.20% - 4.30%			4.00% - 4.30%			3.55% - 4.30%			0.50% - 11.00%			0.45% - 11.40%			0.25% - 10.20%
Discount rate – service cost	4.10% - 4.40%			3.70% - 4.45%			3.60% - 4.45%			0.50% - 11.00%			0.20% - 11.40%			0.05% - 10.20%
Discount rate – interest cost	4.00% - 4.10%			3.45% - 3.80%			2.90% - 3.80%			0.50% - 11.00%			0.45% - 11.40%			0.30% - 10.20%
Expected return on plan assets	7.90	%		7.90	%		8.20	%		4.23	%		4.20	%		4.45	%
Rate of compensation increase	3.90	%		3.90	%		3.90	%		2.88	%		2.89	%		2.83	%

The Company utilizes a full yield curve approach methodology to estimate the service and interest cost components of net periodic pension cost and net periodic post-retirement benefit cost for the Company’s pension and other post-retirement benefits. The full yield curve approach applies specific spot rates along the yield curve to their underlying projected cash flows in estimation of the cost components. The current yield curves represent high quality, long-term fixed income instruments.

The expected long-term rate of return on plan assets assumptions are determined using a building block approach, considering historical averages and real returns of each asset class. In certain countries, where historical returns are not meaningful, consideration is given to local market expectations of long-term returns.

Retirement Benefit Plan Investment Strategy The Company sponsors trusts that hold the assets for U.S. pension plans and other U.S. post-retirement benefit plans, primarily retiree medical benefits. For investment purposes, the legacy Medtronic U.S. pension and other U.S. post-retirement benefit plans are managed in an identical way, as their objectives are similar.

The Company has a Qualified Plan Committee (the Plan Committee) that sets investment guidelines for U.S. pension plans and other U.S. post-retirement benefit plans with the assistance of external consultants. These guidelines are established based on market conditions, risk tolerance, funding requirements, and expected benefit payments. The Plan Committee also oversees the investment allocation process, selects the investment managers, and monitors asset performance. As pension liabilities are long-term in nature, the Company employs a long-term total return approach to maximize the long-term rate of return on plan assets for a prudent level of risk. An annual analysis on the risk versus the return of the investment portfolio is conducted to justify the expected long-term rate of return assumption.

The investment portfolios contain a diversified allocation of investment categories, including equities, fixed income securities, hedge funds, and private equity. Securities are also diversified in terms of domestic and international, short- and long-term, growth and value styles, large cap and small cap stocks, and active and passive management.

Outside the U.S., pension plan assets are typically managed by decentralized fiduciary committees. There is significant variation in policy asset allocation from country to country. Local regulations, funding rules, and financial and tax considerations are part of the funding and investment allocation process in each country. The weighted average target asset allocations at April 26, 2019 for the plans are 38% equity securities, 30% debt securities, and 32% other.

The plans did not hold any investments in the Company’s ordinary shares at April 26, 2019 or April 27, 2018.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

The Company’s U.S. plans target asset allocations at April 26, 2019, compared to the U.S. plans actual asset allocations at April 26, 2019 and April 27, 2018 by asset category, are as follows:

U.S. Plans
	Target Allocation			Actual Allocation
	April 26, 2019			April 26, 2019			April 27, 2018
Asset Category:
Equity securities	49	%		50	%		49	%
Debt securities	32			34			32
Other	19			16			19
Total	100	%		100	%		100	%

Retirement Benefit Plan Asset Fair Values The following is a description of the valuation methodologies used for retirement benefit plan assets measured at fair value:

Short-term investments: Valued at the closing price reported in the active markets in which the individual security is traded.

U.S. government securities: Certain U.S. government securities are valued at the closing price reported in the active markets in which the individual security is traded. Other U.S. government securities are valued based on inputs other than quoted prices that are observable.

Corporate debt securities: Valued based on inputs other than quoted prices that are observable.

Equity commingled trusts: Comprised of investments in equity securities held in pooled investment vehicles. The valuations of equity commingled trusts are based on the respective net asset values which are determined by the fund daily at market close. The net asset values are calculated based on the valuation of the underlying assets which are determined using observable inputs. The net asset values are not publicly reported and funds are valued at the net asset value practical expedient.

Fixed income commingled trusts: Comprised of investments in fixed income securities held in pooled investment vehicles. The valuations of fixed income commingled trusts are based on the respective net asset values which are determined by the fund daily at market close. The net asset values are calculated based on the valuation of the underlying assets which are determined using observable inputs. The net asset values are not publicly reported and funds are valued at the net asset value practical expedient.

Partnership units: Valued based on the year-end net asset values of the underlying partnerships. The net asset values of the partnerships are based on the fair values of the underlying investments of the partnerships. Quoted market prices are used to value the underlying investments of the partnerships, where the partnerships consist of the investment pools which invest primarily in common stocks. Partnership units include partnerships, private equity investments, and real asset investments. Partnerships primarily include long/short equity and absolute return strategies. These investments may be redeemed monthly with notice periods ranging from 45 to 95 days. At April 26, 2019, there are no funds in the process of liquidation. Private equity investments consist of common stock and debt instruments of private companies. For private equity funds, the sum of the unfunded commitments at April 26, 2019 is $337 million, and the estimated liquidation period of these funds is expected to be one to 15 years. Real asset investments consist of commodities, derivatives, Real Estate Investment Trusts, and illiquid real estate holdings. These investments have redemption and liquidation periods ranging from 30 days to 10 years. At April 26, 2019, there are no real estate investments in the process of liquidation. Valuation procedures are utilized to arrive at fair value if a quoted market price is not available for a partnership investment.

Registered investment companies: Valued at net asset values which are not publicly reported. The net asset values are calculated based on the valuation of the underlying assets. The underlying assets are valued at the quoted market prices of shares held by the plan at year-end in the active market on which the individual securities are traded.

Insurance contracts: Comprised of investments in collective (group) insurance contracts, consisting of individual insurance policies. The policyholder is the employer and each member is the owner/beneficiary of their individual insurance policy. These policies are a part of the insurance company’s general portfolio and participate in the insurer’s profit-sharing policy on an excess yield basis.

The methods described above may produce fair values that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methodologies are appropriate and consistent with other market

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

participants, the use of different methodologies or assumptions to determine fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

There were no transfers between Level 1, Level 2, or Level 3 during fiscal years 2019 or 2018.

The following tables provide information by level for the retirement benefit plan assets that are measured at fair value, as defined by U.S. GAAP. See Note 1 for discussion of the fair value measurement terms of Levels 1, 2, and 3. In accordance with authoritative guidance adopted in fiscal year 2017, certain investments for which the fair value is measured using the net asset value per share (or its equivalent) practical expedient are not presented within the fair value hierarchy. The fair value amounts presented for these investments are intended to permit reconciliation to the total fair value of plan assets at April 26, 2019 and April 27, 2018.

U.S. Pension Benefits

	Fair Value at				Fair Value Measurements Using Inputs Considered as												Investments Measured at Net Asset Value
(in millions)	April 26, 2019			Level 1				Level 2				Level 3
Short-term investments	$	61			$	61			$	—			$	—			$	—
U.S. government securities	228				228				—				—				—
Corporate debt securities	144				—				144				—				—
Equity commingled trusts	1,365				—				—				—				1,365
Fixed income commingled trusts	301				—				—				—				301
Partnership units	629				—				—				629				—
	$	2,728			$	289			$	144			$	629			$	1,666

	Fair Value at				Fair Value Measurements Using Inputs Considered as												Investments Measured at Net Asset Value
(in millions)	April 27, 2018			Level 1				Level 2				Level 3
Short-term investments	$	181			$	181			$	—			$	—			$	—
U.S. government securities	181				181				—				—				—
Corporate debt securities	142				—				142				—				—
Equity commingled trusts	1,322				—				—				—				1,322
Fixed income commingled trusts	298				—				—				—				298
Partnership units	537				—				—				537				—
	$	2,661			$	362			$	142			$	537			$	1,620

The following tables provide a reconciliation of the beginning and ending balances of U.S. pension benefit assets measured at fair value that used significant unobservable inputs (Level 3):

(in millions)	Partnership Units
April 27, 2018	$	537
Total realized losses	(1		)
Total unrealized gains	52
Purchases and sales, net	41
April 26, 2019	$	629

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

(in millions)	Partnership Units
April 28, 2017	$	468
Total realized losses	(42		)
Total unrealized gains	141
Purchases and sales, net	(30		)
April 27, 2018	$	537

Non-U.S. Pension Benefits

	Fair Value at				Fair Value Measurements Using Inputs Considered as												Investments Measured at Net Asset Value
(in millions)	April 26, 2019			Level 1				Level 2				Level 3
Registered investment companies	$	1,368			$	—			$	—			$	—			$	1,368
Insurance contracts	41				—				—				41				—
	$	1,409			$	—			$	—			$	41			$	1,368

	Fair Value at				Fair Value Measurements Using Inputs Considered as												Investments Measured at Net Asset Value
(in millions)	April 27, 2018			Level 1				Level 2				Level 3
Registered investment companies	$	1,362			$	—			$	—			$	—			$	1,362
Insurance contracts	42				—				—				42				—
	$	1,404			$	—			$	—			$	42			$	1,362

The following tables provide a reconciliation of the beginning and ending balances of non-U.S. pension benefit assets measured at fair value that used significant unobservable inputs (Level 3):

(in millions)	Insurance Contracts
April 27, 2018	$	42
Total unrealized gains	1
Purchases and sales, net	1
Currency exchange rate changes	(3		)
April 26, 2019	$	41

(in millions)	Insurance Contracts
April 28, 2017	$	44
Total unrealized gains	2
Purchases and sales, net	(7		)
Currency exchange rate changes	3
April 27, 2018	$	42

Retirement Benefit Plan Funding It is the Company’s policy to fund retirement costs within the limits of allowable tax deductions. During fiscal year 2019, the Company made discretionary contributions of approximately $93 million to the U.S. pension plan. Internationally, the Company contributed approximately $78 million for pension benefits during fiscal year 2019. The Company anticipates that it will make contributions of $93 million and $60 million to its U.S. pension benefit plans and non-U.S. pension benefit plans, respectively, in fiscal year 2020. Based on the guidelines under the U.S. Employee Retirement Income Security Act of 1974 and the various guidelines which govern the plans outside the U.S., the majority of anticipated fiscal year 2020 contributions

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

will be discretionary. The Company believes that, along with pension assets, the returns on invested pension assets, and Company contributions, the Company will be able to meet its pension and other post-retirement obligations in the future.

Retiree benefit payments, which reflect expected future service, are anticipated to be paid as follows:

(in millions)	Gross Payments
Fiscal Year	U.S. Pension Benefits				Non-U.S. Pension Benefits
2020	$	115			$	51
2021	123				49
2022	133				51
2023	144				57
2024	154				56
2025 – 2029	954				350
Total	$	1,623			$	614

Post-retirement Benefit Plans The net periodic benefit cost associated with the Company’s post-retirement benefit plans was income of $17 million and $9 million in fiscal years 2019 and 2018, respectively, and expense of $11 million in fiscal year 2017. The Company’s projected benefit obligation for all post-retirement benefit plans was $323 million and $317 million at April 26, 2019 and April 27, 2018, respectively. The Company’s fair value of plan assets for all post-retirement benefit plans was $297 million and $303 million at April 26, 2019 and April 27, 2018, respectively.

Defined Contribution Savings Plans The Company has defined contribution savings plans that cover substantially all U.S. employees and certain non-U.S. employees. The general purpose of these plans is to provide additional financial security during retirement by providing employees with an incentive to make regular savings. Company contributions to the plans are based on employee contributions and Company performance. Expense recognized under these plans was $415 million, $374 million, and $347 million in fiscal years 2019, 2018, and 2017, respectively.

Effective May 1, 2005, the Company froze participation in the original defined benefit pension plan in the U.S. and implemented two new plans: an additional defined benefit pension plan, the Personal Pension Account (PPA), and a new defined contribution plan, the Personal Investment Account (PIA). Employees in the U.S. hired on or after May 1, 2005 but before January 1, 2016 had the option to participate in either the PPA or the PIA. Participants in the PPA receive an annual allocation of their salary and bonus on which they will receive an annual guaranteed rate of return, which is based on the ten-year Treasury bond rate. Participants in the PIA also receive an annual allocation of their salary and bonus; however, they are allowed to determine how to invest their funds among identified fund alternatives. The cost associated with the PPA is included in U.S. Pension Benefits in the tables presented earlier. The defined contribution cost associated with the PIA was approximately $54 million, $56 million, and $58 million in fiscal years 2019, 2018, and 2017, respectively.

Effective January 1, 2016, the Company froze participation in the existing defined benefit (PPA) and contribution (PIA) pension plans in the U.S. and implemented a new form of benefit under the existing defined contribution plan for legacy Covidien employees and employees in the U.S. hired on or after January 1, 2016. Participants in the Medtronic Core Contribution (MCC) also receive an annual allocation of their salary and bonus and are allowed to determine how to invest their funds among identified fund alternatives. The defined contribution cost associated with the MCC was approximately $58 million, $49 million, and $45 million and in fiscal years 2019, 2018, and 2017, respectively.

17**.** Leases

The Company leases office, manufacturing, and research facilities and warehouses, as well as transportation, data processing, and other equipment. A substantial number of these leases contain options that allow the Company to renew at the fair rental value on the date of renewal.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Future minimum payments under non-cancelable operating leases at April 26, 2019 are:

(in millions) Fiscal Year	Operating Leases
2020	$	216
2021	157
2022	103
2023	61
2024	34
Thereafter	81
Total minimum lease payments	$	652

Rent expense for all operating leases was $305 million, $319 million, and $294 million in fiscal years 2019, 2018, and 2017, respectively.

18**.** Accumulated Other Comprehensive Loss

The following table provides changes in AOCI, net of tax and by component.

(in millions)	Unrealized (Loss) Gain on Investment Securities				Cumulative Translation Adjustments				Net Investment Hedges				Net Change in Retirement Obligations				Unrealized (Loss) Gain on Cash Flow Hedges				Total Accumulated Other Comprehensive (Loss) Income
April 28, 2017	$	(69	)		$	(1,195	)		$	(257	)		$	(1,129	)		$	37			$	(2,613	)
Other comprehensive (loss) income before reclassifications	(95		)		1,218				—				100				(272		)		951
Reclassifications	(8		)		(34		)		—				67				54				79
Other comprehensive (loss) income	(103		)		1,184				—				167				(218		)		1,030
Cumulative effect of change in accounting principle(1)	(22		)		—				—				(155		)		(26		)		(203		)
April 27, 2018	(194		)		(11		)		(257		)		(1,117		)		(207		)		(1,786		)
Other comprehensive income (loss) before reclassifications	67				(1,372		)		88				(266		)		457				(1,026		)
Reclassifications	35				—				—				75				(56		)		54
Other comprehensive income (loss)	102				(1,372		)		88				(191		)		401				(972		)
Cumulative effect of change in accounting principle(2)	47				—				—				—				—				47
April 26, 2019	$	(45	)		$	(1,383	)		$	(169	)		$	(1,308	)		$	194			$	(2,711	)

(1) The cumulative effect of change in accounting principle in fiscal year 2018 related to the Company's adoption of accounting guidance which permitted reclassification from AOCI to retained earnings for stranded tax effects resulting from the Tax Act.

(2) See Note 1 to the consolidated financial statements for discussion regarding the adoption of accounting standards during fiscal year 2019.

The income tax on gains and losses on investment securities in other comprehensive income before reclassifications during fiscal years 2019, 2018, and 2017 was a benefit of $5 million, an expense of $26 million, and an expense of $41 million, respectively. During fiscal years 2019, 2018, and 2017, realized gains and losses on investment securities reclassified from AOCI were reduced by income taxes of $3 million, $4 million, and $8 million, respectively. When realized, gains and losses on investment securities reclassified from AOCI are recognized within other non-operating income, net. Refer to Note 6 for additional information.

During fiscal year 2019, the income tax benefit on cumulative translation adjustments was $7 million. During fiscal years 2018 and 2017, taxes were not provided on cumulative translation adjustments as substantially all translation adjustments relate to earnings that were intended to be indefinitely reinvested outside the U.S.

During fiscal years 2019, 2018, and 2017, there were no tax impacts on net investment hedges. Refer to Note 8 for additional information.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

The net change in retirement obligations in other comprehensive income includes net amortization of prior service costs and actuarial losses included in net periodic benefit cost. The income tax on the net change in retirement obligations in other comprehensive income before reclassifications during fiscal years 2019, 2018, and 2017 was a benefit of $63 million, an expense of $14 million, and an expense of $41 million, respectively. During fiscal years 2019, 2018, and 2017, the gains and losses on defined benefit and pension items reclassified from AOCI were reduced by income taxes of $19 million, $27 million, and $23 million, respectively. Refer to Note 16 for additional information.

The income tax on unrealized gains and losses on cash flow hedges in other comprehensive income before reclassifications during fiscal years 2019, 2018, and 2017 was an expense of $158 million, a benefit of $132 million, and an expense of $130 million, respectively. During fiscal years 2019, 2018, and 2017, gains and losses on cash flow hedges reclassified from AOCI were reduced by income taxes of $24 million, $22 million, and $61 million, respectively. When realized, gains and losses on currency exchange rate contracts reclassified from AOCI are recognized within other operating expense, net and gains and losses on forward starting interest rate derivatives reclassified from AOCI are recognized within interest expense. Refer to Note 8 for additional information.

19**.** Commitments and Contingencies

Legal Matters

The Company and its affiliates are involved in a number of legal actions involving product liability, intellectual property and commercial disputes, shareholder related matters, environmental proceedings, income tax disputes, and governmental proceedings and investigations, including those described below. With respect to governmental proceedings and investigations, like other companies in our industry, the Company is subject to extensive regulation by national, state and local governmental agencies in the United States and in other jurisdictions in which the Company and its affiliates operate. As a result, interaction with governmental agencies is ongoing. The Company’s standard practice is to cooperate with regulators and investigators in responding to inquiries. The outcomes of legal actions are not within the Company’s 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, result in lost revenues, or limit the Company's ability to conduct business in the applicable jurisdictions.

The Company records a liability in the consolidated financial statements on an undiscounted basis for loss contingencies related to legal actions when a loss is known or considered probable and the amount may be reasonably estimated. If the reasonable estimate of a known or probable loss is a range, and no amount within the range is a better estimate than any other, the minimum amount of the range is accrued. If a loss is reasonably possible but not known or probable, and may be reasonably estimated, the estimated loss or range of loss is disclosed. When determining the estimated loss or range of loss, significant judgment is required. Estimates of probable losses resulting from litigation and governmental proceedings involving the Company 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. At April 26, 2019 and April 27, 2018, accrued litigation was approximately $0.5 billion and $0.9 billion, respectively. The ultimate cost to the Company with respect to accrued litigation could be materially different than the amount of the current estimates and accruals and could have a material adverse impact on the Company’s consolidated earnings, financial position, and/or cash flows. The Company includes accrued litigation in other accrued expenses and other liabilities on the consolidated balance sheets. While it is not possible to predict the outcome for most of the legal matters discussed below, the Company believes it is possible that the costs associated with these matters could have a material adverse impact on the Company’s consolidated earnings, financial position, and/or cash flows.

Product Liability Matters

Sprint Fidelis

In 2007, a putative class action was filed in the Ontario Superior Court of Justice in Canada seeking damages for personal injuries allegedly related to the Company's Sprint Fidelis family of defibrillation leads. On October 20, 2009, the court certified a class proceeding but denied class certification on plaintiffs' claim for punitive damages. The Company has recognized an expense for probable and estimable damages related to this matter, and during the fourth quarter of fiscal year 2019 the Company paid out previously accrued settlement amounts with no admission of liability, bringing this matter to a conclusion.

INFUSE Litigation

The Company estimated law firms representing approximately 6,000 claimants asserted or intended to assert personal injury claims against Medtronic in the U.S. state and federal courts involving the INFUSE bone graft product. As of June 1, 2017, the Company

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

had reached agreements to settle substantially all of these claims, and during the fourth quarter of fiscal year 2019 the Company paid out previously accrued settlement amounts with no admission of liability, bringing this matter to a conclusion.

Pelvic Mesh Litigation

The Company is currently involved in litigation in various state and federal courts against manufacturers of pelvic mesh products alleging personal injuries resulting from the implantation of those products. Two subsidiaries of Covidien supplied pelvic mesh products to one of the manufacturers, C.R. Bard (Bard), named in the litigation. The litigation includes a federal multi-district litigation in the U.S. District Court for the Northern District of West Virginia and cases in various state courts and jurisdictions outside the U.S. Generally, complaints allege design and manufacturing claims, failure to warn, breach of warranty, fraud, violations of state consumer protection laws and loss of consortium claims. In fiscal year 2016, Bard paid the Company $121 million towards the settlement of 11,000 of these claims. In May 2017, the agreement with Bard was amended to extend the terms to apply to up to an additional 5,000 claims. That agreement does not resolve the dispute between the Company and Bard with respect to claims that do not settle, if any. As part of the agreement, the Company and Bard agreed to dismiss without prejudice their pending litigation with respect to Bard’s obligation to defend and indemnify the Company. The Company estimates law firms representing approximately 15,800 claimants have asserted or may assert claims involving products manufactured by Covidien’s subsidiaries. As of June 1, 2019, the Company had reached agreements to settle approximately 15,400 of these claims. The Company's accrued expenses for this matter are included within accrued litigation as discussed above.

Patent Litigation

Ethicon

On December 14, 2011, Ethicon filed an action against Covidien in the U.S. District Court for the Southern District of Ohio, alleging patent infringement and seeking monetary damages and injunctive relief. On January 22, 2014, the district court entered summary judgment in Covidien's favor, and the majority of this ruling was affirmed by the Federal Circuit on August 7, 2015. Following appeal, the case was remanded back to the District Court with respect to one patent. On January 21, 2016, Covidien filed a second action in the U.S. District Court for the Southern District of Ohio, seeking a declaration of non-infringement with respect to a second set of patents held by Ethicon. The court consolidated this second action with the remaining patent issues from the first action. Following consolidation of the cases, Ethicon dismissed six of the asserted patents, leaving a single asserted patent. In addition to claims of non-infringement, the Company asserts an affirmative defense of invalidity. The Company has not recognized an expense related to damages in connection with this matter, because any potential loss is not currently probable or reasonably estimable under U.S. GAAP. Additionally, the Company is unable to reasonably estimate the range of loss, if any, that may result from this matter.

Sasso

The Company is involved in litigation in Indiana relating to certain patent and royalty disputes with Dr. Sasso under agreements originally entered into in 1999 and 2001. On November 28, 2018, a jury in Indiana state court returned a verdict against the Company for approximately $112 million. The Company has strong arguments to appeal the verdict and has filed post-trial motions and appeals with the appropriate appellate courts. The Company has not recognized an expense in connection with this matter because it does not currently believe a loss is probable under U.S. GAAP.

Shareholder Related Matters

Covidien Acquisition

On July 2, 2014, Lewis Merenstein filed a putative shareholder class action in Hennepin County, Minnesota, District Court seeking to enjoin the then-potential acquisition of Covidien. The lawsuit named Medtronic, Inc., Covidien, and each member of the Medtronic, Inc. Board of Directors at the time as defendants, and alleged that the directors breached their fiduciary duties to shareholders with regard to the then-potential acquisition. On August 21, 2014, Kenneth Steiner filed a putative shareholder class action in Hennepin County, Minnesota, District Court, also seeking an injunction to prevent the potential Covidien acquisition. In September 2014, the Merenstein and Steiner matters were consolidated and in December 2014, the plaintiffs filed a preliminary injunction motion seeking to enjoin the Covidien transaction. On March 20, 2015, the District Court issued an order and opinion granting Medtronic’s motion to dismiss the case. In May of 2015, the plaintiffs filed an appeal, and, in January of 2016, the Minnesota State Court of Appeals affirmed in part, and reversed in part. On April 19, 2016, the Minnesota Supreme Court granted the Company’s petition to review the issue of whether most of the original claims are properly characterized as direct or derivative under Minnesota law. In August of 2017, the Minnesota Supreme Court affirmed the decision of the Minnesota State Court of Appeals, sending the matter back to the trial court for further proceedings, which are ongoing. The Company has not recognized

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

an expense related to damages in connection with this matter, because any potential loss is not currently probable or reasonably estimable under U.S. GAAP. Additionally, the Company is unable to reasonably estimate the range of loss, if any, that may result from these matters.

HeartWare

On January 22, 2016, the St. Paul Teachers’ Retirement Fund Association filed a putative class action complaint (the “Complaint”) in the United States District Court for the Southern District of New York against HeartWare on behalf of all persons and entities who purchased or otherwise acquired shares of HeartWare from June 10, 2014 through January 11, 2016 (the “Class Period”). The Complaint was amended on June 29, 2016 and claims HeartWare and one of its executives violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by making false and misleading statements about, among other things, HeartWare’s response to a June 2014 U.S. FDA warning letter, the development of the Miniaturized Ventricular Assist Device (MVAD) System and the proposed acquisition of Valtech Cardio Ltd. The Complaint seeks to recover damages on behalf of all purchasers or acquirers of HeartWare’s stock during the Class Period. In August of 2016, the Company acquired HeartWare. In October of 2018, the parties reached an agreement to settle this matter, and in January 2019, the settlement amount was deposited into a qualified settlement fund to be distributed following final court approval. In the fourth quarter of fiscal year 2019, the court approved the settlement, bringing this matter to a conclusion.

Environmental Proceedings

The Company is involved in various stages of investigation and cleanup related to environmental remediation matters at a number of sites. These projects relate to a variety of activities, including removal of solvents, metals and other hazardous substances from soil and groundwater. The ultimate cost of site cleanup and timing of future cash flows is difficult to predict given uncertainties regarding the extent of the required cleanup, the interpretation of applicable laws and regulations, and alternative cleanup methods.

The Company is a successor to a company which owned and operated a chemical manufacturing facility in Orrington, Maine from 1967 until 1982, and is responsible for the costs of completing an environmental site investigation as required by the Maine Department of Environmental Protection (MDEP). MDEP served a compliance order on Mallinckrodt LLC and U.S. Surgical Corporation, subsidiaries of Covidien, in December 2008, which included a directive to remove a significant volume of soils at the site. After a hearing on the compliance order before the Maine Board of Environmental Protection (Maine Board) to challenge the terms of the compliance order, the Maine Board modified the MDEP order and issued a final order requiring removal of two landfills, capping of the remaining three landfills, installation of a groundwater extraction system and long-term monitoring of the site and the three remaining landfills.

The Company has proceeded with implementation of the investigation and remediation at the site in accordance with the MDEP order as modified by the Maine Board order.

Since the early 2000s, the Company or its predecessors have also been involved in a lawsuit filed in the U.S. District Court for the District of Maine by the Natural Resources Defense Council and the Maine People’s Alliance. Plaintiffs sought an injunction requiring the Company's predecessor to conduct extensive studies of mercury contamination of the Penobscot River and Bay and options for remediating such contamination, and to perform appropriate remedial activities, if necessary.

Following a trial in March 2002, the Court held that conditions in the Penobscot River and Bay may pose an imminent and substantial endangerment and that the Company’s predecessor was liable for the cost of performing a study of the River and Bay. Following a second trial in June 2014, the Court ordered that further engineering study and engineering design work was needed to determine the nature and extent of remediation in the Penobscot River and Bay. The Court also appointed an engineering firm to conduct such studies and issue a report on potential remediation alternatives. In connection with these proceedings, reports have been produced including a variety of cost estimates for a variety of potential remedial options. A third trial to determine the course of remediation to be pursued is scheduled to occur in November of 2019.

The Company's accrued expenses for environmental proceedings are included within accrued litigation as discussed above.

Government Matters

Since 2017, the Company has been responding to requests from the Department of Justice and U.S. Department of Health and Human Services for information about business practices relating to a neurovascular product developed and first marketed by ev3 and Covidien. The Company has provided information in response to these requests and is cooperating with the inquiry. The Company has not recognized an expense in connection with any ongoing investigation, because any such potential loss is not currently probable or reasonably estimable under U.S. GAAP. Additionally, the Company is unable to reasonably estimate the range of loss, if any, that may result from the ongoing information requests.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Income Taxes

In March 2009, the IRS issued its audit report on Medtronic, Inc. for fiscal years 2005 and 2006. Medtronic, Inc. reached agreement with the IRS on some, but not all matters related to these fiscal years. The remaining unresolved issue for fiscal years 2005 and 2006 relates to the allocation of income between Medtronic, Inc. and its wholly-owned subsidiary operating in Puerto Rico, which is one of the Company's key manufacturing sites. The U.S. Tax Court reviewed this dispute, and on June 9, 2016, issued its opinion with respect to the allocation of income between the parties for fiscal years 2005 and 2006. The U.S. Tax Court generally rejected the IRS’s position, but also made certain modifications to the Medtronic, Inc. tax returns as filed. On April 21, 2017, the IRS filed their Notice of Appeal to the U.S. Court of Appeals for the 8th Circuit regarding the Tax Court Opinion. Oral argument for the Appeal occurred on March 14, 2018. The 8th Circuit Court of Appeals issued their opinion on August 16, 2018, and remanded the case back to the U.S. Tax Court for additional factual findings.

In October 2011, the IRS issued its audit report on Medtronic, Inc. for fiscal years 2007 and 2008. Medtronic, Inc. reached agreement with the IRS on some, but not all matters related to these fiscal years. The remaining unresolved issue for fiscal years 2007 and 2008 relates to the allocation of income between Medtronic, Inc. and its wholly-owned subsidiary operating in Puerto Rico for the businesses that are the subject of the U.S. Tax Court Case for fiscal years 2005 and 2006.

In April 2014, the IRS issued its audit report on Medtronic, Inc. for fiscal years 2009, 2010, and 2011. Medtronic, Inc. reached agreement with the IRS on some but not all matters related to these fiscal years. The remaining unresolved issue for fiscal years 2009, 2010, and 2011 relates to the allocation of income between Medtronic, Inc. and its wholly-owned subsidiary operating in Puerto Rico for the businesses that are the subject of the U.S. Tax Court Case for fiscal years 2005 and 2006.

In May 2017, the IRS issued its audit report on Medtronic, Inc. for fiscal years 2012, 2013, and 2014. Medtronic, Inc. reached agreement with the IRS on some but not all matters related to these fiscal years. The significant issues that remain unresolved relate to the allocation of income between Medtronic, Inc. and its wholly-owned subsidiary operating in Puerto Rico, and proposed adjustments associated with the utilization of certain net operating losses. The Company disagrees with the IRS and will attempt to resolve these matters at the IRS Appellate level.

Medtronic, Inc.’s fiscal years 2015 and 2016 U.S. federal income tax returns are currently being audited by the IRS.

Covidien and the IRS have concluded and reached agreement on its audit of Covidien’s U.S. federal income tax returns for all tax years through 2012. The statute of limitations for Covidien’s 2013 and 2014 U.S. federal income tax returns lapsed during the first quarter of fiscal years 2018 and 2019, respectively. Covidien's fiscal year 2015 U.S. federal income tax returns are currently being audited by the IRS.

While it is not possible to predict the outcome for most of the income tax matters discussed above, the Company believes it is possible that charges associated with these matters could have a material adverse impact on the Company’s consolidated earnings, financial position, and/or cash flows.

See Note 14 for additional discussion of income taxes.

Guarantees

As a result of the acquisition of Covidien, the Company has a guarantee commitment related to certain contingent tax liabilities as a party to the Tax Sharing Agreement that was entered into on June 29, 2007, between Covidien, Tyco International (now Johnson Controls), and Tyco Electronics (now TE Connectivity), associated with the spin-off from Tyco. The Tax Sharing Agreement covers certain income tax liabilities for periods prior to and including the spin-off. Medtronic’s share of the income tax liabilities for these periods is 42 percent, with Johnson Controls and TE Connectivity share being 27 percent, and 31 percent, respectively. If Johnson Controls and TE Connectivity default on their obligations to the Company under the Tax Sharing Agreement, the Company would be liable for the entire amount of these liabilities. All costs and expenses associated with the management of these tax liabilities are being shared equally among the parties. The most significant amounts at risk under this Tax Sharing Agreement were resolved with the U.S. Tax Court and IRS Appeals resolutions reached in May 2016. However, the Tax Sharing Agreement remains in place with respect to income tax liabilities that are not the subject of such resolution, including certain state and international tax matters that remain open.

The Company has used available information to develop its best estimates for certain assets and liabilities related to periods prior to the 2007 separation, including amounts subject to or impacted by the provisions of the Tax Sharing Agreement. The actual amounts that the Company may be required to ultimately accrue or pay under the Tax Sharing Agreement, however, could vary depending upon the outcome of the unresolved tax matters. Final determination of the balances will be made in subsequent periods,

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

primarily related to tax years that remain open for examination. These balances will also be impacted by the filing of final or amended income tax returns in certain jurisdictions where those returns include a combination of Tyco International, Covidien and/or Tyco Electronics legal entities for periods prior to the 2007 separation.

As part of the Company’s sale of the Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency businesses to Cardinal on July 29, 2017, the Company has indemnified Cardinal for certain contingent tax liabilities related to the divested businesses that existed prior to the date of divestiture. The actual amounts that the Company may be required to ultimately accrue or pay could vary depending upon the outcome of the unresolved tax matters.

In the normal course of business, the Company and/or its affiliates periodically enter into agreements that require one or more of the Company and/or its affiliates to indemnify customers or suppliers for specific risks, such as claims for injury or property damage arising as a result of the Company or its affiliates’ products, the negligence of the Company's personnel, or claims alleging that the Company's products infringe on third-party patents or other intellectual property. The Company also offers warranties on various products. The Company’s maximum exposure under these guarantees is unable to be estimated. Historically, the Company has not experienced significant losses on these types of guarantees.

The Company believes the ultimate resolution of the above guarantees is not expected to have a material effect on the Company’s consolidated earnings, financial position, or cash flows.

20**.** Quarterly Financial Data (unaudited)

The table below summarizes select unaudited quarterly financial data for fiscal years 2019 and 2018:

		Fiscal Year 2019																Fiscal Year 2018
(in millions, except per share data)		First Quarter				Second Quarter				Third Quarter				Fourth Quarter				First Quarter				Second Quarter				Third Quarter				Fourth Quarter
Net sales		$	7,384			$	7,481			$	7,546			$	8,146			$	7,390			$	7,050			$	7,369			$	8,144
Gross profit		5,180				5,278				5,281				5,663				5,038				4,927				5,175				5,746
Net income (loss)		1,077				1,120				1,271				1,182				1,009				2,013				(1,392		)		1,465
Net income (loss) attributable to Medtronic		1,075				1,115				1,269				1,172				1,016				2,017				(1,389		)		1,460
Basic earnings (loss) per share		0.79				0.83				0.95				0.87				0.75				1.49				(1.03		)		1.08
Diluted earnings (loss) per share		0.79				0.82				0.94				0.87				0.74				1.48				(1.03		)		1.07

The data in the schedule above has been intentionally rounded to the nearest million, and therefore, the quarterly amounts may not sum to the fiscal year-to-date amounts.

21**.** Segment and Geographic Information

The Company’s organizational structure is based upon four principal operating and reportable segments: the Cardiac and Vascular Group, the Minimally Invasive Therapies Group, the Restorative Therapies Group, and the Diabetes Group. The Company's management has chosen to organize the entity based upon therapy solutions provided by each segment. The four principal segments are strategic businesses that are managed separately, as each one develops and manufactures products and provides services oriented toward targeted therapy solutions.

The primary products and services from which the Cardiac and Vascular Group segment derives its revenues include products for the diagnosis, treatment, and management of cardiac rhythm disorders and cardiovascular disease, as well as services to diagnose, treat, and manage heart- and vascular-related disorders and diseases.

The primary products and services from which the Minimally Invasive Therapies Group segment derives its revenues include those focused on diseases of the respiratory system, gastrointestinal tract, renal system, lungs, pelvic region, kidneys, obesity, and other preventable complications.

The primary products and services from which the Restorative Therapies Group segment derives its revenues include those focused on neurostimulation therapies and drug delivery systems for the treatment of chronic pain, as well as various areas of the spine and brain, along with pelvic health and conditions of the ear, nose, and throat.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

The primary products from which the Diabetes Group segment derives its revenues include those focused on diabetes management, including insulin pumps, continuous glucose monitoring systems, insulin pump consumables, and diabetes therapy management software.

Segment disclosures are on a performance basis, consistent with internal management reporting. Net sales of the Company's segments include end-customer revenues from the sale of products the segment develops, manufactures, and distributes. There are certain corporate and centralized expenses that are not allocated to the segments. The Company's management evaluates the performance of the segments and allocates resources based on net sales and segment earnings before interest, taxes, and amortization ("Segment EBITA"). Segment EBITA represents income before income taxes, excluding interest expense, interest income, amortization of intangible assets, centralized distribution costs, certain corporate charges, and other items not allocated to the segments.

The accounting policies of the segments are the same as those described in Note 1. Certain depreciable assets may be recorded by one segment, while the depreciation expense is allocated to another segment. The allocation of depreciation expense is based on the proportion of the assets used by each segment.

The following tables present reconciliations of financial information from the segments to the applicable line items in the Company's consolidated financial statements:

Net Sales

	Fiscal Year
(in millions)	2019				2018				2017
Cardiac and Vascular Group	$	11,505			$	11,354			$	10,498
Minimally Invasive Therapies Group	8,478				8,716				9,919
Restorative Therapies Group	8,183				7,743				7,366
Diabetes Group	2,391				2,140				1,927
Total	$	30,557			$	29,953			$	29,710

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Segment EBITA

	Fiscal Year
(in millions)	2019				2018				2017
Cardiac and Vascular Group	$	4,541			$	4,460			$	4,134
Minimally Invasive Therapies Group	3,266				3,346				3,434
Restorative Therapies Group	3,323				3,058				2,868
Diabetes Group	739				634				690
Segment EBITA	11,869				11,498				11,126
Interest expense	(1,444		)		(1,146		)		(1,094		)
Interest income	283				397				366
Amortization of intangible assets	(1,764		)		(1,823		)		(1,980		)
Corporate	(1,253		)		(1,437		)		(1,232		)
Centralized distribution costs	(1,688		)		(1,936		)		(1,543		)
Restructuring and associated costs	(407		)		(107		)		(373		)
Acquisition-related items	(88		)		(132		)		(230		)
Certain litigation charges	(166		)		(61		)		(300		)
Gain/(loss) on minority investments	62				—				—
IPR&D charges	(58		)		(46		)		—
Exit of businesses	(149		)		—				—
Divestiture-related items	—				(115		)		—
Gain on sale of businesses	—				697				—
Contribution to Medtronic Foundation	—				(80		)		(100		)
Hurricane Maria	—				(34		)		—
Impact of inventory step-up	—				—				(38		)
Income before income taxes	$	5,197			$	5,675			$	4,602

Total Assets and Depreciation Expense

	Total Assets								Depreciation Expense
(in millions)	April 26, 2019				April 27, 2018				2019				2018				2017
Cardiac and Vascular Group	$	15,453			$	15,407			$	194			$	183			$	180
Minimally Invasive Therapies Group	41,186				43,002				206				217				358
Restorative Therapies Group	16,825				15,245				217				146				167
Diabetes Group	3,095				2,900				34				29				29
Segments	76,559				76,554				651				575				734
Corporate	13,135				14,839				244				246				203
Total	$	89,694			$	91,393			$	895			$	821			$	937

Geographic Information

Net sales are attributed to the country based on the location of the customer taking possession of the products or in which the services are rendered. Geographic property, plant, and equipment are attributed to the country based on the physical location of the assets.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

The following table presents net sales for fiscal years 2019, 2018, and 2017, and property, plant, and equipment, net at April 26, 2019 and April 27, 2018 for the Company's country of domicile, countries with significant concentrations, and all other countries:

	Net sales												Property, plant, and equipment, net
(in millions)	2019				2018				2017				April 26, 2019				April 27, 2018
Ireland	$	91			$	85			$	69			$	156			$	149
United States	16,194				15,875				16,663				3,122				2,927
Rest of world	14,272				13,993				12,978				1,397				1,528
Total other countries, excluding Ireland	30,466				29,868				29,641				4,519				4,455
Total	$	30,557			$	29,953			$	29,710			$	4,675			$	4,604

No single customer represented over 10 percent of the Company’s consolidated net sales in fiscal years 2019, 2018, or 2017.

22**.** Guarantor Financial Information

Medtronic plc and Medtronic Global Holdings S.C.A. (Medtronic Luxco), a wholly-owned subsidiary guarantor, each have provided full and unconditional guarantees of the obligations of Medtronic, Inc., a wholly-owned subsidiary issuer, under the Senior Notes (Medtronic Senior Notes) and full and unconditional guarantees of the obligations of Covidien International Finance S.A. (CIFSA), a wholly-owned subsidiary issuer, under the Senior Notes (CIFSA Senior Notes). The guarantees of the CIFSA Senior Notes are in addition to the guarantees of the CIFSA Senior Notes by Covidien Ltd. and Covidien Group Holdings Ltd., both of which are wholly-owned subsidiary guarantors of the CIFSA Senior Notes. Medtronic plc and Medtronic, Inc. each have provided a full and unconditional guarantee of the obligations of Medtronic Luxco under the Senior Notes (Medtronic Luxco Senior Notes).

The following is a summary of these guarantees:

Guarantees of Medtronic Senior Notes

•	Parent Company Guarantor - Medtronic plc

•	Subsidiary Issuer - Medtronic, Inc.

•	Subsidiary Guarantor - Medtronic Luxco

Guarantees of Medtronic Luxco Senior Notes

•	Parent Company Guarantor - Medtronic plc

•	Subsidiary Issuer - Medtronic Luxco

•	Subsidiary Guarantor - Medtronic, Inc.

Guarantees of CIFSA Senior Notes

•	Parent Company Guarantor - Medtronic plc

•	Subsidiary Issuer - CIFSA

•	Subsidiary Guarantors - Medtronic Luxco, Covidien Ltd., and Covidien Group Holdings Ltd. (CIFSA Subsidiary Guarantors)

The following presents the Company’s consolidating statements of comprehensive income and condensed consolidating statements of cash flows as of and for the fiscal years ended April 26, 2019, April 27, 2018, and April 28, 2017, and condensed consolidating balance sheets at April 26, 2019 and April 27, 2018. The guarantees provided by the parent company guarantor and subsidiary guarantors are joint and several. Condensed consolidating financial information for Medtronic plc, Medtronic Luxco, Medtronic, Inc., CIFSA, and CIFSA Subsidiary Guarantors, on a stand-alone basis, is presented using the equity method of accounting for subsidiaries. Certain reclassifications have been made to prior year financial statements to conform to classifications used in the current year.

During fiscal year 2019, the Company undertook certain steps to reorganize ownership of various subsidiaries. The transactions were entirely among subsidiaries under the common control of Medtronic. The reorganization has been reflected as of the beginning of the earliest period presented.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Consolidating Statement of Comprehensive Income

Fiscal Year Ended April 26, 2019

Medtronic Senior Notes and Medtronic Luxco Senior Notes

(in millions)	Medtronic plc				Medtronic, Inc.				Medtronic Luxco				Subsidiary Non-guarantors				Consolidating Adjustments				Total
Net sales	$	—			$	1,318			$	—			$	30,558			$	(1,319	)		$	30,557
Costs and expenses:
Cost of products sold	—				1,110				—				8,833				(788		)		9,155
Research and development expense	—				659				—				1,671				—				2,330
Selling, general, and administrative expense	11				1,476				—				8,931				—				10,418
Amortization of intangible assets	—				8				—				1,756				—				1,764
Restructuring charges, net	—				44				—				154				—				198
Certain litigation charges	—				55				—				111				—				166
Other operating expense (income), net	54				(2,426		)		(28		)		3,085				(427		)		258
Operating profit (loss)	(65		)		392				28				6,017				(104		)		6,268
Other non-operating (income) expense, net	—				(507		)		(808		)		(1,890		)		2,832				(373		)
Interest expense	478				2,375				511				912				(2,832		)		1,444
Equity in net (income) loss of subsidiaries	(5,167		)		(3,089		)		(4,842		)		—				13,098				—
Income (loss) before income taxes	4,624				1,613				5,167				6,995				(13,202		)		5,197
Income tax (benefit) provision	(7		)		(246		)		—				800				—				547
Net income (loss)	4,631				1,859				5,167				6,195				(13,202		)		4,650
Net income attributable to noncontrolling interests	—				—				—				(19		)		—				(19		)
Net income (loss) attributable to Medtronic	4,631				1,859				5,167				6,176				(13,202		)		4,631
Other comprehensive income (loss), net of tax	(972		)		(1,049		)		(972		)		(882		)		2,900				(975		)
Comprehensive income attributable to noncontrolling interests	—				—				—				(16		)		—				(16		)
Total comprehensive income (loss) attributable to Medtronic	$	3,659			$	810			$	4,195			$	5,297			$	(10,302	)		$	3,659

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Consolidating Statement of Comprehensive Income

Fiscal Year Ended April 27, 2018

Medtronic Senior Notes and Medtronic Luxco Senior Notes

(in millions)	Medtronic plc				Medtronic, Inc.				Medtronic Luxco				Subsidiary Non-guarantors				Consolidating Adjustments				Total
Net sales	$	—			$	1,198			$	—			$	29,952			$	(1,197	)		$	29,953
Costs and expenses:
Cost of products sold	—				971				—				8,884				(788		)		9,067
Research and development expense	—				656				—				1,600				—				2,256
Selling, general, and administrative expense	12				1,416				—				8,810				—				10,238
Amortization of intangible assets	—				8				—				1,815				—				1,823
Restructuring charges, net	—				(7		)		—				37				—				30
Certain litigation charges	—				24				—				37				—				61
Gain on sale of businesses	—				—				—				(697		)		—				(697		)
Other operating expense (income), net	52				(2,265		)		—				3,156				(408		)		535
Operating (loss) profit	(64		)		395				—				6,310				(1		)		6,640
Other non-operating (income) expense, net	—				(192		)		(482		)		(1,527		)		2,020				(181		)
Interest expense	247				1,897				234				788				(2,020		)		1,146
Equity in net (income) loss of subsidiaries	(3,408		)		(940		)		(3,160		)		—				7,508				—
Income (loss) before income taxes	3,097				(370		)		3,408				7,049				(7,509		)		5,675
Income tax (benefit) provision	(7		)		41				—				2,546				—				2,580
Net income (loss)	3,104				(411		)		3,408				4,503				(7,509		)		3,095
Net loss attributable to noncontrolling interests	—				—				—				9				—				9
Net income (loss) attributable to Medtronic	3,104				(411		)		3,408				4,512				(7,509		)		3,104
Other comprehensive income (loss), net of tax	1,030				972				1,030				954				(2,956		)		1,030
Comprehensive loss attributable to noncontrolling interests	—				—				—				9				—				9
Total comprehensive income (loss) attributable to Medtronic	$	4,134			$	561			$	4,438			$	5,466			$	(10,465	)		$	4,134

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Consolidating Statement of Comprehensive Income

Fiscal Year Ended April 28, 2017

Medtronic Senior Notes and Medtronic Luxco Senior Notes

(in millions)	Medtronic plc				Medtronic, Inc.				Medtronic Luxco				Subsidiary Non-guarantors				Consolidating Adjustments				Total
Net sales	$	—			$	1,199			$	—			$	29,708			$	(1,197	)		$	29,710
Costs and expenses:
Cost of products sold	—				935				—				9,152				(793		)		9,294
Research and development expense	—				636				—				1,557				—				2,193
Selling, general, and administrative expense	12				1,308				—				8,698				—				10,018
Amortization of intangible assets	—				11				—				1,969				—				1,980
Restructuring charges, net	—				54				—				249				—				303
Certain litigation charges	—				—				—				300				—				300
Other operating expense (income), net	18				(2,380		)		—				3,024				(423		)		239
Operating (loss) profit	(30		)		635				—				4,759				19				5,383
Other non-operating (income) expense, net	—				(197		)		(649		)		(1,065		)		1,598				(313		)
Interest expense	113				1,652				62				865				(1,598		)		1,094
Equity in net (income) loss of subsidiaries	(4,163		)		(1,563		)		(3,576		)		—				9,302				—
Income (loss) before income taxes	4,020				743				4,163				4,959				(9,283		)		4,602
Income tax (benefit) provision	(8		)		(124		)		—				710				—				578
Net income (loss)	4,028				867				4,163				4,249				(9,283		)		4,024
Net loss attributable to noncontrolling interests	—				—				—				4				—				4
Net income (loss) attributable to Medtronic	4,028				867				4,163				4,253				(9,283		)		4,028
Other comprehensive (loss) income, net of tax	(745		)		(430		)		(745		)		(928		)		2,104				(744		)
Comprehensive loss attributable to noncontrolling interests	—				—				—				3				—				3
Total comprehensive income (loss) attributable to Medtronic	$	3,283			$	437			$	3,418			$	3,324			$	(7,179	)		$	3,283

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Condensed Consolidating Balance Sheet

April 26, 2019

Medtronic Senior Notes and Medtronic Luxco Senior Notes

(in millions)	Medtronic plc				Medtronic, Inc.				Medtronic Luxco				Subsidiary Non-guarantors				Consolidating Adjustments				Total
ASSETS
Current assets:
Cash and cash equivalents	$	—			$	18			$	1			$	4,374			$	—			$	4,393
Investments	—				—				—				5,455				—				5,455
Accounts receivable, net	—				—				—				6,222				—				6,222
Inventories, net	—				188				—				3,792				(227		)		3,753
Intercompany receivable	40				9,407				6				19,170				(28,623		)		—
Other current assets	10				190				3				1,941				—				2,144
Total current assets	50				9,803				10				40,954				(28,850		)		21,967
Property, plant and equipment, net	—				1,480				—				3,195				—				4,675
Goodwill	—				2,009				—				37,950				—				39,959
Other intangible assets, net	—				99				—				20,461				—				20,560
Tax assets	—				568				—				951				—				1,519
Investment in subsidiaries	64,352				71,284				65,012				—				(200,648		)		—
Intercompany loans receivable	3,000				21				27,858				35,398				(66,277		)		—
Other assets	—				216				—				798				—				1,014
Total assets	$	67,402			$	85,480			$	92,880			$	139,707			$	(295,775	)		$	89,694
LIABILITIES AND EQUITY
Current liabilities:
Current debt obligations	$	—			$	500			$	—			$	338			$	—			$	838
Accounts payable	—				481				—				1,472				—				1,953
Intercompany payable	—				11,971				7,200				9,452				(28,623		)		—
Accrued compensation	3				913				—				1,273				—				2,189
Accrued income taxes	—				—				—				567				—				567
Other accrued expenses	20				331				53				2,521				—				2,925
Total current liabilities	23				14,196				7,253				15,623				(28,623		)		8,472
Long-term debt	—				14,418				8,621				1,447				—				24,486
Accrued compensation and retirement benefits	—				1,069				—				582				—				1,651
Accrued income taxes	10				692				—				2,136				—				2,838
Intercompany loans payable	17,278				12,613				19,682				16,704				(66,277		)		—
Deferred tax liabilities	—				—				—				1,278				—				1,278
Other liabilities	—				133				—				624				—				757
Total liabilities	17,311				43,121				35,556				38,394				(94,900		)		39,482
Shareholders’ equity	50,091				42,359				57,324				101,192				(200,875		)		50,091
Noncontrolling interests	—				—				—				121				—				121
Total equity	50,091				42,359				57,324				101,313				(200,875		)		50,212
Total liabilities and equity	$	67,402			$	85,480			$	92,880			$	139,707			$	(295,775	)		$	89,694

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Condensed Consolidating Balance Sheet

April 27, 2018

Medtronic Senior Notes and Medtronic Luxco Senior Notes

(in millions)	Medtronic plc				Medtronic, Inc.				Medtronic Luxco				Subsidiary Non-guarantors				Consolidating Adjustments				Total
ASSETS
Current assets:
Cash and cash equivalents	$	—			$	20			$	1			$	3,648			$	—			$	3,669
Investments	—				76				—				7,482				—				7,558
Accounts receivable, net	—				—				—				5,987				—				5,987
Inventories, net	—				165				—				3,539				(125		)		3,579
Intercompany receivable	37				23,480				—				33,929				(57,446		)		—
Other current assets	6				178				—				2,003				—				2,187
Total current assets	43				23,919				1				56,588				(57,571		)		22,980
Property, plant and equipment, net	—				1,426				—				3,178				—				4,604
Goodwill	—				1,883				—				37,660				—				39,543
Other intangible assets, net	—				12				—				21,711				—				21,723
Tax assets	—				385				—				1,080				—				1,465
Investment in subsidiaries	60,381				73,495				61,461				—				(195,337		)		—
Intercompany loans receivable	3,000				6,519				19,337				34,196				(63,052		)		—
Other assets	—				223				—				855				—				1,078
Total assets	$	63,424			$	107,862			$	80,799			$	155,268			$	(315,960	)		$	91,393
LIABILITIES AND EQUITY
Current liabilities:
Current debt obligations	$	—			$	—			$	1,696			$	362			$	—			$	2,058
Accounts payable	—				381				—				1,247				—				1,628
Intercompany payable	—				28,401				5,542				23,503				(57,446		)		—
Accrued compensation	3				787				—				1,198				—				1,988
Accrued income taxes	—				—				—				979				—				979
Other accrued expenses	16				359				4				3,052				—				3,431
Total current liabilities	19				29,928				7,242				30,341				(57,446		)		10,084
Long-term debt	—				20,598				844				2,257				—				23,699
Accrued compensation and retirement benefits	—				902				—				523				—				1,425
Accrued income taxes	10				531				—				2,510				—				3,051
Intercompany loans payable	12,675				14,339				19,335				16,703				(63,052		)		—
Deferred tax liabilities	—				—				—				1,423				—				1,423
Other liabilities	—				68				—				821				—				889
Total liabilities	12,704				66,366				27,421				54,578				(120,498		)		40,571
Shareholders' equity	50,720				41,496				53,378				100,588				(195,462		)		50,720
Noncontrolling interests	—				—				—				102				—				102
Total equity	50,720				41,496				53,378				100,690				(195,462		)		50,822
Total liabilities and equity	$	63,424			$	107,862			$	80,799			$	155,268			$	(315,960	)		$	91,393

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Condensed Consolidating Statement of Cash Flows

Fiscal Year Ended April 26, 2019

Medtronic Senior Notes and Medtronic Luxco Senior Notes

(in millions)	Medtronic plc				Medtronic, Inc.				Medtronic Luxco				Subsidiary Non-guarantors				Consolidating Adjustments				Total
Operating Activities:
Net cash provided by operating activities	$	(7	)		$	4,944			$	298			$	7,691			$	(5,919	)		$	7,007
Investing Activities:
Acquisitions, net of cash acquired	—				(237		)		—				(1,590		)		—				(1,827		)
Additions to property, plant, and equipment	—				(313		)		—				(821		)		—				(1,134		)
Purchases of investments	—				—				—				(2,532		)		—				(2,532		)
Sales and maturities of investments	—				76				—				4,607				—				4,683
Capital contributions paid	(18		)		(97		)		—				—				115				—
Other investing activities, net	—				—				82				(46		)		—				36
Net cash (used in) provided by investing activities	(18		)		(571		)		82				(382		)		115				(774		)
Financing Activities:
Change in current debt obligations, net	—				—				(1,696		)		983				—				(713		)
Issuance of long-term debt	—				—				7,791				3				—				7,794
Payments on long-term debt	—				(6,182		)		—				(1,766		)		—				(7,948		)
Dividends to shareholders	(2,693		)		—				—				—				—				(2,693		)
Issuance of ordinary shares	992				—				—				—				—				992
Repurchase of ordinary shares	(2,877		)		—				—				—				—				(2,877		)
Net intercompany loan borrowings (repayments)	4,603				1,807				(6,518		)		108				—				—
Intercompany dividends paid	—				—				—				(5,919		)		5,919				—
Capital contributions received	—				—				—				115				(115		)		—
Other financing activities	—				—				43				(29		)		—				14
Net cash (used in) provided by financing activities	25				(4,375		)		(380		)		(6,505		)		5,804				(5,431		)
Effect of exchange rate changes on cash and cash equivalents	—				—				—				(78		)		—				(78		)
Net change in cash and cash equivalents	—				(2		)		—				726				—				724
Cash and cash equivalents at beginning of period	—				20				1				3,648				—				3,669
Cash and cash equivalents at end of period	$	—			$	18			$	1			$	4,374			$	—			$	4,393

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Condensed Consolidating Statement of Cash Flows

Fiscal Year Ended April 27, 2018

Medtronic Senior Notes and Medtronic Luxco Senior Notes

(in millions)	Medtronic plc				Medtronic, Inc.				Medtronic Luxco				Subsidiary Non-guarantors				Consolidating Adjustments				Total
Operating Activities:
Net cash provided by operating activities	$	155			$	(1,567	)		$	249			$	16,419			$	(10,572	)		$	4,684
Investing Activities:
Acquisitions, net of cash acquired	—				—				—				(137		)		—				(137		)
Proceeds from sale of businesses	—				—				—				6,058				—				6,058
Additions to property, plant, and equipment	—				(340		)		—				(728		)		—				(1,068		)
Purchases of investments	—				(98		)		(25		)		(3,124		)		47				(3,200		)
Sales and maturities of investments	—				25				—				4,249				(47		)		4,227
Capital contributions paid	—				(59		)		(4,200		)		—				4,259				—
Other investing activities, net	—				—				—				(22		)		—				(22		)
Net cash (used in) provided by investing activities	—				(472		)		(4,225		)		6,296				4,259				5,858
Financing Activities:
Change in current debt obligations, net	—				—				(205		)		(44		)		—				(249		)
Issuance of long-term debt	—				—				—				21				—				21
Payments on long-term debt	—				(6,166		)		—				(1,204		)		—				(7,370		)
Dividends to shareholders	(2,494		)		—				—				—				—				(2,494		)
Issuance of ordinary shares	403				—				—				—				—				403
Repurchase of ordinary shares	(2,171		)		—				—				—				—				(2,171		)
Net intercompany loan borrowings (repayments)	4,107				8,180				4,177				(16,464		)		—				—
Intercompany dividends paid	—				—				—				(10,572		)		10,572				—
Capital contributions received	—				—				—				4,259				(4,259		)		—
Other financing activities	—				—				—				(94		)		—				(94		)
Net cash (used in) provided by financing activities	(155		)		2,014				3,972				(24,098		)		6,313				(11,954		)
Effect of exchange rate changes on cash and cash equivalents	—				—				—				114				—				114
Net change in cash and cash equivalents	—				(25		)		(4		)		(1,269		)		—				(1,298		)
Cash and cash equivalents at beginning of period	—				45				5				4,917				—				4,967
Cash and cash equivalents at end of period	$	—			$	20			$	1			$	3,648			$	—			$	3,669

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Condensed Consolidating Statement of Cash Flows

Fiscal Year Ended April 28, 2017

Medtronic Senior Notes and Medtronic Luxco Senior Notes

(in millions)	Medtronic plc				Medtronic, Inc.				Medtronic Luxco				Subsidiary Non-guarantors				Consolidating Adjustments				Total
Operating Activities:
Net cash provided by operating activities	$	842			$	1,902			$	302			$	4,721			$	(887	)		$	6,880
Investing Activities:
Acquisitions, net of cash acquired	—				(940		)		—				(384		)		—				(1,324		)
Additions to property, plant, and equipment	—				(369		)		—				(885		)		—				(1,254		)
Purchases of investments	—				—				—				(4,533		)		162				(4,371		)
Sales and maturities of investments	—				210				—				5,308				(162		)		5,356
Capital contributions paid	—				(248		)		—				—				248				—
Other investing activities, net	—				—				—				22				—				22
Net cash (used in) provided by investing activities	—				(1,347		)		—				(472		)		248				(1,571		)
Financing Activities:
Change in current debt obligations, net	—				—				901				5				—				906
Issuance of long-term debt	—				150				1,850				140				—				2,140
Payments on long-term debt	—				(500		)		—				(363		)		—				(863		)
Dividends to shareholders	(2,376		)		—				—				—				—				(2,376		)
Issuance of ordinary shares	428				—				—				—				—				428
Repurchase of ordinary shares	(3,544		)		—				—				—				—				(3,544		)
Net intercompany loan borrowings (repayments)	4,650				(255		)		(3,048		)		(1,347		)		—				—
Intercompany dividends paid	—				—				—				(887		)		887				—
Capital contributions received	—				—				—				248				(248		)		—
Other financing activities	—				40				—				(14		)		—				26
Net cash (used in) provided by financing activities	(842		)		(565		)		(297		)		(2,218		)		639				(3,283		)
Effect of exchange rate changes on cash and cash equivalents	—				—				—				65				—				65
Net change in cash and cash equivalents	—				(10		)		5				2,096				—				2,091
Cash and cash equivalents at beginning of period	—				55				—				2,821				—				2,876
Cash and cash equivalents at end of period	$	—			$	45			$	5			$	4,917			$	—			$	4,967

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Consolidating Statement of Comprehensive Income

Fiscal Year Ended April 26, 2019

CIFSA Senior Notes

(in millions)	Medtronic plc				CIFSA				CIFSA Subsidiary Guarantors				Subsidiary Non-guarantors				Consolidating Adjustments				Total
Net sales	$	—			$	—			$	—			$	30,557			$	—			$	30,557
Costs and expenses:
Cost of products sold	—				—				—				9,155				—				9,155
Research and development expense	—				—				—				2,330				—				2,330
Selling, general, and administrative expense	11				1				4				10,402				—				10,418
Amortization of intangible assets	—				—				—				1,764				—				1,764
Restructuring charges, net	—				—				—				198				—				198
Certain litigation charges	—				—				—				166				—				166
Other operating expense (income), net	54				1				(27		)		230				—				258
Operating (loss) profit	(65		)		(2		)		23				6,312				—				6,268
Other non-operating (income) expense, net	—				(44		)		(836		)		(830		)		1,337				(373		)
Interest expense	478				99				511				1,693				(1,337		)		1,444
Equity in net (income) loss of subsidiaries	(5,167		)		(3,144		)		(4,819		)		—				13,130				—
Income (loss) before income taxes	4,624				3,087				5,167				5,449				(13,130		)		5,197
Income tax (benefit) provision	(7		)		—				—				554				—				547
Net income (loss)	4,631				3,087				5,167				4,895				(13,130		)		4,650
Net income attributable to noncontrolling interests	—				—				—				(19		)		—				(19		)
Net income (loss) attributable to Medtronic	4,631				3,087				5,167				4,876				(13,130		)		4,631
Other comprehensive income (loss), net of tax	(972		)		7				(972		)		(1,060		)		2,022				(975		)
Comprehensive income attributable to noncontrolling interests	—				—				—				(16		)		—				(16		)
Total comprehensive income (loss) attributable to Medtronic	$	3,659			$	3,094			$	4,195			$	3,819			$	(11,108	)		$	3,659

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Consolidating Statement of Comprehensive Income

Fiscal Year Ended April 27, 2018

CIFSA Senior Notes

(in millions)	Medtronic plc				CIFSA				CIFSA Subsidiary Guarantors				Subsidiary Non-guarantors				Consolidating Adjustments				Total
Net sales	$	—			$	—			$	—			$	29,953			$	—			$	29,953
Costs and expenses:
Cost of products sold	—				—				—				9,067				—				9,067
Research and development expense	—				—				—				2,256				—				2,256
Selling, general, and administrative expense	12				1				2				10,223				—				10,238
Amortization of intangible assets	—				—				—				1,823				—				1,823
Restructuring charges, net	—				—				—				30				—				30
Certain litigation charges	—				—				—				61				—				61
Gain on sale of businesses	—				—				—				(697		)		—				(697		)
Other operating expense, net	52				1				—				482				—				535
Operating (loss) profit	(64		)		(2		)		(2		)		6,708				—				6,640
Other non-operating (income) expense, net	—				(60		)		(498		)		(346		)		723				(181		)
Interest expense	247				83				234				1,305				(723		)		1,146
Equity in net (income) loss of subsidiaries	(3,408		)		(4,105		)		(3,146		)		—				10,659				—
Income (loss) before income taxes	3,097				4,080				3,408				5,749				(10,659		)		5,675
Income tax (benefit) provision	(7		)		—				—				2,587				—				2,580
Net income (loss)	3,104				4,080				3,408				3,162				(10,659		)		3,095
Net loss attributable to noncontrolling interests	—				—				—				9				—				9
Net (income) loss attributable to Medtronic	3,104				4,080				3,408				3,171				(10,659		)		3,104
Other comprehensive income (loss), net of tax	1,030				43				1,030				1,030				(2,103		)		1,030
Comprehensive loss attributable to noncontrolling interests	—				—				—				9				—				9
Total comprehensive income (loss) attributable to Medtronic	$	4,134			$	4,123			$	4,438			$	4,201			$	(12,762	)		$	4,134

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Consolidating Statement of Comprehensive Income

Fiscal Year Ended April 28, 2017

CIFSA Senior Notes

(in millions)	Medtronic plc				CIFSA				CIFSA Subsidiary Guarantors				Subsidiary Non-guarantors				Consolidating Adjustments				Total
Net sales	$	—			$	—			$	—			$	29,710			$	—			$	29,710
Costs and expenses:
Cost of products sold	—				—				—				9,294				—				9,294
Research and development expense	—				—				—				2,193				—				2,193
Selling, general, and administrative expense	12				1				2				10,003				—				10,018
Amortization of intangible assets	—				—				—				1,980				—				1,980
Restructuring charges, net	—				—				—				303				—				303
Certain litigation charges	—				—				—				300				—				300
Other operating expense, net	18				1				4				216				—				239
Operating (loss) profit	(30		)		(2		)		(6		)		5,421				—				5,383
Other non-operating (income) expense, net	—				(82		)		(656		)		(380		)		805				(313		)
Interest expense	113				104				62				1,620				(805		)		1,094
Equity in net (income) loss of subsidiaries	(4,163		)		(3,736		)		(3,575		)		—				11,474				—
Income (loss) before income taxes	4,020				3,712				4,163				4,181				(11,474		)		4,602
Income tax (benefit) provision	(8		)		—				—				586				—				578
Net income (loss)	4,028				3,712				4,163				3,595				(11,474		)		4,024
Net loss attributable to noncontrolling interests	—				—				—				4				—				4
Net income (loss) attributable to Medtronic	4,028				3,712				4,163				3,599				(11,474		)		4,028
Other comprehensive (loss) income, net of tax	(745		)		(234		)		(745		)		(744		)		1,724				(744		)
Comprehensive loss attributable to noncontrolling interests	—				—				—				3				—				3
Total comprehensive income (loss) attributable to Medtronic	$	3,283			$	3,478			$	3,418			$	2,854			$	(9,750	)		$	3,283

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Condensed Consolidating Balance Sheet

April 26, 2019

CIFSA Senior Notes

(in millions)	Medtronic plc				CIFSA				CIFSA Subsidiary Guarantors				Subsidiary Non-guarantors				Consolidating Adjustments				Total
ASSETS
Current assets:
Cash and cash equivalents	$	—			$	—			$	1			$	4,392			$	—			$	4,393
Investments	—				—				—				5,455				—				5,455
Accounts receivable, net	—				—				—				6,222				—				6,222
Inventories, net	—				—				—				3,753				—				3,753
Intercompany receivable	40				—				1,374				7,212				(8,626		)		—
Other current assets	10				—				3				2,131				—				2,144
Total current assets	50				—				1,378				29,165				(8,626		)		21,967
Property, plant and equipment, net	—				—				—				4,675				—				4,675
Goodwill	—				—				—				39,959				—				39,959
Other intangible assets, net	—				—				—				20,560				—				20,560
Tax assets	—				—				—				1,519				—				1,519
Investment in subsidiaries	64,352				39,402				63,651				—				(167,405		)		—
Intercompany loans receivable	3,000				4,119				27,858				29,002				(63,979		)		—
Other assets	—				—				—				1,014				—				1,014
Total assets	$	67,402			$	43,521			$	92,887			$	125,894			$	(240,010	)		$	89,694
LIABILITIES AND EQUITY
Current liabilities:
Current debt obligations	$	—			$	—			$	—			$	838			$	—			$	838
Accounts payable	—				—				—				1,953				—				1,953
Intercompany payable	—				1,308				7,199				119				(8,626		)		—
Accrued compensation	3				—				—				2,186				—				2,189
Accrued income taxes	—				—				—				567				—				567
Other accrued expenses	20				11				60				2,834				—				2,925
Total current liabilities	23				1,319				7,259				8,497				(8,626		)		8,472
Long-term debt	—				1,354				8,621				14,511				—				24,486
Accrued compensation and retirement benefits	—				—				—				1,651				—				1,651
Accrued income taxes	10				—				—				2,828				—				2,838
Intercompany loans payable	17,278				9,320				19,682				17,699				(63,979		)		—
Deferred tax liabilities	—				—				—				1,278				—				1,278
Other liabilities	—				—				1				756				—				757
Total liabilities	17,311				11,993				35,563				47,220				(72,605		)		39,482
Shareholders’ equity	50,091				31,528				57,324				78,553				(167,405		)		50,091
Noncontrolling interests	—				—				—				121				—				121
Total equity	50,091				31,528				57,324				78,674				(167,405		)		50,212
Total liabilities and equity	$	67,402			$	43,521			$	92,887			$	125,894			$	(240,010	)		$	89,694

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Condensed Consolidating Balance Sheet

April 27, 2018

CIFSA Senior Notes

(in millions)	Medtronic plc				CIFSA				CIFSA Subsidiary Guarantors				Subsidiary Non-guarantors				Consolidating Adjustments				Total
ASSETS
Current assets:
Cash and cash equivalents	$	—			$	—			$	1			$	3,668			$	—			$	3,669
Investments	—				—				—				7,558				—				7,558
Accounts receivable, net	—				—				—				5,987				—				5,987
Inventories, net	—				—				—				3,579				—				3,579
Intercompany receivable	37				—				1,343				5,560				(6,940		)		—
Other current assets	6				—				—				2,181				—				2,187
Total current assets	43				—				1,344				28,533				(6,940		)		22,980
Property, plant and equipment, net	—				—				—				4,604				—				4,604
Goodwill	—				—				—				39,543				—				39,543
Other intangible assets, net	—				—				—				21,723				—				21,723
Tax assets	—				—				—				1,465				—				1,465
Investment in subsidiaries	60,381				31,239				60,122				—				(151,742		)		—
Intercompany loans receivable	3,000				1,291				19,337				19,436				(43,064		)		—
Other assets	—				—				—				1,078				—				1,078
Total assets	$	63,424			$	32,530			$	80,803			$	116,382			$	(201,746	)		$	91,393
LIABILITIES AND EQUITY
Current liabilities:
Current debt obligations	$	—			$	—			$	1,696			$	362			$	—			$	2,058
Accounts payable	—				—				—				1,628				—				1,628
Intercompany payable	—				1,283				5,542				115				(6,940		)		—
Accrued compensation	3				—				—				1,985				—				1,988
Accrued income taxes	—				—				—				979				—				979
Other accrued expenses	16				21				8				3,386				—				3,431
Total current liabilities	19				1,304				7,246				8,455				(6,940		)		10,084
Long-term debt	—				2,111				844				20,744				—				23,699
Accrued compensation and retirement benefits	—				—				—				1,425				—				1,425
Accrued income taxes	10				—				—				3,041				—				3,051
Intercompany loans payable	12,675				100				19,335				10,954				(43,064		)		—
Deferred tax liabilities	—				—				—				1,423				—				1,423
Other liabilities	—				—				—				889				—				889
Total liabilities	12,704				3,515				27,425				46,931				(50,004		)		40,571
Shareholders' equity	50,720				29,015				53,378				69,349				(151,742		)		50,720
Noncontrolling interests	—				—				—				102				—				102
Total equity	50,720				29,015				53,378				69,451				(151,742		)		50,822
Total liabilities and equity	$	63,424			$	32,530			$	80,803			$	116,382			$	(201,746	)		$	91,393

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Condensed Consolidating Statement of Cash Flows

Fiscal Year Ended April 26, 2019

CIFSA Senior Notes

(in millions)	Medtronic plc				CIFSA				CIFSA Subsidiary Guarantors				Subsidiary Non-guarantors				Consolidating Adjustments				Total
Operating Activities:
Net cash provided by operating activities	$	(7	)		$	661			$	323			$	6,780			$	(750	)		$	7,007
Investing Activities:
Acquisitions, net of cash acquired	—				—				—				(1,827		)		—				(1,827		)
Additions to property, plant, and equipment	—				—				—				(1,134		)		—				(1,134		)
Purchases of investments	—				—				—				(2,532		)		—				(2,532		)
Sales and maturities of investments	—				—				—				4,683				—				4,683
Capital contributions paid	(18		)		(6,346		)		—				—				6,364				—
Other investing activities, net	—				—				82				(46		)		—				36
Net cash (used in) provided by investing activities	(18		)		(6,346		)		82				(856		)		6,364				(774		)
Financing Activities:
Change in current debt obligations, net	—				—				(1,696		)		983				—				(713		)
Issuance of long-term debt	—				—				7,791				3				—				7,794
Payments on long-term debt	—				(732		)		—				(7,216		)		—				(7,948		)
Dividends to shareholders	(2,693		)		—				—				—				—				(2,693		)
Issuance of ordinary shares	992				—				—				—				—				992
Repurchase of ordinary shares	(2,877		)		—				—				—				—				(2,877		)
Net intercompany loan borrowings (repayments)	4,603				6,417				(6,543		)		(4,477		)		—				—
Intercompany dividend paid	—				—				—				(750		)		750				—
Capital contributions received	—				—				—				6,364				(6,364		)		—
Other financing activities	—				—				43				(29		)		—				14
Net cash (used in) provided by financing activities	25				5,685				(405		)		(5,122		)		(5,614		)		(5,431		)
Effect of exchange rate changes on cash and cash equivalents	—				—				—				(78		)		—				(78		)
Net change in cash and cash equivalents	—				—				—				724				—				724
Cash and cash equivalents at beginning of period	—				—				1				3,668				—				3,669
Cash and cash equivalents at end of period	$	—			$	—			$	1			$	4,392			$	—			$	4,393

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Condensed Consolidating Statement of Cash Flows

Fiscal Year Ended April 27, 2018

CIFSA Senior Notes

(in millions)	Medtronic plc				CIFSA				CIFSA Subsidiary Guarantors				Subsidiary Non-guarantors				Consolidating Adjustments				Total
Operating Activities:
Net cash provided by operating activities	$	155			$	974			$	264			$	4,339			$	(1,048	)		$	4,684
Investing Activities:
Acquisitions, net of cash acquired	—				—				—				(137		)		—				(137		)
Proceeds from sale of businesses	—				—				—				6,058				—				6,058
Additions to property, plant, and equipment	—				—				—				(1,068		)		—				(1,068		)
Purchases of investments	—				—				(25		)		(3,200		)		25				(3,200		)
Sales and maturities of investments	—				—				—				4,252				(25		)		4,227
Capital contributions paid	—				(1,557		)		(4,200		)		—				5,757				—
Other investing activities, net	—				—				—				(22		)		—				(22		)
Net cash (used in) provided by investing activities	—				(1,557		)		(4,225		)		5,883				5,757				5,858
Financing Activities:
Change in current debt obligations, net	—				—				(205		)		(44		)		—				(249		)
Issuance of long-term debt	—				—				—				21				—				21
Payments on long-term debt	—				(1,150		)		—				(6,220		)		—				(7,370		)
Dividends to shareholders	(2,494		)		—				—				—				—				(2,494		)
Issuance of ordinary shares	403				—				—				—				—				403
Repurchase of ordinary shares	(2,171		)		—				—				—				—				(2,171		)
Net intercompany loan borrowings (repayments)	4,107				1,700				4,162				(9,969		)		—				—
Intercompany dividend paid	—				—				—				(1,048		)		1,048				—
Capital contributions received	—				—				—				5,757				(5,757		)		—
Other financing activities	—				—				—				(94		)		—				(94		)
Net cash (used in) provided by financing activities	(155		)		550				3,957				(11,597		)		(4,709		)		(11,954		)
Effect of exchange rate changes on cash and cash equivalents	—				—				—				114				—				114
Net change in cash and cash equivalents	—				(33		)		(4		)		(1,261		)		—				(1,298		)
Cash and cash equivalents at beginning of period	—				33				5				4,929				—				4,967
Cash and cash equivalents at end of period	$	—			$	—			$	1			$	3,668			$	—			$	3,669

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Condensed Consolidating Statement of Cash Flows

Fiscal Year Ended April 28, 2017

CIFSA Senior Notes

(in millions)	Medtronic plc				CIFSA				CIFSA Subsidiary Guarantors				Subsidiary Non-guarantors				Consolidating Adjustments				Total
Operating Activities:
Net cash provided by operating activities	$	842			$	1,904			$	302			$	5,829			$	(1,997	)		$	6,880
Investing Activities:
Acquisitions, net of cash acquired	—				—				—				(1,324		)		—				(1,324		)
Additions to property, plant, and equipment	—				—				—				(1,254		)		—				(1,254		)
Purchases of investments	—				—				—				(4,371		)		—				(4,371		)
Sales and maturities of investments	—				—				—				5,356				—				5,356
Capital contributions paid	—				(537		)		—				—				537				—
Other investing activities, net	—				—				—				22				—				22
Net cash (used in) provided by investing activities	—				(537		)		—				(1,571		)		537				(1,571		)
Financing Activities:
Change in current debt obligations, net	—				—				901				5				—				906
Issuance of long-term debt	—				—				1,850				290				—				2,140
Payments on long-term debt	—				—				—				(863		)		—				(863		)
Dividends to shareholders	(2,376		)		—				—				—				—				(2,376		)
Issuance of ordinary shares	428				—				—				—				—				428
Repurchase of ordinary shares	(3,544		)		—				—				—				—				(3,544		)
Net intercompany loan borrowings (repayments)	4,650				(1,542		)		(3,048		)		(60		)		—				—
Intercompany dividend paid	—				—				—				(1,997		)		1,997				—
Capital contributions received	—				—				—				537				(537		)		—
Other financing activities	—				—				—				26				—				26
Net cash (used in) provided by financing activities	(842		)		(1,542		)		(297		)		(2,062		)		1,460				(3,283		)
Effect of exchange rate changes on cash and cash equivalents	—				—				—				65				—				65
Net change in cash and cash equivalents	—				(175		)		5				2,261				—				2,091
Cash and cash equivalents at beginning of period	—				208				—				2,668				—				2,876
Cash and cash equivalents at end of period	$	—			$	33			$	5			$	4,929			$	—			$	4,967