Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

UNDERSTANDING OUR FINANCIAL INFORMATION

The following discussion and analysis provides information management believes to be relevant to understanding the financial condition and results of operations of Medtronic plc and its subsidiaries (Medtronic plc, Medtronic, or the Company, or we, us, or our). For a full understanding of financial condition and results of operations, you should read this discussion along with Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended April 29, 2022. In addition, you should read this discussion along with our consolidated financial statements and related notes thereto at and for the three months ended July 29, 2022. Amounts reported in millions within this quarterly report are computed based on the amounts in thousands, and therefore, the sum of the components may not equal the total amount reported in millions due to rounding. Additionally, certain columns and rows within tables may not sum due to rounding.

Financial Trends

Throughout this Management’s Discussion and Analysis, we present certain financial measures that facilitate management's review of the operational performance of the Company and as a basis for strategic planning; however, such financial measures are not presented in our financial statements prepared in accordance with accounting principles generally accepted in the United States (U.S.) (U.S. GAAP). These financial measures are considered "non-GAAP financial measures" and are intended to supplement, and should not be considered as superior to, financial measures presented in accordance with U.S. GAAP. We believe that non-GAAP financial measures provide information useful to investors in understanding the Company's underlying operational performance and trends and may facilitate comparisons with the performance of other companies in the medical technologies industry.

As presented in the GAAP to Non-GAAP Reconciliations section below, our non-GAAP financial measures exclude the impact of certain charges or benefits that contribute to or reduce earnings and that may affect financial trends and include certain charges or benefits that result from transactions or events that we believe may or may not recur with similar materiality or impact to our operations in future periods (Non-GAAP Adjustments).

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

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

Refer to the “GAAP to Non-GAAP Reconciliations," "Income Taxes," and "Free Cash Flow" sections for reconciliations of the non-GAAP financial measures to their most directly comparable financial measures prepared in accordance with U.S. GAAP.

EXECUTIVE LEVEL OVERVIEW

Medtronic is the leading global healthcare technology company — alleviating pain, restoring health, and extending life for millions of people around the world. Our primary products include those for cardiac rhythm disorders, cardiovascular disease, advanced and general surgical care, respiratory and monitoring solutions, renal care, neurological disorders, spinal conditions and musculoskeletal trauma, urological and digestive disorders, and ear, nose, and throat, and diabetes conditions.

The global healthcare system is continuing to respond to the challenge posed by the COVID-19 pandemic ("COVID-19" or the "pandemic"). Several of our businesses continued to be affected by the pandemic, including the most recent COVID-19 lockdowns in China which began in late March and continued through the end of May, and the impacts of healthcare system staffing shortages on procedural volumes. In addition to the impacts of the pandemic, certain businesses continue to be impacted by supply chain disruptions that began during the fourth quarter of fiscal year 2022. We cannot predict with confidence the duration and severity of the pandemic and its impact on global procedure volumes. We expect medical procedure rates may continue to vary by therapy and country and to be impacted by regional COVID-19 case volumes, vaccine and booster immunization rates, and new COVID-19 variants. Additionally, we cannot predict the impact further healthcare system staffing shortages will have on procedural volumes, and the continued impact supply chain disruptions will have on the business.

The following is a summary of revenue and diluted earnings per share for the three months ended July 29, 2022 and July 30, 2021, and operating cash flow for the three months ended July 29, 2022 and July 30, 2021:

GAAP to Non-GAAP Reconciliations

Starting with the quarter ended April 29, 2022, the Company no longer adjusts non-GAAP financial measures for certain license payments for, or acquisitions of, technology not approved by regulators due to recent industry guidance from the U.S. Securities and Exchange Commission. Historical non-GAAP financial measures presented in this quarterly report have been recast for comparability.

The tables below present our GAAP to Non-GAAP reconciliations for the three months ended July 29, 2022 and July 30, 2021:

			Three months ended July 29, 2022
(in millions, except per share data)			Income Before Income Taxes						Income Tax Provision (Benefit)						Net Income Attributable to Medtronic						Diluted EPS						Effective Tax Rate
GAAP			$	1,044					$	112					$	929					$	0.70					10.7		%
Non-GAAP Adjustments:
Restructuring and associated costs (1)			76						16						60						0.04						21.1
Acquisition-related items (2)			35						6						29						0.02						17.1
(Gain)/loss on minority investments (3)			(4)						—						(4)						—						—
Medical device regulations (4)			32						6						26						0.02						18.8
Amortization of intangible assets			423						65						359						0.27						15.4
RCS impairments / costs (5)			74						1						73						0.05						1.4
Debt redemption premium and other charges (6)			53						11						42						0.03						20.8
Certain tax adjustments, net (7)			—						13						(13)						(0.01)						—
Non-GAAP			$	1,734					$	230					$	1,502					$	1.13					13.3		%
			Three months ended July 30, 2021
(in millions, except per share data)			Income Before Income Taxes						Income Tax Provision (Benefit)						Net Income Attributable to Medtronic						Diluted EPS						Effective Tax Rate
GAAP			$	833					$	64					$	763					$	0.56					7.7		%
Non-GAAP Adjustments:
Restructuring and associated costs (1)			81						17						65						0.05						21.0
Acquisition-related items (2)			19						1						17						0.01						5.3
Certain litigation charges			26						5						21						0.02						19.2
(Gain)/loss on minority investments (3)			(31)						—						(29)						(0.02)						—
Medical device regulations (4)			21						4						17						0.01						19.0
Amortization of intangible assets			436						69						366						0.27						15.8
MCS impairment / costs (8)			726						162						564						0.42						22.3
Certain tax adjustments, net (9)			—						(53)						53						0.04						—
Non-GAAP			$	2,111					$	269					$	1,838					$	1.36					12.7		%

(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)The charges primarily include business combination costs and changes in fair value of contingent consideration.

(3)We exclude unrealized and realized gains and losses on our minority investments as we do not believe that these components of income or expense have a direct correlation to our ongoing or future business operations.

(4)The charges represent incremental costs of complying with the new European Union (E.U.) medical device regulations for previously registered products and primarily include charges for contractors supporting the project and other direct third-party expenses. We consider these costs to be duplicative of previously incurred costs and/or one-time costs, which are limited to a specific time period.

(5)The charges predominantly include non-cash pre-tax impairments, primarily related to goodwill, as a result of the anticipated sale of half of the Company's Renal Care Solutions (RCS) business related to the May 25, 2022 agreement with DaVita Inc.

(6)The charges relate to the early redemption of approximately $2.3 billion of senior notes and were recorded within interest expense within the consolidated statements of income.

(7)The net benefit is due to a valuation allowance release associated with certain carryover attributes as a result of the anticipated RCS transaction listed above in (5) partially offset by the amortization of previously established deferred tax assets from intercompany intellectual property transactions.

(8)The charges relate to the Company’s June 2021 decision to stop the distribution and sale of the Medtronic HVAD System within the Mechanical Circulatory Support Operating Unit (MCS). The charges included $515 million of non-cash impairments, primarily related to $409 million of intangible asset impairments, as well as $211 million for commitments and obligations in connection with the decision, including customer support obligations, restructuring, and other associated costs. Medtronic is committed to serving the needs of the approximately 3,200 patients currently implanted with the HVAD System.

(9)The charges are associated with a change in the company’s permanently reinvestment assertion on certain historical earnings and the amortization on previously established deferred tax assets from intercompany intellectual property transactions.

Free Cash Flow

Free cash flow, a non-GAAP financial measure, is calculated by subtracting additions to property, plant, and equipment from net cash provided by operating activities. Management uses this non-GAAP financial measure, in addition to U.S. GAAP financial measures, to evaluate our operating results. Free cash flow should be considered supplemental to, and not a substitute for, our reported financial results prepared in accordance with U.S. GAAP. Reconciliations between net cash provided by operating activities (the most comparable U.S. GAAP measure) and free cash flow are as follows:

			Three months ended
(in millions)			July 29, 2022						July 30, 2021
Net cash provided by operating activities			$	1,083					$	1,292
Additions to property, plant, and equipment			(426)						(378)
Free cash flow			$	657					$	914

Refer to the Summary of Cash Flows section for drivers of the change in cash provided by operating activities.

NET SALES

Segment and Division

The charts below illustrate the percent of net sales by segment for the three months ended July 29, 2022 and July 30, 2021:

The table below illustrates net sales by segment and division for the three months ended July 29, 2022 and July 30, 2021:

			Three months ended
(in millions)			July 29, 2022						July 30, 2021						% Change
Cardiac Rhythm & Heart Failure			$	1,393					$	1,483					(6)		%
Structural Heart & Aortic			741						787						(6)
Coronary & Peripheral Vascular			579						620						(7)
Cardiovascular			2,713						2,890						(6)
Surgical Innovations			1,338						1,554						(14)
Respiratory, Gastrointestinal, & Renal			664						768						(14)
Medical Surgical			2,001						2,322						(14)
Cranial & Spinal Technologies			1,043						1,123						(7)
Specialty Therapies			667						641						4
Neuromodulation			405						440						(8)
Neuroscience			2,115						2,204						(4)
Diabetes			541						572						(5)
Total			$	7,371					$	7,987					(8)		%

Segment and Market Geography

The charts below illustrate the percent of net sales by market geography for the three months ended July 29, 2022 and July 30, 2021:

The table below includes net sales by market geography for each of our segments for the three months ended July 29, 2022 and July 30, 2021:

			U.S.****(1)																		Non-U.S. Developed Markets**(2)**																		Emerging Markets**(3)**
			Three months ended																		Three months ended																		Three months ended
(in millions)			July 29, 2022						July 30, 2021						% Change						July 29, 2022						July 30, 2021						% Change						July 29, 2022						July 30, 2021						% Change
Cardiovascular			$	1,298					$	1,420					(9)		%				$	892					$	1,003					(11)		%				$	523					$	467					12		%
Medical Surgical			843						990						(15)						767						869						(12)						392						463						(15)
Neuroscience			1,419						1,446						(2)						407						465						(12)						290						293						(1)
Diabetes			206						245						(16)						264						263						—						72						63						14
Total			$	3,766					$	4,101					(8)		%				$	2,328					$	2,601					(10)		%				$	1,276					$	1,286					(1)		%

(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.

The decline in net sales for three months ended July 29, 2022, as compared to the corresponding period in the prior fiscal year, was driven primarily by the impact of supply chain challenges in certain businesses. For the three months ended July 29, 2022, currency had an unfavorable impact on emerging markets and non-U.S. developed markets of $35 million and $315 million, respectively.

Looking ahead, a number of macro-economic and geopolitical factors could negatively impact our business, including without limitation:

• Competitive product launches and pricing pressure, geographic macro-economic risks including general price inflation, rising interest rates, reimbursement challenges, impacts from changes in the mix of our product offerings, delays in product registration approvals, replacement cycle challenges, and fluctuations in currency exchange rates;

• National and provincial tender pricing for certain products, particularly in China;

• The uncertain and uneven impact of COVID-19 on future procedural volumes, supply constraints including certain electronic components and semiconductors, healthcare staffing, worker absenteeism with our customers, suppliers, and in our own operations and field teams, and resulting impacts on demand for our products and therapies; and

• The potential impact that sanctions and other measures being imposed in response to the Russia-Ukraine conflict could have on revenue and supply chain. The financial impact of the conflict in the first quarter of fiscal year 2023, including on accounts receivable and inventory reserves, was not material and for the three months ended July 29, 2022, the business of the Company in these countries represented less than 1% of the Company's consolidated revenues and assets. Although the implications of this conflict are difficult to predict at this time, the ongoing conflict may increase pressure on the global economy and supply chains, resulting in increased future volatility risk for our business operations and performance.

Cardiovascular

Cardiovascular products include pacemakers, insertable cardiac monitors, cardiac resynchronization therapy devices, implantable cardioverter defibrillators (ICD), leads and delivery systems, electrophysiology catheters, products for the treatment of atrial fibrillation, information systems for the management of patients with Cardiac Rhythm & Heart Failure devices, products designed to reduce surgical site infections, coronary and peripheral stents and related delivery systems, balloons and related delivery systems, endovascular stent graft systems, heart valve replacement technologies, cardiac tissue ablation systems, and open heart and coronary bypass grafting surgical products. Cardiovascular also includes Care Management Services and Cath Lab Managed Services (CLMS) within the Cardiac Rhythm & Heart Failure division. Cardiovascular's net sales for the three months ended July 29, 2022 were $2.7 billion, which represents a decrease of 6 percent compared to the corresponding period in the prior fiscal year. Currency had an unfavorable impact of $138 million on net sales for the three months ended July 29, 2022. The net sales decrease for the three months ended July 29, 2022 was primarily due to supply chain challenges in certain businesses.

The graphs below illustrate the percent of Cardiovascular net sales by division for the three months ended July 29, 2022 and July 30, 2021:

Cardiac Rhythm & Heart Failure (CRHF) net sales for the three months ended July 29, 2022 decreased 6 percent as compared to the corresponding period in the prior fiscal year. The decrease was led by Cardiac Rhythm Management due to supply constraints within Defibrillation Solutions. The decrease was partially offset by increases in Cardiac Pacing Therapies and Procedure Innovations, due to continued adoption of Micra AV and TYRX antibacterial envelopes, respectively. Cardiac Ablation Solutions net sales for the three months ended July 29, 2022 also decreased due to COVID lockdowns as well as hospital staffing shortages in markets outside the U.S.

Structural Heart & Aortic (SHA) net sales for the three months ended July 29, 2022 decreased 6 percent as compared to the corresponding period in the prior fiscal year. The decrease was led by transcatheter aortic valve replacement (TAVR) performance as a result of strong sales in the comparative period, the impact from a FCA, and supply shortages of contrast. Aortic also contributed to the decrease caused by supply chain challenges and FCAs issued in prior fiscal years.

Coronary & Peripheral Vascular (CPV) net sales for the three months ended July 29, 2022 decreased 7 percent as compared to the corresponding period in the prior fiscal year. The decrease was led by Coronary and Renal Denervation with market procedural volumes remaining below pre-COVID levels in several major markets and headwinds related to U.S. hospital contrast shortages early in the quarter. Peripheral Vascular Health also experienced a decrease in net sales for the three months ended July 29, 2022 due to competitors re-entering the market and supply chain challenges.

In addition to the macro-economic and geopolitical factors described in the Executive Level Overview, looking ahead, we expect Cardiovascular could be affected by the following:

• Continued growth of our Micra transcatheter pacing system. The Micra AV launched in Japan in November 2021 and received approval in China in May 2022. Micra AV expands the Micra target population from 15 percent to 45 percent of pacemaker patients.

• Continued acceptance and growth from the Azure XT and S SureScan pacing systems. Azure pacemakers feature Medtronic-exclusive BlueSync technology, which enables automatic, secure wireless remote monitoring with increased device longevity.

• Growth of the Cobalt and Crome portfolio of ICDs and CRT-Ds.

• Continued acceptance and expansion of the Claria MRI CRT-D system with AdaptivCRT and compatibility with TriageHF technology.

• Continued acceptance and expansion of the LINQ II cardiac monitor. Supply for the LINQ II cardiac monitor is improving as we continue to ramp our wafer scale manufacturing. During the third quarter of fiscal year 2022, we

launched two AccuRhythm AI algorithms on the LINQ II platform to significantly reduce false positive alerts for Atrial Fibrillation and Pause while retaining sensitivity for true positive detection and reduce clinic workload and burden. AccuRhythm AI launched in Europe during the first quarter of fiscal year 2023.

• Growth of the CRT-P quadripolar pacing system.

• Continued growth, adoption, and utilization of the TYRX Envelope for implantable devices.

• Continued growth of Arctic Front cryoablation for treatment of atrial fibrillation.

• Continued acceptance and growth of the self-expanding CoreValve Evolut transcatheter aortic valve replacement platform into intermediate risk indication globally and for the treatment of patients determined to be at low risk with surgery.

• Continued expansion and training of field support to increase coverage in the U.S. centers performing TAVR procedures.

• Continued acceptance and growth from Evolut PRO, which provides industry-leading hemodynamics, reliable delivery, enhanced durability versus SAVR procedures at 5 years, and advanced sealing with an excellent safety profile. In August 2021, the U.S. FDA approved the Evolut FX TAVR, a system enhancement designed to improve the overall procedural experience through enhancements in deliverability, implant visibility and deployment stability. During the third quarter of fiscal year 2022, Evolut PRO received NMPA approval within China.

• Continued acceptance and growth from the VenaSeal Closure System in the U.S. The VenaSeal Closure System is a unique non-thermal solution to address superficial venous disease that provides improved patient comfort, reduces the recovery time, and eliminates the risk of thermal nerve injury.

• Pressure from competitors re-entering the market contributing to the decline in the Abre venous self-expanding stent system. Abre is designed for the unique challenges of venous disease. It offers easy deployment and delivers demonstrated endurance, to give patients freedom of movement.

• Our voluntary recall of the Valiant Navion Thoracic Stent Graft System and our ability to ramp production of our previous generation product, the Valiant Captivia Thoracic Stent Graft System. We are currently ramping production of the Valiant Captivia Thoracic Stent Graft System and plan to reach full production capacity in the second quarter of fiscal year 2023.

• Our ability to successfully develop, obtain regulatory approval of and commercialize the products within our pipeline, which include, but not limited to, the Symplicity Spyral Multi-Electrode Renal Denervation Catheter, Pulse Field Ablation, a novel energy source that is non-thermal and Aurora Extravascular ICD.

Medical Surgical

Medical Surgical’s products span the entire continuum of patient care from diagnosis to recovery, with a focus on diseases of the gastrointestinal tract, lungs, pelvic region, kidneys, obesity, and preventable complications. The products include those for advanced and general surgical products, surgical stapling devices, vessel sealing instruments, wound closure, electrosurgery products, hernia mechanical devices, mesh implants, advanced ablation, interventional lung, ventilators, airway products, renal care products, and sensors and monitors for pulse oximetry, capnography, level of consciousness and cerebral oximetry. Medical Surgical's net sales for the three months ended July 29, 2022 were $2.0 billion, a decrease of 14 percent as compared to the corresponding period in the prior fiscal year. Currency had an unfavorable impact of $115 million on net sales for the three months ended July 29, 2022. The net sales decrease for the three months ended July 29, 2022 was primarily driven by supply chain disruptions, the recent COVID-19 lockdowns and provincial volume-based procurement (VBP) stapling tenders in China, and a decline in ventilator sales due to the high COVID-19 demand in the corresponding period in the prior year.

The graphs below illustrate the percent of Medical Surgical net sales by division for the three months ended July 29, 2022 and July 30, 2021:

Surgical Innovations (SI) net sales for the three months ended July 29, 2022 decreased 14 percent, as compared to the corresponding period in the prior fiscal year. The decrease was led by Advanced Surgical instruments, driven by global supply chain challenges, including resins, semiconductors, and packaging trays, which impacted energy and stapling products, and recent COVID-19 lockdowns in China.

Respiratory, Gastrointestinal, & Renal (RGR) net sales for the three months ended July 29, 2022 decreased 14 percent as compared to the corresponding period in the prior fiscal year. The decrease was largely due to declines in ventilator demand when compared to the corresponding period in the prior year as demand dropped below pre-pandemic levels as expected.

In addition to the macro-economic and geopolitical factors described in the Executive Level Overview, looking ahead we expect Medical Surgical could be affected by the following:

• Acceptance and continued growth of Open-to-MIS (minimally invasive surgery) techniques and tools through our efforts to transition open surgery to MIS. Open-to-MIS initiative focuses on capturing the market opportunity that exists in transitioning open procedures to MIS, whether through traditional MIS, advanced instrumentation, or robotics. Through our approach, in parallel, we also expand our presence and optimize open surgery in current open surgery markets.

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

• Our ability to execute ongoing strategies addressing the competitive pressure of reprocessing vessel sealing disposables and growth of our surgical soft tissue robotics procedures in the U.S.

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

• Continued elevation of the standard of care for respiratory compromise, leveraging our market leading MicroStream capnography technology.

• Continued acceptance and growth in patient monitoring, airway, and ventilation management. Key products in this area include the Puritan Bennett 980 ventilator, Microstream Capnography, Nellcor pulse oximetry system with OxiMax technology, Shiley tracheostomy and endotracheal tubes, McGRATH MAC video laryngoscopes, SonarMed Airway Monitoring System for the NICU, and the Nellcor Oxysoft pulse oximetry system for neonatal and adult critical care patients, which received U.S. FDA clearance during the fourth quarter of fiscal year 2022.

• Acceptance of less invasive standards of care in Gastrointestinal and Hepatology products, including GI Diagnostic and Therapeutic product lines. Recently launched products include the PillCam COLON capsule endoscopy, the Barrx platform through ablation with the Barrx 360 Express catheter, Endoflip imaging systems, Bravo Calibration-free reflux testing, and the Emprint ablation system with Thermosphere Technology.

• Continued and future acceptance of Interventional Lung Solutions. Products include our Illumisite navigation platform, combined with our portfolio of biopsy tools including the Arcpoint pulmonary needle, and to access lesions outside the airway, the CrossCountry transbronchial access tool. This comprehensive portfolio gives the power to display position and access lung nodules in the periphery of the lungs, in a minimally invasive approach to accessing difficult-to-reach areas of the lung, which may aid in the diagnosis of lung cancer.

• Expanding the use of less invasive treatments and furthering our commitment to improving options for women with abnormal uterine bleeding. Our expanded and strengthened surgical offerings complement our global gynecology business.

• Global adoption of robotic-assisted surgery and installations of Hugo robotic assisted surgery (RAS) system for urologic, bariatric, gynecologic, and general surgery procedures. This includes continued integration and adoption of Touch Surgery Enterprise with the first artificial intelligence powered surgical videos and analytics platform to make it easier to train and discover new techniques within the robotics platform. The Hugo RAS system, which received CE Mark in October 2021, as well as secured additional regulatory approvals outside the U.S., is designed to help reduce unwanted variability, improve patient outcomes, and, by extension, lower per procedure cost.

• The pending contribution of our Renal Care Solutions business as a result of the May 25, 2022 definitive agreement with DaVita Inc.

• Our ability to successfully develop, obtain regulatory approval of and commercialize the products within our pipeline, which include, but are not limited to, our Hugo RAS system in the U.S., our NextGen McGrath MAC video laryngoscopes, Signia power stapling devices, and our Ligasure and Sonicision vessel sealing devices.

Neuroscience

Neuroscience's products include various spinal implants, bone graft substitutes, biologic products, image-guided surgery and intra-operative imaging systems, robotic guidance systems used in the robot-assisted spine procedures, and systems that incorporate advanced energy surgical instruments. Neuroscience's products also focus on the treatment of overactive bladder, urinary retention, fecal incontinence, as well as products to treat ear, nose, and throat (ENT), and therapies to treat the diseases of the vasculature in and around the brain, including coils, neurovascular stents and flow diversion products. Neuroscience also manufactures products related to implantable neurostimulation therapies and drug delivery systems for the treatment of chronic pain, movement disorders, and epilepsy. Neuroscience’s net sales for the three months ended July 29, 2022 was $2.1 billion, a decrease of 4 percent, compared to the corresponding period in the prior fiscal year. Currency had an unfavorable impact of $64 million on net sales for the three months ended July 29, 2022. The net sales decrease for the three months ended July 29, 2022, was primarily due to supply chain challenges in certain businesses, prolonged purchasing timelines for large capital, and reduced Spinal sales in China in advance of potential national VBP tenders and COVID-19 lockdowns.

The graphs below illustrate the percent of Neuroscience net sales by division for the three months ended July 29, 2022 and July 30, 2021:

Cranial and Spinal Technologies (CST) net sales for the three months ended July 29, 2022 decreased 7 percent, as compared to the corresponding period in the prior fiscal year. Neurosurgery experienced decreases in large capital sales of StealthStation Navigation, and Spine and Cranial Robotics from prolonged customer purchasing timelines. Additionally, Biologics saw decreases in customer ordering patterns when compared to the corresponding period in the prior year.

Specialty Therapies (Specialty) net sales for the three months ended July 29, 2022 increased 4 percent, as compared to the corresponding period in the prior fiscal year. The increase was driven by growth in Neurovascular led by hemorrhagic and ischemic stroke, flow diversion and access delivery products. ENT growth for the three months ended July 29, 2022, including benefit from the recent May 2022 acquisition of Intersect ENT, partially offset by declines driven by supply chain disruptions in disposables. For the three months ended July 29, 2022, Pelvic Health experienced net sales declines due to recent competitive launches.

Neuromodulation (NM) net sales for the three months ended July 29, 2022 decreased 8 percent, as compared to the corresponding period in the prior fiscal year. For the three months ended July 29, 2022, declines were largely due to healthcare staffing challenges impacting spinal cord stimulation implant volumes, continued supply chain challenges in interventional, and difficult year-over-year comparisons in targeted drug delivery due to backlog recovery in the prior year comparative period.

In addition to the general impacts of COVID-19 on our Company as described in the Executive Level Overview, looking ahead we expect Neuroscience could be affected by the following:

• Continued growth from enabling technologies, including StealthStation and O-arm Imaging Systems, Midas, and ENT Navigation and Power Systems, as well as acceptance of the Stealth Autoguide cranial robotic guidance platform.

• Continued sales of Mazor robotic units and associated market adoption of robot-assisted spine procedures, including the Mazor X Stealth, our integrated robotics and navigation platform.

• Continued growth from spine titanium interbody implants.

• Continued adoption of our integrated solutions through the Surgical Synergy strategy which integrates our spinal implants with enabling technologies such as imaging, navigation, power instruments, nerve monitoring, and Mazor robotics, as well as AI-driven surgical planning, personalized spinal implants, and robot-assisted surgery due to the newly acquired Medicrea technologies.

• Market acceptance and continued global adoption of innovative new spine products and procedural solutions within our CST division, such as our Infinity OCT System and Prestige LP cervical disc system.

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

• Continued acceptance and growth of our ENT and Pelvic Health therapies within our Specialty Therapies division, including our InterStim therapy with InterStim II, InterStim Micro and InterStim X neurostimulators for the treatment of the symptoms of overactive bladder, urinary retention, and bowel incontinence, and capital equipment sales of the Stealth Station ENT surgical navigation system and intraoperative NIM nerve monitoring system.

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

• Continued acceptance of our React Catheter and Riptide aspiration system, along with our next-generation Solitaire revascularization device.

• Market acceptance and continued global adoption of our Intellis spinal cord stimulator, DTM proprietary waveform, Evolve workflow algorithm, and Snapshot reporting to treat chronic pain in major markets around the world.

• Continued acceptance and growth of our Percept PC DBS device with BrainSense technology, including its treatment of Parkinson's Disease, epilepsy, and other movement disorders.

• Market acceptance and growth from SCS therapy for treating Diabetic Peripheral Neuropathy (DPN) on Intellis rechargeable neurostimulator and Vanta recharge-free neurostimulator which received U.S. FDA approval in January 2022.

• Ongoing obligations under the U.S. FDA consent decree entered in April 2015 relating to the SynchroMed drug infusion system and the Neuromodulation quality system. The U.S. FDA lifted its distribution requirements on our implantable drug pump in October 2017 and its warning letter in November 2017.

• Strengthening our position in the ear, nose and throat market as a result of the May 2022 acquisition of Intersect ENT, a global ear, nose and throat (ENT) medical technology leader. The acquisition expands Neuroscience's portfolio of products used during ENT procedures and, combined with the Company's navigation, powered instruments, and existing tissue health products, will offer a broader suite of solutions to assist surgeons treating patients who suffer from chronic rhinosinusitis (CRS).

• Our ability to successfully develop, obtain regulatory approval of and commercialize the products within our pipeline, which include our closed-loop Percept PC and RC devices with adaptive DBS (aDBS) within Neuromodulation, as well as our hemorrhagic stroke intravascular device within Specialty Therapies, and our next-generation spine enabling technologies within CST.

Diabetes

Diabetes' products include insulin pumps, continuous glucose monitoring (CGM) systems, consumables, and smart insulin pen systems. Diabetes' net sales for the three months ended July 29, 2022 were $541 million, a decrease of 5 percent as compared to the corresponding period in the prior fiscal year. Currency had an unfavorable impact of $33 million on net sales for the three months ended July 29, 2022. Diabetes' net sales were impacted by international growth in integrated CGM with offsetting declines in the durable pump business worldwide.

In addition to the macro-economic and geopolitical factors described in the Executive Level Overview, looking ahead we expect Diabetes could be affected by the following:

• Continued patient demand for the MiniMed 770G insulin pump system, which is powered by SmartGuard technology and features the added benefits of smartphone connectivity and an expanded age indication to children as young as age two.

• Continued acceptance and growth internationally for the MiniMed 780G insulin pump system. The global adoption of sensor-augmented insulin pump systems has resulted in strong sensor attachment rates.

• Continued acceptance and growth of the Guardian Connect CGM system, which displays glucose information directly to a smartphone to help ensure patients have access to their glucose levels seamlessly and discretely. The Guardian Connect CGM system is available on both Apple iOS and Android devices.

• Market acceptance and growth of our InPen smart pen system, which allows users to have their Medtronic CGM readings in real-time alongside insulin dose information, all in one view.

• Continued pump and CGM competition in an expanding global market.

• Changes in medical reimbursement policies and programs, along with additional payor coverage on insulin pumps.

• Resolution of findings contained in a December 2021 U.S. FDA warning letter relating to the MiniMed 600 series insulin pump and a remote controller device for MiniMed 508 and Paradigm pumps. We are currently working with the U.S. FDA to resolve the findings. The existence of the warning letter may limit our ability to launch certain new Diabetes products in the U.S. prior to resolution of the findings.

• Our ability to successfully develop, obtain regulatory approval of and commercialize the products within our pipeline, which include, but are not limited to, our MiniMed 780G insulin pump and the Guardian 4 sensor, which have been submitted to the U.S. FDA.

COSTS AND EXPENSES

The following is a summary of cost of products sold, research and development, and selling, general, and administrative expenses as a percent of net sales for the three months ended July 29, 2022 and July 30, 2021:

Cost of Products Sold We continue to focus on reducing our costs of production through supplier management, manufacturing improvements, and optimizing our manufacturing network. Cost of products sold for the three months ended July 29, 2022 was $2.5 billion, as compared to $2.6 billion for the corresponding period in the prior fiscal year. The increase in cost of products sold as a percentage of net sales was primarily attributable to increased freight, largely due to higher fuel costs and expedited shipments for backorders as a result of certain supply chain challenges, as well as increased labor and direct material manufacturing costs, predominantly due to inflationary pressures and supply chain challenges. The three months ended July 30, 2021 included $58 million of inventory write-downs associated with our June 2021 decision to stop the distribution and sale of Medtronic's HVAD System (MCS charges). Looking forward, our cost of products sold likely will be further negatively impacted by inflation, supply chain challenges, and higher labor and direct material costs.

Research and Development Expense We remain committed to deliver the best possible experiences for patients, physicians, and caregivers we serve; to create technologies that expand what’s possible across the entire human body to transform lives; to turn data and insights into real action to serve patient needs to improve care; and to expand healthcare access and deliver positive outcomes. Research and development expense for the three months ended July 29, 2022 was $692 million, as compared to $750 million for the corresponding period in the prior fiscal year. The three months ended July 30, 2021 included $90 million of acquisitions of, and license payments for, technology not yet approved by regulators, primarily in our Diabetes segment.

Selling, General, and Administrative Expense Our goal is to continue to leverage selling, general, and administrative expense initiatives. Selling, general, and administrative expense primarily consists of salaries and wages, other administrative costs, such as professional fees and marketing expenses, and certain acquisition and restructuring expenses. Selling, general, and administrative expense for the three months ended July 29, 2022 was $2.6 billion, as compared to $2.5 billion for the corresponding period in the prior fiscal year. The increase in selling, general, and administrative expense as a percentage of net sales was primarily driven by net sales declines and increased employee travel as compared to the corresponding period in the prior year when travel was limited.

The following is a summary of other costs and expenses (income):

			Three months ended
(in millions)			July 29, 2022						July 30, 2021
Amortization of intangible assets			$	423					$	436
Restructuring charges, net			14						11
Certain litigation charges, net			—						26
Other operating expense, net			35						760
Other non-operating income, net			(83)						(111)
Interest expense			164						137

Amortization of Intangible Assets Amortization of intangible assets includes the amortization expense of our definite-lived intangible assets, consisting of purchased patents, trademarks, tradenames, customer relationships, purchased technology, and other intangible assets.

Restructuring Charges, Net

Enterprise Excellence

In the third quarter of fiscal year 2018, we announced a multi-year global Enterprise Excellence Program designed to drive long-term business growth and sustainable efficiency. Further program details are described in Note 4 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended April 29, 2022.

Since inception, the Company has incurred pre-tax exit and disposal costs and other costs, across all segments, of $1.6 billion in connection with the Enterprise Excellence program. In total, the Company estimates it will recognize approximately $1.8 billion of exit and disposal costs and other costs related to the Enterprise Excellence program, the majority of which are expected to be incurred by the end of this fiscal year.

For the three months ended July 29, 2022, we recognized net charges of $40 million associated with our Enterprise Excellence Program*.* Net charges for the three months ended July 29, 2022 included costs incurred as a direct result of the restructuring program, such as salaries for employees supporting the program and consulting expenses, including $19 million recognized within cost of products sold and $28 million recognized within selling, general, and administrative expense in the consolidated statements of income. Charges recognized within restructuring charges, net for the period were not significant.

For the three months ended July 30, 2021, we recognized net charges of $74 million associated with our Enterprise Excellence Program, including $11 million recognized within restructuring charges, net in the consolidated statements of income primarily comprised of employee termination benefits. Net charges for the three months ended July 30, 2021 also included costs incurred as a direct result of the restructuring program, such as salaries for employees supporting the program and consulting expenses, including $33 million recognized within cost of products sold, and $30 million recognized within selling, general and administrative expense in the consolidated statements of income.

Simplification

In the first quarter of fiscal year 2021, we initiated our Simplification restructuring program, designed to make the Company a more nimble and competitive organization. Further program details are described in Note 4 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended April 29, 2022.

Since inception, the Company has incurred pre-tax exit and disposal costs and other costs, across all segments, of $385 million in connection with the Simplification program. In total, the Company estimates it will recognize approximately $450 million of exit and disposal costs and other costs related to the Simplification program, the majority of which are expected to be incurred by the end of this fiscal year.

For the three months ended July 29, 2022, we recognized net charges of $36 million including $21 million recognized within restructuring charges, net in the consolidated statements of income primarily comprised of employee termination benefits. Net charges for the three months ended July 29, 2022 also included costs incurred as a direct result of the restructuring program, such as salaries for employees supporting the program and consulting expenses, including $13 million recognized within selling, general and administrative expense in the consolidated statements of income.

For the three months ended July 30, 2021, we recognized net charges of $7 million which included costs incurred as a direct result of the restructuring program, such as salaries for employees supporting the program and consulting expenses. These charges were recognized within selling, general and administrative expense in the consolidated statements of income.

For additional information about our restructuring programs, refer to Note 5 to the current period's consolidated financial statements.

Certain Litigation Charges, Net We classify specified certain litigation charges and gains related to significant legal matters as certain litigation charges in the consolidated statements of income. For additional information, refer to Note 16 in the current period's consolidated financial statements.

Other Operating Expense, Net Other operating expense, net primarily includes royalty income and expense, currency remeasurement and derivative gains and losses, Puerto Rico excise taxes, changes in the fair value of contingent consideration, MCS charges, impairment charges, and income from funded research and development arrangements.

For the three months ended July 29, 2022, the change in other operating expense, net was primarily driven by MCS charges recorded during three months ended July 30, 2021. The charges of $668 million primarily included $409 million of intangible asset impairments and $211 million for commitments and obligations, including customer support obligations, restructuring, and other associated costs. Additionally, the change is driven by the net currency impact of remeasurement expense and our hedging programs, which resulted in a net gain of $81 million combined for the three months ended July 29, 2022 as compared to a net loss of $33 million for the corresponding period in the prior year. During the three months ended July 29, 2022, the Company also recorded non-cash pre-tax impairments of $67 million, primarily related to goodwill, as a result of the anticipated sale of half of the Company's RCS business, related to the May 25, 2022 agreement with DaVita Inc.

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

For the three months ended July 29, 2022, the decrease in other non-operating income, net is primarily attributable to reduced gains on our equity method and minority investment portfolios partially offset by an increase in interest income. Gains on equity method and minority investments were $4 million and $43 million for the three months ended July 29, 2022 and July 30, 2021, respectively. Interest income was $55 million and $43 million for the three months ended July 29, 2022 and July 30, 2021, respectively.

Interest Expense Interest expense includes interest incurred on our outstanding borrowings, amortization of debt issuance costs and debt premiums or discounts, amortization of amounts excluded from the effectiveness assessment of certain net investment hedges, and charges recognized in connection with the early redemption of senior notes. The increase in interest expense was primarily due to the $53 million charge incurred as a result of the early redemption of approximately $2.3 billion of senior notes during the three months ended July 29, 2022.

INCOME TAXES

			Three months ended
(in millions)			July 29, 2022						July 30, 2021
Income tax provision			$	112					$	64
Income before income taxes			1,044						833
Effective tax rate			10.7		%				7.7		%
Non-GAAP income tax provision			$	230					$	269
Non-GAAP income before income taxes			1,734						2,111
Non-GAAP Nominal Tax Rate			13.3		%				12.7		%
Difference between the effective tax rate and Non-GAAP Nominal Tax Rate			2.6		%				5.0		%

Our effective tax rate for the three months ended July 29, 2022 was 10.7%, as compared to 7.7% for the three months ended July 30, 2021. The increase in our effective tax rate was primarily due to the tax impact of MCS charges in the three months ended July 30, 2021, partially offset by a $39 million charge in the three months ended July 30, 2021 related to a change in the Company’s permanent reinvestment assertion on certain historical earnings. The increase was also partially offset by a $25 million benefit in the three months ended July 29, 2022 related to a valuation allowance release associated with certain carryover attributes due to the anticipated RCS transaction, as discussed in Note 4 to the current period's consolidated financial statements.

Our Non-GAAP Nominal Tax Rate for the three months ended July 29, 2022 was 13.3%, as compared to 12.7% for the three months ended July 30, 2021. The increase in our Non-GAAP Nominal Tax Rate was primarily due to the decrease in the stock-based compensation benefit and the impact of year-over-year changes in operational results by jurisdiction. An increase in our Non-GAAP Nominal Tax Rate of 1 percent would result in an additional income tax provision for the three months ended July 29, 2022 of approximately $17 million.

Subsequent to the quarter close on July 29, 2022, on August 18, 2022 the U.S. Tax Court (Tax Court) issued its opinion on the previously disclosed litigation regarding the allocation of income between Medtronic, Inc. and its wholly-owned subsidiary operating in Puerto Rico for fiscal years 2005 and 2006 (Opinion). While the Opinion rejected the IRS’s position and the Tax Court determined the methodology advanced by Medtronic was appropriate for purposes of determining the intercompany royalty rate between Puerto Rico and the U.S., it determined that the royalty rate should be higher, thereby increasing income allocated to the U.S. and consequently subject to U.S. tax. This case relates only to fiscal years 2005 and 2006. The Opinion remains subject to finalization by the Tax Court and to appeal by either or both parties. At this time, the Company is evaluating the impact of the Opinion and whether the Company will appeal. If the Opinion is finalized as is, without appeal by either party, the Company anticipates the findings will likely be applied for all years following fiscal year 2006. Under this potential scenario, the Company has currently estimated a potential income tax charge, including interest, of up to $2.0 billion, which would result in a future cash payment of up to $2.5 billion and no material impact to the Company’s tax rate going forward. The impact of this potential scenario was contemplated in the Company's fiscal year 2023 adjusted earnings per share guidance reiterated on August 23, 2022.

LIQUIDITY AND CAPITAL RESOURCES

We are currently in a strong financial position, and we believe our balance sheet and liquidity as of July 29, 2022 provide us with flexibility, and our cash, cash equivalents, and current investments, along with our credit facility and related commercial paper programs will satisfy our foreseeable operating needs.

Our liquidity and capital structure are evaluated regularly within the context of our annual operating and strategic planning processes. We consider the liquidity necessary to fund our operations, which includes working capital needs, investments in research and development, property, plant, and equipment, and other operating costs. We also consider capital allocation alternatives that balance returning value to shareholders through dividends and share repurchases, satisfying maturing debt, and acquiring businesses and technology.

Summary of Cash Flows

The following is a summary of cash provided by (used in) operating, investing, and financing activities, the effect of exchange rate changes on cash and cash equivalents, and the net change in cash and cash equivalents:

			Three months ended
(in millions)			July 29, 2022						July 30, 2021
Cash provided by (used in):
Operating activities			$	1,083					$	1,292
Investing activities			(1,585)						(784)
Financing activities			(950)						(1,055)
Effect of exchange rate changes on cash and cash equivalents			(122)						(42)
Net change in cash and cash equivalents			$	(1,574)					$	(589)

Operating Activities The $209 million decrease in net cash provided was primarily driven by a decrease in cash collected from customers, partially offset by a decrease in cash paid to employees. The decrease in cash collected from customers was primarily related to supply chain challenges, which caused lower net sales as compared to the corresponding period in the prior fiscal year. Cash paid to employees decreased due to lower annual incentive plan payouts for prior year performance compared to the corresponding period in the prior fiscal year.

Investing Activities The $801 million increase in cash used was primarily attributable to cash paid for acquisitions of $1.2 billion, partially offset by a decrease in net purchases of investments of $332 million, as compared to the corresponding period in the prior fiscal year. For more information on the aforementioned acquisitions, refer to Note 4 to the current's period's consolidated financial statements.

Financing Activities There was a $105 million decrease in net cash used during the three months ended July 29, 2022, as compared to the corresponding period in the prior fiscal year. In the current period, the Company issued short-term borrowings of approximately $2.3 billion under the Fiscal 2023 Loan Agreement and used the proceeds to fund the early redemption of senior notes for total consideration of $2.3 billion. Also contributing to the total change was the decrease in share issuances of $68 million and increase in dividends paid of $57 million. For more information on the issuance of the Term Loan and redemptions of senior notes, refer to the Debt and Capital section.

Debt and Capital

Our capital structure consists of equity and interest-bearing debt. We primarily utilize unsecured senior debt obligations to meet our financing needs and, to a lesser extent, bank borrowings. From time to time, we may repurchase our outstanding debt obligations in the open market or through privately negotiated transactions.

Total debt at July 29, 2022 was $23.2 billion as compared to $24.1 billion at April 29, 2022. The decrease in total debt was driven by fluctuations in exchange rates as it pertains to our Euro-denominated senior notes.

On May 2, 2022, we entered into a term loan agreement (Fiscal 2023 Loan Agreement) with Mizuho Bank, Ltd. for an aggregate principal amount of up to ¥300 billion with a term of 364 days. In May and June 2022, Medtronic Luxco borrowed an aggregate of ¥297 billion, or approximately $2.3 billion, of the term loan, under the Fiscal 2023 Loan Agreement. The Company used the net proceeds of the borrowings to fund the early redemption of $1.9 billion of Medtronic Inc. Senior Notes for $1.9 billion of total consideration, and $368 million of Medtronic Luxco Senior Notes for $376 million of total consideration. The Company recognized a total loss on debt extinguishment of $53 million in the quarter ended July 29, 2022, which primarily includes cash premiums and accelerated amortization of deferred financing costs and debt discounts and premiums. The loss was recognized in interest expense in the consolidated statements of income.

We repurchase our ordinary shares on occasion as part of our focus on returning value to our shareholders. In March 2019, the Company's Board of Directors authorized the repurchase of $6.0 billion of the Company's ordinary shares. There is no specific time period associated with these repurchase authorizations. During the three months ended July 29, 2022, the Company repurchased a total of 3 million shares under this program at an average price of $96.48. At July 29, 2022, we had approximately $2.6 billion remaining under the share repurchase program authorized by our Board of Directors.

For more information on credit arrangements, refer to Note 7 to the current period's consolidated financial statements and Note 6 to the consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended April 29, 2022.

Liquidity

Our liquidity sources at July 29, 2022 included $2.1 billion of cash and cash equivalents and $6.7 billion of current investments. Additionally, we maintain commercial paper programs and a Credit Facility.

Our investments primarily include available-for-sale debt securities, including U.S. and non-U.S. government and agency securities, corporate debt securities, mortgage-backed securities, certificates of deposits, and other asset-backed securities. Refer to Note 6 to the current period's consolidated financial statements for additional information regarding fair value measurements.

We maintain multicurrency commercial paper programs for short-term financing, which allow us to issue unsecured commercial paper notes on a private placement basis up to a maximum aggregate amount outstanding at any time of $3.5 billion. At both July 29, 2022 and April 29, 2022, we had no commercial paper outstanding. The issuance of commercial paper reduces the amount of credit available under our existing line of credit, as explained below.

We also have a $3.5 billion five-year syndicated credit facility (Credit Facility), which expires in December 2026. At each anniversary date of the Credit Facility we can request a one-year extension of the maturity date. The Credit Facility provides backup funding for the commercial paper programs and may also be used for general corporate purposes. The Credit Facility provides us with the ability to increase our borrowing capacity by an additional $1.0 billion at any time during the term of the agreement. At July 29, 2022 and April 29, 2022, no amounts were outstanding under the Credit Facility.

Interest rates on advances of our Credit Facility are determined by a pricing matrix based on our long-term debt ratings assigned by Standard & Poor's Ratings Services (S&P) and Moody's Investors Service (Moody’s). Facility fees are payable on the Credit Facility and are determined in the same manner as the interest rates. We are in compliance with all covenants related to the Credit Facility.

The following table is a summary of our S&P and Moody's long-term debt ratings and short-term debt ratings:

						Agency Rating**(1)**
						July 29, 2022						April 29, 2022
Standard & Poor's Ratings Services
Long-term debt						A						A
Short-term debt						A-1						A-1
Moody's Investors Service
Long-term debt						A3						A3
Short-term debt						P-2						P-2

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

S&P and Moody's long-term debt ratings and short-term debt ratings at July 29, 2022 were unchanged as compared to the ratings at April 29, 2022. We do not expect the S&P and Moody's ratings to have a significant impact on our liquidity or future flexibility to access additional liquidity given our balance sheet, Credit Facility, and related commercial paper programs.

We have future contractual obligations and other minimum commercial commitments that are entered into in the normal course of business. We believe our off-balance sheet arrangements do not have a material current or anticipated future effect on our consolidated earnings, financial position, and/or cash flows. There have been no material changes to our long-term contractual obligations as reported in our most recent Annual Report filed on Form 10-K for the fiscal year ended April 29, 2022.

ACQUISITIONS

Information regarding acquisitions is included in Note 4 to the current period's consolidated financial statements.

CRITICAL ACCOUNTING ESTIMATES

We have used various accounting policies to prepare the consolidated financial statements in accordance with U.S. GAAP. Our significant accounting policies are disclosed in Note 1 to the consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended April 29, 2022.

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

As of July 29, 2022, there were no material changes to our critical accounting estimates.

NEW ACCOUNTING PRONOUNCEMENTS

Information regarding new accounting pronouncements is included in Note 2 to the current period's consolidated financial statements.

SUPPLEMENTAL 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 tables present summarized results of operations for the three months ended July 29, 2022 and summarized balance sheet information at July 29, 2022 and April 29, 2022 for the obligor groups of Medtronic and Medtronic Luxco Senior Notes, and CIFSA Senior Notes. The obligor group consists of the parent company guarantor, subsidiary issuer, and subsidiary guarantors for the applicable senior notes. The summarized financial information is presented after elimination of (i) intercompany transactions and balances among the guarantors and issuers and (ii) equity in earnings from and investments in any subsidiary that is a non-guarantor or issuer.

The summarized results of operations information for the three months ended July 29, 2022 was as follows:

(in millions)			Medtronic & Medtronic Luxco Senior Notes (1)						CIFSA Senior Notes (2)
Net sales			$	589					$	—
Operating profit (loss)			(141)						(15)
Loss before income taxes			(423)						(253)
Net loss attributable to Medtronic			(328)						(251)

The summarized balance sheet information at July 29, 2022 was as follows:

(in millions)			Medtronic & Medtronic Luxco Senior Notes (1)						CIFSA Senior Notes (2)
Total current assets(3)			$	17,225					$	7,393
Total noncurrent assets(4)			12,135						8,394
Total current liabilities(5)			35,386						26,478
Total noncurrent liabilities(6)			46,315						59,163
Noncontrolling interests			170						170

(1)The Medtronic Senior Notes and Medtronic Luxco Senior Notes obligor group consists of the following entities: Medtronic plc, Medtronic Luxco, and Medtronic, Inc. Refer to the guarantee summary above for further details.

(2)The CIFSA Senior Notes obligor group consists of the following entities: Medtronic plc, Medtronic Luxco, CIFSA, and CIFSA Subsidiary Guarantors. Refer to the guarantee summary above for further details.

(3)Includes receivables due from non-guarantor subsidiaries of $16.4 billion and $7.1 billion for Medtronic & Medtronic Luxco Senior Notes, and CIFSA Senior Notes, respectively.

(4)Includes loans receivable due from non-guarantor subsidiaries of $6.5 billion and $8.4 billion for Medtronic & Medtronic Luxco Senior Notes, and CIFSA Senior Notes, respectively.

(5)Includes payables due to non-guarantor subsidiaries of $27.0 billion and $20.1 billion for Medtronic & Medtronic Luxco Senior Notes, and CIFSA Senior Notes, respectively.

(6)Includes loans payable due to non-guarantor subsidiaries of $27.6 billion and $46.3 billion for Medtronic & Medtronic Luxco Senior Notes, and CIFSA Senior Notes, respectively.

The summarized balance sheet information at April 29, 2022 was as follows:

(in millions)			Medtronic & Medtronic Luxco Senior Notes (1)						CIFSA Senior Notes (2)
Total current assets(3)			$	20,767					$	6,881
Total noncurrent assets(4)			12,099						8,293
Total current liabilities(5)			32,647						24,302
Total noncurrent liabilities(6)			50,542						60,292
Noncontrolling interests			171						171

(1)The Medtronic Senior Notes and Medtronic Luxco Senior Notes obligor group consists of the following entities: Medtronic plc, Medtronic Luxco, and Medtronic, Inc. Refer to the guarantee summary above for further details.

(2)The CIFSA Senior Notes obligor group consists of the following entities: Medtronic plc, Medtronic Luxco, CIFSA, and CIFSA Subsidiary Guarantors. Refer to the guarantee summary above for further details.

(3)Includes receivables due from non-guarantor subsidiaries of $20.2 billion and $6.9 billion for Medtronic & Medtronic Luxco Senior Notes, and CIFSA Senior Notes, respectively.

(4)Includes loans receivable due from non-guarantor subsidiaries of $6.5 billion and $8.3 billion for Medtronic & Medtronic Luxco Senior Notes, and CIFSA Senior Notes, respectively.

(5)Includes payables due to non-guarantor subsidiaries of $26.4 billion and $20.2 billion for Medtronic & Medtronic Luxco Senior Notes, and CIFSA Senior Notes, respectively.

(6)Includes loans payable due to non-guarantor subsidiaries of $29.0 billion and $46.4 billion for Medtronic & Medtronic Luxco Senior Notes, and CIFSA Senior Notes, respectively.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, and other written reports and oral statements made by or with the approval of one of the Company’s executive officers from time to time, may include “forward-looking” statements. All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, business strategy and plans, objectives of management for future operations and current expectations or forecasts of future results, are forward-looking statements. These statements involve known and unknown risks, uncertainties, and other important factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. Our forward-looking statements may include statements related to our growth and growth strategies, developments in the markets for our products, therapies and services, financial results, product development launches and effectiveness, research and development strategy, regulatory approvals, competitive strengths, the potential or anticipated direct or indirect impact of COVID-19 on our business, results of operations, and/or financial condition, restructuring and cost-saving initiatives, intellectual property rights, litigation and tax matters, governmental proceedings and investigations, mergers and acquisitions, divestitures, market acceptance of our products, therapies and services, accounting estimates, financing activities, ongoing contractual obligations, working capital adequacy, value of our investments, our effective tax rate, our expected returns to shareholders, and sales efforts. In some cases, such statements may be identified by the use of terminology such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “intend,” “looking ahead,” “may,” “plan,” “possible,” “potential,” “project,” “should,” “will,” and similar words or expressions. Forward-looking statements in this Quarterly Report include, but are not limited to, statements regarding our ability to drive long-term shareholder value, development and future launches of products and continued or future acceptance of products, therapies and services in our segments; expected timing for completion of research studies relating to our products; market positioning and performance of our products, including stabilization of certain product markets; divestitures and the potential benefits thereof; the costs and benefits of integrating previous acquisitions; anticipated timing for United States (U.S.) Food and Drug Administration (U.S. FDA) and non-U.S. regulatory approval of new products; increased presence in new markets, including markets outside the U.S.; changes in the market and our market share; acquisitions and investment initiatives, including the timing of regulatory approvals as well as integration of acquired companies into our operations; the resolution of tax matters; the effectiveness of our development activities in reducing patient care costs and hospital stay lengths; our approach towards cost containment; our expectations regarding healthcare costs, including potential changes to reimbursement policies and pricing pressures; our expectations regarding changes to patient standards of care; our ability to identify and maintain successful business partnerships; the elimination of certain positions or costs related to restructuring initiatives; outcomes in our litigation matters and governmental proceedings and investigations; general economic conditions; the adequacy of available working capital and our working capital needs; our payment of dividends and redemption of shares; the continued strength of our balance sheet and liquidity; our accounts receivable exposure; and the potential impact of our compliance with governmental regulations and accounting guidance.

We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, results of operations, financial condition, and/or cash flows. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of risks, uncertainties and assumptions described in the “Risk Factors” section and elsewhere in our Annual Report on Form 10-K. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. One must carefully consider forward-looking statements and understand that such forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, and involve a variety of risks and uncertainties, known and unknown, including, among others, those discussed in the sections entitled “Government Regulation” within “Item 1. Business” and “Item 1A. Risk Factors” in our Annual Report on Form 10-K, as well as those related to:

• competition in the medical device industry;

• delays in regulatory approvals;

• the global COVID-19 pandemic, including new COVID-19 variants that may emerge, as well as impacts of the pandemic on healthcare staffing levels;

• reduction or interruption in our supply;

• failure to complete or achieve the intended benefits of acquisitions or divestitures;

• adverse regulatory action;

• laws and governmental regulations;

• litigation results;

• quality problems;

• healthcare policy changes;

• cybersecurity incidents;

• international operations, including the impact of armed conflicts;

• self-insurance;

• commercial insurance;

• changes in applicable tax rates;

• positions taken by taxing authorities;

• decreasing selling prices and pricing pressure;

• liquidity shortfalls;

• fluctuations in currency exchange rates;

• inflation; or

• disruption of our current plans and operations.

Consequently, no forward-looking statement may be guaranteed, and actual results may vary materially from those projected in the forward-looking statements. We intend to take advantage of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 regarding our forward-looking statements and are including this sentence for the express purpose of enabling us to use the protections of the safe harbor with respect to all forward-looking statements. While we may elect to update these forward-looking statements at some point in the future, whether as a result of any new information, future events, or otherwise, we have no current intention of doing so except to the extent required by applicable law.