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 28, 2023. In addition, you should read this discussion along with our consolidated financial statements and related notes thereto at and for the three and six months ended October 27, 2023. 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 on the following pages, our non-GAAP financial measures exclude the impact of amortization of intangible assets and 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, neurological disorders, spinal conditions and musculoskeletal trauma, urological and digestive disorders, and ear, nose, and throat, and diabetes conditions.

The following is a summary of revenue and diluted earnings per share for the three months ended October 27, 2023 and October 28, 2022, and operating cash flow for the six months ended October 27, 2023 and October 28, 2022:

GAAP to Non-GAAP Reconciliations

The tables below present our GAAP to Non-GAAP reconciliations for the three months ended October 27, 2023 and October 28, 2022:

			Three months ended October 27, 2023
(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			$	1,313					$	402					$	909					$	0.68					30.6		%
Non-GAAP Adjustments:
Amortization of intangible assets			425						65						360						0.27						15.3
Restructuring and associated costs (2)			91						16						76						0.06						17.6
Acquisition and divestiture-related items (3)			58						7						51						0.04						12.1
Certain litigation charges			65						15						50						0.04						23.1
(Gain)/loss on minority investments (4)			25						5						21						0.02						20.0
Medical device regulations (5)			30						6						24						0.02						20.0
Certain tax adjustments, net (6)			—						(176)						176						0.13						—
Non-GAAP			$	2,008					$	339					$	1,667					$	1.25					16.9		%
			Three months ended October 28, 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			$	1,395					$	959					$	427					$	0.32					68.7		%
Non-GAAP Adjustments:
Amortization of intangible assets			421						65						356						0.27						15.4
Restructuring and associated costs (2)			95						19						76						0.06						20.0
Acquisition and divestiture-related items (3)			63						9						55						0.05						404.2
(Gain)/loss on minority investments (4)			(11)						—						(11)						(0.01)						—
Medical device regulations (5)			37						7						30						0.02						18.9
Certain tax adjustments, net (7)			—						(793)						793						0.60						—
Non-GAAP			$	1,999					$	266					$	1,725					$	1.30					13.3		%

(1)The data in this schedule has been intentionally rounded to the nearest million or $0.01 for EPS figures, and, therefore, may not sum.

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

(3)The charges primarily include business combination costs, changes in fair value of contingent consideration, and charges related to the impending separation of the Patient Monitoring and Respiratory Interventions businesses within our Medical Surgical Portfolio.

(4)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.

(5)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.

(6)The charge primarily relates to the establishment of a valuation allowance against certain net operating losses.

(7)The charge primarily relates to a $764 million reserve adjustment that was a direct result of the U.S. Tax Court opinion, issued on August 18, 2022, on the previously disclosed litigation regarding the allocation of income between Medtronic, Inc. and its wholly owned subsidiary operating in Puerto Rico.

The tables below present our GAAP to Non-GAAP reconciliations for the six months ended October 27, 2023 and October 28, 2022:

			Six months ended October 27, 2023
(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			$	2,510					$	802					$	1,700					$	1.28					32.0		%
Non-GAAP Adjustments:
Amortization of intangible assets			855						130						724						0.54						15.2
Restructuring and associated costs (2)			182						30						152						0.11						16.5
Acquisition and divestiture-related items (3)			107						10						97						0.07						9.3
Certain litigation charges			105						24						81						0.06						22.9
(Gain)/loss on minority investments (4)			89						5						85						0.06						5.6
Medical device regulations (5)			62						13						49						0.04						21.0
Certain tax adjustments, net (6)			—						(375)						375						0.28						—
Non-GAAP			$	3,910					$	640					$	3,262					$	2.45					16.4		%
			Six months ended October 28, 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			$	2,438					$	1,072					$	1,356					$	1.02					44.0		%
Non-GAAP Adjustments:
Amortization of intangible assets			844						129						715						0.54						15.3
Restructuring and associated costs (2)			171						35						136						0.10						20.5
Acquisition and divestiture-related items (3)			174						16						157						0.12						38.8
(Gain)/loss on minority investments (4)			(15)						—						(15)						(0.01)						—
Medical device regulations (5)			70						14						56						0.04						20.0
Debt redemption premium and other charges (7)			53						11						42						0.03						20.8
Certain tax adjustments, net (8)			—						(780)						780						0.59						—
Non-GAAP			$	3,733					$	497					$	3,226					$	2.42					13.3		%

(1)The data in this schedule has been intentionally rounded to the nearest million or $0.01 for EPS figures, and, therefore, may not sum.

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

(3)The charges primarily include business combination costs, changes in fair value of contingent consideration, and charges related to the impending separation of the Patient Monitoring and Respiratory Interventions businesses within our Medical Surgical Portfolio. The prior year included non-cash pre-tax impairments, primarily related to goodwill and other associated costs, as a result of the April 1, 2023, sale of half of the Company's Renal Care Solutions (RCS) business.

(4)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.

(5)The charges represent incremental costs of complying with the new European Union 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 period.

(6)The charge relates to an income tax reserve adjustment associated with the June 1, 2023, Israeli Central-Lod District Court decision, the establishment of a valuation allowance against certain net operating losses and amortization of previously established deferred tax assets from intercompany intellectual property transactions.

(7)The charges relate to the early redemption of approximately $2.3 billion of debt and were recorded within interest expense, net within the consolidated statements of income.

(8)The charge primarily relates to a $764 million reserve adjustment that was a direct result of the U.S. Tax Court opinion, issued on August 18, 2022, on the previously disclosed litigation regarding the allocation of income between Medtronic, Inc. and its wholly owned subsidiary operating in Puerto Rico.

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:

			Six months ended
(in millions)			October 27, 2023						October 28, 2022
Net cash provided by operating activities			$	1,536					$	2,005
Additions to property, plant, and equipment			(815)						(749)
Free cash flow			$	721					$	1,256

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

NET SALES

Segment and Division

Prior period revenue has been recast to reflect the new reporting structure, which primarily includes allocating certain prior Medical Surgical businesses to the Other line. Refer to Note 17 to the consolidated financial statements for additional information regarding the Company's new reporting structure. The charts below illustrate the percent of net sales by segment for the three months ended October 27, 2023 and October 28, 2022:

The table below illustrates net sales by segment and division for the three and six months ended October 27, 2023 and October 28, 2022:

			Three months ended																		Six months ended
(in millions)			October 27, 2023						October 28, 2022						% Change						October 27, 2023						October 28, 2022						% Change
Cardiac Rhythm & Heart Failure			$	1,492					$	1,417					5		%				$	2,938					$	2,798					5		%
Structural Heart & Aortic			819						757						8						1,633						1,499						9
Coronary & Peripheral Vascular			613						584						5						1,202						1,163						3
Cardiovascular			2,923						2,759						6						5,773						5,459						6
Cranial & Spinal Technologies			1,157						1,081						7						2,260						2,124						6
Specialty Therapies			705						686						3						1,400						1,353						4
Neuromodulation			426						419						2						846						824						3
Neuroscience			2,288						2,186						5						4,506						4,301						5
Surgical & Endoscopy			1,641						1,513						9						3,187						2,968						7
Patient Monitoring & Respiratory Interventions			501						489						3						994						967						3
Medical Surgical			2,142						2,002						7						4,181						3,935						6
Diabetes			610						556						10						1,189						1,098						8
Other(1)			22						82						(73)						37						162						(77)
Total			$	7,984					$	7,585					5		%				$	15,686					$	14,955					5		%

(1) Includes revenue from the divested Renal Care Solutions business and Transition Manufacturing Agreements from previously divested businesses.

Segment and Market Geography

The charts below illustrate the percent of net sales by market geography for the three months ended October 27, 2023 and October 28, 2022:

The table below includes net sales by market geography for each of our segments for the three and six months ended October 27, 2023 and October 28, 2022:

			U.S.****(1)																		Non-U.S. Developed Markets**(2)**																		Emerging Markets**(3)**
			Three months ended																		Three months ended																		Three months ended
(in millions)			October 27, 2023						October 28, 2022						% Change						October 27, 2023						October 28, 2022						% Change						October 27, 2023						October 28, 2022						% Change
Cardiovascular			$	1,427					$	1,410					1		%				$	912					$	802					14		%				$	584					$	546					7		%
Neuroscience			1,560						1,512						3						399						382						4						329						292						13
Medical Surgical			963						895						8						740						685						8						438						421						4
Diabetes			217						228						(5)						310						254						22						84						74						14
Other(4)			8						23						(65)						7						33						(79)						7						25						(72)
Total			$	4,175					$	4,069					3		%				$	2,368					$	2,157					10		%				$	1,441					$	1,359					6		%
			U.S.****(1)																		Non-U.S. Developed Markets**(2)**																		Emerging Markets**(3)**
			Six months ended																		Six months ended																		Six months ended
(in millions)			October 27, 2023						October 28, 2022						% Change						October 27, 2023						October 28, 2022						% Change						October 27, 2023						October 28, 2022						% Change
Cardiovascular			$	2,776					$	2,696					3		%				$	1,869					$	1,694					10		%				$	1,128					$	1,070					5		%
Neuroscience			3,057						2,931						4						815						788						3						634						582						9
Medical Surgical			1,845						1,726						7						1,512						1,420						6						824						789						4
Diabetes			405						434						(7)						625						518						21						159						145						10
Other(4)			16						49						(67)						12						65						(82)						10						48						(79)
Total			$	8,099					$	7,835					3		%				$	4,831					$	4,485					8		%				$	2,755					$	2,635					5		%

(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.

(4)Includes revenue from the divested Renal Care Solutions business and Transition Manufacturing Agreements from previously divested businesses.

The increase in net sales for the three and six months ended October 27, 2023, as compared to the corresponding period in the prior fiscal year, was driven primarily by growth in most products lines and businesses, including Micra, Transcatheter Aortic Valve replacements (TAVR), Core Spine, Advanced Surgical Technologies, and Diabetes.

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 fluctuations in currency exchange rates, 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 supply chain challenges from time to time;

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

• The sanctions and other measures being imposed in response to the Russia-Ukraine conflict are having, and could continue to have impacts on revenue and supply chain. The financial impact of the conflict in the second quarter of fiscal year 2024, including on accounts receivable and inventory reserves, was not material, and for the three and six months ended October 27, 2023, 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.

• Although the long-term implications of Israel's recent conflict are difficult to predict at this time, the financial impact of the conflict in the second quarter of fiscal year 2024, including on accounts receivable and inventory reserves, was not material. For the three and six months ended October 27, 2023, the business of the Company in Israel represented less than 1% of the Company's consolidated revenues and assets.

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, products for the treatment of hypertension, endovascular stent graft systems, heart valve replacement technologies, cardiac tissue ablation systems, and open heart and coronary bypass grafting surgical products. Cardiovascular also includes Cath Lab Managed Services (CLMS) within the Cardiac Rhythm & Heart Failure division. Cardiovascular's net sales for the three and six months ended October 27, 2023 were $2.9 billion and $5.8 billion, respectively, an increase of 6 percent for both periods as compared to the corresponding periods in the prior fiscal year. The net sales increase for both periods was primarily due to strong performance of Micra, TAVR, Cannula, and Perfusion.

The graphs below illustrate the percent of Cardiovascular net sales by division for the three months ended October 27, 2023 and October 28, 2022:

Cardiac Rhythm & Heart Failure (CRHF) net sales for the three and six months ended October 27, 2023 increased 5 percent, for both periods as compared to the corresponding periods in the prior fiscal year. The net sales increase for both periods was driven by continued adoption of Micra, including the U.S. launch of Micra AV2 and Micra VR2, and growth from transvenous pacemakers and Arctic Front cryoablation catheters. Net sales growth was also driven by increases in Cardiovascular Diagnostics led by LINQ II implant growth due to U.S launch of AccuRythm AI 2.0.

Structural Heart & Aortic (SHA) net sales for the three and six months ended October 27, 2023 increased 8 percent and 9 percent, respectively, as compared to the corresponding periods in the prior fiscal year. The net sales increase was driven by growth in TAVR, including the recent U.S. and Japan launches of Evolut FX TAVR system, and in Cardiac Surgery driven by growth in Cannula and Perfusion particularly in the U.S.

Coronary & Peripheral Vascular (CPV) net sales for the three and six months ended October 27, 2023 increased 5 percent and 3 percent, respectively, as compared to the corresponding periods in the prior fiscal year. The increase in net sales was driven by the launch of the Onyx Frontier, TruStar and TruCor families of drug-eluting stents, as well as growth in guide catheters and drug coated balloons, and performance of our vascular embolization and superficial venous product portfolio, including the VenaSeal system.

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 including the recent U.S. launch of Micra AV2 and Micra VR2 and increasing global penetration.

• Continued acceptance and growth from the Azure XT and Azure S SureScan pacing systems and the 3830 lead. Azure pacemakers feature Medtronic-exclusive BlueSync technology, which enables automatic, secure wireless remote monitoring with increased device longevity. The 3830 lead, previously labeled for His-bundle pacing, has now been expanded to include left bundle branch area pacing effectively covering all current forms of conduction system pacing.

• Acceptance and growth of Aurora Extravascular ICD.

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

• Growth of the CRT-P quadripolar pacing system.

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

• Continued acceptance and expansion of the LINQ II cardiac monitor with AccuRhythm AI algorithms.

• Continued acceptance, adoption, and growth of our innovative portfolio of products in the electrophysiology (EP) segment, including the Arctic Front cryoablation system, PulseSelect pulse field ablation (PFA), and Affera mapping and navigation system.

• Continued acceptance and growth of the self-expanding CoreValve Evolut transcatheter aortic valve replacement platform. This includes Evolut PRO which provides enhanced hemodynamics, reliable delivery, enhanced durability, advanced sealing, and Evolut FX, a system designed to improve the overall procedural experience through enhancements in deliverability, implant visibility, and deployment stability.

• Market acceptance and reimbursement for the Symplicity Spyral Multi-Electrode Renal Denervation Catheter.

• Continued acceptance and growth of the Onyx Frontier DES platform. The platform launched in the U.S. in the first quarter of fiscal year 2023 and in select international countries in the second quarter of fiscal year 2023. Onyx Frontier is a drug-eluding stent (DES) that introduces an enhanced delivery system and is used for complex percutaneous coronary intervention (PCI).

• Continued acceptance of 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.

• Acceptance and growth of IN.PACT 018 drug-coated balloons (DCB). The product was launched under limited market release in the first quarter of fiscal year 2023 with full market release in the third quarter of fiscal year 2023. IN.PACT 018 adds to the existing IN.PACT Admiral DCB portfolio and is used to treat femoropopliteal disease

• Our ability to successfully develop, obtain regulatory approval of and commercialize the products within our pipeline.

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 therapies to treat the diseases of the vasculature in and around the brain, including coils, neurovascular stents, and flow diversion products, as well as products to treat ear, nose, and throat (ENT), and the treatment of overactive bladder, urinary retention, and fecal incontinence. 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 and six months ended October 27, 2023 were $2.3 billion and $4.5 billion, respectively, an increase of 5 percent for both periods, compared to the corresponding periods in the prior fiscal year. The net sales increase for both periods was primarily due to growth in Core Spine and Neurosurgery. For the six months ended October 27, 2023, the increase was also driven by growth in ENT.

The graphs below illustrate the percent of Neuroscience net sales by division for the three months ended October 27, 2023 and October 28, 2022:

Cranial and Spinal Technologies (CST) net sales for the three and six months ended October 27, 2023 increased 7 percent and 6 percent, respectively, as compared to the corresponding periods in the prior fiscal year. The growth for both periods was driven by increased sales of Core Spine products driven by AiBLE spinal ecosystem pull-through. The net sales increase was also attributable to strong growth of StealthStation Navigation and O-arm Imaging Systems. Growth for the six months ended October 27, 2023 was also driven by increased sales of Biologics products.

Specialty Therapies (Specialty) net sales for the three and six months ended October 27, 2023 increased 3 percent and 4 percent, respectively, as compared to the corresponding periods in the prior fiscal year. The increase for both periods was driven by growth in ENT and hemorrhagic stroke flow diversion products. For the three months ended October 27, 2023, the increase was also driven by growth in Pelvic Health. For the six months ended October 27, 2023, Pelvic Health experienced slight net sales declines due to recent competitive launches.

Neuromodulation (NM) net sales for the three and six months ended October 27, 2023 increased 2 percent and 3 percent, respectively, as compared to the corresponding periods in the prior fiscal year. The net sales increase for both periods was driven by growth within Pain Stim and Targeted Drug Delivery, partially offset by a decline in Interventional due to competitive pressure. The increase for the six months ended October 27, 2023 was also driven by growth in Brain Modulation, primarily in the first quarter of fiscal year 2024.

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

• Continued adoption and growth of our integrated solutions through the AiBLE offering, which integrates spinal implants with enabling technologies (StealthStation, O-arm Imaging Systems, and Midas), Mazor robotics, and UNiD Adaptive Spine Intelligence AI-driven technology for surgical planning and personalized spinal implants.

• Market acceptance and continued global adoption of innovative new spine products and procedural solutions within our CST operating unit, such as Catalyft PL, ModuLeX, CD Horizon Voyager System, and our Infinity OCT System, as well as continued growth from Titan spine titanium interbody implants with Nanolock technology.

• Continued growth of Pipeline Embolization Devices, endovascular treatments for large or giant wide-necked brain aneurysms.

• Continued acceptance and growth of the Solitaire X revascularization device for treatment of acute ischemic stroke and our React Catheter and Riptide aspiration system.

• Continued acceptance and growth of our Pelvic Health and ENT therapies, including our InterStim therapy with InterStim X and InterStim II recharge-free neurostimulators and InterStim Micro rechargeable neurostimulator for patients suffering from overactive bladder, (non-obtrusive) urinary retention, and chronic fecal incontinence, and capital equipment sales of the Stealth Station ENT surgical navigation system and intraoperative NIM nerve monitoring system.

• Continued acceptance and growth of Intersect ENT products used in the treatment of chronic rhinosinusitis.

• Market acceptance and growth from SCS therapy for treating chronic pain and Diabetic Peripheral Neuropathy (DPN) on the Intellis rechargeable neurostimulator and Vanta recharge-free neurostimulator.

• Continued acceptance and growth of our Percept family of DBS devices with proprietary BrainSense technology for objectifying and personalizing the treatment of Parkinson's Disease, epilepsy, and other movement disorders.

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

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, 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, and sensors and monitors for pulse oximetry, capnography, level of consciousness and cerebral oximetry. Medical Surgical's net sales for the three and six months ended October 27, 2023 were $2.1 billion and $4.2 billion, respectively, an increase of 7 percent and 6 percent, respectively, as compared to the corresponding periods in the prior fiscal year. The net sales increase for both periods was primarily driven by growth in Advanced Surgical Technologies and in General Surgery Technologies.

The graphs below illustrate the percent of Medical Surgical net sales by division for the three months ended October 27, 2023 and October 28, 2022:

Surgical & Endoscopy (SE) net sales for the three and six months ended October 27, 2023 increased 9 percent and 7 percent, as compared to the corresponding periods in the prior fiscal year. The increase for both periods was predominantly attributable to growth in Advanced Surgical Technologies, primarily driven by supply expansion, as well as continued growth in GI Genius, Wound Management, and Electrosurgery.

Patient Monitoring & Respiratory Interventions (PMRI) net sales for the three and six months ended October 27, 2023 increased 3 percent for both periods, as compared to the corresponding periods in the prior fiscal year. The net sales increase for both periods was largely due to growth in airways and monitors partially offset by decreases in ventilator sales.

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:

• The pending separation of the combined Patient Monitoring and Respiratory Interventions businesses from the Medical Surgical Portfolio.

• 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, near-term pressures to bariatric surgery procedure volumes in the U.S. from pharmaceuticals, 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.

• Acceptance of less invasive standards of care in chronic and colorectal, as well as hepatology products, including products that span the care continuum from diagnostics to therapeutics. Recently launched products include GI Genius.

• 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, hernia, 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.

• Our ability to successfully develop, obtain regulatory approval of and commercialize the products within our pipeline, which include our Hugo RAS system in the U.S., Signia powered stapling devices, and our next-gen Ligasure and Sonicision vessel sealing devices.

Diabetes

Diabetes' products include insulin pumps, continuous glucose monitoring (CGM) systems, and consumables. Diabetes' net sales for the three and six months ended October 27, 2023 were $610 million and $1.2 billion, respectively, an increase of 10 percent and 8 percent, respectively, as compared to the corresponding periods in the prior fiscal year. The increase in net sales for both periods was primarily driven by strong international growth as a result of the continued international expansion of the MiniMed 780G insulin pump system and integrated CGM. The launch of the MiniMed 780G insulin pump system in the U.S., during the first quarter of fiscal year 2024, also contributed to the growth for the three and six months ended October 27, 2023.

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 acceptance and growth for the MiniMed 780G insulin pump system, which is powered by SmartGuard technology and features the added benefits of meal detection technology that automatically adjusts and corrects sugar levels every five minutes. The global adoption of Automated Insulin Delivery (AID) systems has resulted in strong

sensor attachment rates. The MiniMed 780G insulin pump system with the Guardian 4 Sensor was approved by the U.S. FDA in late April 2023.

• Continued acceptance and growth of the Guardian Connect CGM system, which displays glucose information directly to a smartphone to provide patients 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, CGM, and consumable competition in an expanding global market.

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

• Our ability to successfully develop, obtain regulatory approval of and commercialize the products within our pipeline, including our next-generation sensor Simplera, which has been submitted for approval to the U.S. FDA and received CE Mark in September 2023.

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 and six months ended October 27, 2023 and October 28, 2022:

Cost of Products Sold Cost of products sold for the three and six months ended October 27, 2023 was $2.8 billion and $5.4 billion, respectively, as compared to $2.5 billion and $5.1 billion, respectively, for the corresponding periods in the prior fiscal year. The increase in cost products sold as a percentage of net sales was primarily attributable to increased labor and direct material manufacturing costs, predominantly due to inflationary pressures and supply constraints from time to time.

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 improving care; and to expand healthcare access and deliver positive outcomes. Research and development expense for the three and six months ended October 27, 2023 was $698 million and $1.4 billion, respectively, as compared to $676 million and $1.4 billion, respectively, for the corresponding periods in the prior fiscal year.

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, certain acquisition, divestiture, and separation-related costs, and restructuring expenses. Selling, general, and administrative expense for the three and six months ended October 27, 2023 was $2.7 billion and $5.3 billion, respectively, as compared to $2.6 billion and $5.2 billion, respectively, for the corresponding periods in the prior fiscal year. The increase in selling, general, and administrative expense for both periods is primarily due to reduced incentive accruals in the prior year.

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

			Three months ended												Six months ended
(in millions)			October 27, 2023						October 28, 2022						October 27, 2023						October 28, 2022
Amortization of intangible assets			$	425					$	421					$	855					$	844
Restructuring charges, net			40						30						94						44
Certain litigation charges			65						—						105						—
Other operating income, net			(31)						(97)						(30)						(62)
Other non-operating income, net			(154)						(109)						(230)						(192)
Interest expense, net			180						118						329						282

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 For the three and six months ended October 27, 2023, restructuring costs primarily related to employee termination benefits and facility consolidations to support cost reduction initiatives. For the three and six months ended October 28, 2022, restructuring charges primarily related to Enterprise Excellence and Simplification restructuring programs, both of which were substantially completed as of the end of fiscal year 2023. Enterprise Excellence was designed to leverage the Company’s global size and scale to focus on global operations, and functional and commercial optimization, and had total pre-tax charges of $1.8 billion. Simplification was designed to focus the organization on accelerating innovation, enhancing customer experience, driving revenue growth and winning market share, and had total pre-tax charges of $0.5 billion.

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

Certain Litigation Charges 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 Income, Net Other operating income, net primarily includes royalty expense, currency remeasurement and derivative gains and losses, Puerto Rico excise taxes, changes in the fair value of contingent consideration, certain acquisition and divestiture-related items, and income from funded research and development arrangements.

For the three and six months ended October 27, 2023, the decrease in other operating income, net was driven by the net currency impact of remeasurement expense and our hedging programs, which results in a net gain of $32 million and $29 million, respectively, as compared to a net gain of $138 million and $219 million, respectively, in the corresponding periods in the prior year. The decrease was partially offset by a decrease of $25 million and $46 million in Puerto Rico Excise Taxes for the three and six months ended October 27, 2023. As a result of newly enacted tax legislation in Puerto Rico, the Company is no longer subject to Puerto Rico Excise Tax, but is now subject to a higher withholding tax, which is recorded in income tax provision in the consolidated statements of income.

For the six months ended October 27, 2023, the decrease in other operating income, net was also driven by a decrease in acquisition and divestiture-related expenses, which was primarily attributable to non-cash pre-tax charges of $81 million, primarily related to goodwill, recorded in the prior year as a result of the April 1, 2023 sale of half of the Company's RCS business.

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 and six months ended October 27, 2023, the increase in other non-operating income, net is primarily attributable an increase in interest income, partially offset by losses on our minority investment portfolio. Interest income was $148 million and $259 million for the three and six months ended October 27, 2023, respectively, and $73 million and $128 million for the three and six months ended October 28, 2022, respectively. Net losses on minority investments were $25 million and $89 million for the three and six months ended October 27, 2023, respectively, as compared to a net gain of $12 million and $15 million for the three and six months ended October 28, 2022, respectively.

Interest Expense, Net Interest expense, net 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.

For the three and six months ended October 27, 2023, the increase in interest expense, net was primarily driven by increased interest rates on our global liquidity structures, the impact of higher coupons on Senior Notes issued in the second quarter of fiscal year 2023, and the higher outstanding commercial paper balance. Partially offsetting the increase for the three and six months was $50 million and $99 million, respectively, in after-tax gains representing amounts excluded from the effectiveness assessment of certain net investment hedges, compared to $27 million and $47 million, respectively, for the corresponding periods in the prior year. Also partially offsetting the increase in interest expense, net was the $53 million charge incurred as a result of the early redemption of approximately $2.3 billion of senior notes during the six months ended October 28, 2022.

INCOME TAXES

			Three months ended												Six months ended
(in millions)			October 27, 2023						October 28, 2022						October 27, 2023						October 28, 2022
Income tax provision			$	402					$	959					$	802					$	1,072
Income before income taxes			1,313						1,395						2,510						2,438
Effective tax rate			30.6		%				68.7		%				32.0		%				44.0		%
Non-GAAP income tax provision			$	339					$	266					$	640					$	497
Non-GAAP income before income taxes			2,008						1,999						3,910						3,733
Non-GAAP Nominal Tax Rate			16.9		%				13.3		%				16.4		%				13.3		%
Difference between the effective tax rate and Non-GAAP Nominal Tax Rate			(13.7)		%				(55.4)		%				(15.6)		%				(30.7)		%

The Israeli Central-Lod District Court issued its decision in Medtronic Ventor Technologies Ltd (Ventor) v. Kfar Saba Assessing Office on June 1, 2023. The court determined that there was a deemed taxable transfer of intellectual property. As a result, the Company recorded a $187 million income tax charge during the six months ended October 27, 2023. Subsequent to quarter end, the Company filed an appeal with the Supreme Court of Israel.

Our effective tax rate for the three and six months ended October 27, 2023 was 30.6% and 32.0%, respectively, as compared to 68.7% and 44.0% for the three and six months ended October 28, 2022, respectively. The decrease in our effective tax rate for the three months ended October 27, 2023 primarily relates to the $764 million income tax charge recorded during the three months ended October 28, 2022 related to the U.S. Tax Court decision, which was partially offset by an increase in Puerto Rico withholding tax rates and the establishment of a valuation allowance on certain net operating losses recorded during the current quarter. In addition to the items discussed in the current quarter, the decrease in the effective tax rate for the six months ended October 27, 2023 was also attributable to the Ventor court decision noted above.

Our Non-GAAP Nominal Tax Rate for the three and six months ended October 27, 2023 was 16.9% and 16.4%, respectively, as compared to 13.3% for both the three and six months ended October 28, 2022. The change in our Non-GAAP Nominal Tax Rate was primarily due to an increase in Puerto Rico withholding tax rates and 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 and six months ended October 27, 2023 of approximately $20 million and $39 million, respectively.

LIQUIDITY AND CAPITAL RESOURCES

We are currently in a strong financial position, and we believe our balance sheet and liquidity as of October 27, 2023 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:

			Six months ended
(in millions)			October 27, 2023						October 28, 2022
Cash provided by (used in):
Operating activities			$	1,536					$	2,005
Investing activities			(963)						(2,731)
Financing activities			(591)						2,064
Effect of exchange rate changes on cash and cash equivalents			(214)						(223)
Net change in cash and cash equivalents			$	(232)					$	1,114

Operating Activities The $469 million decrease in net cash provided was primarily driven by timing of payments to vendors, as well as an increase in cash paid for taxes, interest, litigation, and restructuring. The decrease in net cash was partially offset by an increase in cash collected from customers primarily due to an increase in sales. The increase in cash paid for taxes is due to the payment of transition tax that resulted from U.S. Tax Reform and an audit related payment made to the Internal Revenue Service. For more information on litigation and restructuring payments, refer to Note 16 and Note 5, respectively.

Investing Activities The $1.8 billion decrease in cash used was primarily attributable to a decrease in cash paid for acquisitions of $1.8 billion, as compared to the corresponding period in the prior fiscal year.

Financing Activities There was a $2.7 billion increase in net cash used during the six months ended October 27, 2023, as compared to the corresponding period in the prior fiscal year. In the current period, there was an increase in commercial paper that was issued and outstanding at quarter end of $972 million. This increase in cash provided by financing activities was offset by activity in the prior fiscal year. In the second quarter of fiscal year 2023, the Company issued four tranches of Euro-denominated Senior Notes of approximately $3.4 billion. In the first quarter of fiscal year 2023, 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. For more information on the commercial paper, Senior Notes issued, Term Loan and redemption 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 October 27, 2023 was $25.1 billion as compared to $24.4 billion at April 28, 2023. The increase in total debt was driven by commercial paper outstanding of $1.3 billion, offset by fluctuations in exchange rates.

In May 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 within interest expense, net in the consolidated statements of income in the quarter ended July 29, 2022, which primarily included cash premiums and accelerated amortization of deferred financing costs and debt discounts and premiums. During the fourth quarter of fiscal year 2023, the Company repaid the term loan in full, including interest.

In September 2022, we issued four tranches of Euro-denominated Senior Notes with an aggregate principal of €3.5 billion, with maturities ranging from fiscal year 2026 to 2035, resulting in cash proceeds of approximately $3.4 billion, net of discounts and issuance costs. The Company used the net proceeds to repay at maturity €750 million of 0.000% Medtronic Luxco Senior Notes for $772 million of total consideration in December 2022 and €1.5 billion of 0.375% Medtronic Luxco Senior Notes and €1.25 billion of 0.000% Medtronic Luxco Senior Notes for $2.9 billion of total consideration in March 2023.

In March 2023, Medtronic Luxco issued two tranches of USD-denominated Senior Notes with an aggregate principal of $2.0 billion, with maturities ranging from 2028 to 2033, resulting in cash proceeds of approximately $2.0 billion, net of discounts and issuance costs. The Company used the net proceeds supplemented by additional cash to repay the ¥297 billion Fiscal 2023 Loan Agreement discussed above for $2.3 billion of total consideration.

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 six months ended October 27, 2023, the Company repurchased a total of 4 million shares under this program at an average price of $83.49. At October 27, 2023, we had approximately $2.0 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 28, 2023.

Liquidity

Our liquidity sources at October 27, 2023 included $1.3 billion of cash and cash equivalents and $6.4 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 deposit, 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 October 27, 2023 and April 28, 2023, we had $1.3 billion and no commercial paper outstanding, respectively. The issuance of commercial paper reduces the amount of credit available under our existing line of credit, as explained below.

We also have a $3.5 billion five-year syndicated credit facility (Credit Facility), which expires in December 2027. 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 October 27, 2023 and April 28, 2023, 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)**
						October 27, 2023						April 28, 2023
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 October 27, 2023 were unchanged as compared to the ratings at April 28, 2023. 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. Refer to the Debt and Capital section above for changes in debt obligations during the second quarter of fiscal year 2024; there have been no other 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 28, 2023.

ACQUISITIONS

EOFlow Co. Ltd Acquisition

On May 25, 2023, the Company entered into a set of definitive agreements to acquire EOFlow Co. Ltd. (EOFlow), manufacturer of the EOPatch device – a tubeless, wearable, and fully disposable insulin delivery device. The acquisition expands the Diabetes segment portfolio of products. To the extent that all the public shares participate in the tender offer, the total consideration for the acquisition of the shares in EOFlow would be KRW 971 billion, or $716 million, at exchange rates on October 27, 2023. The acquisition is subject to the satisfaction of the minimum tender condition and certain customary closing conditions, including receipt of required regulatory clearances, the timing of which is currently uncertain. The Company is aware of litigation between a third party and EOFlow in the U.S. District Court for the District of Massachusetts and the resulting injunction issued by the court against EOFlow in October 2023. The Company is not a party to the litigation but is aware of EOFlow’s decision to appeal the court’s ruling. The Company will continue to monitor the appeals process.

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

GOODWILL

We assess goodwill and indefinite-lived intangible assets 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. As further described in Note 10, we have certain new operating segments as of the beginning of fiscal year 2024. Goodwill reporting units were tested for impairment before and after the alignment. There was no impairment of goodwill as a result of the impairment test.

The goodwill allocation and the tests for impairment of goodwill requires us to make several estimates related to projected future cash flows to determine the fair value of the goodwill reporting units. We calculate the excess of each reporting unit's fair value over its carrying amount, including goodwill, utilizing a discounted cash flow analysis. The test for goodwill is based on future cash flows that require significant judgment with respect to future revenue and expense growth rates and discount rates. The discount rate applied to the cash flow analysis is based on the weighted average cost of capital (“WACC”) for each reporting unit. 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. A change in any of these estimates and assumptions could produce a different fair value, which could have a material impact on our results of operations.

Definite-lived intangible assets 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. There were no impairments of intangible assets in the current period. Further adverse changes to macroeconomic conditions or significant changes to our current and future expected financial performance could lead to goodwill or intangible asset impairment charges in future periods, and such charges could be material to our results of operations.

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 28, 2023.

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 October 27, 2023, 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 six months ended October 27, 2023 and summarized balance sheet information at October 27, 2023 and April 28, 2023 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 six months ended October 27, 2023 was as follows:

(in millions)			Medtronic & Medtronic Luxco Senior Notes (1)						CIFSA Senior Notes (2)
Net sales			$	1,459					$	—
Operating loss			(747)						(14)
Loss before income taxes			(1,876)						(1,654)
Net loss attributable to Medtronic			(1,647)						(1,648)

The summarized balance sheet information at October 27, 2023 was as follows:

(in millions)			Medtronic & Medtronic Luxco Senior Notes (1)						CIFSA Senior Notes (2)
Total current assets(3)			$	19,082					$	6,632
Total noncurrent assets(4)			5,970						67
Total current liabilities(5)			34,022						28,917
Total noncurrent liabilities			59,460						66,509
Noncontrolling interests			187						187

(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 $18.3 billion and $6.5 billion for Medtronic & Medtronic Luxco Senior Notes, and CIFSA Senior Notes, respectively.

(4)Includes loans receivable due from non-guarantor subsidiaries of $19.0 million for Medtronic & Medtronic Luxco Senior Notes. No loans receivable due from non-guarantor subsidiaries for CIFSA Senior Notes.

(5)Includes payables due to non-guarantor subsidiaries of $30.8 billion and $27.3 billion for Medtronic & Medtronic Luxco Senior Notes, and CIFSA Senior Notes, respectively.

(6)Includes loans payable due to non-guarantor subsidiaries of $33.8 billion and $47.4 billion for Medtronic & Medtronic Luxco Senior Notes, and CIFSA Senior Notes, respectively.

The summarized balance sheet information at April 28, 2023 was as follows:

(in millions)			Medtronic & Medtronic Luxco Senior Notes (1)						CIFSA Senior Notes (2)
Total current assets(3)			$	23,198					$	8,344
Total noncurrent assets(4)			5,897						3
Total current liabilities(5)			33,854						25,184
Total noncurrent liabilities(6)			59,624						66,449
Noncontrolling interests			182						182

(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 $22.5 billion and $8.3 billion for Medtronic & Medtronic Luxco Senior Notes, and CIFSA Senior Notes, respectively.

(4)Includes loans receivable due from non-guarantor subsidiaries of $20.0 million for Medtronic & Medtronic Luxco Senior Notes. No loans receivable due from non-guarantor subsidiaries for CIFSA Senior Notes.

(5)Includes payables due to non-guarantor subsidiaries of $31.8 billion and $25.0 billion for Medtronic & Medtronic Luxco Senior Notes, and CIFSA Senior Notes, respectively.

(6)Includes loans payable due to non-guarantor subsidiaries of $33.1 billion and $46.7 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 public health crises and geopolitical conflicts 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;

• public health crises;

• 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.