Item 1. Financial Statements

Medtronic plc

Consolidated Statements of Income

(Unaudited)

			Three months ended
(in millions, except per share data)			July 26, 2024						July 28, 2023
Net sales			$	7,915					$	7,702
Costs and expenses:
Cost of products sold, excluding amortization of intangible assets			2,761						2,628
Research and development expense			676						668
Selling, general, and administrative expense			2,655						2,613
Amortization of intangible assets			414						429
Restructuring charges, net			47						54
Certain litigation charges, net			81						40
Other operating expense, net			1						1
Operating profit			1,278						1,268
Other non-operating income, net			(157)						(76)
Interest expense, net			167						148
Income before income taxes			1,268						1,196
Income tax provision			220						400
Net income			1,049						797
Net income attributable to noncontrolling interests			(6)						(6)
Net income attributable to Medtronic			$	1,042					$	791
Basic earnings per share			$	0.81					$	0.59
Diluted earnings per share			$	0.80					$	0.59
Basic weighted average shares outstanding			1,293.3						1,330.5
Diluted weighted average shares outstanding			1,296.5						1,333.8

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

Medtronic plc

Consolidated Statements of Comprehensive Income

(Unaudited)

			Three months ended
(in millions)			July 26, 2024						July 28, 2023
Net income			$	1,049					$	797
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on investment securities			76						(19)
Translation adjustment			102						14
Net investment hedge			(206)						(143)
Net change in retirement obligations			1						3
Unrealized loss on cash flow hedges			(66)						(30)
Other comprehensive loss			(92)						(175)
Comprehensive income including noncontrolling interests			957						622
Comprehensive income attributable to noncontrolling interests			(6)						(6)
Comprehensive income attributable to Medtronic			$	950					$	616

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

Medtronic plc

Consolidated Balance Sheets

(Unaudited)

(in millions)			July 26, 2024						April 26, 2024
ASSETS
Current assets:
Cash and cash equivalents			$	1,311					$	1,284
Investments			6,532						6,721
Accounts receivable, less allowances and credit losses of $170 and $173, respectively			6,011						6,128
Inventories			5,414						5,217
Other current assets			2,679						2,584
Total current assets			21,947						21,935
Property, plant, and equipment, net			6,282						6,131
Goodwill			41,084						40,986
Other intangible assets, net			12,819						13,225
Tax assets			3,554						3,657
Other assets			4,062						4,047
Total assets			$	89,749					$	89,981
LIABILITIES AND EQUITY
Current liabilities:
Current debt obligations			$	1,553					$	1,092
Accounts payable			2,291						2,410
Accrued compensation			1,776						2,375
Accrued income taxes			1,063						1,330
Other accrued expenses			3,604						3,582
Total current liabilities			10,287						10,789
Long-term debt			26,312						23,932
Accrued compensation and retirement benefits			1,107						1,101
Accrued income taxes			1,917						1,859
Deferred tax liabilities			496						515
Other liabilities			1,470						1,365
Total liabilities			41,589						39,561
Commitments and contingencies (Note 16)
Shareholders’ equity:
Ordinary shares— par value $0.0001, 2.6 billion shares authorized, 1,282,494,588 and 1,311,337,531 shares issued and outstanding, respectively			—						—
Additional paid-in capital			20,810						23,129
Retained earnings			30,547						30,403
Accumulated other comprehensive loss			(3,410)						(3,318)
Total shareholders’ equity			47,947						50,214
Noncontrolling interests			213						206
Total equity			48,160						50,420
Total liabilities and equity			$	89,749					$	89,981

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

Medtronic plc

Consolidated Statements of Equity

(Unaudited)

						Ordinary Shares												Additional Paid-in Capital						Retained Earnings						Accumulated Other Comprehensive Loss						Total Shareholders’ Equity						Noncontrolling Interests						Total Equity
(in millions)						Number						Par Value
April 26, 2024						1,311						$	—					$	23,129					$	30,403					$	(3,318)					$	50,214					$	206					$	50,420
Net income						—						—						—						1,042						—						1,042						6						1,049
Other comprehensive loss						—						—						—						—						(92)						(92)						—						(92)
Dividends to shareholders ($0.70 per ordinary share)						—						—						—						(898)						—						(898)						—						(898)
Issuance of shares under stock purchase and award plans						1						—						87						—						—						87						—						87
Repurchase of ordinary shares						(30)						—						(2,489)						—						—						(2,489)						—						(2,489)
Stock-based compensation						—						—						83						—						—						83						—						83
July 26, 2024						1,282						$	—					$	20,810					$	30,547					$	(3,410)					$	47,947					$	213					$	48,160

						Ordinary Shares												Additional Paid-in Capital						Retained Earnings						Accumulated Other Comprehensive Loss						Total Shareholders’ Equity						Noncontrolling Interests						Total Equity
(in millions)						Number						Par Value
April 28, 2023						1,331						$	—					$	24,590					$	30,392					$	(3,499)					$	51,483					$	182					$	51,665
Net income						—						—						—						791						—						791						6						797
Other comprehensive loss						—						—						—						—						(175)						(175)						—						(175)
Dividends to shareholders ($0.69 per ordinary share)						—						—						—						(918)						—						(918)						—						(918)
Issuance of shares under stock purchase and award plans						1						—						73						—						—						73						—						73
Repurchase of ordinary shares						(2)						—						(148)						—						—						(148)						—						(148)
Stock-based compensation						—						—						73						—						—						73						—						73
July 28, 2023						1,330						$	—					$	24,587					$	30,265					$	(3,674)					$	51,178					$	188					$	51,366

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

Medtronic plc

Consolidated Statements of Cash Flows

(Unaudited)

			Three months ended
(in millions)			July 26, 2024						July 28, 2023
Operating Activities:
Net income			$	1,049					$	797
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			662						672
Provision for credit losses			18						21
Deferred income taxes			88						—
Stock-based compensation			83						73
Other, net			(9)						135
Change in operating assets and liabilities, net of acquisitions and divestitures:
Accounts receivable, net			110						164
Inventories			(217)						(410)
Accounts payable and accrued liabilities			(604)						(673)
Other operating assets and liabilities			(194)						96
Net cash provided by operating activities			986						875
Investing Activities:
Additions to property, plant, and equipment			(520)						(354)
Purchases of investments			(1,879)						(1,916)
Sales and maturities of investments			2,157						1,748
Other investing activities, net			(17)						(17)
Net cash used in investing activities			(259)						(539)
Financing Activities:
Change in current debt obligations, net			(624)						500
Issuance of long-term debt			3,209						—
Dividends to shareholders			(898)						(918)
Issuance of ordinary shares			89						77
Repurchase of ordinary shares			(2,492)						(152)
Other financing activities			(15)						(8)
Net cash used in financing activities			(731)						(501)
Effect of exchange rate changes on cash and cash equivalents			31						(39)
Net change in cash and cash equivalents			27						(204)
Cash and cash equivalents at beginning of period			1,284						1,543
Cash and cash equivalents at end of period			$	1,311					$	1,339
Supplemental Cash Flow Information
Cash paid for:
Income taxes			$	394					$	117
Interest			119						84

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

Medtronic plc

Notes to Consolidated Financial Statements

(Unaudited)

1. Basis of Presentation

The accompanying unaudited consolidated financial statements of Medtronic plc and its subsidiaries (Medtronic plc, Medtronic, or the Company) have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S.) (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, the consolidated financial statements include all the adjustments necessary for a fair statement in conformity with U.S. GAAP. Certain reclassifications have been made to prior year financial statements to conform to classifications used in the current year.

Operating results for interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole. The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures at the date of the financial statements and during the reporting period. Actual results could materially differ from these estimates.

The accompanying unaudited consolidated financial statements include the accounts of Medtronic plc, its wholly-owned subsidiaries, entities for which the Company has a controlling financial interest, and variable interest entities for which the Company is the primary beneficiary. Intercompany transactions and balances have been eliminated in consolidation. 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.

The accompanying unaudited consolidated financial statements and related notes should be read in conjunction with the audited consolidated financial statements of the Company and related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended April 26, 2024. The Company’s fiscal years 2025, 2024, and 2023 will end or ended on April 25, 2025, April 26, 2024, and April 28, 2023, respectively.

2. New Accounting Pronouncements

Recently Adopted Accounting Standards

For the three months ended July 26, 2024, there have been no newly adopted accounting pronouncements that materially impact our consolidated financial statements. Refer to the Company's Annual Report on Form 10-K for the fiscal year ended April 26, 2024 for pronouncements recently adopted.

Not Yet Adopted Accounting Standards

Segment Reporting

In November 2023, the FASB issued ASU 2023-07, Improvements to Segment Reporting (Topic 280), which requires incremental disclosures on reportable segments, primarily through enhanced disclosures on significant segment expenses. The Company will adopt this guidance beginning in the fourth quarter of fiscal year 2025 for our annual report and for interim periods starting in fiscal year 2026. We are currently evaluating the potential effect that the updated standard will have on our financial statement disclosures.

Income Taxes

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (Topic 740), which requires incremental annual disclosures on income taxes, including rate reconciliations, income taxes paid, and other disclosures. The Company will adopt this guidance beginning in the fourth quarter of fiscal year 2026 for our annual report. We are currently evaluating the potential effect that the updated standard will have on our financial statement disclosures.

3. Revenue

The Company's revenues are principally derived from device-based medical therapies and services related to cardiac rhythm disorders, cardiovascular disease, neurological disorders and diseases, spinal conditions and musculoskeletal trauma, chronic pain, urological and digestive disorders, ear, nose, and throat conditions, and diabetes conditions as well as advanced and general surgical care products, respiratory and monitoring solutions, and neurological surgery technologies. The Company's primary customers include healthcare systems, clinics, third-party healthcare providers, distributors, and other institutions, including governmental healthcare programs and group purchasing organizations. Certain prior period revenue has been recast to conform to the new operating segment structure in the fourth quarter of fiscal year 2024. Refer to Note 17 to the consolidated financial statements for additional information regarding the Company's reporting structure. In addition, starting in the first quarter of fiscal year 2025, the Company combined the non-U.S. developed markets and the emerging markets into an international market geography. Prior period revenue has been recast to conform to the new presentation.

Medtronic plc

Notes to Consolidated Financial Statements

(Unaudited)

The table below illustrates net sales by segment and division and by market geography for the three months ended July 26, 2024 and July 28, 2023. The U.S. revenue includes United States and U.S. territories, and the international revenue includes all other non-U.S. countries.

			Three months ended
(in millions)			July 26, 2024						July 28, 2023
Cardiac Rhythm & Heart Failure			$	1,535					$	1,446
Structural Heart & Aortic			856						814
Coronary & Peripheral Vascular			616						589
Cardiovascular			3,007						2,850
Cranial & Spinal Technologies			1,147						1,103
Specialty Therapies			713						695
Neuromodulation			457						420
Neuroscience			2,317						2,219
Surgical & Endoscopy			1,544						1,546
Acute Care & Monitoring			452						459
Medical Surgical			1,996						2,005
Diabetes			647						578
Total reportable segment net sales			7,967						7,652
Other operating segment(1)			38						50
Other adjustments(2)			(90)						—
Total net sales			$	7,915					$	7,702

			U.S.												International
			Three months ended												Three months ended
(in millions)			July 26, 2024						July 28, 2023												July 26, 2024						July 28, 2023
Cardiovascular			$	1,403					$	1,350											$	1,604					$	1,500
Neuroscience			1,565						1,497												752						721
Medical Surgical			881						867												1,115						1,137
Diabetes			215						188												432						390
Reportable segment net sales			4,064						3,903												3,903						3,749
Other operating segment(1)			18						22												19						28
Other adjustments(2)			—						—												(90)						—
Total			$	4,082					$	3,924											$	3,832					$	3,777

(1)Includes the historical operations and ongoing transition agreements from businesses the Company has exited or divested.

(2)Incremental Italian payback accruals resulting from the two July 22, 2024 rulings by the Constitutional Court of Italy relating to certain prior years since 2015.

The amount of revenue recognized is reduced by sales rebates and returns. Adjustments to rebates and returns reserves are recorded as increases or decreases to revenue. At July 26, 2024, $1.0 billion of rebates were classified as other accrued expenses, and $591 million of rebates were classified as a reduction of accounts receivable in the consolidated balance sheet. At April 26, 2024, $1.0 billion of rebates were classified as other accrued expenses, and $574 million of rebates were classified as a reduction of accounts receivable in the consolidated balance sheet.

Medtronic plc

Notes to Consolidated Financial Statements

(Unaudited)

Deferred Revenue and Remaining Performance Obligations

Deferred revenue at July 26, 2024 and April 26, 2024 was $461 million and $453 million, respectively. At July 26, 2024 and April 26, 2024, $362 million and $352 million was included in other accrued expenses, respectively, and $99 million and $101 million was included in other liabilities, respectively. During the three months ended July 26, 2024, the Company recognized $108 million of revenue that was included in deferred revenue as of April 26, 2024. During the three months ended July 28, 2023, the Company recognized $124 million of revenue that was included in deferred revenue as of April 28, 2023.

Remaining performance obligations include goods and services that have not yet been delivered or provided under existing, noncancellable contracts with minimum purchase commitments. At July 26, 2024, the estimated revenue expected to be recognized in future periods related to unsatisfied performance obligations for executed contracts with an original duration of one year or more was approximately $0.4 billion. The Company expects to recognize revenue on the majority of these remaining performance obligations over the next two years.

4. Acquisitions and Dispositions

Acquisition Activity

During the three months ended July 26, 2024, the Company had no acquisitions that were accounted for as business combinations. During the fiscal year ended April 26, 2024, the Company had acquisitions that were accounted for as business combinations. For the three months ended July 26, 2024 and the fiscal year ended April 26, 2024, purchase price allocation adjustments were not significant.

Fiscal year 2024

The acquisition date fair value of net assets acquired during the fiscal year ended April 26, 2024 was $335 million. Based on preliminary valuations, assets acquired were primarily comprised of $131 million of goodwill, $150 million of IPR&D, and $29 million of technology-based intangible assets with estimated useful lives of 10 years. For tax purposes, $51 million of goodwill is deductible while $80 million is not deductible. The Company recognized $30 million of non-cash contingent consideration liabilities in connection with these business combinations during the fiscal year ended April 26, 2024, which are comprised of revenue and product development milestone-based payments.

Contingent Consideration

Certain of the Company’s business combinations involve potential payment of future consideration that is contingent upon the achievement of certain product development milestones and/or contingent on the acquired business reaching certain performance milestones. A liability is recorded for the estimated fair value of the contingent consideration on the acquisition date. The fair value of the contingent consideration is remeasured at each reporting period, and the change in fair value is recognized within other operating expense, net in the consolidated statements of income.

The fair value of contingent consideration liabilities at July 26, 2024 and April 26, 2024 was $128 million and $149 million, respectively. At July 26, 2024, $85 million was recorded in other accrued expenses, and $43 million was recorded in other liabilities in the consolidated balance sheet. At April 26, 2024, $96 million was recorded in other accrued expenses, and $53 million was recorded in other liabilities in the consolidated balance sheet.

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

			Three months ended
(in millions)			July 26, 2024						July 28, 2023
Beginning balance			$	149					$	206
Payments			(6)						(3)
Change in fair value			(15)						3
Ending balance			$	128					$	206

Medtronic plc

Notes to Consolidated Financial Statements

(Unaudited)

The recurring Level 3 fair value measurements of contingent consideration for which a liability is recorded include the following significant unobservable inputs:

						Fair Value at
(in millions)						July 26, 2024												Unobservable Input						Range						Weighted Average (1)
Revenue and other performance-based payments						$61												Discount rate						16.5% - 28.2%						21.8%
												Projected fiscal year of payment						2025 - 2029						2027
Product development and other milestone-based payments						$67												Discount rate						5.5%						5.5%
												Projected fiscal year of payment						2025 - 2027						2025

(1) Unobservable inputs were weighted by the relative fair value of the contingent consideration liability. For projected fiscal year of payment, the amount represents the median of the inputs and is not a weighted average.

On April 1, 2023, the Company and DaVita Inc. (“DaVita”) completed the transaction for the Company to sell half of its Renal Care Solutions (RCS) business. In connection with the sale, the Company may be entitled to receive additional consideration based on the achievement of certain revenue, regulatory, and profitability milestones, with potential payouts starting in fiscal year 2026 through 2029. The fair value of the contingent consideration receivable at July 26, 2024 and April 26, 2024 was $58 million, and was recorded in other assets in the consolidated balance sheet.

The following table provides a reconciliation of the beginning and ending balances of the Level 3 measurement of contingent consideration receivable:

			Three months ended
(in millions)			July 26, 2024						July 28, 2023
Beginning balance			$	58					$	195
Change in fair value			—						(43)
Ending balance			$	58					$	152

5. Restructuring and Other Costs

For the three months ended July 26, 2024 and July 28, 2023, the Company incurred $62 million and $91 million, respectively, of restructuring and associated costs primarily related to employee termination benefits and facility consolidations to support cost reduction initiatives.

Employee-related costs primarily consist of termination benefits provided to employees who have been involuntarily terminated. Associated and other costs primarily include salaries and wages of employees that are fully-dedicated to restructuring activities, consulting expenses, and asset write-offs.

The following table presents the classification of restructuring and associated costs in the consolidated statements of income:

			Three months ended
(in millions)			July 26, 2024						July 28, 2023
Cost of products sold			$	9					$	16
Selling, general, and administrative expenses			5						21
Restructuring charges, net			47						54
Total restructuring and associated costs			$	62					$	91

Medtronic plc

Notes to Consolidated Financial Statements

(Unaudited)

The following table summarizes the activity for the three months ended July 26, 2024:

(in millions)			Employee Termination Benefits						Associated and Other Costs																		Total
April 26, 2024			$	136					$	11																	$	147
Charges			56						15																		71
Cash payments			(71)						(17)																		(87)
Settled non-cash			—						(3)																		(3)
Accrual adjustments(1)			(9)						—																		(9)
July 26, 2024			$	113					$	6																	$	119

(1)Accrual adjustments primarily relate to certain employees identified for termination, finding other positions within the Company.

Medtronic plc

Notes to Consolidated Financial Statements

(Unaudited)

6. Financial Instruments

Debt Securities

The Company holds investments in marketable debt securities that are classified and accounted for as available-for-sale and are remeasured on a recurring basis. The following tables summarize the Company's investments in available-for-sale debt securities by significant investment category and the related consolidated balance sheet classification at July 26, 2024 and April 26, 2024:

			July 26, 2024
			Valuation																								Balance Sheet Classification
(in millions)			Cost						Unrealized Gains						Unrealized Losses						Fair Value						Investments						Other Assets
Level 1:
U.S. government and agency securities			$	462					$	—					$	(14)					$	448					$	448					$	—
Level 2:
Corporate debt securities			3,597						10						(83)						3,524						3,524						—
U.S. government and agency securities			852						—						(33)						818						818						—
Mortgage-backed securities			729						3						(37)						695						695						—
Non-U.S. government and agency securities			5						—						—						5						5						—
Other asset-backed securities			1,006						5						(3)						1,007						1,007						—
Total Level 2			6,189						18						(158)						6,050						6,050						—
Level 3:
Auction rate securities			36						—						(3)						33						—						33
Total available-for-sale debt securities			$	6,687					$	18					$	(174)					$	6,531					$	6,498					$	33

			April 26, 2024
			Valuation																								Balance Sheet Classification
(in millions)			Cost						Unrealized Gains						Unrealized Losses						Fair Value						Investments						Other Assets
Level 1:
U.S. government and agency securities			$	494					$	—					$	(22)					$	472					$	472					$	—
Level 2:
Corporate debt securities			3,953						4						(125)						3,832						3,832						—
U.S. government and agency securities			847						—						(43)						804						804						—
Mortgage-backed securities			692						1						(50)						643						643						—
Non-U.S. government and agency securities			5						—						—						5						5						—
Other asset-backed securities			941						2						(9)						934						934						—
Total Level 2			6,438						7						(227)						6,218						6,218						—
Level 3:
Auction rate securities			36						—						(3)						33						—						33
Total available-for-sale debt securities			$	6,968					$	7					$	(252)					$	6,723					$	6,690					$	33

The amortized cost of debt securities excludes accrued interest, which is reported in other current assets in the consolidated balance sheets.

Medtronic plc

Notes to Consolidated Financial Statements

(Unaudited)

The following tables present the gross unrealized losses and fair values of the Company’s available-for-sale debt securities that have been in a continuous unrealized loss position deemed to be temporary, aggregated by investment category at July 26, 2024 and April 26, 2024:

			July 26, 2024
			Less than 12 months												More than 12 months
(in millions)			Fair Value						Unrealized Losses						Fair Value						Unrealized Losses
Corporate debt securities			$	658					$	(10)					$	1,780					$	(74)
U.S. government and agency securities			144						(2)						700						(45)
Mortgage-backed securities			—						—						510						(37)
Other asset-backed securities			—						—						248						(3)
Auction rate securities			—						—						33						(3)
Total			$	803					$	(12)					$	3,272					$	(162)

			April 26, 2024
			Less than 12 months												More than 12 months
(in millions)			Fair Value						Unrealized Losses						Fair Value						Unrealized Losses
Corporate debt securities			$	661					$	(10)					$	2,448					$	(116)
U.S. government and agency securities			177						(4)						730						(61)
Mortgage-backed securities			—						—						582						(50)
Other asset-backed securities			—						—						502						(9)
Auction rate securities			—						—						33						(3)
Total			$	838					$	(14)					$	4,296					$	(238)

The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the ability to observe valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. There were no transfers into or out of Level 3 during the three months ended July 26, 2024 and July 28, 2023. When a determination is made to classify an asset or liability within Level 3, the determination is based upon the significance of the unobservable inputs to the overall fair value measurement.

Activity related to the Company’s available-for-sale debt securities portfolio is as follows:

			Three months ended
(in millions)			July 26, 2024						July 28, 2023
Proceeds from sales			$	2,157					$	1,747
Gross realized gains			7						5
Gross realized losses			(7)						(12)

The contractual maturities of available-for-sale debt securities at July 26, 2024 is shown in the following table. Within the table, maturities of mortgage-backed securities have been allocated based upon timing of estimated cash flows assuming no change in the current interest rate environment. Actual maturities may differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties.

(in millions)			Amortized Cost						Fair Value
Due in one year or less			$	1,462					$	1,450
Due after one year through five years			3,431						3,326
Due after five years through ten years			685						681
Due after ten years			1,109						1,074
Total			$	6,687					$	6,531

Interest income is recognized in other non-operating income, net, in the consolidated statements of income. During the three months ended July 26, 2024 and July 28, 2023, there was $112 million and $111 million of interest income, respectively.

Medtronic plc

Notes to Consolidated Financial Statements

(Unaudited)

Equity Securities, Equity Method Investments, and Other Investments

The Company holds investments in equity securities with readily determinable fair values, equity method investments for which the Company has elected the fair value option, equity investments without readily determinable fair values, investments accounted for under the equity method, and other investments. Equity securities with readily determinable fair values are included in Level 1 of the fair value hierarchy, as they are measured using quoted market prices. Equity method investments for which the Company has elected the fair value option are included within Level 3 of the fair value hierarchy due to the use of significant unobservable inputs to determine fair value. To determine the fair value of these investments, the Company uses a discounted cash flow methodology, taking into consideration various assumptions including discount rate, and all pertinent financial information available related to the investees, including the timing of anticipated product launches, historical financial results, and projections of future cash flows. Equity investments that do not have readily determinable fair values, and that are not accounted for via the fair value option, are included within Level 3 of the fair value hierarchy, as they are measured using the measurement alternative at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer.

The following table summarizes the Company's equity and other investments at July 26, 2024 and April 26, 2024, which are classified as primarily other assets in the consolidated balance sheets:

(in millions)						July 26, 2024						April 26, 2024
Investments with readily determinable fair value (marketable equity securities)						$	45					$	28
Investments for which the fair value option has been elected						311						311
Investments without readily determinable fair values						860						859
Equity method and other investments						89						84
Total equity and other investments						$	1,305					$	1,282

Gains and losses on the Company's portfolio of equity and other investments are recognized in other non-operating income, net in the consolidated statements of income. During the three months ended July 26, 2024, there were $17 million of net unrealized gains on equity securities and other investments still held at July 26, 2024. During the three months ended July 28, 2023, there were $64 million of net unrealized losses on equity securities and other investments still held at July 28, 2023.

Mozarc Medical Investment

As further described in Note 4, on April 1, 2023, the Company sold half of its RCS business to Mozarc, and as a result of the transaction the Company retained a 50 percent equity interest in Mozarc. Although the equity investment provides the Company with the ability to exercise significant influence over Mozarc, the Company has elected the fair value option to account for this equity investment. The Company believes the fair value option best reflects the economics of the underlying transaction.

Under the fair value option, changes in the fair value of the investment are recognized through earnings each reporting period in other non-operating income, net in the consolidated statements of income. During the three months ended July 26, 2024 and July 28, 2023, the change in fair value was insignificant.

7. Financing Arrangements

Commercial Paper

The Company maintains commercial paper programs that allow the Company to issue U.S. dollar or Euro-denominated unsecured commercial paper notes. The aggregate amount outstanding at any time under the commercial paper programs may not exceed the equivalent of $3.5 billion. Commercial paper outstanding at July 26, 2024 was $449 million. During the three months ended July 26, 2024, the commercial paper outstanding had a weighted average original maturity of 16 days and a weighted average interest rate of 5.50 percent. Commercial paper outstanding at April 26, 2024 was $1.1 billion. During fiscal year 2024, the weighted average original maturity of the commercial paper outstanding was approximately 20 days and the weighted average interest rate was 5.45 percent. The issuance of commercial paper reduces the amount of credit available under the Company’s existing Credit Facility, as defined below.

Line of Credit

The Company has a $3.5 billion five-year unsecured revolving credit facility (Credit Facility), which provides back-up funding for the commercial paper programs described above. The Credit Facility includes a multi-currency borrowing feature for certain specified foreign currencies. At July 26, 2024 and April 26, 2024, no amounts were outstanding under the Credit Facility.

Medtronic plc

Notes to Consolidated Financial Statements

(Unaudited)

Interest rates on advances on the Credit Facility are determined by a pricing matrix, based on the Company’s long-term debt ratings, assigned by Standard & Poor’s Ratings Services and Moody’s Investors Service. Facility fees are payable on the Credit Facility and are determined in the same manner as the interest rates. The Company is in compliance with the covenants under the Credit Facility.

Debt Obligations

The Company's debt obligations consisted of the following:

(in millions)						Maturity by Fiscal Year						July 26, 2024						April 26, 2024
Current debt obligations						2025 - 2026						$	1,553					$	1,092
Long-term debt
0.250 percent six-year 2019 senior notes						2026						—						1,070
2.625 percent three-year 2022 senior notes						2026						543						535
0.000 percent five-year 2020 senior notes						2026						1,085						1,070
1.125 percent eight-year 2019 senior notes						2027						1,628						1,606
4.250 percent five-year 2023 senior notes						2028						1,000						1,000
3.000 percent six-year 2022 senior notes						2029						1,085						1,070
0.375 percent eight-year 2020 senior notes						2029						1,085						1,070
3.650 percent five-year 2024 senior notes						2030						922						—
1.625 percent twelve-year 2019 senior notes						2031						1,085						1,070
1.000 percent twelve-year 2019 senior notes						2032						1,085						1,070
3.125 percent nine-year 2022 senior notes						2032						1,085						1,070
0.750 percent twelve-year 2020 senior notes						2033						1,085						1,070
4.500 percent ten-year 2023 senior notes						2033						1,000						1,000
3.375 percent twelve-year 2022 senior notes						2035						1,085						1,070
4.375 percent twenty-year 2015 senior notes						2035						1,932						1,932
3.875 percent twelve-year 2024 senior notes						2037						922						—
6.550 percent thirty-year 2007 CIFSA senior notes						2038						253						253
2.250 percent twenty-year 2019 senior notes						2039						1,085						1,070
6.500 percent thirty-year 2009 senior notes						2039						158						158
1.500 percent twenty-year 2019 senior notes						2040						1,085						1,070
5.550 percent thirty-year 2010 senior notes						2040						224						224
1.375 percent twenty-year 2020 senior notes						2041						1,085						1,070
4.500 percent thirty-year 2012 senior notes						2042						105						105
4.000 percent thirty-year 2013 senior notes						2043						305						305
4.150 percent nineteen-year 2024 senior notes						2044						651						—
4.625 percent thirty-year 2014 senior notes						2044						127						127
4.625 percent thirty-year 2015 senior notes						2045						1,813						1,813
1.750 percent thirty-year 2019 senior notes						2050						1,085						1,070
1.625 percent thirty-year 2020 senior notes						2051						1,085						1,070
4.150 percent twenty-nine-year 2024 senior notes						2054						760						—
Finance lease obligations						2026 - 2036						52						55
Deferred financing costs						2026 - 2054						(129)						(110)
Debt discount, net						2026 - 2054						(60)						(55)
Total long-term debt												$	26,312					$	23,932

Medtronic plc

Notes to Consolidated Financial Statements

(Unaudited)

During the three months ended July 26, 2024 and July 28, 2023, there was $217 million and $197 million, respectively, of interest expense on outstanding borrowings, including amortization of debt issuance costs and debt discounts and premiums, recognized in interest expense, net in the consolidated statements of income.

Senior Notes

The Company has outstanding unsecured senior obligations, described as senior notes in the tables above (collectively, the Senior Notes). The Senior Notes rank equally with all other unsecured and unsubordinated indebtedness of the Company. The Company is in compliance with all covenants related to the Senior Notes.

On June 3, 2024, Medtronic Inc. issued four tranches of EUR-denominated Senior Notes with an aggregate principal of €3.0 billion, with maturities ranging from fiscal year 2030 to 2054, resulting in cash proceeds of approximately $3.2 billion, net of discounts and issuance costs. In anticipation of the Euro-denominated debt issuance, the Company entered into forward currency exchange rate contracts to manage the exposure to exchange rate movements. These contracts were settled in conjunction with the issuance of the June 2024 Notes.

Financial Instruments Not Measured at Fair Value

At July 26, 2024, the estimated fair value of the Company’s Senior Notes was $25.1 billion compared to a principal value of $27.5 billion. At April 26, 2024, the estimated fair value was $21.2 billion compared to a principal value of $24.0 billion. The fair value was estimated using quoted market prices for the publicly registered Senior Notes, which are classified as Level 2 within the fair value hierarchy. The fair values and principal values consider the terms of the related debt and exclude the impacts of debt discounts and hedging activity.

8. Derivatives and Currency Exchange Risk Management

The Company uses derivative instruments and foreign currency denominated debt to manage the impact that currency exchange rate and interest rate changes have on reported financial statements. The Company does not enter into derivative contracts for speculative purposes.

Fair Value Hedges

Beginning in the first quarter of fiscal year 2025, the Company began using foreign currency forward contracts designated as fair value hedges to manage its exposure to changes in the fair value of its fixed-rate debt obligation.

At inception, foreign currency forward contracts are designated as fair value hedges. Changes in the fair value of these derivatives are reported as a component of other operating expense, net. Amounts excluded from the assessment of effectiveness are recognized in interest expense, net on a straight-line basis over the term of the hedge. During the three months ended July 26, 2024, after-tax unrealized gains related to included components in other operating expense, net were not significant*.* During the three months ended July 26, 2024, amounts related to excluded components that are amortized in interest expense, net over the life of the hedging instrument were not significant. Cash flows related to the Company's derivative instruments designated as fair value hedges are reported as financing activities in the consolidated statements of cash flows. Cash flows attributed to amounts excluded from the assessment of effectiveness are reported as operating activities in the consolidated statements of cash flows.

Cash Flow Hedges

The Company uses foreign currency forward and option contracts designated as cash flow hedges to manage its exposure to the variability of future cash flows that are denominated in a foreign currency.

At inception, foreign currency forward and option contracts are designated as cash flow hedges. Changes in the fair value of these derivatives are reported as a component of accumulated other comprehensive loss until the hedged transaction affects earnings. When the hedged transaction affects earnings, the gain or loss on the derivative is reclassified to earnings. Amounts excluded from the measurement of hedge effectiveness are recognized in earnings on a straight-line basis over the term of the hedge. Cash flows are reported as operating activities in the consolidated statements of cash flows.

The Company's cash flow hedges will mature within the subsequent three-year period. At July 26, 2024 and April 26, 2024, the Company had $165 million and $229 million in after-tax unrealized gains, respectively, associated with cash flow hedging instruments recorded in accumulated other comprehensive loss. The Company expects that $121 million of after-tax net unrealized gains at July 26, 2024 will be recognized in the consolidated statements of income over the next 12 months.

Net Investment Hedges

The Company uses derivative instruments and foreign currency denominated debt to manage foreign currency risk associated with its net investment in foreign operations. The derivative instruments that the Company uses for this purpose may include foreign currency forward exchange contracts used on a standalone basis or in combination with option collars and standalone cross currency interest rate contracts.

Medtronic plc

Notes to Consolidated Financial Statements

(Unaudited)

For instruments that are designated as net investment hedges, the gains or losses are reported as a component of accumulated other comprehensive loss. The gains or losses are reclassified into earnings upon a liquidation event or deconsolidation of the foreign subsidiary. Amounts excluded from the assessment of effectiveness are recognized in interest expense, net on a straight-line basis over the term of the hedge. During the three months ended July 26, 2024 and July 28, 2023, the Company recognized $50 million and $49 million, respectively, in after-tax unrealized gains representing excluded components in interest expense, net. The cash flows related to the Company's derivative instruments designated as net investment hedges are reported as investing activities in the consolidated statements of cash flows. Cash flows attributable to amounts excluded from the assessment of effectiveness are reported as operating activities in the consolidated statements of cash flows.

Undesignated Derivatives

The Company uses foreign currency forward exchange contracts to offset the Company’s exposure to the change in the value of non-functional currency denominated assets, liabilities, and cash flows.

These foreign currency forward exchange rate contracts are not designated as hedges at inception, and therefore, changes in the fair value of these contracts are recognized in the consolidated statements of income. Cash flows related to the Company’s undesignated derivative contracts are reported in the consolidated statements of cash flows based on the nature of the derivative instrument.

Outstanding Instruments

The following table presents the contractual amounts of the Company's outstanding instruments:

									As of
(in billions)			Designation						July 26, 2024						April 26, 2024
Currency exchange rate contracts(1)			Fair value hedge						$	1.1					$	—
Currency exchange rate contracts			Cash flow hedge						11.3						10.4
Currency exchange rate contracts(2)			Net investment hedge						7.5						7.4
Foreign currency-denominated debt(3)			Net investment hedge						19.5						17.1
Currency exchange rate contracts			Undesignated						5.0						5.9

(1)At July 26, 2024, includes derivative contracts with a notional value of €1.0 billion, or $1.1 billion, designated as hedges of a portion of our fixed-rate debt obligations.

(2)At July 26, 2024, includes derivative contracts with a notional value of €5.0 billion, or $5.4 billion, designated as hedges of a portion of our net investment in certain European operations and derivative contracts with a notional value of ¥322.2 billion, or $2.1 billion, designated as hedges of a portion of our net investment in certain Japanese operations. These derivative contracts mature in fiscal years 2025 through 2033.

(3)At July 26, 2024, includes €18.0 billion, or $19.5 billion, of outstanding Euro-denominated debt designated as hedges of a portion our net investment in foreign operations. This debt matures in fiscal years 2026 through 2054.

Medtronic plc

Notes to Consolidated Financial Statements

(Unaudited)

Gains and Losses on Hedging Instruments and Derivatives not Designated as Hedging Instruments

The amount of the gains and losses on hedging instruments and the classification of those gains and losses within our consolidated financial statements for the three months ended July 26, 2024 and July 28, 2023 were as follows:

			(Gain) Loss Recognized in Accumulated Other Comprehensive Loss																								(Gain) Loss Reclassified into Income
			Three months ended																		Three months ended																		Location of (Gain) Loss in Income Statement
(in millions)			July 26, 2024						July 28, 2023																		July 26, 2024						July 28, 2023
Fair value hedges
Currency exchange rate contracts			$	—					$	—																	$	(1)					$	—																	Other operating expense, net
Cash flow hedges
Currency exchange rate contracts			43						(4)																		(36)						(51)																		Other operating expense, net
Currency exchange rate contracts			(20)						(33)																		(17)						(5)																		Cost of products sold
Net investment hedges
Foreign currency-denominated debt			246						114																		—						—																		N/A
Currency exchange rate contracts			(41)						30																		—						—																		N/A
Total			$	229					$	106																	$	(55)					$	(56)

The amount of the gains and losses on our derivative instruments not designated as hedging instruments and the classification of those gains and losses within our consolidated financial statements during the three months ended July 26, 2024 and July 28, 2023 were as follows:

			(Gain) Loss Recognized in Income
			Three months ended																		Location of (Gain) Loss in Income Statement
(in millions)			July 26, 2024						July 28, 2023
Currency exchange rate contracts			$	(8)					$	(2)																	Other operating expense, net

Balance Sheet Presentation

The following tables summarize the balance sheet classification and fair value of derivative instruments included in the consolidated balance sheets at July 26, 2024 and April 26, 2024. The fair value amounts are presented on a gross basis, and are segregated between derivatives that are designated and qualify as hedging instruments and those that are not designated and do not qualify as hedging instruments, and are further segregated by type of contract within those two categories.

			Fair Value - Assets																		Fair Value - Liabilities
(in millions)			July 26, 2024						April 26, 2024						Balance Sheet Classification						July 26, 2024						April 26, 2024						Balance Sheet Classification
Derivatives designated as hedging instruments
Currency exchange rate contracts			$	320					$	368					Other current assets						$	58					$	37					Other accrued expenses
Currency exchange rate contracts			309						276						Other assets						26						17						Other liabilities
Total derivatives designated as hedging instruments			629						644												84						54
Derivatives not designated as hedging instruments
Currency exchange rate contracts			24						15						Other current assets						14						12						Other accrued expenses
Total return swaps			15						—						Other current assets						—						—						Other accrued expenses
Total derivatives not designated as hedging instruments			39						15												14						12
Total derivatives			$	668					$	659											$	98					$	66

Medtronic plc

Notes to Consolidated Financial Statements

(Unaudited)

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

			July 26, 2024												April 26, 2024
(in millions)			Derivative Assets						Derivative Liabilities												Derivative Assets						Derivative Liabilities
Level 1			$	653					$	98											$	659					$	66
Level 2			15						—												—						—
Total			$	668					$	98											$	659					$	66

The Company has elected to present the fair value of derivative assets and liabilities within the consolidated balance sheets on a gross basis, even when derivative transactions are subject to master netting arrangements and may otherwise qualify for net presentation. The cash flows related to collateral posted and received are reported gross as investing and financing activities, respectively, in the consolidated statements of cash flows.

The following tables provide information as if the Company had elected to offset the asset and liability balances of derivative instruments, netted in accordance with various criteria as stipulated by the terms of the master netting arrangements with each of the counterparties. Derivatives not subject to master netting arrangements are not eligible for net presentation.

						July 26, 2024
												Gross Amount Not Offset on the Balance Sheet
(in millions)						Gross Amount of Recognized Assets (Liabilities)						Financial Instruments						Cash Collateral (Received) Posted												Net Amount
Derivative assets:
Currency exchange rate contracts						$	653					$	(98)					$	(92)											$	462
Total return swaps						15						—						—												15
						668						(98)						(92)												477
Derivative liabilities:
Currency exchange rate contracts						(98)						98						—												—
Total						$	569					$	—					$	(92)											$	477

						April 26, 2024
												Gross Amount Not Offset on the Balance Sheet
(in millions)						Gross Amount of Recognized Assets (Liabilities)						Financial Instruments						Cash Collateral (Received) Posted												Net Amount
Derivative assets:
Currency exchange rate contracts						$	659					$	(66)					$	(101)											$	492
Derivative liabilities:
Currency exchange rate contracts						(66)						66						—												—
Total						$	593					$	—					$	(101)											$	492

9. Inventories

Inventory balances were as follows:

(in millions)			July 26, 2024						April 26, 2024
Finished goods			$	3,732					$	3,668
Work-in-process			696						642
Raw materials			986						907
Total			$	5,414					$	5,217

Medtronic plc

Notes to Consolidated Financial Statements

(Unaudited)

10. Goodwill and Other Intangible Assets

Goodwill

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

(in millions)			Cardiovascular						Neuroscience						Medical Surgical						Diabetes						Total
April 26, 2024			$	7,966					$	11,644					$	19,121					$	2,255					$	40,986
Currency translation and other			11						10						77						—						99
July 26, 2024			$	7,977					$	11,654					$	19,198					$	2,255					$	41,084

As further described in Note 19, the Company had changes to the operating segments and goodwill reporting units during the fourth quarter of fiscal year 2024. For further information on the reporting unit changes, refer to Note 9 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended April 26, 2024. No goodwill impairment was recognized during the three months ended July 26, 2024 and July 28, 2023.

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

			July 26, 2024												April 26, 2024
(in millions)			Gross Carrying Amount						Accumulated Amortization						Gross Carrying Amount						Accumulated Amortization
Definite-lived:
Customer-related			$	16,524					$	(8,929)					$	16,518					$	(8,689)
Purchased technology and patents			11,559						(7,037)						11,557						(6,868)
Trademarks and tradenames			424						(277)						424						(274)
Other			255						(87)						256						(84)
Total			$	28,762					$	(16,329)					$	28,755					$	(15,915)
Indefinite-lived:
IPR&D			$	385					$	—					$	385					$	—

The Company did not recognize any definite-lived or indefinite-lived intangible asset impairment charges during the three months ended July 26, 2024 and July 28, 2023. Due to the nature of IPR&D projects, the Company may experience future delays or failures to obtain regulatory approvals to conduct clinical trials, failures of clinical trials, delays or failures to obtain required market clearances, other failures to achieve a commercially viable product, or the discontinuation of certain projects, and as a result, may recognize impairment losses in the future.

Amortization Expense

Intangible asset amortization expense for the three months ended July 26, 2024 and July 28, 2023 was $414 million and $429 million, respectively. Estimated aggregate amortization expense by fiscal year based on the carrying value of definite-lived intangible assets at July 26, 2024, excluding any possible future amortization associated with acquired IPR&D which has not yet met technological feasibility, is as follows:

(in millions)			Amortization Expense
Remaining 2025			$	1,227
2026			1,626
2027			1,603
2028			1,552
2029			1,476
2030			1,344

11. Income Taxes

The Organization for Economic Co-operation and Development (OECD) published Pillar Two Model Rules defining the global minimum tax, which calls for the taxation of large multinational corporations at a minimum rate of 15% in each jurisdiction in which the group

Medtronic plc

Notes to Consolidated Financial Statements

(Unaudited)

operates. The OECD has since issued administrative guidance providing transition and safe harbor rules around the implementation of the Pillar Two global minimum tax. A number of countries, including Ireland, have enacted legislation to implement the core elements of Pillar Two, which are effective for the Company in fiscal year 2025. We will continue to monitor the impacts of further legislation, regulatory guidance, and regulations issued in the countries in which we do business.

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 first quarter of fiscal year 2024 and has filed an appeal with the Supreme Court of Israel.

The Company's effective tax rate for the three months ended July 26, 2024 was 17.4%, as compared to 33.4% for the three months ended July 28, 2023. The decrease in the effective tax rate primarily relates to an income tax reserve adjustment made during the three months ended July 28, 2023 associated with the Medtronic Ventor Technologies Ltd court decision and year-over-year changes in operational results by jurisdiction, which were partially offset by the impact of the Pillar Two global minimum tax for the three months ended July 26, 2024.

At both July 26, 2024 and April 26, 2024, the Company's gross unrecognized tax benefits were $2.8 billion. In addition, the Company had accrued gross interest and penalties that were not significant at July 26, 2024. If all of the Company’s unrecognized tax benefits were recognized, approximately $2.7 billion would impact the Company’s effective tax rate. At both July 26, 2024 and April 26, 2024, the amount of the Company's gross unrecognized tax benefits, net of cash advance, recorded as a noncurrent liability within accrued income taxes on the consolidated balance sheets was $1.8 billion. The Company recognizes interest and penalties related to income tax matters within income tax provision in the consolidated statements of income and records the liability within either current or noncurrent accrued income taxes on the consolidated balance sheets.

Refer to Note 16 to the consolidated financial statements for additional information regarding the status of current tax audits and proceedings.

12. Earnings Per Share

Basic earnings per share is computed based on the weighted average number of ordinary shares outstanding. Diluted earnings per share is computed based on the weighted number of ordinary shares outstanding, increased by the number of additional shares that would have been outstanding had the potentially dilutive ordinary shares been issued, and reduced by the number of shares the Company could have repurchased with the proceeds from issuance of the potentially dilutive shares. Potentially dilutive ordinary shares include stock-based awards granted under stock-based compensation plans and shares committed to be purchased under the employee stock purchase plan.

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

			Three months ended
(in millions, except per share data)			July 26, 2024						July 28, 2023
Numerator:
Net income attributable to ordinary shareholders			$	1,042					$	791
Denominator:
Basic – weighted average shares outstanding			1,293.3						1,330.5
Effect of dilutive securities:
Employee stock options			0.5						1.2
Employee restricted stock units			2.0						1.7
Employee performance share units			0.8						0.3
Diluted – weighted average shares outstanding			1,296.5						1,333.8
Basic earnings per share			$	0.81					$	0.59
Diluted earnings per share			$	0.80					$	0.59

The calculation of weighted average diluted shares outstanding excludes options to purchase approximately 27 million and 22 million ordinary shares for the three months ended July 26, 2024 and July 28, 2023, respectively, because their effect would have been anti-dilutive on the Company’s earnings per share.

Medtronic plc

Notes to Consolidated Financial Statements

(Unaudited)

13. Stock-Based Compensation

The following table presents the components and classification of stock-based compensation expense for stock options, restricted stock, performance share units, and employee stock purchase plan shares recognized for the three months ended July 26, 2024 and July 28, 2023:

			Three months ended
(in millions)			July 26, 2024						July 28, 2023
Stock options			$	13					$	12
Restricted stock			43						38
Performance share units			15						12
Employee stock purchase plan			12						11
Total stock-based compensation expense			$	83					$	73
Cost of products sold			$	9					$	7
Research and development expense			10						9
Selling, general, and administrative expense			64						58
Total stock-based compensation expense			83						73
Income tax benefits			(13)						(11)
Total stock-based compensation expense, net of tax			$	70					$	62

14. Retirement Benefit Plans

The Company sponsors various retirement benefit plans, including defined benefit pension plans, post-retirement medical plans, defined contribution savings plans, and termination indemnity plans, covering substantially all U.S. employees and many employees outside the U.S. The net periodic benefit cost of the defined benefit pension plans included the following components for the three months ended July 26, 2024 and July 28, 2023:

			U.S.												Non-U.S.
			Three months ended												Three months ended
(in millions)			July 26, 2024						July 28, 2023						July 26, 2024						July 28, 2023
Service cost			$	13					$	15					$	11					$	10
Interest cost			43						40						13						12
Expected return on plan assets			(66)						(65)						(17)						(17)
Amortization of prior service cost			(1)						(1)						—						—
Amortization of net actuarial loss			4						5						—						—
Net periodic benefit (credit) cost			$	(7)					$	(6)					$	7					$	5

Components of net periodic benefit (credit) cost other than the service component are recognized in other non-operating income, net in the consolidated statements of income.

Medtronic plc

Notes to Consolidated Financial Statements

(Unaudited)

15. Accumulated Other Comprehensive Loss

The following table provides changes in accumulated other comprehensive loss (AOCI), net of tax, and by component:

(in millions)			Unrealized (Loss) Gain on Investment Securities						Cumulative Translation Adjustments						Net Investment Hedges						Net Change in Retirement Obligations						Unrealized Gain (Loss) on Cash Flow Hedges						Total Accumulated Other Comprehensive (Loss) Income
April 26, 2024			$	(212)					$	(3,686)					$	878					$	(529)					$	229					$	(3,318)
Other comprehensive income (loss) before reclassifications			70						102						(206)						—						(27)						(60)
Reclassifications			6						—						—						1						(39)						(32)
Other comprehensive income (loss)			76						102						(206)						1						(66)						(92)
July 26, 2024			$	(136)					$	(3,584)					$	672					$	(529)					$	165					$	(3,410)
(in millions)			Unrealized (Loss) Gain on Investment Securities						Cumulative Translation Adjustments						Net Investment Hedges						Net Change in Retirement Obligations						Unrealized Gain (Loss) on Cash Flow Hedges						Total Accumulated Other Comprehensive (Loss) Income
April 28, 2023			$	(258)					$	(2,839)					$	245					$	(741)					$	93					$	(3,499)
Other comprehensive (loss) income before reclassifications			(28)						14						(143)						1						12						(144)
Reclassifications			8						—						—						2						(42)						(32)
Other comprehensive (loss) income			(19)						14						(143)						3						(30)						(175)
July 28, 2023			$	(277)					$	(2,825)					$	102					$	(738)					$	63					$	(3,674)

The income tax on gains and losses on investment securities in other comprehensive income before reclassifications during the three months ended July 26, 2024 and July 28, 2023, was an expense of $14 million and a benefit of $3 million, respectively. When realized, gains and losses on investment securities reclassified from AOCI are recognized within other non-operating income, net. Refer to Note 6 to the consolidated financial statements for additional information.

For the three months ended July 26, 2024 and July 28, 2023, there was no income tax on cumulative translation adjustment.

The income tax on net investment hedges in other comprehensive income before reclassifications during the three months ended July 26, 2024 was a benefit of $4 million. During the three months ended July 28, 2023, there were no tax impacts on net investment hedges.

The net change in retirement obligations in other comprehensive income includes amortization of net actuarial losses included in net periodic benefit cost. During the three months ended July 26, 2024 and July 28, 2023, there were no tax impacts on retirement obligations. During the three months ended July 26, 2024, the gains and losses on defined benefit and pension items reclassified from AOCI were reduced by an insignificant amount of income taxes. During the three months ended July 28, 2023, the gains and losses on defined benefit and pension items reclassified from AOCI were reduced by income taxes of $1 million. When realized, net gains and losses on defined benefit and pension items reclassified from AOCI are recognized within other non-operating income, net. Refer to Note 14 to the consolidated financial statements for additional information.

The income tax on unrealized gains and losses on cash flow hedges in other comprehensive income before reclassifications during the three months ended July 26, 2024 and July 28, 2023, was an expense of $3 million and $25 million, respectively. During the three months ended July 26, 2024 and July 28, 2023, gains and losses on cash flow hedges reclassified from AOCI were reduced by income taxes of $14 million and $13 million, respectively. When realized, gains and losses on currency exchange rate contracts reclassified from AOCI are recognized within other operating expense, net or cost of products sold. Refer to Note 8 to the consolidated financial statements for additional information.

16. Commitments and Contingencies

Legal Matters

The Company and its affiliates are involved in a number of legal actions from time to time involving product liability, employment, intellectual property and commercial disputes, shareholder related matters, environmental proceedings, tax disputes, and governmental proceedings and investigations, including those described below. With respect to governmental proceedings and investigations, like other companies in our industry, the Company is subject to extensive regulation by national, state, and local governmental agencies in the United States and in other jurisdictions in which the Company and its affiliates operate. As a result, interaction with governmental agencies is

Medtronic plc

Notes to Consolidated Financial Statements

(Unaudited)

ongoing. The Company’s standard practice is to cooperate with regulators and investigators in responding to inquiries. The outcomes of legal actions are not within the Company’s complete control and may not be known for prolonged periods of time. In some actions, the enforcement agencies or private claimants seek damages, as well as other civil or criminal remedies (including injunctions barring the sale of products that are the subject of the proceeding), that could require significant expenditures, result in lost revenues, or limit the Company's ability to conduct business in the applicable jurisdictions.

The Company records a liability in the consolidated financial statements on an undiscounted basis for loss contingencies related to legal actions when a loss is known or considered probable and the amount may be reasonably estimated. If the reasonable estimate of a known or probable loss is a range, and no amount within the range is a better estimate than any other, the minimum amount of the range is accrued. If a loss is reasonably possible but not known or probable, and may be reasonably estimated, the estimated loss or range of loss is disclosed. When determining the estimated loss or range of loss, significant judgment is required. Estimates of probable losses resulting from litigation and governmental proceedings involving the Company are inherently difficult to predict, particularly when the matters are in early procedural stages with incomplete scientific facts or legal discovery, involve unsubstantiated or indeterminate claims for damages, potentially involve penalties, fines or punitive damages, or could result in a change in business practice. The Company classifies certain specified litigation charges and gains related to significant legal matters as certain litigation charges, net in the consolidated statements of income. The Company recognized $81 million and $40 million of certain litigation charges during the three months ended July 26, 2024, and July 28, 2023, respectively. At July 26, 2024 and April 26, 2024, accrued litigation was approximately $0.3 billion and $0.2 billion, respectively. The ultimate cost to the Company with respect to accrued litigation could be materially different than the amount of the current estimates and accruals and could have a material adverse impact on the Company’s consolidated earnings, financial position, and/or cash flows. The Company includes accrued litigation in other accrued expenses and other liabilities on the consolidated balance sheets. While it is not possible to predict the outcome for most of the legal matters discussed below, the Company believes it is possible that the costs associated with these matters could have a material adverse impact on the Company’s consolidated earnings, financial position, and/or cash flows.

Intellectual Property Matters

At any given time, the Company is involved in litigation relating to patents, trademarks, copyrights, trade secrets, and other intellectual property (IP) rights, and licenses, acquisitions or other agreements relating to such rights. This litigation includes, but is not limited to, alleged infringement or misappropriation of IP rights, or breach of obligations related to IP rights, or other claims asserted by competitors, individuals, or, consistent with a growing trend across technology-intensive industries, other entities created specifically to fund IP litigation. While the outcome of these litigation matters is inherently uncertain, it is possible that the results of such litigation could require the Company to pay significant monetary damages and/or royalty payments, and negatively impact the Company's ability to sell current or future products, which could have a material adverse impact on the Company's business, results of operations, financial condition, and cash flows.

Colibri

The Company is a defendant in patent litigation brought by Colibri Heart Valve LLC (Colibri) in the U.S. District Court for the Central District of California. Colibri alleges infringement of one patent by the Company’s Evolut family of transcatheter aortic valve replacement devices. The patent asserted by Colibri has expired. On February 8, 2023, a jury returned a verdict against the Company for approximately $106 million. In July 2023, the Company filed its appeal with the U.S. Court of Appeals for the Federal Circuit. The Company has not recognized an expense in connection with this matter because it does not currently believe a loss is probable.

Product Liability Matters

Hernia Mesh Litigation

Starting in fiscal year 2020, plaintiffs began filing lawsuits against certain subsidiaries of the Company in U.S. state and federal courts that allege personal injury from hernia mesh products sold by those subsidiaries. As of August 1, 2024, the Company and certain of its subsidiaries have been named as defendants in lawsuits filed on behalf of approximately 8,600 individual plaintiffs, and certain plaintiffs’ law firms have advised the Company that they may file additional cases in the future. Approximately 6,800 plaintiffs have pending lawsuits in a coordinated proceeding in Massachusetts state court, where they have been consolidated before a single judge. Approximately 500 plaintiffs have pending lawsuits in a coordinated action in Minnesota state court, and there are approximately 1,350 actions coordinated in a federal Multidistrict Litigation in the U.S. District Court for the District of Massachusetts plus six one-off cases filed in other courts. The pending lawsuits relate almost entirely to hernia mesh products that have not been subject to recalls, withdrawals, or other adverse regulatory action. The Company has not recorded an expense related to damages in connection with these matters because any potential loss is not currently probable and reasonably estimable. Additionally, the Company is unable to reasonably estimate the range of loss, if any, that may result from these matters.

Medtronic plc

Notes to Consolidated Financial Statements

(Unaudited)

Diabetes Pump Retainer Ring Litigation

Starting in fiscal year 2021, plaintiffs began filing lawsuits against the Diabetes operating unit in U.S. state and federal courts alleging personal injury from Series 600 insulin pumps with allegedly defective clear retainer rings that were subject to field corrective actions in 2019 and 2021. As of July 26, 2024, 26 lawsuits have been filed on behalf of a total of 106 individual plaintiffs, and certain plaintiffs’ law firms have notified the Company that they may file additional lawsuits in the future on behalf of thousands of additional claimants. Most of the filed suits are coordinated in California state court. The Company has not recorded an expense related to damages in connection with these matters because any potential loss is not currently probable and reasonably estimable. Additionally, the Company is unable to reasonably estimate the range of loss, if any, that may result from these matters.

Environmental Proceedings

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

The Company is also a successor to a party named in a lawsuit filed in the U.S. District Court for the District of Maine in the early 2000's by the Natural Resources Defense Council and the Maine People's Alliance relating to mercury contamination of the Penobscot River and Bay and options for remediating such contamination. In March 2021, the parties notified the court that they had agreed on a settlement in principle of all issues in this matter, and in September 2022 the parties filed a joint motion for final approval by the court. In October 2022, the court issued a final order approving the settlement and the parties are working with consultants on implementation of remedial activities. The final court order did not result in a change to the Company's previous accrual for this matter.

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

Anti-Corruption Matters

The Company has regular and ongoing interactions with governmental agencies, and its practice is to cooperate with such inquiries. In addition, from time to time, the Company self-discloses potential concerns to governmental regulators. Like many in the medical device industry or with international operations, the Company engages in periodic discussions with the U.S. Securities and Exchange Commission, U.S. Department of Justice, and various authorities in China regarding certain activities, including in China. The Company is committed to regularly evaluating and, as appropriate, strengthening its anti-corruption compliance programs and practices. Any possible future determination that certain of our operations and activities, and/or those of our third-party distributors, are not in compliance with existing laws could result in the imposition of fines, penalties, and equitable remedies in the United States or in other jurisdictions. The Company has not recorded an expense in connection with these matters because any potential loss is not currently probable and reasonably estimable. Additionally, the Company is unable to reasonably estimate the range of loss, if any, that may result from these matters.

Other Matters

Italian Payback

In 2015, “payback” legislation was enacted in Italy requiring companies selling medical devices to make payments to the Italian state if Italy’s medical device expenditures exceed annual regional maximum ceilings. The payment amounts are calculated based upon the amount by which the regional ceilings were exceeded for any given year. There has been significant scrutiny on the legality and enforceability of the payback law since its inception, and litigation challenging the law has been proceeding through the Italian Courts. Since the law was enacted, the Company has recognized an estimate for the amount of variable consideration but has not made any payments under the payback law. In July 2024, two rulings by the Constitutional Court of Italy found that the medical device payback law is constitutional. Therefore, the Company increased its liability pertaining primarily to certain prior years since 2015 by $90 million during the three months ended July 26, 2024, as a reduction to net sales in the consolidated statements of income. As litigation before Italian Courts is still pending, final resolution is unknown at this time, and it is possible that the amount of the Company’s liability could differ from the amount currently accrued.

Income Taxes

In March 2009, the IRS issued its audit report on Medtronic, Inc. for fiscal years 2005 and 2006. Medtronic, Inc. reached agreement with the IRS on some, but not all matters related to these fiscal years. The remaining unresolved issue for fiscal years 2005 and 2006 relates to the allocation of income between Medtronic, Inc. and its wholly-owned subsidiary operating in Puerto Rico, which is one of the Company's key manufacturing sites. The U.S. Tax Court (Tax Court) reviewed this dispute, and in June 2016, issued an opinion with respect to the allocation of income between the parties for fiscal years 2005 and 2006 whereby it generally rejected the IRS’s position, but also made

Medtronic plc

Notes to Consolidated Financial Statements

(Unaudited)

certain modifications to the Medtronic, Inc. tax returns as filed. In April 2017, the IRS filed a Notice of Appeal to the U.S. Court of Appeals for the Eighth Circuit regarding the Tax Court opinion. The U.S. Court of Appeals issued its opinion in August 2018 and remanded the case back to the Tax Court for additional factual findings. The Tax Court issued its second opinion in August 2022, the IRS filed a Notice of Appeal to the U.S. Court of Appeals for the Eighth Circuit in September 2023, and Medtronic subsequently filed a cross-appeal in October 2023.

The IRS has issued its audit reports on Medtronic, Inc. for fiscal years 2007 through 2016. Medtronic, Inc. and the IRS have reached agreement on all significant issues except for the allocation of income between Medtronic, Inc. and its wholly-owned subsidiary operating in Puerto Rico for the businesses that are the subject of the U.S. Tax Court matter for fiscal years 2005 and 2006.

Medtronic, Inc.’s fiscal years 2017, 2018, and 2019 U.S. federal income tax returns are currently being audited by the IRS.

Covidien LP (a wholly owned subsidiary of Medtronic plc) has either reached agreement with the IRS or the statute of limitations has lapsed on its U.S. federal income tax returns through fiscal year 2020.

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

Refer to Note 11 for additional discussion of income taxes.

Guarantees

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

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

17. Segment and Geographic Information

Segment disclosures are on a performance basis consistent with internal management reporting. Net sales of the Company's reportable segments include end-customer revenues from the sale of products the segment develops, manufactures, and distributes. The Company’s management evaluates performance of the segments and allocates resources based on net sales and segment operating profit. Segment operating profit represents income before income taxes, excluding interest income or expense, amortization of intangible assets, centralized distribution costs, currency impact of remeasurement and hedging, non-operating income or expense items, certain corporate charges, stock-based compensation, and other items not allocated to the segments.

The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies in Note 1 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended April 26, 2024. Certain depreciable assets may be recorded by one segment, while the depreciation expense is allocated to another segment. The allocation of depreciation expense is based on the proportion of the assets used by each segment.

There have been no changes to reportable segments during the quarter ended July 26, 2024. We continue to have four reportable segments: Cardiovascular Portfolio, Neuroscience Portfolio, Medical Surgical Portfolio, and Diabetes Operating Unit. Prior period amounts have been recast to conform to the new operating segment structure in the fourth quarter of fiscal year 2024. For further information on the operating segment structure changes, refer to Note 19 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended April 26, 2024.

Medtronic plc

Notes to Consolidated Financial Statements

(Unaudited)

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

Segment Operating Profit

			Three months ended
(in millions)			July 26, 2024						July 28, 2023
Cardiovascular			$	1,125					$	1,092
Neuroscience			961						929
Medical Surgical			690						726
Diabetes			102						84
Reportable segment operating profit			2,878						2,831
Other operating segment(1)			13						(3)
Corporate			(455)						(447)
Interest expense, net			(167)						(148)
Other non-operating income, net			157						76
Amortization of intangible assets			(414)						(429)
Stock-based compensation			(83)						(73)
Centralized distribution costs			(394)						(395)
Currency(2)			(6)						(3)
Restructuring and associated costs			(62)						(91)
Acquisition and divestiture-related items			(12)						(50)
Certain litigation charges, net			(81)						(40)
Medical device regulations			(14)						(31)
Other adjustments(3)			(90)						—
Income before income taxes			$	1,268					$	1,196

(1)Includes the historical operations and ongoing transition agreements from businesses the Company has exited or divested.

(2)Includes the net impact of remeasurement and the Company's hedging programs recorded in other operating expense, net.

(3)Incremental Italian payback accruals resulting from the two July 22, 2024 rulings by the Constitutional Court of Italy relating to certain prior years since 2015.

Geographic Information

Net sales are attributed to the country based on the location of the customer taking possession of the products or in which the services are rendered. The following table presents net sales for the three months ended July 26, 2024 and July 28, 2023 for the Company's country of domicile, countries with significant concentrations, and all other countries:

			Three months ended
(in millions)			July 26, 2024						July 28, 2023
Ireland			$	30					$	29
United States			4,082						3,924
Rest of world			3,803						3,749
Total other countries, excluding Ireland			7,885						7,673
Total			$	7,915					$	7,702