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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
July 29, 2022
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
For the transition period from __________ to __________
Commission File Number 001-36820
mdt-20220729_g1.jpg®
Medtronic plc
(Exact name of registrant as specified in its charter)
  
Ireland98-1183488
(State of incorporation)(I.R.S. Employer
Identification No.)
20 On Hatch, Lower Hatch Street
Dublin 2, Ireland
(Address of principal executive offices) (Zip Code)
+353 1 438-1700
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Ordinary shares, par value $0.0001 per shareMDTNew York Stock Exchange
0.00% Senior Notes due 2022MDT/22BNew York Stock Exchange
0.375% Senior Notes due 2023MDT/23BNew York Stock Exchange
0.000% Senior Notes due 2023MDT/23CNew York Stock Exchange
0.25% Senior Notes due 2025MDT/25New York Stock Exchange
0.000% Senior Notes due 2025MDT/25ANew York Stock Exchange
1.125% Senior Notes due 2027MDT/27New York Stock Exchange
0.375% Senior Notes due 2028MDT/28New York Stock Exchange
1.625% Senior Notes due 2031MDT/31New York Stock Exchange
1.00% Senior Notes due 2031MDT/31ANew York Stock Exchange
0.750% Senior Notes due 2032MDT/32New York Stock Exchange
2.250% Senior Notes due 2039MDT/39ANew York Stock Exchange
1.50% Senior Notes due 2039MDT/39BNew York Stock Exchange
1.375% Senior Notes due 2040MDT/40ANew York Stock Exchange
1.75% Senior Notes due 2049MDT/49New York Stock Exchange
1.625% Senior Notes due 2050MDT/50New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes No



Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filerEmerging growth company
Non-accelerated filerSmaller Reporting Company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 1(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes No
As of August 29, 2022, 1,329,153,289 ordinary shares, par value $0.0001, of the registrant were outstanding.









PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
Medtronic plc
Consolidated Statements of Income
(Unaudited)
 Three months ended
(in millions, except per share data)July 29, 2022July 30, 2021
Net sales$7,371 $7,987 
Costs and expenses:  
Cost of products sold, excluding amortization of intangible assets2,516 2,598 
Research and development expense692 750 
Selling, general, and administrative expense2,567 2,547 
Amortization of intangible assets423 436 
Restructuring charges, net14 11 
Certain litigation charges, net 26 
Other operating expense, net35 760 
Operating profit1,125 859 
Other non-operating income, net(83)(111)
Interest expense164 137 
Income before income taxes1,044 833 
Income tax provision112 64 
Net income931 769 
Net income attributable to noncontrolling interests(2)(6)
Net income attributable to Medtronic$929 $763 
Basic earnings per share$0.70 $0.57 
Diluted earnings per share$0.70 $0.56 
Basic weighted average shares outstanding1,329.4 1,344.5 
Diluted weighted average shares outstanding1,334.5 1,356.4 

The accompanying notes are an integral part of these consolidated financial statements.
1


Medtronic plc
Consolidated Statements of Comprehensive Income
(Unaudited)
 Three months ended
(in millions)July 29, 2022July 30, 2021
Net income$931 $769 
Other comprehensive income (loss), net of tax:  
Unrealized (loss) gain on investment securities (16)12 
Translation adjustment(884)(355)
Net investment hedge1,002 424 
Net change in retirement obligations1 19 
Unrealized gain on cash flow hedges220 174 
Other comprehensive income324 274 
Comprehensive income including noncontrolling interests1,255 1,043 
Comprehensive income attributable to noncontrolling interests (4)
Comprehensive income attributable to Medtronic$1,255 $1,039 

The accompanying notes are an integral part of these consolidated financial statements.
2


Medtronic plc
Consolidated Balance Sheets
(Unaudited)
(in millions)July 29, 2022April 29, 2022
ASSETS  
Current assets:  
Cash and cash equivalents$2,140 $3,714 
Investments6,733 6,859 
Accounts receivable, less allowances and credit losses of $219 and $230, respectively
5,308 5,551 
Inventories, net4,809 4,616 
Other current assets3,145 2,318 
Total current assets22,135 23,059 
Property, plant, and equipment13,323 13,365 
Accumulated depreciation(8,043)(7,952)
Property, plant, and equipment, net5,281 5,413 
Goodwill40,324 40,502 
Other intangible assets, net15,775 15,595 
Tax assets3,311 3,403 
Other assets3,088 3,008 
Total assets$89,914 $90,981 
LIABILITIES AND EQUITY 
Current liabilities: 
Current debt obligations$5,729 $3,742 
Accounts payable2,180 2,276 
Accrued compensation1,773 2,121 
Accrued income taxes549 704 
Other accrued expenses3,816 3,551 
Total current liabilities14,049 12,394 
Long-term debt17,481 20,372 
Accrued compensation and retirement benefits1,102 1,113 
Accrued income taxes2,102 2,087 
Deferred tax liabilities899 884 
Other liabilities1,440 1,410 
Total liabilities37,071 38,260 
Commitments and contingencies (Note 16)
Shareholders’ equity: 
Ordinary shares— par value $0.0001, 2.6 billion shares authorized, 1,329,276,973 and 1,330,743,395 shares issued and outstanding, respectively
  
Additional paid-in capital24,335 24,566 
Retained earnings30,276 30,250 
Accumulated other comprehensive loss(1,939)(2,265)
Total shareholders’ equity52,672 52,551 
Noncontrolling interests170 171 
Total equity52,843 52,722 
Total liabilities and equity$89,914 $90,981 
The accompanying notes are an integral part of these consolidated financial statements.
3


Medtronic plc
Consolidated Statements of Equity
(Unaudited)
Ordinary SharesAdditional Paid-in CapitalRetained
Earnings
Accumulated
Other
Comprehensive
Loss
Total
 Shareholders’
 Equity
Noncontrolling InterestsTotal Equity
(in millions)NumberPar Value
April 29, 20221,331 $ $24,566 $30,250 $(2,265)$52,551 $171 $52,722 
Net income— — — 929 — 929 2 931 
Other comprehensive income (loss)— — — — 326 326 (2)324 
Dividends to shareholders ($0.68 per ordinary share)
— — — (903)— (903)— (903)
Issuance of shares under stock purchase and award plans2 — 41 — — 41 — 41 
Repurchase of ordinary shares(3)— (333)— — (333)— (333)
Stock-based compensation— — 62 — — 62 — 62 
July 29, 20221,329 $ $24,335 $30,276 $(1,939)$52,672 $170 $52,843 

Ordinary SharesAdditional Paid-in CapitalRetained
Earnings
Accumulated
Other
Comprehensive
Loss
Total
 Shareholders’
 Equity
Noncontrolling InterestsTotal Equity
(in millions)NumberPar Value
April 29, 20211,345 $ $26,319 $28,594 $(3,485)$51,428 $174 $51,602 
Net income— — — 763 — 763 6 769 
Other comprehensive income (loss)— — — — 276 276 (2)274 
Dividends to shareholders ($0.63 per ordinary share)
— — — (846)— (846)— (846)
Issuance of shares under stock purchase and award plans2 — 107 — — 107 — 107 
Repurchase of ordinary shares(2)— (311)— — (311)— (311)
Stock-based compensation— — 69 — — 69 — 69 
July 30, 20211,345 $ $26,184 $28,511 $(3,209)$51,486 $178 $51,664 

The accompanying notes are an integral part of these consolidated financial statements.
4


Medtronic plc
Consolidated Statements of Cash Flows
(Unaudited)
 Three months ended
(in millions)July 29, 2022July 30, 2021
Operating Activities:  
Net income$931 $769 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization668 671 
Provision for credit losses15 15 
Deferred income taxes(18)(11)
Stock-based compensation62 69 
Loss on debt extinguishment53  
MCS asset impairment and inventory write-down 515 
Other, net121 116 
Change in operating assets and liabilities, net of acquisitions and divestitures:  
Accounts receivable, net89 (40)
Inventories, net(380)(75)
Accounts payable and accrued liabilities(147)(416)
Other operating assets and liabilities(311)(321)
Net cash provided by operating activities1,083 1,292 
Investing Activities:  
Acquisitions, net of cash acquired(1,191) 
Additions to property, plant, and equipment(426)(378)
Purchases of investments(1,884)(2,654)
Sales and maturities of investments1,886 2,324 
Other investing activities, net30 (76)
Net cash used in investing activities(1,585)(784)
Financing Activities:  
Proceeds from short-term borrowings (maturities greater than 90 days)2,284  
Payments on long-term debt(2,311)(1)
Dividends to shareholders(903)(846)
Issuance of ordinary shares43 111 
Repurchase of ordinary shares(336)(315)
Other financing activities273 (4)
Net cash used in financing activities(950)(1,055)
Effect of exchange rate changes on cash and cash equivalents(122)(42)
Net change in cash and cash equivalents(1,574)(589)
Cash and cash equivalents at beginning of period3,714 3,593 
Cash and cash equivalents at end of period$2,140 $3,004 
Supplemental Cash Flow Information  
Cash paid for:  
Income taxes$260 $249 
Interest68 63 
The accompanying notes are an integral part of these consolidated financial statements.
5

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 COVID-19 pandemic ("COVID-19" or the "pandemic") has had, and may continue to have, an adverse effect on our business, results of operations, financial condition, and cash flows, and its future impacts remain uncertain and unpredictable. While there was not a material impact to the Company’s consolidated financial statements as of and for the three months ended July 29, 2022, changes in the Company’s assessment about the length and severity of the pandemic, as well as other factors, could result in actual results differing from 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 29, 2022. The Company’s fiscal years 2023, 2022, and 2021 will end or ended on April 28, 2023, April 29, 2022, and April 30, 2021, respectively. Fiscal year 2021 was a 53-week year.
2. New Accounting Pronouncements
Recently Adopted
For the three months ended July 29, 2022, there were no newly adopted accounting pronouncements that had a material impact to our consolidated financial statements. As of July 29, 2022, there are no recently issued but not yet adopted accounting pronouncements that are expected to materially impact our consolidated financial statements.
3. Revenue
The Company's revenues are principally derived from device-based medical therapies and services related to cardiac rhythm disorders, cardiovascular disease, renal disease, neurological disorders and diseases, spinal conditions and musculoskeletal trauma, chronic pain, urological and digestive disorders, ear, nose, and throat conditions, and diabetes conditions as well as advanced and general surgical care products, respiratory and monitoring solutions, and neurological surgery technologies. The Company's primary customers include healthcare systems, clinics, third-party healthcare providers, distributors, and other institutions, including governmental healthcare programs and group purchasing organizations.
6

Medtronic plc
Notes to Consolidated Financial Statements
(Unaudited)


The table below illustrates net sales by segment and division for the three months ended July 29, 2022 and July 30, 2021:
 
Three months ended
(in millions)July 29, 2022July 30, 2021
Cardiac Rhythm & Heart Failure $1,393 $1,483 
Structural Heart & Aortic741 787 
Coronary & Peripheral Vascular 579 620 
Cardiovascular 2,713 2,890 
Surgical Innovations1,338 1,554 
Respiratory, Gastrointestinal, & Renal664 768 
Medical Surgical 2,001 2,322 
Cranial & Spinal Technologies1,043 1,123 
Specialty Therapies667 641 
Neuromodulation405 440 
Neuroscience 2,115 2,204 
Diabetes 541 572 
Total$7,371 $7,987 

The table below illustrates net sales by market geography for each segment for the three months ended July 29, 2022 and July 30, 2021:
 
U.S.(1)
Non-U.S. Developed Markets(2)
Emerging Markets(3)
Three months endedThree months endedThree months ended
(in millions)July 29, 2022July 30, 2021July 29, 2022July 30, 2021July 29, 2022July 30, 2021
Cardiovascular $1,298 $1,420 $892 $1,003 $523 $467 
Medical Surgical 843 990 767 869 392 463 
Neuroscience 1,419 1,446 407 465 290 293 
Diabetes 206 245 264 263 72 63 
Total$3,766 $4,101 $2,328 $2,601 $1,276 $1,286 
(1)U.S. includes the United States and U.S. territories.
(2)Non-U.S. developed markets include Japan, Australia, New Zealand, Korea, Canada, and the countries within Western Europe.
(3)Emerging markets include the countries of the Middle East, Africa, Latin America, Eastern Europe, and the countries of Asia that are not included in the non-U.S. developed markets, as defined above.
The 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 29, 2022, $955 million of rebates were classified as other accrued expenses, and $576 million of rebates were classified as a reduction of accounts receivable in the consolidated balance sheet. At April 29, 2022, $981 million of rebates were classified as other accrued expenses, and $548 million of rebates were classified as a reduction of accounts receivable in the consolidated balance sheet.
Deferred Revenue and Remaining Performance Obligations
The Company records a deferred revenue liability if a customer pays consideration, or the Company has the right to invoice, before the Company transfers a good or service to the customer. Deferred revenue at July 29, 2022 and April 29, 2022 was $391 million and $399 million, respectively. At July 29, 2022 and April 29, 2022, $302 million and $305 million was included in other accrued expenses, respectively, and $90 million and $94 million was included in other liabilities, respectively. During the three months ended July 29, 2022, the Company recognized $87 million of revenue that was included in deferred revenue as of April 29, 2022.
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 29, 2022, 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 $801 million. The Company expects to recognize revenue on the majority of these remaining performance obligations over the next three years.
7

Medtronic plc
Notes to Consolidated Financial Statements
(Unaudited)


4. Acquisitions and Assets and Liabilities Held for Sale
During the three months ended July 29, 2022, the Company had acquisitions that were accounted for as business combinations. The assets and liabilities of the businesses acquired were recorded and consolidated on the acquisition date at their respective fair values. Goodwill resulting from business combinations is largely attributable to future, yet to be defined technologies, new customer relationships, existing workforce of the acquired businesses, and synergies expected to arise after the Company's acquisition of these businesses. The pro forma impact of these acquisitions was not significant, either individually or in the aggregate, to the consolidated results of the Company for the three months ended July 29, 2022. The results of operations of acquired businesses have been included in the Company's consolidated statements of income since the date each business was acquired. For the three months ended July 29, 2022 and July 30, 2021, purchase price allocation adjustments were not significant.
Fiscal Year 2023
Intersect ENT
On May 13, 2022, the Company acquired Intersect ENT, a global ear, nose, and throat (ENT) medical technology leader. The acquisition expands the Neuroscience segment portfolio of products used during ENT procedures, and combined with the Company's navigation, powered instruments, and existing tissue health products, will offer a broader suite of solutions to assist surgeons treating patients who suffer from chronic rhinosinusitis (CRS). Total consideration, net of cash acquired, for the transaction, in which the Company acquired all outstanding shares of Intersect ENT for $28.25 per share, was $1.2 billion consisting of $1.1 billion of cash and $98 million previously held investments in Intersect ENT. Based upon a preliminary acquisition valuation, the Company acquired $615 million of goodwill, $635 million of technology-based intangible assets, $35 million of customer-related intangible assets, and $13 million of tradenames with estimated useful lives of 20 years. The goodwill is not deductible for tax purposes.
Revenue and net loss attributable to Intersect ENT since the date of acquisition as well as costs incurred in connection with the acquisition included in the consolidated statements of income were not significant for the three months ended July 29, 2022.
The acquisition date fair values of the assets acquired and liabilities assumed were as follows:
(in millions)Intersect ENT
Cash and cash equivalents$39 
Inventory32 
Goodwill615 
Other intangible assets683 
Other assets40 
Total assets acquired1,408 
 
Current liabilities63 
Deferred tax liabilities51 
Other liabilities18 
Total liabilities assumed131 
Net assets acquired$1,277 
8

Medtronic plc
Notes to Consolidated Financial Statements
(Unaudited)


Other acquisitions
For acquisitions other than Intersect ENT, the acquisition date fair value of net assets acquired during the three months ended July 29, 2022 was $123 million. Based upon preliminary valuations, assets acquired were primarily comprised of $66 million of goodwill and $57 million of technology-based intangible assets with estimated useful lives of 16 years. The goodwill is deductible for tax purposes. The Company recognized $73 million of contingent consideration liabilities in connection with these acquisitions during the three months ended July 29, 2022, which are comprised of revenue and regulatory milestone-based payments.
Subsequent Acquisitions
Subsequent to July 29, 2022, on August 30, 2022 the Company acquired Affera, Inc. (Affera) a privately-held manufacturer of cardiac mapping and navigation systems and catheter-based cardiac ablation technologies. The acquisition expands the Cardiovascular segment portfolio of advanced cardiac ablation products and accessories to include its first cardiac mapping and navigation platform to meet physician needs within a growing patient population. Total consideration for the transaction is up to $1.0 billion, including up to $250 million of undiscounted contingent consideration related to certain technical and regulatory milestones. The transaction will be accounted for as a business combination using the acquisition method of accounting. This requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date.
Due to the limited amount of time since the acquisition date and the significant limitations on access to Affera information prior to the acquisition date, the preliminary acquisition valuation for the business combination is incomplete at this time. As a result, the Company is unable to provide the amounts recognized as of the acquisition date for the major classes of assets acquired and liabilities assumed, including the information required for valuation of intangible assets and goodwill. We will include such disclosures in our Form 10-Q for the quarter ending October 28, 2022.
Acquired In-Process Research & Development (IPR&D)
IPR&D with no alternative future use acquired outside of a business combination is expensed immediately. During the three months ended July 29, 2022, IPR&D acquired in connection with asset acquisitions of technology not yet approved by regulators was not significant. During the three months ended July 30, 2021, the Company acquired $90 million of IPR&D in connection with asset acquisitions of technology not yet approved by regulators, which was recognized in research and development expense in the consolidated statements of income.
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 at July 29, 2022 and April 29, 2022 was $193 million and $119 million, respectively. At July 29, 2022, $64 million was recorded in other accrued expenses, and $129 million was recorded in other liabilities in the consolidated balance sheet. At April 29, 2022, $35 million was recorded in other accrued expenses, and $84 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:
 Three months ended
(in millions)July 29, 2022July 30, 2021
Beginning balance$119 $270 
Purchase price contingent consideration73  
Purchase price allocation adjustments 25 
Payments (11)
Change in fair value2 10 
Ending balance$193 $294 
9

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 29, 2022Unobservable InputRange
Weighted Average (1)
Revenue and other performance-based payments$143Discount rate
11.2% - 27.2%
15.0%
Projected fiscal year of payment2023 - 20272025
Product development and other milestone-based payments$50Discount rate
5.5%
5.5%
Projected fiscal year of payment2023 - 20242023
(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.
Assets and Liabilities Held for Sale
On May 25, 2022, the Company and DaVita Inc. (“DaVita”) entered into a definitive agreement for the Company to sell half of its Renal Care Solutions (RCS) business. This sale is part of an agreement between Medtronic and DaVita to form a new, independent kidney care-focused medical device company (“NewCo”) with equal equity ownership. As a result of entering into the definitive agreement, the RCS business met the criteria to be classified as held for sale on the date the agreement was entered into. The transaction is expected to close in calendar year 2023, subject to customary regulatory approvals and closing conditions. RCS is part of the Company’s Medical Surgical portfolio. The Company recorded a non-cash pre-tax impairment of $67 million, primarily related to goodwill, in the three months ending July 29, 2022 recognized in other operating expense, net in the consolidated statements of income. Refer to Note 10 to the consolidated financial statements for additional information on the goodwill impairment.
The following table presents information related to the assets and liabilities that were classified as held for sale in our consolidated balance sheet:
(in millions)July 29, 2022
Inventories, net$119 
Property, plant, and equipment, net141 
Goodwill147 
Other intangible assets, net114 
Other48 
Total assets held for sale (1)
$568 
 
Total liabilities held for sale (1)(2)
$38 
(1) Total assets held for sale and total liabilities held for sale are reported in other current assets and other accrued expenses, respectively in the consolidated balance sheets.
(2) No separate class of liability classified as held for sale was individually significant enough for separate disclosure.
There were no assets or liabilities classified as held for sale at April 29, 2022. The Company determined that the agreement to sell half of the RCS business does not meet the criteria to be classified as discontinued operations.
10

Medtronic plc
Notes to Consolidated Financial Statements
(Unaudited)


5. Restructuring and Other Costs
Enterprise Excellence
In the third quarter of fiscal year 2018, the Company announced its Enterprise Excellence restructuring program. Further program details are described in Note 4 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended April 29, 2022.

Since inception, the Company has incurred pre-tax exit and disposal costs and other costs, across all segments, of $1.6 billion in connection with the Enterprise Excellence program. In total, the Company estimates it will recognize approximately $1.8 billion of exit and disposal costs and other costs related to the program by the end of fiscal year 2023. The remaining charges are costs associated with the restructuring program, such as salaries and benefits for employees supporting the program, including program management and transition teams, and strategic and operational consulting services related to the three objectives of the program. These charges are recognized within restructuring charges, net, cost of products sold, and selling, general, and administrative expense in the consolidated statements of income.
For the three months ended July 29, 2022, the Company recognized net charges of $40 million, of which $19 million was recognized within cost of products sold and $28 million was recognized within selling, general, and administrative expense in the consolidated statements of income. For the three months ended July 30, 2021, the Company recognized net charges of $74 million, of which $33 million were recognized within cost of products sold and $30 million were recognized within selling, general, and administrative expense in the consolidated statements of income.
Simplification
In the first quarter of fiscal year 2021, the Company initiated the Simplification restructuring program. Further program details are described in Note 4 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended April 29, 2022.
Since inception, the Company has incurred pre-tax exit and disposal costs and other costs, across all segments, of $385 million in connection with the Simplification program. In total, the Company estimates it will recognize approximately $450 million of exit and disposal costs and other costs related to the Simplification program by the end of fiscal year 2023. The remaining charges are costs associated with the restructuring program, such as salaries for employees supporting the program and consulting expenses. These charges are recognized within restructuring charges, net, cost of products sold, and selling, general, and administrative expense in the consolidated statements of income.
For the three months ended July 29, 2022, the Company recognized net charges of $36 million of which $13 million were recognized within selling, general, and administrative expense in the consolidated statements of income. For the three months ended July 30, 2021, the Company recognized net charges of $7 million which were all recognized within selling, general, and administrative expense in the consolidated statements of income.
The following table summarizes the activity related to the restructuring programs above for the three months ended July 29, 2022:
(in millions)Employee Termination Benefits
Associated Costs(1)
Other
Costs
Total
April 29, 2022$81 $27 $1 $110 
Charges23 61 1 85 
Cash payments(26)(75)(1)(103)
Accrual adjustments(2)
(9)  (9)
July 29, 2022$69 $13 $1 $83 
(1) Associated costs include costs incurred as a direct result of the restructuring program, such as salaries for employees supporting the program and consulting expenses.
(2) Accrual adjustments relate to certain employees identified for termination finding other positions within the Company.
11

Medtronic plc
Notes to Consolidated Financial Statements
(Unaudited)


Mechanical Circulatory Support (MCS)
In June 2021, the Company announced the decision to stop the distribution and sale of the Medtronic HVAD System in light of a growing body of observational clinical comparisons indicating a lower frequency of neurological adverse events and mortality with another circulatory support device available to patients compared to the HVAD system. In connection with this decision, the Company recorded charges of $726 million (MCS charges) within the Cardiovascular segment during the three months ended July 30, 2021, including $58 million recognized in costs of products sold and $668 million recognized within other operating expense, net in the consolidated statement of income. The charges included $515 million of non-cash impairments and write-downs primarily related to $409 million of intangible asset impairments and $58 million of inventory write-downs. The Company also recorded charges of $211 million for commitments and obligations associated with the decision, which included charges for patient support obligations, restructuring, and other associated costs. During the fourth quarter of fiscal year 2022, the Company recorded additional charges of $155 million within other operating expense, net primarily related to incremental commitments and obligations associated with the exit of the business. As of July 29, 2022, accruals were recorded in the consolidated balance sheet for these obligations, with $81 million reflected in other accrued expenses and $136 million recorded in other liabilities. Medtronic remains committed to serving the needs of the approximately 3,200 patients currently implanted with the HVAD system.
12

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 29, 2022 and April 29, 2022:
    
July 29, 2022
ValuationBalance Sheet Classification
(in millions)CostUnrealized
Gains
Unrealized
Losses
Fair ValueInvestmentsOther Assets
Level 1:
U.S. government and agency securities$532 $1 $(13)$520 $520 $ 
Level 2:
Corporate debt securities4,339 4 (156)4,186 4,186  
U.S. government and agency securities928  (37)891 891  
Mortgage-backed securities573  (38)