Medtronic Annual Report 2016

FY2016 Annual Report · Medtronic

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Annual Report

SEC 10-K Filing for Fiscal Year 2016

Fiscal Year 2016

Dear Shareholder,

Fiscal year 2016 marked my fifth full year at Medtronic, and I am pleased with the progress we have made to take healthcare
Further, Together. We remain committed to and are incredibly inspired by our Mission: to alleviate pain, restore health and
extend life for people around the world. To achieve this, we have had a steady, relentless focus on three core growth strategies:

•

(cid:129)

Therapy Innovation: Creating meaningful product and service innovations that improve people’s lives;
Globalization: Expanding our offerings and presence to serve more people, in more places around the world;
and,
Economic Value: Developing new solutions and value-based business models to improve outcomes for patients
while lowering costs.

We are convinced now, more than ever, that our talented, global team is well-positioned to help transform the healthcare
outcomes for millions of people through our continued innovation, as well as our size and scale.

As has been the case throughout our history, we expect that our focus on our Mission will translate into business growth and
strong returns for our shareholders.

AN ENDURING COMMITMENT TO MEANINGFUL INNOVATION

We continued to deliver market-leading innovations over the past year, driving business growth and improving people’s lives.

Our Cardiac & Vascular Group (CVG) introduced the Micra® Transcatheter Pacing System (TPS), the world’s smallest
pacemaker, to several markets around the world. At one-tenth the size of traditional pacemakers, Micra’s size, ease of implant,
and design that doesn’t require cardiac leads, marks a new standard in pacemaker technology. In addition, we are establishing a
strong leadership position in the fast-growing drug-coated balloon market through our product’s ease of deployment and its
differentiated clinical data. The IN.PACT® Admiral® Drug-Coated balloon (DCB) is a novel innovation to treat peripheral
vascular disease. The drug-coated balloon not only increases blood flow in an upper leg artery, but it also prevents the
re-narrowing of the artery from plaque build-up by releasing medication over time.

Our Minimally Invasive Therapies Group (MITG) portfolio spans the entire patient care continuum-from diagnosis to recovery.
We are driving the adoption of minimally invasive technologies to improve procedural performance and reduce complications
for patients. Examples include product introductions in our Advanced Stapling and Advanced Energy portfolio, including the
only surgical stapler with preloaded buttress material that provides improved ease of use and reduced waste in the operating
room; a new efficient, versatile and multifunctional option for one-step vessel sealing; and our next-generation energy platform,
which spans across all specialties that use energy-based devices, including gynecology, colorectal, bariatric, general, urological
and ENT. Innovations like these contributed to above-market performance in Surgical Solutions.

Our Diabetes Group’s ongoing commitment to the creation of a closed-loop system continued with several innovations in
glucose sensing and monitoring, and pump technologies. In FY16, our MiniMed® 640G System continued to gain acceptance in
markets outside the U.S. We also advanced our commitment to ongoing innovation with sensors and data systems with our
MiniMed® Connect system. We also announced several new partnerships to advance our capabilities. Most notably, we
announced a partnership with IBM’s Watson Health unit to pair Watson’s cognitive and predictive analytics capabilities with
our sensors, pumps and care support models. In early FY17, we received the exciting news that the FDA approved the
MiniMed® 670G system, the world’s first hybrid closed loop system. This important advancement enables personalized and
automated basal insulin delivery with reduced patient input, allowing patients to achieve greater glucose control while enjoying
improved quality of life.

The Restorative Therapies Group (RTG) introduced a number of new Spine technologies and also grew our leadership position
in the interventional stroke market through the broad adoption of our Solitaire™ System – a neurovascular therapy that is
defining an entirely new way of treating ischemic stroke patients and literally saving the lives of thousands of people around the
world.

We continued to add to our offerings with inorganic growth as well. In FY16, we completed 14 acquisitions totaling
$1.5 billion, adding a wealth of capability to our portfolio. For example, we acquired Bellco, an Italy-based pioneer in
hemodialysis treatment solutions for patients with end-stage renal disease. We also acquired Diabeter, based in the Netherlands,
which offers a combination of leading technology and care management services for patients with diabetes. These are just a
couple of examples of how we are expanding access and growing our expertise in comprehensive, value-based care models.

EXPANDING GLOBAL REACH AND GROWTH

Our commitment to globalization continues to drive growth and expand access to care. All of our four regions – Americas; Asia
Pacific; Europe, Middle East, & Africa (EMEA); and China – produced solid growth in FY16. Our regions continued to deliver
balanced growth across our major products and therapies, and each region identified novel approaches for expanding our
offerings through services, partnerships and market expansion.

In China, we have developed comprehensive partnerships with provincial bodies, like the Chengdu municipal government in the
province of Sichuan. We broadened our partnership with Chengdu, agreeing to manufacture our next-generation diabetes pump
technology in Chinese-language for the local market in Sichuan, while working with authorities to expand access for this
product. China continues to represent a tremendous growth opportunity. Over the long-term, we believe China will become our
largest healthcare market, serving more patients and doctors than any other country.

Further, we expanded our Integrated Health Solutions offering in Latin America when we acquired a majority stake in
Cardiored, a privately-held Chilean company and specialized cath lab managed services provider. Cardiored has long-term
agreements to operate 10 cardiovascular suites at nine private clinics throughout Chile. The addition of Cardiored assets further
expands and accelerates the adoption of our Integrated Health Solutions (IHS) model around the world. Our operational
efficiency services and solutions, including full operational management of cath labs and operating rooms, continues to garner
acceptance by our customers around the world and contribute to our overall growth.

FY16 FINANCIAL PERFORMANCE

Medtronic achieved total revenue of $28.8 billion in FY16, an all-time high. Our FY16 non-GAAP diluted earnings per share
(EPS) of $4.37, represented growth of 15 percent on a comparable, constant currency basis. We improved our operating margin
by 100 basis points, including 120 basis points of improvement in SG&A, both on a comparable constant currency basis. We
met or exceeded virtually every financial performance measure.

We increased our dividend substantially, by 25 percent, early in the fiscal year, our 38th consecutive year of growing our
dividend. We returned $4.5 billion to shareholders in the form of dividends and share repurchases, well above our minimum
commitment of 50 percent of free cash flow generated during the fiscal year. Also in FY16, through reorganization as part of
our Covidien integration efforts, we freed approximately $10 billion of cash on our balance sheet to deploy in the United States.
This cash increased our financial flexibility, allowing us to provide additional returns for our shareholders and pay down debt.

FY16 continued our track record of delivering consistent mid-single digit constant currency revenue growth and meeting or
exceeding our commitment to deliver EPS growth 2 to 4 percentage points faster than revenue growth, all on a comparable
constant currency basis. With every quarter, we are increasingly confident about the sustainability of this performance. While
we recognize that we still have a lot of work ahead of us, we are confident we can deliver on our revenue growth, integration
synergy, free cash flow generation and return, and EPS growth commitments.

Finally, in FY16, we communicated Gary Ellis’ decision to retire from Medtronic after 27 years of service to the company. Gary
has been our Chief Financial Officer for the past 11 years, and our growth and expansion over Gary’s tenure has been
tremendous. Gary has been a confidante and advisor to me and countless other leaders and employees across Medtronic.

To succeed Gary, I am pleased that we named Karen Parkhill as our new Executive Vice President and Chief Financial Officer
on June 20, 2016. Karen joined us from Comerica, Incorporated, where she was Vice Chairman and CFO. Karen is also a
member of the Board of Directors of Methodist Health system in Dallas. I am excited to have Karen join Medtronic, and know
she will bring tremendous leadership and experience to our team.

STRATEGY FOR LONG-TERM GROWTH & VALUE CREATION

As indicated above, we have focused intently over the past five years on therapy innovation, globalization and economic
value. We undertook the Covidien acquisition because we knew that it could enhance and accelerate all three of these growth
strategies.

To fully realize the potential of the Covidien acquisition, however, we also know that we must pay particular attention to
operating leverage and cash management. In the coming year, you will see us sharpen our focus on operational efficiency and
excellence. We have a number of ongoing efforts underway to streamline systems and operations, and we are confident they
will continue to help us deliver strong EPS growth over the coming years.

We are committed to consistently delivering mid-single digit constant currency revenue growth and double-digit constant
currency EPS growth, excluding the impact of any non-GAAP adjustments. This will result in substantial free cash flow
generation, of which we plan to return a minimum of 50 percent to shareholders.

We believe our meaningful innovation, unmatched breadth and scale, and margin expansion opportunities, as well as our cash
accessibility and disciplined capital deployment, result in a company of differentiated financial sustainability. Our diversified
revenue base, broad strategies for operating leverage and increased access to cash give us confidence that we can reliably
execute on our commitments to you, our shareholders.

Our Board of Directors has reviewed and approved our long-term strategies and commitments, and regularly reviews our
progress. In fact, our Board spends more than 50 percent of each board meeting discussing strategic topics. In addition to
ensuring that we benefit from a robust approach to corporate governance, our Board reviews the long-term strategic plans of
each of our business groups and regions, as well as corporate strategy themes such as capital allocation and value-based
healthcare.

GOING FURTHER, TOGETHER TO TRANSFORM HEALTHCARE

In the end, it is the impact on patients that drives our more than 88,000 employees around the world to come to work every
day. Currently, two people somewhere in the world benefit from a Medtronic therapy every second. By 2020, we estimate that
number could reach four patients every second – or more than 100 million new patients each year.

I continue to be pleased with the way Medtronic is growing and evolving, and leading the industry in many areas. Our collective
teamwork was instrumental in successfully navigating through another complex year. Our strong results would not have been
possible without the dedication, teamwork, and passion of our employees around the world.

We have undertaken a strategy to transform healthcare. We don’t take lightly the challenges this goal places on our
organization, and it has been amazing to see what our team has accomplished. We play as a team and are collaborating with our
partners in healthcare to serve millions of patients around the world, fulfilling the Medtronic Mission of alleviating pain,
restoring health, and extending life. We truly believe that our focus on partnership and collaboration will help take healthcare
Further, Together.

I remain grateful to our dedicated and passionate employees who have given me encouragement and unflinching support
throughout my time with the company. I couldn’t be more excited about the future and what we can achieve together.

Omar Ishrak
Chairman and Chief Executive Officer

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MEDTRONIC PLC
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSE (SG&A), RESEARCH AND DEVELOPMENT EXPENSE
(R&D), AND OTHER (INCOME) EXPENSE FOR NINE MONTHS ENDED JANUARY 23, 2015
(Unaudited)

(in millions)

Historical
Medtronic(1)

Historical
Covidien(2)

Reclassification
Adjustments(4)

Footnote
Reference

Net sales
Selling, general, and administrative expense

$ 12,957
4,644

$ 8,108
2,870

Research and development expense
Operating Profit

1,112
3,393

419
1,427

—
(48)
(66)
1
(9)
126
(181)
3
—

A
B
C
D
E
F
D

Adjustment
to Align
Fiscal
Months(3)

Combined

(127)
123

$ 20,938
7,460

2
(98)

1,536
4,722

(1)
(2)
(3)

(4)

For the nine months ended January 23, 2015
For the nine months ended December 26, 2014
Represents increase (decrease) in Covidien results for the nine months ended January 23, 2015 as compared to Covidien
results for the nine months ended December 26, 2014.
Certain reclassifications have been made to Covidien’s historical financial statements to conform to Medtronic’s
presentation, as follows:
A. To reclassify Covidien’s medical device excise tax from selling, general, and administrative expense to other expense
(income), net.
B. To reclassify Covidien’s amortization of definite-lived intangible assets from cost of products sold and selling,
general, and administrative expense to amortization of intangible assets.
C. To reclassify Covidien’s net gains and losses on foreign exchange transactions and related gains and losses on
associated hedge transactions from cost of products sold and selling, general, and administrative expense to other
expense (income), net.
D. To reclassify certain of Covidien’s stock-based compensation expense from selling, general, and administrative
expense to cost of products sold and research and development expense.
E. To reclassify certain of Covidien’s shipping and handling costs from cost of products sold to selling, general, and
administrative expense.
F. To reclassify Covidien’s litigation and environmental charges from selling, general, and administrative expense to
certain litigation charges, net.

MEDTRONIC PLC
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSE (SG&A), RESEARCH AND DEVELOPMENT EXPENSE
(R&D), AND OTHER (INCOME) EXPENSE FOR THE FISCAL YEAR ENDED APRIL 24, 2015
(Unaudited)

(in millions, except per share data)

Net sales

Selling, general, and administrative expense
Research and development expense

Operating Profit
Income from continuing operations per share

Diluted

Weighted average shares outstanding(3)

Diluted

Combined(1) Medtronic plc(2) Comparable

$ 20,938
7,460
1,536
4,722

7,304
2,772
528
373

$ 28,242
10,232
2,064
5,095

2.58

— $

2.57

1,438.2

1,440.6

1,438.4

(1)
(2)
(3)

Combined Medtronic, Inc. and Covidien plc results for the nine months ended January 23, 2015
Medtronic plc results for the three months ended April 24, 2015
Combined weighted average shares outstanding have been calculated as if the shares issued in conjunction with the
Covidien transaction had been issued and outstanding at April 26, 2014, the beginning of fiscal year 2015.

MEDTRONIC PLC
COMBINED NON-GAAP RECONCILIATION FOR THE FISCAL YEAR ENDED APRIL 24, 2015
(Unaudited)

(in millions, except per share
data)

Net Sales

Gross Margin
Percent

Selling, general,
and
administrative
expense
(SG&A)

SG&A expense
as a percent of
net sales

Operating
Profit

Operating

profit percent Diluted EPS(4)

28,242

67.8% $

10,232

36.2% 5,095

18.0%

2.57

Combined
Medtronic reported non-
GAAP adjustments(1)
Impact of inventory
step-up(a)
Impact of product
technology upgrade
commitment(b)
Special (gains) charges(c)
Restructuring charges,
net(d)
Certain litigation
charges, net(e)
Acquisition-related
items(f)
Certain tax
adjustments(g)

Covidien reported non-
GAAP adjustments(2)

Restructuring charges,
net(h)
Acquisition-related
costs(i)
Legal charge(j)
Impairment of in-
process research and
development(k)
Transaction costs(l)
Adjustment to gain on
divestiture(m)
Impact of tax sharing
agreement(n)
Tax matters(o)

As adjusted
Combined amortization of
intangible assets(5)

As adjusted, excluding
combined amortization of
intangible assets
(Combined Diluted EPS)(3)

—

—
—

—

—
—

—

—
—

—

—
38

—

(550)

—

(1)
—

(94)
(45)

—

—
—

—

623

74
(38)

252

550

—

13
181

94
45

96
—

28,242

70.3% $

9,580

33.9% 7,103

25.2%

0.32

0.04
(0.02)

0.13

0.02

0.30

0.24

0.04

0.01
0.09

0.05
0.03

—

0.07
(0.16)

3.73

0.47

—

28,242

925

8,028

28.4%

4.20

(1)

For the fiscal year ended April 24, 2015
(a) To exclude the step-up in fair value of inventory acquired in connection with the Covidien acquisition.
(b) To exclude the probable and reasonably estimable commitment related to a CRHF global comprehensive program for
home based monitors due to industry conversion from analog to digital technology.
(c) To exclude the impact of a charitable cash donation made to the Medtronic Foundation, a gain on divestiture
recognized in connection with the sale of a product line in the Surgical Technologies division, and a net gain recognized
in connection with the sale of a certain equity method investment.

(d) To exclude the impact of restructuring charges, net.
(e) To exclude the impact of certain litigation charges, net.
(f) To exclude the impact of acquisition-related items.
(g) To exclude tax expense primarily related to the anticipated resolution of the Kyphon acquisition-related issues with
the IRS.
For the nine months ended December 26, 2014
(h) To exclude the impact of restructuring charges, net.
(i) To exclude the impact of acquisition-related items.
(j) To exclude a legal charge resulting from an increase to Covidien’s estimated indemnification obligation for certain
products liability cases.
(k) To exclude the impairment of in-process research and development related to Covidien’s drug coated balloon
platform, which was sold in connection with Medtronic’s acquisition of Covidien.
(l) To exclude transaction costs incurred by Covidien resulting from Medtronic’s acquisition of Covidien.
(m) To exclude an adjustment to the gain on the sale of Covidien’s Confluent biosurgery product line.
(n) To exclude the non-interest portion of the impact of Covidien’s tax sharing agreement with Tyco International plc
and TE Connectivity Ltd.
(o) Primarily to exclude Covidien’s favorable audit settlement reached with certain non-U.S. taxing authorities, the
effective settlement of all Covidien tax matters relating to the 2005 through 2007 U.S. audit cycle, and $20 million from
the effective settlement of all Covidien tax matters related to a 2004 U.S. audit and $8 million from the retroactive re-
enactment of the U.S. research and development tax credit.
Combined Diluted EPS is calculated as diluted EPS excluding Medtronic and Covidien reported non-GAAP adjustments
and combined amortization of intangible assets.
Combined diluted EPS does not include an adjustment to exclude the incremental interest expense incurred to hold $17
billion of debt from December 10, 2014 through the end of the third quarter of fiscal year 2015 of $77 million.
To exclude combined amortization of intangible assets.

(2)

(3)

(4)

(5)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K

‘

Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934.
For the fiscal year ended April 29, 2016.

Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
For the transition period from

Commission File No. 1-36820

MEDTRONIC PUBLIC LIMITED COMPANY
(Exact name of registrant as specified in its charter)

Ireland
(Jurisdiction of incorporation)

98-1183488
(I.R.S. Employer Identification No.)

20 On Hatch, Lower Hatch Street
Dublin 2, Ireland
(Address of principal executive office)

+353 1 438-1700
(Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Ordinary shares, par value $0.0001 per share

Name of each exchange on which registered
New York Stock Exchange, Inc.

Securities registered pursuant to section 12(g) of the Act:
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes È No ‘

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange
Act. Yes ‘ No È

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 È No ‘

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 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 È No ‘

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. ‘

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of
the Exchange Act.

Large accelerated filer È Accelerated filer ‘ Non-accelerated filer ‘ Smaller reporting company ‘

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ‘ No È

Aggregate market value of voting and non-voting common equity of Medtronic PLC held by non-affiliates of the registrant as of
October 30, 2015, based on the closing price of $73.92, as reported on the New York Stock Exchange: approximately $104.2 billion.
Number of Ordinary Shares outstanding on June 20, 2016: 1,394,731,892

DOCUMENTS INCORPORATED BY REFERENCE

Portions of Registrant’s Proxy Statement for its 2016 Annual General Meeting are incorporated by reference into Part III hereto.

Item

1.
1A.
1B.
2.
3.
4.

6.
7.
7A.
8.
9.
9A.
9B.

10.
11.
12.
13.
14.

15.

Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures

TABLE OF CONTENTS

Description

PART I

PART II

Market for Medtronic’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity
Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information

PART III

Directors, Executive Officers, and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services

Exhibits and Financial Statement Schedules
Signatures

PART IV

Page

1
17
34
34
35
35

36
39
40
66
67
149
149
149

150
150
150
150
150

151
162

Investor Information

Annual Meeting and Record Dates

Medtronic Public Limited Company, organized under the laws of Ireland (Medtronic plc, Medtronic, the Company, or we, us, or
our) will hold its 2016 Annual General Meeting of Shareholders (2016 Annual Meeting) on Friday, December 9, 2016 at 8:00
a.m., local Dublin time at the Conrad Dublin Hotel Earlsfort Terrace Dublin 2, Ireland. The record date for the 2016 Annual
Meeting is October 11, 2016 and all shareholders of record at the close of business on that day will be entitled to vote at the
2016 Annual Meeting.

Medtronic Website

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those
reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (Exchange Act)
are available through our website (www.medtronic.com under the “About Medtronic - Investors” caption and “Financial
Information - SEC Filings” subcaption) free of charge as soon as reasonably practicable after we electronically file such
material with, or furnish it to, the Securities and Exchange Commission (SEC).

Information relating to corporate governance at Medtronic, including our Principles of Corporate Governance, Code of Conduct
(including our Code of Ethics for Senior Financial Officers), Code of Business Conduct and Ethics for Members of the Board of
Directors, and information concerning our executive officers, directors and Board committees (including committee charters) is
available through our website at www.medtronic.com under the “About Medtronic - Corporate Governance” caption.
Information relating to transactions in Medtronic securities by directors and officers is available through our website at
www.medtronic.com under the “About Medtronic - Investors” caption and the “Financial Information - SEC Filings”
subcaption.

The information listed above may also be obtained upon request from the Medtronic Investor Relations Department, 710
Medtronic Parkway, Minneapolis (Fridley), MN 55432 USA.

We are not including the information on our website as a part of, or incorporating it by reference into, our Form 10-K.

Available Information

The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers,
including the Company, that file electronically with the SEC. The public can obtain any documents that the Company files with
the SEC at http://www.sec.gov. The Company files annual reports, quarterly reports, proxy statements, and other documents
with the SEC under the Exchange Act. The public may read and copy any materials that the Company files with the SEC at the
SEC’s Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. The public may obtain information
on the operation of the Public Reference Room by calling the SEC at 800-SEC-0330.

Stock Transfer Agent and Registrar

Wells Fargo Shareowner ServicesSM acts as transfer agent and registrar, dividend paying agent, and direct stock purchase plan
agent for Medtronic and maintains all shareholder records for the Company. If you are a registered shareholder, you may access
your account information online at www.shareowneronline.com. If you have questions regarding the Medtronic stock you own,
stock transfers, address or name changes, direct deposit of dividends, lost dividend checks, lost stock certificates, or duplicate
mailings, please contact Wells Fargo Shareowner ServicesSM by writing or calling: Wells Fargo Shareowner ServicesSM, 1110
Centre Pointe Curve, Suite 101, Mendota Heights, MN 55120 USA, Telephone: 888-648-8154 or 651-450-4064,
Fax: 651-450-4033, www.wellsfargo.com/shareownerservices.

Direct Stock Purchase Plan

Medtronic’s transfer agent, Wells Fargo Bank N.A, administers the direct stock purchase plan, which is called the Shareowner
Service Plus PlanSM. Features of this plan include direct stock purchase and reinvestment of dividends to purchase whole or
fractional shares of Medtronic stock. All registered shareholders and potential investors may participate.

To request information on the Shareowner Service Plus PlanSM, or to enroll in the plan, contact Wells Fargo Shareowner
ServicesSM at 888-648-8154 or 651-450-4064. You may also enroll via the Internet by visiting www.shareowneronline.com and
selecting “Direct Purchase Plan.”

Item 1. Business

PART I

OVERVIEW

Medtronic plc, headquartered in Dublin, Ireland, is among the world’s largest medical technology, services and solutions
companies — alleviating pain, restoring health, and extending life for millions of people around the world. Medtronic was
founded in 1949 and today serves hospitals, physicians, clinicians, and patients in approximately 160 countries worldwide. We
remain committed to a mission written by our founder 56 years ago that directs us “to contribute to human welfare by the
application of biomedical engineering in the research, design, manufacture, and sale of products to alleviate pain, restore health,
and extend life.”

With innovation and market leadership, we have pioneered advances in medical technology in all of our businesses. Our
commitment to enhance our offerings by developing and acquiring new products, wrap-around programs, and solutions to meet
the needs of a broader set of stakeholders is driven by the following primary strategies:

(cid:129)

Therapy Innovation: Delivering a strong launch cadence of meaningful therapies and procedures.

Globalization: Addressing the inequity in health care access globally, primarily in emerging markets.

Economic Value: Becoming a leader in value-based health care by offering new services and solutions to improve
outcomes and efficiencies, lower costs by reducing hospitalizations, improve remote clinical management, and
increase patient engagement.

Our primary customers include hospitals, clinics, third-party health care providers, distributors, and other institutions, including
governmental health care programs and group purchasing organizations (GPOs).

On January 26, 2015 (Acquisition Date), Medtronic completed the acquisition of Covidien plc, a public limited company
organized under the laws of Ireland (Covidien) in a cash and stock transaction valued at $50.0 billion. In connection with the
transaction, Medtronic, Inc., a Minnesota corporation (Medtronic, Inc.), and Covidien were combined under and became
subsidiaries of Medtronic plc. Covidien was a global leader in the development, manufacture and sale of healthcare products for
use in clinical and home settings and had net sales for its fiscal year ended September 26, 2014 of $10.7 billion. On a pro forma
basis, as if the Covidien merger had occurred at the beginning of fiscal year 2014, our combined net sales would have been
$28.4 billion for fiscal year 2015 and $27.4 billion for fiscal year 2014; see Note 2 to the consolidated financial statements in
“Item 8. Financial Statements and Supplementary Data” in this Annual Report on Form 10-K. The merger with Covidien
provides the combined company with increased financial strength and flexibility and is expected to meaningfully accelerate all
three strategies discussed above.

We reorganized our reporting structure and aligned our segments and the underlying divisions and businesses in fiscal year 2015
due to the acquisition of Covidien. The majority of Covidien’s operations are included in our new Minimally Invasive Therapies
Group. For more information on our segments, please see Note 17 to the consolidated financial statements in “Item 8. Financial
Statements and Supplementary Data” in this Annual Report on Form 10-K.

We currently function in four operating segments that primarily manufacture and sell device-based medical therapies. Our
operating segments with each of their reported net sales for fiscal year 2016, along with their related divisions, are as follows:

Cardiac and Vascular Group (Fiscal year 2016 net sales of $10.2 billion)

(cid:129)

Cardiac Rhythm & Heart Failure
Coronary & Structural Heart
Aortic & Peripheral Vascular

Minimally Invasive Therapies Group (Fiscal year 2016 net sales of $9.6 billion)

(cid:129)

Surgical Solutions
Patient Monitoring & Recovery

Restorative Therapies Group (Fiscal year 2016 net sales of $7.2 billion)

(cid:129)

Spine
Neuromodulation

(cid:129)

Surgical Technologies
Neurovascular

(cid:129)

Diabetes Group (Fiscal year 2016 net sales of $1.9 billion)
Intensive Insulin Management
Non-Intensive Diabetes Therapies
Diabetes Service & Solutions

(cid:129)

Cardiac Rhythm & Heart Failure Disease Management (CRHF)

CARDIAC AND VASCULAR GROUP

Our CRHF division develops, manufactures, and markets products for the diagnosis, treatment, and management of heart
rhythm disorders and heart failure. Our products include implantable devices, leads and delivery systems, products for the
treatment of atrial fibrillation (AF), products designed to reduce surgical site infections,
information systems for the
management of patients with CRHF devices, and an integrated health solutions business.

The following are the principal products and services offered by our CRHF division:

Implantable Cardiac Pacemakers (Pacemakers) Our latest generations of pacemaker systems are the Advisa MRI SureScan
models, the Micra Transcatheter Pacing System, and the Ensura MRI SureScan model. The Micra Transcatheter Pacing System,
which is leadless and does not have a subcutaneous device pocket like conventional pacemaker, and the Advisa MRI SureScan
models have received United States (U.S.) Food and Drug Administration (U.S. FDA) approval and Conformité Européene
(CE) Mark approval, while the Ensura MRI SureScan models have received CE Mark approval.

Implantable Cardioverter Defibrillators (ICDs) Our latest generation ICD is the Evera MRI SureScan, the first ICD system
with CE Mark, PMDA (Japan), and U.S. FDA, approval for full-body MRI scans for both 1.5T and 3T scanners. The Evera
system is paired with the reliable Sprint Quattro Secure lead, the only defibrillator lead with more than 11 years of proven
performance with active monitoring.

Implantable Cardiac Resynchronization Therapy Devices (CRT-Ds and CRT-Ps) Our latest generation of CRT-Ds is the
Amplia/Compia/Claria family of MRI Quad CRT-D SureScan systems. The U.S. FDA and CE Mark approved Amplia and
Compia MRI Quad CRT-D SureScan systems are approved for MRI scans on any part of the body. In addition, the Viva/Brava
family with Attain Performa quadripolar features a new algorithm, called AdaptivCRT, which improves heart failure patients’
response rate to CRT-D therapy. Viva CRT-P is our latest generation device, with respect to CRT-P.

AF Products Our portfolio of AF products includes the Arctic Front Advance Cardiac Cryoballoon System, which includes
the U.S. FDA approved Aortic Front Advance ST Cryoablation Catheter, designed for pulmonary vein isolation in the treatment
of patients with drug refractory paroxysmal AF. Additionally, we have a second-generation CE Mark approved Phased RF
System, PVAC Gold, which uses duty cycled, phased radio frequency energy for the treatment of symptomatic paroxysmal
persistent and long-standing persistent AF.

Diagnostics and Monitoring Devices Our Reveal LINQ is our newest Insertable Cardiac Monitor (ICM) System. The system
is used to record the heart’s electrical activity before, during, and after transient symptoms such as syncope (i.e., fainting) and
palpitations to assist in diagnosis.

TYRX Products Our TYRX products include the Absorbable Antibacterial Envelope and the TYRX Neuro Absorbable
Antibacterial Envelope, which are designed to stabilize electronic implantable devices and help prevent infection associated
with implantable pacemakers, defibrillators, and spinal cord neurostimulators.

Services and Solutions Our Care Management Services products and services include remote monitoring and patient-centered
software to enable efficient care coordination and specialized telehealth nurse support. Our Cath Lab Managed Services
business is focused on developing novel partnerships with hospitals to provide services directly related to hospital operational
efficiency.

Coronary & Structural Heart Disease Management (CSH)

Our CSH division includes therapies to treat coronary artery disease (CAD), and heart valve disorders. Our products include
coronary stents and related delivery systems, including a broad line of balloon angioplasty catheters, guide catheters, guide

wires, diagnostic catheters, and accessories as well as products for the repair and replacement of heart valves, perfusion systems,
positioning and stabilization systems for beating heart revascularization surgery, and surgical ablation products.

The following are the principal products offered by our CSH division:

Transcatheter Heart Valves (TCVs) Our latest generation TCVs include the CoreValve family of aortic valves. CoreValve,
which is the only TCV system shown to be superior to open-heart surgery, has received U.S. FDA approval for extreme and
high risk patients. Our next-generation recapturable TCV system, CoreValve Evolut R, has received U.S. FDA approval and CE
Mark approval for the 23, 26, and 29 millimeter sizes of the valve.

Percutaneous Coronary Intervention (PCI) Our latest generation PCI stent products include our Resolute Integrity drug-
eluting stent systems, which have received U.S. FDA approval, as well as Resolute Onyx drug-eluting stent systems, which have
received CE Mark approval.

Heart Surgery We offer a complete line of surgical valve replacement and repair products for damaged or diseased heart
valves. Our replacement products include both tissue and mechanical valves. We also offer a complete line of blood-handling
products that form a circulatory support system to maintain and monitor blood circulation and coagulation status, oxygen
supply, and body temperature during arrested heart surgery. Additionally, we offer surgical ablation systems and positioning
and stabilization technologies.

Aortic & Peripheral Vascular Disease Management (APV)

Our APV division is comprised of a comprehensive line of products and therapies to treat aortic disease (such as aneurysms,
dissections, and transections) as well as peripheral vascular disease (PVD), and critical limb ischemia (CLI). Our products
include endovascular stent graft systems, peripheral drug coated balloon, stent and angioplasty systems, and carotid embolic
protection systems for the treatment of vascular disease outside the heart, as well as products for superficial and deep venous
disease.

The following are the principal products offered by our APV division:

Endovascular Stent Grafts (Aortic) Our products are designed to treat aortic aneurysms in either the abdomen or thoracic
regions of the aorta. Our product line includes a range of endovascular stent grafts and accessories including the market-leading
Endurant 2S Abdominal Aortic Aneurysm (AAA) Stent Graft System and the Valiant Captivia Thoracic Aortic Aneurysm
(TAA) stent graft system and the Aptus endo anchors.

Peripheral Vascular Intervention (PVI) Our primary PVI products include percutaneous angioplasty balloons including the
IN.PACT family of drug-coated balloons, which have U.S. FDA and CE Mark approval, as well as peripheral stents such as the
Protégé & Complete Self Expanding Vascular Stents, the Visi-Pro & Assurant Cobalt Balloon Expandable stents and directional
atherectomy products such as the TurboHawk plaque excision system, and other procedure support products.

EndoVenous (EV) Our EndoVenous product lines are used to treat superficial and deep venous diseases in the lower
extremities and include the Closure Fast RF ablation system, the VenaSeal medical adhesive system while also now focusing on
embolisms with the Concerto detachable coil system, Micro Vascular Plug (MVP), the PV ONYX liquid embolic system and
other procedure support products.

Surgical Solutions

MINIMALLY INVASIVE THERAPIES GROUP

Surgical Solutions develops, manufactures, and markets advanced surgical, general surgical, and hernia products and therapies
to treat diseases and conditions that are typically, but not exclusively, addressed by surgeons. In addition, we develop,
manufacture, and market several unique products in the emerging fields of minimally invasive gastrointestinal diagnostics,
ablation, and interventional lung.

The following are the principal products offered by our Surgical Solutions division:

Surgical Innovations This business includes sales of stapling, vessel sealing, fixation (hernia mechanical devices), mesh,
hardware and surgical instruments, as well as wound closure, and electrosurgical products. Key advanced surgical products

include: the Tri-Staple technology platform for endoscopic stapling, including the Endo GIA reloads and reinforced reloads with
Tri-Staple Technology and the Endo GIA ultra universal stapler; the iDrive and Signia powered stapling systems; the LigaSure
vessel sealing system, which features specialty/application specific handpieces powered by proprietary hardware platforms; the
Sonicision cordless ultrasonic dissection system; AbsorbaTack absorbable mesh fixation device for hernia repair; Symbotex
composite mesh for surgical laparoscopic and open ventral hernia repair; and Parietex ProGrip, a selfgripping, biocompatible
solution for inguinal hernias.

Early Technologies Our products include ablation products, and interventional lung and gastrointestinal solutions. This
includes the PillCam SB and PillCam COLON, a minimally-invasive, swallowed optical endoscopy technology; superDimesion
to evaluate lung lesions; the Cool-tip radiofrequency ablation system; the Evident microwave ablation system; and the HALO
ablation catheters for treatment of Barrett’s esophagus.

Patient Monitoring & Recovery (PMR)

Our PMR division develops, manufactures, and markets products and therapies to enable complication-free recovery to enhance
patient outcomes.

The following are the principal products offered by our PMR division:

Patient Monitoring Our products include sensors, monitors, and temperature management products. Key patient monitoring
products include: Capnostream with Microstream technology capnography monitors,
the Nellcor Bedside SpO2 patient
monitoring system, the Bispectral Index (BIS) brain monitoring technology, the INVOS Cerebral/Somatic Oximeter, and related
modules and sensors.

Airway & Ventilation This business primarily includes sales of airway, ventilator and inhalation therapy products. Key airway
& ventilation products include: the Puritan Bennett 840 and 980 ventilators, the Newport e360 and HT70 ventilators, the
TaperGuard Evac tube, Mallinckrodt Endotracheal Tubes, Shiley Tracheostomy Tubes, DAR Filters, and resuscitation bags.

Nursing Care This business primarily includes sales of incontinence, wound care, enteral feeding, urology, and suction
products. Key nursing care products include Curity and Kerlix gauze and bandages and Kangaroo enteral feeding systems.

Patient Care & Safety (PCS) Our products include medical surgical products, such as operating room supply products,
electrodes, and SharpSafety products, which includes needles, syringes, and sharps disposal products. In addition, we
manufacture Original Equipment Manufacturer (OEM) products, which are various medical supplies manufactured for other
medical products companies. Under our Medi-Trace brand, we offer a comprehensive line of monitoring, diagnostic, and
defibrillation electrodes.

Spine

RESTORATIVE THERAPIES GROUP

Our Spine division develops, manufactures, and markets a comprehensive line of medical devices and implants used in the
treatment of the spine and musculoskeletal system. Our products and therapies treat a variety of conditions affecting the spine,
including degenerative disc disease, spinal deformity, spinal tumors, fractures of the spine, and stenosis. Our Spine division also
provides biologic solutions for the orthopedic and dental markets and, in concert with our Surgical Technologies business, we
offer unique and highly differentiated navigation, neuromonitoring, and power technologies designed for spine procedures.

The following are the principal products offered by our Spine division:

Thoracolumbar Products Our products used to treat conditions in this region of the spine include the CD HORIZON
SOLERA and LEGACY Systems, and the CAPSTONE and CLYDESDALE interbody spacers. In addition, Medtronic offers a
number of products that facilitate less invasive thoracolumbar surgeries, including the CD HORIZON VOYAGER, SOLERA
SEXTANT and LONGITUDE Percutaneous Fixation Systems.

Cervical Products Products used to treat conditions in this region of the spine include the ZEVO and ATLANTIS VISION
ELITE Anterior Cervical Plate Systems, the VERTEX SELECT Reconstruction System, and the PRESTIGE and BRYAN
Cervical Artificial Discs.

Biologics Products Our Biologics platform products include INFUSE Bone Graft (InductOs in the European Union (E.U.)),
which contains a recombinant human bone morphogenetic protein, rhBMP-2, for certain spinal, trauma, and oral maxillofacial
applications, Demineralized Bone Matrix (DBM) products, including MagniFuse, Grafton/Grafton Plus, and PROGENIX, and
the MASTERGRAFT family of synthetic bone graft products — Matrix, Putty, and Granules.

Interventional Products Our interventional products include the Xpander II Balloon Kyphoplasty system, the Kyphon-V
vertebroplastly system and the Osteocool tumor ablation system.

Neuromodulation

Our Neuromodulation division includes implantable neurostimulation and targeted drug delivery systems for the management of
chronic pain, common movement disorders, spasticity, and urologic and gastrointestinal disorders. Neurostimulation uses an
implantable medical device, similar to a pacemaker, called a neurostimulator.

The following are the principal products offered by our Neuromodulation division:

Neurostimulation Systems for Chronic Pain We have a large portfolio of neurostimulation systems, including rechargeable
and non-rechargeable devices and a large selection of leads used to treat chronic back and/or limb pain. Our portfolio of
products includes pain neurostimulation systems with SureScan MRI Technology, including the RestoreSensor (rechargeable)
SureScan MRI, with its proprietary AdaptiveStim technology.

Implantable Drug Infusion Systems Our SynchroMed II Implantable Infusion System delivers small quantities of drug
directly into the intrathecal space surrounding the spinal cord. These devices are used to treat chronic, intractable pain and
severe spasticity associated with cerebral palsy, multiple sclerosis, spinal cord and traumatic brain injuries, and stroke.

Deep Brain Stimulation (DBS) Systems DBS is currently approved in many countries around the world for the treatment of
the disabling symptoms of essential tremor, Parkinson’s disease, refractory epilepsy (outside the U.S.), severe, treatment-
resistant obsessive-compulsive disorder (approved under a Humanitarian Device Exemption (HDE) in the U.S.), and chronic,
intractable primary dystonia (approved under a HDE in the U.S.). Our family of Activa Neurostimulators for DBS includes
Activa SC (single-channel primary cell battery), Activa PC (dual channel primary cell battery), and Activa RC (dual channel
rechargeable battery).

Gastroenterology & Urology (Gastro/Uro) Systems Our Sacral neuromodulation uses InterStim, a neurostimulator, to help
control the symptoms of overactive bladder, (non-obstructive) urinary retention, and chronic fecal incontinence. Currently,
Enterra Therapy is the only gastric electrical stimulation therapy approved in the U.S. (under a HDE), Europe, and Canada for
use in the treatment of intractable nausea and vomiting associated with gastroparesis. The system, which contains a small
neurostimulator and two leads, stimulates the smooth muscles of the lower stomach.

Surgical Technologies

Our Surgical Technologies division develops, manufactures, and markets products and therapies to treat diseases and conditions
of the ear, nose, and throat (ENT) and certain neurological disorders. In addition, the division develops, manufactures, and
markets image-guided surgery and intra-operative imaging systems that facilitate surgical planning during precision cranial,
spinal, sinus, and orthopedic surgeries. Our Advanced Energy business includes products in the emerging field of advanced
energy surgical incision technology, as well as the haemostatic sealing of soft tissue and bone.

The following are the principal products offered by our Surgical Technologies division:

therapies. The StealthStation
Neurosurgery Our portfolio of products include both platform technologies and implant
Navigation System and O-arm Imaging System are both platforms used in cranial, spinal, sinus, and orthopedic procedures. The
Midas Rex Surgical Drills are used in cranial, spinal, and orthopedic procedures. Visualase MRI-Guided Laser Ablation is used
in neurosurgery procedures, and our CSF Management Portfolio is used in treating hydrocephalus and other conditions
impacting the intracranial pressure.

ENT The following products treat ENT diseases and conditions: Straightshot M5 Microdebrider Handpiece, the IPC system,
NIM Nerve Monitoring Systems, Fusion ENT Navigation System, as well as products for hearing restoration and Snoring and
Obstructive Sleep Apnea.

Advanced Energy Our PEAK Surgery System is a tissue dissection system that consists of the PEAK PlasmaBlade and
PULSAR Generator and is cleared for use in a variety of settings, including plastic reconstructive surgery, general surgery, and
certain conditions of ENT. Our Aquamantys System uses patented transcollation technology to provide haemostatic sealing of
soft tissue and bone and is cleared for use in a variety of surgical procedures, including orthopedic surgery, spine, solid organ
resection and thoracic procedures.

Neurovascular

Our Neurovascular division, develops, manufactures, and markets products and therapies to treat diseases of the vasculature in
and around the brain. Our products include coils, neurovascular stents, and flow diversion products, as well as access and
delivery products to support procedures.

The following are the principal products offered by our Neurovascular division:

The Pipeline and Pipeline Flex Embolization Devices, endovascular treatments for large or giant wide-necked brain aneurysms;
the Solitaire FR revascularization device for treatment of acute ischemic stroke; and the Apollo Onyx delivery micro catheter,
the first detachable tip micro-catheter available in the U.S.

DIABETES GROUP

Our Diabetes group consists of three divisions (Intensive Insulin Management, Non-Intensive Diabetes Therapies, and Diabetes
Service & Solutions) that develop, manufacture, and market advanced, integrated diabetes management solutions that include
insulin pump therapy, continuous glucose monitoring (CGM) systems, and therapy management software.

The following are the principal products offered by our Diabetes divisions:

Integrated Diabetes Management Solutions We have an integrated insulin pump and CGM system currently available on the
market. In the U.S., we offer the MiniMed 530G System featuring SmartGuard technology, which automatically suspends
insulin delivery when glucose levels reach a pre-determined threshold, and newest CGM sensor, Enlite, a sensor that can be
worn for 6-days and is more comfortable, more accurate, and smaller than our previous generation sensor. Outside the U.S., we
offer our MiniMed 640G System, an integrated system with the Enhanced Enlite CGM sensor that features SmartGuard
technology, which automatically suspends insulin delivery when sensor glucose levels are predicted to approach a low limit and
then resumes insulin delivery once levels recover.

Professional CGM In addition to our Personal CGM (Enlite), we offer physicians a Professional CGM product called the
iPro2/iPro Professional CGM System. Patients wear the iPro2/iPro recorder to capture glucose data that is later uploaded in a
physician’s office to reveal glucose patterns and potential problems, including hyperglycemic and hypoglycemic episodes. The
data leads to more informed treatment decisions.

Connected Care We continue to innovate and offer new connected care solutions, including the MiniMed Connect, which is
the only system providing remote access to pump and sensor data on the user’s smartphone.

CareLink Therapy Management Software Our web-based therapy management software solutions, including CareLink
Personal software for patients and CareLink Pro software for healthcare professionals, to help patients and their health care
providers control their diabetes.

CUSTOMERS AND COMPETITORS

Cardiac and Vascular Group The primary medical specialists who use our Cardiac and Vascular products include
electrophysiologists, implanting cardiologists, heart failure specialists, cardiovascular, cardiothorasic, and vascular surgeons and
interventional cardiologists and radiologists. Our primary competitors are St. Jude Medical, Inc. (St. Jude), Boston Scientific
Corporation (Boston Scientific), Sorin Group (Sorin), Edwards Lifesciences Corporation (Edwards), C.R. Bard Inc. (Bard), and
Abbott Laboratories (Abbott).

Minimally Invasive Therapies Group The products and therapies of this group are used primarily by hospitals, physicians’
offices, and ambulatory care centers, other alternate site healthcare providers and less frequently in home settings. Our primary
competitors are Johnson & Johnson, Boston Scientific, Baxter International Inc., and Bard.

Restorative Therapies Group The primary medical specialists who use the products of this group include spinal surgeons,
neurosurgeons, neurologists, pain management specialists, anesthesiologists, orthopedic surgeons, urologists, interventional
radiologists, and ear, nose, and throat specialists. Our primary competitors include Johnson & Johnson, Boston Scientific, St.
Jude, Stryker Corporation (Stryker), NuVasive, Inc., and Zimmer Holdings, Inc. (Zimmer).

Diabetes Group The primary medical specialists who use and/or prescribe our Diabetes products are endocrinologists,
diabetologists, and internists. Our primary competitors are Johnson & Johnson, DexCom, Inc., Tandem Diabetes Care Inc.,
Insulet Corporation, and F. Hoffmann-La Roche Ltd.

OTHER FACTORS IMPACTING OUR OPERATIONS

Research and Development

The markets in which we participate can be subject to rapid technological advances. Constant improvement of products and
introduction of new products is necessary to maintain market leadership. Our research and development (R&D) efforts are
directed toward maintaining or achieving technological leadership in each of the markets we serve in order to help ensure that
patients using our devices and therapies receive the most advanced and effective treatment possible. We remain committed to
developing technological enhancements and new indications for existing products, and less invasive and new technologies for
new and emerging markets to address unmet patient needs. That commitment leads to our initiation and participation in many
clinical trials each fiscal year as the demand for clinical and economic evidence remains high. Furthermore, our development
activities are intended to help reduce patient care costs and the length of hospital stays in the future. We have not engaged in
significant customer or government-sponsored research.

During fiscal years 2016, 2015, and 2014, we spent $2.2 billion (7.7 percent of net sales), $1.6 billion (8.1 percent of net sales),
and $1.5 billion (8.7 percent of net sales) on R&D, respectively. Our R&D activities include improving existing products and
therapies, expanding their indications and applications for use, and developing new therapies and procedures. We continue to
focus on optimizing innovation, improving our R&D productivity, driving growth in emerging markets, clinical evidence
generation, and assessing our R&D programs based on their ability to deliver economic value to our customers.

Acquisitions and Investments

Our strategy to provide a broad range of therapies to restore patients’ health and extend lives requires a wide variety of
industry and the
technologies, products, and capabilities. The rapid pace of technological development
specialized expertise required in different areas of medicine make it difficult for one company alone to develop an all-
encompassing portfolio of technological solutions. In addition to internally generated growth through our R&D efforts,
historically we have relied, and expect to continue to rely, upon acquisitions, investments, and alliances to provide access to
new technologies both in areas served by our existing businesses as well as in new areas and markets.

in the medical

We expect to make future investments or acquisitions where we believe that we can stimulate the development of, or acquire
new technologies and products to further our strategic objectives, and strengthen our existing businesses. Mergers and
acquisitions of medical technology companies are inherently risky and no assurance can be given that any of our previous or
future acquisitions will be successful or will not materially adversely affect our consolidated results of operations, financial
condition, and/or cash flows.

information, see Note 2 to the consolidated financial statements in “Item 8. Financial Statements and
For additional
Supplementary Data” in this Annual Report on Form 10-K and “Item 1A. Risk Factors — Failure to integrate acquired
businesses into our operations successfully could adversely affect our business.”

Acquisition of Covidien plc in Fiscal Year 2015

On January 26, 2015, pursuant to a transaction agreement, dated as of June 15, 2014 (the Transaction Agreement), Medtronic,
Inc. and Covidien became subsidiaries of the Company. The total cash and stock value of the Covidien acquisition was $50.0
billion. The operating results for Covidien are included in the Minimally Invasive Therapies Group, Cardiac and Vascular
Group and Restorative Therapies Group segments.

Based upon the acquisition valuation, the Company acquired $18.3 billion of customer-related intangible assets, $7.1 billion of
technology-based intangible assets, $430 million of tradenames, with weighted average estimated useful lives of 18, 16, and 6
years, respectively, $420 million of in-process research and development (IPR&D), and $30.0 billion of goodwill.

Fiscal Year 2016 Acquisitions

Twelve, Inc.

On October 2, 2015, the Company’s Coronary & Structural Heart division acquired Twelve, Inc. (Twelve), a privately-held
medical device company focused on the development of a transcatheter mitral valve replacement device. Total consideration for
the transaction was approximately $472 million, which included an upfront payment of $428 million and the estimated fair
value of product development-based contingent consideration of $44 million. Based upon the acquisition valuation, the
Company acquired $192 million of IPR&D and $291 million of goodwill.

RF Surgical Systems, Inc.

On August 11, 2015, the Company’s Surgical Solutions division acquired RF Surgical Systems, Inc. (RF Surgical), a medical
device company focused on the detection and prevention of retained surgical sponges. Total consideration for the transaction
was approximately $240 million. Based upon the acquisition valuation, the Company acquired $68 million of technology-based
intangible assets, $47 million of customer-related intangible assets, with estimated useful lives of 18 and 16 years, respectively,
and $135 million of goodwill.

Medina Medical

On August 31, 2015, the Company’s Neurovascular division acquired Medina Medical (Medina), a privately-held medical
device company focused on commercializing treatments for vascular abnormalities of the brain, including cerebral aneurysms.
Total consideration for the transaction was approximately $219 million, which includes an upfront payment of $155 million and
the estimated fair value of revenue-based and product development-based contingent consideration of $64 million. Medtronic
had previously invested in Medina and held an 11 percent ownership position. Net of this ownership position, the transaction
value was approximately $195 million. Based upon the acquisition valuation, the Company acquired $122 million of IPR&D
and $126 million of goodwill.

Patents and Licenses

We rely on a combination of patents, trademarks, tradenames, copyrights, trade secrets, and non-disclosure and non-competition
agreements to establish and protect our proprietary technology. We have filed and obtained numerous patents in the U.S. and
abroad, and regularly file patent applications worldwide in our continuing effort to establish and protect our proprietary
technology. U.S. patents typically have a 20-year term from the application date while patent protection outside the U.S. varies
from country to country. In addition, we have entered into exclusive and non-exclusive licenses relating to a wide array of third-
party technologies. We have also obtained certain trademarks and tradenames for our products to distinguish our genuine
products from our competitors’ products, and we maintain certain details about our processes, products, and strategies as trade
secrets. In the aggregate, these intellectual property assets and licenses are of material importance to our business; however, we
believe that no single patent, technology, trademark, intellectual property asset or license is material in relation to any segment
of our business as a whole. Our efforts to protect our intellectual property and avoid disputes over proprietary rights have
included ongoing review of third-party patents and patent applications. For additional information see “Item 1A. Risk
Factors — We are substantially dependent on patent and other proprietary rights and failing to protect such rights or to be
successful in litigation related to our rights or the rights of others may result in our payment of significant monetary damages
and/or royalty payments, negatively impact our ability to sell current or future products, or prohibit us from enforcing our patent
and other proprietary rights against others.” and Note 15 to the consolidated financial statements in “Item 8. Financial
Statements and Supplementary Data” in this Annual Report on Form 10-K.

Markets and Distribution Methods

We sell most of our medical devices and therapies through direct sales representatives in the U.S. and a combination of direct
sales representatives and independent distributors in markets outside the U.S. For certain portions of our business acquired
through the Covidien acquisition, we also sell through distributors in the U.S. Our medical supplies products are used primarily
in hospitals, surgi-centers and alternate care facilities, such as home care and long-term care facilities, and are marketed to
materials managers, GPOs and integrated delivery networks (IDNs) primarily through third-party distributors, although we also
have direct sales representatives. We often negotiate with GPOs and IDNs, which enter into supply contracts for the benefit of
their member facilities. Our three largest markets are the U.S., Western Europe, and Japan. Emerging markets are an area of
increasing focus and opportunity as we believe they remain under-penetrated.

Our marketing and sales strategy is focused on rapid, cost-effective delivery of high-quality products to a diverse group of
customers worldwide — including physicians, hospitals, other medical institutions, and GPOs. To achieve this objective, we
organize our marketing and sales teams around physician specialties. This focus enables us to develop highly knowledgeable
and dedicated sales representatives who are able to foster strong relationships with physicians and other customers and enhance
our ability to cross-sell complementary products. We believe that we maintain excellent working relationships with physicians
and others in the medical industry that enable us to gain a detailed understanding of therapeutic and diagnostic developments,
trends, and emerging opportunities and respond quickly to the changing needs of physicians and patients. We attempt to
enhance our presence in the medical community through active participation in medical meetings and by conducting
comprehensive training and educational activities. We believe that these activities contribute to physician expertise.

In keeping with the increased emphasis on cost-effectiveness in health care delivery, the current trend among hospitals and other
customers is to consolidate into larger purchasing groups to enhance purchasing power. This enhanced purchasing power may
lead to pressure on pricing and increased use of preferred vendors. Our customer base continues to evolve to reflect such
economic changes across the geographic markets we serve. We are not dependent on any single customer for more than 10
percent of our total net sales.

Competition and Industry

Major shifts in industry market share have occurred in connection with product problems, physician advisories, safety alerts,
and publications about our products, reflecting the importance of product quality, product efficacy, and quality systems in the
medical device industry. In addition,
in the current environment of managed care, economically motivated customers,
increased competition, and declining reimbursement rates, we have been
consolidation among health care providers,
increasingly required to compete on the basis of price. In order to continue to compete effectively, we must continue to create or
acquire advanced technology, incorporate this technology into proprietary products, obtain regulatory approvals in a timely
manner, maintain high-quality manufacturing processes, and successfully market these products.

Worldwide Operations

Our global operations are accompanied by certain financial and other risks. Relationships with customers and effective terms of
sale vary by country; often with longer-term receivables than are typical in the U.S. Currency exchange rate fluctuations can
affect revenues, net of expenses, and cash flows from operations outside the U.S. We use operational and economic hedges, as
well as currency exchange rate derivative contracts, to manage the impact of currency exchange rate changes on earnings and
cash flow. See “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” and Note 8 to the consolidated financial
statements in “Item 8. Financial Statements and Supplementary Data” in this Annual Report on Form 10-K. In addition, the
repatriation of earnings of certain subsidiaries outside the U.S. may result in substantial U.S. tax cost.

For financial reporting purposes, net sales and property, plant, and equipment attributable to significant geographic areas are
presented in Note 17 to the consolidated financial statements in “Item 8. Financial Statements and Supplementary Data” in this
Annual Report on Form 10-K.

Production and Availability of Raw Materials

We manufacture most of our products at 89 manufacturing facilities located in various countries throughout the world. For
additional information related to our manufacturing facilities refer to Item 2. in this Annual Report on Form 10-K. We purchase
many of the components and raw materials used in manufacturing these products from numerous suppliers in various countries.
For reasons of quality assurance, sole source availability, or cost effectiveness, certain components and raw materials are
available only from a sole supplier. We work closely with our suppliers to help ensure continuity of supply while maintaining
high quality and reliability. Due to the U.S. FDA’s requirements regarding manufacturing of our products, we may not be able
to quickly establish additional or replacement sources for certain components or materials. Generally, we have been able to
obtain adequate supplies of such raw materials and components. However, a sudden or unexpected reduction or interruption in
supply, and an inability to develop alternative sources for such supply, could adversely affect our operations. We have reporting

and disclosure requirements related to the use of certain minerals, known as “conflict minerals” (tantalum, tin, tungsten (or their
ores), and gold) which are mined from the Democratic Republic of the Congo and adjoining countries. Pursuant to these
requirements, we are required to report on Form SD the procedures we employ to determine the sourcing of such minerals and
metals produced from those minerals. There are costs associated with complying with these disclosure requirements, including
for diligence in regards to the sources of any conflict minerals used in our products, in addition to the cost of remediation and
other changes to products, processes, or sources of supply as a consequence of such verification activities. In addition, the
implementation of these rules could adversely affect the sourcing, supply, and pricing of materials used in our products. As of
the date of our conflict minerals report for the 2015 calendar year, we were unable to obtain the necessary information on
conflict minerals from all of our suppliers and were unable to determine that all of our products are conflict free. We may
continue to face difficulties in gathering this information in the future. We may face reputational challenges if we determine that
certain of our products contain minerals not determined to be conflict free or if we are unable to sufficiently verify the origins
for all conflict minerals used in our products through the procedures we implement.

Working Capital Practices

Our goal is to carry sufficient levels of inventory to ensure adequate supply of raw materials from suppliers and meet the
product delivery needs of our customers. We also provide payment terms to customers in the normal course of business and
rights to return product under warranty to meet the operational demands of our customers.

Employees

On April 29, 2016, we employed more than 88,000 full-time employees. Our employees are vital to our success. We believe we
have been successful in attracting and retaining qualified personnel in a highly competitive labor market due to our competitive
compensation and benefits, and our rewarding work environment.

Seasonality

Worldwide sales, including U.S. sales, do not reflect a significant degree of seasonality; however, the number of medical
procedures incorporating Medtronic products is generally lower during summer months, due to summer vacation schedules in
the northern hemisphere, particularly in European countries. In addition, pulse oximetry sales can be impacted by flu season.

Government Regulation and Other Considerations

Our products are subject to regulation by numerous government agencies, including the U.S. FDA and similar agencies outside
the U.S. To varying degrees, each of these agencies requires us to comply with laws and regulations governing the development,
testing, manufacturing, labeling, marketing, and distribution of our products. Our business is also affected by patient privacy
laws, cost containment initiatives and environmental health and safety laws and regulations. The primary laws and regulations
that affect our business are described below.

The laws applicable to us are subject to change and are subject to evolving interpretations. If a governmental authority were to
conclude that we are not in compliance with applicable laws and regulations, Medtronic and its officers and employees could be
subject to severe criminal and civil penalties including substantial fines and damages, and exclusion from participation as a
supplier of product to beneficiaries covered by Medicare or Medicaid.

Product Approval Processes

Authorization to commercially distribute a new medical device or technology in the U.S. is generally received in one of two
ways. The first, known as pre-market notification or the 510(k) process, requires us to demonstrate that our new medical device
or technology is substantially equivalent to a legally marketed medical device or technology. In this process, we must submit
data that supports our equivalence claim. If human clinical data is required, it must be gathered in compliance with U.S. FDA
investigational device exemption regulations. We must receive an order from the U.S. FDA finding substantial equivalence to
another legally marketed medical device or technology before we can commercially distribute the new medical device or
technology. Modifications to cleared medical devices or technologies can be made without using the 510(k) process if the
changes do not significantly affect safety or effectiveness. Minimally Invasive Therapies Group products are generally subject
to the pre-market notification process. A very small number of our devices are exempt from pre-market review.

The second, more rigorous process, known as pre-market approval (PMA), requires us to independently demonstrate that the
new medical device is safe and effective. We do this by collecting data regarding design, materials, bench and animal testing,

and human clinical data for the medical device. The U.S. FDA will authorize commercial distribution if it determines there is
reasonable assurance that the medical device is safe and effective. This determination is based on the benefit outweighing the
risk for the population intended to be treated with the device. This process is much more detailed, time-consuming, and
expensive than the 510(k) process. A third, seldom used, process for approval exists for humanitarian use devices, intended for
patient populations of less than 4,000 patients per year in the U.S. This exemption is similar to the PMA process; however, a full
showing of product effectiveness from large clinical trials is not required. The threshold for approving these products is
probable benefit and safety.

Many countries outside the U.S. to which we export medical devices also subject such medical devices and technologies to their
own regulatory requirements. Frequently, regulatory approval may first be obtained in a country outside of the U.S. prior to
application in the U.S. due to differing regulatory requirements; however, other countries, such as China for example, require
approval in the country of origin first. Most countries outside of the U.S. require that product approvals be recertified on a
regular basis, generally every five years. The recertification process requires that we evaluate any device or technology changes
and any new regulations or standards relevant to the device or technology and, where needed, conduct appropriate testing to
document continued compliance. Where recertification applications are required, they must be approved in order to continue
selling our products in those countries. Because export control and economic sanctions laws and regulations are complex and
constantly changing, it is possible that laws and regulations may be enacted, amended, enforced or interpreted in a manner
materially impacting our ability to sell or distribute products.

In the E.U., a single regulatory approval process exists, and conformity with the legal requirements is represented by the CE
Mark. To obtain a CE Mark, defined products must meet minimum standards of performance, safety, and quality (i.e., the
essential requirements), and then, according to their classification, comply with one or more of a selection of conformity
assessment routes. A notified body assesses the quality management systems of the manufacturer and the product conformity to
the essential and other requirements within the medical device directive. Medtronic is subject to inspection by notified bodies
for compliance. The competent authorities of the E.U. countries, generally in the form of their ministries or departments of
health, oversee the clinical research for medical devices and are responsible for market surveillance of products once they are
placed on the market. We are required to report device failures and injuries potentially related to product use to these authorities
in a timely manner. Various penalties exist for non-compliance with the laws transcribing the medical device directives. We
anticipate a new Medical Device Regulation to be published by the European Union in 2016, and it is likely to impose
additional premarket and postmarket requirements.

To be sold in Japan, most medical devices must undergo thorough safety examinations and demonstrate medical efficacy before
they are granted approval, or “shonin.” The Japanese government, through the Ministry of Health, Labour, and Welfare
(MHLW), regulates medical devices under the Pharmaceutical Affairs Law (PAL). Oversight for medical devices is conducted
with participation by the Pharmaceutical and Medical Devices Agency (PMDA), a quasi-government organization performing
many of the review functions for MHLW. Penalties for a company’s noncompliance with PAL could be severe, including
revocation or suspension of a company’s business license and criminal sanctions. MHLW and PMDA also assess the quality
management systems of the manufacturer and the product conformity to the requirements of the PAL. Medtronic is subject to
inspection for compliance by these agencies.

Our global regulatory environment is becoming increasingly stringent, and unpredictable, which could increase the time, cost
and complexity of obtaining regulatory approvals for our products. Several countries that did not have regulatory requirements
for medical devices have established such requirements in recent years and other countries have expanded, or plan to expand, on
existing regulations. Certain regulators are requiring local clinical data in addition to global clinical data. While harmonization
of global regulations has been pursued, requirements continue to differ significantly among countries. We expect this global
regulatory environment will continue to evolve, which could impact our ability to obtain future approvals for our products, or
could increase the cost and time to obtain such approvals in the future. There can be no assurance that any new medical devices
we develop will be approved in a timely or cost-effective manner or approved at all.

Ongoing U.S. FDA Regulations

Both before and after a product is commercially released, we have ongoing responsibilities under U.S. FDA regulations. The
U.S. FDA reviews design and manufacturing practices, labeling and record keeping, and manufacturers’ required reports of
adverse experiences and other information to identify potential problems with marketed medical devices. We are also subject to
periodic inspection by the U.S. FDA for compliance with the U.S. FDA’s quality system regulations, which govern the methods
used in, and the facilities and controls used for, the design, manufacture, packaging, and servicing of all finished medical
devices intended for human use. In addition, the U.S. FDA and other U.S. regulatory bodies (including the Federal Trade

Commission, the Office of the Inspector General of the Department of Health and Human Services, the U. S. Department of
Justice, and various state Attorneys General) monitor the manner in which we promote and advertise our products. Although
surgeons are permitted to use their medical judgment to employ medical devices for indications other than those cleared or
approved by the U.S. FDA, the U.S. FDA has prohibited manufacturers from promoting products for such “off-label” uses, and
has taken the position that manufacturers can only market their products for cleared or approved uses.

If the U.S. FDA were to conclude that we are not in compliance with applicable laws or regulations, or that any of our medical
devices are ineffective or pose an unreasonable health risk, the U.S. FDA could require us to notify health professionals and
others that the devices present unreasonable risks of substantial harm to the public health, order a recall, repair, replacement, or
refund of such devices, detain or seize adulterated or misbranded medical devices, or ban such medical devices. The U.S. FDA
may also impose operating restrictions, enjoin and/or restrain certain conduct resulting in violations of applicable law pertaining
to medical devices, including a hold on approving new devices until issues are resolved to its satisfaction, and assess civil or
criminal penalties against our officers, employees, or us. The U.S. FDA may also recommend prosecution to the U. S.
Department of Justice. Conduct giving rise to civil or criminal penalties may also form the basis for private civil litigation by
third-party payers or other persons allegedly harmed by our conduct.

In April 2015, we entered into a consent decree with the U.S. FDA relating to our Neuromodulation business’ SynchroMed drug
infusion system and the Neuromodulation quality system. The consent decree requires the Company to complete certain
corrections and enhancements to the SynchroMed pump and the Neuromodulation quality system. The consent decree limits the
Company’s ability to manufacture and distribute the SynchroMed drug infusion system, unless specific conditions are met. The
agreement does not require the retrieval of any of the Company’s products, but the Company must retain a third-party expert to
inspect the Neuromodulation quality system and to provide a certification that the system complies with the requirements of the
consent decree. Once this certification is accepted by the U.S. FDA, and a U.S. FDA inspection is successfully completed, the
limitations on manufacturer and distribution of SynchroMed pumps will be lifted. Thereafter, the Company must submit
periodic audit reports to the U.S. FDA to ensure ongoing compliance with the consent decree.

In June 2016, TYRX, Inc. received a Warning Letter from the U.S. FDA following an inspection at the TYRX facility in
Monmouth Junction, New Jersey. The Company is taking action to address the Warning Letter and has submitted a response to
the U.S. FDA.

Governmental Trade Regulations

The sale and shipment of our products and services across international borders, as well as the purchase of components and
products from international sources, subject us to extensive governmental trade regulations. A variety of laws and regulations,
both in the U.S. and in the countries in which we transact business, apply to the sale, shipment and provision of goods, services
and technology across international borders. Because we are subject to extensive regulations in the countries in which we
operate, we are subject to the risk that laws and regulations could change in a way that would expose us to additional costs,
penalties or liabilities. These laws and regulations govern, among other things, our import and export activities.

The U.S. FDA, in cooperation with U.S. Customs and Border Protection (CBP), administers controls over the import of medical
devices into the U.S. The CBP imposes its own regulatory requirements on the import of our products, including inspection and
possible sanctions for noncompliance. Medtronic is also subject to foreign trade controls administered by several U.S.
government agencies, including the Bureau of Industry and Security within the Commerce Department and the Office of
Foreign Assets Control within the Treasury Department. We import raw materials, components and finished products into the
countries in which we transact business. We act as the importer of record in many instances, but we also sell and ship goods to
third parties who are themselves responsible for complying with applicable trade laws and regulations. In our role as importer of
record, we are directly responsible for complying with customs laws and regulations concerning the importation of our raw
materials, components and finished products. If applicable government agencies were to determine that we or such third parties
were not in compliance with applicable U.S. FDA or customs laws and regulations when engaging in cross-border transactions
involving our products, we may be subject to civil or criminal enforcement action, and varying degrees of liability, depending
on the nature of the violation and the extent of our culpability. In addition, such determinations may cause supply chain
disruptions and delays in the distribution of our products that impact our business activities.

Many countries, including the U.S., control the export and re-export of goods, technology and services for reasons including
public health, national security, regional stability, antiterrorism policies and other reasons. In certain circumstances, approval
from governmental authorities may be required before goods, technology or services are exported or re-exported to certain
destinations, to certain end-users and for certain end-uses. In addition, international sales of our medical devices that have not

received U.S. FDA approval are subject to U.S. FDA export requirements. Some governments may also impose economic
sanctions against certain countries, persons or entities. In addition to our need to comply with such regulations in connection
with our direct export activities, we also sell and provide goods, technology and services to agents, representatives and
distributors who may export such items to customers and end-users. If applicable government agencies were to determine that
we, or the third parties through which we export goods, were not in compliance with applicable export control or economic
sanctions laws and regulations when engaging in transactions involving our products, we may be subject to civil or criminal
enforcement action, and varying degrees of liability, dependent upon the nature of the violation and the extent of our culpability.
Similarly, such determinations may cause disruption or delays in the distribution and sales of our products, or result in
restrictions being placed upon our international distribution and sales of products which may materially impact our business
activities.

Anti-Boycott Laws

Under U.S. laws and regulations, U.S. companies and their controlled-in-fact subsidiaries and affiliates outside the U.S are
prohibited from participating or agreeing to participate in unsanctioned foreign boycotts in connection with certain business
activities, including the sale, purchase, transfer, shipping or financing of goods or services within the U.S. or between the U.S.
and a foreign country. Currently, the U.S. considers the Arab League boycott of Israel to constitute an unsanctioned foreign
boycott. We are responsible for ensuring we comply with the requirements of U.S. anti-boycott laws for all transactions in
which we are involved. If we, or certain third parties through which we sell or provide goods or services, are determined to have
violated U.S. anti-boycott laws and regulations, we may be subject to civil or criminal enforcement action, and varying degrees
of liability, dependent upon the nature of the violation and the extent of our culpability. Penalties for any violations of anti-
boycott laws and regulations could include criminal penalties and civil sanctions such as fines, imprisonment, debarment from
government contracts, loss of export privileges and the denial of certain tax benefits, including foreign tax credits, and outside
U.S subsidiary deferrals.

Data Privacy and Security Laws and Regulations

The collection, maintenance, protection, use, transmission, disclosure and disposal of sensitive personal information are
regulated at the U.S. federal and state, international and industry levels. U.S. federal and state laws protect the confidentiality of
certain patient health information, including patient medical records, and restrict the use and disclosure of patient health
information by health care providers. For example, the U.S. FDA has issued guidance advising manufacturers to review their
cybersecurity practices and policies to assure that appropriate safeguards are in place to prevent unauthorized access or
modification to their medical devices or compromise of the security of the hospital network that may be connected to the device.
Moreover, in April 2003, the U.S. Department of Health and Human Services (HHS) published patient privacy rules under the
Health Insurance Portability and Accountability Act of 1996 (HIPAA) and, in April 2005, published security rules for protected
health information. The HIPAA privacy and security rules govern the use, disclosure, and security of protected health
information by “Covered Entities,” which are health care providers that submit electronic claims, health plans, and health care
clearinghouses. In 2009, Congress passed the HITECH Act, which modified certain provisions of the HIPAA privacy and
security rules for Covered Entities and their Business Associates (which is anyone that performs a service on behalf of a
Covered Entity involving the use or disclosure of protected health information and is not a member of the Covered Entity’s
workforce). These included directing HHS to publish more specific security standards, and increasing breach notification
requirements, as well as tightening certain aspects of the privacy rules. HHS published the final versions of these new rules in
January 2013, and Covered Entities and Business Associates were expected to be in compliance by September 2013. In addition,
the HITECH Act provided that Business Associates will now be subject to the same security requirements as Covered Entities,
and that with regard to both the security and privacy rule, Business Associates will be subject to direct enforcement by HHS,
including civil and criminal liability, just as Covered Entities are. In the past, HIPAA has generally affected us indirectly, but
these modifications increase the potential for enforcement action against us as a Business Associate. Medtronic is generally not
a Covered Entity, except for our Diabetes business, Medtronic Monitoring, Inc. and our health insurance plans. Medtronic only
operates as a Business Associate to Covered Entities in a limited number of instances. In those cases, the patient data that we
receive and analyze may include protected health information.

A number of states have also adopted laws and regulations that may affect our privacy and security practices, such as state laws
that govern the use, disclosure and protection of social security numbers or that are designed to protect credit card account data.
State and local authorities increasingly focus on the importance of protecting individuals from identity theft, with a significant
number of states enacting laws requiring businesses to notify individuals of security breaches involving personal information.
State consumer protection laws may also apply to privacy and security practices related to personally identifiable information,
including information related to consumers and care providers.

We are also impacted by the privacy requirements of countries outside the United States. Privacy standards in Europe and Asia
are becoming increasingly strict. Enforcement action and financial penalties related to privacy in the E.U. are growing, and new
laws and restrictions are being passed. In April of 2016, the European Council and the Parliament adopted the new General Data
Protection Regulation, which sets demanding requirements for the management of individually identifiable data in the E.U.

The management of cross border transfers of information among and outside of E.U. member countries is becoming more
complex, which may complicate our clinical research activities, as well as product offerings that involve transmission or use of
clinical data. China and Russia have passed so-called “data localization” laws, which require multi-national companies that store
certain individually identifiable data on their citizens to maintain that data on servers located in their country. Restrictions on
transfer or processing of that data may apply as well. The restrictions may complicate our operations in those countries, adding
complexity and additional management and oversight needs, and the Chinese and Russian governments are still clarifying how
they will apply and enforce these laws.

Cost Containment Initiatives

Government and private sector initiatives to limit the growth of health care costs, including price regulation, competitive
pricing, bidding and tender mechanics, coverage and payment policies, comparative effectiveness of therapies, technology
assessments, and managed-care arrangements, are continuing in many countries where we do business, including the U.S. These
changes are causing the marketplace to put increased emphasis on the delivery of more cost-effective medical devices and
therapies. Government programs, including Medicare and Medicaid, private health care insurance, and managed-care plans have
attempted to control costs by limiting the amount of reimbursement they will pay for particular procedures or treatments, tying
reimbursement to outcomes, shifting to population health management, and other mechanisms designed to constrain utilization
and contain costs. Hospitals, which purchase implants, are also seeking to reduce costs through a variety of mechanisms,
including, for example, creating centralized purchasing functions that set pricing and in some cases limiting the number of
vendors that can participate in the purchasing program. Hospitals are also aligning interests with physicians through
employment and other arrangements, such as gainsharing, where a hospital agrees with physicians to share any realized cost
savings resulting from the physicians’ collective change in practice patterns such as standardization of devices where medically
appropriate. This has created an increasing level of price sensitivity among customers for our products.

Some third-party payers must also approve coverage and set reimbursement levels for new or innovative devices or therapies
before they will reimburse health care providers who use the medical devices or therapies. Even though a new medical device
may have been cleared for commercial distribution, we may find limited demand for the device until coverage and sufficient
reimbursement levels have been obtained from governmental and private third-party payers. In addition, some private third-
party payers require that certain procedures or that the use of certain products be authorized in advance as a condition of
reimbursement. International examples of cost containment initiatives and health care reforms in markets significant to
Medtronic’s business include Japan, where the government reviews reimbursement rate benchmarks every two years, which
may significantly reduce reimbursement for procedures using our medical devices or deny coverage for those procedures. As a
result of our manufacturing efficiencies, cost controls and other cost-savings initiatives, we believe we are well-positioned to
respond to changes resulting from the worldwide trend toward cost-containment; however, uncertainty remains as to the nature
of any future legislation, new or changed coverage and reimbursement government or private payer policies or decisions, or
other reforms, making it difficult for us to predict the potential impact of cost-containment trends on future operating results.

Regulations Governing Reimbursement

The delivery of our devices is subject to regulation by HHS and comparable state and non-U.S. agencies responsible for
reimbursement and regulation of health care items and services. U.S. laws and regulations are imposed primarily in connection
with the Medicare and Medicaid programs, as well as the government’s interest in regulating the quality and cost of health care.
Other governments also impose regulations in connection with their health care reimbursement programs and the delivery of
health care items and services.

U.S. federal health care laws apply when we or customers submit claims for items or services that are reimbursed under
Medicare, Medicaid, or other federally-funded health care programs. The principal U.S. federal laws include: (1) the Anti-
kickback Statute, which prohibits offers to pay or receive remuneration of any kind for the purpose of purchasing, ordering,
recommending making referrals to items or services reimbursable by a federal health care program; (2) the False Claims Act
which prohibits the submission of false or otherwise improper claims for payment to a federally-funded health care program,
including claims resulting from a violation of the Anti-kickback Statute; (3) the Stark law, which prohibits physicians from
referring Medicare or Medicaid patients to a provider that bills these programs for the provision of certain designated health

services if the physician (or a member of the physician’s immediate family) has a financial relationship with that provider; and
(4) health care fraud statutes that prohibit false statements and improper claims to any third-party payer. There are often similar
state false claims, anti-kickback, and anti-self-referral and insurance laws that apply to state-funded Medicaid and other health
care programs and private third-party payers. Insurance companies can also bring a private cause of action for treble damages
against a manufacturer for a pattern of causing false claims to be filed under the federal Racketeer Influenced and Corrupt
Organizations Act, or RICO. In addition, as a manufacturer the U.S. FDA-approved devices reimbursable by federal healthcare
programs, are subject to the Physician Payments Sunshine Act, which requires us to annually report certain payments and other
transfers of value we make to U.S.-licensed physicians or U.S. teaching hospitals. Further, the U.S. Foreign Corrupt Practices
Act (FCPA) can be used to prosecute companies in the U.S. for arrangements with physicians, or other parties outside the U.S.
if the physician or party is a government official of another country and the arrangement violates the law of that country.

The laws and regulations of health care goods and services that are applicable to us, including those described above, are subject
to evolving interpretations and enforcement discretion. If a governmental authority were to conclude that we are not in
compliance with applicable laws and regulations, we and our officers and employees could be subject to severe criminal and
civil financial penalties, including, for example, exclusion from participation as a supplier of product to beneficiaries covered by
Medicare. Any failure to comply with laws and regulations relating to reimbursement and health care goods and services could
adversely affect our reputation, business, financial condition and cash flows.

Our profitability and operations are subject to risks relating to changes in legislative, regulatory and reimbursement policies and
decisions as well as changes to private payer reimbursement coverage and payment decisions and policies. Implementation of
further legislative or administrative reforms to the reimbursement system in the U.S. and abroad, or adverse decisions relating to
our products by administrators of these systems in coverage or reimbursement, could significantly reduce reimbursement or
result in the denial of coverage, which could have an impact on the acceptance of and demand for our products and the prices
that our customers are willing to pay for them.

Environmental Health and Safety Laws

We are also subject to various environmental health and safety laws and regulations both within and outside the U.S. Similar to
other companies in our industry, our manufacturing and other operations involve the use and transportation of substances
regulated under environmental health and safety laws including those related to the transportation of hazardous materials. To the
best of our knowledge at this time, we do not expect that compliance with environmental protection laws will have a material
impact on our consolidated results of operations, financial position, and/or cash flows.

Litigation Risks

Patent Litigation We operate in an industry characterized by extensive patent litigation. Patent litigation can result in
significant damage awards and injunctions that could prevent the manufacture and sale of affected products or result in
significant royalty payments in order to continue selling the products. At any given time, we are involved as both a plaintiff and
a defendant in a number of patent infringement actions, the outcomes of which may not be known for prolonged periods of time.
While it is not possible to predict the outcome of patent litigation incidents to our business, we believe the outcomes associated
with this type of litigation could have a material adverse impact on our consolidated results of operations, financial position, or
cash flows. For additional information, see “Item 1A. Risk Factors — We are substantially dependent on patent and other
proprietary rights and failing to protect such rights or to be successful in litigation related to our rights or the rights of others
may result in our payment of significant monetary damages and/or royalty payments, negatively impact our ability to sell
current or future products, or prohibit us from enforcing our patent and other proprietary rights against others.” and Note 15 to
the consolidated financial statements in “Item 8. Financial Statements and Supplementary Data” in this Annual Report on
Form 10-K.

Product Liability and Other Claims We operate in an industry susceptible to significant product liability claims. These
claims may be brought by individuals seeking relief on their own behalf or purporting to represent a class. We are also
susceptible to other litigation, including private securities litigation, shareholder derivative suits and contract litigation. These
claims may be asserted against us in the future based on events we are not aware of at the present time. While it is not possible
to predict the outcome of product liability litigation, we believe the outcomes associated with this type of litigation could have a
material adverse impact on our consolidated results of operations, financial position, or cash flows. For additional information,
see “Item 1A. Risk Factors — Quality problems with, and product liability claims in connection with, our processes, goods, and
services, could lead to recalls or safety alerts, harm our reputation and have a material adverse effect on our business, results of
operations, financial condition and our cash flows.” and Note 15 to the consolidated financial statements in “Item 8. Financial
Statements and Supplementary Data” in this Annual Report on Form 10-K.

Insurance

We have elected to self-insure most of our insurable risks across the Company, and we made this decision based on costs and
availability factors in the insurance marketplace. We continue to maintain a directors’ and officers’ liability insurance policy
providing coverage for the directors and officers of the Company. We continue to monitor the insurance marketplace to evaluate
the value to us of obtaining insurance coverage for other categories of losses in the future. Based on historical loss trends, we
believe that our self-insurance program accruals and our existing insurance coverage will be adequate to cover future losses.
Historical trends, however, may not be indicative of future losses. The absence of third-party insurance coverage for other
categories of losses increases our exposure to unanticipated claims and these losses could have a material adverse impact on our
consolidated earnings, financial condition and/or cash flows.

Section 13(r) of the Exchange Act

Under Section 13(r) of the Exchange Act, the Company is required to include certain disclosures in its periodic reports if the
Company or any of its affiliates knowingly engaged in certain specified activities during the period covered by the report. As a
global medical device company, Medtronic conducts business throughout the world, including supplying life enhancing medical
products for patient use in Iran in accordance with authorizations issued by the U.S. Department of the Treasury’s Office of
Foreign Assets Control (OFAC) and other U.S. and non-U.S. governmental entities, and consistent with the Company’s
corporate policies. As part of its ongoing global trade compliance program, the Company identified that certain authorized
shipments during the period covered by this report, which were arranged and effectuated by third-party logistics providers, were
sent to Iran on aircraft owned or operated by Iran Air. This air carrier was designated under Executive Order 13382 during the
relevant time period. Iran Air’s designation under Executive Order 13382 was terminated on January 16, 2016. While Medtronic
paid associated freight expenses to the third-party logistics company, there were no gross revenues or net profits accrued by
Medtronic as a result of Iran Air being used by the third-party logistics providers. Medtronic is taking corrective actions with
regard to its third party logistics providers to confirm that air carriers designated under the Executive Orders are not used to ship
Medtronic medical products in the future, and will implement additional controls as necessary. The Company has also notified
OFAC regarding this matter.

Executive Officers of Medtronic

Set forth below are the names and ages of current Section 16(b) executive officers of Medtronic, as well as information
regarding their positions with Medtronic, their periods of service in these capacities, and their business experiences. There are
no family relationships among any of the officers named, nor is there any arrangement or understanding pursuant to which any
person was selected as an officer.

Omar Ishrak, age 60, has been Chairman and Chief Executive Officer of the Company since January 2015 and of Medtronic,
Inc. since June 2011. Prior to that, Mr. Ishrak served as President and Chief Executive Officer of GE Healthcare Systems, a
division of GE Healthcare, from 2009 to 2011. Prior to that, Mr. Ishrak was President and Chief Executive Officer of GE
Healthcare Clinical Systems from 2005 to 2008 and President and Chief Executive Officer of GE Healthcare Ultrasound and
BMD from 1995 to 2004.

Michael J. Coyle, age 54, has been Executive Vice President and Group President, Cardiac and Vascular Group of the Company
since January 2015 and of Medtronic, Inc. since December 2009. Prior to that, he served as President of the Cardiac Rhythm
Management division at St. Jude from 2001 to 2007, and prior positions included serving St. Jude as President of the company’s
Daig Catheter division and numerous leadership positions at Eli Lilly & Company.

Gary L. Ellis, age 59, has served as Executive Vice President of Global Operations and Information Technology since June
2016. Mr. Ellis previously served as Executive Vice President and Chief Financial Officer of the Company beginning in January
2015 and of Medtronic, Inc. beginning in April 2014. Prior to that, he was Senior Vice President and Chief Financial Officer
from May 2005 to April 2014; Vice President, Corporate Controller and Treasurer from October 1999 to May 2005, and Vice
President and Corporate Controller from August 1994 to October 1999. Mr. Ellis joined Medtronic in 1989 as Assistant
Corporate Controller and was promoted to Vice President of Finance for Medtronic Europe in 1992, until being named as
Corporate Controller in 1994. Mr. Ellis is a member of the board of directors of The Toro Company and past chairman of the
American Heart Association.

Hooman C. Hakami, age 46, has been Executive Vice President and Group President, Diabetes Group of the Company since
January 2015 and of Medtronic, Inc. since June 2014. Prior to that, he was President and Chief Executive Officer of Detection

and Guidance Solutions at GE Healthcare from April 2012 to May 2014. Prior to that, he served as President and Chief
Executive Officer of Interventional Systems from July 2009 to April 2012; Global Business Transformation leader for GE
Healthcare from December 2008 to July 2009; and Vice President and General Manager, Global Ultrasound Services from June
2004 to December 2008. Mr. Hakami started his career with GE and has held the following financial roles: Chief Financial
Officer for the Global Ultrasound division from 2001 to 2004; Chief Financial Officer for Clinical and Multi-vendor Services
from 1999 to 2001; as well as various finance roles at GE Capital from 1994 to 1999; GE’s Aerospace Division from 1992 to
1994 and GE Power Systems from 1991 to 1992.

Bryan C. Hanson, age 49, has been Executive Vice President and Group President, Minimally Invasive Therapies Group of the
Company since February 2015. Prior to that, he was Senior Vice President and Group President, Covidien since October 2014;
Senior Vice President and Group President, Medical Devices and United States of Covidien from October 2013 to September
2014; Senior Vice President and Group President of Covidien for the Surgical Solutions business from July 2011 to October
2013; and President of Covidien’s Energy-based Devices business from July 2006 to June 2011. Mr. Hanson held several other
positions of increasing responsibility in sales, marketing and general management with Covidien from October 1992 to July
2006.

Bradley E. Lerman, age 59, has been Senior Vice President, General Counsel and Corporate Secretary of the Company since
January 2015 and of Medtronic, Inc. since May 2014. Prior to that, he was Executive Vice President, General Counsel, and
Corporate Secretary at Federal National Mortgage Association (Fannie Mae) from October 2012 to May 2014; Senior Vice
President and Chief Litigation Counsel at Pfizer, Inc. from January 2009 to September 2012; Partner at Winston & Strawn from
August 1998 to January 2009; partner at Kirkland & Ellis from March 1996 to July 1998; Associate Independent Counsel from
October 1994 to March 1996; and Assistant U.S. Attorney in the Northern District of Illinois from February 1986 to September
1994.

Geoffrey S. Martha, age 46, has been Executive Vice President and President, Restorative Therapies Group since June 2015.
Mr. Martha previously served as Senior Vice President of Strategy and Business Development of the Company beginning in
January 2015 and of Medtronic, Inc. beginning in August 2011. Prior to that, he served as Managing Director of Business
Development at GE Healthcare from April 2007 to July 2011; General Manager for GE Capital Technology Finance Services
from November 2003 to March 2007; Senior Vice President, Business Development for GE Capital Vendor Financial Services
from February 2002 to October 2003; General Manager for GE Capital Colonial Pacific Leasing from February 2001 to January
2002; and Vice President, Business Development for Potomac Federal, the GE Capital federal financing investment bank from
May 1998 to January 2001.

Karen L. Parkhill, age 50, joined the Company as Executive Vice President and Chief Financial Officer in June 2016. From
2011 to 2016, Ms. Parkhill served as Vice Chairman and Chief Financial Officer of Comerica Incorporated. Ms. Parkhill was a
member of Comerica’s Management Executive Committee and the Comerica Bank Board of Directors. Prior to joining
Comerica, Ms. Parkhill worked for J.P. Morgan Chase & Co. in various capacities from 1992 to 2011, including serving as
Chief Financial Officer of the Commercial Banking business from 2007 to 2011. Ms. Parkhill is also a current member of the
Board of Directors for the Methodist Health System in Dallas.

Carol A. Surface, age 50, has been Senior Vice President and Chief Human Resources Officer of the Company since January
2015 and of Medtronic, Inc. since September 2013. Prior to that, she was the Executive Vice President and Chief Human
Resources Officer at Best Buy Co., Inc. from March 2010 to September 2013, and held a series of HR leadership roles at
PepsiCo Inc., from May 2000 to March 2010.

Robert ten Hoedt, age 55, has been Executive Vice President and President, EMEA of the Company since January 2015 and of
Medtronic, Inc. since May 2014. Prior to that, he was Senior Vice President and President, EMEA and Canada from 2009 to
2014; Vice President CardioVascular Europe and Central Asia from 2006 to 2009; Vice President and General Manager,
Vitatron from 1999 to 2006; Gastro-Uro leader from 1994 to 1999; and Marketing Manager, Neurological from 1991 to 1994.

Item 1A. Risk Factors

Investing in us involves a variety of risks and uncertainties, known and unknown, including, among others, those discussed
below. Each of the following risks should be carefully considered. Based on the information currently known to us, we believe
the following information identifies the most significant risk factors affecting our Company. However,
the risks and
uncertainties described below are not the only ones related to our businesses and are not necessarily listed in the order of their
importance. Additional risks and uncertainty not presently known to us or that we currently believe to be immaterial may also
adversely affect our business.

Risks Relating to the Company

We operate in a highly competitive industry and we may be unable to compete effectively.

We compete in both the therapeutic and diagnostic medical markets in approximately 160 countries throughout the world. These
markets are characterized by rapid change resulting from technological advances and scientific discoveries. In the product lines
in which we compete, we face a mixture of competitors ranging from large manufacturers with multiple business lines to small
manufacturers that offer a limited selection of niche products. Development by other companies of new or improved products,
processes, technologies, or the introduction of reprocessed products or generic versions when our proprietary products lose their
patent protection may make our products or proposed products less competitive. In addition, we face competition from
providers of alternative medical therapies such as pharmaceutical companies.

Competitive factors include:

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product reliability,
product performance,
product technology,
product quality,
breadth of product lines,
product services,
customer support,
price, and
reimbursement approval from health care insurance providers.

We also face competition for marketing, distribution, and collaborative development agreements, for establishing relationships
with academic and research institutions, and for licenses to intellectual property. In addition, academic institutions,
governmental agencies and other public and private research organizations also may conduct research, seek patient protection
and establish collaborative arrangements for discovery, research, clinical development and marketing of products similar to
ours. These companies and institutions compete with us in recruiting and retaining qualified scientific and management
personnel, as well as in acquiring necessary product technologies.

Major shifts in industry market share have occurred in connection with product problems, physician advisories, safety alerts,
and publications about our products; reflecting the importance of product quality, product efficacy, and quality systems in our
industry. In the current environment of managed care, consolidation among health care providers, increased competition, and
declining reimbursement rates, we have been increasingly required to compete on the basis of price. In order to continue to
compete effectively, we must continue to create, invest in, or acquire advanced technology, incorporate this technology into our
proprietary products, obtain regulatory approvals in a timely manner, and manufacture and successfully market our products.
Given these factors, we cannot guarantee that we will be able to compete effectively or continue our level of success in our
industry.

Reduction or interruption in supply and an inability to develop alternative sources for supply or other manufacturing
difficulties, may adversely affect our manufacturing operations and related product sales.

The manufacture of our products requires the timely delivery of sufficient amount of quality components and materials and is
highly exacting and complex, due in part to strict regulatory requirements. We manufacture most of our products at numerous
manufacturing facilities located throughout the world. We purchase many of the components and raw materials used in
manufacturing these products from numerous suppliers in various countries. We have generally been able to obtain adequate
supplies of such raw materials and components. However, for reasons of quality assurance, cost effectiveness, or availability,
we procure certain components and raw materials from a sole supplier. We work closely with our suppliers to try to ensure
continuity of supply while maintaining high quality and reliability. However, we cannot guarantee that these efforts will be
successful. In addition, due to the stringent regulations and requirements of the U.S. FDA regarding the manufacture of our
products, we may not be able to quickly establish additional or replacement sources for certain components or materials. A
reduction or interruption in supply, and an inability to develop alternative sources for such supply, could adversely affect our
ability to manufacture our products in a timely or cost-effective manner and to make our related product sales.

Other problems in the manufacturing process, including equipment malfunction, failure to follow specific protocols and
procedures, defective raw materials and environmental factors, could lead to launch delays, product shortage, unanticipated
costs, lost revenues and damage to our reputation. A failure to identify and address manufacturing problems prior to the release
of products to our customers may also result in quality or safety issues.

In addition, several of our key products are manufactured at a single manufacturing facility, with limited alternate facilities. If
an event occurs that results in damage to one or more of such facilities, we may be unable to manufacture the relevant products
at the previous levels or at all. Because of the time required to approve and license a manufacturing facility, a third-party
manufacturer may not be available on a timely basis to replace production capacity in the event manufacturing capacity is lost.

Moreover, pursuant to the conflict minerals requirements promulgated by the SEC as a part of Dodd-Frank, we are required to
report on the source of any conflict minerals used in our products, as well as the process we use to determine the source of such
materials. We will continue to incur expenses as we work with our suppliers to evaluate the source of any conflict minerals in
our products, and compliance with these requirements could adversely affect the sourcing, supply, and pricing of our raw
materials.

Our industry is experiencing greater scrutiny and regulation by governmental authorities, which may lead to greater
regulation in the future.

Our medical devices and technologies and our business activities are subject to a complex regime of regulations and an
aggressive enforcement environment, including by the U.S. FDA, U. S. Department of Justice, Health and Human Services-
Office of the Inspector General, and numerous other federal, state, and non-U.S. governmental authorities. These authorities and
members of Congress have been increasing their scrutiny of our industry. In addition, certain state governments and the federal
government have enacted legislation aimed at increasing transparency of our interactions with health care providers. As a result,
we are required by law to disclose payments and other transfers of value to health care providers licensed by certain states and
to all U.S. physicians and U.S. teaching hospitals at the federal level. Any failure to comply with these legal and regulatory
requirements could impact our business. In addition, we may continue to devote substantial additional time and financial
resources to further develop and implement policies, systems, and processes to comply with enhanced legal and regulatory
requirements, which may also impact our business. We anticipate that governmental authorities will continue to scrutinize our
industry closely, and that additional regulation may increase compliance and legal costs, exposure to litigation, and other
adverse effects to our operations.

We are subject to costly and complex laws and governmental regulations and any adverse regulatory action may materially
adversely affect our financial condition and business operations.

Our medical devices are subject to regulation by numerous government agencies, including the U.S. FDA and comparable
agencies outside the U.S. To varying degrees, each of these agencies requires us to comply with laws and regulations governing
the development, testing, manufacturing, labeling, marketing, and distribution of our products. We cannot guarantee that we will
be able to obtain or maintain marketing clearance for our new products or enhancements or modifications to existing products,
and the failure to maintain approvals or obtain approval or clearance could have a material adverse effect on our business,
results of operations, financial conditions and cash flows. Even if we are able to obtain such approval or clearance, it may:

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take a significant amount of time,
require the expenditure of substantial resources,
involve stringent clinical and pre-clinical testing, as well as increased post-market surveillance,
involve modifications, repairs, or replacements of our products, and
result in limitations on the proposed uses of our products.

Both before and after a product is commercially released, we have ongoing responsibilities under U.S. FDA regulations. Many
of our facilities and procedures and those of our suppliers are also subject to periodic inspections by the U.S. FDA to determine
compliance with the U.S. FDA’s requirements, including primarily the quality system regulations and medical device reporting
regulations. The results of these inspections can include inspectional observations on U.S. FDA’s Form-483, warning letters, or
other forms of enforcement. Since 2009, the U.S. FDA has significantly increased its oversight of companies subject to its
regulations, including medical device companies, by hiring new investigators and stepping up inspections of manufacturing
facilities. The U.S. FDA has recently also significantly increased the number of warning letters issued to companies. If the U.S.
FDA were to conclude that we are not in compliance with applicable laws or regulations, or that any of our medical devices are
ineffective or pose an unreasonable health risk, the U.S. FDA could ban such medical devices, detain or seize adulterated or
misbranded medical devices, order a recall, repair, replacement, or refund of such devices, refuse to grant pending pre-market
approval applications or require certificates of non-U.S governments for exports, and/or require us to notify health professionals
and others that the devices present unreasonable risks of substantial harm to the public health. The U.S. FDA may also assess
civil or criminal penalties against us, our officers or employees and impose operating restrictions on a company-wide basis, or
enjoin and/or restrain certain conduct resulting in violations of applicable law. The U.S. FDA may also recommend prosecution

to the U. S. Department of Justice. Any adverse regulatory action, depending on its magnitude, may restrict us from effectively
marketing and selling our products and limit our ability to obtain future pre-market clearances or approvals, and could result in a
substantial modification to our business practices and operations.

In addition, the U.S. FDA has taken the position that device manufacturers are prohibited from promoting their products other
than for the uses and indications set forth in the approved product labeling. A number of enforcement actions have been taken
against manufacturers that promote products for “off-label” uses, including actions alleging that federal health care program
reimbursement of products promoted for “off-label” uses constitute false and fraudulent claims to the government. The failure
to comply with “off-label” promotion restrictions can result in significant civil or criminal exposure, administrative obligations
and costs, and/or other potential penalties from, and/or agreements with, the federal government.

Pursuant to Dodd-Frank, the SEC promulgated final rules regarding disclosure of the use of certain minerals, known as “conflict
minerals” (tantalum, tin, tungsten (or their ores), and gold) which are mined from the Democratic Republic of the Congo and
adjoining countries. Under the rules, we are now required to disclose the procedures we employ to determine the sourcing of
such minerals and metals produced from those minerals. There are costs associated with complying with these disclosure
requirements, including for diligence in regards to the sources of any conflict minerals used in our products, in addition to the
cost of remediation and other changes to products, processes, or sources of supply as a consequence of such verification
activities. In addition, the implementation of these rules could adversely affect the sourcing, supply, and pricing of materials
used in our products. As of the date of our conflict minerals report for the 2015 calendar year, we were unable to obtain the
necessary information on conflict minerals from all of our suppliers and were unable to determine that all of our products are
conflict free. In addition, we may continue to face difficulties in gathering this information in the future. We may face
reputational challenges if we determine that certain of our products contain minerals not determined to be conflict free or if we
are unable to sufficiently verify the origins for all conflict minerals used in our products through the procedures we implement.

Governmental regulations outside the U.S have become increasingly stringent and more common, and we may become subject
to more rigorous regulation by governmental authorities in the future. In the European Union, for example, we anticipate a new
Medical Device Regulation to be published in 2016, and it
is likely to impose additional premarket and postmarket
requirements. Penalties for a company’s non-compliance with governmental regulation could be severe, including fines,
revocation or suspension of a company’s business license, mandatory price reductions and criminal sanctions. Any
governmental law or regulation imposed in the future may have a material adverse effect on us.

We are subject to environmental laws and regulations and the risk of environmental liabilities, violations and litigation.

We are subject to numerous U.S. federal, state, local and non-U.S. environmental, health and safety laws and regulations
concerning, among other things, the generation, storage, use and transportation of hazardous materials, emissions or discharges
of substances into the environment, investigation and remediation of hazardous substances or materials at various sites,
chemical constituents in medical equipment and end-of-life disposal and take-back programs, and the health and safety of our
employees. Our operations involve the use of substances regulated under such laws and regulations, primarily those used in
manufacturing and sterilization processes. If we violate these environmental laws and regulations, we could be fined, criminally
charged or otherwise sanctioned by regulators. Furthermore, environmental laws outside of the U.S. are becoming more
stringent, resulting in increased costs and compliance burdens.

In addition, certain environmental laws assess liability on current or previous owners or operators of real property for the costs
of investigation, removal or remediation of hazardous substances or materials at their properties or at properties which they have
disposed of hazardous substances. Liability for investigative, removal and remedial costs under certain U.S. federal and state
laws are retroactive, strict and joint and several. In addition to cleanup actions brought by governmental authorities, private
parties could bring personal injury or other claims due to the presence of, or exposure to, hazardous substances. The ultimate
cost of site cleanup and timing of future cash outflows is difficult to predict, given the uncertainties regarding the extent of the
required cleanup, the interpretation of applicable laws and regulations, and alternative cleanup methods.

We may in the future be subject to additional environmental claims for personal injury or cleanup based on our past, present or
future business activities (including the past activities of companies we have acquired). The costs of complying with current or
future environmental protection and health and safety laws and regulations, or liabilities arising from past or future releases of,
or exposures to, hazardous substances, may exceed our estimates, or have a material adverse effect on our business,
consolidated earnings, financial condition, and/or cash flow.

Our failure to comply with laws and regulations relating to reimbursement of health care goods and services may subject us
to penalties and adversely impact our reputation, business, financial condition and cash flows.

Our devices, products and therapies are purchased principally by hospitals or physicians that typically bill various third-party
payers, such as governmental programs (e.g., Medicare, Medicaid and comparable non-U.S. programs), private insurance plans
and managed care plans, for the healthcare services provided to their patients. The ability of our customers to obtain appropriate
reimbursement for products and services from third-party payers is critical because it affects which products customers purchase
and the prices they are willing to pay. As a result, our devices, products and therapies are subject to regulation regarding quality
and cost by HHS, including the Centers for Medicare & Medicaid Services (CMS) as well as comparable state and non-U.S.
agencies responsible for reimbursement and regulation of health care goods and services. The principal U.S. federal laws
implicated include those that prohibit (i) the filing of false or improper claims for federal payment, known as the false claims
laws, (ii) unlawful inducements for the referral of business reimbursable under federally-funded health care programs, known as
the anti-kickback laws, and (iii) health care service providers from seeking reimbursement for providing certain services to a
patient who was referred by a physician who has certain types of direct or indirect financial relationships with the service
provider, known as the Stark law. Many states have similar laws that apply to reimbursement by state Medicaid and other
funded programs as well as in some cases to all payers. Insurance companies can also bring a private cause of action for treble
damages against a manufacturer for causing a false claim to be filed under the federal Racketeer Influenced and Corrupt
Organizations Act, RICO. In addition, as a manufacturer of U.S. FDA-approved devices reimbursable by federal healthcare
programs, we are subject to the Physician Payments Sunshine Act, which requires us to annually report certain payments and
other transfers of value we make to U.S.-licensed physicians or U.S. teaching hospitals.

Our profitability and international operations are subject to risks relating to changes in government and private medical
reimbursement programs and policies, and changes in legal regulatory requirements in the U.S. and around the world.
Implementation of further legislative or administrative reforms to the reimbursement system in the U.S. and abroad, or adverse
decisions relating to our products by administrators of these systems in coverage or reimbursement, could significantly reduce
reimbursement or result in the denial of coverage, which could have an impact on the acceptance of and demand for our
products and the prices that our customers are willing to pay for them.

The laws and regulations of health care goods and services that are applicable to us, including those described above, are subject
to evolving interpretations. If a governmental authority were to conclude that we are not in compliance with applicable laws and
regulations, we and our officers and employees could be subject to severe criminal and civil penalties, including, for example,
exclusion from participation as a supplier of product to beneficiaries covered by CMS. Any failure to comply with laws and
regulations relating to reimbursement and health care goods and services could adversely affect our reputation, business,
financial condition and cash flows.

We are substantially dependent on patent and other proprietary rights and failing to protect such rights or to be successful in
litigation related to our rights or the rights of others may result in our payment of significant monetary damages and/or
royalty payments, negatively impact our ability to sell current or future products, or prohibit us from enforcing our patent
and other proprietary rights against others.

We are substantially dependent on patent and other proprietary rights and rely on a combination of patents, trade secrets, and
non-disclosure and non-competition agreements to protect our proprietary intellectual property. We also operate in an industry
characterized by extensive patent litigation. Patent litigation against us can result in significant damage awards and injunctions
that could prevent our manufacture and sale of affected products or require us to pay significant royalties in order to continue to
manufacture or sell affected products. At any given time, we are generally involved as both a plaintiff and a defendant in a
number of patent infringement actions, the outcomes of which may not be known for prolonged periods of time. While it is not
possible to predict the outcome of patent litigation, we believe the results associated with any such litigation could result in our
payment of significant monetary damages and/or royalty payments, negatively impact our ability to sell current or future
products, or prohibit us from enforcing our patent and proprietary rights against others, which would generally have a material
adverse impact on our consolidated earnings, financial condition, and/or cash flows.

While we intend to defend against any threats to our intellectual property, our patents, trade secrets, or other agreements may
not adequately protect our intellectual property. Further, pending patent applications owned by us may not result in patents
being issued to us, patents issued to or licensed by us in the past or in the future may be challenged or circumvented by
competitors and such patents may be found invalid, unenforceable or insufficiently broad to protect our technology or to provide
us with any competitive advantage. Third parties could obtain patents that may require us to negotiate licenses to conduct our
business, and the required licenses may not be available on reasonable terms or at all. We also rely on non-disclosure and non-

competition agreements with certain employees, consultants, and other parties to protect, in part, trade secrets and other
proprietary rights. We cannot be certain that these agreements will not be breached, that we will have adequate remedies for any
breach, that others will not independently develop substantially equivalent proprietary information, or that third parties will not
otherwise gain access to our trade secrets or proprietary knowledge.

In addition, the laws of certain countries in which we market some of our products do not protect our intellectual property rights
to the same extent as the laws of the U.S., which could make it easier for competitors to capture market position in such
countries by utilizing technologies that are similar to those developed or licensed by us. Competitors also may harm our sales by
designing products that mirror the capabilities of our products or technology without infringing our intellectual property rights.
If we are unable to protect our intellectual property in these countries, it could have a material adverse effect on our business,
financial condition or results of operations.

Quality problems with, and product liability claims in connection with, our processes, goods, and services, could lead to
recalls or safety alerts, harm our reputation and have a material adverse effect on our business, results of operations,
financial condition and our cash flows.

Quality is extremely important to us and our customers due to the serious and costly consequences of product failure and our
business exposes us to potential product liability risks that are inherent in the design, manufacture, and marketing of medical
devices. In addition, many of our products are often used in intensive care settings with seriously ill patients and some of the
medical devices we manufacture and sell are designed to be implanted in the human body for long periods of time or
indefinitely. Component failures, manufacturing defects, design flaws, off-label use, or inadequate disclosure of product-related
risks or product-related information with respect to our products could result in an unsafe condition or injury to, or death of, a
patient. These problems could lead to recall of, or issuance of a safety alert relating to, our products, and could result in product
liability claims and lawsuits, including class actions, which could ultimately result, in certain cases, in the removal from the
body of such products and claims regarding costs associated therewith. Due to the strong name recognition of the Medtronic and
Covidien brands, a material adverse event involving one of our products could result in reduced market acceptance and demand
for all products within that brand, and could harm our reputation and ability to market products in the future.

Strong product quality is critical to the success of our goods and services. If we fail to meet these standards and our products are
the subject of recalls or safety alerts, our reputation could be damaged, we could lose customers, and our revenue and results of
operations could decline. Our success also depends generally on our ability to manufacture to exact tolerances precision-
engineered components, subassemblies, and finished devices from multiple materials. If our components fail to meet these
standards or fail to adapt to evolving standards, our reputation, competitive advantage and market share could be harmed. In
certain situations, we may undertake a voluntary recall of products or temporarily shut down production lines based on
performance relative to our own internal safety and quality monitoring and testing data.

Further, we have elected to self-insure with respect to product liability risks and any product liability claim brought against us,
with or without merit, could be costly to defend. See “Our insurance program may not be adequate to cover future losses.” Any
of the foregoing problems, including product liability claims or product recalls in the future, regardless of their ultimate
outcome, could harm our reputation and have a material adverse effect on our business, results of operations, financial
condition, and cash flows.

Health care policy changes, including U.S. health care reform legislation, signed in 2010, may have a material adverse effect
on us.

In response to perceived increases in health care costs in recent years, there have been and continue to be proposals by the
federal government, state governments, regulators, and third-party payers to control these costs and, more generally, to reform
the U.S. health care system. Certain of these proposals could limit the prices we are able to charge for our products or the
amounts of reimbursement available for our products and could limit the acceptance and availability of our products. The
adoption of some or all of these proposals could have a material adverse effect on our financial condition and results of
operations.

The Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act of 2010
provide for a number of healthcare policy changes that are or will be applicable to us. However, certain provisions of the law are
not yet effective and there are many programs and requirements for which the details have not yet been fully established or
consequences not fully understood, and it is unclear what the full impacts will be from the law. The legislation provides for
significant new taxes on medical device makers in the form of a 2.3 percent excise tax on all U.S. medical device sales that

commenced in January 2013. Although the excise tax has been suspended by Congress until the end of 2017, its status is unclear
for 2018 and subsequent years. Under the legislation,
the total cost to the medical device industry is expected to be
approximately $20 billion over 10 years. The law also focuses on a number of Medicare provisions aimed at improving quality
and decreasing costs. It is uncertain at this point what negative unintended consequences these provisions will have on patient
access to new technologies. The Medicare provisions include value-based payment programs, increased funding of comparative
effectiveness research, reduced hospital payments for avoidable readmissions and hospital acquired conditions, and pilot
programs to evaluate alternative payment methodologies that promote care coordination (such as bundled physician and hospital
payments). Additionally, the law includes a reduction in the annual rate of inflation for Medicare payments to hospitals that
began in 2011 and the establishment of an independent payment advisory board to recommend ways of reducing the rate of
growth in Medicare spending. We cannot predict what health care programs and regulations will be ultimately implemented at
the federal or state level, or the effect of any future legislation or regulation. However, any changes that lower reimbursement
for our products or reduce medical procedure volumes could adversely affect our business and results of operations.

Our insurance program may not be adequate to cover future losses.

We have elected to self-insure most of our insurable risks across the company, and we made this decision based on cost and
availability factors in the insurance marketplace. We manage and maintain a portion of our self-insured program through a
wholly-owned captive insurance company. We continue to maintain a directors and officers liability insurance policy with a
third party insurer that provides coverage for the directors and officers of the company. We continue to monitor the insurance
marketplace to evaluate the value of obtaining insurance coverage for other categories of losses in the future. Although we
believe, based on historical loss trends, that our self-insurance program accruals and our existing insurance coverage will be
adequate to cover future losses, historical trends may not be indicative of future losses. The absence of third-party insurance
coverage for other categories of losses increases our exposure to unanticipated claims and these losses could have a material
adverse impact on our consolidated earnings, financial condition and/or cash flows.

If we experience decreasing prices for our goods and services and we are unable to reduce our expenses, our results of
operations will suffer.

We may experience decreasing prices for our goods and services due to pricing pressure experienced by our customers from
managed care organizations and other third-party payers, increased market power of our customers as the medical device
industry consolidates, and increased competition among medical engineering and manufacturing services providers. If the prices
for our goods and services decrease and we are unable to reduce our expenses, our results of operations will be adversely
affected.

We may experience higher costs to produce our products as a result of changes in prices for oil, gas and other commodities.

We use resins, other petroleum-based materials and pulp as raw materials in some of our products. Prices of oil and gas also
significantly affect our costs for freight and utilities. Oil, gas and pulp prices are volatile and may increase, resulting in higher
costs to produce and distribute our products. New laws or regulations adopted in response to climate change could also increase
energy costs and the costs of certain raw materials and components. Due to the highly competitive nature of the healthcare
industry and the cost-containment efforts of our customers and third-party payers, we may be unable to pass along cost increases
through higher prices. If we are unable to fully recover these costs through price increases or offset these increases through cost
reductions, we could experience lower margins and profitability and our business, results of operations, financial condition and
cash flows could be materially and adversely affected.

Economic and political instability around the world could adversely affect our revenues, financial condition or results of
operations.

There can be no assurance that economic and political instability around the world will not adversely affect our revenues,
financial condition or results of operations. Our customers and vendors may experience financial difficulties or be unable to
borrow money to fund their operations which may adversely impact their ability to purchase our products or to pay for our
products on a timely basis, if at all. As with our customers and vendors, these economic conditions make it more difficult for us
to accurately forecast and plan our future business activities. In addition, a significant amount of our trade receivables are with
national health care systems in many countries. Repayment of these receivables is dependent upon the political and financial
stability of those countries. In light of these global economic fluctuations, we continue to monitor the creditworthiness of
customers located outside the U.S. Failure to receive payment of all or a significant portion of these receivables could adversely
affect our results of operations.

We are subject to a variety of market and financial risks due to our international operations that could adversely affect those
operations or our profitability and operating results.

Although our stock is traded on the New York Stock Exchange, we are a global company. Operations in countries outside of the
U.S., which account for approximately 43 percent of our net sales for the fiscal year ended April 29, 2016, are accompanied by
certain financial and other risks that would not be faced by a company operating purely within the U.S. We intend to continue to
pursue growth opportunities in sales outside the U.S., especially in emerging markets, which could expose us to greater risks
associated with international sales and operations. Our profitability and international operations are, and will continue to be,
subject to a number of risks and potential costs, including:

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fluctuations in currency exchange rates,
healthcare reform legislation,
multiple non-U.S. regulatory requirements that are subject to change and that could restrict our ability to
manufacture and sell our products,
local product preferences and product requirements,
longer-term receivables than are typical in the U.S.,
trade protection measures and import or export licensing requirements,
less intellectual property protection in some countries outside the U.S. than exists in the U.S.,
different labor regulations and workforce instability,
political instability,
the potential payment of U.S. income taxes on earnings of certain controlled foreign subsidiaries subject
to U.S. taxation upon repatriation,
the expiration and non-renewal of foreign tax rulings and/or grants,
potentially negative consequences from changes in or interpretations of tax laws, and
economic instability and inflation, recession or interest rate fluctuations.

There are recent legislative proposals to tax profits of U.S. affiliates which are earned abroad. While it is impossible for us to
predict whether these and other proposals will be implemented, or how they will ultimately impact us, they may materially
impact our results of operations if, for example, our profits earned abroad are subject to U.S. income tax, or we are otherwise
disallowed deductions as a result of these profits.

On June 23, 2016, the United Kingdom (U.K.) held a referendum in which voters approved an exit from the E.U., commonly
referred to as “Brexit”. As a result of the referendum, it is expected that the British government will begin negotiating the terms
of the U.K.’s future relationship with the E.U. Although it is unknown what those terms will be, it is possible that there will be
greater restrictions on imports and exports between the U.K. and E.U. countries and increased regulatory complexities. These
changes may adversely affect our operations and financial results.

Finally, changes in currency exchange rates may reduce the reported value of our revenues outside the U.S, net of expenses, and
cash flows. We cannot predict changes in currency exchange rates, the impact of exchange rate changes, nor the degree to which
we will be able to manage the impact of currency exchange rate changes.

The failure to comply with U.S. Foreign Corrupt Practices Act and similar anti-bribery laws in non-U.S. jurisdiction could
materially adversely affect our business and result in civil and/or criminal sanctions.

The U.S. Foreign Corrupt Practices Act (FCPA) and similar anti-bribery laws in non-U.S. jurisdictions generally prohibit
companies and their intermediaries from making improper payments to non-U.S. government officials for the purpose of
obtaining or retaining business. Because of the predominance of government-sponsored healthcare systems around the world,
many of our customer relationships outside of the U.S. are with governmental entities and are therefore potentially subject to
such laws.

Global enforcement of anti-corruption laws has increased substantially in recent years, with more frequent voluntary self-
disclosures by companies, aggressive investigations and enforcement proceedings by U.S. and non-U.S. governmental agencies,
and assessment of significant fines and penalties against companies and individuals. Our international operations create the risk
of unauthorized payments or offers of payments by one of our employees, consultants, sales agents, or distributors, because
these parties are not always subject to our control. It is our policy to implement safeguards to educate our employees and agents
on these legal requirements and prohibit improper practices. However, our existing safeguards and any future improvements
may not always be effective, and our employees, consultants, sales agents, or distributors may engage in conduct for which we

might be held responsible. In addition, the government may seek to hold us liable for successor liability FCPA violations
committed by any companies in which we invest or that we acquire. Any alleged or actual violations of these regulations may
subject us to government scrutiny, severe criminal or civil sanctions and other liabilities, including exclusion from government
contracting, and could disrupt our business, and result in a material adverse effect on our reputation, results of operations,
financial condition, and cash flows.

Laws and regulations governing the export of our products could adversely impact our business.

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC), and the Bureau of Industry and Security at
the U.S. Department of Commerce (BIS), administer certain laws and regulations that restrict U.S. persons and, in some
instances, non-U.S. persons, in conducting activities, transacting business with or making investments in certain countries,
governments, entities and individuals subject to U.S. economic sanctions. Due to our international operations, we are subject to
such laws and regulations, which are complex, restrict our business dealings with certain countries and individuals, and are
constantly changing. Further restrictions may be enacted, amended, enforced or interpreted in a manner that materially impacts
our operations.

From time to time, certain of our subsidiaries have limited business dealings in countries subject to comprehensive sanctions,
including Iran, Sudan, Syria, Cuba and those in the region of Crimea. Certain of our subsidiaries sell medical devices and
surgical tools, and may provide related services, to distributors and other purchasing bodies in such countries. These business
dealings represent an insignificant amount of our consolidated revenues and income, but expose us to a heightened risk of
violating applicable sanctions regulations. Violations of these regulations are punishable by civil penalties, including fines,
denial of export privileges, injunctions, asset seizures, debarment from government contracts and revocations or restrictions of
licenses, as well as criminal fines and imprisonment. We have established policies and procedures designed to assist with our
compliance with such laws and regulations. However, there can be no assurance that our policies and procedures will effectively
prevent us from violating these regulations in every transaction in which we may engage, and such a violation could adversely
affect our reputation, business, financial condition, results of operations and cash flows.

Consolidation in the health care industry could have an adverse effect on our revenues and results of operations.

In response to a variety of actions by legislators, regulators, and third party payers to reduce the perceived rise in healthcare
costs, many health care industry companies, including health care systems, are consolidating to create new companies with
greater market power. As the health care industry consolidates, competition to provide goods and services to industry
participants will become more intense. These industry participants may try to use their market power to negotiate price
concessions or reductions for medical devices that incorporate components produced by us. If we are forced to reduce our prices
because of consolidation in the health care industry, our revenues would decrease and our consolidated earnings, financial
condition, and/or cash flows would suffer.

Our business is indirectly subject to health care industry cost-containment measures that could result in reduced sales of
medical devices and medical devices containing our components.

Most of our customers, and the health care providers to whom our customers supply medical devices, rely on third-party payers,
including government programs and private health insurance plans, to reimburse some or all of the cost of the procedures in
which medical devices that
incorporate components we manufacture or assemble are used. The continuing efforts of
governmental authorities, insurance companies, and other payers of health care costs to contain or reduce these costs could lead
to patients being unable to obtain approval for payment from these third-party payers. If third-party payer payment approval
cannot be obtained by patients, sales of finished medical devices that include our components may decline significantly and our
customers may reduce or eliminate purchases of our components. The cost-containment measures that health care providers are
instituting, both in the U.S. and internationally, could harm our ability to operate profitably. For example, managed care
organizations have successfully negotiated volume discounts for pharmaceuticals.

In an effort to reduce costs, many existing and potential customers for our products within the U.S. have become members of
group purchase organizations (GPOs) and integrated delivery networks (IDNs). GPOs and IDNs negotiate pricing arrangement
with healthcare product manufacturers and distributors and offer the negotiated prices to affiliated hospitals and other members.
GPOs and IDNs typically award contracts on a category-by-category basis through a competitive bidding process. Bids are
generally solicited from multiple manufacturers with the intention of driving down pricing. Due to the highly competitive nature
of the GPO and IDN contracting processes, we may not be able to obtain or maintain contract positions with major GPOs and
IDNs across our product portfolio. Furthermore, the increasing leverage of organized buying groups may reduce market prices
for our products, thereby reducing our profitability.

While having a contract with a GPO and IDN for a given product category can facilitate sales to members of that GPO or IDN,
such contract positions can offer no assurance that sales volumes of those products will be maintained. GPOs and IDNs
increasingly are awarding contracts to multiple suppliers for the same product category. Even when we are the sole contracted
supplier of a GPO or IDN for a certain product category, members of the GPO or IDN generally are free to purchase from other
suppliers. Furthermore, GPO and IDN contracts typically are terminable without cause upon 60 to 90 days’ notice. Accordingly,
although we have multiple contracts with many major GPOs and IDNs, the members of such groups may choose to purchase
from our competitors due to the price or quality offered by such competitors, which could result in a decline in our sales and
profitability.

Our research and development efforts rely upon investments and investment collaborations, and we cannot guarantee that
any previous or future investments or investment collaborations will be successful.

Our strategy to provide a broad range of therapies to restore patients to fuller, healthier lives requires a wide variety of
technologies, products, and capabilities. The rapid pace of technological development
industry and the
specialized expertise required in different areas of medicine make it difficult for one company alone to develop a broad portfolio
of technological solutions. In addition to internally generated growth through our research and development efforts, historically
we have relied, and expect to continue to rely, upon investments and investment collaborations to provide us access to new
technologies both in areas served by our existing businesses as well as in new areas.

in the medical

We expect to make future investments where we believe that we can stimulate the development or acquisition of new
technologies and products to further our strategic objectives and strengthen our existing businesses. Investments and investment
collaborations in and with medical technology companies are inherently risky, and we cannot guarantee that any of our previous
or future investments or investment collaborations will be successful or will not materially adversely affect our consolidated
earnings, financial condition, and/or cash flows.

The continuing development of many of our products depends upon us maintaining strong relationships with health care
professionals.

If we fail to maintain our working relationships with health care professionals, many of our products may not be developed and
marketed in line with the needs and expectations of the professionals who use and support our products, which could cause a
decline in our earnings and profitability. The research, development, marketing, and sales of many of our new and improved
products is dependent upon our maintaining working relationships with health care professionals. We rely on these professionals
to provide us with considerable knowledge and experience regarding the development, marketing, and sale of our products.
Physicians assist us as researchers, marketing and product consultants, inventors, and public speakers. If we are unable to
maintain our strong relationships with these professionals and continue to receive their advice and input, the development and
marketing of our products could suffer, which could have a material adverse effect on our consolidated earnings, financial
condition, and/or cash flows.

We are increasingly dependent on sophisticated information technology systems to operate our business and many of our
products and services include integrated software and information technology. If we fail to properly maintain the integrity of
our systems and data, if our products and services do not operate as intended, or we experience a cyber-attack or other
breach of these systems or products, our business could be materially affected.

We are increasingly dependent on sophisticated information technology for our products and infrastructure. We rely on
information technology systems to process, transmit and store electronic information in our day-to-day operations, and routinely
process, store and transmit large amounts of data in our operations, including sensitive personal information as well as
proprietary or confidential information. In addition, many of our products and services incorporate software and information
technology that allows patients and physicians to be connected or to collect data regarding a patient and the therapy he or she is
receiving.

The size and complexity of our information technology systems makes them vulnerable to increasingly sophisticated cyber-
attacks, breakdown, destruction,
loss or compromise of data, obsolescence or incompatibility among systems, or other
significant disruption including power outages and telecommunications failures. Unauthorized persons may attempt to hack into
our products or systems to obtain personal data relating to patients or employees, our confidential or proprietary information or
confidential information we hold on behalf of third parties. If third parties successfully hack into or interfere with our implanted
or connected products or services, they may create issues with product functionality that could pose a risk of loss of data, a risk
to patient safety, and a risk of product recall or field activity. We have programs in place to detect, contain and respond to data

to minimize
security incidents, and we make ongoing improvements to our
vulnerabilities,
in accordance with industry and regulatory standards. However, because the techniques used to obtain
unauthorized access or sabotage systems change frequently and may be difficult to detect, we may not be able to anticipate and
prevent these intrusions or mitigate them when and if they occur.

information-sharing products in order

We also rely on third party vendors to supply and/or support certain aspects of our information technology systems. Third party
systems may contain defects in design or manufacture or other problems that could unexpectedly compromise information
security of our own systems, and we are dependent on these third parties to deploy appropriate security programs to protect their
systems.

In addition, we continue to grow in part through new business acquisitions. With this growth we will continue to consolidate
and integrate the number of systems we operate, and to upgrade and expand our information system capabilities for stable and
secure business operations.

If we are unable to maintain reliable information technology systems and prevent data breaches, we may suffer regulatory
consequences in addition to business consequences. Our worldwide operations mean that we are subject to data protection and
cyber security laws and regulations in many jurisdictions, and that some of the data we process, store and transmit may be
transmitted across countries. In the U.S., HIPAA privacy and security rules require certain of our operations to protect the
confidentiality of patient medical records and other health information, and the Federal Trade Commission has begun to assert
authority over protection of privacy and the use of cyber security in information systems, particularly in the area of online
communications and mobile healthcare applications, in which we have a growing presence. In Europe, the General Data
Protection Regulation requires us to manage individually identifiable information in the E.U. and, in the event of violations,
may impose fines of up to four percent of our global revenue. China and Russia have also passed laws that require individually
identifiable data on their citizens to be maintained on local servers and that may restrict transfer or processing of that data. We
believe that we meet the expectations of applicable regulations and that the ongoing costs and impacts of ensuring compliance
with such rules are not material to our business. However, there is no guarantee that we will avoid enforcement actions by
governmental bodies. Enforcement actions can be costly and interrupt regular operations of our business. In addition, there has
been a developing trend of civil lawsuits and class actions relating to breaches of consumer data held by large companies. While
Medtronic has not been named in any such suits, if a substantial breach or loss of data from our records were to occur, we could
become a target of such litigation.

Our information systems require an ongoing commitment of significant resources to maintain, protect, and enhance existing
systems and develop new systems to keep pace with continuing changes in information processing technology, evolving legal
and regulatory standards, the increasing need to protect patient and customer information, and the information technology needs
associated with our changing products and services. There can be no assurance that our process of consolidating the number of
systems we operate, upgrading and expanding our information systems capabilities, continuing to build security into the design
of our products, protecting and enhancing our systems and developing new systems to keep pace with continuing changes in
information processing technology will be successful or that additional systems issues will not arise in the future. Any
significant breakdown, intrusion, interruption, corruption, or destruction of these systems, as well as any data breaches, could
have a material adverse effect on our business. If we fail to maintain or protect our information systems and data integrity
effectively, we could expose patients or employees to financial or medical identity theft, suffer a loss of product functionality,
lose existing customers, have difficulty attracting new customers, have difficulty preventing, detecting, and controlling fraud, be
exposed to the loss or misuse of confidential information, have disputes with customers, physicians, and other health care
professionals, suffer regulatory sanctions or penalties under federal laws, state laws, or the laws of other jurisdictions,
experience increases in operating expenses, incur expenses or lose revenues as a result of a data privacy breach, or suffer other
adverse consequences including legal action and damage to our reputation.

Negative conditions in global credit markets may impair our ability to issue debt securities, including our commercial paper
program and the liquidity and/or market value of investments in marketable debt securities such as our other fixed income
securities, which may cause us losses and liquidity issues.

We have investments in marketable debt securities that are classified and accounted for as available-for-sale. Our debt securities
include government and agency securities, corporate debt securities, certificates of deposit, debt funds, and mortgage-backed
and other asset-backed securities. Market conditions over the past several years have included periods of significant economic
uncertainty and at times general market distress. During these periods, we may experience reduced liquidity across the fixed-
income investment market, including the securities in which we invest. In the event we need to sell these securities, we may not
be able to do so in a timely manner or for a value that is equal to the underlying principal. In addition, we may be required to

adjust the carrying value of the securities and record an impairment charge. If we determine that the fair value of such securities
is temporarily impaired, we would record a temporary impairment as a component of accumulated other comprehensive (loss)
income within shareholders’ equity. If it is determined that the fair value of these securities is other-than-temporarily impaired,
we would record a loss in our consolidated statements of earnings, which could materially adversely impact our results of
operations and financial condition.

Negative market conditions may also impair our ability to access the capital markets through the issuance of commercial paper
or debt securities, or may impact our ability to sell such securities at a reasonable price and may negatively impact our ability to
borrow from financial institutions.

Our products are continually the subject of clinical trials conducted by us, our competitors, or other third parties, the results
of which may be unfavorable, or perceived as unfavorable, and could have a material adverse effect on our business,
financial condition, and results of operations.

As a part of the regulatory process of obtaining marketing clearance for new products and new indications for existing products,
we conduct and participate in numerous clinical trials with a variety of study designs, patient populations, and trial endpoints.
Unfavorable or inconsistent clinical data from existing or future clinical trials conducted by us, by our competitors, or by third
parties, or the market’s or U.S. FDA’s perception of this clinical data, may adversely impact our ability to obtain product
approvals, our position in, and share of, the markets in which we participate, and our business, financial condition, and results of
operations.

Failure to integrate acquired businesses into our operations successfully could adversely affect our business.

As part of our strategy to develop and identify new products and technologies, we have made several acquisitions in recent
years, including the 2015 acquisition of Covidien, and may make additional acquisitions in the future. Our integration of the
operations of acquired businesses requires significant efforts, including the coordination of information technologies, research
and development, sales and marketing, operations, manufacturing, and finance. These efforts result in additional expenses and
involve significant amounts of management’s time that cannot then be dedicated to other projects. Our failure to manage and
coordinate the growth of the combined company successfully could also have an adverse impact on our business. In addition, we
cannot be certain that the businesses we acquire will become profitable or remain so. Factors that will affect the success of our
acquisitions include:

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the presence or absence of adequate internal controls and/or significant fraud in the financial systems of
acquired companies,
our ability or inability to integrate information technology systems of acquired companies in a secure and
reliable manner,
adverse developments arising out of investigations by governmental entities of the business practices of
acquired companies, including potential liability imposed by FCPA,
any decrease in customer loyalty and product orders caused by dissatisfaction with the combined
companies’ product lines and sales and marketing practices, including price increases,
our ability to retain key employees, and
the ability of the combined company to achieve synergies among its constituent companies, such as
increasing sales of the combined company’s products, achieving cost savings, and effectively combining
technologies to develop new products.

We also could experience negative effects on our results of operations, cash flows, and financial condition from acquisition-
related charges, amortization of intangible assets and asset impairment charges. These effects, individually or in the aggregate,
could cause a deterioration of our credit rating and result in increased borrowing costs and interest expense.

The expansion of our services and solutions business may not yield the revenue we expect and will expose us to new risks.

We are increasingly focusing on our services and solutions businesses and the creation of comprehensive value-based healthcare
offerings, in which payment is based on measurable patient outcomes over a specific time horizon. These offerings include care
management services, cath lab and operating room managed services, and solutions for chronic disease management. We intend
to expand our services and solutions model across all of our business groups and across geographic regions. However, we
remain in the relatively early stages of developing and implementing this business model. As a result, we will need to invest
significant expense and management resources into developing our expertise and executing our strategies, and our efforts may
not be profitable.

In addition, the expansion of our services and solutions business model will expose us to, or increase our exposure to, a variety
of regulations in the various countries we provide services and solutions, including regulations related to government payments,
fraud and abuse, patient privacy, and the corporate practice of medicine. Compliance with these regulations may prove to be
more costly than we anticipate, and we may not successfully comply with such regulations. These regulatory costs may slow our
expansion into these business areas and may have a negative effect on our results of operations, cash flows, and financial
condition.

The medical device industry is the subject of numerous governmental investigations into marketing and other business
practices. These investigations could result in the commencement of civil and/or criminal proceedings, substantial fines,
penalties, and/or administrative remedies, divert the attention of our management, and have an adverse effect on our
financial condition and results of operations.

We are subject to rigorous regulation by the U.S. FDA and numerous other federal, state, and non-U.S. governmental
authorities. These authorities have been increasing their scrutiny of our industry. We occasionally receive subpoenas or other
requests for information from state and federal governmental agencies, including, among others, the U.S. Department of Justice
and the Office of Inspector General of HHS. These investigations typically relate primarily to financial arrangements with
health care providers, regulatory compliance, and product promotional practices.

We cooperate with these investigations and respond to such requests. However, when an investigation begins, we cannot predict
when it will be resolved, the outcome of the investigation, or its impact on us. An adverse outcome in one or more of these
investigations could include the commencement of civil and/or criminal proceedings, substantial fines, penalties, and/or
administrative remedies,
including exclusion from government reimbursement programs, entry into Corporate Integrity
Agreements (CIAs) with governmental agencies and amendments to existing CIAs. In addition, resolution of any of these
matters could involve the imposition of additional and costly compliance obligations. Finally, if these investigations continue
over a long period of time, they could divert the attention of management from the day-to-day operations of our business and
impose significant administrative burdens, including cost, on us. These potential consequences, as well as any adverse outcome
from these investigations or other investigations initiated by a government at any time, could have a material adverse effect on
our financial condition and results of operations.

Our substantial leverage and debt service obligations could adversely affect our business.

As of April 29, 2016, our total consolidated external debt was approximately $31.2 billion. We may also incur additional
indebtedness in the future. Our substantial indebtedness could have adverse consequences, including:

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making it more difficult for us to satisfy our financial obligations;
increasing our vulnerability to adverse economic, regulatory and industry conditions, and placing us at a
disadvantage compared to our competitors that are less leveraged;
limiting our ability to compete and our flexibility in planning for, or reacting to, changes in our business
and the industry in which we operate;
limiting our ability to borrow additional funds for working capital, capital expenditures, acquisitions and
general corporate or other purposes; and
exposing us to greater interest rate risk.

Our debt service obligations will require us to use a portion of our operating cash flow to pay interest and principal on
indebtedness instead of for other corporate purposes, including funding future expansion of our business, acquisitions, and
ongoing capital expenditures, which could impede our growth. Our ability to make payments on, and to refinance, our
indebtedness, and to fund capital expenditures will depend on our ability to generate cash in the future. This is subject to general
economic, financial, competitive, legislative, regulatory and other factors, many of which are beyond our control.

Changes in tax laws or exposure to additional income tax liabilities could have a material impact on our financial condition
and results of operations.

We are subject to income taxes as well as non-income based taxes, in both the U.S. and various jurisdictions outside the U.S.
We are subject to ongoing tax audits in various jurisdictions. Tax authorities may disagree with certain positions we have taken
and assess additional taxes. We regularly assess the likely outcomes of these audits in order to determine the appropriateness of
our tax provision. However, there can be no assurance that we will accurately predict the outcomes of these audits, and the
actual outcomes of these audits could have a material impact on our consolidated earnings and financial condition. Additionally,

changes in tax laws or tax rulings could materially impact our effective tax rate. For example, legislation in 2010 imposed a 2.3
percent excise tax on medical device manufacturers for U.S. sales of medical devices beginning in January 2013. Proposals for
fundamental U.S. corporate tax reform, if enacted, could have a material impact on our financial condition and results of
operations.

Medtronic, Inc. tax court proceeding outcome could have an adverse impact on our financial condition.

In March 2009, the IRS issued its audit report for Medtronic Inc.’s fiscal years 2005 and 2006. Medtronic, Inc. reached
agreements with the IRS on some, but not all matters related to these fiscal years. On December 23, 2010, the IRS issued a
statutory notice of deficiency with respect to the remaining issues. Medtronic, Inc. filed a petition with the U.S. Tax Court on
March 21, 2011 objecting to the deficiency. During October and November 2012, Medtronic, Inc. reached a resolution with the
IRS on various matters, including the deductibility of a settlement payment. Medtronic, Inc. and the IRS agreed to hold one
issue, the calculation of amounts eligible for the one-time repatriation holiday, because such issue was being addressed by other
taxpayers in litigation with the IRS. The remaining unresolved issue 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 Tax
Court proceeding with respect to this issue began on February 3, 2015 and ended on March 12, 2015. The U.S. Tax Court issued
its opinion on June 9, 2016. The U.S. Tax Court generally rejected the IRS’s position, but also made certain modifications to the
Medtronic, Inc. tax returns as filed. Final resolution of this matter is not expected until the end of calendar 2016 or later if the
tax court opinion is appealed.

Examination and audits by tax authorities could result in additional tax payments, which could have a material adverse
effect on our and Covidien’s business, results of operations, financial condition and cash flow.

The Company has provided reserves for potential payments of tax to various tax authorities related to uncertain tax positions.
However, the calculation of such tax liabilities involves the application of complex tax regulations in many jurisdictions.
Therefore, any dispute with a tax authority may result in a payment that is significantly different from current estimates. If
payment of these amounts ultimately proves to be less than the recorded amounts, the reversal of the liabilities generally would
result in tax benefits being recognized in the period when we determine the liabilities are no longer necessary. If the Company’s
estimate of tax liabilities proves to be less than the amount for which it is ultimately liable, we would incur additional charges to
expense and such charges could have a material adverse effect on our business, results of operations, financial condition and
cash flows.

If the distribution of Mallinckrodt ordinary shares to Covidien shareholders in 2013, or certain internal transactions
undertaken in anticipation of the 2013 separation, are determined to be taxable for U.S. federal income tax purposes, we
could incur significant U.S. federal income tax liabilities.

Covidien received an IRS ruling substantially to the effect that, for U.S. federal income tax purposes, (i) certain transactions
effected in connection with its 2013 separation of Mallinckrodt qualify as transactions under Sections 355 and/or 368(a) of the
Code, and (ii) the distribution qualifies as a transaction under Sections 355 and 368(a)(1)(D) of the Code. In addition to
obtaining the IRS ruling, Covidien received a tax opinion from Skadden, Arps, Slate, Meagher & Flom LLP, in form and
substance acceptable to Covidien, which relied on the effectiveness of the IRS ruling, substantially to the effect that, for U.S.
federal income tax purposes, the distribution and certain transactions entered into in connection with the distribution qualify as
transactions under Sections 355 and/or 368(a) of the Code.

The private letter rulings and the opinions relied on certain facts and assumptions, and certain representations and undertakings
in the case of the 2013 separation, from Covidien and Mallinckrodt, regarding the past and future conduct of their respective
businesses and other matters. Notwithstanding the private letter rulings and the tax opinions, the IRS could determine on audit
that the 2013 distribution or the related internal transactions should be treated as taxable transactions if it determines that any of
the respective facts, assumptions, representations or undertakings is not correct or has been violated, or that the distributions
should be taxable for other reasons, including as a result of significant changes in stock or asset ownership after the
distributions, or if the IRS were to disagree with the conclusions of the tax opinions that are not covered by the IRS rulings.

We could incur significant U.S. federal income tax liabilities or tax indemnification obligations, whether under applicable law
or the tax matters agreement that was entered into with Mallinckrodt, if it is ultimately determined that certain related
transactions undertaken in anticipation of the 2013 distribution are taxable.

Our tax position may be adversely affected by changes in tax law relating to multinational corporations.

Recent legislative proposals have aimed to expand the scope of U.S. corporate tax residence, limit the ability of foreign-owned
corporations to deduct interest expense, tax the accumulated unrepatriated earnings of foreign subsidiaries of U.S. corporations,
impose a minimum tax on the future offshore earnings of U.S. multinational groups, and to make other changes in the taxation
of multinational corporations.

Additionally, the U.S. Congress, government agencies in non-U.S. jurisdictions where we and our affiliates do business, and the
Organisation for Economic Co-operation and Development have recently focused on issues related to the taxation of
multinational corporations. One example is in the area of “base erosion and profit shifting,” where profits are claimed to be
earned for tax purposes in low-tax jurisdictions, or payments are made between affiliates from a jurisdiction with high tax rates
to a jurisdiction with lower tax rates. The Organisation for Economic Co-operation and Development has released several
components of its comprehensive plan to create an agreed set of international rules for fighting base erosion and profit shifting.
As a result, the tax laws in the U.S., Ireland and other countries in which we and our affiliates do business could change on a
prospective or retroactive basis, and any such changes could materially adversely affect our business.

Moreover, tax authorities may carefully scrutinize companies that result from a cross-border business combination (such as us),
which may lead such authorities to assert that we owe additional taxes, which could have a material adverse effect on our
business, results of operations, financial condition, and cash flows.

Risks Relating to Our Jurisdiction of Incorporation

Irish law differs from the laws in effect in the U.S. and may afford less protection to holders of our securities.

It may not be possible to enforce court judgments obtained in the U.S. against us in Ireland based on the civil liability provisions
of the U.S. federal or state securities laws. In addition, there is some uncertainty as to whether the courts of Ireland would
recognize or enforce judgments of U.S. courts obtained against us or our directors or officers based on the civil liabilities
provisions of the U.S. federal or state securities laws or hear actions against us or those persons based on those laws. We have
been advised that the U.S. currently does not have a treaty with Ireland providing for the reciprocal recognition and enforcement
of judgments in civil and commercial matters. Therefore, a final judgment for the payment of money rendered by any U.S.
federal or state court based on civil liability, whether or not based solely on U.S. federal or state securities laws, would not
automatically be enforceable in Ireland.

As an Irish company, we are governed by the Irish Companies Acts, which differ in some material respects from laws generally
applicable to U.S. corporations and shareholders, including, among others, differences relating to interested director and officer
transactions and shareholder lawsuits. Likewise, the duties of directors and officers of an Irish company generally are owed to
the company only. Shareholders of Irish companies generally do not have a personal right of action against directors or officers
of the company and may exercise such rights of action on behalf of the company only in limited circumstances. Accordingly,
holders of our securities may have more difficulty protecting their interests than would holders of securities of a corporation
incorporated in a jurisdiction of the U.S.

A transfer of our shares, other than ones effected by means of the transfer of book-entry interests in the Depository Trust
Company, may be subject to Irish stamp duty.

Transfers of our shares effected by means of the transfer of book entry interests in the Depository Trust Company (DTC) will
not be subject to Irish stamp duty. However, if you hold our shares directly rather than beneficially through DTC, any transfer of
your shares could be subject to Irish stamp duty (currently at the rate of 1% of the higher of the price paid or the market value of
the shares acquired). Payment of Irish stamp duty is generally a legal obligation of the transferee. The potential for stamp duty
could adversely affect the price of your shares.

In certain limited circumstances, dividends we pay may be subject to Irish dividend withholding tax and dividends received
by Irish residents and certain other shareholders may be subject to Irish income tax.

In certain limited circumstances, dividend withholding tax (currently at a rate of 20%) may arise in respect of dividends paid on
our shares. A number of exemptions from dividend withholding tax exist such that shareholders resident in the U.S. and other
specified countries may be entitled to exemptions from dividend withholding tax.

Shareholders resident in the U.S. that hold their shares through DTC will not be subject to dividend withholding tax, provided
the addresses of the beneficial owners of such shares in the records of the brokers holding such shares are recorded as being in
the U.S. (and such brokers have further transmitted the relevant information to a qualifying intermediary appointed by us).
However, other shareholders may be subject to dividend withholding tax, which could adversely affect the price of their shares.

Shareholders entitled to an exemption from Irish dividend withholding tax on dividends received from us will not be subject to
Irish income tax in respect of those dividends unless they have some connection with Ireland other than their shareholding in
our Company (for example, they are resident in Ireland). Shareholders who receive dividends subject to Irish dividend
withholding tax will generally have no further liability to Irish income tax on those dividends.

Our shares received by means of a gift or inheritance could be subject to Irish capital acquisitions tax.

Irish capital acquisitions tax (CAT) could apply to a gift or inheritance of our shares irrespective of the place of residence,
ordinary residence or domicile of the parties. This is because our shares will be regarded as property situated in Ireland. The
person who receives the gift or inheritance has primary liability for CAT. Gifts and inheritances passing between spouses are
exempt from CAT. Children have a tax-free threshold which Irish Revenue typically updates annually in respect of taxable gifts
or inheritances received from their parents.

Risks Relating to the Covidien Acquisition (the Transaction)

We may not realize all of the anticipated benefits of the Transactions or those benefits may take longer to realize than
expected. We may also encounter significant unexpected difficulties in integrating Medtronic, Inc. and Covidien.

Our ability to realize the anticipated benefits of the Transaction will depend, to a large extent, on our ability to integrate the
Medtronic, Inc. and Covidien businesses. The combination of two independent businesses is a complex, costly and time-
consuming process. As a result, we will be required to devote significant management attention and resources to integrating the
business practices and operations of Medtronic, Inc. and Covidien. The integration process may disrupt the businesses and, if
implemented ineffectively or if impacted by unforeseen negative economic or market conditions or other factors, we may not
realize the full anticipated benefits of the transaction. Our failure to meet the challenges involved in integrating the two
businesses to realize the anticipated benefits of the transaction could cause an interruption or a loss of momentum in, our
activities and could adversely affect our results of operations.

In addition, the overall integration of the businesses may result in material unanticipated problems, expenses, liabilities,
competitive responses, loss of customer relationships, and diversion of management’s attention. The difficulties of combining
the operations of the companies include, among others:

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the diversion of management’s attention to integration matters;
difficulties in achieving anticipated cost savings, synergies, business opportunities and growth prospects
from combining the businesses;
difficulties in the integration of operations and systems;
difficulties in the assimilation of employees;
difficulties in managing the expanded operations of a significantly larger and more complex company;
challenges in keeping existing customers and obtaining new customers; and
challenges in attracting and retaining key personnel.

Many of these factors will be outside of our control and any one of them could result in increased costs, decreases in the amount
of expected revenues and diversion of management’s time and energy, which could materially impact our business, financial
condition and results of operations. In addition, even if the operations of the businesses of Medtronic, Inc. and Covidien are
integrated successfully, we may not realize the full benefits of the Transaction, including the synergies, cost savings or sales or
growth opportunities that we expect. These benefits may not be achieved within the anticipated time frame, or at all.
Furthermore, additional unanticipated costs may be incurred in the integration of the businesses of Medtronic, Inc. and
Covidien. All of these factors could negatively impact our earnings per share, decrease or delay the expected accretive effect of
the transaction, and negatively impact the price of our ordinary shares. As a result, we cannot assure you that the combination of
the Medtronic, Inc. and Covidien businesses will result in the realization of the full benefits anticipated from the transaction.

Future potential changes to the U.S. tax laws could result in us being treated as a U.S. corporation for U.S. federal tax
purposes, and the IRS may not agree with the conclusion that we should be treated as a foreign corporation for U.S federal
income tax purposes.

Because we are an Irish incorporated entity, we would generally be classified as a foreign corporation under the general rule that
a corporation is considered tax resident in the jurisdiction of its organization or incorporation for U.S. federal income tax
purposes. Even so, the IRS may assert that we should be treated as a U.S. corporation (and, therefore, a U.S. tax resident) for
U.S. federal income tax purposes pursuant to Section 7874 of the U.S. Internal Revenue Code of 1986, as amended (the Code).

Under Section 7874 of the Code, if Medtronic Inc.’s shareholders immediately prior to the Transaction hold 80% or more of the
vote or value of our shares by reason of holding stock in Medtronic, Inc. immediately after the Transaction (the ownership test),
and our expanded affiliated group after the Transaction does not have substantial business activities in Ireland relative to its
worldwide activities (the substantial business activities test), we would be treated as a U.S. corporation for U.S. federal income
tax purposes. Based on the rules for determining share ownership under Section 7874 of the Code, Medtronic, Inc.’s
shareholders received approximately 70% of our ordinary shares (by both vote and value) by reason of holding stock in
Medtronic, Inc. Therefore, under current law, we should not be treated as a U.S. corporation for U.S. federal income tax
purposes. However, there is limited guidance regarding the application of Section 7874, including the application of the
ownership test.

In addition, changes to Section 7874 or the U.S. Treasury regulations promulgated thereunder could affect our status as a
foreign corporation for U.S. federal tax purposes. Any such changes could have prospective or retroactive application.

Since Section 7874 was enacted, there have been various legislative proposals to broaden its scope. Such proposals could,
among other things, treat a foreign acquiring corporation as a U.S. corporation under Section 7874 if the former shareholders of
the U.S. corporation own more than 50% of the shares of the foreign acquiring corporation after the transaction, or if the foreign
corporation’s affiliated group has substantial business activities in the U.S. and the foreign corporation is primarily managed
and controlled in the U.S. Accordingly, if enacted in their present form and retroactively effective to apply to the Transactions,
such proposals could cause us to be treated as a U.S. corporation for U.S. federal tax purposes.

If we were to be treated as a U.S. corporation for federal tax purposes, based on our existing expected cash flows, we could be
subject to substantially greater U.S. tax liability than currently contemplated as a non-U.S. corporation.

Specifically, if we were to be treated as a U.S. corporation for federal tax purposes, we would be subject to U.S. corporate
income tax on our worldwide income, and the income of our foreign subsidiaries would be subject to U.S. tax when repatriated
or when deemed recognized under the U.S. tax rules for controlled foreign corporations (CFC’s). Additionally, Covidien’s
foreign corporations, which are not currently CFC’s, would become CFC’s making them potentially subject to current or future
U.S. taxation, which could have a material adverse effect on our results of operations, financial condition, and cash flows.

The U.S. Treasury Department and the IRS may promulgate rules that would adversely affect our tax position.

The U.S. Treasury Department has announced that it is examining possible changes in the regulatory rules affecting companies
that move their tax domicile outside the U.S. In the event the U.S. Treasury Department and the IRS were to change the
applicable regulatory rules, we could face potentially substantial tax costs as a result of the Transactions. We are unable to
assess the potential impact of any such possible changes, if adopted, until they are announced.

On September 22, 2014, the U.S. Treasury Department and the IRS issued new guidance announcing their intention to issue
regulations interpreting multiple sections of the Code, including Section 7874, to address inversion transactions and transactions
that Treasury and the IRS characterize as “post-inversion tax avoidance transactions” (the IRS Notice). When issued, such
regulations would apply to transactions completed on or after September 22, 2014. The regulations described in the IRS Notice
would expand the set of circumstances under which Section 7874 applies to cause the foreign acquirer of a U.S. corporation to
be treated as a U.S. corporation for U.S. federal income tax purposes. Such regulations would also impose additional U.S. taxes
on certain transactions involving the acquired U.S. corporation’s CFC’s.

The regulations interpreting Section 7874 of the Code announced in the IRS Notice are not expected to cause us to be treated as
a U.S. corporation for U.S. federal tax purposes. However, if ultimately upheld by a reviewing court, the regulations announced
in the IRS Notice would be expected to limit our ability to engage in various intercompany transactions involving non-U.S.
subsidiaries.

In addition, in the IRS Notice, the U.S. Treasury Department and the IRS announced their intention to issue additional guidance
in the future intended to restrict our ability to undertake certain transactions which could reduce our U.S. tax liability. According
to the IRS Notice, such guidance may include, among other things, limitations on our ability to deduct interest on certain
intercompany debt for U.S federal income tax purposes. We are unable to predict the likelihood that any such guidance will be
issued, the nature of regulations that may be promulgated thereunder or the effect such guidance may have on our business.

The Transaction may not allow us to maintain competitive global cash management and a competitive effective corporate tax
rate.

While we believe that being incorporated in Ireland should help us maintain a competitive worldwide effective corporate tax
rate and provide flexible global cash management, we cannot give any assurance as to what our effective tax rate nor global
cash accessibility will be, however, because of, among other things, uncertainty regarding the tax policies of the jurisdictions
where we will operate. Additionally, the tax laws of Ireland and other jurisdictions could change in the future, and such changes
could cause a material change in our effective tax rate or global cash accessibility.

Legislative or other governmental action relating to the denial of U.S. federal or state governmental contracts to U.S.
companies that redomicile abroad could adversely affect our business.

Various U.S. federal and state legislative proposals that would deny governmental contracts to U.S. companies that move their
corporate location abroad may affect us. We are unable to predict the likelihood that, or final form in which, any such proposed
legislation might become law, the nature of the regulations that may be promulgated under any future legislative enactments, or
the effect such enactments and increased regulatory scrutiny may have on our business.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Our principal executive office is located in Ireland and is leased by us. Our main operational offices are owned by us and
located in the Minneapolis, Minnesota metropolitan area.

Our total manufacturing and research space is approximately 14 million square feet. Approximately 72 percent of the
manufacturing or research facilities are owned by us and the balance is leased. The following is a summary of our largest
manufacturing or research facilities by location:

Location Country or State

China
South Carolina
Connecticut
Minnesota
Mexico
Puerto Rico
Ireland
Florida
Massachusetts
California
Illinois
Italy
Texas
Switzerland
Arizona
Indiana
Colorado
Nebraska
Georgia
Japan
Dominican Republic
Canada

Square Feet
(in thousands)

1,182
1,146
1,098
1,024
959
831
640
550
504
502
459
454
431
347
294
291
287
281
236
220
217
206

We also maintain sales offices in the U.S. at 12 locations in 10 states and outside the U.S. at 202 locations in 67 countries. Most
of these locations are leased. We are using substantially all of our currently available productive space to develop, manufacture,
and market our products. Our facilities are in good operating condition, suitable for their respective uses, and adequate for
current needs.

Item 3. Legal Proceedings

A discussion of the Company’s legal proceedings is contained in Note 15 to the consolidated financial statements in “Item 8.
Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Medtronic’s Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity Securities

The Company’s ordinary shares are listed on the New York Stock Exchange under the symbol “MDT.”

In January 2015, the Company’s Board of Directors authorized, subject to the ongoing existence of sufficient distributable
reserves, the adoption of the existing Medtronic, Inc. share redemption program. As of April 29, 2016, the Company had used
all of the 80 million shares authorized under the January 2015 share redemption program. In June 2015, the Company’s Board
of Directors authorized, subject to the ongoing existence of sufficient distributable reserves, the redemption of an additional 80
million of the Company’s ordinary shares. As of April 29, 2016, the Company had used 8 million of the 80 million shares
authorized under the June 2015 share redemption program. As authorized by the Board of Directors, our share redemption
program expires when the total number of authorized shares have been redeemed.

The following table provides information about shares redeemed by the Company during the fourth quarter of fiscal year 2016:

Fiscal Period

1/30/2016-2/26/2016
2/27/2016-4/1/2016
4/2/2016-4/29/2016

Total

Total Number of
Shares Purchased

Average Price
Paid per Share

Total Number of Shares
Purchased as a Part of
Publicly Announced
Program

Maximum Number
of Shares that May
Yet Be Purchased
Under the Program

2,700,350
3,710,152
2,351,007

8,761,509

74.08
75.47
76.56

75.34

2,700,350
3,710,152
2,351,007

8,761,509

77,939,900
74,229,748
71,878,741

71,878,741

On June 20, 2016, there were approximately 40,100 shareholders of record of the Company’s ordinary shares. Ordinary cash
dividends declared and paid totaled 38.0 cents per share for each quarter of fiscal year 2016 and 30.5 cents per share for each
quarter of fiscal year 2015. The following prices are the high and low market sales quotations per share of the Company’s
ordinary shares for the quarters indicated:

Fiscal

2016 High
2016 Low
2015 High
2015 Low

1st Quarter

2nd Quarter

3rd Quarter

4th Quarter

79.08
72.20
65.50
57.81

78.91
55.54
67.11
59.83

78.92
72.28
77.39
65.51

80.74
71.03
79.50
70.91

Stock Performance Graph

The following graph compares the cumulative total shareholder return on Medtronic’s ordinary shares with the cumulative total
shareholder return on the Standard & Poor’s (S&P) 500 Index and the S&P 500 Health Care Equipment Index for the last five
fiscal years. The graph assumes that $100 was invested at market close on April 29, 2011 in Medtronic’s ordinary shares, the
S&P 500 Index, and the S&P 500 Health Care Equipment Index and that all dividends were reinvested.

$250

$200

$150

$100

$50

April 2011

April 2012

April 2013

April 2014

April 2015

April 2016

Medtronic. Inc. / Medtronic plc

S&P 500 Index

S&P 500 Health Care Equipment Index

Company/Index

April 2011

April 2012

April 2013

April 2014

April 2015

April 2016

Medtronic, Inc. / Medtronic plc
S&P 500 Index
S&P 500 Health Care
Equipment Index

100.00
100.00

92.68
105.16

116.80
121.27

149.62
145.85

203.06
169.15

211.37
168.63

100.00

97.46

113.00

134.57

177.23

187.79

For information on our equity compensation plans, see “Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Shareholder Matters” in this Annual Report on Form 10-K.

Irish Restrictions on Import and Export of Capital

The Financial Transfers Act 1992 provides that the Irish Minister for Finance can make provision for the restriction of financial
transfers between Ireland and other countries. For the purposes of this Act, “financial transfers” include all transfers which
would be movements of capital or payments within the meaning of the treaties governing the European Communities if they had
been made between Member States of the Communities. This Act has been used by the Minister for Finance to implement
European Council Directives, which provide for the restriction of financial transfers to certain countries, organizations and
people including the Al-Qaeda network and the Taliban, Afghanistan, Belarus, Burma (Myanmar), Democratic People’s
Republic of Korea, Democratic Republic of Congo, Egypt, Eritrea, Iran, Iraq, Ivory Coast, Lebanon, Liberia, Libya, Republic of
Guinea, Somalia, Sudan, and Syria.

Irish Taxes Applicable to U.S. Holders

Dividends paid by Medtronic will generally be subject to Irish dividend withholding tax at the standard rate of income tax
(currently 20 percent) unless an exemption applies.

Dividends paid to U.S. residents will not be subject to Irish dividend withholding tax provided that:

(cid:129)

in the case of a beneficial owner of Medtronic shares held in the Depository Trust Company (DTC), the address
of the beneficial owner in the records of his or her broker is in the United States and this information is provided
by the broker to the Company’s qualifying intermediary; or

in the case of a record owner, the record owner has provided to the Company’s transfer agent a valid U.S
Certification of Residence (Form 6166) or valid Irish Non-Resident Form V2.

Irish income tax may also arise with respect to dividends paid on Medtronic’s ordinary shares. A U.S. resident who meets one of
the exemptions from dividend withholding tax described above and who does not hold Medtronic shares through a branch or
agency in Ireland through which a trade is carried on generally will not have any Irish income tax liability on a dividend paid by
Medtronic. In addition, if a U.S. shareholder is subject to the dividend withholding tax, the withholding payment discharges any
Irish income tax liability, provided the shareholder furnishes to the Irish Revenue authorities a statement of the dividend
withholding tax imposed.

While the U.S./Ireland Double Tax Treaty contains provisions regarding withholding, due to the wide scope of the exemptions
from dividend withholding tax available under Irish domestic law, it would generally be unnecessary for a U.S. resident
shareholder to rely on the treaty provisions.

Item 6. Selected Financial Data

(in millions, except per share data and additional information)
Operating Results for the Fiscal Year:
Net sales
Cost of products sold
Research and development expense
Selling, general, and administrative expense
Special charges (gains), net
Restructuring charges, net
Certain litigation charges, net
Acquisition-related items
Amortization of intangible assets
Other expense, net

Operating profit
Operating profit margin percentage
Interest expense, net

Income from continuing operations before income
taxes
Provision for income taxes

Income from continuing operations
Income from discontinued operations, net of tax

Net income

Per Ordinary Share:
Basic - Income from continuing operations
Basic - Net income
Diluted - Income from continuing operations
Diluted - Net income
Cash dividends declared per ordinary share
Financial Position at Fiscal Year-end:
Working capital
Current ratio
Total assets
Long-term debt
Shareholders’ equity
Additional Information:(2)
Full-time employees at year-end
Full-time equivalent employees at year-end

2016

2015(1)

Fiscal Year

2014

2013

2012

28,833
9,142
2,224
9,469
70
290
26
283
1,931
107

5,291

18.4%
955

4,336
798

3,538
—

3,538

2.51
2.51
2.48
2.48
1.52

16,435
3.3:1.0
99,782
30,247
52,063

88,063
98,017

20,261
6,309
1,640
6,904
(38)
237
42
550
733
118

3,766

18.6%
280

3,486
811

2,675
—

2,675

2.44
2.44
2.41
2.41
1.22

21,671
3.4:1.0
$ 106,685
33,752
53,230

85,573
92,500

17,005
4,333
1,477
5,847
40
78
770
117
349
181

3,813

22.4%
108

3,705
640

3,065
—

3,065

3.06
3.06
3.02
3.02
1.12

15,651
3.8:1.0
37,943
10,315
19,443

43,305
49,247

16,590
4,126
1,557
5,698
—
172
245
(49)
331
108

4,402

26.5%
151

4,251
784

3,467
—

3,467

3.40
3.40
3.37
3.37
1.04

13,902
4.5:1.0
34,900
9,741
18,671

42,466
46,659

16,184
3,889
1,490
5,623
—
87
90
12
335
364

4,294

26.5%
149

4,145
730

3,415
202

3,617

3.24
3.43
3.22
3.41
0.97

10,409
2.8:1.0
32,818
7,359
17,113

40,601
44,944

(1) Covidien was acquired on January 26, 2015. For further information, see the section entitled “Understanding our Financial
Information” contained in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations.”

(2) Employee counts include continuing operations only.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Understanding Our Financial Information

The following discussion and analysis provides information management believes to be relevant to understanding the financial
condition and results of operations of the Company and its subsidiaries. You should read this discussion and analysis along with
our consolidated financial statements and related notes thereto as of April 29, 2016 and April 24, 2015 and for each of the three
fiscal years ended April 29, 2016, April 24, 2015, and April 25, 2014.

to the Transaction Agreement,

On January 26, 2015, pursuant
the Company acquired Covidien and Medtronic, Inc.
(collectively, the Transactions). Following the consummation of the Transactions, Medtronic, Inc. and Covidien became
subsidiaries of the Company. In connection with the Transactions, the Company became the successor registrant to Medtronic,
Inc. and re-registered as a public limited company organized under the laws of Ireland. For the fiscal year ended April 24, 2015,
the results of operations of Covidien are reflected in Medtronic’s results of operations for only the fourth quarter due to the
timing of the Transactions, which will affect comparability throughout this Annual Report on Form 10-K.

For further information regarding the Acquisition, see the section entitled “Acquisition and Investments —Acquisition of
Covidien plc in Fiscal Year 2015” contained in “Item 1. Business” and Note 2 to the consolidated financial statements in
“Item 8. Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.

Organization of Financial Information

Management’s discussion and analysis provides material historical and prospective disclosures designed to enable investors and
other users to assess our financial condition and results of operations.

Statements that are forward-looking and not historical in nature are subject to risks and uncertainties. See “Item 1A. Risk
Factors” in this Annual Report on Form 10-K and “Cautionary Factors That May Affect Future Results” in this management’s
discussion and analysis for more information.

The consolidated financial statements are presented within Item 8 of this Annual Report on Form 10-K and include the
consolidated statements of
income, consolidated statements of comprehensive income, consolidated balance sheets,
consolidated statements of shareholders’ equity, consolidated statements of cash flows, and the related notes, which are an
integral part of the consolidated financial statements.

Financial Trends

Throughout this management’s discussion and analysis, we present certain financial measures that management uses to evaluate
the operational performance of the Company and as a basis for strategic planning; however, such financial measures are not
presented in our financial statements prepared in accordance with generally accepted accounting principles in the United States
(U.S. GAAP). These financial measures are considered non-GAAP financial measures.

Management uses non-GAAP financial measures to facilitate management’s review of the operational performance of the
Company and as a basis for strategic planning. Management believes that non-GAAP financial measures provide useful
information to investors regarding the underlying business trends and performance of the Company’s ongoing operations and
are useful for period over period comparisons of such operations. The non-GAAP financial measures reflect an additional way
of viewing aspects of the Company’s operations. Investors should not consider results reflecting non-GAAP financial measures
in isolation from, or as a substitute for, financial information prepared in accordance with U.S. GAAP and are cautioned that
Medtronic may calculate results reflecting non-GAAP financial measures in a manner that is different from other companies.

The GAAP to Non-GAAP Reconciliation presents non-GAAP financial measures that exclude the impact of charges or gains
that contribute to or reduce earnings and may affect financial trends but which include charges or benefits that result from
transactions or events that management believes may or may not recur with similar materiality or impact to our operations in
future periods (Non-GAAP Adjustments).

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

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

Refer to the “GAAP to Non-GAAP Reconciliation,” “Income Taxes,” and “Summary of Cash Flows” sections for
reconciliations of our results of operations prepared in accordance with U.S. GAAP to the adjusted non-GAAP measurements
considered by management.

Our fiscal year-end is the last Friday in April, and therefore, the total weeks in a fiscal year can fluctuate between 52 and 53
weeks. Fiscal year 2016 was a 53-week year, with the additional week occurring in the first quarter. Fiscal years 2015 and 2014
were 52-week years.

Executive Level Overview

Medtronic is among the world’s largest medical technology, services, and solutions companies — alleviating pain, restoring
health, and extending life for millions of people around the world. We employ more than 88,000 full-time employees
worldwide, serving physicians, hospitals, and patients in approximately 160 countries. Our primary products include those for
cardiac rhythm disorders, cardiovascular disease, advanced and general surgical care, respiratory and monitoring solutions,
neurological disorders, spinal conditions and musculoskeletal trauma, urological and digestive disorders, and ear, nose, and
throat and diabetes conditions.

Net income for the fiscal year ended April 29, 2016 was $3.5 billion, $2.48 per diluted share, as compared to net income of $2.7
billion, $2.41 per diluted share, for the fiscal year ended April 24, 2015, representing an increase of 32 percent and 3 percent,
respectively.

The table below illustrates net sales by operating segment for fiscal years 2016 and 2015:

(dollars in millions; NM — Not Meaningful)

Cardiac and Vascular Group
Minimally Invasive Therapies Group (1)
Restorative Therapies Group
Diabetes Group

Total Net Sales

Net Sales

Fiscal Year

2016

2015

% Change

10,196
9,563
7,210
1,864

9,361
2,387
6,751
1,762

301
7
6

28,833

20,261

42%

(1)

The Minimally Invasive Therapies Group was a new group in the fourth quarter of fiscal year 2015 that contains the
majority of Covidien’s former operations. Revenue growth is compared to a full year of operations in fiscal year 2016.

Our performance for the fiscal year ended April 29, 2016 was favorably impacted by an additional selling week during the first
quarter of fiscal year 2016 due to our 52/53 week fiscal year calendar. Currency translation had an unfavorable impact of $1.4
billion on net sales compared to the prior fiscal year. The Cardiac and Vascular Group’s performance was primarily a result of
the addition of the Covidien Peripheral business into the Aortic & Peripheral Vascular division and strong net sales across all
three divisions: Cardiac Rhythm & Heart Failure, Coronary & Structural Heart, and Aortic & Peripheral Vascular. The Surgical
Solutions and Patient Monitoring & Recovery divisions, within the Minimally Invasive Therapies Group, contributed $5.3
billion and $4.3 billion of revenue, respectively. The Restorative Therapies Group’s performance was a result of solid growth in
Surgical Technologies, and was favorably impacted by the addition of the Covidien Neurovascular division, partially offset by
declines in Spine and Neuromodulation. The Diabetes Group’s performance was primarily due to growth in international
markets, driven by the next-generation MiniMed 640G System with the Enhanced Enlite Sensor. See our discussion in the “Net
Sales” section of this management’s discussion and analysis for more information on the results of our operating segments.

Acquisition of Covidien In fiscal year 2015, we acquired Covidien to continue in our mission to create a medical technology
and services company with a comprehensive product portfolio and a broad global reach that is better able to improve healthcare
outcomes. Covidien meaningfully accelerates our core strategies of therapy innovation, globalization and economic value. The
transaction was accounted for as a business combination using the acquisition method of accounting, which requires, among
other things, that assets acquired and liabilities assumed be recognized at their fair values at the Acquisition Date.

For further information regarding the Acquisition, see the section entitled “Acquisition and Investments — Acquisition of
Covidien” contained in “Item 1. Business,” and Note 2 to the consolidated financial statements in “Item 8. Financial Statements
and Supplementary Data” in this Annual Report on Form 10-K. The full text of the Transaction Agreement was filed as Exhibit
2.1 to our Amendment No. 5 to the Registration Statement on Form S-4 filed with the SEC on November 20, 2014.

GAAP to Non-GAAP Reconciliation The following is a reconciliation of our net sales, operating profit, income from
operations before income taxes, net income, provision for income taxes, and effective tax rate prepared in accordance with U.S.
GAAP to those results after giving effect to adjustments relating to charges or gains that management believes may or may not
recur with similar materiality or impact on net income in future periods. We have provided these non-GAAP financial measures,
because we believe they provide meaningful information regarding our results on a consistent and comparable basis for the
periods presented. Management uses these non-GAAP financial measures to facilitate management’s review of the operational
performance of the Company and as a basis for strategic planning. Management believes that the resulting non-GAAP financial
measures provide useful information to investors regarding the underlying business trends and performance of the Company’s
ongoing operations and are useful for period over period comparisons of such operations. These non-GAAP financial measures
reflect an additional way of viewing aspects of the Company’s operations. Investors should not consider results reflecting non-
GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with U.S. GAAP
and are cautioned that Medtronic may calculate results reflecting non-GAAP financial measures in a manner that is different
from other companies.

Refer to the “Cost and Expenses,” “Income Taxes,” and “Liquidity and Capital Resources” sections of this Management’s
Discussion and Analysis for more information on the Non-GAAP Adjustments.

(in millions)

GAAP
Non-GAAP Adjustments:

Impact of inventory step-up
Special charges
Restructuring charges, net
Certain litigation charges, net
Acquisition-related items
Amortization of intangible assets
Loss on previously held forward starting
interest rate swaps
Debt tender premium
Certain tax adjustments

Net Sales

Operating
Profit

Fiscal year ended April 29, 2016

Income from
Operations
Before Income
Taxes

Net Income

Provision
for Income
Taxes(1)

Effective
Tax Rate

$ 28,833

5,291

4,336

3,538

798

18.4%

—
—
—
—
—
—

—
—
—

226
70
299
26
283
1,931

—
—
—

226
70
299
26
283
1,931

45
183
—

165
44
221
17
212
1,467

29
118
417

61
26
78
9
71
464

16
65
(417)

27.0
37.1
26.1
34.6
25.1
24.0

35.6
35.5
—

Non-GAAP

$ 28,833

8,126

7,399

6,228

1,171

15.8%

(1)

The tax effect of each Non-GAAP Adjustment is based on the jurisdictions in which the expense (income) is incurred
and the tax laws in effect for each such jurisdiction.

(in millions)

GAAP
Non-GAAP Adjustments:

Impact of inventory step-up
Impact of product technology upgrade
commitment
Special (gains) charges, net
Restructuring charges, net
Certain litigation charges, net
Acquisition-related items
Amortization of intangible assets
Impact of acquisition on interest expense
Certain tax adjustments

Net Sales

Operating
Profit

Fiscal year ended April 24, 2015

Income from
Operations
Before Income
Taxes

Net Income

Provision
for Income
Taxes(1)

Effective
Tax Rate

$ 20,261

3,766

3,486

2,675

811

23.3%

—

—
—
—
—
—
—
—
—

623

74
(38)
252
42
550
733
—
—

623

74
(38)
252
42
550
733
77
—

455

61
(23)
180
27
433
538
49
349

168

13
(15)
72
15
117
195
28
(349)

27.0

17.6
39.5
28.6
35.7
21.3
26.6
36.4
—

Non-GAAP

$ 20,261

6,002

5,799

4,744

1,055

18.2%

(1)

The tax effect of each Non-GAAP Adjustment is based on the jurisdictions in which the expense (income) is incurred
and the tax laws in effect for each such jurisdiction.

(in millions)

GAAP
Non-GAAP Adjustments:

Special charges
Restructuring charges, net
Certain litigation charges, net
Acquisition-related items
Amortization of intangible assets
Certain tax adjustments

Net Sales

Operating
Profit

Fiscal year ended April 25, 2014

Income from
Operations
Before Income
Taxes

Net Income

Provision
for Income
Taxes(1)

Effective
Tax Rate

$ 17,005

3,813

3,705

3,065

640

17.3%

—
—
—
—
—
—

40
88
770
117
349
—

26
60
701
79
230
(63)

14
28
69
38
119
63

971

35.0
31.8
9.0
32.5
34.1
—

19.2%

Non-GAAP

$ 17,005

5,177

5,069

4,098

(1)

The tax effect of each Non-GAAP Adjustment is based on the jurisdictions in which the expense (income) is incurred
and the tax laws in effect for each such jurisdiction.

Critical Accounting Estimates

The preparation of the consolidated financial statements, in conformity with U.S. GAAP, requires management to use judgment
in making estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. These
estimates reflect managements’ best judgment about economic and market conditions and their potential effects on the valuation
and/or carrying value of assets and liabilities based upon relevant information available. We base our estimates on historical
experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
See also Note 1 to the consolidated financial statements in “Item 8. Financial Statements and Supplementary Data” in this
Annual Report on Form 10-K, which discusses our significant accounting policies.

Our critical accounting estimates include the following:

Revenue Recognition Based upon the lag time between the original sale to distributors at list price and the related distributor
rebate earned at time of sale to the end customer and the judgments involved in estimating such rebates, we consider certain

Minimally Invasive Therapies Group price adjustment rebates to be a critical accounting estimate. We adjust reserves to reflect
differences between estimated and actual experience, and record such adjustment as a reduction of sales in the period of
adjustment. Adjustments to recorded reserves have not been significant. Price adjustment rebates charged against gross sales for
the fiscal year ended April 29, 2016 and the fourth quarter of fiscal year 2015 were $2.9 billion and $679 million, respectively.

Litigation Contingencies We are involved in a number of legal actions involving product liability, intellectual property
disputes, shareholder derivative actions, securities class actions, other class actions, income tax matters, and environmental
matters. The outcomes of these legal actions are not within our complete control and may not be known for prolonged periods of
time. In some actions, the claimants seek damages, as well as other relief (including injunctions barring the sale of products that
are the subject of the lawsuit), that could require significant expenditures or result in lost revenues. Estimates of probable losses
resulting from litigation, governmental proceedings, and income tax matters 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. Our significant legal proceedings are discussed in Note 15 to the consolidated financial statements
in “Item 8. Financial Statements and Supplementary Data” in this Annual Report on Form 10-K. While it is not possible to
predict the outcome for most of the matters discussed in Note 15 to the consolidated financial statements, we believe it is
possible that costs associated with these matters could have a material adverse impact on our consolidated earnings, financial
position, and/or cash flows.

Income Tax Reserves We establish reserves when, despite our belief that our tax return positions are fully supportable, we
believe that certain positions are likely to be challenged and that we may or may not prevail. These reserves are established and
adjusted in accordance with the principles of U.S. GAAP. Under U.S. GAAP, if we determine that a tax position is more likely
than not of being sustained upon audit, based solely on the technical merits of the position, we recognize the benefit. We
measure the benefit by determining the amount that is greater than 50 percent likely of being realized upon settlement. We
presume that all tax positions will be examined by a taxing authority with full knowledge of all relevant information. The
calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations in a multitude
of jurisdictions across our global operations. We regularly monitor our tax positions and tax liabilities. We reevaluate the
technical merits of our tax positions and recognize an uncertain tax benefit, or derecognize a previously recorded tax benefit,
when (i) there is a completion of a tax audit, (ii) effective settlement of an issue (iii) there is a change in applicable tax law
including a tax case or legislative guidance, or (iv) there is an expiration of the statute of limitations. Significant judgment is
required in accounting for tax reserves. Although we believe that we have adequately provided for liabilities resulting from tax
assessments by taxing authorities, positions taken by these tax authorities could have a material impact on our effective tax rate,
consolidated earnings, financial position and/or cash flows.

Valuation of Intangible Assets and Goodwill When we acquire a business, the assets acquired and liabilities assumed are
recorded at their respective fair values as of the acquisition date. Goodwill is the excess of the purchase price consideration over
the estimated fair value of net assets of acquired businesses. Intangible assets include patents, trademarks, tradenames, customer
relationships, purchased technology, and IPR&D. Determining the fair value of intangible assets acquired as part of a business
combination requires us to make significant estimates. These estimates include the amount and timing of projected future cash
flows of each project or technology, the discount rate used to discount those cash flows to present value, the assessment of the
asset’s life cycle, and the consideration of legal, technical, regulatory, economic, and competitive risks.

The test for goodwill impairment requires us to make several estimates about fair value, most of which are based on projected
future cash flows. Our estimates associated with the goodwill impairment test are considered critical due to the amount of
goodwill recorded on our consolidated balance sheets and the judgment required in determining fair value, including projected
future cash flows. The Company assesses the impairment of goodwill annually in the third quarter at the reporting unit level and
whenever an event occurs or circumstances change that would indicate that the carrying amount may be impaired. Goodwill was
$41.5 billion and $40.5 billion as of April 29, 2016 and April 24, 2015, respectively.

We test definite-lived intangible assets for impairment when an event occurs or circumstances change that would indicate the
carrying amount of the assets or asset group may be impaired. Our tests are based on future cash flows that require significant
judgment with respect to future revenue and expense growth rates, appropriate discount rate, asset groupings, and other
assumptions and estimates. We use estimates that are consistent with our business plans and a market participant view of the
assets being evaluated. Actual results may differ from our estimates due to a number of factors including, among others,
changes in competitive conditions, timing of regulatory approval, results of clinical trials, changes in worldwide economic
conditions, and fluctuations in currency exchange rates. These risk factors are discussed in “Item 1A. Risk Factors” in this
Annual Report on Form 10-K. Definite-lived intangible assets, net of accumulated amortization, were $26.2 billion and $27.4
billion as of April 29, 2016 and April 24, 2015, respectively.

The Company assesses the impairment of indefinite-lived intangibles annually in the third quarter and whenever an event occurs
or circumstances change that would indicate that the carrying amount may be impaired. Our impairment tests of indefinite-lived
intangibles require the Company to make several estimates about fair value, most of which are based on projected future cash
flows. Indefinite-lived intangible assets, were $721 million and $720 million as of April 29, 2016 and April 24, 2015,
respectively.

The results of our annual impairment test are discussed in Note 6 to the consolidated financial statements in “Item 8. Financial
Statements and Supplementary Data” in this Annual Report on Form 10-K.

Contingent Consideration Contingent consideration is recorded at the acquisition date at estimated fair value and is
remeasured each reporting period with the change in fair value recognized as income or expense within acquisition-related
items in our consolidated statements of income. Changes to the fair value of contingent consideration can result from changes in
the timing and amount of revenue estimates, in the timing or probability of achieving the milestones which trigger payment, or
in discount rates. The fair value of contingent consideration was $377 million and $264 million as of April 29, 2016 and
April 24, 2015, respectively.

Net Sales

In the fourth quarter of fiscal year 2015, we amended the way in which we evaluate performance and allocate resources with the
acquisition of Covidien. As a result, we began to operate under four reportable segments and four operating segments, the
Cardiac and Vascular Group (composed of Cardiac Rhythm & Heart Failure, Coronary & Structural Heart and Aortic &
Peripheral Vascular businesses),
the Minimally Invasive Therapies Group (composed of Surgical Solutions and Patient
Monitoring & Recovery), the Restorative Therapies Group (composed of the Spine, Neuromodulation, Surgical Technologies,
and Neurovascular businesses), and the Diabetes Group. See Note 17 to the consolidated financial statements in “Item 8.
Financial Statements and Supplementary Data” in this Annual Report on Form 10-K for additional discussion related to our
segment reporting.

The table below illustrates net sales by operating segment and division for fiscal years 2016, 2015, and 2014:

Net Sales

Fiscal Year

Net Sales

Fiscal Year

(dollars in millions; NC — Not Calculable)

2016

2015

% Change

2015

2014

% Change

Cardiac Rhythm & Heart Failure
Coronary & Structural Heart
Aortic & Peripheral Vascular(1)

Total Cardiac and Vascular Group

Surgical Solutions(1)
Patient Monitoring & Recovery(1)

Total Minimally Invasive Therapies Group(1)

Spine
Neuromodulation
Surgical Technologies
Neurovascular(1)

Total Restorative Therapies Group
Diabetes Group

5,465
3,093
1,638

10,196

5,265
4,298

9,563

2,924
1,926
1,773
587

7,210
1,864

5,245
3,038
1,078

9,361

1,293
1,094

2,387

2,971
1,977
1,671
132

6,751
1,762

4% $
2
52

307
293

301

(2)
(3)
6
345

7
6

5,245
3,038
1,078

9,361

1,293
1,094

2,387

2,971
1,977
1,671
132

6,751
1,762

4,996
2,956
895

8,847

—
—

—

3,041
1,898
1,562
—

6,501
1,657

5%
3
20

NC
NC

(2)
4
7
NC

4
6

Total

$ 28,833

$ 20,261

42% $ 20,261

$ 17,005

19%

(1)

Growth rates are impacted by the acquisition of Covidien in the fourth quarter of fiscal year 2015. Revenue growth is
compared to a full year of operations in fiscal year 2016.

Cardiac and Vascular Group The Cardiac and Vascular Group’s products, with specific focus on comprehensive disease
management, include pacemakers, insertable and external cardiac monitors, cardiac resynchronization therapy devices (CRT-D),
implantable cardioverter defibrillators (ICD), leads and delivery systems, ablation products, electrophysiology catheters,

products for the treatment of atrial fibrillation, information systems for the management of patients with Cardiac Rhythm &
Heart Failure devices, products designed to reduce surgical site infections, coronary and peripheral stents, balloon, and related
delivery systems, endovascular stent graft systems, heart valve replacement technologies, cardiac tissue ablation systems, and
open heart and coronary bypass grafting surgical products. The Cardiac and Vascular Group also includes Care Management
Services (formerly known as Cardiocom) and Cath Lab Managed Services (CLMS) within the Cardiac Rhythm & Heart Failure
division. The Cardiac and Vascular Group’s net sales for fiscal year 2016 were $10.2 billion, an increase of 9 percent compared
to the prior fiscal year. Currency translation had an unfavorable impact on net sales of $572 million as a result of the change in
exchange rates from the prior year. The Cardiac and Vascular Group’s performance was favorably impacted by an additional
selling week during the first quarter of fiscal year 2016. The Cardiac and Vascular Group’s performance for fiscal year 2016
also benefited from the addition of the Covidien Peripheral business into the Aortic & Peripheral Vascular division and strong
net sales across all three divisions. See the more detailed discussion of each division’s performance below.

Cardiac Rhythm & Heart Failure net sales for fiscal year 2016 were $5.5 billion, an increase of 4 percent compared to the prior
fiscal year. The increase in Cardiac Rhythm & Heart Failure net sales was driven by strong growth in AF Solutions, with the
continued global acceptance of our Arctic Front Advance Cardiac CryoAblation Catheter (Arctic Front) system. Additionally,
net sales were driven by the continued adoption of the Reveal LINQ insertable cardiac monitor, and the launch of the Evera
MRI SureScan ICD in the U.S. during the second quarter of fiscal year 2016, with continued strong adoption through the fourth
quarter fiscal year 2016. Net sales for the Cardiac Rhythm & Heart Failure division were also affected by continued pricing
pressures.

Coronary & Structural Heart net sales for fiscal year 2016 were $3.1 billion, an increase of 2 percent compared to the prior
fiscal year. Nets sales were driven by the CoreValve Evolut R recapturable system in the U.S., which was launched late in the
first quarter of fiscal year 2016, and a strong CoreValve launch in Japan in the fourth quarter of fiscal year 2016. In addition, net
sales of Coronary & Structural Heart division were driven by drug-eluting stents, including the Resolute Onyx drug-eluting stent
in Europe and the Resolute Integrity drug-eluting stent in the U.S., and the recent launches of the NC Euphora and SC Euphora
balloon dilatation catheters. Net sales were partially offset by continued pricing pressures in our Coronary business.

Aortic & Peripheral Vascular net sales for fiscal year 2016 were $1.6 billion, an increase of 52 percent compared to the prior
fiscal year. The Aortic & Peripheral Vascular division net sales performance benefited from the addition of the Covidien
Peripheral business. The increase in Aortic & Peripheral Vascular net sales was driven by strong growth of the IN.PACT
Admiral drug-coated balloon in the U.S. and globally, continued strength in Valiant Captiva TAA stent graft sales, continued
solid adoption of our Aptus Heli-FX endoanchor, and continued adoption of the Endurant IIs Abdominal Aortic Aneurysm
(AAA) 3-piece system in the U.S. Net sales for the Aortic & Peripheral Vascular division were affected by increased
competition in international markets and reimbursement cuts in Japan.

The Cardiac and Vascular Group’s net sales for fiscal year 2015 were $9.4 billion, an increase of 6 percent compared to the
prior fiscal year. The Cardiac and Vascular Group’s performance was primarily a result of strong net sales in Cardiac Rhythm &
Heart Failure and Aortic & Peripheral Vascular and solid growth in Coronary & Structural Heart.

Cardiac Rhythm & Heart Failure net sales for fiscal year 2015 were $5.2 billion, an increase of 5 percent compared to the prior
fiscal year. The increase in Cardiac Rhythm & Heart Failure net sales was driven by the ongoing acceptance of the Reveal
LINQ insertable cardiac monitor and the launches of the Viva XT CRT-D with Attain Performa quadripolar CRT-D lead system
in the U.S. in September 2014 and Evera MRI SureScan ICD in Japan in November 2014. Net sales of the Cardiac Rhythm &
Heart failure division were also driven by the continued global acceptance of the Arctic Front Advance Cardiac CryoAblation
Catheter (Arctic Front) system, net sales from Cardiocom and our CLMS business, which includes the August 2014 acquisition
of NGC Medical S.p.A. (NGC).

Coronary & Structural Heart net sales for fiscal year 2015 were $3.0 billion, an increase of 3 percent compared to the prior
fiscal year. The increase in Coronary & Structural Heart net sales was driven by ongoing success of the CoreValve transcatheter
aortic heart valve in the U.S., the launch of the CoreValve Evolute R recapturable system in international markets, and the
international launch of the Resolute Onyx drug-eluting stent in November 2014. Net sales were partially offset by continued
pricing pressures in the U.S., Western Europe, Japan, and India in our Coronary business.

Aortic & Peripheral Vascular net sales for fiscal year 2015 were $1.1 billion, an increase of 20 percent compared to the prior
fiscal year. The Aortic & Peripheral Vascular division includes a portion of the Covidien Peripheral business, which contributed
strong performance during the fourth quarter of fiscal year 2015 on the strength of its chronic venous insufficiency products.
The increase in Aortic & Peripheral Vascular net sales was driven by IN.PACT Admiral drug-coated balloons in the U.S. and

international markets. Aortic & Peripheral Vascular net sales were also driven by strong sales of our Valiant Captivia Thoracic
Stent Graft System, and growth from the Endurant 2S Abdominal Aortic Aneurysm (AAA) Stent Graft System in the U.S. and
Western Europe. Net sales for the Aortic & Peripheral Vascular division were impacted by increased competitive and pricing
pressures in the U.S., Western Europe, and Japan.

Looking ahead, we expect our Cardiac and Vascular Group could be affected by the following:

(cid:129)

Increasing competition, fluctuations in currency exchange rates, and continued pricing pressures.

Continued acceptance and future growth of the Amplia/Compia/Claria family of MRI Quad CRT-D SureScan
systems. The Amplia and Compia MRI Quad CRT-D SureScan systems received U.S. FDA approval in
February 2016 and launched in March 2016. The Amplia/Compia/Claria family of MRI Quad CRT-D
SureScan systems received CE Mark approval in February 2016. The systems are approved for MRI scans on
any part of the body without positioning restrictions.

Continued acceptance and future growth from the Viva/Brava family of CRT-D devices and the Attain
Performa portfolio of quadripolar leads. The Viva/Brava family of CRT-D devices utilizes a new algorithm,
called AdaptivCRT, which improves patients’ response rates to CRT-D therapy by preserving the patients’
normal heart rhythms and continually adapts to individual patient needs. Paired with Viva/Brava Quad CRT-
D, Attain Performa leads provide additional options for physicians to optimize patient therapy. In the second
quarter of fiscal year 2015, we received U.S. FDA approval of our Attain Performa quadripolar lead, Viva
Quad XT CRT-D, and Viva Quad S CRT-D.

Continued acceptance and future growth from the Evera family of ICDs. The Evera family of ICDs has
increased battery longevity, advanced shock reduction technology, and a contoured shape with thin, smooth
edges that better fits inside the body. Our Evera MRI SureScan ICD received CE Mark approval late in the
fourth quarter of fiscal year 2014 and launched in Japan in November 2014. We received U.S. FDA approval
of our Evera MRI SureScan ICD in the second quarter of fiscal year 2016.

Continued acceptance and future growth from the Advisa DR MRI SureScan pacing system for use in full-
body MRI scans. The Advisa DR MRI SureScan is our second-generation MRI pacing system and is the first
system to combine advanced pacing technology with proven MRI access. We received U.S. FDA approval of
the Advisa SR MRI SureScan single-chamber pacemaker in the first quarter of fiscal year 2016.

Continued future growth from the Arctic Front system, including the second generation Arctic Front Advance
Cardiac Cryoballoon. The Arctic Front system is a cryoballoon indicated for the treatment of drug refractory
involves a minimally invasive procedure that
paroxysmal atrial fibrillation. The cryoballoon treatment
efficiently creates circumferential lesions around the pulmonary vein, which studies have indicated is the
source of erratic electrical signals that cause irregular heartbeat. We received U.S. FDA approval in the first
quarter of fiscal year 2016 for the Aortic Front Advance ST Cryoablation Catheter.

Continued future growth from Reveal LINQ, our next-generation insertable cardiac monitor launched in
international and U.S. markets in the third and fourth quarters of fiscal year 2014, respectively.

Acceptance and future growth of our Micra transcatheter pacing system, which received CE Mark approval in
April 2015 and U.S. FDA approval in April 2016. Micra is a miniaturized single chamber pacemaker system
that is delivered through the femoral vein and is implanted in the right ventricle of the heart. The system does
not use a lead and does not have a subcutaneous device pocket underneath the skin as with conventional
pacemaker systems.

Continued acceptance and future growth from Care Management Service’s remote telemonitoring solutions
business for the management of chronic diseases such as heart failure, diabetes, and hypertension. Care
Management Services has a readmission reduction program focused on minimizing heart failure readmission
penalties for U.S. hospitals.

Continued acceptance of our CLMS business. CLMS provides a unique service offering, whereby we enter
into long-term contracts with hospitals, both within Europe and in certain other regions around the world, to
upgrade and more effectively manage their cath lab and hybrid operating rooms. At the end of fiscal year
2016, we had 88 long-term CLMS agreements.

(cid:129)

Continued acceptance of CoreValve Evolut R, our next-generation recapturable system with differentiated 14-
French equivalent delivery system. We have CE Mark approval for the 23 millimeter size of the valve and
received CE Mark approval for the 26 and 29 millimeter sizes early in the fourth quarter of fiscal year 2015.
We received U.S. FDA approval of the 23, 26, and 29 millimeter sizes in the first quarter of fiscal year 2016.

Acceptance of our CoreValve transcatheter heart valve technologies for the replacement of the aortic valve in
Japan. We received Japanese regulatory approval in March 2015 and launched in Japan late in the third
quarter of fiscal year 2016 following reimbursement approval. We received U.S. FDA approval for valve-in-
valve implantation in March 2015.

in
Acceptance of the Resolute Onyx drug-eluting coronary stent, which received CE Mark approval
November 2014. Resolute Onyx builds on the Resolute Integrity drug-eluting coronary stent with thinner
struts to improve deliverability and is the first stent to feature our CoreWire technology, allowing greater
visibility during the procedure. We added new sizes and indications for Resolute Onyx in Europe in the third
quarter of fiscal year 2016.

The global stent market continues to experience pricing pressure resulting from government austerity
programs and reimbursement cuts in Europe and Japan.

Continued worldwide growth of our Euphora Non-Compliant and Semi-Compliant Balloon Dilatation
Catheter and our family of coronary guide catheters.

Acceptance of the IN.PACT Admiral drug-coated balloon for the treatment of peripheral artery disease in the
upper leg. The IN.PACT Admiral drug-coated balloon was launched in the U.S. early in the fourth quarter of
fiscal year 2015, and received CE Mark approval in January 2016 for arteriovenous access to help maintain
hemodialysis access in patients with end-stage renal disease.

Integration of Aptus Endosystems, Inc. (Aptus), acquired in June 2015, into the Aortic & Peripheral division.
Aptus is a medical device company focused on developing advanced technology for endovascular aneurysm
repair and thoracic endovascular aneurysm repair.

Continued and future acceptance of the Endurant family of AAA stent graft products. We received CE Mark
and U.S. FDA approval of the Endurant IIs stent graft late in the second quarter of fiscal year 2015. Continued
worldwide growth of the Valiant Captivia Thoracic Stent Graft System.

Acceptance of our VenaSeal closure system, which was launched in the U.S. in November 2015. The
VenaSeal closure system is a minimally invasive procedure that uses a proprietary medical adhesive to close
superficial veins of the lower extremities in patients with symptomatic venous reflux.

Minimally Invasive Therapies Group Minimally Invasive Therapies Group’s goals are to diagnose and intervene earlier,
improve treatments, and help patients recover faster. Our technologies and products span the entire continuum of care. The
group looks to enhance patient outcomes through minimally invasive solutions with a focus on diseases of the gastrointestinal
tract, lungs, pelvic region, kidneys, obesity, and preventable complications. The Surgical Solutions division’s products include
those for advanced and general surgical care (stapling, vessel sealing, and other surgical instruments), sutures, electrosurgery
products, hernia mechanical devices, mesh implants, and solutions for gastrointestinal
(GI), advanced ablation, and
interventional lung. The Patient Monitoring & Recovery division’s products include ventilators, capnography and other airway
products, sensors, monitors, compression and dialysis products, enteral feeding, wound care, and medical surgical products
(including operating room supply products, electrodes, needles, syringes, and sharps disposals). The Minimally Invasive
Therapies Group’s net sales for fiscal year 2016 were $9.6 billion. Currency translation had an unfavorable impact on net sales
of $493 million as a result of the change in exchange rates from the prior year. The Minimally Invasive Therapies Group was
favorably impacted by an additional selling week during the first quarter of fiscal year 2016. The Minimally Invasive Therapies
Group contains the majority of Covidien’s former operations. See the more detailed discussion of each business’s performance
below.

Net sales contributions in Surgical Solutions for fiscal year 2016 were $5.3 billion. The net sales performance in Surgical
Solutions was mainly attributable to stapling and energy. Stapling products results benefited from continued worldwide market
adoption of the Endo GIA Reinforced Reload and energy products benefited from continued strong adoption of the LigaSure
Maryland Jaw and Valleylab FT10 Energy Platform. Further, Early Technologies product performance was driven by
gastrointestinal solutions products, more specifically, our gastrointestinal diagnostic product line.

Patient Monitoring & Recovery net sales for fiscal year 2016 were $4.3 billion. Net sales contributions in Patient Monitoring &
Recovery were driven mainly by U.S. sales within Respiratory and Patient Monitoring, Patient Care and Safety, and Nursing
Care. Respiratory and Patient Monitoring performance was attributable to sensors, airway products, and acute ventilator sales.
Patient Care and Safety net sales results were primarily due to sales of compression and SharpSafety product lines, and sales
within our electrode and dialysis products. The Nursing Care results were largely driven by sales of incontinence, enteral
feeding and wound care products.

Looking ahead, we expect Minimally Invasive Therapies Group could be impacted by the following:

(cid:129)

Continued acceptance and future growth of Open-to-Minimally Invasive Surgery (MIS) techniques and tools
supported by our efforts to transition open surgery to MIS. The Open to MIS initiative focuses on establishing
our presence in and working to optimize open surgery globally, while capturing the market opportunity that
exists in transitioning open procedures to MIS, whether through traditional MIS, or advanced technologies
like robotics. To achieve this transition, we are focused on product training, surgical skill training and
continued therapy innovation to advance MIS.

Changes in procedural volumes, competitive pressure, reimbursement challenges, reprocessed products,
impacts from changes in the mix of our product offerings, fluctuations in currency exchange rates and pricing
pressure, particularly in developed markets.

Our ability to create markets and drive product and procedures into emerging markets. We have high quality
and cost-effective surgical products designed for customers in emerging markets such as the ReliaMax
reusable stapler, which is reposable (part reusable, part disposable), and the ValleyLab LS10 single channel
vessel sealing generator, which is compatible with our line of LigaSure instruments and designed for
simplified use and affordability.

Continued acceptance and future growth within the end stage renal disease market. The population of patients
treated for end stage renal disease globally is expected to double over the next decade. We will grow our
therapy innovation with scalable and affordable dialysis delivery and investing in vascular creation and
maintenance technologies. Our ability to successfully integrate Bellco into Medtronic. Bellco is a pioneer in
hemodialysis treatment solutions that we acquired in February 2016.

Continued growth due to cross-selling initiatives of Minimally Invasive Therapies Group within other
businesses with Medtronic.

Continued elevation of the standard of care for respiratory compromise, a progressive condition impacting a
patient’s ability to breathe effectively. The Capnostream35 is expected to launch in fiscal year 2017.

Creation of less invasive standards of care in diseases and conditions of the gastrointestinal tract and lung to
enable earlier diagnosis and intervention.

Continued and future acceptance of advanced and general surgical care products from both physicians and
patients of open and minimally invasive procedures in Surgical Solutions, including stapling, vessel sealing,
and other surgical instruments.

Expanding the use of less invasive treatments and furthering our commitment to improving options for women
with abnormal uterine bleeding with the fiscal year 2017 acquisition of a highly profitable and fast-growing
gynecology business. The addition will expand and strengthen the Minimally Invasive Therapies Group’s
offerings and complement the existing global gynecology business.

Ability to develop a surgical robotic platform that reduces the variability of surgical procedures and improves
the repeatability and reliability of procedures

Continued acceptance of other recently launched products including the Endo GIA Reinforced Reload, the
LigaSure Maryland jaw laparoscopic sealer and divider, and three additional sizes of the Sonicision Cordless
Ultrasonic Dissection Device and the GastriSail Gastric Positioning System.

(cid:129)

Future acceptance of the Signia Stapling System, expected to launch in fiscal year 2017. The single-hand use
increases patient focus and consistent staple lines reduce leaks and tissue trauma.

Future acceptance of the HD multi-pass system, expected to launch in fiscal year 2018. The HD multi-pass
system reduces infrastructure by requiring less water, has less start-up costs, and offers high quality ultrapure
dialysate treatment.

Continued acceptance and growth in respiratory care, ventilation and airway management, patient monitoring,
and homecare. Key products in this area include the Puritan Bennett 980 ventilator, Microstream Capnography
bedside capnography monitor, portable monitor with Nellcor pulse oximetry system with OxiMax technology
and the Nellcor Respiratory Compromise monitor with vital signs of SpO2, pulse rate, End-Tidal CO2, and
Respiratory Rate.

Continued and future acceptance of Early Technologies, including the areas of GI solutions, advanced
ablation, and interventional lung solutions. Recently launched products include the PillCam COLON capsule
endoscopy, Emprint ablation system with Thermosphere Technology which maintains predictable spherical
ablation zones throughout procedures reducing procedure time and cost, and the GenCut core biopsy system
and the superDimension Triple Needle Cytology Brush,
lung tissue biopsy tools for use with the
superDimension navigation system. The superDimension system enables a minimally invasive approach to
accessing difficult-to-reach areas of the lung, which can aid in the diagnosis of lung cancer.

Ability to generate product innovation and adoption of less invasive surgical techniques to help patients
recover faster and at less overall cost to the healthcare system. Opportunities exist to provide advanced
solutions that minimize complications and increase efficiency. Our goal is to create localized solutions to
improve surgical approaches and increase access to care, address economic and clinical challenges, and
advance minimally invasive surgery by minimizing complications, thereby reducing surgical variability and
increasing efficiency.

Continued and future acceptance of the Valleylab FT10 energy platform, which we launched in fiscal year
2016. The faster sealing of the Valleylab FT10 decreases procedure times and auto-adjusting energy
accommodates different tissue types.

(OCD), overactive bladder, urinary retention,

Restorative Therapies Group The Restorative Therapies Group includes products for various areas of the spine, bone graft
substitutes, biologic products, trauma, implantable neurostimulation therapies and drug delivery systems for the treatment of
chronic pain, movement disorders, obsessive-compulsive disorder
fecal
incontinence and gastroparesis, products to treat conditions of the ear, nose, and throat, and systems that incorporate advanced
energy surgical instruments. Additionally, this group manufactures and sells image-guided surgery and intra-operative imaging
systems. With the addition of the Neurovascular division through the January 2015 Covidien acquisition,
the group
manufactures and markets products and therapies to treat diseases of the vasculature in and around the brain and includes sales
of coils, neurovascular stents and flow diversion products. The Restorative Therapies Group’s net sales for fiscal year 2016
were $7.2 billion, an increase of 7 percent over the prior fiscal year. Currency translation had an unfavorable impact on net sales
of approximately $244 million as a result of the change in exchange rates from the prior year. The Restorative Therapies
Group’s performance was favorably impacted by an additional selling week during the first quarter of fiscal year 2016. The
Restorative Therapies Group’s performance for fiscal year 2016 was favorably impacted by the addition of the Neurovascular
division, growth in Surgical Technologies, and by an additional selling week during the first quarter of fiscal 2016, partially
offset by declines in Neuromodulation and Spine. See the more detailed discussion of each business’s performance below.

Spine net sales for fiscal year 2016 were $2.9 billion, a decrease of 2 percent over the prior fiscal year. The decrease in Spine
net sales was driven by declines in Core Spine and Interventional, partially offset by growth in BMP (composed of INFUSE
bone graft (InductOs in the E.U.)) in the U.S. The U.S. Core Spine market grew in the low-single digits, with modest procedural
growth offset by continued pricing pressures. During fiscal year 2016, new product introductions across several procedures,
resulted in a sequential improvement in the Core Spine growth rate. We are seeing incremental revenue from our differentiated
OLIF procedures, as well as from the recent Solera, Voyager, Elevate, and PTC Interbody launches for TLIF and MIDLF
procedures. In Core Spine, we are also realizing some early benefits from our Speed to Scale initiative, which accelerates
innovation and enables rapid deployment of these products and procedures to the market. The Interventional Spine net sales
decline was driven by continued pricing pressures. In BMP, strong growth in the U.S. was offset by declines in international
BMP due to the InductOs stop shipment in Europe which we expect to continue until the back half of fiscal year 2017.

Neuromodulation net sales for fiscal year 2016 were $1.9 billion, a decrease of 3 percent over the prior fiscal year. The decrease
in net sales was primarily due to challenges in Drug Pumps and Pain Stimulation, partially offset by growth in Gastro/Uro, with
relatively flat results in DBS. In Drug Pumps, the business was negatively affected by challenges related to its April 2015 U.S.
FDA consent decree, as well as the January divestiture of its intrathecal baclofen drug. In Pain Stimulation and DBS, declines
were driven by increased competition in the market, however, drivers such as the expanded early onset DBS indication in the
U.S. that we received earlier this fiscal year and new strategies that focus our pain products on the growing opioid epidemic
could improve future results. In Gastro/Uro, implant growth of our InterStim Therapy for overactive bladder, urinary retention,
and bowel incontinence continued in the U.S. during fiscal year 2016.

Surgical Technologies net sales for fiscal year 2016 were $1.8 billion, an increase of 6 percent over the prior fiscal year. The
increase in net sales was driven by continued worldwide net sales growth across the portfolio of Advanced Energy, ENT, and
Neurosurgery. Performance was driven by strong growth of power systems, Aquamantys Transcollation, and PEAK
PlasmaBlade technologies, as well as solid growth of Midas Rex products, monitoring, and O-arm imaging systems.

Neurovascular net sales for fiscal year 2016 were $587 million. The division contributed revenue from the strength of its coils,
stents, flow diversion, and access product lines. Our Solitaire FR mechanical thrombectomy device delivered strong results,
solidifying our leadership position in the rapidly expanding ischemic stroke market. Our Flow Diversion products for the
treatment of intracranial aneurysms, Pipeline Flex in the U.S. and Japan and Pipeline Shield in Europe, continue to lead the
market.

Spine net sales for fiscal year 2015 were $3.0 billion, a decrease of 2 percent over the prior fiscal year. The decrease in Spine’s
net sales for fiscal year 2015 was driven by declines in Core Spine and Interventional, partially offset by growth in BMP. Both
the global and U.S. Core Spine markets grew in the low-single digits, with modest procedural growth offset by continued
pricing pressures. During fiscal year 2015, the Core Spine business continued to focus on differentiating itself over the long-
term through portfolio updates, procedural innovation, and continued development and deployment of the its Surgical Synergy
program that integrates imaging, navigation, and powered surgical instruments. Fiscal year 2015 included several new product
launches, including our Prestige LP cervical disc and Pure Titanium Coated (PTC) interbodies spacers, which partially offset
declines in Core Spine. Interventional Spine net sales decline was driven by a decline in European sales, where the business
faced pricing pressures in Germany and unfavorable currency translation. Underlying demand for BMP stabilized and returned
to slight growth in the latter half of fiscal year 2015.

Neuromodulation net sales for fiscal year 2015 were $2.0 billion, an increase of 4 percent over the prior fiscal year. The increase
in net sales was primarily due to strong growth in Gastro/Uro and growth in DBS and Pain Stimulation. Our global focus on our
neurologist referral programs, and the strength of the EARLYSTIM data in international markets, continues to drive solid
growth of DBS systems. Implant growth of our InterStim Therapy for overactive bladder, urinary retention, and bowel
incontinence continued in the U.S. throughout fiscal year 2015. The increase in net sales for fiscal year 2015 was also due to
global growth of our RestoreSensor SureScan MRI system. While the U.S. pain stimulation market has weakened as a result of
reimbursement changes, net sales of our SureScan MRI system for the fiscal year demonstrate our continued strength in the
market.

Surgical Technologies net sales for fiscal year 2015 were $1.7 billion, an increase of 7 percent over the prior fiscal year. The
increase in net sales was driven by continued worldwide net sales growth across the portfolio of Advanced Energy, ENT, and
Neurosurgery, partially offset by unfavorable currency translation. Performance was driven by strong growth of power systems,
Aquamantys Transcollation, and PEAK PlasmaBlade technologies, as well as solid growth of Midas Rex products, monitoring,
and O-arm imaging systems. Additionally, net sales growth was positively impacted by launch of our NuVent sinus balloons in
the second quarter of fiscal year 2015 and the acquisition of Visualase during the first quarter of fiscal year 2015, adding a MRI-
guided laser ablation technology to our broad suite of neuroscience solutions for neurosurgery. The increase in revenue from
Visualase and our NuVent sinus balloons was partially offset by our divestiture of the MicroFrance product line during the third
quarter of fiscal year 2015.

Neurovascular net sales for fiscal year 2015 were $132 million. The division, formerly part of Covidien, contributed revenue
from the strength of its coils, stents, flow diversion, and access product lines. The New England Journal of Medicine published
several positive clinical trials on our Solitaire FR revascularization device, resulting in continued customer adoption of the
product. Additionally, net sales were positively impacted by the U.S. launch of the Pipeline Flex embolization device, which
was launched during the third quarter of fiscal year 2015.

Looking ahead, we expect our Restorative Therapies Group could be affected by the following:

(cid:129)

Changes in procedural volumes, competitive and pricing pressure, reimbursement challenges, impacts from
changes in the mix of our product offerings, the timing of product registration approvals, and fluctuations
in currency exchange rates.

integration in the Restorative Therapies group and market acceptance of our new
Continued commercial
integrated solutions through the Surgical Synergy program, which integrates our spinal implants and Surgical
Technologies’ imaging and navigation equipment.

Market acceptance and continued adoption of innovative new products, such as our CD Horizon Solera Voyager
system, our ELEVATE expandable interbody cage, and our OLIF25 and OLIF51 procedure solutions, both of
which have recently been augmented with new implant technology.

Continued pricing and competitive pressures on premium balloon kyphoplasty (BKP) within Interventional
Spine. Though we remain focused on communicating the clinical and economic benefits for premium BKP, we
expect pressure in several markets to continue. We believe opportunities for growth exist in the broader vertebral
compression fracture (VCF) and adjacent markets, and continue to pursue the development of other therapies to
treat more patients with VCF, including the recent U.S. launches of both the Kyphon V vertebroplasty system
and the Osteocool tumor ablation system.

Acceptance of Kanghui’s broad portfolio of trauma, spine, and large-joint reconstruction products focused on the
growing global value segment.

Continued acceptance and adoption rates of stimulators and leads approved to treat chronic pain in major markets
around the world.

Ongoing obligations under the U.S. FDA consent decree entered in April 2015 relating to the SynchroMed drug
infusion system and the Neuromodulation quality system. We continue to make progress against our U.S FDA
consent decree commitments.

Continued and future acceptance of our current indications for Medtronic DBS Therapy for the treatment of
movement disorders, epilepsy (approved in Europe), and OCD. The DBS Therapy portfolio includes Activa PC,
our small and advanced primary cell battery, and Activa RC, a rechargeable DBS device. We anticipate
continued competitive pressures in Europe and expect competition to enter the U.S. market in the coming year.

Continued acceptance of InterStim Therapy for the treatment of the symptoms of overactive bladder, urinary
retention, and bowel incontinence.

Continued acceptance and growth of our Surgical Technologies therapies, including Advanced Energy products
and strategies to focus on its four core markets of orthopedic, spine, breast surgery, and CRDM replacements,
Neurosurgery StealthStation S7 and O-Arm Imaging Systems, Midas and ENT power systems, and intraoperative
nerve monitoring during surgical procedures utilizing the NIM-Response 3.0 during head and neck surgical
procedures. Additionally, continued growth in nerve monitoring utilizing the NIM Eclipse system during spinal
surgical procedures.

Acceptance of the recently launched NuVent sinus balloon, with built-in surgical EM navigation, used for
chronic sinusitis to restore sinus drainage in a minimally invasive way.

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

Future acceptance of the Medina mesh coil implant launched in European Union in May 2016. Medina Medical
was acquired in August 2015 and focuses on the commercialization of treatments for vascular abnormalities of
the brain, including cerebral aneurysms.

(cid:129)

Efficiencies gained from fiscal year 2017 reorganization to provide a stronger focus on the diseases and
conditions that we serve to further innovate, integrate platforms and leverage breadth of product portfolio across
Restorative Therapies Group. Beginning in the first quarter of fiscal year 2017, the new reporting structure
includes Spine, Brain Therapies (consists of Modulation, Neurovascular, and Neurosurgery), Pain Therapies
(consists of Stimulation, Pump, and Interventional), and Specialty Therapies (consists of Pelvic Health,
Advanced Energy, and ENT).

Diabetes Group The Diabetes Group is composed of the Intensive Insulin Management (IIM), Non-Intensive Diabetes
Therapies (NDT) and Diabetes Service & Solutions (DSS) divisions. The Diabetes Group products include insulin pumps,
continuous glucose monitoring (CGM) systems, insulin pump consumables, and therapy management software. The Diabetes
Group’s net sales for fiscal year 2016 were $1.9 billion, an increase of 6 percent over the prior fiscal year, and were favorably
affected by an additional selling week during the first quarter of fiscal year 2016. Net sales in the U.S. increased 6 percent
compared to the prior fiscal year, driven by the MiniMed 530G System with Enlite sensor in the IIM division. Currency
translation had an unfavorable impact on net sales of $101 million as a result of the change in exchange rates from the prior
year. The Diabetes Group’s performance in international markets was favorably affected by our next-generation MiniMed 640G
System with the Enhanced Enlite sensor.

The Diabetes Group’s net sales for fiscal year 2015 were $1.8 billion, an increase of 6 percent over the prior fiscal year. The
increase in net sales was primarily driven by 9 percent growth in the U.S., driven by the ongoing launch of the MiniMed 530G
System with Enlite Sensor. Approval was obtained late in the second quarter of fiscal year 2014. Net sales in the international
markets increased 2 percent compared to the prior fiscal year. Performance in international markets was favorably affected by
the launch of our next-generation MiniMed 640G System with the Enhanced Enlite CGM sensor in Australia and Europe,
partially offset by unfavorable currency translation.

Looking ahead, we expect our Diabetes Group could be impacted by the following:

(cid:129)

Increasing competition, potential risk of pricing pressures, reduction in reimbursement rates, and fluctuations in
currency exchange rates.

Changes in medical reimbursement policies and programs. Continued acceptance and improved reimbursement
of CGM technologies.

Continued acceptance from both physicians and patients of insulin-pump and CGM therapy.

Continued acceptance and future growth of the MiniMed 530G System, available in the U.S., which includes the
insulin pump and Enlite sensor. This is the first system in the U.S. that assists in protecting against the risk of
hypoglycemia by automatically suspending insulin delivery when glucose falls below a specified threshold.

Continued acceptance and future growth from our next-generation pump systems, the MiniMed 640G with
SmartGuard predictive low-glucose management, which has launched in Europe, Australia, and select Latin
America countries, and the MiniMed 620G, the first integrated system customized for the Japanese market. The
Company continues to make progress in bringing the MiniMed 640G to the U.S., and plans to submit the
premarket approval to the U.S. FDA in the third quarter of fiscal year 2017. In addition, the Company is on track
to file its premarket approval to the U.S. FDA for the first hybrid closed loop system by the end of June 2016.

Acceptance of MiniMed Connect, which allows users to view their insulin pump and CGM data on a smartphone
and provides remote monitoring and text message notifications. The Company received U.S. FDA approval
during the first quarter of fiscal 2016.

Selection by UnitedHealthcare as the preferred in-network provider of insulin pumps, giving their members
access to our advanced diabetes technology and comprehensive support services.

Operations by Market Geography

The graph below illustrates net sales by market geography for fiscal years 2016, 2015, and 2014:

Fiscal Year 2016
(dollars in millions)

Fiscal Year 2015
(dollars in millions)

Fiscal Year 2014
(dollars in millions)

Emerging Markets
$3,703

13%

U.S.
$16,422

Emerging Markets
$2,584

13%

U.S.
$11,305

Emerging Markets
$2,106

13%

30%

57%

31%

56%

33%

U.S.
$9,247

54%

Non-U.S.
Developed
$8,708

Consolidated Net Sales
$28,833

Non-U.S.
Developed
$6,372

Consolidated Net Sales
$20,261

Non-U.S.
Developed
$5,652

Consolidated Net Sales
$17,005

The table below illustrates net sales by market geography for each of our operating segments for fiscal years 2016 and 2015:

(in millions)

Cardiac and Vascular Group
Minimally Invasive Therapies Group
Restorative Therapies Group
Diabetes Group

U.S.

5,347
5,014
4,921
1,140

Fiscal Year 2016

Non-U.S.
Developed
Markets

Emerging
Markets

U.S.

Fiscal Year 2015

Non-U.S.
Developed
Markets

Emerging
Markets

3,283
3,299
1,542
584

1,566
1,250
747
140

4,435
1,230
4,569
1,071

3,412
856
1,556
548

1,514
301
626
143

2,584

Total

16,422

8,708

3,703

11,305

6,372

For fiscal year 2016, net sales for the U.S. increased 45 percent, developed markets outside the U.S. increased 37 percent, and
emerging markets increased 43 percent compared to the prior fiscal year. Currency translation had an unfavorable impact of
$1.4 billion on net sales for fiscal year 2016. Net sales growth in the U.S. was led by strong growth in the Cardiac and Vascular
Group and solid growth in the Restorative Therapies Group and Diabetes. The growth in all markets was primarily driven by the
addition of Minimally Invasive Therapies Group net sales totaling $9.6 billion for fiscal year 2016 and was also favorably
impacted by an additional selling week during the first quarter of fiscal year 2016.

For fiscal year 2015, net sales for the U.S increased 22 percent, non-U.S. developed markets increased 13 percent, and emerging
markets increased 23 percent over the prior fiscal year. Currency translation had an unfavorable impact of $666 million on net
sales for fiscal year 2015. Net sales growth in non-U.S. developed markets was driven by the addition of the Minimally Invasive
Therapies Group in the fourth quarter, as a result of the Covidien acquisition, offset by unfavorable currency translation.
Emerging markets growth was led by strong growth in the Restorative Therapies Group and Diabetes, solid growth in the
Cardiac and Vascular Group, and the addition of the Minimally Invasive Therapies Group in the fourth quarter as a result of the
Covidien acquisition, partially offset by unfavorable currency translation.

Net sales outside the U.S. are accompanied by certain financial risks, such as changes in currency exchange rates and collection
of receivables, which typically have longer payment terms. We monitor the creditworthiness of our customers to which we grant
credit terms in the normal course of business. However, a significant amount of our outstanding accounts receivable are with
international customers. We continue to monitor the economic conditions in many countries outside the U.S. and the average
length of time it takes to collect on our outstanding accounts receivable in these countries. Although we do not currently foresee
a significant credit risk associated with a material portion of these receivables, repayment is dependent upon the financial
stability of the economies of those countries.

Costs and Expenses

The following is a summary of major costs and expenses as a percent of net sales:

Cost of products sold
Research and development expense
Selling, general, and administrative expense

Fiscal Year

2016

2015

2014

31.7% 31.1% 25.5%
8.1
34.1

7.7
32.8

8.7
34.4

Cost of Products Sold We continue to focus on reducing our costs of production through channel optimization, supply chain
management, and review of our manufacturing network. Beginning in fiscal year 2015, our product mix has substantially
changed with the acquisition of Covidien in fiscal year 2015. The Patient Monitoring & Recovery division within Minimally
Invasive Therapies Group, which accounts for approximately 45 percent of Minimally Invasive Therapies Group’s net sales,
generally realizes a lower average margin due to the type products sold within the division. Therefore, cost of products sold as a
percentage of net sales has increased in fiscal years 2016 and 2015. Cost of products sold was $9.1 billion, $6.3 billion, and $4.3
billion in fiscal years 2016, 2015, and 2014, respectively.

We have recognized amortization of the adjustment related to inventory fair value from the Covidien acquisition to cost of
products sold totaling $226 million and $623 million in fiscal years 2016 and 2015, respectively. Additionally, in fiscal year
2015, cost of products sold included a $74 million charge related to a CRHF global comprehensive program for home based
monitors due to industry conversion from analog to digital technology. Restructuring charges included in cost of products sold
totaled $9 million, $15 million, and $10 million in fiscal years 2016, 2015, and 2014, respectively, for inventory write-offs of
discontinued product lines. These charges affect the comparability of our operating results between periods, therefore, we
consider this a Non-GAAP Adjustment, refer to the “Executive Level Overview” section of this Management’s Discussion and
Analysis for further analysis related to these charges.

Research and Development We remain committed to accelerating the development of meaningful innovations to deliver
better patient outcomes at appropriate costs, lead to enhanced quality of life, and can be validated by clinical and economic
evidence. We are also focused on expanding access to quality healthcare. During fiscal year 2016, we continued to invest in new
technologies to support our mission with several new acquisitions, as well as, continued product growth within our business
units.

Research and development expense for fiscal year 2016, 2015, and 2014 was $2.2 billion, $1.6 billion, and $1.5 billion,
respectively. Research and development expense remained fairly flat as a percentage of net sales over the three-year period.

Selling, General, and Administrative Our goal is to continue selling, general, and administrative expense leverage initiatives
and to continue to realize cost synergies expected from the acquisition of Covidien. During fiscal year 2016, we realized a 1.3
percentage point decrease in our selling, general, and administrative expense percentage to net sales as a result of these
initiatives.

Selling, general, and administrative expense was $9.5 billion, $6.9 billion, and $5.8 billion during fiscal years 2016, 2015, and
2014, respectively.

The following is a summary of other costs and expenses:

(in millions)

Special charges (gains), net
Restructuring charges, net
Certain litigation charges, net
Acquisition-related items
Amortization of intangible assets
Other expense, net
Interest expense, net

Fiscal Year

2016

2015

2014

70
290
26
283
1,931
107
955

(38)
237
42
550
733
118
280

40
78
770
117
349
181
108

Special Charges (Gains), Net During fiscal year 2016, we recognized special charges of $70 million in connection with the
impairment of a debt investment.

During fiscal year 2015, we recognized special gains of $138 million, which consisted of a $41 million gain on the sale of a
product line in the Surgical Technologies division, and a $97 million gain on the sale of an equity method investment.

During fiscal year 2015 and 2014, consistent with our commitment to improving the health of people and communities
throughout the world, we made charitable contributions of $100 million and $40 million, respectively, to the Medtronic
Foundation, which is a related party non-profit organization.

Special charges (gains), net will affect the comparability of our operating results between periods, and we consider this a Non-
GAAP Adjustment, refer to the “Executive Level Overview” section of this Management’s Discussion and Analysis for further
analysis related to these charges.

Restructuring Charges, Net We incur restructuring charges in connection with our cost-reduction and productivity initiatives
or with acquisitions when we implement plans to restructure and integrate the acquired operations. Amounts recognized as
restructuring charges result from a series of judgments and estimates about future events and uncertainties and rely heavily on
assumptions upon implementation of the initiative programs. Restructuring programs will affect the comparability of our
operating results between periods, and we consider this a Non-GAAP Adjustment. Refer to the “Executive Level Overview”
section of this Management’s Discussion and Analysis.

We began our restructuring program related to the acquisition of Covidien, the cost synergies initiative, in the fourth quarter of
fiscal year 2015. We anticipate approximately $850 million in cost synergies to be achieved as a result of the Covidien
including administrative office optimization, manufacturing and supply chain
acquisition through fiscal year 2018,
infrastructure, and certain general and administrative savings. Restructuring charges are expected to be incurred in future fiscal
years as cost synergy initiatives are finalized. Restructuring charges are expected to be primarily related to employee
termination costs and costs related to manufacturing and facility closures.

Currently, we have several initiative programs in various states of progress with total restructuring liabilities of $257 million
and $233 million at April 29, 2016 and April 24, 2015, respectively. During fiscal year 2016, we incurred $332 million in
restructuring charges, $9 million of which was related to inventory write-offs of discontinued product lines recognized within
cost of products sold in the consolidated statements of income. These charges were partially offset by a $33 million reversal of
excess restructuring reserves.

For additional
Supplementary Data” in this Annual Report on Form 10-K.

information, see Note 3 to the consolidated financial statements in “Item 8. Financial Statements and

Certain Litigation Charges, Net We classify material litigation charges and gains recognized as certain litigation charges,
net. Certain litigation charges, net will affect the comparability of our operating results between periods, and we consider this a
Non-GAAP Adjustment, refer to the “Executive Level Overview” section of this Management’s Discussion and Analysis.
During fiscal years 2016 and 2015, we recorded certain litigation charges, net of $26 million and $42 million, respectively,
which primarily relate to additional accounting charges for probable and reasonably estimable INFUSE product liability
litigation, which were recorded as a result of additional filed and unfiled claims, and other litigation matters. See Note 15 to the
consolidated financial statements in “Item 8. Financial Statements and Supplementary Data” in this Annual Report on
Form 10-K for additional information.

During fiscal year 2014, we recorded certain litigation charges, net of $770 million, which primarily included the global patent
settlement agreement with Edwards Lifesciences Corporation of $589 million, and accounting charges for probable and
reasonably estimable INFUSE product liability litigation of $140 million.

Acquisition-Related Items During fiscal year 2016, we recorded charges from acquisition-related items of $283 million,
primarily related to costs incurred in connection with the Covidien acquisition. The charges incurred in connection with the
Covidien acquisition include $219 million of professional services and integration costs and $58 million of accelerated or
incremental stock compensation expense.

During fiscal year 2015, we recorded charges from acquisition-related items of $550 million, primarily related to costs incurred
in connection with the Covidien acquisition. The charges incurred in connection with the Covidien acquisition include $275
million of professional services and integration costs, $189 million of accelerated or incremental stock compensation expense,
and $69 million of incremental officer and director excise tax.

During fiscal year 2014, we recorded net charges from acquisition-related items of $117 million, primarily including IPR&D
and long-lived asset impairment charges of $236 million related to the Ardian, Inc. acquisition recorded in the third quarter of
fiscal year 2014. The impairment charges were partially offset by income of $138 million related to the change in fair value of
contingent consideration associated with acquisitions subsequent to April 29, 2009.

Acquisition-related items will affect the comparability of our operating results between periods, and we consider this a Non-
GAAP Adjustment. Refer to the “Executive Level Overview” section of this Management’s Discussion and Analysis. See Note
2 to the consolidated financial statements in “Item 8. Financial Statements and Supplementary Data” in this Annual Report on
Form 10-K for further discussion on IPR&D charges.

Amortization of Intangible Assets Amortization of intangible assets includes the amortization expense of our definite-lived
intangible assets consisting of purchased patents, trademarks, tradenames, purchased technology, and other intangible assets.
Amortization of intangible assets will affect the comparability of our operating results between periods, therefore we consider
this a Non-GAAP Adjustment, refer to the “Executive Level Overview” section of this Management’s Discussion and Analysis
for further details related to this expense.

In fiscal year 2016, amortization expense was $1.9 billion as compared to $733 million in fiscal year 2015. The $1.2 billion
increase in amortization expense in fiscal year 2016 was primarily due to realizing a full year impact of amortization of
intangibles acquired with Covidien in the fourth quarter of fiscal year 2015.

In fiscal year 2015, amortization expense was $733 million, an increase of $384 million from $349 million in fiscal year 2014.
The increase was primarily due to the fourth quarter fiscal year 2015 acquisition of Covidien, which added $379 million in
amortization expense and fiscal year 2014 acquisitions of TYRX, Corventis, Inc. and Visualase, Inc., partially offset by reduced
ongoing amortization expense from certain intangible assets that became fully amortized.

Other Expense, Net Other expense, net includes royalty income and expense, realized equity security gains and losses,
realized currency transaction and derivative gains and losses, impairment charges on equity securities, the Puerto Rico excise
tax, and the U.S. medical device excise tax. In fiscal year 2016, other expense, net was $107 million, a decrease of $11 million
from $118 million in the prior fiscal year. The largest contributor to the change in other expense, net was an increase in net
realized currency gains, which were partially offset by increased royalty expense within Minimally Invasive Therapies Group,
and a write-off of a minority investment in the current year. Total net realized currency gains recorded in other expense, net
were $314 million in fiscal year 2016 compared to gains of $196 million in the prior fiscal year. Looking ahead, we expect other
expense, net will be impacted as a result of the suspension of the U.S. medical device excise tax for two years beginning
January 1, 2016 and ending December 31, 2017.

In fiscal year 2015, other expense, net was $118 million, a decrease of $63 million from $181 million in the prior fiscal year.
The decrease was primarily due to an increase in net realized currency gains partially offset by increased royalties in our
Structural Heart business and increased U.S. medical device excise tax, which for fiscal year 2015 was $135 million compared
to $112 million in the prior fiscal year. Total net realized currency gains recorded in other expense, net were $196 million in
fiscal year 2016 compared to gains of $43 million in the prior fiscal year.

Interest Expense, Net
Interest expense, net includes interest earned on our cash, cash equivalents and investments, interest
incurred on our outstanding borrowings, amortization of debt issuance costs and debt discounts, the net realized and unrealized
gain or loss on trading securities, ineffectiveness on interest rate derivative instruments, and the net realized gain or loss on the
sale or impairment of available-for-sale debt securities. In fiscal year 2016, interest expense, net was $955 million, as compared
to $280 million in fiscal year 2015. The increase in interest expense, net for fiscal year 2016 was largely driven by an increase
in total short-term and long-term borrowings, primarily resulting from the Covidien acquisition, and a $183 million charge
recorded in connection with the cash tender offer and redemption of certain outstanding debt securities, as discussed within the
“Liquidity and Capital Resources” section of this management’s discussion and analysis. In addition, during the second quarter
of fiscal year 2016 we incurred a $45 million loss on interest rate swaps, which were previously entered into in advance of a
planned debt issuance that is no longer expected after the internal reorganization of the ownership of certain legacy Covidien
businesses completed in the second quarter of fiscal year 2016. The Company treats this interest expense charge, as well as the
$183 million charge associated with the cash tender offer and redemption as Non-GAAP Adjustments. The increase in interest
expense, net during fiscal year 2016 was partially offset by increased interest income earned on higher investment balances, as
compared to fiscal year 2015. Based on current expected rates, we expect interest expense, net to increase in future quarters as
our investment balances decline resulting from the deployment of capital, including incremental share repurchases and net debt
reduction.

In fiscal year 2015, interest expense, net was $280 million, as compared to $108 million in fiscal year 2014. For fiscal year
2015, the increase in interest expense, net was primarily due to the impact of the incremental interest expense resulting from the
issuance of $17.0 billion of debt to fund the Covidien acquisition and the $3.0 billion term loan funded in January 2015. The
$17.0 billion debt resulted in $77 million of incremental interest expense in the third quarter of fiscal year 2015 prior to the
close of the Covidien transaction. The Company treated this interest expense item as a Non-GAAP Adjustment.

See our discussion in the “Liquidity and Capital Resources” section of this management’s discussion and analysis for more
information regarding our investment portfolio.

Income Taxes

(in millions)

Provision for income taxes
Income from operations before taxes

Effective tax rate

Non-GAAP provision for income taxes
Non-GAAP income from operations before taxes

Non-GAAP Nominal Tax Rate

Difference between the effective tax rate and Non-GAAP Nominal Tax Rate

2016

Fiscal Year

2015

2014

$
$

798
4,336

18.4%

1,171
7,399

$
$

15.8%

(2.6)%

811
3,486

23.3%

1,055
5,799

$
$

18.2%

(5.1)%

640
3,705

17.3%

971
5,069

19.2%

1.9%

Our effective tax rate for fiscal year 2016 was 18.4 percent compared to 23.3 percent in the prior fiscal year. The decrease in our
effective tax rate was due to the net tax impact of inventory step-up, debt tender premium, acquisition-related items, certain tax
adjustments, amortization of intangible assets, the impact from the acquisition of Covidien, operational tax benefits described
below, and year-over-year changes in operational results by jurisdiction.

Our Non-GAAP Nominal Tax Rate for fiscal year 2016 was 15.8 percent compared to 18.2 percent in the prior fiscal year. The
decrease in our Non-GAAP Nominal Tax Rate for fiscal year 2016 as compared to the prior fiscal year was primarily due to the
impact of the Covidien acquisition, operational tax benefits, and year-over-year changes in operational results by jurisdiction.

During fiscal year 2016, we recorded $97 million in operational tax benefits. The retroactive renewal and extension of the U.S.
federal research and development tax credit resulted in a $16 million operational tax benefit for fiscal year 2016. In addition, we
recorded a $40 million benefit from the reversal of a valuation allowance associated with foreign net operating losses, and a $41
million net benefit associated with the resolution of certain income tax audits, finalization of certain tax returns, and changes to
uncertain tax position reserves.

Our effective tax rate for fiscal year 2015 was 23.3 percent compared to 17.3 percent from the prior fiscal year. The increase in
our effective tax rate was due to the net tax impact of special charges (gains), net, restructuring charges, net, certain litigation
charges, net, acquisition-related items, certain tax adjustments, the impact from the acquisition of Covidien, the operational tax
benefits described below.

Our Non-GAAP Nominal Tax Rate for fiscal year 2015 was 18.2 percent compared to 19.2 percent in the prior fiscal year. The
decrease in our Non-GAAP Nominal Tax Rate for fiscal year 2015 as compared to the prior fiscal year was primarily due to the
impact of the Covidien acquisition, operational tax benefits described below, and year-over-year changes in operational results
by jurisdiction.

During fiscal year 2015, we recorded $33 million in operational tax benefits. The retroactive renewal and extension of the U.S.
federal research and development tax credit resulted in a $12 million operational tax benefit for fiscal year 2015. In addition, we
recorded a $9 million benefit associated with foreign dividend distributions, and a $12 million net benefit associated with the
resolution of certain income tax audits, finalization of certain tax returns, and changes to uncertain tax position reserves.

An increase in our Non-GAAP Nominal Tax Rate of 1 percent would result in an additional income tax provision for the fiscal
years ended April 29, 2016 and April 24, 2015 of approximately $74 million and $58 million, respectively.

Certain Tax Adjustments

During fiscal year 2016 we recorded certain tax adjustments of $417 million. A $442 million certain tax adjustment charge was
recorded, which primarily related to the U.S. income tax expense resulting from our completion of an internal reorganization of
the ownership of certain legacy Covidien businesses that reduced the cash and investments held by our U.S.-controlled non-U.S.
subsidiaries (the Internal Reorganization). As a result of the Internal Reorganization, approximately $9.7 billion of cash, cash
equivalents and investments in marketable debt and equity securities previously held by U.S.-controlled non-U.S. subsidiaries
became available for general corporate purposes. This charge was partially offset by a $25 million tax benefit associated with
the disposition of a wholly owned U.S. subsidiary. The $417 million net certain tax adjustment was recorded in the provision for
income taxes in the consolidated statement of income for fiscal year 2016.

In fiscal year 2015, we recorded certain tax adjustments of $349 million, of which $329 million related to the resolution of the
Kyphon Inc. (Kyphon) acquisition-related issues with the U.S. Internal Revenue Service (IRS). In addition, the certain tax
adjustments include $20 million related to a taxable gain associated with the Covidien acquisition. The $349 million certain tax
adjustment was recorded in the provision for income taxes in the consolidated statement of income for fiscal year 2015.

In fiscal year 2014, we recorded a $63 million certain tax benefit associated with the resolution of certain issues in the fourth
quarter of fiscal year 2014 with the IRS relating to their review of our fiscal year 2009 through 2011 domestic income tax
returns. The $63 million certain tax benefit was recorded in the provision for income taxes in the consolidated statement of
income for fiscal year 2014.

Certain tax adjustments will affect the comparability of our operating results between periods, therefore, we consider these Non-
GAAP Adjustments. Refer to the “Executive Level Overview” section of this Management’s Discussion and Analysis for
further analysis related to these adjustments.

Liquidity and Capital Resources

(in millions)

Working capital
Current ratio(1)
Cash, cash equivalents, and current investments
Short-term borrowings and long-term debt

Net cash position(2)

Total shareholder’s equity

Debt-to-total capital ratio(3)

Fiscal Year

2016

2015

16,435
3.3:1.0
12,634
31,240

(18,606)

52,063

21,671
3.4:1.0
19,480
36,186

(16,706)

53,230

38%

40%

(1)
(2)

(3)

The ratio of current assets to current liabilities.
The sum of cash, cash equivalents, and current investments less short-term borrowings and long-term debt and excludes
non-current investments that are not considered readily available to fund current operations.
The ratio of total debt (short-term borrowings and long-term debt) to total capitalization (total debt and total
shareholder’s equity).

As of April 29, 2016, we believe our balance sheet and liquidity provide us with flexibility in the future. Approximately $5
billion of our cash, cash equivalents, and investments held by certain U.S.-controlled non-U.S. subsidiaries may not represent
available liquidity for general corporate purposes. However, we believe our other existing cash, cash equivalents and
investments, as well as our $3.5 billion revolving credit facility and related commercial paper program (no commercial paper
outstanding as of April 29, 2016), will satisfy our foreseeable working capital requirements for at least the next 12 months. We
regularly review our capital needs and consider various investing and financing alternatives to support our requirements.

Our net cash position in fiscal year 2016 decreased by $1.9 billion as compared to fiscal year 2015. See the “Summary of Cash
Flows” section of this management’s discussion and analysis for further information.

amortization of deferred financing costs and debt discounts and premiums. The loss on debt extinguishment was recorded in the
interest expense in the consolidated statement of income. In addition to the loss on debt extinguishment, we recognized $20
million of interest expense due to the acceleration of net losses on forward starting interest rate derivatives, which had been
terminated at the time of original debt issuances, relating to the portion of debt extinguished in the tender offer.

Standard & Poor’s (S&P) Ratings Services

Long-term debt
Short-term debt

Moody’s Investors Service (Moody’s)

Long-term debt
Short-term debt

Rating for Fiscal Year Ended(1)

April 29, 2016 April 24, 2015

A
A-1

A3
P-2

A
A-1

A3
P-2

(1)

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

Standard & Poor’s (S&P) Ratings Services’ and Moody’s Investors Service long-term debt rating and short-term debt rating at
April 29, 2016 were unchanged as compared to the ratings at April 24, 2015. We do not expect the Moody’s and S&P Ratings
Services’ ratings to have a significant impact on our liquidity or future flexibility to access additional liquidity given our balance
sheet, our $3.5 billion revolving credit facility and related commercial paper program, discussed above and within the “Debt and
Capital” section of this management’s discussion and analysis.

We have future contractual obligations and other minimum commercial commitments that are entered into in the normal course
of business. We believe our off-balance sheet arrangements do not have a material current or anticipated future effect on our
consolidated earnings, financial position, and/or cash flows.

Notes 1 and 15 to the consolidated financial statements in “Item 8. Financial Statements and Supplementary Data” in this
Annual Report on Form 10-K provide information regarding amounts we have accrued related to significant legal proceedings.
In accordance with U.S. GAAP, we record a liability in our consolidated financial statements for these actions when a loss is
known or considered probable and the amount can be reasonably estimated. Actual settlements may be different than estimated
and could have a material impact on our consolidated earnings, financial position, and/or cash flows.

We provide for tax liabilities in our financial statements with respect to amounts that we expect to repatriate from subsidiaries
(to the extent the repatriation would be subject to tax); however, no tax liabilities are recorded for amounts that we consider to
be permanently reinvested. Our current plans do not foresee a need to repatriate funds that are designated as permanently
reinvested in order to fund our operations or meet currently anticipated liquidity and capital investment needs. However, we
evaluate our legal entity structure supporting our business operations, and to the extent such evaluation results in a change to our
overall business structure, we may be required to accrue for additional tax obligations.

We have investments in marketable debt securities that are classified and accounted for as available-for-sale. Our debt securities
include U.S. government and agency securities, corporate debt securities, mortgage-backed securities, other asset-backed
securities, debt funds, and auction rate securities. Some of our investments may experience reduced liquidity due to changes in
market conditions and investor demand. Our auction rate security holdings continue to experience reduced liquidity due to low
investor demand. Although our auction rate securities are currently illiquid and other securities could become illiquid, we
believe we could liquidate a substantial amount of our portfolio without incurring a material impairment loss.

For the fiscal year ended April 29, 2016, the total other-than-temporary impairment losses on available-for-sale debt securities
were not significant. Based on our assessment of the credit quality of the underlying collateral and credit support available to
each of the remaining securities in which we are invested, we believe we have recorded all necessary other-than-temporary
impairments as we do not have the intent to sell, nor is it more likely than not that we will be required to sell, before recovery of
the amortized cost. However, as of April 29, 2016, we have $327 million of gross unrealized losses on our aggregate short-term
and long-term available-for-sale debt securities of $9.7 billion; if market conditions deteriorate, some of these holdings may
experience other-than-temporary impairment in the future which could have a material impact on our financial results.

Management is required to use estimates and assumptions in its valuation of our investments, which requires a high degree of
judgment, and therefore, actual results could differ materially from those estimates. See Note 5 to the consolidated financial
statements in “Item 8. Financial Statements and Supplementary Data” in this Annual Report on Form 10-K for additional
information regarding fair value measurements.

Summary of Cash Flows

(in millions)

Cash provided by (used in):

Operating activities
Investing activities
Financing activities

Effect of exchange rate changes on cash and cash equivalents

Net change in cash and cash equivalents

2016

Fiscal Year
2015

2014

5,218
2,245
(9,543)
113

4,902
(17,058)
15,949
(353)

4,959
(3,594)
(918)
37

(1,967)

3,440

484

Operating Activities Our net cash provided by operating activities was $5.2 billion for the fiscal year ended April 29, 2016
compared to $4.9 billion provided in the prior year. The $316 million increase was primarily driven by an increase in net
income before depreciation and amortization, loss on debt extinguishment, and acquisition-related items of $2.1 billion and a
decrease in certain litigation payments of $469 million, partially offset by an increase in cash paid for incomes taxes and interest
of $747 million and $688 million, respectively. The increase in cash paid for income taxes was primarily a result of the
settlement payments made for the resolution of the Kyphon acquisition-related matters, internal reorganization of the ownership
of certain legacy Covidien businesses, and the impacts from the full year of Covidien results. The increase in cash paid for
interest was primarily the result of a full year of interest payments on the Senior Notes and Term Loan issued in fiscal year 2015
primarily to fund the $16 billion cash consideration portion of the Covidien acquisition, as well as the interest payments on the
outstanding debt assumed as part of the Covidien acquisition. Net cash provided by operating activities was further offset by the
impact of a full year of operations post-Covidien acquisition.

Our net cash provided by operating activities was $4.9 billion for the fiscal year ended April 24, 2015 compared to $5.0 billion
provided in the fiscal year ended April 25, 2014. The slight year-over-year decrease is primarily the result of certain Covidien
acquisition impacts, including acquisition-related items, accrued liabilities, and deferred income taxes, offset by the $750
million settlement payment made to Edwards in May 2014.

Investing Activities Our net cash provided by investing activities was $2.2 billion for the fiscal year ended April 29, 2016
compared to $17.1 billion used in the prior year. The $19.3 billion increase was primarily attributable to higher levels of cash
used in the prior year for acquisitions, primarily related to the Covidien acquisition, as well as an increase in net proceeds from
purchases and sales and maturities of marketable securities in the current fiscal year.

Our net cash used in investing activities was $17.1 billion for the fiscal year ended April 24, 2015 compared to $3.6 billion used
in the fiscal year ended April 25, 2014. The $13.5 billion increase was primarily attributable to higher levels of cash used in
fiscal year ended April 24, 2015 for acquisitions, primarily related to the Covidien acquisition, partially offset by a decrease in
net purchases and sales and maturities of marketable securities.

Financing Activities Our net cash used in financing activities was $9.5 billion for the fiscal year ended April 29, 2016
compared to $15.9 billion provided in the prior year. The $25.5 billion decrease primarily resulted from a net decrease in debt
issued, primarily related to the Covidien acquisition, higher payments of maturing and extinguished long-term debt, an increase
in cash paid for dividends to shareholders, and an increase in repurchases of ordinary shares.

Our net cash provided by financing activities was $15.9 billion for the fiscal year ended April 24, 2015 compared to $918
million used in the fiscal year ended April 25, 2014. The $16.9 billion increase primarily resulted from a net increase in
issuances of long-term debt, primarily related to the Covidien acquisition, net of payments on long-term debt and short-term
borrowings, partially offset by a decrease in net issuance and repurchases of ordinary shares.

Free Cash Flow

Free cash flow, a non-GAAP financial measure, is calculated by subtracting property, plant, and equipment additions from
operating cash flows. Management uses this non-GAAP financial measure, in addition to U.S. GAAP financial measures to

evaluate our operating results. Free cash flow should be considered supplemental to, and not a substitute for, our reported
financial results prepared in accordance with U.S. GAAP. Reconciliations between net cash provided by operating activities (the
most comparable U.S. GAAP measure) and free cash flow are as follows:

(in millions)

Net cash provided by operating activities
Net cash provided by (used in) investing activities
Net cash (used in) provided by financing activities
Net cash provided by operating activities
Additions to property, plant, and equipment

Free cash flow

Dividends to shareholders
Repurchase of ordinary shares
Issuances of ordinary shares

Return to shareholders

Return of operating cash flow percentage
Return of free cash flow percentage

Debt and Capital

Fiscal Year

2016

2015

2014

5,218
2,245
(9,543)
5,218
(1,046)

4,172

2,139
2,830
(491)

4,902
(17,058)
15,949
4,902
(571)

4,331

1,337
1,920
(649)

4,959
(3,594)
(918)
4,959
(396)

4,563

1,116
2,553
(1,307)

4,478

2,608

2,362

86%
107%

53%
60%

48%
52%

Our capital structure consists of equity and interest-bearing debt. Interest-bearing debt as a percentage of total interest-bearing
debt and equity was 38 percent as of April 29, 2016 and 40 percent as of April 24, 2015.

As part of our focus on returning value to our shareholders, shares are repurchased from time to time. In January 2015, the
Company’s Board of Directors authorized, subject to the ongoing existence of sufficient distributable reserves, the adoption of
the existing Medtronic, Inc. share redemption program. During fiscal years 2016 and 2015, we repurchased a total of 38 million
and 30 million shares at an average price of $74.92 and $64.53, respectively. In June 2015, the Company’s Board of Directors
authorized, subject to the ongoing existence of sufficient distributable reserves, the redemption of an additional 80 million of the
Company’s ordinary shares. As of April 29, 2016, we have approximately 72 million shares remaining under the current Board
authorization.

We use a combination of bank borrowings and commercial paper issuances to fund our short-term financing needs. Short-term
debt, including the current portion of our long-term debt and capital lease obligations, as of April 29, 2016, was $993 million
compared to $2.4 billion as of April 24, 2015.

We maintain a commercial paper program for short term financing, which allows us to issue unsecured commercial paper notes
on a private placement basis up to a maximum aggregate amount outstanding at any time of $3.5 billion. No amounts were
outstanding under this program as of April 29, 2016 and April 24, 2015, respectively.

During fiscal years 2016 and 2015,
the weighted average original maturity of the commercial paper outstanding was
approximately 49 and 52 days, respectively, and the weighted average interest rate was 0.57 percent and 0.13 percent,
respectively. The issuance of commercial paper reduces the amount of credit available under our existing line of credit, as
explained below.

We also have a $3.5 billion syndicated line of credit facility ($3.5 Billion Revolving Credit Facility) which expires in January
2020. The $3.5 Billion Revolving Credit Facility provides backup funding for the commercial paper program and may also be
used for general corporate purposes. The $3.5 Billion Revolving Credit Facility provides us with the ability to increase its
borrowing capacity by an additional $500 million at any time during the term of the agreement. At each anniversary date of the
$3.5 Billion Revolving Credit Facility, but not more than twice prior to the maturity date, the Company could also request a
one-year extension of the maturity date. As of April 29, 2016 and April 24, 2015, no amounts were outstanding on the
committed line of credit.

Interest rates on advances on our $3.5 Billion Revolving Credit Facility are determined by a pricing matrix, based on our long-
term debt ratings assigned by S&P Ratings Services and Moody’s. For additional information on our credit ratings status by
S&P Ratings Services and Moody’s refer to “Liquidity and Capital Resources” section of this Management’s Discussion and
Analysis. Facility fees are payable on the credit facility and are determined in the same manner as the interest rates. The
agreements also contain customary covenants, all of which we remain in compliance with as of April 29, 2016.

We utilize Senior Notes that are unsecured, senior obligations that rank equally with all other secured and unsubordinated
indebtedness to meet our long-term financing needs. We use the net proceeds from the sale of the Senior Notes primarily for
working capital and general corporate purposes and in the case of Senior Notes issued on December 10, 2014, to finance the
Covidien acquisition and related expenses. Long-term debt as of April 29, 2016 was $30.2 billion compared to $33.8 billion as
of April 24, 2015. The decrease is primarily due to the cash tender offer and redemption of $2.7 billion of senior notes for $3.0
billion of total consideration in April 2016, as discussed within the “Liquidity and Capital Resources” section of this
Management’s Discussion and Analysis. The indentures under which the Senior Notes have been issued contain customary
covenants, all of which we remain in compliance with as of April 29, 2016.

On December 10, 2014, we issued seven tranches of the 2015 Senior Notes with an aggregate face value of $17.0 billion. In
addition, on January 26, 2015, we also borrowed $3.0 billion for a term of three years under a term loan agreement. We used
these combined proceeds to fund the $16.0 billion cash consideration portion of the Covidien acquisition, to pay certain
transaction and financing expenses, and for working capital and general corporate purposes.

For additional information regarding our debt agreements, refer to Note 7 of the consolidated financial statements in “Item 8.
Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.

Off-Balance Sheet Arrangements and Long-Term Contractual Obligations

Presented below is a summary of contractual obligations and other minimum commercial commitments as of April 29, 2016.
See Notes 7 and 13 to the consolidated financial statements in “Item 8. Financial Statements and Supplementary Data” in this
Annual Report on Form 10-K for additional
information regarding long-term debt and lease obligations, respectively.
Additionally, see Note 11 to the consolidated financial statements in “Item 8. Financial Statements and Supplementary Data” in
this Annual Report on Form 10-K for additional information regarding accrued income tax obligations, which are not reflected
in the table below.

(in millions)

Total

2017

2018

2019

2020

2021

Thereafter

Maturity by Fiscal Year

Contractual obligations related to off-
balance sheet arrangements:
Operating leases(1)
Commitments to fund minority
investments/contingent acquisition
consideration(2)
Interest payments(3)
Other(4)

Contractual obligations related to off-
balance sheet arrangements subtotal

Contractual obligations reflected in the
balance sheet:
Long-term debt, including current
portion(5)
Capital leases

Contractual obligations reflected in the
balance sheet subtotal

Total contractual obligations

544

180

130

520
13,925
603

89
1,058
351

72
1,014
115

155
911
35

48
882
27

41
760
25

115
9,300
50

15,592

1,678

1,331

1,191

1,013

859

9,520

30,805
132

30,937

46,529

887
106

887

2,565

6,188
4

6,188

7,519

408
3

408

1,599

3,774
2

3,774

4,787

1,102
2

1,102

1,961

18,446
15

18,446

27,966

(1)

Certain leases require us to pay real estate taxes, insurance, maintenance, and other operating expenses associated with
the leased premises. These future costs are not included in the schedule above.

(2)

(3)

Certain commitments related to the funding of cost or equity method investments and/or previous acquisitions are
contingent upon the achievement of certain product-related milestones and various other favorable operational
conditions, and estimated royalty obligations. While it is not certain if and/or when these payments will be made, the
maturity dates included in this table reflect our best estimates. Contingent consideration includes only the maximum
potential amount of undiscounted future contingent consideration associated with all completed business combinations
or purchases of intellectual property prior to April 24, 2009. See Note 2 to the consolidated financial statements in “Item
8. Financial Statements and Supplementary Data” in this Annual Report on Form 10-K for additional information
regarding our debt agreements.
Interest payments in the table above reflect the contractual interest payments on our outstanding debt, and exclude the
impact of the debt discount amortization and impact of interest rate swap agreements. See Note 7 to the consolidated
financial statements in “Item 8. Financial Statements and Supplementary Data” in this Annual Report on Form 10-K for
additional information regarding our debt agreements.

(5)

(4) We have included inventory purchase commitments which are legally binding and specify minimum purchase quantities.
These purchase commitments do not exceed our projected requirements and are in the normal course of business. These
commitments do not include open purchase orders. These obligations also include certain research and development
arrangements.
Long-term debt in the table above includes the $3.0 billion Term Loan Credit Agreement, $3.1 billion of CIFSA Senior
Notes, $16.9 billion of 2015 Senior Notes, $1.5 billion of 2014 Senior Notes, $1.9 billion of 2013 Senior Notes, $1.1
billion of 2012 Senior Notes, $500 million of 2011 Senior Notes, $1.3 billion of 2010 Senior Notes, and $700 million of
2009 Senior Notes. The table above excludes the debt premium and discount, the fair value impact of outstanding
interest rate swap agreements, and the unamortized gains from terminated interest rate swap agreements. See Notes 7
and 8 to the consolidated financial statements in “Item 8. Financial Statements and Supplementary Data” in this Annual
Report on Form 10-K for additional information regarding the interest rate swap agreements.

Milestone Payments We acquire assets still in development, enter into research and development arrangements, and sponsor
certain clinical trials that often require milestone and/or royalty payments to a third-party, contingent upon the occurrence of
certain future events. Milestone payments may be required upon the successful achievement of an important point in the
development life cycle of a product or upon certain pre-designated levels of achievement in clinical trials. In addition, if
required by the arrangement, we may have to make royalty payments based on a percentage of sales related to the product under
development or in the event that regulatory approval for marketing is obtained. In situations where we have no ability to
influence the achievement of the milestone or otherwise avoid the payment, we have included those milestone or minimum
royalty payments in the preceding table. However, the majority of these arrangements give us the discretion to unilaterally make
the decision to stop development of a product or cease progress of a clinical trial, which would allow us to avoid making the
contingent payments. Although we are unlikely to cease development if a device successfully achieves clinical testing
objectives, these payments are not included in the table of contractual obligations because of the contingent nature of these
payments and our ability to avoid them if we decided to pursue a different path of development or testing. See Note 2 to the
consolidated financial statements in “Item 8. Financial Statements and Supplementary Data” in this Annual Report on Form 10-
K for additional information regarding contingent consideration.

In the normal course of business, we periodically enter into agreements that require us to
Indemnification provisions
indemnify customers or suppliers for specific risks, such as claims for injury or property damage arising out of our products or
the negligence of our personnel or claims alleging that our products infringe third-party patents or other intellectual property.
Our maximum exposure under these indemnification provisions cannot be estimated, and we have not accrued any liabilities
within our consolidated financial statements or included any indemnification provisions in our commitments table. Historically,
we have not experienced significant losses on these types of indemnification obligations.

Acquisitions

Information regarding acquisitions is included in Note 2 to the consolidated financial statements in “Item 8. Financial
Statements and Supplementary Data” in this Annual Report on Form 10-K.

We periodically acquire certain tangible or intangible assets from enterprises that do not otherwise qualify for accounting as a
business combination. These transactions are reflected in the consolidated statements of cash flows as a component of investing
activities under other investing activities, net.

New Accounting Pronouncements

Information regarding new accounting pronouncements is included in Note 1 to the consolidated financial statements in “Item 8.
Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.

Cautionary Factors That May Affect Future Results

This Annual Report, and other written reports and oral statements made by or with the approval of one of the Company’s
executive officers from time to time, may include “forward-looking” statements. Forward-looking statements broadly include
our current expectations or forecasts of future results. Our forward-looking statements generally relate to our growth and growth
strategies, developments in the markets for our products, financial results, product development launches and effectiveness,
research and development strategy, regulatory approvals, competitive strengths, restructuring and cost-saving initiatives,
intellectual property rights, litigation and tax matters, government investigations, mergers and acquisitions, divestitures, market
acceptance of our products, accounting estimates, financing activities, ongoing contractual obligations, working capital
adequacy, value of our investments, our effective tax rate, our expected returns to shareholders, and sales efforts. Such
statements can be identified by the use of terminology such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,”
“intend,” “looking ahead,” “may,” “plan,” “possible,” “potential,” “project,” “should,” “will,” and similar words or expressions.
Forward-looking statements in this Annual Report include, but are not limited to, statements regarding our ability to drive long-
term shareholder value, development and future launches of products and continued or future acceptance of products in our
operating segments; expected timing for completion of research studies relating to our products; market positioning and
performance of our products, including stabilization of certain product markets; unanticipated issues that may affect U.S. FDA
and non-U.S. regulatory approval of new products; increased presence in new markets, including markets outside the U.S.;
changes in the market and our market share; acquisitions and investment initiatives, as well as integration of acquired
companies into our operations; the resolution of tax matters; the effectiveness of our development activities in reducing patient
care costs and hospital stay lengths; our approach towards cost containment; our expectations regarding health care costs; the
elimination of certain positions or costs related to restructuring initiatives; outcomes in our litigation matters and government
investigations; general economic conditions; the adequacy of available working capital and our working capital needs; our
payment of dividends and redemption of shares; the continued strength of our balance sheet and liquidity; our accounts
receivable exposure; and the potential impact of our compliance with governmental regulations and accounting guidance. One
must carefully consider forward-looking statements and understand that such statements may be affected by inaccurate
assumptions and may involve a variety of risks and uncertainties, known and unknown, including, among others, those
discussed in the sections entitled “Government Regulation and Other Considerations” within “Item 1. Business” and “Item 1A.
Risk Factors” in this Annual Report on Form 10-K, as well as those related to competition in the medical device industry,
reduction or interruption in our supply, quality problems, liquidity shortfalls, decreasing prices and pricing pressure, fluctuations
in currency exchange rates, changes in applicable tax rates, positions taken by taxing authorities, adverse regulatory action,
litigation results, self-insurance, commercial insurance, health care policy changes, international operations, failure to achieve
the intended benefits of the Covidien and other acquisitions or disruption of our current plans and operations.

Consequently, no forward-looking statement can be guaranteed and actual results may vary materially. We intend to take
advantage of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 regarding our forward-looking
statements, and are including this sentence for the express purpose of enabling us to use the protections of the safe harbor with
respect to all forward-looking statements.

We undertake no obligation to update any statement we make, but investors are advised to consult all other disclosures by us in
our filings with the Securities and Exchange Commission, especially on Forms 10-K, 10-Q, and 8-K, in which we discuss in
more detail various important factors that could cause actual results to differ from expected or historical results. In addition,
actual results may differ materially from those anticipated due to a number of factors, including, among others, those discussed
in the section entitled “Item 1A. Risk Factors” in this Annual Report on Form 10-K. It is not possible to foresee or identify all
such factors. As such, investors should not consider any list of such factors to be an exhaustive statement of all risks,
uncertainties, or potentially inaccurate assumptions.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Currency Exchange Rate Risk

Due to the global nature of our operations, we are exposed to currency exchange rate changes. In a period where the U.S. dollar
is strengthening/weakening as compared to other currencies, our revenues and expenses denominated in other currencies are
translated into U.S. dollars at a lower/higher value than they would be in an otherwise constant currency exchange rate
environment.

We use operational and economic hedges, as well as currency exchange rate derivative instruments, to manage the impact of
currency exchange rate fluctuations on earnings and cash flows. In order to minimize earnings and cash flow volatility resulting
from currency exchange rate fluctuations, we enter into derivative instruments, principally forward currency exchange rate
contracts. These contracts are designed to hedge anticipated currency transactions and changes in the value of specific assets
and liabilities. At inception of the contract, the derivative instrument is designated as either a freestanding derivative or a cash
flow hedge. The primary currencies of the derivative instruments are the Euro and Japanese Yen. Fluctuations in the currency
exchange rates of currency exposures that are unhedged, such as in certain emerging markets, may result in future earnings and
cash flow volatility. We do not enter into currency exchange rate derivative instruments for speculative purposes.

The gross notional amount of all currency exchange rate derivative instruments outstanding at April 29, 2016 and April 24,
2015 was $10.8 billion and $9.8 billion, respectively. At April 29, 2016, these contracts were in an unrealized loss position of
$11 million. A sensitivity analysis of changes in the fair value of all currency exchange rate derivative contracts at April 29,
2016 indicates that, if the U.S. dollar uniformly strengthened/weakened by 10 percent against all currencies, the fair value of
these contracts would increase/decrease by approximately $725 million. Any gains and losses on the fair value of derivative
contracts would generally be offset by gains and losses on the underlying transactions. These offsetting gains and losses are not
reflected in the above analysis.

Interest Rate Risk

We are subject to interest rate risk on our short-term investments and our borrowings. We manage interest rate risk in the
aggregate, while focusing on our immediate and intermediate liquidity needs. Our debt portfolio as of April 29, 2016, was
comprised of debt predominately denominated in U.S. dollars, of which approximately 90% is fixed rate debt and approximately
10% is floating-rate debt. We are also exposed to interest rate changes affecting our investments in interest rate sensitive
instruments, which include our marketable debt securities, fixed-to-floating interest rate swap agreements, and forward starting
interest rate swap agreements.

A sensitivity analysis of the impact on our investments in interest rate sensitive financial instruments of a hypothetical 10 basis
point change in interest rates, compared to interest rates as of April 29, 2016, indicates that the fair value of these instruments
would correspondingly change by $85 million.

For a discussion of current market conditions and the impact on our financial condition and results of operations, please see the
“Liquidity and Capital Resources” section of “Item 7. Management’s Discussion and Analysis of Financial Condition and Results
of Operations” in this Annual Report on Form 10-K. For additional discussion of market risk, see Notes 5 and 8 to the consolidated
financial statements in “Item 8. Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.

Item 8. Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of Medtronic plc:

the accompanying consolidated balance sheets and the related consolidated statements of

income,
In our opinion,
comprehensive income, shareholders’ equity and cash flows present fairly, in all material respects, the financial position of
Medtronic plc and its subsidiaries (the Company) at April 29, 2016 and April 24, 2015, and the results of their operations and
their cash flows for each of the three years in the period ended April 29, 2016 in conformity with accounting principles
generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the
index appearing under Item 15(a)(1) presents fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of April 29, 2016, based on criteria established in Internal
Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). The Company’s management is responsible for these financial statements and financial statement schedule, for
maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over
financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting.
Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the
Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and
whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial
statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial
statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures
as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

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

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

PricewaterhouseCoopers LLP
Minneapolis, Minnesota
June 28, 2016

Medtronic plc
Consolidated Statements of Income

(in millions, except per share data)
Net sales

Costs and expenses:

Cost of products sold
Research and development expense
Selling, general, and administrative expense
Special charges (gains), net
Restructuring charges, net
Certain litigation charges, net
Acquisition-related items
Amortization of intangible assets
Other expense, net

Operating profit
Interest income
Interest expense

Interest expense, net

Income from operations before income taxes
Provision for income taxes

Net income

Basic earnings per share

Diluted earnings per share

Basic weighted average shares outstanding
Diluted weighted average shares outstanding

Cash dividends declared per ordinary share

2016

Fiscal Year

2015

2014

28,833

20,261

17,005

9,142
2,224
9,469
70
290
26
283
1,931
107

5,291
(431)
1,386

955

4,336
798

3,538

2.51

2.48

6,309
1,640
6,904
(38)
237
42
550
733
118

3,766
(386)
666

280

3,486
811

2,675

2.44

2.41

4,333
1,477
5,847
40
78
770
117
349
181

3,813
(271)
379

108

3,705
640

3,065

3.06

3.02

1,409.6
1,425.9

1,095.5
1,109.0

1,002.1
1,013.6

1.52

1.22

1.12

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

Medtronic plc
Consolidated Statements of Comprehensive Income

(in millions)
Net income

Other comprehensive loss, net of tax:
Unrealized (loss) gain on available-for-sale securities, net of tax (benefit) expense of
$(102), $11, and $(58), respectively
Translation adjustment
Net change in retirement obligations, net of tax (benefit) expense of $(46), $(173), and
$72, respectively
Unrealized (loss) gain on derivatives, net of tax (benefit) expense of $(172), $146, and
$(60), respectively

Other comprehensive loss, net of tax

Comprehensive income

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

Fiscal Year

2016

2015

2014

3,538

2,675

3,065

(121)
(197)

20
(495)

(103)
13

(66)

(366)

(300)

(684)

254

(587)

(102)

(105)

2,854

2,088

2,960

Medtronic plc
Consolidated Balance Sheets

(in millions, except per share data)
ASSETS
Current assets:

Cash and cash equivalents
Investments
Accounts receivable, less allowances of $161 and $144, respectively
Inventories
Tax assets
Prepaid expenses and other current assets

Total current assets

Property, plant, and equipment, net
Goodwill
Other intangible assets, net
Long-term tax assets
Other assets

Total assets

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:

Short-term borrowings
Accounts payable
Accrued compensation
Accrued income taxes
Deferred tax liabilities
Other accrued expenses

Total current liabilities

Long-term debt
Long-term accrued compensation and retirement benefits
Long-term accrued income taxes
Long-term deferred tax liabilities
Other long-term liabilities

Total liabilities

Commitments and contingencies (Notes 2, 13, and 15)
Shareholders’ equity:

Ordinary shares — par value $0.0001, 2.6 billion shares authorized, 1,399,018,022
and 1,421,648,005 shares issued and outstanding, respectively
Retained earnings
Accumulated other comprehensive (loss) income

Total shareholders’ equity

Total liabilities and shareholders’ equity

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

April 29,
2016

April 24,
2015

2,876
9,758
5,562
3,473
697
1,234

23,600
4,841
41,500
26,899
1,383
1,559

4,843
14,637
5,112
3,463
1,335
1,454

30,844
4,699
40,530
28,101
774
1,737

99,782

106,685

993
1,709
1,712
566
—
2,185

7,165
30,247
1,759
2,903
3,729
1,916

47,719

2,434
1,610
1,611
935
119
2,464

9,173
33,752
1,535
2,476
4,700
1,819

53,455

—
53,931
(1,868)

52,063

—
54,414
(1,184)

53,230

99,782

106,685

Medtronic plc
Consolidated Statements of Shareholders’ Equity

(in millions)
Balance as of April 26, 2013

Net income

Other comprehensive loss

Dividends to shareholders

Issuance of shares under stock purchase and award plans

Repurchase of ordinary shares

Tax benefit from exercise of stock-based awards

Stock-based compensation

Balance as of April 25, 2014

Net income

Other comprehensive loss

Ordinary shares issued in connection with the Covidien plc
acquisition, net of taxes

Result of contribution of Medtronic, Inc. to Medtronic plc

Dividends to shareholders

Issuance of shares under stock purchase and award plans

Repurchase of ordinary shares

Tax benefit from exercise of stock-based awards

Stock-based compensation

Balance as of April 24, 2015

Net income

Other comprehensive loss

Dividends to shareholders

Issuance of shares under stock purchase and award plans

Repurchase of ordinary shares

Tax benefit from exercise of stock-based awards

Stock-based compensation

Balance as of April 29, 2016

Ordinary Shares

Number

Par Value

Retained
Earnings

Accumulated
Other
Comprehensive
Loss

Total
Shareholders’
Equity

1,016

102

—

(48)

—

(5)

—

999

100

—

436

—

(30)

—

1,422

—

(38)

—

1,399

—

(99)

—

(3)

—

19,061

3,065

—

(1,116)

1,304

(2,548)

145

19,940

2,675

—

33,787

(1,337)

647

(1,917)

439

54,414

3,538

—

(2,139)

491

(2,830)

375

(492)

—

(105)

—

(597)

—

(587)

—

(1,184)

—

(684)

—

18,671

3,065

(105)

(1,116)

1,307

(2,553)

145

19,443

2,675

(587)

33,787

—

(1,337)

649

(1,920)

439

53,230

3,538

(684)

(2,139)

491

(2,830)

375

53,931

(1,868)

52,063

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

Medtronic plc
Consolidated Statements of Cash Flows

(in millions)
Operating Activities:

Net income

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

Amortization of debt discount and issuance costs

Acquisition-related items

Provision for doubtful accounts

Deferred income taxes

Stock-based compensation

Loss on debt extinguishment

Other, net

Change in operating assets and liabilities, net of acquisitions:

Accounts receivable, net

Inventories
Accounts payable and accrued liabilities

Other operating assets and liabilities

Certain litigation charges, net

Certain litigation payments

Net cash provided by operating activities

Investing Activities:

Acquisitions, net of cash acquired

Additions to property, plant, and equipment

Purchases of marketable securities

Sales and maturities of marketable securities

Other investing activities, net

Net cash provided by (used in) investing activities

Financing Activities:

Acquisition-related contingent consideration

Change in short-term borrowings, net

Repayment of short-term borrowings (maturities greater than 90 days)

Proceeds from short-term borrowings (maturities greater than 90 days)

Issuance of long-term debt

Payments on long-term debt

Dividends to shareholders

Issuance of ordinary shares

Repurchase of ordinary shares

Other financing activities

Net cash (used in) provided by financing activities

Effect of exchange rate changes on cash and cash equivalents

Net change in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Supplemental Cash Flow Information

Cash paid for:

Income taxes

Interest

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

Fiscal Year

2016

2015

2014

3,538

2,675

3,065

2,820

1,306

218

(460)

375

163

(111)

(435)

(186)
(65)

(403)

(340)

5,218

(1,213)

(1,046)

(5,406)

9,924

(14)

2,245

(22)

(139)

139

—

(5,132)

(2,139)

491

(2,830)

(9,543)

113

(1,967)

4,843

2,876

1,379

1,266

634

(926)

439

—

(134)

(413)

(282)
1,616

643

(809)

4,902

(14,884)

(571)

(7,582)

5,890

(17,058)

(85)

(1)

(150)

150

19,942

(1,268)

(1,337)

649

(1,920)

(31)

15,949

(353)

3,440

1,403

4,843

632

578

850

110

(207)

145

—

(28)

(70)

(39)
(117)

444

770

(15)

4,959

(385)

(396)

(10,895)

8,111

(29)

(3,594)

(1)

127

(1,301)

1,176

1,994

(565)

(1,116)

1,307

(2,553)

(918)

484

919

1,403

521

394

Medtronic plc
Notes to Consolidated Financial Statements

1. Summary of Significant Accounting Policies

Nature of Operations Medtronic plc (Medtronic or the Company) is the global leader in medical technology — alleviating
pain, restoring health, and extending life for millions of people around the world. The Company provides innovative products
and therapies to serve hospitals, physicians, clinicians, and patients. Medtronic was founded in 1949 and is headquartered in
Dublin, Ireland. Medtronic plc is the successor registrant to Medtronic, Inc.

Principles of Consolidation The consolidated financial statements include the accounts of Medtronic plc and its consolidated
subsidiaries. All significant intercompany transactions and accounts have been eliminated.

Use of Estimates The preparation of the consolidated financial statements in conformity with generally accepted accounting
principles in the United States (U.S. GAAP) requires management to make estimates and assumptions that affect the reported
amount of assets and liabilities, contingencies, and revenues and expenses in the consolidated financial statements and
accompanying notes, sales discounts,
income tax reserves,
depreciation, amortization, employee benefits, contingencies, and intangible asset and liability valuations. Actual results may or
may not differ from those estimates.

rebates, allowances and incentives, warranty obligations,

Fiscal Year-End The Company utilizes a 52/53-week fiscal year, ending the last Friday in April. The Company’s fiscal years
2016, 2015, and 2014 ended on April 29, 2016, April 24, 2015, and April 25, 2014, respectively. Fiscal year 2016 was a 53-
week year, with the additional week occurring in the first quarter. Fiscal years 2015 and 2014 were 52-week years.

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

Investments
Investments in marketable equity securities and certain debt securities are classified and accounted for as
available-for-sale. Debt securities include corporate debt securities, government and agency securities, certificates of deposit,
mortgage-backed securities, other asset-backed securities, debt funds, and auction rate securities. These investments are
recorded at fair value in the consolidated balance sheets. The change in fair value for available-for-sale securities is recorded,
net of taxes, as a component of accumulated other comprehensive (loss) income on the consolidated balance sheets.
Management determines the appropriate classification of its investments in debt and equity securities at the time of purchase
and reevaluates such determinations at each balance sheet date. The classification of marketable securities as current or long-
term is based on the nature of the securities and their availability for use in current operations consistent with how the Company
manages its capital structure and liquidity.

Investments in securities that are classified and accounted for as trading securities primarily include exchange-traded funds and
are recorded at fair value on the consolidated balance sheets. The Company seeks to offset changes in liabilities related to equity
and other market risks of certain deferred compensation arrangements. The change in fair value for trading securities is recorded
as a component of interest expense, net on the consolidated statements of income.

Certain of the Company’s investments in equity and other securities are long-term, strategic investments in companies that are
in varied stages of development. These investments are included in other assets on the consolidated balance sheets. The
Company accounts for these investments under the cost or the equity method of accounting, as appropriate. Certain of these
investments are publicly traded companies and are therefore accounted for as available for sale. The valuation of equity and
other securities accounted for under the cost method considers all available financial information related to the investee,
including valuations based on recent third-party equity investments in the investee. If an unrealized loss for any investment is
considered to be other-than-temporary, the loss is recognized in the consolidated statements of income in the period the
determination is made. Equity securities accounted for under the equity method are initially recorded at the amount of the
Company’s investment and are adjusted each period for the Company’s share of the investee’s income or loss and dividends
paid. Equity securities accounted for under both the cost and equity methods are reviewed quarterly for changes in circumstance
or the occurrence of events that suggest the Company’s investment may not be recoverable. See Note 5 for discussion of the
gains and losses recognized on equity and other securities.

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

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

(in millions)

Finished goods
Work in-process
Raw materials

Total

April 29,
2016

April 24,
2015

2,242
499
732

3,473

2,268
509
686

3,463

Property, Plant, and Equipment Property, plant, and equipment is stated at cost. Additions and improvements that extend
the lives of the assets are capitalized, while expenditures for repairs and maintenance are expensed as incurred. The Company
assesses property, plant, and equipment for impairment whenever events or changes in circumstances indicate that the carrying
amount of property, plant, and equipment assets may not be recoverable. Depreciation is provided using the straight-line method
over the estimated useful lives of the various assets. Depreciation expense of $889 million, $573 million, and $501 million was
recognized in fiscal years 2016, 2015, and 2014, respectively.

Property, plant, and equipment balances and corresponding lives are as follows:

(in millions)

Land and land improvements
Buildings and leasehold improvements
Equipment
Construction in progress

Subtotal
Less: Accumulated depreciation

Property, plant, and equipment, net

April 29,
2016

April 24,
2015

Lives
(in years)

215
2,394
6,328
777

9,714
(4,873)

4,841

Up to 20
217
Up to 40
2,314
5,649 Generally 3-7, up to 15
—

683

8,863
(4,164)

4,699

Goodwill and Intangible Assets Goodwill is the excess of the purchase price over the estimated fair value of net assets of
acquired businesses. In accordance with U.S. GAAP, goodwill is not amortized. The Company assesses the impairment of
goodwill annually in the third quarter and whenever an event occurs or circumstances change that would indicate the carrying
amount may be impaired. Impairment testing for goodwill is done at a reporting unit level. An impairment loss is recognized
when the carrying amount of the reporting unit’s net assets exceeds the estimated fair value of the reporting unit. The estimated
fair value is determined using a discounted future cash flow analysis.

trademarks,

Intangible assets include patents,
tradenames, customer relationships, purchased technology, and in-process
research and development (IPR&D). Intangible assets with a definite life are amortized on a straight-line basis with estimated
useful lives ranging from three to 20 years. Intangible assets with a definite life are tested for impairment whenever events or
changes in circumstances indicate that the carrying amount of an intangible asset (asset group) may not be recoverable.
Indefinite-lived intangible assets are tested for impairment annually in the third quarter and whenever events or changes in
circumstances indicate that the carrying amount may be impaired. Impairment is calculated as the excess of the asset’s carrying
value over its fair value. Fair value is generally determined using a discounted future cash flow analysis.

IPR&D represents the fair value of those research and development (R&D) projects for which the related products have not
received regulatory approval and have no alternative future use. IPR&D acquired in a business combination is initially
capitalized at its fair value as an indefinite-lived intangible asset. Determining the fair value of IPR&D requires the Company to
make significant estimates. The fair value of IPR&D is determined by estimating the future cash flows of each R&D project or
technology and discounting the net cash flows back to their present values. The discount rate used is determined at the time of
measurement in accordance with accepted valuation methodologies. IPR&D has an indefinite life and is not amortized until
regulatory approval is received and the product is launched, at which time the IPR&D becomes an amortizable asset.

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

At the time of acquisition, the Company expects that all acquired IPR&D will reach technological feasibility, but there can be
no assurance that the commercial viability of these products will actually be achieved. The nature of the efforts to develop the
acquired technologies into commercially viable products consists principally of planning, designing, and conducting clinical
trials necessary to obtain regulatory approvals. The risks associated with achieving commercialization include, but are not
limited to, delays or failure to obtain regulatory approvals to conduct clinical trials, delays or failure to obtain required market
clearances, or delays or issues with patent issuance, validity, and litigation. If commercial viability were not achieved, the
Company would likely look to other alternatives to provide these therapies. If the related R&D project is not completed in a
timely manner or the R&D project is terminated or abandoned, the Company may have an impairment related to the IPR&D,
calculated as the excess of the asset’s carrying value over its fair value.

Contingent Consideration The Company recognizes contingent consideration at fair value at the date of acquisition based on
the consideration expected to be transferred, estimated as the probability-weighted future cash flows, discounted back to present
value. The discount rate used is determined at the time of measurement in accordance with accepted valuation methodologies.
The fair value of the contingent consideration is remeasured each reporting period with the change in fair value, including
accretion for the passage of time, recognized as income or expense within acquisition-related items in the consolidated
statements of income.

Derivatives U.S. GAAP requires companies to recognize all derivatives as assets and liabilities on the balance sheet and to
measure the instruments at fair value through earnings unless the derivative qualifies for hedge accounting. If the derivative
qualifies for hedge accounting, depending on the nature of the hedge and hedge effectiveness, changes in the fair value of the
derivative will either be recognized immediately in earnings or recorded in other comprehensive income (loss) until the hedged
item is recognized in earnings upon settlement/termination. The changes in the fair value of the derivative are intended to offset
the change in fair value of the hedged asset, liability, or probable commitment. The Company evaluates hedge effectiveness at
inception and on an ongoing basis. If a derivative is no longer expected to be highly effective, hedge accounting is discontinued.
Hedge ineffectiveness, if any, is recorded in earnings. Cash flows from derivative contracts are reported as operating activities
in the consolidated statements of cash flows.

The Company uses operational and economic hedges, as well as currency exchange rate derivative contracts and interest rate
derivative instruments, to manage the impact of currency exchange and interest rate changes on earnings and cash flows. In
addition, the Company uses cross currency interest rate swaps to manage currency risk related to certain debt. In order to
minimize earnings and cash flow volatility resulting from currency exchange rate changes, the Company enters into derivative
instruments, principally forward currency exchange rate contracts. These contracts are designed to hedge anticipated
transactions in another currency and changes in the value of specific assets and liabilities. At inception of the contract, the
derivative is designated as either a freestanding derivative or a cash flow hedge. The primary currencies of the derivative
instruments are the Euro and the Japanese Yen. The Company does not enter into currency exchange rate derivative contracts
for speculative purposes. All derivative instruments that qualify for hedge accounting are recorded at fair value on the
consolidated balance sheets, as a component of prepaid expenses and other current assets, other assets, other accrued expenses,
or other long-term liabilities depending upon the gain or loss position of the contract and contract maturity date.

Forward contracts designated as cash flow hedges are designed to hedge the variability of cash flows associated with forecasted
transactions denominated in another currency that will take place in the future. For derivative instruments that are designated
and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative instrument is reported as a
component of accumulated other comprehensive (loss) income. The effective portion of the gain or loss on the derivative
instrument is reclassified into earnings and is included in other expense, net or cost of products sold in the consolidated
statements of income, depending on the underlying transaction that is being hedged, in the same period or periods during which
the hedged transaction affects earnings.

The Company uses freestanding derivative contracts to offset its exposure to the change in value of specific non-U.S. dollar
currency denominated assets and liabilities and to offset variability of cash flows associated with forecasted transactions
denominated other currencies. These derivatives are not designated as hedges, and therefore, changes in the value of these
contracts are recognized in earnings, thereby offsetting the current earnings effect of the related change in value of non-U.S
dollar denominated assets and liabilities.

The Company uses forward starting interest rate derivative instruments designated as cash flow hedges to manage the exposure
to interest rate volatility with regard to future issuances of fixed-rate debt. The effective portion of the gains or losses on the

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

forward starting interest rate derivative instruments that are designated and qualify as cash flow hedges are reported as a
component of accumulated other comprehensive (loss) income. Beginning in the period in which the planned debt issuance
occurs and the related derivative instruments are terminated, the effective portion of the gains or losses are then reclassified into
interest expense, net over the term of the related debt. Any portion of the gains or losses that are determined to be ineffective are
immediately recognized in interest expense, net.

The Company uses interest rate derivative instruments designated as fair value hedges to manage the exposure to interest rate
movements and to reduce borrowing costs by converting fixed-rate debt into floating-rate debt. Under these agreements, the
Company agrees to exchange, at specified intervals, the difference between fixed and floating interest amounts calculated by
reference to agreed-upon notional principal amounts. Changes in the fair value of the derivative instrument are recorded in
interest expense, net, and are offset by changes in the fair value of the underlying debt instrument. The gains (losses) from
terminated interest rate swap agreements are recorded in long-term debt, increasing (decreasing) the outstanding balances of the
debt, and amortized as a reduction of (addition to) interest expense, net over the remaining life of the related debt. The cash
flows from the termination of the interest rate swap agreements are reported as operating activities in the consolidated
statements of cash flows.

In addition, the Company has collateral credit agreements with its primary derivative counterparties. Under these agreements,
either party is required to post eligible collateral when the market value of transactions covered by the agreement exceeds
specific thresholds, thus limiting credit exposure for both parties.

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

(cid:129)

Level 1 — Inputs are quoted prices in active markets for identical assets or liabilities.
Level 2 — Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for
identical or similar assets or liabilities in markets that are not active, and inputs (other than quoted prices) that
are observable for the asset or liability, either directly or indirectly.
Level 3 — Inputs are unobservable for the asset or liability.

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

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

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow
methodologies, or similar techniques, and at least one significant model assumption or input is unobservable. Level 3 financial
assets also include certain investment securities for which there is limited market activity such that the determination of fair

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

value requires significant judgment or estimation. Level 3 investment securities include certain corporate debt securities, auction
rate securities, and certain mortgage-backed securities. With the exception of auction rate securities, these securities were
valued using third-party pricing sources that incorporate transaction details such as contractual terms, maturity, timing, and
amount of expected future cash flows, as well as assumptions about liquidity and credit valuation adjustments by market
participants. The fair value of auction rate securities is estimated by the Company using a discounted cash flow model, which
incorporates significant unobservable inputs. The significant unobservable inputs used in the fair value measurement of the
Company’s auction rate securities are years to principal recovery and the illiquidity premium that is incorporated into the
discount rate. Significant increases (decreases) in any of those inputs in isolation would result in a significantly lower (higher)
fair value of the securities.

Warranty Obligation The Company offers a warranty on various products. The Company estimates the costs that may be
incurred under its warranties and records a liability in the amount of such costs at the time the product is sold. The amount of
the reserve recorded is equal to the net costs to repair or otherwise satisfy the obligation. The Company includes the warranty
obligation in other accrued expenses and other long-term liabilities on the consolidated balance sheets.

Changes in the Company’s product warranty obligations during the years ended April 29, 2016 and April 24, 2015 consisted of
the following:

(in millions)

Warranty Obligation

Balance as of April 25, 2014
Fair value of warranty obligation acquired from Covidien
Technology upgrade commitment
Warranty claims provision
Settlements made

Balance as of April 24, 2015
Warranty claims provision
Settlements made

Balance as of April 29, 2016

32
23
74
30
(24)

135
64
(91)

108

It is the Company’s policy to self-insure the vast majority of its insurable risks including medical and dental
Self-Insurance
costs, disability coverage, physical loss to property, business interruptions, workers’ compensation, comprehensive general, and
product liability. Insurance coverage is obtained for those risks required to be insured by law or contract. The Company uses
claims data and historical experience, as applicable, to estimate liabilities associated with the exposures that the Company has
self-insured. Based on historical loss trends, the Company believes that its self-insurance program accruals and its existing
insurance coverage will be adequate to cover future losses. Historical trends, however, may not be indicative of future losses.
These losses could have a material adverse impact on the Company’s consolidated financial statements.

Retirement Benefit Plan Assumptions The Company sponsors various retirement benefit plans, including defined benefit
pension plans (pension benefits), post-retirement medical plans (post-retirement benefits), defined contribution savings plans,
and termination indemnity plans, covering substantially all U.S. employees and many employees outside the U.S. Pension
benefit costs include assumptions for the discount rate, retirement age, compensation rate increases, and the expected return on
plan assets. Post-retirement benefit costs include assumptions for the discount rate, retirement age, expected return on plan
assets, and health care cost trend rate assumptions.

The Company changed the methodology used to estimate the service and interest cost components of net periodic pension cost
and net periodic postretirement benefit cost for the Company’s pension and other post-retirement benefits, effective April 30,
2016. Previously, the Company estimated such cost components utilizing a single weighted-average discount rate derived from
the market-observed yield curves of high-quality fixed income securities used to measure the pension benefit obligation and
accumulated post-retirement benefit obligation. The new methodology utilizes a full yield curve approach in the estimation of
these cost components by applying the specific spot rates along the yield curve to their underlying projected cash flows and
provides a more precise measurement of service and interest costs by improving the correlation between projected cash flows

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

and their corresponding spot rates. The change does not affect the measurement of the Company’s pension obligation or
accumulated post-retirement benefit obligation. The Company has accounted for this change prospectively as a change in
accounting estimate.

Revenue Recognition The Company sells its products through direct sales representatives and independent distributors. The
Company recognizes revenue when title to the goods and risk of loss transfers to customers, which may be upon shipment or
upon delivery to the customer site, based on the contract terms or legal requirements in non-U.S. jurisdictions, provided there
are no material remaining performance obligations required of the Company or any matters requiring customer acceptance. In
cases where the Company utilizes distributors or ships product directly to the end user, it generally recognizes revenue upon
shipment provided all revenue recognition criteria have been met. A portion of the Company’s revenue is generated from
inventory maintained at hospitals or with field representatives. For these products, revenue is recognized at the time the product
has been used or implanted.

The Company records estimated sales returns, discounts, and rebates as a reduction of sales in the same period revenue is
recognized. Rebates are estimated based on sales terms, historical experience, and trend analysis. In estimating rebates, the
Company considers the lag time between the point of sale and the payment of the rebate claim, contractual commitments,
including stated rebate rates, and other relevant information. The Company adjusts reserves to reflect differences between
estimated and actual experience, and records such adjustment as a reduction of sales in the period of adjustment.

In certain circumstances, the Company enters into arrangements in which it provides multiple deliverables to its customers.
Arrangements with multiple deliverables are divided into separate units of accounting. Total revenue is first allocated among the
deliverables based upon their relative fair values. Revenue is then recognized for each deliverable in accordance with the
principles described above. Fair values are determined based on the prices at which the individual deliverables are regularly sold
to other third parties.

Shipping and Handling Shipping and handling costs incurred were $316 million, $284 million, and $194 million in fiscal
years 2016, 2015, and 2014, respectively, and are included in selling, general, and administrative expense in the consolidated
statements of income.

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

Costs Associated with Exit Activities The Company accrues employee termination costs associated with ongoing benefit
arrangements, including benefits provided as part of the Company’s U.S. severance policy or provided in accordance with non-
U.S. statutory requirements, if the obligation is attributed to prior services rendered, the rights to the benefits have vested, the
payment is probable, and the amount can be reasonably estimated. Other costs associated with exit activities may include
distributor cancellation fees, costs related to leased facilities to be abandoned or subleased, and asset impairments.

Contingencies The Company records a liability in the consolidated financial statements for loss contingencies when a loss is
known or considered probable and the amount can 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 can be reasonably estimated, the estimated loss or range of loss is
disclosed. In accordance with U.S. GAAP, income tax liabilities are not accounted for under the loss contingency rules, but
rather specific accounting guidance. Insurance recoveries related to potential claims are recognized up to the amount of the
recorded liability when coverage is confirmed and the estimated recoveries are probable of payment. These recoveries are not
netted against the related liabilities for financial statement presentation.

the Company has guarantee commitments and
Tax Guarantees As a result of the recent acquisition of Covidien,
indemnifications with Tyco International plc (Tyco International) and TE Connectivity Ltd. (TE Connectivity) which relate to
certain contingent tax liabilities as part of a tax sharing agreement. These commitments and indemnifications were recorded at
their respective fair values as of the Acquisition Date. Each reporting period, the Company evaluates the potential loss that it
believes is probable. This guarantee currently has not been amortized into income because there has been no predictable pattern

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

of performance. As a result, the liability generally will be reduced upon the Company’s release from its obligations or as
payments are made. As of April 29, 2016, liabilities related to guarantee commitments associated with Tyco International’s and
TE Connectivity’s tax obligations totaled $284 million and are included in other accrued expenses and on the Company’s
consolidated balance sheet.

The Company also has current and non-current receivables due from Tyco International and TE Connectivity as a result of the
tax sharing agreement. As of April 29, 2016, receivables from Tyco International and TE Connectivity totaled $261 million and
are included in prepaid expenses and other current assets on the Company’s consolidated balance sheet. See Notes 15 and 18
for additional background on the tax sharing agreement.

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

Earnings Per Share Earnings per share is calculated using the two-class method, as the Company’s A Preferred Shares are
considered participating securities. Accordingly, earnings are allocated to both ordinary shares and participating securities in
determining earnings per ordinary share. Due to the limited number of A Preferred Shares outstanding, this allocation had no
effect on ordinary earnings per share; therefore, it is not presented below. Basic earnings per share is computed based on the
weighted average number of ordinary shares outstanding. Diluted earnings per share is computed based on the weighted average
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
from the proceeds from issuance of the potentially dilutive shares. Potentially dilutive ordinary shares include stock options and
other 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:

(in millions, except per share data)

Numerator:
Net income attributable to ordinary shareholders
Denominator:
Basic – weighted average shares outstanding

Effect of dilutive securities:
Employee stock options
Employee restricted stock units
Other

2016

Fiscal Year

2015

2014

3,538

2,675

3,065

1,409.6

1,095.5

1,002.1

12.2
4.0
0.1

9.1
4.3
0.1

7.1
4.3
0.1

Diluted – weighted average shares outstanding

1,425.9

1,109.0

1,013.6

Basic earnings per share
Diluted earnings per share

$
$

2.51
2.48

$
$

2.44
2.41

$
$

3.06
3.02

The calculation of weighted average diluted shares outstanding excludes options to purchase approximately 4 million, 2 million,
and 5 million ordinary shares in fiscal years 2016, 2015, and 2014, respectively, because their effect would be anti-dilutive on
the Company’s earnings per share. Additionally, the calculation of weighted average diluted shares outstanding excludes

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

approximately 20 million and 5 million shares for fiscal years 2016 and 2015 respectively, and does not exclude any shares for
fiscal year 2014, because the performance criteria had not yet been met. The calculation of weighted average diluted shares
outstanding excludes approximately 1 million restricted stock units for each fiscal year 2016, 2015 and 2014, because the
performance criteria had not yet been met.

New Accounting Standards

Recently Adopted

In April 2014, the Financial Accounting Standards Board (FASB) issued amended guidance for reporting discontinued
operations. The amended guidance changes the criteria for determining when the results of operations are to be reported as
discontinued operations and expands the related disclosure requirements. The guidance defines a discontinued operation as a
component or group of components that is disposed of or classified as held for sale, which is a strategic shift that has, or will
have, a major effect on financial position and results of operations. The Company prospectively adopted this accounting
guidance in the first quarter of fiscal year 2016. Its adoption did not have a material impact on the Company’s consolidated
financial statements.

In September 2015, the FASB issued accounting guidance which eliminates the requirement for an acquirer in a business
combination to restate prior period financial statements for measurement period adjustments. An acquirer in a business
combination is required to report provisional amounts when measurements are incomplete at the end of the reporting period
covering the business combination. Prior to the issuance of the new guidance, an acquirer was required to adjust such
provisional amounts by restating prior period financial statements. Under the new guidance, the acquirer will recognize the
measurement-period adjustment
is determined. The Company prospectively adopted this
accounting guidance in the third quarter of fiscal year 2016. Its adoption did not have a material impact on the Company’s
consolidated financial statements.

in the period the adjustment

In November 2015, the FASB issued accounting guidance that requires all deferred tax assets and liabilities, along with any
related valuation allowance, to be classified as noncurrent on the Consolidated Balance Sheets. Current guidance requires the
deferred taxes for each jurisdiction to be presented as a net current asset or liability and net noncurrent asset or liability. As a
result of the new guidance, each jurisdiction will now only have one net noncurrent deferred tax asset or liability. The new
guidance does not change the existing requirement that only permits offsetting deferred tax assets and liabilities within a single
jurisdiction. Entities have the option to apply the new guidance prospectively or retrospectively. This accounting guidance is
effective for financial statements issued for annual periods beginning after December 15, 2016, with early adoption permitted.
The Company prospectively adopted this accounting guidance in the third quarter of fiscal year 2016. Prior periods have not
been retrospectively adjusted for adoption of this statement.

In March 2016, the FASB issued accounting guidance which eliminates the requirement to apply the equity method of
accounting retrospectively when a reporting entity obtains significant influence over a previously held investment. Instead, the
equity method of accounting should be applied prospectively from the date significant influence is obtained. Investors should
add the cost of acquiring the additional interest in the investee (if any) to the current basis of their previously held interest. For
available-for-sale securities that become eligible for the equity method of accounting, any unrealized gain or loss recorded
within accumulated other comprehensive income (AOCI) should be recognized in earnings at the date the investment initially
qualifies for the use of the equity method. The Company prospectively adopted this accounting guidance in the fourth quarter of
fiscal year 2016. Its adoption did not have a material impact on the Company’s consolidated financial statements.

Not Yet Adopted

In May 2014, the FASB issued amended revenue recognition guidance to clarify the principles for recognizing revenue from
contracts with customers. The guidance requires an entity to recognize revenue in an amount that reflects the consideration to
which an entity expects to be entitled in exchange for the transfer of goods or services. The guidance also requires expanded
disclosures relating to the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with
customers. Additionally, qualitative and quantitative disclosures are required about customer contracts, significant judgments
and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. This accounting guidance is
effective for the Company beginning in the first quarter of fiscal year 2019 using one of two prescribed retrospective methods.
Early adoption is permitted. The Company is evaluating the impact of the amended revenue recognition guidance on the
Company’s consolidated financial statements.

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

In February 2016, the FASB issued guidance which requires lessees to recognize right-of-use assets and lease liabilities on the
balance sheet. The guidance is to be applied using a modified retrospective approach at the beginning of the earliest comparative
period in the financial statements and is effective for the Company beginning in the first quarter of fiscal year 2020. Early
adoption is permitted. The Company is evaluating the impact of the lease guidance on the Company’s consolidated financial
statements.

In March 2016, the FASB issued guidance to simplify the accounting for share based payment transactions by requiring all
excess tax benefits and deficiencies to be recognized in income tax expense or benefit in earnings. An entity can make an entity-
wide accounting policy election to either estimate the expected forfeiture awards or account for forfeitures as they occur. This
accounting guidance is effective for the Company beginning in the first quarter of fiscal year 2018. Early adoption is permitted
for any entity in any interim or annual period. The Company is currently assessing the impact of the guidance on the Company’s
consolidated financial statements.

2. Acquisitions and Acquisition-Related Items

The Company had various acquisitions and other acquisition-related activity during fiscal years 2016, 2015, and 2014. Certain
acquisitions were accounted for as business combinations as noted below. In accordance with authoritative guidance on business
combination accounting, the assets and liabilities of the companies acquired were recorded as of the acquisition date, at their
respective fair values, and consolidated. With the exception of the Covidien acquisition, and unless otherwise disclosed, the pro
forma impact of these acquisitions was not significant, either individually or in the aggregate, to the results of the Company for
the fiscal years ended April 29, 2016, April 24, 2015, or April 25, 2014. The results of operations related to each company
acquired have been included in the Company’s consolidated statements of income since the date each company was acquired.

Acquisition of Covidien public limited company in Fiscal Year 2015

On January 26, 2015 (Acquisition Date), pursuant to the transaction agreement, dated as of June 15, 2014 (the Transaction
Agreement), the Company acquired Covidien plc (Covidien), and Covidien and Medtronic, Inc. became subsidiaries of
Medtronic (collectively, the Transactions). In connection with the consummation of the Transactions, Medtronic re-registered as
a public limited company organized under the laws of Ireland.

On January 26, 2015, (a) each Covidien ordinary share was converted into the right to receive $35.19 in cash and 0.956 of a
newly issued Medtronic plc share (the Arrangement Consideration) in exchange for each Covidien share held by such
shareholders, and (b) each share of Medtronic, Inc. common stock was converted into the right to receive one Medtronic plc
ordinary share. Based on the number of outstanding shares of Medtronic, Inc. and Covidien as of January 23, 2015 (the last
business day prior to the close of the transaction), former Medtronic, Inc. and Covidien shareholders held approximately 69
percent and 31 percent, respectively, of the Company’s ordinary shares after giving effect to the acquisition.

Covidien is a global leader in the development, manufacture, and sale of healthcare products for use in clinical and home
settings. The operating results for Covidien are included in the Minimally Invasive Therapies Group, Cardiac and Vascular
Group and Restorative Therapies Group segments.

Fair Value of Consideration Transferred

Total consideration was $50.0 billion, consisting of $16.0 billion cash and $34.0 billion of non-cash consideration. Total
consideration is comprised of the equity value of the shares that were outstanding as of January 23, 2015 and the portion of
Covidien’s share awards and share options earned as of January 23, 2015 ($559 million). Share awards and share options not
earned ($496 million) as of January 23, 2015 will be expensed over the remaining future vesting period, including $189 million
and $70 million recognized in acquisition-related items and restructuring charges, net, respectively, for the fiscal year ended
April 24, 2015. Share award and share options of $58 million and $18 million were recognized in acquisition-related items and
restructuring charges, net, respectively, for the fiscal year ended April 29, 2016.

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

The following table summarizes the total fair value of consideration transferred:

(in millions, except per share data)

Cash consideration paid to Covidien shareholders ($35.19 per share)
Cash consideration paid for vested Covidien share awards ($35.19 per share)

Total cash consideration

Covidien shares outstanding as of January 23, 2015
Exchange ratio per share

Total Medtronic shares issued to Covidien shareholders(1)

Medtronic per share value as of January 23, 2015

Fair value of Medtronic shares issued to Covidien shareholders

Fair value of shares issued to Covidien share award holders(1)
Fair value of share options and awards issued to Covidien share option and award holders

Total fair value of consideration transferred

(1)

1 million ordinary shares were issued, net, to Covidien share award holders.

Fair Value of Assets Acquired and Liabilities Assumed

15,994
33

16,027
455
0.956

435
76.95

33,435
70
456

49,988

The Company accounted for the acquisition of Covidien as a business combination using the acquisition method of accounting.
The assets acquired and liabilities assumed were recorded at their respective fair values as of the Acquisition Date. The fair
value of assets acquired and liabilities assumed was finalized during the third quarter of fiscal year 2016. During the
measurement period, which ended January 26, 2016, adjustments were made to finalize Covidien’s preliminary fair value
estimates related primarily to other current assets, intangible assets, goodwill, certain property value, contingent liabilities and
the related deferred tax impacts. Based upon the acquisition valuation, the Company acquired $18.3 billion of customer-related
intangible assets, $7.1 billion of technology-based intangible assets, $430 million of tradenames, with weighted average
estimated useful lives of 18, 16, and 6 years, respectively, $420 million of IPR&D, and $30.0 billion of goodwill.

The fair values of the assets acquired and liabilities assumed are as follows:

(estimated in millions)
Accounts receivable
Inventories
Other current assets
Property, plant, and equipment
Goodwill
Intangible assets
Other assets

Total assets acquired

Short-term borrowings
Other current liabilities
Long-term debt
Long-term deferred tax liabilities
Other long-term liabilities

Total liabilities assumed

Net assets acquired

1,349
2,219
3,181
2,293
29,979
26,210
761

65,992

1,011
2,434
4,623
4,745
3,191

16,004

49,988

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

Goodwill has been allocated to the Minimally Invasive Therapies Group, Cardiac and Vascular Group, Restorative Therapies
Group, and Diabetes Group. Goodwill is calculated as the excess of the consideration transferred over the net assets recognized
and represents the expected revenue and cost synergies of the combined company, which are further described above. Goodwill
recognized as a result of the acquisition is not deductible for tax purposes. See Note 6 for additional information about goodwill
and other intangible assets.

Contingent liabilities assumed as part of the Acquisition total $2.7 billion and are included in accrued income taxes, other
accrued expenses, long-term accrued income taxes, and other long-term liabilities. These contingent liabilities include $1.5
billion related to income taxes (including uncertain tax positions and guarantee commitments), and $1.2 billion related to legal
claims (including product liability and environmental matters). Contingent liabilities are recorded at their estimated fair values,
aside from those pertaining to uncertainty in income taxes which are an exception to the fair value basis of accounting. Legal
matters and certain environmental matters that are legal in nature are recorded at their respective probable and estimable
amounts. See Note 15 for additional background on contingent liabilities.

Actual and Pro Forma Impact

The Company’s consolidated financial statements for the fiscal year ended April 24, 2015 include Covidien’s results of
operations from the Acquisition Date through April 24, 2015. Net sales and operating loss attributable to Covidien during this
period and included in Medtronic’s consolidated financial statements for the fiscal year ended April 24, 2015 total $2.7 billion
and $423 million, respectively. The $423 million operating loss includes $623 million of amortization from the step-up in fair
value of inventory acquired, $379 million of intangible asset amortization, $218 million of acquisition-related charges, and $142
million of restructuring charges, net, all of which relate to the Covidien acquisition.

The following unaudited pro forma information gives effect to Medtronic’s acquisition of Covidien as if the acquisition had
occurred on April 27, 2013, the first day of fiscal year 2014, and had been included in the Company’s consolidated statements
of income for fiscal years 2015 and 2014.

(in millions)

Pro forma net sales
Pro forma net income

2015

2014

$
$

28,369
3,944

$
$

27,380
3,280

The historical consolidated financial information of the Company and Covidien has been adjusted in the pro forma information
to give effect to pro forma events that are (1) directly attributable to the transaction, (2) factually supportable, and (3) expected
to have a continuing impact on the combined results. In order to reflect the occurrence of the acquisition on April 27, 2013 as
required, the unaudited pro forma results include adjustments to reflect, among other things, the amortization of the inventory
step-up, the incremental intangible asset amortization to be incurred based on the values of each identifiable intangible asset,
and interest expense from debt financing obtained to fund the cash consideration transferred. Pro forma adjustments were tax-
effected at the Company’s statutory rate. These pro forma amounts are not necessarily indicative of the results that would have
been obtained if the acquisition had occurred as of the beginning of the period presented or that may occur in the future, and
does not reflect future synergies, integration costs, or other such costs or savings.

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

Fiscal Year 2016

The fair values of the assets acquired and liabilities assumed from acquisitions during fiscal year 2016 are as follows:

(in millions)

Other current assets
Property, plant, and equipment
IPR&D
Other intangible assets
Goodwill
Other assets

Total assets acquired

Current liabilities
Long-term deferred tax liabilities, net
Other liabilities

Total liabilities assumed

Net assets acquired

Twelve, Inc.

RF Surgical
Systems, Inc.

Medina Medical

All Other

Total

60
—
192
—
291
—

543

37
34
—

40
2
—
115
135
2

294

27
27
—

11
—
122
—
126
—

259

6
34
—

472

240

219

134
39
143
199
304
15

834

91
53
50

194

640

245
41
457
314
856
17

1,930

161
148
50

359

1,571

RF Surgical Systems, Inc.

Medina Medical

The Company accounted for the acquisitions of Twelve, RF Surgical, and Medina and all other acquisitions as business
combinations using the acquisition method of accounting.

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

Fiscal Year 2015

The fair values of the assets acquired and liabilities assumed from acquisitions during fiscal year 2015, other than the Covidien
acquisition, are as follows:

(in millions)

Other current assets
Property, plant, and equipment
IPR&D
Other intangible assets
Goodwill
Other assets

Total assets acquired

Current liabilities
Long-term deferred tax liabilities, net
Other liabilities

Total liabilities assumed

Net assets acquired

NGC Medical S.p.A

NGC Medical
S.p.A.

Sapiens Steering
Brain
Stimulation

All Other

Total

55
15
—
159
197
3

429

34
51
4

3
1
30
—
170
3

207

4
—
—

12
2
39
157
108
49

367

6
66
—

340

203

295

70
18
69
316
475
55

1,003

44
117
4

165

838

On August 26, 2014, the Company acquired NGC Medical S.p.A. (NGC), a privately-held Italian company that offers a broad
suite of hospital managed services. Total consideration for this transaction was approximately $340 million. Medtronic had
previously invested in NGC and held a 30 percent ownership position in that company. Net of this ownership position, the
transaction value was approximately $238 million. Based upon the acquisition valuation, the Company acquired $159 million of
customer-related intangible assets and tradenames with an estimated useful life of 20 years at the time of acquisition and $197
million of goodwill. The acquired goodwill is not deductible for tax purposes. During fiscal year 2015, the Company recorded
adjustments to goodwill, other intangible assets, net, and long-term deferred tax liabilities.

Sapiens Steering Brain Stimulation

On August 25, 2014, the Company acquired Sapiens Steering Brain Stimulation (Sapiens), a privately-held developer of deep
brain stimulation technologies. Total consideration for the transaction was approximately $203 million. Based upon the
acquisition valuation, the Company acquired $30 million of IPR&D and $170 million of goodwill. The acquired goodwill is not
deductible for tax purposes.

The Company accounted for the acquisitions of NGC and Sapiens as business combinations using the acquisition method of
accounting.

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

Fiscal Year 2014

The fair values of the assets acquired and liabilities assumed during fiscal year 2014 are as follows:

(in millions)

Current assets
Property, plant, and equipment
Intangible assets
Goodwill

Total assets acquired

Current liabilities
Long-term deferred tax liabilities, net

Total liabilities assumed

Net assets acquired

TYRX, Inc.

All Other

Total

6
1
94
132

233

4
7

14
7
61
123

205

12
—

20
8
155
255

438

16
7

222

193

415

On December 30, 2013, the Company acquired TYRX, Inc. (TYRX), a privately-held developer of antibiotic drug and
implanted medical device combinations. TYRX’s products include those designed to reduce surgical site infections associated
with implantable pacemakers, defibrillators, and spinal cord neurostimulators. Under the terms of the agreement, the transaction
included an initial up-front payment of $159 million, representing a purchase price amount that was net of acquired cash,
including the assumption and settlement of existing TYRX debt and direct acquisition costs. Total consideration for the
transaction was approximately $222 million, which included estimated fair values for product development-based and revenue-
based contingent consideration of $25 million and $35 million, respectively. The product development-based contingent
consideration includes a future potential payment of $40 million upon achieving certain milestones, and the revenue-based
contingent consideration payments equal TYRX’s actual annual revenue growth for the company’s fiscal years 2015 and 2016.
Based upon the acquisition valuation, the Company acquired $94 million of technology-based intangible assets with an
estimated useful life of 14 years and $132 million of goodwill. The acquired goodwill is not deductible for tax purposes.

The Company accounted for the acquisition of TYRX as a business combination using the acquisition method of accounting.

Acquisition-Related Items

During fiscal year 2016, the Company recorded charges from acquisition-related items of $283 million, primarily related to
costs incurred in connection with the Covidien acquisition. The charges incurred in connection with the Covidien acquisition
include $219 million of professional services and integration costs and $58 million of accelerated or incremental stock
compensation expense.

During fiscal year 2015, the Company recorded charges from acquisition-related items of $550 million, primarily related to
costs incurred in connection with the Covidien acquisition. The charges incurred in connection with the Covidien acquisition
include $275 million of professional services and integration costs, $189 million of accelerated or incremental stock
compensation expense, and $69 million of incremental officer and director excise tax. These amounts are included within
acquisition-related items in the consolidated statements of income.

During fiscal year 2014, the Company recorded net charges from acquisition-related items of $117 million, primarily including
IPR&D and long-lived asset impairment charges of $236 million related to the Ardian, Inc. (Ardian) acquisition recorded in the
third quarter of fiscal year 2014. The impairment charges were partially offset by income of $138 million related to the change
in fair value of contingent consideration associated with acquisitions subsequent to April 29, 2009. These amounts are included
within acquisition-related items in the consolidated statements of income.

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

Contingent Consideration

Certain of the Company’s business combinations and purchases of intellectual property involve the potential for the payment of
future contingent consideration upon the achievement of certain product development milestones and/or various other favorable
operating conditions. Payment of the additional consideration is generally contingent on the acquired company reaching certain
performance milestones, including attaining specified revenue levels or achieving product development targets. For business
combinations subsequent to April 24, 2009, 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 with the change in fair
value recognized as income or expense within acquisition-related items in the consolidated statements of income. The Company
measures the liability on a recurring basis using Level 3 inputs.

The fair value of contingent consideration is measured using projected payment dates, discount rates, probabilities of payment,
and projected revenues (for revenue-based considerations). Projected contingent payment amounts are discounted back to the
current period using a discounted cash flow model. Projected revenues are based on the Company’s most recent internal
operational budgets and long-range strategic plans. Increases (decreases) in projected revenues, probabilities of payment,
discount rates, or projected payment dates may result in higher (lower) fair value measurements. Fluctuations in any of the
inputs may result in a significantly lower (higher) fair value measurement.

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

($ in millions)

Fair Value at
April 29, 2016

Valuation
Technique

Revenue-based payments

Product development-based
payments

195 Discounted cash flow

182 Discounted cash flow

Unobservable Input

Range

Discount rate
Probability of payment
Projected fiscal year of payment

11% - 27%
30% - 100%
2017 - 2025

0.3% - 5.5%
75% - 100%
2017 - 2025

At April 29, 2016, the estimated maximum potential amount of undiscounted future contingent consideration that the Company
is expected to make associated with all completed business combinations or purchases of intellectual property prior to April 24,
2009 was approximately $175 million. The Company estimates the milestones or other conditions associated with the
contingent consideration will be reached in fiscal year 2017 and thereafter.

The fair value of contingent consideration associated with acquisitions subsequent to April 24, 2009, as of April 29, 2016 and
April 24, 2015, was $377 million and $264 million, respectively. As of April 29, 2016, $311 million was reflected in other long-
term liabilities and $66 million was reflected in other accrued expenses in the consolidated balance sheets. As of April 24,
2015, $242 million was reflected in other long-term liabilities and $22 million was reflected in other accrued expenses in the
consolidated balance sheets. The portion of the contingent consideration related to the acquisition date fair value is reported as
financing activities in the consolidated statements of cash flows. Amounts paid in excess of the original acquisition date fair
value are reported as operating activities in the consolidated statements of cash flows. The following table provides a
reconciliation of the beginning and ending balances of contingent consideration:

(in millions)

Beginning Balance
Acquired contingent consideration
Purchase price contingent consideration
Contingent consideration payments
Change in fair value of contingent consideration

Ending Balance

Fiscal Year

2016

2015

264
—
149
(22)
(14)

377

68
236
40
(85)
5

264

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

3. Restructuring Charges, Net

Cost Synergies Initiative

The cost synergies initiative, initially referred to as the fiscal year 2015 initiative, was the beginning of the Company’s
restructuring program primarily related to the acquisition of Covidien. This initiative is expected to contribute to the
approximately $850 million in cost synergies expected to be achieved as a result of the Covidien acquisition through fiscal year
including administrative office optimization, manufacturing and supply chain infrastructure, certain program
2018,
cancellations, and certain general and administrative savings. Restructuring charges are expected to be incurred in future fiscal
years as cost synergy strategies are finalized. Restructuring accruals resulting from restructuring charges are scheduled to be
substantially complete within one year from the period in which the restructuring charge was initially incurred.

A summary of the activity related to the cost synergies initiative is presented below:

(in millions)

Balance as of April 25, 2014
Restructuring charges
Payments/write-downs

Balance as of April 24, 2015
Restructuring charges
Payments/write-downs
Reversal of excess accrual

Balance as of April 29, 2016

Employee
Termination
Costs

Asset
Write-downs

Other
Costs

Total

— $
213
(77)

136
248
(153)
(18)

213

— $
28
(28)

— $
23
(23)
— $

— $

7
—

7
61
(31)
—

—
248
(105)

143
332
(207)
(18)

— $

250

As a result of certain employees identified for termination finding other positions within the Company and revisions to
severance provisions, the Company recorded an $18 million reversal of excess restructuring reserves during the fiscal year
ended April 29, 2016.

As part of the cost synergies initiative for the fiscal year ended April 29, 2016, the Company recognized $23 million of asset
write-downs, which included $9 million related to inventory write-offs of discontinued product lines recognized within cost of
products sold in the consolidated statements of income. In addition, for the fiscal year ended April 29, 2016, asset write-downs
included $14 million related to property, plant, and equipment impairments.

In the fiscal year ended April 24, 2015, the Company recognized $28 million of asset write-downs, which included $15 million
related to inventory write-offs of discontinued product lines and production-related asset impairments recognized within cost of
products sold in the consolidated statements of income. In addition, for the fiscal year ended April 24, 2015, asset write-downs
included $13 million related to property, plant, and equipment impairments.

Covidien Initiative

Covidien’s pre-acquisition restructuring program is designed to improve Covidien’s cost structure. The program consists of
reducing corporate expenses, expanding shared services, consolidating manufacturing locations, and optimizing distribution
centers. The Covidien restructuring initiative is scheduled to be substantially complete by the end of fiscal year 2018. At the
Acquisition Date, the Company reserved $103 million in connection with the Covidien initiative, which consisted of employee
termination costs of $76 million and other costs of $27 million.

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

A summary of the activity related to the Covidien initiative is presented below:

(in millions)

Balance as of January 26, 2015 (Acquisition Date)
Restructuring charges
Payments/write-downs
Reversal of excess accrual

Balance as of April 24, 2015
Restructuring charges
Payments/write-downs
Reversal of excess accrual

Balance as of April 29, 2016

Covidien Initiative

Employee
Termination
Costs

Other
Costs

Total

76
—
(10)
(5)

61
—
(49)
(10)

27
—
(10)
—

17
—
(12)
—

103
—
(20)
(5)

78
—
(61)
(10)

In the fiscal year ended April 29, 2016 and April 24, 2015, the Company recorded reversals of excess restructuring reserves
related to the Covidien initiative of $10 million and $5 million, respectively. The reversals were primarily a result of certain
employees identified for termination finding other positions within the Company and early lease termination negotiations in
fiscal year 2015.

4. Special Charges (Gains), Net and Certain Litigation Charges, Net

Special Charges (Gains), Net

During fiscal year 2016, the Company recognized a special charge of $70 million in connection with the impairment of a debt
investment.

During fiscal year 2015, the Company recognized a $138 million gain, which consisted of a $41 million gain on the sale of a
product line in the Surgical Technologies division and a $97 million gain on the sale of an equity method investment.

During 2015 and 2014, continuing with the Company’s commitment to improving the health of people and communities
throughout the world, the Company made charitable contributions of $100 million and $40 million, respectively, to the
Medtronic Foundation, a related party non-profit organization.

Certain Litigation Charges, Net

The Company classifies material litigation charges and gains recognized as certain litigation charges, net. During fiscal years
2016 and 2015, the Company recorded certain litigation charges, net of $26 million and $42 million, respectively, which
primarily relate to additional accounting charges for probable and reasonably estimable INFUSE product liability litigation,
which were recorded as a result of additional filed and unfiled claims, and other litigation matters. Refer to Note 15 for
additional information.

During fiscal year 2014, the Company recorded certain litigation charges, net of $770 million, which primarily include the
global patent settlement agreement with Edwards Lifesciences Corporation of $589 million, accounting charges for probable
and reasonably estimable INFUSE product liability litigation of $140 million, and other litigation matters.

5. Financial Instruments

The Company holds investments consisting primarily of marketable debt and equity securities. The authoritative guidance is
principally applied to financial assets and liabilities such as marketable equity securities and debt and equity securities that are
classified and accounted for as trading and available-for-sale and are measured on a recurring basis. Further, we also hold cost
or equity method investments which are measured at fair value on a nonrecurring basis.

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

The following table summarizes the Company’s investments by significant investment categories and the related consolidated
balance sheet classification at April 29, 2016:

Valuation

Balance Sheet Classification

Cost

Unrealized
Gains

Unrealized
Losses

Fair Value

Investments

Other Assets

(in millions)

Available-for-sale securities

Level 1:

U.S. government and agency
securities
Marketable equity securities

Total Level 1

Level 2:

Corporate debt securities
U.S. government and agency
securities
Mortgage-backed securities
Other asset-backed securities
Debt funds

Total Level 2

Level 3:

Corporate debt securities
Auction rate securities

Total Level 3

Total available-for-sale securities
Trading securities:

Level 1:

Exchange-traded funds

Total Level 1:

Total trading securities
Cost method, equity method, and other
investments:
Level 3:

Cost method, equity method, and
other investments

Total Level 3:

Total cost method, equity method, and
other investments

792
75

867

3,935

902
1,016
192
3,040

9,085

1
47

10,000

506

14
21

2
17
3
5

112

—
—

—

147

—

(1) $
(11)

(12)

(24)

—
(18)
—
(281)

(323)

—
(3)

(3)

805
85

890

3,996

904
1,015
195
2,764

8,874

1
44

805

3,996

904
1,015
195
2,764

8,874

—
—

—

—
85

—

—
—
—
—

—

1
44

(338)

9,809

9,679

130

(1)

—

N/A

—

506

636

Total investments

10,571

162

(339) $

9,888

9,758

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

The following table summarizes the Company’s investments by significant investment categories and the related consolidated
balance sheet classification at April 24, 2015:

Valuation

Balance Sheet Classification

Cost

Unrealized
Gains

Unrealized
Losses

Fair Value

Investments

Other Assets

(in millions)

Available-for-sale securities:

Level 1:

U.S. government and agency
securities
Marketable equity securities

Total Level 1

Level 2:

Corporate debt securities
U.S. government and agency
securities
Mortgage-backed securities
Non-U.S. government and agency
securities
Certificates of deposit
Other asset-backed securities
Debt funds

Total Level 2

Level 3:

Corporate debt securities
Auction rate securities

Total Level 3

Total available-for-sale securities
Trading securities:

Level 1:

Exchange-traded funds

Total Level 1

Total trading securities
Cost method, equity method, and other
investments:
Level 3:

Cost method, equity method, and
other investments

Total Level 3

Total cost method, equity method, and
other investments

1,525
64

1,589

6,282

1,597
1,462

85
44
504
3,061

13,035

1
109

110

14,734

520

17
35

105

4
22

—
—
3
19

153

—
—

—

205

—

(1) $
(19)

(20)

(10)

(3)
(6)

—
—
—
(150)

(169)

—
(4)

(4)

1,541
80

1,621

6,377

1,598
1,478

85
44
507
2,930

1,541
—

1,541

6,377

1,598
1,478

85
44
507
2,930

13,019

1
105

106

—
—

—

(193)

14,746

14,560

—

N/A

—

—
80

—

—
—

—
—
—
—

—

1
105

106

186

—

520

706

Total investments

15,312

224

(193) $

14,823

14,637

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

Marketable Debt and Equity Securities:

The following tables show the gross unrealized losses and fair values of the Company’s available-for-sale securities that have
been in a continuous unrealized loss position deemed to be temporary, aggregated by investment category as of April 29, 2016
and April 24, 2015:

Total

1,975

(in millions)

Corporate debt securities
Auction rate securities
Mortgage-backed securities
U.S. government and agency securities
Debt funds
Marketable equity securities

(in millions)

Corporate debt securities
Auction rate securities
Mortgage-backed securities
U.S. government and agency securities
Debt funds
Marketable equity securities

April 29, 2016

Less than 12 months

More than 12 months

Fair Value

Unrealized
Losses

Fair Value

Unrealized
Losses

756
—
196
308
670
45

(18) $
—
(5)
(4)
(26)
(11)

(64) $

136
44
92
67
1,601
—

1,940

(6)
(3)
(5)
(5)
(256)
—

(275)

April 24, 2015

Less than 12 months

More than 12 months

Fair Value

Unrealized
Losses

Fair Value

Unrealized
Losses

944
—
346
356
1,291
4

(9) $
—
(3)
(1)
(109)
(19)

(141) $

34
105
206
267
559
—

1,171

(1)
(4)
(3)
(3)
(41)
—

(52)

Total

2,941

The following table represents the range of the unobservable inputs utilized in the fair value measurement of the auction rate
securities classified as Level 3 as of April 29, 2016:

Auction rate securities

Discounted cash flow

Years to principal recovery
Illiquidity premium

2 yrs. - 12 yrs. (3 yrs.)
6%

Valuation Technique

Unobservable Input

Range (Weighted Average)

The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the ability to observe valuation
inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. The Company’s policy is to
recognize transfers into and out of levels within the fair value hierarchy at the end of the fiscal quarter in which the actual event
or change in circumstances that caused the transfer occurs. There were no transfers between Level 1, Level 2, or Level 3 during
the twelve months ended April 29, 2016. 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.

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

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

(in millions)

Balance as of April 24, 2015
Total unrealized gains/(losses) included in other comprehensive income
Settlements

Balance as of April 29, 2016

(in millions)

Balance as of April 25, 2014
Total realized losses and other-than-temporary impairment losses included
in earnings
Total unrealized gains/(losses) included in other comprehensive income
Settlements

Balance as of April 24, 2015

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

Total Level 3
Investments

Corporate debt
securities

Auction rate
securities

106
(3)
(58)

1
—
—

105
(3)
(58)

Total Level 3
Investments

Corporate debt
securities

Auction rate
securities

106

(5)
10
(5)

(5)
2
(5)

—
8
—

106

105

2016

Fiscal Year

2015

2014

(in millions)

Debt(1)

Equity(2)

Debt(1)

Equity(2)(3)

Debt(1)

Equity(2)(3)

Proceeds from sales
Gross realized gains
Gross realized losses
Impairment losses recognized

9,881
36
(53)
—

42
38
—
(114)

5,640
33
(19)
—

250
164
—
(29)

7,991
15
(12)
(1)

120
69
—
(9)

(1)
(2)
(3)

(4)

Includes available-for-sale debt securities.
Includes marketable equity securities, cost method, equity method, exchange-traded funds, and other investments.
As a result of certain acquisitions that occurred during the fiscal year ended April 29, 2016, the Company recognized a
non-cash realized gain of $9 million on its previously-held minority investment included in other expense, net on the
consolidated statement of income.
As a result of certain acquisitions that occurred during the fiscal year ended April 24, 2015, the Company recognized a
non-cash realized gain of $41 million on its previously-held minority investments included in other expense, net on the
consolidated statement of income. Also, a realized gain on an equity method investment totaling $97 million is
included in special (gains) charges, net on the consolidated statement of income.

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

As of April 29, 2016 and April 24, 2015, the credit loss portion of other-than temporary impairments on debt securities were not
significant. The total reductions for available-for-sale debt securities sold during the fiscal years ended April 29, 2016 and
April 24, 2015 were not significant.

The April 29, 2016 balance of available-for-sale debt securities, excluding debt funds which have no single maturity date, by
contractual maturity is shown in the following table. Within the table, maturities of mortgage-backed securities have been

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

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)

Due in one year or less
Due after one year through five years
Due after five years through ten years
Due after ten years

Total debt securities

April 29, 2016

899
3,181
2,792
88

6,960

The Company holds investments in marketable equity securities, which are classified as other assets in the consolidated balance
sheets. The aggregate carrying amount of these investments was $85 million and $80 million as of April 29, 2016 and April 24,
2015, respectively. During the fiscal years ended April 29, 2016 and April 24, 2015, the Company determined that the fair value
of certain marketable equity securities were below their carrying values and that the carrying values of these investments were
not expected to be recoverable within a reasonable period of time. As a result, the Company recognized $20 million and $7
million in impairment charges for fiscal years 2016 and 2015 respectively, which were recognized within other expense, net in
the consolidated statements of income. There were no marketable equity securities impairment charges recognized for the fiscal
year ended April 25, 2014.

Cost method, equity method, and other investments

The Company holds investments in equity and other securities that are accounted for using the cost or equity method, which are
classified as other assets in the consolidated balance sheets. As of April 29, 2016 and April 24, 2015, the aggregate carrying
amount of equity and other securities without a quoted market price and accounted for using the cost or equity method was $506
million and $520 million, respectively. These cost or equity method investments are measured at fair value on a nonrecurring
basis. The total carrying value of these investments is reviewed quarterly for changes in circumstance or the occurrence of
events that suggest the Company’s investment may not be recoverable. The value of cost or equity method investments is not
adjusted if there are no identified events or changes in circumstances that may have a material adverse effect on the fair value of
the investment.

During the fiscal year ended April 29, 2016, the Company determined that the fair values of certain cost method investments
were below their carrying values and that the carrying values of these investments were not expected to be recoverable within a
reasonable period of time. As a result, the Company recognized $23 million in impairment charges during the fiscal year ended
April 29, 2016, which was recorded in other expense, net and $70 million in impairment charges which was recorded in special
charges (gains), net in the consolidated statements of income. During the fiscal year ended April 24, 2015, and April 25, 2014
the Company determined that the fair values of certain cost method investments were below their carrying values and that the
carrying values of these investments were not expected to be recoverable within a reasonable period of time. As a result, the
Company recognized $7 million and $10 million in impairment charges during fiscal years 2015 and 2014 respectively, which
were recorded in other expense, net in the consolidated statements of income. These investments fall within Level 3 of the fair
value hierarchy, due to the use of significant unobservable inputs to determine fair value, as the investments are privately-held
entities without quoted market prices. To determine the fair value of these investments, the Company used all pertinent financial
information available related to the entities, including financial statements and market participant valuations from recent and
proposed equity offerings.

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

6. Goodwill and Other Intangible Assets, Net

Goodwill

The changes in the carrying amount of goodwill for fiscal years 2016 and 2015 are as follows:

(in millions)

Balance as of April 25, 2014
Goodwill as a result of Covidien acquisition
Goodwill as a result of other acquisitions
Other adjustments, net
Currency adjustment, net

Balance as of April 24, 2015
Goodwill as a result of acquisitions
Measurement period adjustments related to
Covidien
Other adjustments, net
Currency adjustment, net

Cardiac and
Vascular Group

Minimally
Invasive
Therapies Group

Restorative
Therapies
Group

Diabetes Group

Total

2,881
2,795
245
—
(66)

5,855
393

21
—
(26)

— $

23,399
—
—
—

23,399
264

346
(34)
(191)

6,368
2,892
218
(9)
(45)

9,424
199

26
3
(32)

1,344
500
9
—
(1)

1,852
—

—
—
1

10,593
29,586
472
(9)
(112)

40,530
856

393
(31)
(248)

Balance as of April 29, 2016

6,243

23,784

9,620

1,853

41,500

The Company assesses goodwill for impairment annually in the third quarter and whenever an event occurs or circumstances
change that would indicate that the carrying amount may be impaired. Impairment testing for goodwill is performed at the
reporting unit level. The Company included the Minimally Invasive Therapies Group as an additional reporting unit in its
annual impairment testing performed in the third quarter of fiscal year 2016. No other changes were made to reporting units
during fiscal year 2016. The test for impairment of goodwill requires the Company to make several estimates about fair value,
most of which are based on projected future cash flows. The Company calculated the excess of each reporting unit’s fair value
over its carrying amount, including goodwill, utilizing a discounted cash flow analysis. As a result of the analysis performed,
the fair value of each reporting unit’s goodwill was deemed to be greater than the carrying value. The Company did not record
any goodwill impairments during fiscal years 2016, 2015, or 2014.

Intangible Assets Carrying Value

The gross carrying amount and accumulated amortization of intangible assets at the end of fiscal years 2016 and 2015 are as
follows:

(in millions)

Definite-lived
Customer-related
Purchased technology and patents
Trademarks and tradenames
Other

Total

Indefinite-lived
IPR&D
Tradenames

Total

Fiscal Year 2016

Fiscal Year 2015

Gross Carrying
Amount

Accumulated
Amortization

Gross Carrying
Amount

Accumulated
Amortization

18,596
11,397
854
72

(1,331)
(2,976)
(403)
(31)

30,919

(4,741)

721
—

721

18,492
11,118
640
79

(273)
(2,268)
(363)
(44)

30,329

(2,948)

470
250

720

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

The Company assesses indefinite-lived assets for impairment annually in the third quarter and whenever an event occurs or
circumstances change that would indicate that the carrying amount may be impaired. Similar to the goodwill impairment test,
the indefinite-lived assets impairment test requires the Company to make several estimates about fair value, most of which are
based on projected future cash flows. The Company calculates the excess of indefinite-lived asset fair values over their carrying
values utilizing a discounted future cash flow analysis. The Company did not record any significant indefinite-lived asset
impairments during fiscal year 2016. As a result of the analysis performed during fiscal year 2015, the fair value of certain
IPR&D indefinite-lived assets were deemed to be less than their carrying value, resulting in an impairment loss of $5 million,
which was recorded in acquisition-related items in the consolidated statements of income. During fiscal year 2014, the fair
value of IPR&D indefinite-lived assets were deemed to be less than the carrying value, resulting in a pre-tax impairment loss of
$207 million primarily related to the Ardian acquisition and was recorded in acquisition-related items in the consolidated
statements of income. See discussion below for additional information on impairments recorded on the Ardian long-lived asset
group. Due to the nature of IPR&D projects, the Company may experience future delays or failures to obtain regulatory
approvals to conduct clinical trials, failures of such clinical trials, delays or failures to obtain required market clearances or other
failures to achieve a commercially viable product, and as a result, may record impairment losses in the future.

The Company assesses definite-lived intangible assets for impairment whenever events or changes in circumstances indicate
that the carrying amount of an intangible asset (asset group) may not be recoverable. When events or changes in circumstances
indicate that the carrying amount of an intangible asset may not be recoverable, the Company calculates the excess of an
intangible asset’s carrying value over its undiscounted future cash flows. If the carrying value is not recoverable, an impairment
loss is recorded based on the amount by which the carrying value exceeds the fair value. The inputs used in the fair value
analysis fall within Level 3 of the fair value hierarchy due to the use of significant unobservable inputs to determine fair value.
The Company did not record any intangible asset impairments during fiscal year 2016 and 2015. During fiscal year 2014, the
Company determined that a change in events and circumstances indicated that the carrying amount of certain definite-lived
intangible assets, representing less than five percent of the total aggregate carrying amount of intangible assets, may not be fully
recoverable. During fiscal year 2014, the carrying amount of Ardian definite-lived intangible assets was less than the
undiscounted future cash flows, therefore, the Company assessed the fair value of the assets and recorded an impairment of $41
million that was included in acquisition-related items in the consolidated statements of income.

Intangible Asset Amortization

Amortization expense for fiscal years 2016, 2015, and 2014 was $1.9 billion, $733 million, and $349 million, respectively.

Estimated aggregate amortization expense by fiscal year based on the current carrying value of definite-lived intangible assets,
excluding any possible future amortization associated with acquired IPR&D, which has not met technological feasibility, is as
follows:

(in millions)
Fiscal Year

2017
2018
2019
2020
2021

Amortization
Expense

1,931
1,899
1,805
1,757
1,739

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

7. Financing Arrangements

Short-term debt consisted of the following:

(in millions)

April 29, 2016 April 24, 2015

Capital lease obligations
Bank borrowings
Floating rate three-year 2014 senior notes
0.875 percent three-year 2014 senior notes
2.625 percent five-year 2011 senior notes
4.750 percent ten-year 2005 senior notes
1.350 percent 2012 CIFSA senior notes
2.800 percent 2010 CIFSA senior notes
Interest rate swaps
Debt premium

Total Short-Term Borrowings

106
387
250
250
—
—
—
—
—
—

993

16
303
—
—
500
600
600
400
10
5

2,434

Commercial Paper On January 26, 2015, Medtronic Global Holdings S.C.A., an entity organized under the laws of
Luxembourg (Medtronic Luxco), entered into various agreements pursuant to which Medtronic Luxco may issue unsecured
commercial paper notes (the 2015 Commercial Paper Program) on a private placement basis up to a maximum aggregate
amount outstanding at any time of $3.5 billion. The Company and Medtronic, Inc. have guaranteed the obligations of Medtronic
Luxco under the 2015 Commercial Paper Program. No amounts were outstanding as of April 29, 2016 and April 24,2015.

Bank Borrowings Outstanding bank borrowings as of April 29, 2016 were short-term advances to certain non-U.S.
subsidiaries under credit agreements with various banks. Bank borrowings consist primarily of borrowings at interest rates
considered favorable by management ranging from 0.18% to 0.19% and the borrowing is a natural hedge of currency and
exchange rate risk.

Line of Credit The Company has a $3.5 billion Five Year Revolving Credit Facility ($3.5 billion Five Year Revolving Credit
Facility), by and among Medtronic, Medtronic, Inc., Medtronic Luxco, the lenders from time to time party thereto and Bank of
America, N.A., as administrative agent and issuing bank, which expires in January 2020. The $3.5 billion Five Year Revolving
Credit Facility provides the Company with the ability to increase its borrowing capacity by an additional $500 million at any
time during the term of the agreement. At each anniversary date of the $3.5 billion Five Year Revolving Credit Facility, but not
more than twice prior to the maturity date, the Company could also request a one-year extension of the maturity date. The
Company, Medtronic Luxco, and Medtronic, Inc. guarantee the obligations under the Amended and Restated Revolving Credit
Agreement. As of April 29, 2016 and April 24, 2015, no amounts were outstanding on the committed line of credit.

Interest rates 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 agreement also contains customary covenants, all of which the Company remains in
compliance with as of April 29, 2016.

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

Long-term debt consisted of the following:

(in millions, except interest rates)

Floating rate three-year 2014 senior notes
0.875 percent three-year 2014 senior notes
6.000 percent ten-year 2008 CIFSA senior notes
1.375 percent five-year 2013 senior notes
1.500 percent three-year 2015 senior notes
5.600 percent ten-year 2009 senior notes
4.450 percent ten-year 2010 senior notes
2.500 percent five-year 2015 senior notes
Floating rate five-year 2015 senior notes
4.200 percent ten-year 2010 CIFSA senior notes
4.125 percent ten-year 2011 senior notes
3.125 percent ten-year 2012 senior notes
3.200 percent ten-year 2012 CIFSA senior notes
3.150 percent seven-year 2015 senior notes
2.750 percent ten-year 2013 senior notes
2.950 percent ten-year 2013 CIFSA senior notes
3.625 percent ten-year 2014 senior notes
3.500 percent ten-year 2015 senior notes
4.375 percent twenty-year 2015 senior notes
6.550 percent thirty-year 2007 CIFSA senior notes
6.500 percent thirty-year 2009 senior notes
5.550 percent thirty-year 2010 senior notes
4.500 percent thirty-year 2012 senior notes
4.000 percent thirty-year 2013 senior notes
4.625 percent thirty-year 2014 senior notes
4.625 percent thirty-year 2015 senior notes
Three-year term loan
Interest rate swaps
Deferred gains from interest rate swap terminations, net
Capital lease obligations
Bank borrowings
Debt premium (discount)

April 29, 2016

April 24, 2015

Maturity by
Fiscal Year

Payable

Effective
Interest
Rate

Payable

Effective
Interest
Rate

2017
2017
2018
2018
2018
2019
2020
2020
2020
2021
2021
2022
2023
2022
2023
2024
2024
2025
2035
2038
2039
2040
2042
2043
2044
2045
2018
2021-2022
—
2018-2026
2018-2021
2018-2045

—
—
1,150
1,000
1,000
400
766
2,500
500
600
500
675
650
2,500
530
310
850
4,000
2,382
374
300
500
400
325
650
4,000
3,000
89
—
26
56
214

—% $
—
1.41
1.41
1.59
5.61
4.47
2.52
1.04
2.22
4.19
3.16
2.66
3.18
2.78
2.67
3.65
3.61
4.44
3.75
6.52
5.56
4.51
4.12
4.67
4.64
1.12
—
—
4.66
6.46
—

250
250
1,150
1,000
1,000
400
1,250
2,500
500
600
500
675
650
2,500
1,250
750
850
4,000
2,500
850
300
500
400
750
650
4,000
3,000
79
3
129
17
499

0.32%
0.91
1.41
1.41
1.59
5.61
4.47
2.52
1.04
2.22
4.19
3.16
2.66
3.18
2.78
2.67
3.65
3.61
4.44
3.75
6.52
5.56
4.51
4.12
4.67
4.64
1.12
—
—
3.52
—
—

Total Long-Term Debt

30,247

33,752

Senior Notes The Company has outstanding unsecured senior obligations including those indicated as senior notes in the
long-term debt table above (collectively, the Senior Notes). The Senior Notes rank equally with all other unsecured and
unsubordinated indebtedness of the Company. The indentures under which the Senior Notes were issued contain customary
covenants, all of which the Company remains in compliance with as of April 29, 2016. The Company used the net proceeds
from the sale of the Senior Notes primarily for working capital and general corporate uses, which includes the repayment of
other indebtedness of the Company, and to fund the acquisition of Covidien in fiscal year 2015.

In April 2016, the Company completed a cash tender offer and redemption of $2.7 billion of senior notes for $3.0 billion of total
consideration. We recognized a loss on debt extinguishment of $163 million, which included cash premiums and accelerated
amortization of deferred financing costs and debt discounts and premiums. The loss on debt extinguishment was recorded in the
interest expense in the consolidated statement of income. In addition to the loss on debt extinguishment, we recognized $20
million of interest expense due to the acceleration of net losses on forward starting interest rate derivatives, which had been
terminated at the time of original debt issuances, relating to the portion of debt extinguished in the tender offer.

On January 26, 2015, Medtronic and Medtronic Luxco each provided a full and unconditional guarantee of the Senior Note
obligations of Medtronic, Inc. and of Covidien International Finance S.A., a Luxembourg company (“CIFSA”).

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

On December 10, 2014, the Company issued seven tranches of Senior Notes (collectively the 2015 Senior Notes) with an
aggregate face value of $17.0 billion, resulting in cash proceeds of approximately $16.8 billion, net of discounts and issuance
costs. The first tranche consisted of $1.0 billion of 1.500 percent Senior Notes due 2018. The second tranche consisted of $2.5
billion of 2.500 percent Senior Notes due 2020. The third tranche consisted of $500 million of floating rate Senior Notes due
2020 (the 2020 floating rate notes). The 2020 floating rate notes bear interest at the three-month London InterBank Offered Rate
(LIBOR) plus 80 basis points. The fourth tranche consisted of $2.5 billion of 3.150 percent Senior Notes due 2022. The fifth
tranche consisted of $4.0 billion of 3.500 percent Senior Notes due 2025. The sixth tranche consisted of $2.5 billion of 4.375
percent Senior Notes due 2035. The seventh tranche consisted of $4.0 billion of 4.625 percent Senior Notes due 2045. Interest
on the 2020 floating rate notes is payable quarterly and interest on each series of the fixed rate notes is payable semi-annually.
The Company used the combined proceeds from the 2015 Senior Notes and the $3.0 billion borrowed for a term of three years
under the Term Loan Credit Agreement (as defined below) to fund the approximately $16 billion cash consideration portion of
the January 26, 2015 estimated $50 billion acquisition of Covidien, to pay certain transaction and financing expenses, and for
working capital and general corporate purposes, which may include repayment of indebtedness.

As of January 26, 2015, Covidien had $5.0 billion aggregate principal amount issued and outstanding consisting of $750
million aggregate principal amount of 2.950 percent senior notes due 2023, $600 million aggregate principal amount of 1.350
percent senior notes due 2015, $650 million aggregate principal amount of 3.200 percent senior notes due 2022, $400
million aggregate principal amount of 2.800 percent senior notes due 2015, $600 million aggregate principal amount of 4.200
percent senior notes due 2020, $1.2 billion aggregate principal amount of 6.000 percent senior notes due 2018 and $850
million aggregate principal amount of 6.550 percent senior notes due 2037 (collectively, the “CIFSA Senior Notes”). The
Company recorded a fair value adjustment as required upon acquisition and subsequently recorded a premium totaling $607
million related to CIFSA Senior Notes.

As of April 29, 2016 and April 24, 2015, the Company had interest rate swap agreements designated as fair value hedges of
certain underlying fixed-rate obligations including the Company’s $500 million 4.125 percent 2011 Senior Notes, and $675
million 3.125 percent 2012 Senior Notes. As of April 24, 2015, the Company also had an interest rate swap agreement
designated as a fair value hedge underlying the fixed rate obligation related to the Company’s $600 million 4.750 percent 2005
Senior Notes and the $500 million 2.625 percent 2011 Senior Notes, which were due during fiscal year 2016. For additional
information regarding the interest rate swap agreements, refer to Note 8.

Term Loan On January 26, 2015, Medtronic, Inc. borrowed $3.0 billion for a term of three years under that certain Senior
Unsecured Term Loan Credit Agreement (the “Term Loan Credit Agreement”), among Medtronic, Inc., Medtronic, Medtronic
Luxco, the lenders from time to time party thereto and Bank of America, N.A., as administrative agent, to finance, in part, the
cash component of the Arrangement Consideration and certain transaction expenses. Medtronic and Medtronic Luxco have
guaranteed the obligations of Medtronic, Inc. under the Term Loan Credit Agreement.

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

(in millions)
Fiscal Year
2017
2018
2019
2020
2021
Thereafter

Total debt
Less: Current portion of debt

Long-term portion of debt

Financial Instruments Not Measured at Fair Value

993
6,176
411
3,777
1,104
18,476

30,937
993

29,944

The estimated fair value of the Company’s long-term debt, including the short-term portion, as of April 29, 2016 was $29.8
billion compared to a principal value of $27.4 billion. As of April 24, 2015 the estimated fair value was $34.6 billion compared

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

to a principal value of $32.1 billion. Fair value was estimated using quoted market prices for the publicly registered senior
notes, 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 derivative/hedging activity.

8. Derivatives and Currency Exchange Risk Management

The Company uses operational and economic hedges, as well as currency exchange rate derivative contracts and interest rate
derivative instruments, to manage the impact of currency exchange and interest rate changes on earnings and cash flows. In
addition, the Company uses cross currency interest rate swaps to manage currency risk related to certain debt. In order to
minimize earnings and cash flow volatility resulting from currency exchange rate changes, the Company enters into derivative
instruments, principally forward currency exchange rate contracts. These contracts are designed to hedge anticipated foreign
currency transactions and changes in the value of specific assets and liabilities. At inception of the contract, the derivative is
designated as either a freestanding derivative or a cash flow hedge. The primary currencies of the derivative instruments are the
Euro and Japanese Yen. The Company does not enter into currency exchange rate derivative contracts for speculative purposes.
The gross notional amount of all currency exchange rate derivative instruments outstanding at April 29, 2016 and April 24,
2015 was $10.8 billion and $9.8 billion, respectively. The aggregate currency exchange rate gains (losses) were $314 million,
$131 million, and $(1) million, in fiscal years 2016, 2015, and 2014, respectively.

The information that follows explains the various types of derivatives and financial instruments used by the Company, how and
why the Company uses such instruments, how such instruments are accounted for, and how such instruments impact the
Company’s consolidated balance sheets, statements of income, and statements of cash flows.

Freestanding Derivative Contracts

Freestanding derivative contracts are used to offset the Company’s exposure to the change in value of specific foreign currency
denominated assets and liabilities and to offset variability of cash flows associated with forecasted transactions denominated in
a foreign currency. The gross notional amount of these contracts, not designated as hedging instruments, outstanding at
April 29, 2016 and April 24, 2015 was $5.0 billion and $4.7 billion, respectively.

The amount and location of the gains in the consolidated statements of income related to derivative instruments, not designated
as hedging instruments, for fiscal years 2016, 2015, and 2014 are as follows:

(in millions)

Fiscal Year

Derivatives Not Designated as Hedging Instruments

Location

2016

2015

2014

Currency exchange rate contracts

Other expense

210

Cash Flow Hedges

Currency Exchange Rate Risk

Forward contracts designated as cash flow hedges are designed to hedge the variability of cash flows associated with forecasted
transactions denominated in a foreign currency that will take place in the future. No gains or losses relating to ineffectiveness of
cash flow hedges were recognized in earnings during fiscal years 2016, 2015, or 2014. No components of the hedge contracts
were excluded in the measurement of hedge ineffectiveness and no hedges were derecognized or discontinued during fiscal
years 2016, 2015, or 2014. The gross notional amount of these contracts, designated as cash flow hedges, outstanding at
April 29, 2016 and April 24, 2015 was $5.7 billion and $5.1 billion, respectively, and will mature within the subsequent two-
year period.

100

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

The amount of gains (losses) and location of the gains (losses) in the consolidated statements of income and other
comprehensive income (OCI) related to foreign currency exchange rate contract derivative instruments designated as cash flow
hedges for the fiscal years ended April 29, 2016, April 24, 2015, and April 25, 2014 are as follows:

April 29, 2016

(in millions)

Derivatives in Cash Flow Hedging
Relationships

Currency exchange rate
contracts

Total

April 24, 2015

(in millions)

Derivatives in Cash Flow Hedging
Relationships

Currency exchange rate
contracts

Total

April 25, 2014

(in millions)

Derivatives in Cash Flow Hedging
Relationships

Currency exchange rate
contracts

Total

Gross Gains Recognized in OCI
on Effective Portion of Derivative

Effective Portion of Gains (Losses) on Derivative Reclassified
from AOCI into Income

Amount

Location

Amount

(165)

Other expense, net
Cost of products sold

405
(37)

368

Gross Losses Recognized in OCI
on Effective Portion of Derivative

Effective Portion of Gains (Losses) on Derivative Reclassified
from AOCI into Income

Amount

Location

Amount

707

Other expense, net
Cost of products sold

221
(65)

156

Gross Gains Recognized in OCI
on Effective Portion of Derivative

Effective Portion of Gains (Losses) on Derivative Reclassified
from AOCI into Income

Amount

Location

Amount

(152)

Other expense, net
Cost of products sold

94
(43)

Forecasted Debt Issuance Interest Rate Risk

Forward starting interest rate derivative instruments designated as cash flow hedges are designed to manage the exposure to
interest rate volatility with regard to future issuances of fixed-rate debt. No gains or losses relating to ineffectiveness of forward
starting interest rate derivative instruments were recognized in earnings during fiscal years 2016, 2015, or 2014. No components
of the hedge contracts were excluded in the measurement of hedge ineffectiveness. In connection with the closing of the 2015
Senior Notes, the Company entered into forward starting interest rate derivatives with a notional amount of $5.9 billion, these
swaps were terminated upon the issuance of the 2015 Senior Notes. Upon termination, there was no material ineffectiveness on
the contracts which were in a net liability position, resulting in cash payment of $79 million. During fiscal year 2016, the
Company terminated forward starting interest rate derivatives with a consolidated notional amount of $500 million, which were
previously entered into in advance of a planned debt issuance that is no longer expected. Upon termination, these swaps were in
a net liability position, resulting in a cash payment of $45 million. As of April 29, 2016, the Company had $300 million of fixed
pay, forward starting interest rate swaps with a weighted average fixed rate of 3.10 percent in anticipation of planned debt
issuances.

For the fiscal years ended April 29, 2016 and April 24, 2015, the Company reclassified $12 million and $11 million,
respectively, of the effective portion of the net losses on forward starting interest rate derivative instruments from accumulated
other comprehensive (loss) income to interest expense, net. In addition, we reclassified $20 million from accumulated other

101

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

comprehensive (loss) income to interest expense, net due to the acceleration of net losses on forward starting interest derivatives,
which had been terminated at the time of the original debt issuances, relating to the portion of debt extinguished in the tender
offer.

The unrealized losses on outstanding forward starting interest rate swap derivative instruments as of April 29, 2016 and
April 24, 2015 were $48 million and $71 million, respectively.

As of April 29, 2016 and April 24, 2015, the Company had $(90) million and $210 million, respectively, in after-tax net
unrealized (losses) gains associated with cash flow hedging instruments recorded in accumulated other comprehensive (loss)
income. The Company expects that $17 million of after-tax net unrealized gains as of April 29, 2016 will be reclassified into the
consolidated statements of earnings over the next 12 months.

Fair Value Hedges

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

As of April 29, 2016 and April 24, 2015, the Company had interest rate swaps in gross notional amounts of $1.2 billion and $2.0
billion, respectively, designated as fair value hedges of underlying fixed rate obligations. As of April 29, 2016 and April 24,
2015, the Company had interest rate swap agreements designated as fair value hedges of underlying fixed rate obligations
including the Company’s $500 million 4.125 percent 2011 Senior Notes due 2021, and the $675 million 3.125 percent 2012
Senior Notes due 2022. As of April 24, 2015, the Company also had an interest rate swap agreement designated as a fair value
hedge underlying the fixed rate obligation related to the Company’s $600 million 4.750 percent 2005 Senior Notes due 2016
and the $500 million 2.625 percent 2011 Senior Notes due 2016.

As of April 29, 2016 and April 24, 2015, the market value of outstanding interest rate swap agreements was an unrealized gain
of $89 million and $18 million, respectively, and the market value of the hedged items was an unrealized loss of $89 million and
$18 million, respectively, which was recorded in other assets, prepaid expenses and other current assets, and other long-term
liabilities with the offsets recorded in long-term debt and short-term borrowings on the consolidated balance sheets. No
significant hedge ineffectiveness was recorded as a result of these fair value hedges for fiscal year 2016, 2015, and 2014.

During fiscal years 2016, 2015, and 2014, the Company did not have any ineffective fair value hedging instruments. In addition,
the Company did not recognize any gains or losses during fiscal years 2016, 2015, or 2014 on firm commitments that no longer
qualify as fair value hedges.

102

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

Balance Sheet Presentation

The following tables summarize the location and fair value amounts of derivative instruments reported in the consolidated
balance sheets as of April 29, 2016 and April 24, 2015. 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, and are further segregated by
type of contract within those two categories.

Asset Derivatives

Liability Derivatives

Balance Sheet Location

Fair
Value

Balance Sheet Location

Fair
Value

— Other accrued expenses

123 Other accrued expenses
Other long-term
liabilities
Other long-term
liabilities

—

221

191

— Other accrued expenses

13 Other accrued expenses
Other long-term
liabilities

248

219

April 29, 2016

(in millions)

Derivatives designated as hedging
instruments

Interest rate contracts

Currency exchange rate contracts

Prepaid expenses and
other current assets
Prepaid expenses and
other current assets

Interest rate contracts

Other assets

Currency exchange rate contracts

Other assets

Total derivatives designated as hedging
instruments

Derivatives not designated as hedging
instruments

Commodity derivatives

Currency exchange rate contracts

Prepaid expenses and
other current assets
Prepaid expenses and
other current assets

Cross currency interest rate contracts

Other assets

Total derivatives not designated as hedging
instruments

Total derivatives

103

—

116

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

April 24, 2015

(in millions)

Derivatives designated as hedging
instruments

Interest rate contracts

Currency exchange rate contracts

Prepaid expenses and
other current assets
Prepaid expenses and
other current assets

Interest rate contracts

Other assets

Currency exchange rate contracts

Other assets

Asset Derivatives

Liability Derivatives

Balance Sheet Location

Fair
Value

Balance Sheet Location

Fair
Value

10 Other accrued expenses

382 Other accrued expenses
Other long-term
liabilities
Other long-term
liabilities

143

Total derivatives designated as hedging
instruments

Derivatives not designated as hedging
instruments

Currency exchange rate contracts

Total derivatives not designated as hedging
instruments

Total derivatives

614

Prepaid expenses and
other current assets

119 Other accrued expenses

119

733

The following table provides information by level for the derivative assets and liabilities that are measured at fair value on a
recurring basis as of April 29, 2016 and April 24, 2015:

(in millions)

Derivative Assets
Derivative Liabilities

April 29, 2016

April 24, 2015

Level 1

Level 2

Level 3

Level 1

Level 2

Level 3

145
166

103
53

— $
—

644
45

89
71

—
—

104

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

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

April 29, 2016

(in millions)

Derivative Assets

Currency exchange rate contracts
Interest rate contracts
Cross Currency interest rate contracts

Derivative Liabilities

Currency exchange rate contracts
Interest rate contracts
Cross currency interest rate contracts
Commodity contracts

Total

April 24, 2015

(in millions)

Derivative Assets

Currency exchange rate contracts
Interest rate contracts

Derivative Liabilities

Currency exchange rate contracts
Interest rate contracts

Total

Concentrations of Credit Risk

Gross Amount Not Offset on the
Balance Sheet

Gross Amount of
Recognized Assets
(Liabilities)

Financial
Instruments

Cash Collateral
(Received) or
Posted

Net Amount

145
89
14

248

(166) $
(48)
(4)
(1)

(219) $

(98) $
(20)
—

(118) $

85
34
—
—

119

(1) $
—
—

(1) $

26
—
—
—

46
69
14

129

(55)
(14)
(4)
(1)

(74)

Gross Amount Not Offset on the
Balance Sheet

Gross Amount of
Recognized Assets
(Liabilities)

Financial
Instruments

Cash Collateral
(Received) or
Posted

Net Amount

644
89

733

(45) $
(71)

(116) $

617

(61) $
(10)

(71) $

31
40

(325) $
(13)

(338) $

— $
8

— $

(330) $

258
66

324

(14)
(23)

(37)

287

Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist principally of
interest-bearing investments, forward exchange derivative contracts, and trade accounts receivable.

The Company maintains cash and cash equivalents, investments, and certain other financial instruments (including currency
exchange rate and interest rate derivative contracts) with various major financial institutions. The Company performs periodic
evaluations of the relative credit standings of these financial institutions and limits the amount of credit exposure with any one
institution. In addition, the Company has collateral credit agreements with its primary derivatives counterparties. Under these
agreements, either party is required to post eligible collateral when the market value of transactions covered by the agreement
exceeds specific thresholds, thus limiting credit exposure for both parties. As of April 29, 2016, the Company posted net cash

105

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

collateral of $25 million to its counterparties. As of April 24, 2015, the Company received net cash collateral of $330 million
from its counterparties. The collateral received was recorded in cash and cash equivalents, with the offset recorded as an
increase in other accrued expenses on the consolidated balance sheets. The collateral posted was recorded in Prepaid expenses
and other current assets, with the offset recorded as a decrease in cash and cash equivalents on the consolidated balance sheets.

Global concentrations of credit risk with respect to trade accounts receivable are limited due to the large number of customers
and their dispersion across many geographic areas. The Company monitors the creditworthiness of its customers to which it
grants credit terms in the normal course of business. However, a significant amount of trade receivables are with hospitals that
are dependent upon governmental health care systems in many countries. The current economic conditions in many countries
outside the U.S. may continue to increase the average length of time it takes the Company to collect on its outstanding trade
receivables in these countries as certain payment patterns have been impacted. Although the Company does not currently
foresee a significant credit risk associated with the outstanding accounts receivable, repayment is dependent upon the financial
stability of the economies of these countries.

9. Shareholders’ Equity

Share Capital

Medtronic plc is authorized to issue 2.6 billion Ordinary Shares, $0.0001 par value; 40 thousand Euro Deferred Shares, €1.00
par value; 128 million Preferred Shares, $0.20 par value; and 500 thousand A Preferred Shares, $1.00 par value.

Euro Deferred Shares

During the Transactions, the Company issued 40 thousand Euro Deferred Shares at their par value of €1.00 per share. The
holders of the Euro Deferred Shares are not entitled to receive any dividend or distribution and are not entitled to receive notice
of, nor attend, speak or vote at any general meeting of the Company. On a return of assets, whether on liquidation or otherwise,
the Euro Deferred Shares are entitled to only the repayment of the amounts paid up on such shares, after repayment of the
capital paid up on the ordinary shares. Euro Deferred shareholders are not entitled to any further participation in the assets or
profits of the Company. On March 23, 2016, the Euro Deferred Shares were transferred back to the Company and were
subsequently canceled.

A Preferred Shares

The Company issued 624 A Preferred Shares, par value $1.00, each to three of its advisors in connection with the Transactions,
for a total of 1,872 A Preferred Shares outstanding with an aggregate consideration of $75 thousand. The holders of A Preferred
Shares are entitled to payment of dividends prior to any other class of shares in the Company equal to twice the dividend to be
paid per Company ordinary share. On a return of assets, whether on liquidation or otherwise, the A Preferred Shares are entitled
to repayment of the capital paid up thereon in priority to any repayment of capital to the holders of any other shares and the
holders of the A Preferred Shares shall not be entitled to any further participation in the assets or profits of the Company. The
holders of the A Preferred Shares are not entitled to receive notice of, nor to attend, speak, or vote at any general meeting of the
Company.

Dividends

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

Ordinary Share Repurchase Program

Shares are repurchased from time to time to support the Company’s stock-based compensation programs and to return capital to
shareholders. During fiscal years 2016 and 2015, the Company repurchased approximately 38 million and 30 million shares at
an average price of $74.92 and $64.53, respectively. In June 2015, the Company’s Board of Directors authorized, subject to the

106

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

ongoing existence of sufficient distributable reserves, the redemption of 80 million of the Company’s ordinary shares. As of
April 29, 2016, the Company had used 8 million of the 80 million shares authorized under the repurchase program, leaving 72
million shares available for future repurchases. The Company accounts for repurchases of ordinary shares using the par value
method and shares repurchased are canceled.

10. Stock Purchase and Award Plans

The Company measures stock-based compensation expense at the grant date based on the fair value of the award and recognizes
the compensation expense over the requisite service period, which is generally the vesting period.

The Medtronic, Inc. 2013 Stock Award and Incentive Plan was originally approved by the Company’s shareholders in August
2013. In January 2015, the Company’s Board of Directors approved an amendment to and assumption of the existing Medtronic,
Inc. 2013 Stock Award and Incentive Plan, which created the new Medtronic plc 2013 Stock Award and Incentive Plan (2013
Plan). In fiscal year 2016, the Company granted stock awards under the 2013 Plan. The 2013 Plan provides for the grant of non-
qualified and incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, and
other stock and cash-based awards. As of April 29, 2016, there were approximately 27 million shares available for future grants
under the 2013 Plan.

Share Options Options are granted at the exercise price equal to the closing price of the Company’s ordinary share on the
grant date. The majority of the Company’s options are non-qualified options with a 10-year life and a 4-year ratable vesting
term. In fiscal year 2016, the Company granted share options under the 2013 Plan.

Restricted Stock Awards Restricted stock and restricted stock units (collectively referred to as restricted stock awards) are
granted to officers and key employees. The Company grants restricted stock awards that typically cliff vest after four years. The
expense recognized for restricted stock awards is equal to the grant date fair value, which is equal to the closing stock price on
the date of grant. Restricted stock awards are expensed over the vesting period and are subject to forfeiture if employment
terminates prior to the lapse of the restrictions. The Company also grants shares of performance-based restricted stock awards
that typically cliff vest after three years only if the Company has also achieved certain performance objectives. Performance
awards are expensed over the performance period based on the probability of achieving the performance objectives.

Shares of restricted stock are considered issued and outstanding shares of the Company at the grant date and have the same
dividend and voting rights as other ordinary shares. Restricted stock units are not considered issued or outstanding ordinary
shares of the Company. Dividend equivalent units are accumulated on restricted stock units during the vesting period. In fiscal
year 2016, the Company granted restricted stock units under the 2013 Plan. As of April 29, 2016, all restricted stock awards
outstanding were restricted stock units.

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

Employees can contribute between 2 percent and 10 percent of their wages or the statutory limit under the U.S. Internal
Revenue Code toward the purchase of newly issued ordinary shares of the Company at 85 percent of its market value at the end
of the calendar quarter purchase period. Employees purchased 2 million shares at an average price of $61.66 per share in the
fiscal year ended April 29, 2016. As of April 29, 2016, plan participants have had approximately $12 million withheld to
purchase the Company’s ordinary shares at 85 percent of its market value on July 1, 2016, the last trading day before the end of
the calendar quarter purchase period. At April 29, 2016, approximately 20 million ordinary shares were available for future
purchase under the ESPP.

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

107

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

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

Weighted average fair value of options granted
Assumptions used:

Expected life (years)(1)
Risk-free interest rate(2)
Volatility(3)
Dividend yield(4)

2016

Fiscal Year

2015

2014

13.72

25.39

12.00

5.94
1.79%
21.00%
1.96%

4.24
0.99%
21.29%
1.66%

6.40
1.88%
25.20%
2.02%

(1) Expected life: The Company analyzes historical employee stock option exercise and termination data to estimate the
expected life assumption. The Company calculates the expected life assumption using the midpoint scenario, which
combines historical exercise data with hypothetical exercise data, as the Company believes this data currently represents
the best estimate of the expected life of a new employee option. The Company also stratifies its employee population into
two groups based upon distinctive exercise behavior patterns.

(2) Risk-free interest rate: The rate is based on the grant date yield of a zero-coupon U.S. Treasury bond whose maturity

period equals the expected term of the option.

(3) Volatility: Expected volatility is based on a blend of historical volatility and an implied volatility of the Company’s

ordinary shares. Implied volatility is based on market traded options of the Company’s ordinary shares.

(4) Dividend yield: The dividend yield rate is calculated by dividing the Company’s annual dividend, based on the most recent

quarterly dividend rate, by the closing stock price on the grant date.

Stock-Based Compensation Expense Under the fair value recognition provisions of U.S. GAAP for accounting for stock-
based compensation, the Company measures stock-based compensation expense at the grant date based on the fair value of the
award and recognizes the compensation expense over the requisite service period, which is generally the vesting period.

The amount of stock-based compensation expense recognized during a period is based on the portion of the awards that are
ultimately expected to vest. The Company estimates pre-vesting forfeitures at the time of grant by analyzing historical data and
revises those estimates in subsequent periods if actual forfeitures differ from those estimates. Ultimately, the total expense
recognized over the vesting period will equal the fair value of awards that actually vest.

Pursuant to the Transaction Agreement, outstanding stock option awards held by Covidien employees upon transaction close
were converted into options to acquire the Company’s ordinary shares in a manner designed to preserve the intrinsic value of
such awards. In addition, unvested restricted stock units granted on or after June 15, 2014 which were held by Covidien
employees upon close of the Covidien acquisition were converted into restricted stock units of the Company in a manner
designed to preserve the intrinsic value of such awards. The modifications made to the restricted stock units granted on or after
June 15, 2014 and all outstanding share options pursuant to the Transaction Agreement that converted such awards constituted
modifications under the authoritative guidance for accounting for stock compensation. This guidance requires the Company to
revalue the award upon the transaction close and allocate the revised fair value between consideration paid and continuing
expense based on the ratio of service performed through the transaction date over the total service period of the award. The
revised fair value allocated to post-combination services resulted in incremental expense which is recognized over the remaining
service period of the award. The Company recognized $58 million of incremental expense related to these modifications during
fiscal year 2016 and is included in acquisition-related items. Except for the conversion of share options and restricted stock
units discussed herein, the material terms of these awards remained unchanged.

108

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

The following table presents the components and classification of stock-based compensation expense for stock options,
restricted stock awards, and ESPP shares recognized for fiscal years 2016, 2015, and 2014:

(in millions)

Stock options
Restricted stock awards
Employees stock purchase plan

Total stock-based compensation expense

Cost of products sold
Research and development expense
Selling, general, and administrative expense
Restructuring charges
Acquisition-related items

Total stock-based compensation expense
Income tax benefits

2016

Fiscal Year

2015

2014

206
148
21

375

50
37
212
18
58

375
(108)

140
284
15

439

23
29
128
70
189

439
(138)

Total stock-based compensation expense, net of tax

267

301

34
98
13

145

14
27
104
—
—

145
(40)

105

Stock Options The following table summarizes all stock option activity, including activity from options assumed or issued as
a result of acquisitions, during fiscal year 2016:

Outstanding at April 24, 2015
Granted
Exercised
Expired/Forfeited

Outstanding at April 29, 2016

Vested and expected to vest at April 29, 2016

Exercisable at April 29, 2016

Options
(in thousands)

Wtd. Avg.
Exercise
Price

Wtd. Avg.
Remaining
Contractual
Term (in years)

Aggregate
Intrinsic Value
(in millions)

62,021
5,785
(11,103)
(3,733)

52,970

25,542

23,383

53.27
77.76
41.99
70.62

57.09

69.91

40.14

6.47

1,168

8.48

3.90

236

912

The following table summarizes the total cash received from the issuance of new shares upon stock option award exercises, the
total intrinsic value of options exercised and the related tax benefit during fiscal years 2016, 2015, and 2014:

(in millions)

Cash proceeds from options exercised
Intrinsic value of options exercised
Tax benefit related to options exercised

Fiscal Year

2016

2015

2014

452
374
131

609
329
106

1,273
249
78

Unrecognized compensation expense related to outstanding stock options as of April 29, 2016 was $303 million and is expected
to be recognized over a weighted average period of 2.1 years.

109

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

Restricted Stock Awards The following table summarizes restricted stock award activity, including activity from restricted
stock awards assumed or issued as a result of acquisitions, during fiscal year 2016:

Nonvested at April 24, 2015
Granted
Vested
Forfeited

Nonvested at April 29, 2016

Awards
(in thousands)

Wtd. Avg.
Grant
Price

10,022
2,565
(3,148)
(619)

8,820

53.88
77.68
42.96
59.16

64.33

The following table summarizes the weighted-average grant date fair value of restricted stock awards granted, total fair value of
restricted stock awards vested and related tax benefit during fiscal years 2016, 2015, and 2014:

(in millions, except per share data)

Weighted-average grant-date fair value per restricted stock award
Fair value of restricted stock awards vested
Tax benefit related to restricted stock awards vested

2016

77.68
276
76

Fiscal Year

2015

69.30
174
50

2014

55.62
142
40

Unrecognized compensation expense related to restricted stock awards as of April 29, 2016 was $278 million and is expected to
be recognized over a weighted average period of 2.5 years.

11. Income Taxes

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

(in millions)

U.S.
International

Income from continuing operations before income taxes

The provision for income taxes from continuing operations consists of the following:

(in millions)

Current tax expense:

U.S.
International

Total current tax expense
Deferred tax (benefit) expense:

U.S.
International

Net deferred tax benefit

Total provision for income taxes

Fiscal Year

2016

2015

2014

333
4,003

4,336

639
2,847

3,486

1,690
2,015

3,705

2016

Fiscal Year

2015

2014

440
835

1,275

(67)
(410)

(477)

1,128
502

1,630

(705)
(114)

(819)

532
248

780

(175)
35

(140)

798

811

640

Deferred taxes arise because of the different treatment of transactions for financial statement accounting and income tax
accounting, known as temporary differences. The Company records the tax effect of these temporary differences as deferred tax

110

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

assets and deferred tax liabilities. Deferred tax assets generally represent items that can be used as a tax deduction or credit in a
tax return in future years for which the Company has already recorded the tax benefit in the consolidated statements of income.
The Company establishes valuation allowances for deferred tax assets when the amount of expected future taxable income is not
likely to support the use of the deduction or credit. Deferred tax liabilities generally represent tax expense recognized in the
consolidated financial statements for which payment has been deferred or expense has already been taken as a deduction on the
Company’s tax return but has not yet been recognized as an expense in the consolidated statements of income. Tax assets
(liabilities), shown before jurisdictional netting of deferred tax assets (liabilities), are comprised of the following:

(in millions)

Deferred tax assets:

Net operating loss, capital loss, and credit carryforwards
Other accrued liabilities
Accrued compensation
Pension and post-retirement benefits
Stock-based compensation
Other
Inventory
Federal and state benefit on uncertain tax positions
Unrealized loss on available-for-sale securities and derivative financial instruments

Gross deferred tax assets
Valuation allowance

Total deferred tax assets
Deferred tax liabilities:

Intangible assets
Basis impairment
Realized loss on derivative financial instruments
Other
Accumulated depreciation
Unrealized gain on available-for-sale securities and derivative financial instruments

Total deferred tax liabilities
Prepaid income taxes
Income tax receivables

Tax liabilities, net

Reported as (after valuation allowance and jurisdictional netting):

Tax assets
Long-term tax assets
Deferred tax liabilities
Long-term deferred tax liabilities

Tax liabilities, net

April 29, 2016

April 24, 2015

7,568
619
358
530
316
341
225
308
107

10,372
(7,032)

3,340

(5,173)
(230)
(112)
(179)
(189)
—

(5,883)
365
529

(1,649)

697
1,383
—
(3,729)

(1,649)

5,912
585
330
449
418
303
171
296
—

8,464
(5,607)

2,857

(5,393)
(204)
(112)
(96)
(217)
(160)

(6,182)
427
188

(2,710)

1,335
774
(119)
(4,700)

(2,710)

At April 29, 2016, the Company had approximately $26.6 billion of net operating loss carryforwards in certain non-U.S.
jurisdictions, of which $22.4 billion have no expiration, and the remaining $4.2 billion will expire in future years through 2036.
Included in these net operating loss carryforwards are $18.0 billion of net operating losses related to a subsidiary of the
Company, substantially all of which were recorded in fiscal 2008 as a result of the receipt of a favorable tax ruling from certain
non-U.S. taxing authorities. The Company has recorded a full valuation allowance against these net operating losses as
management does not believe that it is more likely than not that these net operating losses will be utilized. Certain of the

111

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

remaining non-US net operating loss carryforwards of $8.6 billion have a valuation allowance recorded against
carryforwards as management does not believe that it is more likely than not that these net operating losses will be utilized.

the

At April 29, 2016, the Company had $847 million of U.S. federal net operating loss carryforwards, which will expire during
fiscal 2018 through 2036. For U.S. state purposes, the Company had $755 million of net operating loss carryforwards at April
29, 2016, which will expire during fiscal 2017 through 2036.

At April 29, 2016, the Company also had $202 million of tax credits available to reduce future income taxes payable, of which
$98 million have no expiration, and the remaining credits begin to expire during fiscal 2017.

The Company has established valuation allowances of $7.0 billion and $5.6 billion at April 29, 2016 and April 24, 2015,
respectively, primarily related to the uncertainty of the utilization of certain deferred tax assets, primarily tax loss and credit
carryforwards in various jurisdictions. These valuation allowances would result in a reduction to the provision for income taxes
in the consolidated statements of income, if they are ultimately not required.

At April 29, 2016, the Company had certain potential non-U.S. tax attributes that had not been recorded in the consolidated
financial statements, including $12.4 billion of non-U.S. special deductions with an indefinite carryforward period. The
Company has treated these amounts as special deductions for financial statement purposes since utilization is contingent upon
the annual performance of certain economic factors. The Company intends to recognize the applicable portion of the special
deduction annually at an estimated tax rate of between 1% and 3% when and if these economic factors are met.

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

U.S. federal statutory tax rate
Increase (decrease) in tax rate resulting from:
U.S. state taxes, net of federal tax benefit
Research and development credit
Domestic production activities
International
Puerto Rico Excise Tax
Impact of adjustments(1)
Reversal of excess tax accruals
Valuation allowance release
Other, net

Effective tax rate

2016

Fiscal Year

2015

2014

35.0%

0.9
(1.2)
(0.3)
(23.4)
(1.6)
11.4
—
(0.9)
(1.5)

0.8
(0.7)
(0.4)
(24.3)
(1.7)
13.3
—
—
1.3

0.6
(0.5)
(0.4)
(17.7)
(1.6)
5.6
(1.9)
—
(1.8)

18.4%

23.3%

17.3%

(1) Adjustments include the impact of inventory step-up, impact of product technology upgrade commitment, special charges
(gains), net, restructuring charges, net, certain litigation charges, net, acquisition-related items, amortization of intangible
assets, and certain tax adjustments.

During fiscal year 2016 the Company recorded certain tax adjustments of $417 million. A $442 million certain tax adjustment
charge was recorded, which primarily related to the U.S. income tax expense resulting from our completion of an internal
reorganization of the ownership of certain legacy Covidien businesses that reduced the cash and investments held by our U.S.-
controlled non-U.S. subsidiaries (the Internal Reorganization). As a result of the Internal Reorganization, approximately $9.7
billion of cash, cash equivalents and investments in marketable debt and equity securities previously held by U.S.-controlled
non-U.S. subsidiaries became available for general corporate purposes. This charge was partially offset by a $25 million tax
benefit associated with the disposition of a wholly owned U.S. subsidiary. The $417 million net certain tax adjustment was
recorded in the provision for income taxes in the consolidated statement of income for fiscal year 2016.

112

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

During fiscal year 2015, a settlement was reached with the IRS for the Kyphon acquisition-related matters. As a result, the
Company recorded a $329 million certain tax adjustment associated with the settlement. In addition, the certain tax adjustments
includes a $20 million charge related to a taxable gain associated with the Covidien acquisition. The $349 million net tax cost
was recorded in the provision for income taxes in the consolidated statement of income for fiscal year 2015.

In fiscal year 2014, the Company recorded a $71 million net tax benefit associated with the reversal of excess tax accruals. This
net tax benefit included $63 million related to the settlement of certain issues reached with the IRS involving the review of the
Company’s fiscal years 2009 through 2011 domestic income tax returns and the remaining amount related to the resolution of
various state and foreign audit proceedings covering multiple years and issues. The $71 million net tax benefit was recorded in
the provision for income taxes in the consolidated statement of income for fiscal year 2014.

No deferred taxes have been provided for any portion of the approximately $29.0 billion and $27.8 billion of undistributed
earnings of the Company’s subsidiaries as of April 29, 2016 and April 24, 2015, respectively, since these earnings have been,
and under current plans will continue to be, permanently reinvested in these subsidiaries. The Company has not provided U.S.
income taxes on approximately $20.5 billion of undistributed earnings, net, from non-U.S. subsidiaries as of April 25, 2014.
Due to the number of legal entities and jurisdictions involved and the complexity of the legal entity structure of the Company,
the complexity of the tax laws in the relevant jurisdictions, including, but not limited to the rules pertaining to the utilization of
foreign tax credits in the United States and the impact of projections of income for future years to any calculations, the
Company believes it is not practicable to estimate, within any reasonable range, the amount of additional taxes which may be
payable upon distribution of these earnings.

Currently, the Company’s operations in Puerto Rico, Switzerland, Singapore, Dominican Republic, Costa Rica, and Israel have
various tax incentive grants. The tax reductions as compared to the local statutory rate favorably impacted earnings per diluted
share by $0.33 in fiscal year 2016, $0.37 in fiscal year 2015, and $0.42 in fiscal year 2014. Unless these grants are extended,
they will expire between fiscal years 2017 and 2029. The Company’s historical practice has been to renew, extend, or obtain
new tax incentive grants upon expiration of existing tax incentive grants. If the Company is not able to renew, extend, or obtain
new tax incentive grants, the expiration of existing tax incentive grants could have a material impact on the Company’s financial
results in future periods.

The Company had $2.7 billion, $2.9 billion, and $1.2 billion of gross unrecognized tax benefits as of April 29, 2016, April 24,
2015, and April 25, 2014, respectively. A reconciliation of the beginning and ending amount of unrecognized tax benefits for
fiscal years 2016, 2015, and 2014 is as follows:

(in millions)

Gross unrecognized tax benefits at beginning of fiscal year
Gross increases:

2016

Fiscal Year

2015

2014

2,860

1,172

1,068

Prior year tax positions
Current year tax positions
Acquisitions
Gross decreases:

Prior year tax positions
Settlements
Statute of limitation lapses

36
202
—

(116)
(275)
(4)

331
231
1,199

(40)
(33)
—

Gross unrecognized tax benefits at end of fiscal year

Cash advance paid in connection with proposed settlements

Gross unrecognized tax benefits at end of fiscal year, net of cash advance

2,703
(384)

2,319

2,860
(378)

2,482

64
166
—

(58)
(66)
(2)

1,172
—

1,172

If all of the Company’s unrecognized tax benefits as of April 29, 2016, April 24, 2015, and April 25, 2014 were recognized,
$2.1 billion, $2.2 billion, and $1.1 billion would impact the Company’s effective tax rate, respectively. Although the Company
believes that it has adequately provided for liabilities resulting from tax assessments by taxing authorities, positions taken by

113

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

these tax authorities could have a material impact on the Company’s effective tax rate in future periods. The Company has
recorded $7 million of gross unrecognized tax benefits as a current liability, and $2.7 billion as a long-term liability. The
Company estimates that within the next 12 months, it is reasonably possible that its uncertain tax positions, excluding interest,
could decrease by as much as $500 million, net as a result of the resolution of tax matters with the U.S. Tax Court, Appeals
Division of the IRS, other settlements with taxing authorities as well as statute of limitation lapses.

The Company recognizes interest and penalties related to income tax matters in the provision for income taxes in the
consolidated statements of income and records the liability in the current or long-term accrued income taxes in the consolidated
balance sheets, as appropriate. The Company had $609 million, $656 million, and $141 million of accrued gross interest and
penalties as of April 29, 2016, April 24, 2015, and April 25, 2014, respectively. During the fiscal years ended April 29, 2016,
April 24, 2015, and April 25, 2014, the Company recognized gross interest expense of approximately $80 million, $142 million,
and $36 million, respectively, in the provision for income taxes in the consolidated statements of income.

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

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

Jurisdiction

United States — federal and state
Brazil
Canada
China
Costa Rica
Dominican Republic
France
Germany
India
Ireland
Israel
Italy
Japan
Luxembourg
Mexico
Puerto Rico
Singapore
Switzerland
United Kingdom

Earliest Year Open

1996
2011
2005
2009
2012
2011
2011
2009
2001
2011
2010
2005
2010
2009
2005
2009
2011
2003
2009

See Note 15 for additional information regarding the status of current tax audits and proceedings.

12. Retirement Benefit Plans

The Company sponsors various retirement benefit plans, including defined benefit pension plans (pension benefits), post-
retirement medical plans (post-retirement benefits), defined contribution savings plans, and termination indemnity plans,
covering substantially all U.S. employees and many employees outside the U.S. The expense related to these plans was $584
million, $433 million, and $419 million in fiscal years 2016, 2015, and 2014, respectively.

114

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

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

As of April 29, 2016 and April 24, 2015, the net underfunded status of the Company’s benefit plans was $1.4 billion and $1.3
billion, respectively.

115

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

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

U.S. Pension Benefits

Non-U.S. Pension Benefits

Fiscal Year

2016

2015

2016

2015

2,757

2,956
120
122
—
—
(28)
(42)
(80)
—

2,699

2,203
104
105
214
—
—
391
(61)
—

1,367

1,647
81
31
—
16
(133)
(103)
(49)
45

1,462

1,031
60
33
472
16
(35)
354
(34)
(250)

3,048

2,956

1,535

1,647

2,204
(70)
—
112
—
(28)
(80)
—

1,917
69
188
91
—
—
(61)
—

1,189
(44)
—
93
16
(118)
(49)
26

889
162
262
80
16
(1)
(34)
(185)

2,138

2,204

1,113

1,189

2,138
3,048

(910)

2,204
2,956

(752)

— $
(12)
(898)

21
(11)
(762)

1,113
1,535

(422)

20
(8)
(434)

(910)

(752)

(422)

4
1,361

1,365

4
1,253

1,257

(14)
359

345

1,189
1,647

(458)

2
(48)
(412)

(458)

(2)
372

370

(in millions)

Accumulated benefit obligation at end of year:

Change in projected benefit obligation:
Projected benefit obligation at beginning of year
Service cost
Interest cost
Benefit obligations assumed in Covidien acquisition
Employee contributions
Plan curtailments and settlements
Actuarial (gain) loss
Benefits paid
Currency exchange rate changes and other

Projected benefit obligation at end of year

Change in plan assets:
Fair value of plan assets at beginning of year
Actual return on plan assets
Plan assets acquired in Covidien acquisition
Employer contributions
Employee contributions
Plan settlements
Benefits paid
Currency exchange rate changes

Fair value of plan assets at end of year

Funded status at end of year:
Fair value of plan assets
Benefit obligations

Underfunded status of the plans

Recognized liability

Amounts recognized on the consolidated balance sheets consist of:
Non-current assets
Current liabilities
Non-current liabilities

Recognized liability

Amounts recognized in accumulated other comprehensive (loss) income:
Prior service cost (benefit)
Net actuarial loss

Ending balance

116

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

In certain countries outside the U.S., fully funding pension plans is not a common practice, as funding provides no income tax
benefit. Consequently, certain pension plans were partially funded as of April 29, 2016 and April 24, 2015. U.S. and non-U.S.
plans with accumulated benefit obligations in excess of plan assets consist of the following:

(in millions)

Accumulated benefit obligation
Projected benefit obligation
Plan assets at fair value

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

(in millions)

Projected benefit obligation
Plan assets at fair value

Fiscal Year

2016

2015

3,922
4,333
2,981

3,678
4,032
2,823

Fiscal Year

2016

2015

4,362
3,009

4,319
3,086

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

U.S. Pension Benefits

Fiscal Year

Non-U.S. Pension Benefits

Fiscal Year

(in millions)

2016

2015

2014

2016

2015

2014

Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost
Amortization of net actuarial loss
Settlement gain

Net periodic benefit cost

120
122
(180)
—
98
(1)

159

104
105
(160)
—
65
— $

107
97
(141)
1
85
— $

114

149

81
31
(48)
—
20
(10)

60
33
(41)
—
12
— $

54
29
(35)
1
11
—

The other changes in plan assets and projected benefit obligations recognized in accumulated other comprehensive (loss)
income for fiscal year 2016 are as follows:

(in millions)

Net actuarial loss (gain)
Amortization of net actuarial loss
Prior service cost
Effect of exchange rates

Total loss (gain) recognized in accumulated other comprehensive (loss) income

Total loss recognized in net periodic benefit cost and accumulated other comprehensive (loss) income

U.S. Pension
Benefits

Non-U.S.
Pension
Benefits

205
(98)
— $
1

108

267

(11)
(12)
(12)
10

(25)

The estimated net actuarial loss that will be amortized from accumulated other comprehensive (loss) income into net periodic
benefit cost, before tax, in fiscal year 2017 for U.S. and non-U.S. pension benefits is expected to be $89 million and $17
million, respectively.

117

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

The actuarial assumptions are as follows:

Critical assumptions – projected benefit obligation:
Discount rate
Rate of compensation increase
Critical assumptions – net periodic benefit cost:
Discount rate
Expected return on plan assets
Rate of compensation increase

U.S. Pension Benefits

Non-U.S. Pension Benefits

Fiscal Year

2016

2015

2014

2016

2015

2014

3.60%-4.30% 4.20% 4.75% 0.25%-10.20% 1.88% 3.32%
2.83% 2.92% 2.80%

3.90% 3.90% 3.90%

4.20%-4.80% 4.75% 4.55% 0.80%-9.00% 3.32% 3.52%
4.35% 4.77% 4.76%
2.92% 2.80% 2.78%

8.20% 8.25% 8.25%
3.90% 3.90% 3.90%

The Company changed the methodology used to estimate the service and interest cost components of net periodic pension cost
and net periodic postretirement benefit cost for the Company’s pension and other postretirement benefit plans, effective April
30, 2016. Previously, the Company estimated such cost components utilizing a single weighted-average discount rate derived
from the market-observed yield curves of high-quality fixed income securities used to measure the pension benefit obligation
and accumulated postretirement benefit obligation. The new methodology utilizes a full yield curve approach in the estimation
of these cost components by applying the specific spot rates along the yield curve to their underlying projected cash flows and
provides a more precise measurement of service and interest costs by improving the correlation between projected cash flows
and their corresponding spot rates. The current yield curves represent high quality, long-term fixed income instruments. The
change does not affect the measurement of the Company’s pension obligation or accumulated postretirement benefit obligation.
The Company has accounted for this change prospectively as a change in accounting estimate.

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

Retirement Benefit Plan Investment Strategy The Company has an account that holds the assets for both the U.S. pension
plan and other U.S. post-retirement benefits, primarily retiree medical benefits. For investment purposes, the plans are managed
in an identical way, as their objectives are similar.

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

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

Outside the U.S., pension plan assets are typically managed by decentralized fiduciary committees. There is significant variation
in policy asset allocation from country to country. Local regulations,
local funding rules, and local financial and tax
considerations are part of the funding and investment allocation process in each country.

The Plan did not hold any investments in the Company’s ordinary shares as of April 29, 2016 or April 24, 2015.

118

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

The Company’s pension plan target allocations at April 29, 2016 and April 24, 2015, by asset category, are as follows:

U.S. Plans

Asset Category
Equity securities
Debt securities
Other

Total

Non-U.S. Plans

Asset Category
Equity securities
Debt securities
Other

Total

Target Allocation

April 29,
2016

April 24,
2015

49%
23
28

100%

49%
23
28

100%

Target Allocation

April 29, 2016

April 24, 2015

34%
27
39

100%

35%
29
36

100%

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

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

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

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

Common stock: Valued at the closing price reported in the active markets in which the individual security is traded.

Equity mutual funds/Commingled trusts: Valued based on the year-end net asset values of the investment vehicles. The net asset
values of the investment vehicles are based on the fair values of the underlying investments of the commingled trusts valued at the
closing price reported in the active markets in which the individual security is traded. Certain equity commingled trusts contain
underlying investments that are characterized as Level 1 or Level 2 and provide a daily net asset value. The Company classifies
these investments as Level 2. Certain equity commingled trusts contain a material amount underlying investments that are
characterized as Level 3 and do not have a daily reported net asset value. The Company classifies these investments as Level 3.

Fixed income/Commingled trusts: Valued based on the year-end net asset values of the investment vehicles. The net asset values
of the investment vehicles are based on the fair values of the underlying investments of the commingled trusts valued based on
inputs other than quoted prices that are observable. The Company evaluates fixed income commingled trusts to characterize the
underlying investments as Level 1, 2, or 3. Certain fixed income commingled trusts contain underlying investments that are
characterized as Level 1 or Level 2 and the Company classifies these investments as Level 2. Certain fixed income commingled
trusts could contain a material amount underlying investments that are characterized as Level 3 and the Company would classify
these investments as Level 3. As of April 29, 2016, no fixed income commingled trusts are classified as Level 3.

119

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

Partnership units: Valued based on the year-end net asset values of the underlying partnerships. The net asset values of the
partnerships are based on the fair values of the underlying investments of the partnerships. Quoted market prices are used to
value the underlying investments of the partnerships, where the partnerships consist of the investment pools which invest
primarily in common stocks. Partnership units include partnerships, private equity investments, and real asset investments.
Partnerships primarily include long/short equity and absolute return strategies. These investments can be redeemed monthly
with notice periods ranging from 45 to 95 days. As of April 29, 2016, there is one absolute return strategy fund totaling $1
million that is in the process of liquidation. The Company expects to receive the proceeds over the next five years. Private
equity investments consist of common stock and debt instruments of private companies. For private equity funds, the sum of the
unfunded commitments as of April 29, 2016 is $119 million, and the estimated liquidation period of these funds is expected to
be one to 15 years. Real asset investments consist of commodities, derivatives, Real Estate Investment Trusts, and illiquid real
estate holdings. These investments have redemption and liquidation periods ranging from 30 days to 10 years. Other valuation
procedures are utilized to arrive at fair value if a quoted market price is not available for a partnership investment.

Registered investment companies: Valued at the quoted market prices of shares held by the plan at year-end in the active market
on which the individual securities are traded.

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

The methods described above may produce fair values that may not be indicative of net realizable value or reflective of future
fair values. Furthermore, while the Company believes its valuation methodologies are appropriate and consistent with other
market participants, the use of different methodologies or assumptions to determine fair value of certain financial instruments
could result in a different fair value measurement at the reporting date.

There were no transfers between Level 1, Level 2, or Level 3 during fiscal years 2016, 2015, or 2014.

The following tables provide information by level for the retirement benefit plan assets that are measured at fair value, as
defined by U.S. GAAP. See Note 1 for discussion of the fair value measurement terms of Levels 1, 2, and 3.

U.S. Pension Benefits

(in millions)

Short-term investments
U.S. government securities
Corporate debt securities
Equity mutual funds/commingled trusts
Fixed income mutual funds
Partnership units

(in millions)

Short-term investments
U.S. government securities
Corporate debt securities
Equity commingled trusts
Fixed income commingled trusts
Partnership units

Fair Value
as of
April 29, 2016

Fair Value Measurements
Using Inputs Considered as

Level 1

Level 2

Level 3

127
146
216
956
231
462

127
137
—
—
—
—

— $
9
216
763
231
—

2,138

264

1,219

—
—
—
193
—
462

655

Fair Value
as of
April 24, 2015

Fair Value Measurements
Using Inputs Considered as

Level 1

Level 2

Level 3

247
155
5
951
374
472

247
109
—
—
—
—

— $
46
4
751
374
—

2,204

356

1,175

—
—
1
200
—
472

673

120

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

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

(in millions)

Balance as of April 24, 2015
Total realized gains included in income
Total unrealized losses included in accumulated other
comprehensive (loss) income
Purchases and sales, net

Balance as of April 29, 2016

Total Level 3
Investments

Corporate Debt
Securities

Commingled
Trusts

Partnership Units

673
10

(151)
123

1
—

(1)
—

200
—

(7)
—

655

— $

193

472
10

(143)
123

462

(in millions)

Total Level 3
Investments

Corporate Debt
Securities

Commingled
Trusts

Partnership Units

Balance as of April 25, 2014
Total realized gains included in income
Total unrealized gains included in accumulated other
comprehensive (loss) income
Purchases and sales, net

959
162

(130)
(318)

Balance as of April 24, 2015

673

1
—

—
—

285
65

(31)
(119)

200

673
97

(99)
(199)

472

Non-U.S. Pension Benefits

(in millions)

Registered investment companies
Insurance contracts

(in millions)

Registered investment companies
Insurance contracts
Partnership units

Fair Value
as of
April 29, 2016

1,037
76

1,113

Fair Value
as of
April 24, 2015

1,113
60
16

1,189

Fair Value Measurements
Using Inputs Considered as

Level 1

Level 2

Level 3

— $
—

— $

1,037
—

1,037

Fair Value Measurements
Using Inputs Considered as

Level 1

Level 2

Level 3

— $
—
—

— $

1,113
—
—

1,113

—
76

—
60
16

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

(in millions)

Balance as of April 24, 2015
Total unrealized gains included in accumulated other comprehensive (loss)
income
Purchases and sales, net
Currency exchange rate changes

Balance as of April 29, 2016

Total Level 3
Investments

Insurance
Contracts

Partnership
Units

—
(2)
2

—
14
2

—
(16)
—

—

121

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

(in millions)

Balance as of April 25, 2014
Total unrealized gains included in accumulated other comprehensive (loss)
income
Purchases and sales, net
Currency exchange rate changes

Balance as of April 24, 2015

Total Level 3
Investments

Insurance
Contracts

Partnership
Units

1
63
(9)

(1)
56
(6)

2
7
(3)

Retirement Benefit Plan Funding It is the Company’s policy to fund retirement costs within the limits of allowable tax
deductions. During fiscal year 2016, the Company made discretionary contributions of approximately $112 million to the U.S.
pension plan. Internationally, the Company contributed approximately $93 million for pension benefits during fiscal year 2016.
The Company anticipates that it will make contributions of $73 million to its pension benefits in fiscal 2017. Based on the
guidelines under the U.S. Employee Retirement Income Security Act of 1974 and the various guidelines which govern the plans
outside the U.S., the majority of anticipated fiscal year 2015 contributions will be discretionary. The Company believes that,
along with pension assets, the returns on invested pension assets, and Company contributions, the Company will be able to meet
its pension and other post-retirement obligations in the future.

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

(in millions)

Fiscal Year

2017
2018
2019
2020
2021
2022 – 2026

Total

U.S. Pension
Benefits

Non-U.S. Pension
Benefits

Gross Payments Gross Payments

87
96
105
116
126
810

1,340

39
40
39
40
43
265

466

Post-retirement Benefit Plans The net periodic benefit cost associated with the Company’s post-retirement benefit plans was
$12 million, $14 million, and $15 million in fiscal years 2016, 2015, and 2014, respectively. The Company’s projected benefit
obligation for all post-retirement benefit plans was $369 million and $352 million at April 29, 2016 and April 24, 2015,
respectively. The Company’s fair value of plan assets for all post-retirement benefit plans was $269 million and $288 million at
April 29, 2016 and April 24, 2015, respectively. The activity during fiscal 2016 and 2015 related to both the change in projected
benefit obligations and the fair value of plan assets was not material.

Defined Contribution Savings Plans The Company has defined contribution savings plans that cover substantially all U.S.
employees and certain non-U.S. employees. The general purpose of these plans is to provide additional financial security during
retirement by providing employees with an incentive to make regular savings. Company contributions to the plans are based on
employee contributions and Company performance and since fiscal year 2006, the entire match has been made in cash. Expense
under these plans was $269 million, $188 million, and $145 million in fiscal years 2016, 2015, and 2014, respectively.

Effective May 1, 2005, the Company froze participation in the original defined benefit pension plan in the U.S. and
implemented two new plans including an additional defined benefit pension plan and a new defined contribution pension plan,
respectively: the Personal Pension Account (PPA) and the Personal Investment Account (PIA). Employees in the U.S. hired on
or after May 1, 2005 have the option to participate in either the PPA or the PIA. Participants in the PPA receive an annual
allocation of their salary and bonus on which they will receive an annual guaranteed rate of return which is based on the ten-
year Treasury bond rate. Participants in the PIA also receive an annual allocation of their salary and bonus; however, they are
allowed to determine how to invest their funds among identified fund alternatives. The cost associated with the PPA is included

122

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

in U.S. Pension Benefits in the tables presented earlier. The defined contribution cost associated with the PIA was
approximately $58 million, $53 million, and $50 million in fiscal years 2016, 2015, and 2014, respectively.

Effective January 1, 2016, the Company froze participation in the existing defined benefit (PPA) and contribution (PIA) pension
plans in the U.S. and implemented a new form of benefit under the existing defined contribution plan for legacy Covidien
employees and employees in the U.S. hired on or after January 1, 2016. Participants in the Medtronic Core Contribution (MCC)
also receive an annual allocation of their salary and bonus and are allowed to determine how to invest their funds among
identified fund alternatives. The cost associated with the MCC is included in U.S. Pension Benefits in the tables presented
earlier. The defined contribution cost associated with the MCC was approximately $12 million in fiscal year 2016.

13. Leases

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

Future minimum payments under capitalized leases and non-cancelable operating leases at April 29, 2016 are:

(in millions)
Fiscal Year

2017
2018
2019
2020
2021
Thereafter

Total minimum lease payments
Less amounts representing interest

Present value of net minimum lease payments

Capitalized
Leases

Operating
Leases

109
5
4
4
3
16

141
(9)

132

180
130
90
56
33
55

544
N/A

N/A

Rent expense for all operating leases was $269 million, $195 million, and $150 million in fiscal years 2016, 2015, and 2014,
respectively. The increase in fiscal year 2016 rent expense is primarily related to the Covidien acquisition.

123

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

14. Accumulated Other Comprehensive (Loss) Income

Changes in accumulated other comprehensive (loss) income by component are as follows:

(in millions)

Unrealized
Gain (Loss) on
Available-for-
Sale Securities

Cumulative
Translation
Adjustments(1)

Net Change in
Retirement
Obligations

Unrealized
Gain (Loss) on
Derivatives

Total
Accumulated
Other
Comprehensive
(Loss) Income

Balance as of April 25, 2014, net of tax

(6)

218

(765)

(44)

(597)

Other comprehensive income (loss) before
reclassifications, before tax
Tax (expense) benefit

Other comprehensive income (loss) before
reclassifications, net of tax

Reclassifications, before tax
Tax benefit (expense)

Reclassifications, net of tax

Other comprehensive income (loss), net of tax

Balance as of April 24, 2015, net of tax

Other comprehensive loss before
reclassifications, before tax
Tax benefit

Other comprehensive loss before reclassifications,
net of tax

Reclassifications, before tax
Tax benefit (expense)

Reclassifications, net of tax

Other comprehensive loss, net of tax

169
(60)

109
(138)
49

(89)(2)

(201)
94

(107)
(22)
8

(14)(2)

(121)

(495)
—

(495)
—
—

—

(495)

(277)

(197)
—

(197)
—
—

—

(197)

(617)
198

(419)
78
(25)

545
(199)

346
(145)
53

53(3)

(92)(4)

(366)

(1,131)

(226)
85

(141)
114
(39)

75(3)

(66)

254

210

(145)
51

(94)
(327)
121

(206)(4)

(300)

(398)
(61)

(459)
(205)
77

(128)

(587)

(1,184)

(769)
230

(539)
(235)
90

(145)

(684)

Balance as of April 29, 2016, net of tax

(107)

(474)

$ (1,197)

(90)

(1,868)

(1) Taxes are not provided on cumulative translation adjustments as substantially all translation adjustments relate to earnings

that are intended to be indefinitely reinvested outside the U.S.

(2) Represents net realized losses on sales of available-for-sale securities that were reclassified from AOCI to other expense,

net (see Note 5).
(3)
Includes net amortization of prior service costs and actuarial losses included in net periodic benefit cost (see Note 12).
(4) Relates to cash flow hedges that were reclassified from AOCI to other expense, net or cost of products sold and forward

starting interest rate derivative instruments that were reclassified from AOCI to interest expense, net (see Note 8).

15. Commitments and Contingencies

The Company and its affiliates are involved in a number of legal actions involving product liability, intellectual property
disputes, shareholder related matters, environmental proceedings,
income tax disputes, governmental proceedings and
investigations in the United States and around the world, and other matters, including those described below. With respect to
governmental proceedings and investigations our standard practice is to cooperate with regulators and investigators in
responding to inquiries. The outcomes of these 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 relief (including injunctions barring the sale of products that are the subject of the proceeding), that could require
significant expenditures or result in lost revenues. The Company records a liability in the consolidated financial statements for

124

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

loss contingencies related to legal actions when a loss is known or considered probable and the amount can 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 can
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. As of April 29, 2016 and April 24, 2015, accrued
certain litigation charges were approximately $1.0 billion and $879 million, respectively. The ultimate cost to the Company with
respect to accrued certain litigation charges 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, or cash flows. The
Company includes accrued certain litigation charges in other accrued expenses and other long-term liabilities on the
consolidated balance sheets.

In addition to litigation contingencies, the Company also has certain guarantee obligations that may potentially result in future
costs. While it is not possible to predict the outcome for most of the matters discussed below, the Company believes it is
possible that costs associated with them could have a material adverse impact on the Company’s consolidated earnings,
financial position, or cash flows.

Product Liability Matters

Sprint Fidelis

In 2007, a putative class action was filed in the Ontario Superior Court of Justice in Canada seeking damages for personal
injuries allegedly related to the Company’s Sprint Fidelis family of defibrillation leads. On October 20, 2009, the court certified
a class proceeding but denied class certification on plaintiffs’ claim for punitive damages. Pretrial proceedings are underway.
The Company has not recorded an expense related to damages in connection with this matter because any potential loss is not
currently probable or reasonably estimable under U.S. GAAP. Additionally, the Company cannot reasonably estimate the range
of loss, if any, that may result from this matter.

INFUSE Litigation

The Company estimates law firms representing approximately 6,000 claimants have asserted or intend to assert personal injury
claims against Medtronic in the U.S. state and federal courts involving the INFUSE bone graft product. As of June 1, 2016, the
Company has reached agreements to settle approximately 3,900 of these claims. The Company recorded an additional expense
of $26 million in the second quarter of fiscal year 2016 related to probable and reasonably estimable damages in connection
with this matter. The Company’s accrued expenses for this matter are included within accrued certain litigation charges in other
accrued expenses and other long-term liabilities on the consolidated balance sheets as discussed above.

Other INFUSE Litigation

On June 5, 2014, Humana, Inc. filed a lawsuit for unspecified monetary damages in the U.S. District Court for the Western
District of Tennessee, alleging that Medtronic, Inc. violated federal racketeering (RICO) law and various state laws, by
conspiring with physicians to promote unapproved uses of INFUSE. In September of 2015 the Court granted Medtronic’s
motion to dismiss the primary allegations, including the RICO claims, in Humana’s complaint. In April of 2016 the Court
denied Humana’s motion to file an amended complaint. The Company has not recorded an expense related to damages in
connection with this matter because any potential loss is not currently probable or reasonably estimable under U.S. GAAP.
Additionally, the Company cannot reasonably estimate the range of loss, if any, that may result from this matter.

Pelvic Mesh Litigation

The Company, through the acquisition of Covidien, is currently involved in litigation in various state and federal courts against
manufacturers of pelvic mesh products alleging personal injuries resulting from the implantation of those products. Two
subsidiaries of Covidien supplied pelvic mesh products to one of the manufacturers, C.R. Bard (Bard), named in the litigation.

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Medtronic plc
Notes to Consolidated Financial Statements (Continued)

The litigation includes a federal multi-district litigation in the U.S. District Court for the Northern District of West Virginia and
cases in various state courts and jurisdictions outside the U.S. Generally, complaints allege design and manufacturing claims,
failure to warn, breach of warranty, fraud, violations of state consumer protection laws and loss of consortium claims. In July
2015, the Company and Bard agreed that Bard would pay the Company $121 million towards the settlement of 11,000 of these
claims. The $121 million settlement was recorded as an opening balance sheet adjustment related to the Covidien acquisition in
the first quarter of fiscal year 2016. That agreement does not resolve the dispute between the Company and Bard with respect to
claims that do not settle, if any. As part of the agreement, the Company and Bard agreed to dismiss without prejudice their
pending litigation with respect to Bard’s obligation to defend and indemnify the Company. The Company estimates law firms
representing approximately 15,800 claimants have asserted or may assert claims involving products manufactured by
Covidien’s subsidiaries. As of June 1, 2016, the Company has reached agreements to settle approximately 6,200 of these claims.
The Company’s accrued expenses for this matter are included within accrued certain litigation charges in other accrued
expenses and other long-term liabilities on the consolidated balance sheets as discussed above.

Patent Litigation

Ethicon

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

Shareholder Related Matters

INFUSE

On March 12, 2012, Charlotte Kokocinski (Kokocinski) filed a shareholder derivative action against both Medtronic, Inc. and
certain of its current and former officers and directors in the U.S. District Court for the District of Minnesota, setting forth
certain allegations, including a claim that defendants violated various purported duties in connection with the INFUSE bone
graft product and otherwise. On March 25, 2013, the Court dismissed the case without prejudice, and Kokocinski subsequently
filed an amended complaint. On March 30, 2015, the Court granted defendants’ motion to dismiss the amended complaint,
dismissing the case with prejudice. Kokocinski sought reconsideration of that decision, and, on September 30, 2015, the Court
denied Kokocinski’s request for reconsideration. Kokocinski has appealed the Court’s decision to the U.S. Court of Appeals for
the Eighth Circuit.

West Virginia Pipe Trades and Phil Pace, on June 27, 2013 and July 3, 2013, respectively, filed putative class action complaints
against Medtronic, Inc. and certain of its officers in the U.S. District Court for the District of Minnesota, alleging that the
defendants made false and misleading public statements regarding the INFUSE Bone Graft product during the period of
December 8, 2010 through August 3, 2011. The matters were consolidated in September, 2013, and in the consolidated
complaint plaintiffs alleged a class period of September 28, 2010 through August 3, 2011. On September 30, 2015, the Court
granted defendants’ motion for summary judgment in the consolidated matters. Plaintiffs have appealed the dismissal to the U.S.
Court of Appeals for the Eighth Circuit.

Shareholder Related Matters Resulting from the Covidien Acquisition

On July 2, 2014, Lewis Merenstein filed a putative shareholder class action in Hennepin County, Minnesota, District Court
seeking to enjoin the then-potential acquisition of Covidien. The lawsuit named Medtronic, Inc., Covidien, and each member of

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Medtronic plc
Notes to Consolidated Financial Statements (Continued)

the Medtronic, Inc. Board of Directors at the time as defendants, and alleged that the directors breached their fiduciary duties to
shareholders with regard to the then-potential acquisition. On August 21, 2014, Kenneth Steiner filed a putative shareholder
class action in Hennepin County, Minnesota, District Court, also seeking an injunction to prevent the potential Covidien
acquisition. In September 2014, the Merenstein and Steiner matters were consolidated and in December 2014, the plaintiffs filed
a preliminary injunction motion seeking to enjoin the Covidien transaction. On December 30, 2014, a hearing was held on
plaintiffs’ motion for preliminary injunction and on defendants’ motion to dismiss. On January 2, 2015, the District Court
denied the plaintiffs’ motion for preliminary injunction and on January 5, 2015 issued its opinion. On March 20, 2015, the
District Court issued its order and opinion granting Medtronic’s motion to dismiss the case. In May of 2015, the plaintiffs filed
an appeal, and, in January of 2016, the Minnesota State Court of Appeals affirmed in part, reversed in part, and remanded the
case to the District Court for further proceedings. In February of 2016, the Company petitioned the Minnesota Supreme Court to
review the decision of the Minnesota State Court of Appeals, and on April 19, 2016 the Minnesota Supreme Court granted the
Company’s petition on the issue of whether most of the original claims are properly characterized as direct or derivative under
Minnesota law. A decision from the Minnesota Supreme Court is expected in calendar year 2017.

The Company has not recorded an expense related to damages in connection with the shareholder related matters, because any
the Company cannot
potential
reasonably estimate the range of loss, if any, that may result from these matters.

loss is not currently probable or reasonably estimable under U.S. GAAP. Additionally,

Environmental Proceedings

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

The Company is a successor to a company which owned and operated a chemical manufacturing facility in Orrington, Maine
from 1967 until 1982, and is responsible for the costs of completing an environmental site investigation as required by the
Maine Department of Environmental Protection (MDEP). MDEP served a compliance order on Mallinckrodt LLC and U.S.
Surgical Corporation in December 2008. The compliance order included a directive to remove a significant volume of soils at
the site. On December 19, 2008, Covidien filed an appeal with the Maine Board of Environmental Protection (Maine Board) to
challenge the terms of the compliance order. A hearing before the Maine Board began on January 25, 2010 and concluded on
February 4, 2010. On August 19, 2010, the Maine Board modified the MDEP order and issued a final order requiring removal of
two landfills, capping of the remaining three landfills, installation of a groundwater extraction system and long-term monitoring
of the site and the three remaining landfills.

On April 3, 2014, the Maine Supreme Judicial Court affirmed the Maine Board’s compliance order. The Company has
proceeded with implementation of the investigation and remediation at the site in accordance with the MDEP order as modified
by the Maine Board order.

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

On July 29, 2002, following a March 2002 trial, the District Court entered an opinion and order which held that conditions in the
Penobscot River and Bay may pose an imminent and substantial endangerment and that Covidien was liable for the cost of
performing a study of the river and bay. The District Court subsequently appointed an independent study panel to oversee the
study and ordered Covidien to pay costs associated with the study. A report issued by the study panel contains recommendations
for a variety of potential remedial options which could be implemented individually or in a variety of combinations, and
included preliminary cost estimates for a variety of potential remedial options, which the report describes as “very rough
estimates of cost,” ranging from $25 million to $235 million. The report indicates that these costs are subject to uncertainties,
and that before any remedial option is implemented, further engineering studies and engineering design work are necessary to
determine the feasibility of the proposed remedial options. In June of 2014, a trial was held to determine if remediation was

127

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

necessary and feasible, and on September 2, 2015, the District Court issued an order concluding that further engineering study
and engineering design work is appropriate to determine the nature and extent of remediation in the Penobscot River and Bay.
In January of 2016, the Court appointed an engineering firm to conduct the next phase of the study. The study is targeted for
completion late 2017.

The Company’s accrued expenses for environmental proceedings are included within accrued certain litigation charges in other
accrued expenses and other long-term liabilities on the consolidated balance sheets as discussed above.

Government Matters

Medtronic has received subpoenas or document requests from the Attorneys General in Massachusetts, California, Oregon,
Illinois, and Washington seeking information regarding sales, marketing, clinical, and other information relating to the INFUSE
bone graft product. The Company has not recorded an expense related to damages in connection with these matters, because any
potential
the Company cannot
reasonably estimate the range of loss, if any, that may result from these matters.

loss is not currently probable or reasonably estimable under U.S. GAAP. Additionally,

On May 2, 2011, the U.S. Attorney’s Office for the District of Massachusetts issued a subpoena to ev3, a subsidiary of the
Company, requesting production of documents relating to sales and marketing and other issues in connection with several
neurovascular products. The matters under investigation relate to activities prior to Covidien’s acquisition of ev3 in 2010. ev3
complied as required with the subpoena and cooperated with the investigation. In the third quarter of fiscal year 2016, the
Company accrued expenses in connection with this matter, which are included within accrued certain litigation charges in other
accrued expenses and other long-term liabilities on the consolidated balance sheets as discussed above.

On September 2, 2014, the U.S. Department of Health and Human Services, Office of Inspector General and the U.S. Attorney’s
Office for the Northern District of California, issued a subpoena requesting production of documents relating to sales and
marketing practices associated with certain of ev3’s peripheral vascular products. The Company has not recorded an expense
related to damages in connection with this matter, because any potential loss is not currently probable or reasonably estimable
under U.S. GAAP. Additionally, the Company cannot reasonably estimate the range of loss, if any, that may result from this
matter.

Income Taxes

In March 2009, the U.S. Internal Revenue Service (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. On December
23, 2010, the IRS issued a statutory notice of deficiency with respect to the remaining issues. Medtronic, Inc. filed a petition
with the U.S. Tax Court on March 21, 2011 objecting to the deficiency. During October and November 2012, Medtronic, Inc.
reached resolution with the IRS on various matters, including the deductibility of a settlement payment. Medtronic, Inc. and the
IRS agreed to hold one issue, the calculation of amounts eligible for the one-time repatriation holiday, because such specific
issue was being addressed by other taxpayers in litigation with the IRS. 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 proceeding with respect to this issue began on
February 3, 2015 and ended on March 12, 2015. The U.S. Tax Court issued its opinion on June 9, 2016. Please see Note 18 for
additional information regarding this subsequent event.

In October 2011, the IRS issued its audit report on Medtronic, Inc. for fiscal years 2007 and 2008. Medtronic, Inc. reached
agreement with the IRS on some but not all matters related to these fiscal years. During the first quarter of fiscal year 2016, the
Company finalized its agreement with the IRS on the proposed adjustments associated with the tax effects of the Company’s
acquisition of Kyphon Inc. (Kyphon). The settlement was consistent with the certain tax adjustment recorded during the fourth
quarter of fiscal year 2015. The significant issues that remain unresolved for these tax years relate to the allocation of income
between Medtronic, Inc. and its wholly-owned subsidiary operating in Puerto Rico.

In April 2014, the IRS issued its audit report on Medtronic, Inc. for fiscal years 2009, 2010, and 2011. Medtronic, Inc. reached
agreement with the IRS on some but not all matters related to these fiscal years. The significant issues that remain unresolved
relate to the allocation of income between Medtronic, Inc. and its wholly-owned subsidiary operating in Puerto Rico, and

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Medtronic plc
Notes to Consolidated Financial Statements (Continued)

proposed adjustments associated with the tax effects of its acquisition structures for Ardian, CoreValve, Inc., and Ablation
Frontiers, Inc. The Company disagrees with the IRS and will attempt to resolve these matters at the IRS Appellate level,
however, it will proceed through litigation, if necessary. The IRS continues to audit Medtronic, Inc.’s U.S. federal income tax
returns for the fiscal years 2012 through 2014.

Covidien and the IRS have concluded and reached agreement on its audit of Covidien’s U.S. federal income tax returns for the
2008 and 2009 tax years. The IRS continues to audit Covidien’s U.S. federal income tax returns for the years 2010 through
2012. Open periods for examination also include certain periods during which Covidien was a subsidiary of Tyco International
plc (Tyco International). The resolution of these matters is subject to the conditions set forth in the Tyco tax sharing agreement
(Tax Sharing Agreement). Tyco International has the right to administer, control and settle all U.S. income tax audits for periods
prior to the 2007 separation.

The IRS has concluded its field examination of certain of Tyco International’s U.S. federal income tax returns for the years
1997 through 2000 and proposed tax adjustments, several of which also affect Covidien’s income tax returns for certain years
after 2000. Tyco International has appealed certain of the tax adjustments proposed by the IRS and has resolved all but one of
the matters associated with the proposed tax adjustments. The IRS has asserted that substantially all of Tyco International’s
intercompany debt originating during the years 1997 through 2000 should not be treated as debt for U.S. federal income tax
purposes, and has disallowed interest deductions related to the intercompany debt and certain tax attribute adjustments
recognized on Tyco International’s U.S. income tax returns. The Company disagrees with the IRS’s proposed adjustments and,
on July 22, 2013, Tyco International filed a petition with the U.S. Tax Court contesting the IRS assessment. On January 15,
2016, Tyco International, as the audit managing party under the Tax Sharing Agreement, entered into Stipulations of Settled
Issues with the IRS intended to resolve all disputes related to the intercompany debt issues for the tax sharing participants for
the 1997 — 2000 audit cycle, currently before the U.S. Tax Court. The Stipulations of Settled Issues are contingent upon the
IRS Appeals Division applying the same settlement to all intercompany debt issues on appeal for subsequent audit cycles
(2001 — 2007) and the approval of the U.S. Congress Joint Committee on Taxation, if required. If finalized, the tentative
resolution would cover all aspects of the controversy before the U.S. Tax Court and the Appeals Division of the IRS. During the
fourth quarter of fiscal 2016, the Company paid $10 million to the IRS related to the settlement. In addition, the Company paid
$183 million to TE Connectivity Ltd. and received $2 million from Tyco International plc, representing its estimated share of
the total amount payable to or receivable from the other Tax Sharing Participants in connection with this matter. The resolutions
with the U.S. Tax Court and IRS Appeals were finalized during May 2016. Please see Note 18 regarding this subsequent event
for additional information.

See Note 11 for additional discussion of income taxes.

Guarantees

As a result of the acquisition of Covidien, the Company has guarantee commitments and indemnifications with Tyco
International, TE Connectivity, and Mallinckrodt plc (Mallinckrodt) which relate to certain contingent tax liabilities.

On June 29, 2007, Covidien entered into the Tax Sharing Agreement, under which Covidien shares responsibility for certain of
its, Tyco International’s and TE Connectivity’s income tax liabilities for periods prior to Covidien’s 2007 separation from Tyco
International (2007 separation). Covidien, Tyco International and TE Connectivity share 42 percent, 27 percent, and 31 percent,
respectively, of U.S.
income tax liabilities that arise from adjustments made by tax authorities to Covidien’s, Tyco
International’s and TE Connectivity’s U.S. income tax returns, certain income tax liabilities arising from adjustments made by
tax authorities to intercompany transactions or similar adjustments, and certain taxes attributable to internal transactions
undertaken in anticipation of the 2007 separation. If Tyco International and TE Connectivity default on their obligations to
Covidien under the Tax Sharing Agreement, the Company would be liable for the entire amount of these liabilities. All costs
and expenses associated with the management of these tax liabilities are being shared equally among the parties.

In connection with the 2007 separation, all tax liabilities associated with Covidien business became Covidien’s tax liabilities.
Following Covidien’s spin-off of its Pharmaceuticals business to Covidien shareholders through a distribution of all the
outstanding ordinary shares of Mallinkrodt (2013 separation), Mallinckrodt became the primary obligor to the taxing authorities
for the tax liabilities attributable to its subsidiaries, a significant portion of which relate to periods prior to the 2007 separation.
However, Covidien remains the sole party subject to the Tax Sharing Agreement. Accordingly, Mallinckrodt does not share in

129

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

Covidien’s liability to Tyco International and TE Connectivity, nor in the receivable that Covidien has from Tyco International
and TE Connectivity.

If any party to the Tax Sharing Agreement were to default in its obligation to another party to pay its share of the distribution
taxes that arise as a result of no party’s fault, each non-defaulting party would be required to pay, equally with any other non-
defaulting party, the amounts in default. In addition, if another party to the Tax Sharing Agreement that is responsible for all or
a portion of an income tax liability were to default in its payment of such liability to a taxing authority, the Company could be
legally liable under applicable tax law for such liabilities and be required to make additional tax payments. Accordingly, under
certain circumstances, the Company may be obligated to pay amounts in excess of the Company’s agreed upon share of
Covidien’s, Tyco International’s and TE Connectivity’s tax liabilities.

The Company has used available information to develop its best estimates for certain assets and liabilities related to periods
prior to the 2007 separation, including amounts subject to or impacted by the provisions of the Tax Sharing Agreement. The
actual amounts that the Company may be required to ultimately accrue or pay under the Tax Sharing Agreement, however,
could vary depending upon the outcome of the unresolved tax matters. Final determination of the balances will be made in
subsequent periods, primarily related to certain pre-2007 separation tax liabilities and tax years open for examination. These
balances will also be impacted by the filing of final or amended income tax returns in certain jurisdictions where those returns
include a combination of Tyco International, Covidien and/or TE Connectivity legal entities for periods prior to the 2007
separation. The resolutions with the U.S. Tax Court and IRS Appeals were finalized during May 2016. Please see Note 18
regarding this subsequent event for additional information.

In conjunction with the 2013 separation, Mallinckrodt assumed the tax liabilities that are attributable to its subsidiaries, and
Covidien indemnified Mallinckrodt to the extent that such tax liabilities arising from periods prior to 2013 exceed $200 million,
net of certain tax benefits realized. In addition, in connection with the 2013 separation, Covidien entered into certain other
guarantee commitments and indemnifications with Mallinckrodt.

Except as described above in this note or for certain income tax related matters, the Company has not recorded an expense
related to losses in connection with these matters because any potential loss is not currently probable or reasonably estimable
under U.S. GAAP. Additionally, the Company cannot reasonably estimate the range of loss, if any, that may result from these
matters.

In the normal course of business, the Company and/or its affiliates periodically enter into agreements that require one or more of
them to indemnify customers or suppliers for specific risks, such as claims for injury or property damage arising out of the
Company or its affiliates’ products or the negligence of any of their personnel or claims alleging that any of their products
infringe third-party patents or other intellectual property. The Company’s maximum exposure under these indemnification
provisions cannot be estimated, and the Company has not accrued any liabilities within the consolidated financial statements.
Historically, the Company has not experienced significant losses on these types of indemnifications.

130

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

16. Quarterly Financial Data (unaudited)

(in millions, except per share data)

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Fiscal Year

Net Sales

Gross Profit

Net Income (Loss)

Basic Earnings per Share

Diluted Earnings per Share

2016
2015

7,274
4,273

4,818
3,168

820
871

0.58
0.88

0.57
0.87

7,058
4,366

4,876
3,224

520
828

0.37
0.84

0.36
0.83

6,934
4,318

4,793
3,190

1,095
977

0.78
0.99

0.77
0.98

7,567
7,304

5,204
4,370

1,104
(1)

0.79
—

0.78
—

28,833
20,261

19,691
13,952

3,538
2,675

2.51
2.44

2.48
2.41

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

17. Segment and Geographic Information

The Company’s management evaluates performance and allocates resources based on profit and loss from operations before
income taxes and interest expense, net, not including the impact of inventory step-up, the impact of product technology upgrade
commitment, special (gains) charges, net, restructuring charges, net, certain litigation charges, net, acquisition-related items, and
certain tax adjustments. The accounting policies of the reportable segments are the same as those described in the summary of
significant accounting policies in Note 1.

In the fourth quarter of fiscal year 2015, the Company amended the way in which management evaluates performance and
allocates resources due to the Covidien acquisition. As a result, the Company began to operate under four reportable segments
and four operating segments. This change had no impact on the Company’s consolidated results for prior periods presented.

The Company’s Cardiac and Vascular Group consists of three divisions: Cardiac Rhythm & Heart Failure, Coronary &
Structural Heart, and Aortic & Peripheral Vascular. The primary products sold by this operating segment include products for
cardiac rhythm disorders and cardiovascular disease, as well as services to diagnose, treat, and manage heart and vascular-
related disorders and diseases. The products produced by this operating segment require highly-skilled, technical manufacturing
processes and are distributed through direct sales representatives in the U.S. and through direct sales representatives and indirect
distributors outside of the U.S. Further, the primary customers of this operating segment are surgeons and specialists and the
regulatory approval process for the Cardiac and Vascular Group is similar across all components. The Company’s Minimally
Invasive Therapies Group consists of two divisions: Surgical Solutions and Patient Monitoring & Recovery. The primary
products sold by this operating segment include those which enhance patient outcomes through minimally invasive solutions.
These products include those for advanced and general surgical care and patient monitoring, nursing and patient care, and
airway and ventilation. Further, the regulatory approval process for the Minimally Invasive Therapies Group is similar across all
components. The Company’s Restorative Therapies Group consists of four divisions: Spine, Neuromodulation, Surgical
Technologies, and Neurovascular. The primary customers of this operating segment include spinal surgeons, neurosurgeons, and
pain specialists. The products sold by this operating segment are distributed through direct sales representatives in the U.S. and
through direct sales representatives and indirect distributors outside of the U.S. Further, the regulatory approval process for the
Restorative Therapies Group is similar across all components. The primary products sold by the Company’s Diabetes Group
include those for diabetes management and the approval process for the Diabetes is similar across all divisions.

131

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

Net sales of the Company’s reportable segments include end-customer revenues from the sale of products each reportable
segment develops and manufactures or distributes. Net sales and income before income taxes by reportable segment are as
follows:

(in millions)

Cardiac and Vascular Group
Minimally Invasive Therapies Group
Restorative Therapies Group
Diabetes Group

Total Net Sales

(in millions)

Cardiac and Vascular Group
Minimally Invasive Therapies Group
Restorative Therapies Group
Diabetes Group

Total Reportable Segments’ Income Before Income Taxes

Impact of inventory step-up
Impact of product technology upgrade commitment
Special (gains) charges, net
Restructuring charges, net (1)
Certain litigation charges, net
Acquisition-related items
Interest expense, net
Corporate

2016

Fiscal Year
2015

2014

10,196
9,563
7,210
1,864

9,361
2,387
6,751
1,762

8,847
—
6,501
1,657

28,833

20,261

17,005

2016

Fiscal Year

2015

2014

3,182
1,394
1,976
543

7,095
(226)
—
(70)
(299)
(26)
(283)
(955)
(900)

3,140
342
1,828
540

5,850
(623)
(74)
38
(252)
(42)
(550)
(280)
(581)

2,982
—
1,821
457

5,260
—
—
(40)
(88)
(770)
(117)
(108)
(432)

3,705

Total Income From Operations Before Income Taxes

4,336

3,486

(1) Restructuring charges, net within this table include the impact of amounts recorded within cost of products sold in the

consolidated statements of income.

The following table presents the Company’s assets by reportable segment:

(in millions)

Cardiac and Vascular Group
Minimally Invasive Therapies Group
Restorative Therapies Group
Diabetes Group

Total Assets of Reportable Segments

Corporate

Total Assets

April 29,
2016

April 24,
2015

13,563
52,227
14,564
2,592

82,946
16,836

13,642
51,228
15,249
2,597

82,716
23,969

99,782

106,685

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Medtronic plc
Notes to Consolidated Financial Statements (Continued)

Geographic Information

The following table presents net sales to external customers and property, plant, and equipment, net by geographic region:

(in millions)

Americas (1)

EMEA (2)

Asia Pacific

Greater China

Consolidated

Fiscal Year 2016
Net sales to external customers
Property, plant, and equipment, net
Fiscal Year 2015
Net sales to external customers
Property, plant, and equipment, net
Fiscal Year 2014
Net sales to external customers
Property, plant, and equipment, net

$
$

17,578
3,728

12,125
3,626

9,922
1,833

$
$

6,700
708

5,064
725

4,483
393

$
$

3,060
220

2,059
165

1,776
74

$
$

1,495
185

1,013
183

824
92

$
$

28,833
4,841

20,261
4,699

17,005
2,392

(1) The U.S., which is included in the Americas, had net sales to external customers of $16.4 billion, $11.3 billion, and $9.2
billion in fiscal years 2016, 2015, and 2014, respectively. Property, plant, and equipment, net includes $3.3 billion, $3.0
billion, and $1.7 billion in the U.S. in fiscal years 2016, 2015, and 2014 respectively.

(2) EMEA consists of the following regions: Europe, Middle East, and Africa. Sales to Ireland were insignificant during all
periods presented. Property, plant, and equipment, net includes $169 million, $151 million, and $72 million in Ireland in
fiscal years 2016, 2015, and 2014, respectively.

No single customer represented over 10 percent of the Company’s consolidated net sales in fiscal years 2016, 2015, or 2014.

18. Subsequent Events

Tyco International, as audit managing party under the Tax Sharing Agreement, entered into Stipulations of Settled Issues with
the IRS intended to resolve all Federal tax disputes related to the previously disclosed intercompany debt issues for the Tax
Sharing Participants for the 1997-2000 audit cycle before the U.S. Tax Court. The Stipulations of Settled Issues were contingent
upon the IRS Appeals Division applying the same settlement terms to all intercompany debt issues on appeal for subsequent
audit cycles (2001-2007). On May 17, 2016 the IRS Office of Appeals issued fully executed Forms 870-AD that effectively
settled the matters on appeal on the same terms as those set forth in the Stipulations of Settled Issues, and on May 31, 2016 the
U.S. Tax Court entered decisions consistent with the Stipulations of Settled Issues. As a result, all aspects of this controversy
that were before the U.S. Tax Court and Appeals Division of the IRS have been finally resolved for audit cycles from 1997-
2007. The Company estimates the adjustments to the income tax reserve and guarantee contingencies will result in the
recognition of a benefit of approximately $425 million in the Company’s first quarter of fiscal 2017 results.

On May 18, 2016, the Company signed a definitive agreement to acquire Smith & Nephew’s gynecology business for
approximately $350 million. The addition of Smith & Nephew’s gynecology business will expand and strengthen Medtronic’s
minimally invasive surgical offerings and will further complement its existing global gynecology business. The acquisition is
expected to close in fiscal year 2017.

On June 9, 2016, the U.S. Tax court issued its opinion with respect to the allocation of income between Medtronic, Inc. and its
wholly-owned subsidiary operating in Puerto Rico for fiscal years 2005 and 2006. The U.S. Tax Court generally rejected the
IRS’s position, but also made certain modifications to the Medtronic, Inc. tax returns as filed. We do not expect the results of
the opinion to have a material impact on the financial statements. An Appeal of the U.S. Tax Court Opinion must be filed within
90 days of the final decision by the Tax Court. The final decision will not occur until all issues related to the fiscal years are
resolved. As one item remains open, the calculation of amounts eligible for the one-time repatriation holiday, a final decision is
not expected until later this fiscal year, and, therefore, an estimate of the financial statement impact cannot yet be made.

On June 27, 2016, the Company announced entry into a definitive agreement to acquire HeartWare International, Inc. for
approximately $1.1 billion. The addition of HeartWare International, Inc.’s portfolio of heart failure products will expand and
strengthen Medtronic’s heart failure product offerings and will further complement its existing global cardiac rhythm and heart
failure business. The acquisition is expected to close in fiscal year 2017.

133

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

19. Guarantor Financial Information

On January 26, 2015, Medtronic plc (“Parent Company Guarantor”) and Medtronic Luxco, a subsidiary guarantor, each
provided a full and unconditional guarantee of the obligations of Medtronic, Inc. under the Medtronic 2015 Senior Notes. In
addition, Medtronic plc and Medtronic Luxco each provided a full and unconditional guarantee of the obligations of CIFSA,
assumed as part of the Covidien acquisition, under the CIFSA Senior Notes. These guarantees of the CIFSA Senior Notes were
in addition to the guarantees of the CIFSA Senior Notes by acquired Covidien holding companies Covidien Ltd. (f/k/a Covidien
plc) and Covidien Group Holdings Ltd. (f/k/a Covidien Ltd.), both of which remain guarantors of the CIFSA Senior Notes. A
summary of the guarantees is as follows:

Guarantees of Medtronic Senior Notes

(cid:129)

Parent Company Guarantor — Medtronic plc
Subsidiary Issuer — Medtronic, Inc.
Subsidiary Guarantor — Medtronic Luxco

Since Medtronic plc and Medtronic Luxco did not exist in prior years, the Parent Company Guarantor column and Subsidiary
Guarantor Column in the consolidating financial information for the guarantees of the Medtronic 2015 Senior Notes appear as
zeros for fiscal year 2014. Accordingly, the fiscal year 2014 consolidating financial information is of the predecessor registrant,
Medtronic, Inc.

Guarantees of CIFSA Senior Notes

(cid:129)

Parent Company Guarantor — Medtronic plc
Subsidiary Issuer — CIFSA
Subsidiary Guarantors — Medtronic Luxco, Covidien Ltd., and Covidien Group Holdings Ltd.

The following presents the Company’s Consolidating Statements of Comprehensive Income and Condensed Consolidating
Statements of Cash Flows as of and for the fiscal years ended April 29, 2016, April 24, 2015, and April 25, 2014, and
Condensed Consolidating Balance Sheets as of April 29, 2016 and April 24, 2015. The guarantees provided by the Parent
Company Guarantor and Subsidiary Guarantors are joint and several. Condensed consolidating financial information for
Medtronic plc, Medtronic Luxco, Medtronic, Inc. and CIFSA, on a stand-alone basis, is presented using the equity method of
accounting for subsidiaries.

There were no Medtronic plc or Medtronic Luxco guarantees in effect in periods prior to fiscal year 2015, and the CIFSA Senior
Notes were assumed as part of the Covidien acquisition. Therefore, no consolidating financial information for the fiscal year
ended April 25, 2014 is presented related to the guarantees of the CIFSA Senior Notes.

During fiscal year 2016, the Company undertook certain steps to reorganize ownership of various subsidiaries. The transactions
were entirely among subsidiaries under the common control of Medtronic. This reorganization has been reflected as of the
beginning of the earliest period presented.

The Company made revisions to its Condensed Consolidating Balance Sheet of the guarantees of the CIFSA Senior Notes as
previously presented in Note 19 in the Company’s Annual Report on Form 10-K for the year ended April 24, 2015. A $14.7
billion revision increased investment in subsidiaries and shareholders’ equity in the Subsidiary Issuer (CIFSA) column of the
Condensed Consolidating Balance Sheet due to an incorrect presentation primarily related to the investment balance upon
acquisition and an intercompany dividend. The Company also made revisions to the Condensed Consolidating Statement of
Cash Flows of the guarantees of the CIFSA Senior Notes as previously presented in Note 19 in the Company’s Annual Report
on Form 10-K for the year ended April 24, 2015. An approximately $8.0 billion revision to cash from investing and financing
activities was made in both the Subsidiary Issuer (CIFSA) and Subsidiary Non-Guarantors columns, as well as a $1.3 billion
revision to cash from investing and operating activities in the Subsidiary Guarantors column related to an incorrect presentation
of intercompany loan activity. A $937 million revision to cash from operating and investing activities in the Subsidiary Issuer
(CIFSA) column and operating and financing activities in the Subsidiary Non-Guarantors column was related to an incorrect
presentation of an intercompany capital contribution. The Company made certain revisions to its consolidating financial

134

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

statements of the guarantees of the Medtronic Senior Notes as previously presented in Note 19 in the Company’s Annual Report
on Form 10-K for the years ended April 24, 2015 and April 25, 2014. There is no impact to the consolidated financial statements
of Medtronic plc as previously filed in the 2015 Annual Report on Form 10-K or Quarterly Reports on Form 10-Q.

Consolidating Statement of Comprehensive Income
Fiscal Year Ended April 29, 2016
Medtronic Senior Notes

(in millions)

Net sales
Costs and expenses:

Parent
Company
Guarantor
(Medtronic
plc)

Subsidiary
Issuer
(Medtronic,
Inc.)

Subsidiary
Guarantors

Subsidiary
Non-
guarantors

Consolidating
Adjustments

Total

$ — $ 1,411

$ — $28,832

(1,410)

$28,833

Cost of products sold
Research and development expense
Selling, general, and administrative expense
Special (gains) charges, net
Restructuring charges, net
Certain litigation charges, net
Acquisition-related items
Amortization of intangible assets
Other (income) expense, net

Operating profit (loss)

Interest income
Interest expense

Interest expense (income), net

Equity in net (income) loss of subsidiaries

Income (loss) from operations before income taxes
Provision (benefit) for income taxes

Net income (loss)

Other comprehensive income (loss), net of tax

—
—
10
—
—
—
—
—
112

(122)
—
25

25
(3,676)

3,529
(9)

3,538
(684)

991
627
991
70
17
—
135
12
(2,329)

897
(237)
1,906

1,669
4,224

(4,996)
(96)

(4,900)
(493)

—
—
—
—
—
—
—
—
—

—
(706)
10

(696)
(2,980)

3,676
—

3,676
(684)

9,561
1,597
8,468
—
273
26
148
1,919
2,324

4,516
(448)
405

(43)
—

4,559
903

3,656
(673)

(1,410)
—
—
—
—
—
—
—
—

—
960
(960)

—
2,432

(2,432)
—

(2,432)
1,850

9,142
2,224
9,469
70
290
26
283
1,931
107

5,291
(431)
1,386

955
—

4,336
798

3,538
(684)

Total comprehensive income (loss)

$ 2,854

$ (5,393)

$ 2,992

$ 2,983

(582)

$ 2,854

135

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

Consolidating Statement of Comprehensive Income
Fiscal Year Ended April 24, 2015
Medtronic Senior Notes

(in millions)

Net sales
Costs and expenses:

Parent
Company
Guarantor
(Medtronic
plc)

Subsidiary
Issuer
(Medtronic,
Inc.)

Subsidiary
Guarantors

Subsidiary
Non-
guarantors

Consolidating
Adjustments

Total

$ — $ 1,261

$ — $20,261

(1,261)

$20,261

Cost of products sold
Research and development expense
Selling, general, and administrative expense
Special (gains) charges
Restructuring charges, net
Certain litigation charges, net
Acquisition-related items
Amortization of intangible assets
Other (income) expense, net

Operating profit (loss)

Interest income
Interest expense

Interest expense (income), net

Equity in net (income) loss of subsidiaries

Income (loss) from operations before income taxes
Provision (benefit) for income taxes

Net income

Other comprehensive income (loss), net of tax

—
—
1
—
—
—
—
—
103

(104)
—
—

—
(2,790)

2,686
11

2,675
(587)

895
552
857
100
7
—
312
11
(1,618)

145
(56)
762

706
(5,830)

5,269
(44)

5,313
(540)

—
—
—
—
—
—
—
—
—

—
(170)
—

(170)
(2,620)

2,790
—

2,790
(587)

6,659
1,088
6,046
(138)
230
42
238
722
1,633

3,741
(387)
131

(256)
—

3,997
844

3,153
(232)

(1,245)
—
—
—
—
—
—
—
—

(16)
227
(227)

—
11,240

(11,256)
—

(11,256)
1,359

6,309
1,640
6,904
(38)
237
42
550
733
118

3,766
(386)
666

280
—

3,486
811

2,675
(587)

Total comprehensive income (loss)

$ 2,088

$ 4,773

$ 2,203

$ 2,921

(9,897)

$ 2,088

136

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

Consolidating Statement of Comprehensive Income
Fiscal Year Ended April 25, 2014
Medtronic Senior Notes

(in millions)

Net sales

Costs and expenses:

Cost of products sold
Research and development expense
Selling, general, and administrative

expense

Special (gains) charges
Restructuring charges, net
Certain litigation charges, net
Acquisition-related items
Amortization of intangible assets
Other (income) expense, net

Operating profit (loss)

Interest income
Interest expense

Interest expense (income), net

Equity in net (income) loss of
subsidiaries

Income (loss) from operations before

income taxes

Provision (benefit) for income taxes

Net income (loss)

Other comprehensive income (loss), net
of tax

Total comprehensive income

(loss)

Parent
Company
Guarantor
(Medtronic
plc)

Subsidiary
Issuer
(Medtronic,
Inc.)

Subsidiary
Guarantors

Subsidiary
Non-
guarantors

Consolidating
Adjustments

Total

— $

1,155

— $ 17,005

(1,155)

$ 17,005

—
—

—
—
—
—
—
—
—

—
—
—

—

—
—

—

787
540

821
40
71
(24)
—
12
(1,623)

531
(5)
317

312

(3,077)

3,296
231

3,065

(105)

—
—

—
—
—
—
—
—
—

—
—
—

—

—
—

—

4,674
937

5,026
—
7
794
117
337
1,804

3,309
(267)
63

(204)

(1,128)
—

—
—
—
—
—
—
—

(27)
1
(1)

—

4,333
1,477

5,847
40
78
770
117
349
181

3,813
(271)
379

108

—

3,077

—

3,513
409

3,104

(3,104)
—

(3,104)

3,705
640

3,065

(286)

286

(105)

— $

2,960

— $

2,818

(2,818)

2,960

137

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

Condensed Consolidating Balance Sheet
April 29, 2016
Medtronic Senior Notes

(in millions)

ASSETS

Current assets:

Cash and cash equivalents

Investments

Accounts receivable, net

Inventories

Intercompany receivable

Tax assets

Prepaid expenses and other current assets

Total current assets

Property, plant and equipment, net

Goodwill

Other intangible assets, net

Long-term tax assets

Investment in subsidiaries

Intercompany loans receivable

Other assets

Total assets

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

Short-term borrowings

Accounts payable

Intercompany payable

Accrued compensation

Accrued income taxes

Deferred tax liabilities

Other accrued expenses

Total current liabilities

Long-term debt

Long-term accrued compensation and retirement

benefits

Long-term accrued income taxes

Long-term intercompany loans payable

Long-term deferred tax liabilities

Other long-term liabilities

Total liabilities

Shareholders’ equity

Parent
Company
Guarantor
(Medtronic
plc)

Subsidiary
Issuer
(Medtronic,
Inc.)

Subsidiary
Guarantors

Subsidiary
Non-
guarantors

Consolidating
Adjustments

Total

— $ 2,876

—

389

—

413

—

73,108

3,000

—

162

161,868

122

149

162,356

1,139

—

690

63,806

8,884

644

—

70,198

10,203

—

2,821

9,758

5,562

3,511

—

(200)

162,278

(324,535)

575

1,061

—

185,566

(324,735)

3,702

41,500

26,868

693

—

18,140

915

—

(207,112)

(40,227)

9,758

5,562

3,473

—

697

1,234

23,600

4,841

41,500

26,899

1,383

—

1,559

$ 76,521

$ 237,550

$ 80,401

$ 277,384

(572,074)

$99,782

—

500

288

20,486

151,687

—

20,530

—

3,918

—

24,458

52,063

616

—

243

153,334

26,784

1,258

1,422

10,128

—

202

193,128

44,422

—

14,297

—

14,297

66,104

493

1,421

152,362

1,064

555

—

1,941

157,836

3,463

501

1,471

11,884

3,729

1,714

180,598

96,786

—

(324,535)

—

(324,535)

—

(40,227)

—

993

1,709

—

1,712

566

—

2,185

7,165

30,247

1,759

2,903

—

3,729

1,916

(364,762)

(207,312)

47,719

52,063

Total liabilities and shareholders’ equity

$ 76,521

$ 237,550

$ 80,401

$ 277,384

(572,074)

$99,782

138

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

Condensed Consolidating Balance Sheet
April 24, 2015
Medtronic Senior Notes

(in millions)
ASSETS

Current assets:

Cash and cash equivalents

Investments

Accounts receivable, net

Inventories

Intercompany receivable

Tax assets
Prepaid expenses and other current assets

Total current assets

Property, plant and equipment, net

Goodwill

Other intangible assets, net

Long-term tax assets

Investment in subsidiaries

Intercompany loans receivable

Other assets

Total assets

LIABILITIES AND SHAREHOLDERS’
EQUITY

Current liabilities:

Short-term borrowings

Accounts payable

Intercompany payable

Accrued compensation

Accrued income taxes

Deferred tax liabilities

Other accrued expenses

Total current liabilities

Long-term debt

Long-term accrued compensation and retirement

benefits

Long-term accrued income taxes

Long-term intercompany loans payable

Long-term deferred tax liabilities

Other long-term liabilities

Total liabilities

Shareholders’ equity

Parent
Company
Guarantor
(Medtronic
plc)

Subsidiary
Issuer
(Medtronic,
Inc.)

Subsidiary
Guarantors

Subsidiary
Non-
guarantors

Consolidating
Adjustments

Total

263

1,071

170

3,339

— $

4,843

—

259

—
4

526

—

70,233

3,000

—

165

146,942

295
128

—

—
—

14,637

5,112

3,497

—

(199)

144,638

(291,839)

1,040
1,322

—
—

148,601

170

173,585

(292,038)

976

—

294

68,710

6,516

678

—

63,063

10,000

—

3,723

40,530

28,062

480

—

10,218

1,059

—

(202,006)

(29,734)

14,637

5,112

3,463

—

1,335
1,454

30,844

4,699

40,530

28,101

774

—

1,737

$ 73,759

$ 225,814

$ 73,233

$ 257,657

(523,778)

$106,685

—

1,110

261

20,506

135,660

—

20,529

—

20,529

53,230

490

—

628

138,149

29,004

965

1,048

10,218

—

207

179,591

46,223

—

10,000

—

10,000

63,233

1,324

1,349

135,673

1,120

916

116

1,836

142,334

4,748

570

1,428

9,516

4,700

1,612

164,908

92,749

—

(291,839)

—

(291,839)

—

(29,734)

—

(321,573)

(202,205)

2,434

1,610

—

1,611

935

119

2,464

9,173

33,752

1,535

2,476

—

4,700

1,819

53,455

53,230

Total liabilities and shareholders’ equity

$ 73,759

$ 225,814

$ 73,233

$ 257,657

(523,778)

$106,685

139

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

Condensed Consolidating Statement of Cash Flows
Fiscal Year Ended April 29, 2016
Medtronic Senior Notes

Parent
Company
Guarantor
(Medtronic
plc)

Subsidiary
Issuer
(Medtronic,
Inc.)

Subsidiary
Guarantors

Subsidiary
Non-
guarantors

Consolidating
Adjustments

Total

(in millions)
Operating Activities:

Net cash provided by (used in) operating activities

297 $

402 $

696 $

4,635 $

(812) $ 5,218

Investing Activities:
Acquisitions, net of cash acquired
Additions to property, plant, and equipment
Purchases of marketable securities
Sales and maturities of marketable securities
Net (increase) decrease in intercompany loans receivable
Capital contributions paid
Other investing activities, net

Net cash provided by (used in) investing activities

Financing Activities:
Acquisition-related contingent consideration
Change in short-term borrowings, net
Repayment of short-term borrowings (maturities greater

than 90 days)

Proceeds from short-term borrowings (maturities greater

than 90 days)

Issuance of long-term debt
Payments on long-term debt
Dividends to shareholders
Issuance of ordinary shares
Repurchase of ordinary shares
Net intercompany loan borrowings (repayments)
Intercompany dividend paid
Capital contributions received
Other financing activities

—
—
—
—
—
—
—

—

—
—

—

—
—
—
(2,139)
491
(2,830)
3,918
—
—
—

(526)
(334)
—
—
(2,368)
(11)
—

(3,239)

—
—

—

—
—
(2,988)
—
—
—
(91)
—
4,900
—

(687)
—
—
(712)
— (5,406)
9,924
—
(7,921)
(203)
(4,900)
(4,959)
(14)
—

— (1,213)
— (1,046)
— (5,406)
— 9,924
—
—
(14)

10,492
9,870
—

(5,162)

(9,716)

20,362

2,245

—
—

(139)

(22)
7

—

—
139
—
—
— (2,144)
—
—
—
—
—
—
2,369
4,296
(812)
—
4,970
—
82
—

—
—

—

(22)
7

(139)

139
—
—
—
— (5,132)
— (2,139)
—
491
— (2,830)
—
—
—
82

(10,492)
812
(9,870)
—

Net cash provided by (used in) financing activities

(560)

1,821

4,296

4,450

(19,550)

(9,543)

Effect of exchange rate changes on cash and cash

equivalents

Net change in cash and cash equivalents
Cash and cash equivalents at beginning of period

—

(263)
263

—

(1,016)
1,071

—

(170)
170

113

(518)
3,339

—

113

— (1,967)
— 4,843

Cash and cash equivalents at end of period

— $

55 $

— $

2,821 $

— $ 2,876

140

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

Condensed Consolidating Statement of Cash Flows
Fiscal Year Ended April 24, 2015
Medtronic Senior Notes

(in millions)

Operating Activities:

Net cash provided by (used in)
operating activities

Investing Activities:

Acquisitions, net of cash acquired

Additions to property, plant, and equipment

Purchases of marketable securities

Sales and maturities of marketable securities

Net (increase) decrease in intercompany
loans receivable

Other investing activities, net

Net cash provided by (used in)
investing activities

Financing Activities:
Acquisition-related contingent consideration

Change in short-term borrowings, net

Repayment of short-term borrowings
(maturities greater than 90 days)

Proceeds from short-term borrowings
(maturities greater than 90 days)

Issuance of long-term debt

Payments on long-term debt

Dividends to shareholders

Issuance of ordinary shares

Repurchase of ordinary shares

Net intercompany loan borrowings
(repayments)

Intercompany dividends paid

Other financing activities

Net cash provided by (used in)
financing activities

Effect of exchange rate changes on cash and

cash equivalents

Net change in cash and cash equivalents

Cash and cash equivalents at beginning of

period

Cash and cash equivalents at end of

period

Parent
Company
Guarantor
(Medtronic
plc)

Subsidiary
Issuer
(Medtronic,
Inc.)

Subsidiary
Guarantors

Subsidiary
Non-
guarantors

Consolidating
Adjustments

Total

1,479

170

3,640

(413)

4,902

(9,700)

—

(65)

(187)

—

(16,996)

—

(9,700)

(17,248)

—

(435)

172

(300)

10,500

—

(150)

150

19,942

(1,268)

(902)

477

(1,620)

(53)

—

9,937

16,576

—

263

—

807

264

—

(5,119)

(384)

(7,582)

5,890

—

16,943

—

(14,884)

(571)

(7,582)

5,890

—

(7,053)

16,943

(17,058)

(85)

(1)

—

6,496

(413)

(31)

—

(16,943)

413

—

(85)

(1)

(150)

150

19,942

(1,268)

(1,337)

649

(1,920)

—

(31)

5,966

(16,530)

15,949

—

170

—

(353)

2,200

1,139

—

(353)

3,440

1,403

263

1,071

170

3,339

— $

4,843

141

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

Condensed Consolidating Statement of Cash Flows
Fiscal Year Ended April 25, 2014
Medtronic Senior Notes

(in millions)

Operating Activities:

Net cash provided by (used in)
operating activities

Investing Activities:

Acquisitions, net of cash acquired

Additions to property, plant, and equipment

Purchases of marketable securities

Sales and maturities of marketable securities

Net (increase) decrease in intercompany
loans receivable

Other investing activities, net

Net cash provided by (used in)
investing activities

Financing Activities:
Acquisition-related contingent consideration

Change in short-term borrowings, net

Repayment of short-term borrowings
(maturities greater than 90 days)

Proceeds from short-term borrowings
(maturities greater than 90 days)

Issuance of long-term debt

Payments on long-term debt

Dividends to shareholders

Issuance of ordinary shares

Repurchase of ordinary shares

Net intercompany loan borrowings
(repayments)

Intercompany dividends paid

Other financing activities

Net cash provided by (used in)
financing activities

Effect of exchange rate changes on cash and

cash equivalents

Net change in cash and cash equivalents

Cash and cash equivalents at beginning of

period

Cash and cash equivalents at end of

period

Parent
Company
Guarantor
(Medtronic
plc)

Subsidiary
Issuer
(Medtronic,
Inc.)

Subsidiary
Guarantors

Subsidiary
Non-
guarantors

Consolidating
Adjustments

Total

— $

1,384

— $

3,949

(374)

4,959

—

(154)

—

(153)

—

(1,301)

1,045

1,994

(565)

(1,116)

1,307

(2,553)

—

(1,163)

—

196

—

(385)

(242)

(10,895)

8,111

(12)

(29)

(3,452)

(1)

127

—

131

—

(1)

(374)

—

(118)

416

723

—

(11)

374

—

363

—

(385)

(396)

(10,895)

8,111

—

(29)

(3,594)

(1)

127

(1,301)

1,176

1,994

(565)

(1,116)

1,307

(2,553)

—

(918)

484

919

— $

264

— $

1,139

— $

1,403

142

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

Consolidating Statement of Comprehensive Income
Fiscal Year Ended April 29, 2016
CIFSA Senior Notes

(in millions)

Net sales
Costs and expenses:

Cost of products sold

Research and development expense

Selling, general, and administrative expense

Special (gains) charges, net

Restructuring charges, net

Certain litigation charges, net

Acquisition-related items
Amortization of intangible assets

Other (income) expense, net

Operating profit (loss)

Interest income

Interest expense

Interest (income) expense, net

Equity in net (income) loss of subsidiaries

(3,676)

(8,563)

Income (loss) from operations before income

taxes

Provision (benefit) for income taxes

Net income (loss)

Other comprehensive income (loss), net of tax

3,529
(9)

3,538

(684)

8,857
—

8,857

(102)

Parent
Company
Guarantor
(Medtronic
plc)

Subsidiary
Issuer
(CIFSA)

Subsidiary
Guarantors

Subsidiary
Non-
guarantors

Consolidating
Adjustments

—

—
—

112

(122)

—

—
—

(2)

(434)

138

(296)

—

—
—

(18)

(710)

(700)

(2,961)

3,676
—

3,676

(684)

28,833

9,142

2,224

9,455

290

283
1,931

5,400

(451)

2,377

1,926

—

3,474
807

2,667

(684)

—

—
—

—

1,164

(1,164)

—

15,200

(15,200)
—

(15,200)

1,470

Total

28,833

9,142

2,224

9,469

290

283
1,931

107

5,291

(431)

1,386

955

—

4,336
798

3,538

(684)

Total comprehensive income (loss)

2,854

8,755

2,992

1,983

(13,730)

2,854

143

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

Consolidating Statement of Comprehensive Income
Fiscal Year Ended April 24, 2015
CIFSA Senior Notes

(in millions)

Net sales
Costs and expenses:

Cost of products sold

Research and development expense

Selling, general, and administrative expense

Special (gains) charges, net

Restructuring charges, net

Certain litigation charges, net

Acquisition-related items
Amortization of intangible assets

Other (income) expense, net

Operating profit (loss)

Interest income

Interest expense

Interest (income) expense, net

Equity in net (income) loss of subsidiaries

Income (loss) from operations before income

taxes

Provision (benefit) for income taxes

Net income (loss)

Other comprehensive income (loss), net of tax

Parent
Company
Guarantor
(Medtronic
plc)

—

—
—

103

(104)

—

(2,790)

2,686
11

2,675

(587)

Subsidiary
Issuer
(CIFSA)

Subsidiary
Guarantors

Subsidiary
Non-
guarantors

Consolidating
Adjustments

—

—
—

—

(149)

(120)

1,412

(1,292)
—

(1,292)

200

—

—
—

(47)

(170)

—

(170)

(2,667)

2,790
—

2,790

(587)

20,261

6,309

1,640

6,882

(38)

237

550
733

(11)

3,917

(386)

956

570

—

3,347
800

2,547

(587)

—

—
—

—

319

(319)

—

4,045

(4,045)
—

(4,045)

974

Total

20,261

6,309

1,640

6,904

(38)

237

550
733

118

3,766

(386)

666

280

—

3,486
811

2,675

(587)

Total comprehensive income (loss)

2,088

(1,092)

2,203

1,960

(3,071)

2,088

144

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

Condensed Consolidating Balance Sheet
April 29, 2016
CIFSA Senior Notes

(in millions)

ASSETS
Current assets:

Cash and cash equivalents
Investments
Accounts receivable, net
Inventories
Intercompany receivable
Tax assets
Prepaid expenses and other current assets

Total current assets
Property, plant and equipment, net
Goodwill
Other intangible assets, net
Long-term tax assets
Investment in subsidiaries
Intercompany loans receivable
Other assets

Parent
Company
Guarantor
(Medtronic
plc)

Subsidiary
Issuer
(CIFSA)

Subsidiary
Guarantors

Subsidiary
Non-
guarantors

Consolidating
Adjustments

Total

— $
—
—
—
389
—
24

208 $
—
—
—
—
—
—

— $
—
—
—
61
—
—

2,668 $
9,758
5,562
3,473
20,469
697
1,210

— $ 2,876
— 9,758
— 5,562
— 3,473
—
(20,919)
—
697
— 1,234

413
—
—
—
—
73,108
3,000
—

208
—
—
—
—
41,582
8,253
—

61
43,837
4,840
1
— 41,500
— 26,899
1,383
—
—
68,875
27,724
11,465
1,559
—

(20,919)

23,600
— 4,841
— 41,500
— 26,899
— 1,383
—
—
— 1,559

(183,565)
(50,442)

Total assets

$ 76,521 $ 50,043 $ 80,402 $147,742 $ (254,926) $99,782

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:

Short-term borrowings
Accounts payable
Intercompany payable
Accrued compensation
Accrued income taxes
Deferred tax liabilities
Other accrued expenses

Total current liabilities

Long-term debt
Long-term accrued compensation and retirement

benefits

Long-term accrued income taxes
Long-term intercompany loans payable
Long-term deferred tax liabilities
Other long-term liabilities

Total liabilities
Shareholders’ equity

— $
—
20,486
32
11
—
1

— $
—
—
—
—
—
24

20,530
—

—
10
3,918
—
—

24,458
52,063

24
3,382

—
—
14,689
—
—

18,095
31,948

— $
—
—
—
—
—
—

993 $

1,709
433
1,680
555
—
2,160

(20,919)

993
— $
— 1,709
—
— 1,712
566
—
—
—
— 2,185

7,530
—
— 26,865

(20,919)

7,165
— 30,247

—
—
14,298
—
—

14,298
66,104

1,759
2,893
17,537
3,729
1,916

62,229
85,513

(50,442)

— 1,759
— 2,903
—
— 3,729
— 1,916

(71,361)
(183,565)

47,719
52,063

Total liabilities and shareholders’ equity

$ 76,521 $ 50,043 $ 80,402 $147,742 $ (254,926) $99,782

145

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

Condensed Consolidating Balance Sheet
April 24, 2015
CIFSA Senior Notes

(in millions)

ASSETS
Current assets:

Cash and cash equivalents
Investments
Accounts receivable, net
Inventories
Intercompany receivable
Tax assets
Prepaid expenses and other current assets

Total current assets
Property, plant and equipment, net
Goodwill
Other intangible assets, net
Long-term tax assets
Investment in subsidiaries
Intercompany loans receivable
Other assets

Parent
Company
Guarantor
(Medtronic
plc)

263
—
—
—
259
—
4

526
—
—
—
—
70,233
3,000
—

Subsidiary
Issuer
(CIFSA)

Subsidiary
Guarantors

Subsidiary
Non-
guarantors

Consolidating
Adjustments

Total

728
—
—
—
—
—
—

728
—
—
—
—
28,663
7,401
—

170
—
—
—
269
—
6

445
1
—
—
—
61,768
11,303
—

3,682
14,637
5,112
3,463
20,506
1,335
1,444

50,179
4,698
40,530
28,101
774
—
17,082
1,737

— $
—
—
—
(21,034)
—
—

(21,034)
—
—
—
—
(160,664)
(38,786)
—

4,843
14,637
5,112
3,463
—
1,335
1,454

30,844
4,699
40,530
28,101
774
—
—
1,737

Total assets

$73,759

$ 36,792

$ 73,517

$143,101

$ (220,484)

$106,685

LIABILITIES AND SHAREHOLDERS’
EQUITY
Current liabilities:

Short-term borrowings
Accounts payable
Intercompany payable
Accrued compensation
Accrued income taxes
Deferred tax liabilities
Other accrued expenses

Total current liabilities

Long-term debt
Long-term accrued compensation and

retirement benefits

Long-term accrued income taxes
Long-term intercompany loans payable
Long-term deferred tax liabilities
Other long-term liabilities

Total liabilities
Shareholders’ equity

$ — $ 1,002
—
—
—
—
—
40

—
20,506
1
19
3
—

$ — $
2
279
—
—
—
1

20,529
—

—
—
—
—
—

1,042
4,581

—
—
8,385
—
—

20,529
53,230

14,008
22,784

282
—

—
—
10,002
—
—

10,284
63,233

1,432
1,608
249
1,610
916
116
2,423

8,354
29,171

1,535
2,476
20,399
4,700
1,819

68,454
74,647

— $
—
(21,034)
—
—
—
—

(21,034)
—

—
—
(38,786)
—
—

(59,820)
(160,664)

2,434
1,610
—
1,611
935
119
2,464

9,173
33,752

1,535
2,476
—
4,700
1,819

53,455
53,230

Total liabilities and shareholders’ equity

$73,759

$ 36,792

$ 73,517

$143,101

$(220,484)

$106,685

146

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

Condensed Consolidating Statement of Cash Flows
Fiscal Year Ended April 29, 2016
CIFSA Senior Notes

(in millions)

Operating Activities:

Net cash provided by (used in) operating
activities

receivable
Sales of subsidiaries
Capital contributions paid
Other investing activities, net

Net cash provided by (used in) investing
activities

Financing Activities:
Acquisition-related contingent consideration
Change in short-term borrowings, net
Repayment of short-term borrowings (maturities

greater than 90 days)

Proceeds from short-term borrowings (maturities

greater than 90 days)
Issuance of long-term debt
Payments on long-term debt
Dividends to shareholders
Issuance of ordinary shares
Repurchase of ordinary shares
Net intercompany loan borrowings (repayments)
Intercompany dividend paid
Capital Contributions received
Other financing activities

Net cash provided by (used in) financing
activities

Effect of exchange rate changes on cash and cash

equivalents

Net change in cash and cash equivalents
Cash and cash equivalents at beginning of period

Parent
Company
Guarantor
(Medtronic
plc)

Subsidiary
Issuer
(CIFSA)

Subsidiary
Guarantors

Subsidiary
Non-
guarantors

Consolidating
Adjustments

Total

297

$ 4,208

604

$ 4,114

(4,005)

$ 5,218

—
—
—
—

—

—
—

—

—
—
—
(2,139)
491
(2,830)
3,918
—
—
—

—
—
—
—

(8,193)
—
(720)
—

(164)
53
(4,959)
—

(1,266)
(1,046)
(5,406)
9,924

(3,302)
—
—
(14)

53
—
—
—

(1,213)
(1,046)
(5,406)
9,924

11,659
(53)
5,679
—

—
—
—
(14)

(8,913)

(5,070)

(1,110)

17,338

2,245

—
—

—

—
—
(2,121)
—
—
—
6,306
—
—
—

—
—

(139)

139
—
—
—
—
—
4,296
—
—
—

(22)
7

—

—
—
(3,011)
—
—
—
(2,861)
(4,005)
5,679
82

—
—

—

—
—
—
—
—
—
(11,659)
4,005
(5,679)
—

(22)
7

(139)

139
—
(5,132)
(2,139)
491
(2,830)
—
—
—
82

(560)

4,185

4,296

(4,131)

(13,333)

(9,543)

—

(263)
263

—

(520)
728

—

(170)
170

113

(1,014)
3,682

—

—
—

113

(1,967)
4,843

Cash and cash equivalents at end of period

$ — $

208

$ — $ 2,668

— $ 2,876

147

Medtronic plc
Notes to Consolidated Financial Statements (Continued)

Condensed Consolidating Statement of Cash Flows
Fiscal Year Ended April 24, 2015
CIFSA Senior Notes

(in millions)

Operating Activities:

Net cash provided by (used in) operating
activities

receivable

Capital contributions paid
Other investing activities, net

Net cash provided by (used in) investing
activities

Financing Activities:
Acquisition-related contingent consideration
Change in short-term borrowings, net
Repayment of short-term borrowings (maturities

greater than 90 days)

Proceeds from short-term borrowings (maturities

Net cash provided by (used in) financing
activities

Effect of exchange rate changes on cash and cash

equivalents

Net change in cash and cash equivalents
Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Parent
Company
Guarantor
(Medtronic
plc)

Subsidiary
Issuer
(CIFSA)

Subsidiary
Guarantors

Subsidiary
Non-
guarantors

Consolidating
Adjustments

Total

$ 1,238

142

$ 4,596

(1,100)

$ 4,902

(9,700)
—
—
—

—
—
—

440
—
—
—

(59)
(937)
—

—
(1)
—
—

29
—
—

(5,624)
(570)
(7,582)
5,890

(10,626)
—
89

—
—
—
—

(14,884)
(571)
(7,582)
5,890

10,656
937
—

—
—
89

(9,700)

(556)

(18,423)

11,593

(17,058)

—
—

(150)

150
—
—
—
—
—
—
—
—
—

(85)
(1)

—

—
19,942
(1,217)
(902)
477
(1,620)
59
(1,100)
937
(31)

—
—

—

—
—
—
—
—
—
(10,656)
1,100
(937)
—

(85)
(1)

(150)

150
19,942
(1,268)
(1,337)
649
(1,920)
—
—
—
(31)

—

16,459

(10,493)

15,949

—

170
—

170

(353)

2,279
1,403

—

—
—

(353)

3,440
1,403

$ 3,682

— $ 4,843

—
—

—

—
—
(51)
—
—
—
97
—
—
—

—

728
—

728

—
—

—

—
—
—
(435)
172
(300)
10,500
—
—
—

9,937

—

263
—

263

148

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A. Controls and Procedures

Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the
effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the
Securities Exchange Act of 1934, as amended (the Exchange Act)) and changes in the Company’s internal control over financial
reporting (as defined in Rule 13a-15(f) under the Exchange Act) as of the end of the period covered by this report. Based upon
that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered
by this annual report, our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) are effective.

Management’s Annual Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company
(as defined in Exchange Act Rule 13a-15(f)). Management conducted an evaluation of the effectiveness of internal control over
financial reporting based on the framework in Internal Control – Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). Based on this evaluation, management concluded that the
Company’s internal control over financial reporting was effective as of April 29, 2016. Our internal control over financial
reporting as of April 29, 2016, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting
firm who has also audited our consolidated financial statements, as stated in their report in the section entitled “Report of
Independent Registered Public Accounting Firm,” which expresses an unqualified opinion on the effectiveness of the
Company’s internal control over financial reporting as of April 29, 2016, which is included in “Item 8. Financial Statements and
Supplementary Data” in this Annual Report on Form 10-K.

Changes in Internal Control over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting during the Company’s most recently
completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal
control over financial reporting.

Item 9B. Other Information

None.

149

PART III

Part III of this Annual Report on Form 10-K incorporates information by reference from our 2016 definitive proxy statement,
which will be filed no later than 120 days after April 29, 2016.

Item 10. Directors, Executive Officers, and Corporate Governance

The sections entitled “Proposal 1 — Election of Directors — Directors and Nominees,” “Governance of Medtronic —
Committees of the Board and Meetings,” and “Share Ownership Information — Section 16(a) Beneficial Ownership Reporting
Compliance” in our Proxy Statement for our 2016 Annual General Meeting of Shareholders, which will be filed no later than
120 days after April 29, 2016, are incorporated herein by reference. See also “Executive Officers of Medtronic” herein.

We have adopted a written Code of Ethics that applies to our Chief Executive Officer, Chief Financial Officer, Corporate
Treasurer, Corporate Controller, and other senior financial officers performing similar functions who are identified from time to
time by the Chief Executive Officer. We have also adopted a written Code of Business Conduct and Ethics for Members of the
Board of Directors. The Code of Ethics for Senior Financial Officers, which is part of our broader Code of Conduct applicable
to all employees, and the Code of Business Conduct and Ethics for Members of the Board of Directors are posted on our
website, www.medtronic.com under the “About Medtronic” menu, under the “Investors” caption, and under the “Corporate
Governance” subcaption. Any amendments to, or waivers for executive officers or directors of, these ethics codes will be
disclosed on our website promptly following the date of such amendment or waiver.

Item 11. Executive Compensation

The sections entitled “Governance of Medtronic — Director Compensation,” “Governance of Medtronic — Compensation
Committee — Compensation Committee Interlocks and Insider Participation,” “Compensation Discussion and Analysis
(CD&A),” and “Executive Compensation” in our Proxy Statement for our 2016 Annual General Meeting of Shareholders,
which will be filed no later than 120 days after April 29, 2016, are incorporated herein by reference. The section entitled
“Compensation Committee Report” in our Proxy Statement for our 2016 Annual General Meeting of Shareholders, which will
be filed no later than 120 days after April 29, 2016, is furnished herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters

The sections entitled “Share Ownership Information — Significant Shareholders,” “Share Ownership Information — Beneficial
Ownership of Management,” and “Executive Compensation — Equity Compensation Plan Information” in our Proxy Statement
for our 2016 Annual General Meeting of Shareholders, which will be filed no later than 120 days after April 29, 2016, are
incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The sections entitled “Proposal 1 — Election of Directors — Director Independence” and “Proposal 1 —Election of
Directors — Related Transactions and Other Matters” in our Proxy Statement for our 2016 Annual General Meeting of
Shareholders, which will be filed no later than 120 days after April 29, 2016, are incorporated herein by reference.

Item 14. Principal Accounting Fees and Services

The sections entitled “Governance of Medtronic — Audit Committee — Audit Committee Pre-Approval Policies” and “Audit
and Non-Audit Fees” in our Proxy Statement for our 2016 Annual General Meeting of Shareholders, which will be filed no later
than 120 days after April 29, 2016, are incorporated herein by reference.

150

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a) 1. Financial Statement Schedules

Schedule II. Valuation and Qualifying Accounts — years ended April 29, 2016, April 24, 2015, and April 25, 2014.

All other schedules are omitted because they are not applicable or the required information is shown in the financial
statements or notes thereto.

2. Exhibits

Exhibit No.

Description

2.1

2.2

2.3

2.4

2.5

3.1

3.2

4.1

4.2

4.3

4.4

4.5

Transaction Agreement, dated as of June 15, 2014, among Medtronic, Inc., Covidien plc, Medtronic plc
(formerly known as Kalani I Limited), Makani II Limited, Aviation Acquisition Co., Inc., and Aviation Merger
Sub, LLC (incorporated by reference to Exhibit 2.1 to Medtronic plc’s Amendment No. 5 to the Registration
Statement on Form S-4, filed on November 20, 2014, File No. 333-197406).

Appendix III to the Rule 2.5 Announcement (Conditions Appendix) (incorporated by reference to Exhibit 2.2
to Medtronic, Inc.’s Current Report on Form 8-K, filed on June 16, 2014, File No. 001-07707).

Expenses Reimbursement Agreement, dated as of June 15, 2014, by and between Covidien plc and Medtronic,
Inc. (incorporated by reference to Exhibit 2.3 to Medtronic, Inc.’s Current Report on Form 8-K, filed on June
16, 2014, File No. 001-07707).

Separation and Distribution Agreement, dated as of June 29, 2007, by and among Tyco International Ltd.,
Covidien Ltd. and Tyco Electronics Ltd. (incorporated by reference to Exhibit 2.1 to Covidien plc’s Current
Report on Form 8-K, filed on July 5, 2007, File No. 001-33259).

Separation and Distribution Agreement, dated as of June 28, 2013, between Covidien plc and Mallinckrodt plc
(incorporated by reference to Exhibit 2.1 to Covidien plc’s Current Report on Form 8-K filed on July 1, 2013,
File No. 001-33259).

Certificate of Incorporation of Medtronic plc (incorporated by reference to Exhibit 3.1 to Medtronic plc’s
Current Report on Form 8-K, filed on January 27, 2015, File No. 001-36820).

Amended and Restated Memorandum and Articles of Association of Medtronic plc (incorporated by reference
to Exhibit 3.1 to Medtronic plc’s Current Report on Form 8-K12B, filed on January 27, 2015, File No. 001-
36820).

Form of Indenture between Medtronic, Inc. and Wells Fargo Bank, National Association (incorporated by
reference to Exhibit 4.1 to Medtronic, Inc.’s Amendment No. 2 to the Registration Statement on Form S-4,
filed on January 10, 2005, File No. 333-121239).

Indenture, dated as of September 15, 2005, between Medtronic, Inc. and Wells Fargo Bank, N. A. (including
the Forms of Notes thereof) (incorporated by reference to Exhibit 4.1 to Medtronic, Inc.’s Registration
Statement on Form S-4, filed December 6, 2005, File No. 333-130163).

First Supplemental Indenture, dated as of January 26, 2015, by and among Medtronic plc, Medtronic, Inc.,
Medtronic Global Holdings S.C.A. and Wells Fargo Bank, National Association (incorporated by reference to
Exhibit 4.1 to Medtronic plc’s Current Report on Form 8-K12B, filed on January 27, 2015, File No. 001-
36820).

Form of Indenture between Medtronic, Inc. and Wells Fargo Bank, National Association regarding 2009
offering (incorporated by reference to Exhibit 4.1 to Medtronic, Inc.’s Registration Statement on Form S-3,
filed on March 9, 2009, File No. 333-157777).

First Supplemental Indenture, dated March 12, 2009, between Medtronic, Inc. and Wells Fargo Bank, National
Association (including the Forms of Notes thereof) (incorporated by reference to Exhibit 4.1 to Medtronic,
Inc.’s Current Report on Form 8-K, filed on March 12, 2009, File No. 001-07707).

151

4.6

4.7

4.8

4.9

4.10

4.11

4.12

4.13

4.14

4.15

4.16

4.17

4.18

4.19

4.20

Second Supplemental Indenture, dated March 16, 2010, between Medtronic, Inc. and Wells Fargo Bank,
National Association (including the Forms of Notes thereof) (incorporated by reference to Exhibit 4.1 to
Medtronic, Inc.’s Current Report on Form 8-K, filed on March 16, 2010, File No. 001-07707).

Third Supplemental Indenture, dated March 15, 2011, between Medtronic, Inc. and Wells Fargo Bank,
National Association (including the Forms of Notes thereof) (incorporated by reference to Exhibit 4.1 to
Medtronic, Inc.’s Current report on Form 8-K, filed on March 16, 2011, File No. 001-07707).

Fourth Supplemental Indenture, dated March 19, 2012, between Medtronic, Inc. and Wells Fargo Bank,
National Association (including the Forms of Notes thereof) (incorporated by reference to Exhibit 4.2 to
Medtronic, Inc.’s Current Report on Form 8-K, filed on March 20, 2012, File No. 001-07707).

Fifth Supplemental Indenture, dated March 26, 2013, between Medtronic, Inc. and Wells Fargo Bank, National
Association (including the Forms of Notes thereof) (incorporated by reference to Exhibit 4.1 to Medtronic,
Inc.’s Current Report on Form 8-K, filed on March 26, 2013, File No. 001-07707).

Sixth Supplemental Indenture, dated February 27, 2014, between Medtronic, Inc. and Wells Fargo Bank,
National Association (including the Form of Global Note thereof) (incorporated by reference to Exhibit 4.2 to
Medtronic, Inc.’s Current Report on Form 8-K, filed on February 27, 2014, File No. 001-07707).

Seventh Supplemental Indenture, dated as of January 26, 2015, by and among Medtronic plc, Medtronic, Inc.,
Medtronic Global Holdings S.C.A. and Wells Fargo Bank, National Association (incorporated by reference to
Exhibit 4.2 to Medtronic plc’s Current Report on Form 8-K12B, filed on January 27, 2015, File No. 001-
36820).

Indenture, dated December 10, 2014, between Medtronic, Inc. and Wells Fargo Bank, National Association
(incorporated by reference to Exhibit 4.1 to Medtronic, Inc.’s Current Report on Form 8-K filed with the
Commission on December 10, 2014, File No. 001-07707).

First Supplemental Indenture, dated December 10, 2014, between Medtronic, Inc. and Wells Fargo Bank,
National Association (including Form of Floating Rate Senior Notes due 2020, Form of 1.500% Senior Notes
due 2018, Form of 2.500% Senior Notes due 2020, Form of 3.150% Senior Notes due 2022, Form of 3.500%
Senior Notes due 2025, Form of 4.375% Senior Notes due 2035 and Form of 4.625% Senior Notes due 2045)
(incorporated by reference to Exhibit 4.2 of Medtronic, Inc.’s Current Report on Form 8-K filed with the
Commission on December 10, 2014, File No. 001-07707).

Second Supplemental Indenture, dated as of January 26, 2015, by and among Medtronic plc and Wells Fargo
Bank, National Association (incorporated by reference to Exhibit 4.3 to Medtronic plc’s Current Report on
Form 8-K12B, filed on January 27, 2015, File No. 001-36820).

Third Supplemental Indenture, dated as of January 26, 2015, by and among Medtronic Global Holdings S.C.A.
and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 4.4 to Medtronic plc’s
Current Report on Form 8-K12B, filed on January 27, 2015, File No. 001-36820).

Indenture, dated as of October 22, 2007, by and among Covidien International Finance S.A., Covidien Ltd. and
Deutsche Bank Trust Company Americas (incorporated by reference to Exhibit 4.1(a) to Covidien plc’s
Current Report on Form 8-K filed on October 22, 2007, File No. 001-33259).

First Supplemental Indenture, dated as of October 22, 2007, by and among Covidien International Finance
S.A., Covidien Ltd. 1and Deutsche Bank Trust Company Americas (incorporated by reference to Exhibit
4.1(b) to the Covidien plc’s Current Report on Form 8-K filed on October 22, 2007, File No. 001-33259).

Second Supplemental Indenture, dated as of October 22, 2007, by and among Covidien International Finance
S.A., Covidien Ltd. and Deutsche Bank Trust Company Americas (incorporated by reference to Exhibit 4.1(c)
to the Covidien plc’s Current Report on Form 8-K filed on October 22, 2007, File No. 001-33259).

Third Supplemental Indenture, dated as of October 22, 2007, by and among Covidien International Finance
S.A., Covidien Ltd. and Deutsche Bank Trust Company Americas (incorporated by reference to Exhibit 4.1(d)
to Covidien plc’s Current Report on Form 8-K filed on October 22, 2007, File No. 001-33259).

Fourth Supplemental Indenture, dated as of October 22, 2007, by and among Covidien International Finance
S.A., Covidien Ltd. and Deutsche Bank Trust Company Americas (incorporated by reference to Exhibit 4.1(e)
to Covidien plc’s Current Report on Form 8-K filed on October 22, 2007, File No. 001-33259).

152

4.21

4.22

4.23

4.24

4.25

4.26

4.27

10.1

10.2

10.3

10.4

10.5

10.6

Fifth Supplemental Indenture, dated as of June 4, 2009, by and among Covidien International Finance S.A.,
Covidien Ltd., Covidien plc and Deutsche Bank Trust Company Americas (incorporated by reference to
Exhibit 4.1 to Covidien plc’s Current Report on Form 8-K12G3 filed on June 5, 2009, File No. 001-33259).

Sixth Supplemental Indenture, dated as of June 28, 2010, among Covidien International Finance S.A.,
Covidien Ltd., Covidien plc and Deutsche Bank Trust Company Americas (incorporated by reference to
Exhibit 4.1 to Coviden plc’s Current Report on Form 8-K filed on June 28, 2010, File No. 001-33259).

Seventh Supplemental Indenture, dated as of May 30, 2012, among Covidien International Finance S.A.,
Covidien Ltd., Covidien plc and Deutsche Bank Trust Company Americas (incorporated by reference to
Exhibit 4.1 to Covidien plc’s Current Report on Form 8-K filed on May 30, 2012, File No. 001-33259).

Eighth Supplemental Indenture, dated as of May 16, 2013, among Covidien International Finance S.A.,
Covidien Ltd., Covidien plc and Deutsche Bank Trust Company Americas (incorporated by reference to
Exhibit 4.1 to Covidien plc’s Current Report on Form 8-K filed on May 16, 2013, File No. 001-33259).

Ninth Supplemental Indenture, dated as of January 26, 2015, by and among Medtronic plc, Medtronic Global
Holdings S.C.A., Covidien public limited company, Covidien International Finance S.A., Covidien Ltd. and
Deutsche Bank Trust Company Americas (incorporated by reference to Exhibit 4.5 to Medtronic plc’s Current
Report on Form 8-K12B, filed on January 27, 2015, File No. 001-36820).

Registration Rights Agreement, dated December 10, 2014, by and among Medtronic, Inc. and Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Deutsche Bank Securities Inc. and J.P. Morgan Securities LLC, as
representatives of the several initial purchasers (incorporated by reference to Exhibit 4.10 to Medtronic, Inc.’s
Current Report on Form 8-K filed with the Commission on December 10, 2014, File No. 001-07707)

Joinder Agreement to the Registration Rights Agreement, dated as of January 26, 2015, by and among
Medtronic plc and Medtronic Global Holdings S.C.A. (incorporated by reference to Exhibit 4.6 to Medtronic
plc’s Current Report on Form 8-K12B, filed on January 27, 2015, File No. 001-36820).

Senior Unsecured Term Loan Credit Agreement, dated as of November 7, 2014, by and among Medtronic,
Inc., Medtronic Holdings Limited, Medtronic Global Holdings SCA, the lenders from time to time party
thereto and Bank of America, N.A., as administrative agent (incorporated by reference to Exhibit 10.2 to
Medtronic Inc.’s Current Report on Form 8-K, filed on November 10, 2014, File No. 001-07707).

Amendment and Restatement Agreement, dated as of November 7, 2014, by and among Medtronic, Inc.,
Medtronic plc (formerly known as Medtronic Holdings Limited), Medtronic Global Holdings S.C.A., the
lenders from time to time party thereto, and Bank of America, N.A., as administrative agent and issuing bank
(incorporated by reference to Exhibit 10.3 to Medtronic, Inc.’s Current Report on Form 8-K, filed on
November 10, 2014, File No. 001-07707).

Senior Unsecured Bridge Credit Agreement, dated as of November 7, 2014, by and among Medtronic, Inc.,
Medtronic Holdings Limited, Medtronic Global Holdings SCA, the lenders from time to time party thereto,
and Bank of America, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to Medtronic,
Inc.’s Current Report on Form 8-K, filed on November 10, 2014, File No. 001-07707).

Senior Unsecured Bridge Credit Agreement, dated as of June 15, 2014, by and among Medtronic, Inc., Kalani I
Limited, the lenders from time to time party thereto, and Bank of America, N.A., as administrative agent
(incorporated by reference to Exhibit 10.1 to Medtronic, Inc.’s Current Report on Form 8-K, filed on June 18,
2014, File No. 001-07707).

Senior Unsecured Cash Bridge Credit Agreement, dated as of June 15, 2014, by and among Makani II Limited,
Kalani I Limited, the lenders from time to time party thereto, and Bank of America, N.A., as administrative
agent (incorporated by reference to Exhibit 10.2 to Medtronic, Inc.’s Current Report on Form 8-K, filed on
June 18, 2014, File No. 001-07707).

Amendment dated September 30, 2015, to Senior Unsecured Term Loan Credit Agreement, dated as of
November 7, 2014, by and among Medtronic, Inc., Medtronic Holdings Limited, Medtronic Global Holdings,
SCA, the lenders from time to time party thereto, and Bank of America, N.A., as administrative agent.
(incorporated by reference to Exhibit 10.1 to Medtronic plc’s Form 10-Q for the quarter ended October 30,
2015, filed on December 9, 2015, File No. 001-36820).

153

10.7

10.8

10.9

10.10

10.11

10.12

10.13

10.14

*10.15

*10.16

*10.17

*10.18

*10.19

*10.20

*10.21

*10.22

Amendment dated September 30, 2015, to Amended and Restated Revolving Credit Agreement, dated as of
November 7, 2014, by and among Medtronic, Inc., Medtronic Holdings Limited, Medtronic Global Holdings,
SCA, the lenders from time to time party thereto, and Bank of America, N.A., as administrative agent and
issuing bank (incorporated by reference to Exhibit 10.2 to Medtronic plc’s Form 10-Q for the quarter ended
October 30, 2015, filed on December 9, 2015, File No. 001-36820).

Amended and Restated Five-Year Senior Credit Agreement, dated as of May 23, 2014, among Covidien
International Finance S.A., Covidien plc, the lenders party thereto and Citibank, N.A., as administrative agent
(incorporated by reference to Exhibit 10.1 to Covidien plc’s Current Report on Form 8-K, filed on May 28,
2014, File No. 001-33259).

Tax Sharing Agreement, dated as of June 29, 2007, by and among Tyco International Ltd., Covidien Ltd. and
Tyco Electronics Ltd. (incorporated by reference to Exhibit 10.1 to Covidien plc’s Current Report on Form 8-
K, filed on July 5, 2007, File No. 001-33259).

Tax Matters Agreement, dated as of June 28, 2013, between Covidien plc and Mallinckrodt plc (incorporated
by reference to Exhibit 10.1 to Covidien plc’s Current Report on Form 8-K filed on July 1, 2013, File No. 001-
33259).

Employee Matters Agreement, dated as of June 28, 2013, between Covidien plc and Mallinckrodt plc
(incorporated by reference to Exhibit 10.2 to Covidien plc’s Current Report on Form 8-K filed on July 1, 2013,
File No. 001-33259).

Transition Services Agreement, dated as of June 28, 2013, between Covidien plc and Mallinckrodt plc
(incorporated by reference to Exhibit 10.3 to Covidien plc’s Current Report on Form 8-K filed on July 1, 2013,
File No. 001-33259).

Form of Deed of Indemnification (incorporated by reference to Exhibit 10.1 to Medtronic plc’s Current Report
on Form 8-K12B, filed on January 27, 2015, File No. 001-36820).

Form of Indemnification Agreement (incorporated by reference to Exhibit 10.2 to Medtronic plc’s Current
Report on Form 8-K12B, filed on January 27, 2015, File No. 001-36820).

Letter Agreement by and between Medtronic, Inc. and Omar Ishrak dated May 11, 2011 (incorporated by
reference to Exhibit 10.1 to Medtronic, Inc.’s Current Report on Form 8-K, filed on May 11, 2011, File No.
001-07707).

Change of Control Severance Plan—Section 16B Officers (as amended and restated as of January 26, 2015)
(incorporated by reference to Exhibit 10.14 to Medtronic plc’s Current Report on Form 8-K, filed on January
27, 2015, File No. 001-36820).

Amendment to Letter Agreement dated May 11, 2011 by and between Medtronic, Inc. and Omar Ishrak
(incorporated by reference to Exhibit 10.1 to Medtronic, Inc.’s Quarterly Report on Form 10-Q for the quarter
ended July 29, 2011, filed September 7, 2011, File No. 001-07707).

Amendment dated February 12, 2015 to the Letter Agreement by and between Medtronic, Inc. and Omar
Ishrak dated May 11, 2011 (incorporated by reference to Exhibit 10.24 to Medtronic plc’s Quarterly Report on
Form 10-Q for the quarter ended January 23, 2015, filed on February 27, 2015, File No. 001-36820).

Letter Agreement by and between Medtronic, Inc. and Michael J. Coyle dated November 19, 2009
(incorporated by reference to Exhibit 10.55 to Medtronic, Inc.’s Annual Report on Form 10-K for the year
ended April 27, 2012, filed on June 26, 2012, File No. 001-07707).

Letter Agreement by and between Medtronic, Inc. and Carol Surface dated August 22, 2013 (incorporated by
reference to Exhibit 10.44 to Medtronic, Inc.’s Annual Report on Form 10-K for the year ended April 25, 2014,
filed on June 20, 2014, File No. 001-07707).

Letter Agreement by and between Medtronic, Inc. and Hooman Hakami dated April 29, 2014 (incorporated by
reference to Exhibit 10.5 of Medtronic, Inc.’s Quarterly Report on Form 10-Q for the quarter ended July 25,
2014, filed on August 29, 2014, File No. 001-07707)

Letter Agreement by and between Medtronic, Inc. and Bradley E. Lerman dated May 2, 2014 (incorporated by
reference to Exhibit 10.4 of Medtronic, Inc.’s Quarterly Report on Form 10-Q for the quarter ended July 25,
2014, filed on August 29, 2014, File No. 001-07707)

154

*10.23

*10.24

*10.25

*10.26

*10.27

*10.28

*10.29

*10.30

*10.31

*10.32

*10.33

*10.34

*10.35

*10.36

*10.37

*10.38

*10.39

*10.40

Letter Agreement by and between Medtronic plc and Bryan C. Hanson dated February 12, 2015 (incorporated
by reference to Exhibit 10.30 to Medtronic plc’s Quarterly Report on Form 10-Q for the quarter ended January
23, 2015, filed on February 27, 2015, File No. 001-36820).

Letter Agreement by and between Medtronic, Inc. and Karen Parkhill dated May 2, 2016 (incorporated by
reference to Exhibit 10.1 to Medtronic, plc’s Current Report on Form 8-K, filed on May 4, 2016, File No. 001-
36820).

Form of Offer Letter Amendment (incorporated by reference to Exhibit 10.25 to Medtronic plc’s Quarterly
Report on Form 10-Q for the quarter ended January 23, 2015, filed on February 27, 2015, File No. 001-36820).

1994 Stock Award Plan (amended and restated as of January 1, 2008) (incorporated by reference to Exhibit
10.1 of Medtronic, Inc.’s Quarterly Report on Form 10-Q for the quarter ended January 28, 2008, filed on
March 4, 2008, File No. 001-07707).

Amendment to the 1994 Stock Award Plan (incorporated by reference to Exhibit 10.7 to Medtronic plc’s
Current Report on Form 8-K, filed on January 27, 2015, File No. 001-36820).

1998 Outside Director Stock Compensation Plan (as amended and restated effective as of January 1, 2008)
(incorporated by reference to Exhibit 10.3 to Medtronic, Inc.’s Current Report on Form 8-K, filed on February
27, 2014, File No. 001-07707)

Amendment to the 1998 Outside Director Stock Compensation Plan (incorporated by reference to Exhibit 10.2
to Medtronic plc’s Current Report on Form 8-K, filed on January 27, 2015, File No. 001-36820).

Form of Initial Option Agreement under the 1998 Outside Director Stock Compensation Plan (incorporated by
reference to Exhibit 10.17 to Medtronic, Inc.’s Annual Report on Form 10-K for the year ended April 29, 2005,
filed June 29, 2005, File No. 001-07707).

Form of Annual Option Agreement under the 1998 Outside Director Stock Compensation Plan (incorporated
by reference to Exhibit 10.18 to Medtronic, Inc.’s Annual Report on Form 10-K for the year ended April 29,
2005, filed June 29, 2005, File No. 001-07707).

Form of Replacement Option Agreement under the 1998 Outside Director Stock Compensation Plan
(incorporated by reference to Exhibit 10.19 to Medtronic, Inc.’s Annual Report on Form 10-K for the year
ended April 29, 2005, filed June 29, 2005, File No. 001-07707).

Kyphon Inc. 2002 Stock Plan (amended and restated July 26, 2007, as further amended on October 18, 2007)
(incorporated by reference to Exhibit 10.6 to Medtronic, Inc.’s Quarterly Report on Form 10-Q for the quarter
ended January 25, 2008, filed on March 4, 2008, File No. 001-07707).

Addendum: Kyphon Inc. 2002 Stock Plan (dated December 13, 2007) (incorporated by reference to Exhibit
10.7 to Medtronic, Inc.’s Quarterly Report on Form 10-Q for the quarter ended January 25, 2008, filed on
March 4, 2008, File No. 001-07707).

Amendment to the Kyphon Inc. 2002 Stock Plan (incorporated by reference to Exhibit 10.1 to Medtronic plc’s
Current Report on Form 8-K, filed on January 27, 2015, File No. 001-36820).

2003 Long-Term Incentive Plan (as amended and restated effective January 1, 2008) (incorporated by
reference to Exhibit 10.4 to Medtronic, Inc.’s Quarterly Report on Form 10-Q for the quarter ended January 28,
2008, filed on March 4, 2008, File No. 001-07707).

Amendment to the 2003 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.3 to Medtronic
plc’s Current Report on Form 8-K, filed on January 27, 2015, File No. 001-36820).

Form of Restricted Stock Award Agreement under 2003 Long-Term Incentive Plan (incorporated by reference
to Exhibit 10.3 to Medtronic, Inc.’s Quarterly Report on Form 10-Q for the quarter ended January 28, 2005,
filed on March 7, 2005, File No. 001-07707).

Form of Non-Qualified Stock Option Agreement under 2003 Long-Term Incentive Plan (four year vesting)
(incorporated by reference to Exhibit 10.1 to Medtronic, Inc.’s Quarterly Report on Form 10-Q for the quarter
ended January 28, 2005, filed on March 7, 2005, File No. 001-07707).

Form of Non-Qualified Stock Option Agreement under 2003 Long-Term Incentive Plan (immediate vesting)
(incorporated by reference to Exhibit 10.2 to Medtronic, Inc.’s Quarterly Report on Form 10-Q for the quarter
ended January 28, 2005, filed on March 7, 2005, File No. 001-07707).

155

*10.41

*10.42

*10.43

*10.44

*10.45

*10.46

*10.47

*10.48

*10.49

*10.50

*10.51

*10.52

*10.53

*10.54

*10.55

*10.56

*10.57

Form of Restricted Stock Units Award Agreement under 2003 Long-Term Incentive Plan (incorporated by
reference to Exhibit 10.20 to Medtronic, Inc.’s Annual Report on Form 10-K for the year ended April 29, 2005,
filed on June 29, 2005, File No. 001-07707).

Form of Performance Share Award Agreement under 2003 Long-Term Incentive Plan (incorporated by
reference to Exhibit 10.21 to Medtronic, Inc.’s Annual Report on Form 10-K for the year ended April 29, 2005,
filed on June 29, 2005, File No. 001-07707).

Form of Non-Qualified Stock Option Agreement under 2003 Long-Term Incentive Plan effective June 22,
2006 (incorporated by reference to Exhibit 10.23 to Medtronic, Inc.’s Annual Report on Form 10-K for the
year ended April 28, 2006, filed on June 28, 2006, File No. 001-07707).

Form of Restricted Stock Award Agreement under 2003 Long-Term Incentive Plan effective June 22, 2006
(incorporated by reference to Exhibit 10.24 to Medtronic, Inc.’s Annual Report on Form 10-K for the year
ended April 28, 2006, filed on June 28, 2006, File No. 001-07707).

Form of Restricted Stock Unit Award Agreement under 2003 Long-Term Incentive Plan effective June 22,
2006 (incorporated by reference to Exhibit 10.25 to Medtronic, Inc.’s Annual Report on Form 10-K for the
year ended April 28, 2006, filed on June 28, 2006, File No. 001-07707).

Form of Performance Award Agreement under 2003 Long-Term Incentive Plan effective June 22, 2006
(incorporated by reference to Exhibit 10.26 to Medtronic, Inc.’s Annual Report on Form 10-K for the year
ended April 28, 2006, filed on June 28, 2006, File No. 001-07707).

Form of Restricted Stock Award Agreement under 2003 Long-Term Incentive Plan (incorporated by reference
to Exhibit 10.3 to Medtronic, Inc.’s Quarterly Report on Form 10-Q for the quarter ended October 26, 2007,
filed on December 4, 2007, File No. 001-07707).

Form of Restricted Stock Unit Award Agreement under 2003 Long-Term Incentive Plan (incorporated by
reference to Exhibit 10.4 to Medtronic, Inc.’s Quarterly Report on Form 10-Q for the quarter ended October
26, 2007, filed on December 4, 2007, File No. 001-07707).

Form of Non-Qualified Stock Option Agreement under 2003 Long-Term Incentive Plan (incorporated by
reference to Exhibit 10.39 to Medtronic, Inc.’s Annual Report on Form 10-K for the year ended April 25, 2008,
filed on June 24, 2008, File No. 001-07707).

Form of Restricted Stock Unit Award Agreement under 2003 Long-Term Incentive Plan (incorporated by
reference to Exhibit 10.40 to Medtronic, Inc.’s Annual Report on Form 10-K for the year ended April 25, 2008,
filed on June 24, 2008, File No. 001-07707).

Form of Restricted Stock Unit Award Agreement under 2003 Long-Term Incentive Plan (incorporated by
reference to Exhibit 10.41 to Medtronic, Inc.’s Annual Report on Form 10-K for the year ended April 25, 2008,
filed on June 24, 2008, File No. 001-07707).

Israeli Amendment to the 2003 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.5 to
Medtronic, Inc.’s Quarterly Report on Form 10-Q for the quarter ended January 25, 2008, filed on March 4,
2008, File No. 001-07707).

2008 Stock Award and Incentive Plan (as amended and restated effective August 27, 2009) (incorporated by
reference to Exhibit 10.2 to Medtronic, Inc.’s Quarterly Report on Form 10-Q for the quarter ended October
30, 2009, filed on December 9, 2009, File No. 001-07707).

Amendment to the 2008 Stock Award and Incentive Plan (incorporated by reference to Exhibit 10.4 to
Medtronic plc’s Current Report on Form 8-K, filed on January 27, 2015, File No. 001-36820).

Form of Restricted Stock Unit Award Agreement under 2008 Stock Award and Incentive Plan (incorporated by
reference to Exhibit 10.2 to Medtronic, Inc.’s Quarterly Report on Form 10-Q for the quarter ended July 25,
2008, filed on September 3, 2008, File No. 001-07707).

Form of Restricted Stock Award Agreement under 2008 Stock Award and Incentive Plan (incorporated by
reference to Exhibit 10.3 to Medtronic, Inc.’s Quarterly Report on Form 10-Q for the quarter ended July 25,
2008, filed on September 3, 2008, File No. 001-07707).

Form of Restricted Stock Award Agreement under 2008 Stock Award and Incentive Plan (incorporated by
reference to Exhibit 10.4 to Medtronic, Inc.’s Quarterly Report on Form 10-Q for the quarter ended July 25,
2008, filed on September 3, 2008, File No. 001-07707).

156

*10.58

*10.59

*10.60

*10.61

*10.62

*10.63

*10.64

*10.65

*10.66

*10.67

*10.68

*10.69

*10.70

*10.71

*10.72

*10.73

*10.74

Form of Restricted Stock Unit Award Agreement under 2008 Stock Award and Incentive Plan (incorporated by
reference to Exhibit 10.5 to Medtronic, Inc.’s Quarterly Report on Form 10-Q for the quarter ended July 25,
2008, filed on September 3, 2008, File No. 001-07707).

Form of Non-Qualified Stock Option Agreement under 2008 Stock Award and Incentive Plan (incorporated by
reference to Exhibit 10.6 to Medtronic, Inc.’s Quarterly Report on Form 10-Q for the quarter ended July 25,
2008, filed on September 3, 2008, File No. 001-07707).

Terms of Non-Employee Director Compensation under 2008 Stock Award and Incentive Plan (incorporated by
reference to Exhibit 10.42 to Medtronic, Inc.’s Annual Report on Form 10-K for the year ended April 27, 2012,
filed on June 26, 2012, File No. 001-07707).

Form of Non-Employee Director Initial Option Agreement under 2008 Stock Award and Incentive Plan
(incorporated by reference to Exhibit 10.1 to Medtronic, Inc.’s Quarterly Report on Form 10-Q for the quarter
ended October 24, 2008, filed on December 3, 2008, File No. 001-07707).

Form of Non-Employee Director Annual Option Agreement under 2008 Stock Award and Incentive Plan
(incorporated by reference to Exhibit 10.2 to Medtronic, Inc.’s Quarterly Report on Form 10-Q for the quarter
ended October 24, 2008, filed on December 3, 2008, File No. 001-07707).

Form of Non-Employee Director Deferred Unit Award Agreement under 2008 Stock Award and Incentive Plan
(incorporated by reference to Exhibit 10.3 to Medtronic, Inc.’s Quarterly Report on Form 10-Q for the quarter
ended October 24, 2008, filed on December 3, 2008, File No. 001-07707).

Form of Non-Employee Restricted Stock Unit Award Agreement under Amended and Restated 2013 Stock
Award and Incentive Plan (incorporated by reference to Exhibit 10.65 to Medtronic plc’s Annual Report on
Form 10-K for the year ended April 24, 2015, filed on June 23, 2015, File No. 001-36820).

Medtronic Incentive Plan (amended and restated effective January 1, 2008) (incorporated by reference to
Exhibit 10.2 to Medtronic, Inc.’s Quarterly Report on Form 10-Q for the quarter ended January 28, 2008, filed
on March 4, 2008, File No. 001-07707).

Amended and Restated 2013 Stock Award and Incentive Plan (incorporated by reference to Exhibit 10.9 to
Medtronic plc’s Current Report on Form 8-K, filed on January 27, 2015, File No. 001-36820).

Israeli Amendment to the Amended and Restated 2013 Stock Award and Incentive Plan (incorporated by
reference to Exhibit 10.10 to Medtronic plc’s Current Report on Form 8-K, filed on January 27, 2015, File No.
001-36820).

Form of Non-Qualified Stock Option Agreement under Amended and Restated 2013 Stock Award and
Incentive Plan (incorporated by reference to Exhibit 10.31 to Medtronic plc’s Quarterly Report on Form 10-Q
for the quarter ended January 23, 2015, filed on February 27, 2015, File No. 001-36820).

Form of Non-Employee Director Deferred Unit Award Agreement under the 2008 Stock Award and Incentive
Plan (incorporated by reference to Exhibit 19.3 to Medtronic, Inc.’s Quarterly Report on Form 10-Q for the
quarter ended October 24, 2008, filed on December 3, 2008, File No. 001-07707).

Form of Non-Qualified Stock Option Agreement under 2013 Stock Award and Incentive Plan (incorporated by
reference to Exhibit 10.2 to Medtronic, Inc.’s Current Report on Form 8-K, filed on August 27, 2013, File No.
001-07707).

Form of Restricted Stock Unit Award Agreement (U.S. Employees) under 2013 Stock Award and Incentive
Plan (incorporated by reference to Exhibit 10.3 to Medtronic, Inc.’s Current Report on Form 8-K, filed on
August 27, 2013, File No. 001-07707).

Form of Restricted Stock Unit Award Agreement (Non-U.S. Employees) under 2013 Stock Award and
Incentive Plan (incorporated by reference to Exhibit 10.4 to Medtronic, Inc.’s Current Report on Form 8-K,
filed on August 27, 2013, File No. 001-07707).

Form of Restricted Stock Unit Award Agreement (Time-Based) under 2013 Stock Award and Incentive Plan
(incorporated by reference to Exhibit 10.5 to Medtronic, Inc.’s Current Report on Form 8-K, filed on August
27, 2013, File No. 001-07707).

Form of Restricted Stock Unit Award Agreement (Israeli-Employees) under 2013 Stock Award and Incentive
Plan (incorporated by reference to Exhibit 10.8 to Medtronic, Inc.’s Current Report on Form 8-K, filed on
August 27, 2013, File No. 001-07707).

157

*10.75

*10.76

*10.77

*10.78

*10.79

*10.80

*10.81

*10.82

*10.83

*10.84

*10.85

*10.86

*10.87

*10.88

*10.89

*10.90

*10.91

Form of Non-Qualified Stock Option Agreement under Amended and Restated 2013 Stock Award and
Incentive Plan (incorporated by reference to Exhibit 10.48 to Medtronic plc’s Quarterly Report on Form 10-Q
for the quarter ended January 23, 2015, filed on February 27, 2015, File No. 001-36820).

Form of Restricted Stock Unit Award Agreement under Amended and Restated 2013 Stock Award and
Incentive Plan (incorporated by reference to Exhibit 10.49 to Medtronic plc’s Quarterly Report on Form 10-Q
for the quarter ended January 23, 2015, filed on February 27, 2015, File No. 001-36820).

Form of Restricted Stock Unit Award Agreement under Amended and Restated 2013 Stock Award and
Incentive Plan (incorporated by reference to Exhibit 10.50 to Medtronic plc’s Quarterly Report on Form 10-Q
for the quarter ended January 23, 2015, filed on February 27, 2015, File No. 001-36820).

Form of Restricted Stock Unit Award Agreement under Amended and Restated 2013 Stock Award and
Incentive Plan (incorporated by reference to Exhibit 10.51 to Medtronic plc’s Quarterly Report on Form 10-Q
for the quarter ended January 23, 2015, filed on February 27, 2015, File No. 001-36820).

Form of Stock Option Agreement under Amended and Restated 2013 Stock Award and Incentive Plan
(incorporated by reference to Exhibit 10.53 to Medtronic plc’s Quarterly Report on Form 10-Q for the quarter
ended January 23, 2015, filed on February 27, 2015, File No. 001-36820).

Form of Restricted Stock Unit Award Agreement under Amended and Restated 2013 Stock Award and
Incentive Plan (incorporated by reference to Exhibit 10.54 to Medtronic plc’s Quarterly Report on Form 10-Q
for the quarter ended January 23, 2015, filed on February 27, 2015, File No. 001-36820).

Medtronic plc 2014 Amended and Restated Employees Stock Purchase Plan (incorporated by reference to
Exhibit 10.8 to Medtronic plc’s Current Report on Form 8-K, filed on January 27, 2015, File No. 001-36820).

Medtronic plc Incentive Plan (as amended and restated effective January 26, 2015) (incorporated by reference
to Exhibit 10.11 to Medtronic plc’s Current Report on Form 8-K, filed on January 27, 2015, File No. 001-
36820).

Medtronic plc Supplemental Executive Retirement Plan (as restated generally effective January 26, 2015)
(incorporated by reference to Exhibit 10.15 to Medtronic plc’s Current Report on Form 8-K, filed on January
27, 2015, File No. 001-36820).

Medtronic plc Savings and Investment Plan (as amended and restated generally effective January 26, 2015)
(incorporated by reference to Exhibit 4.22 to Medtronic plc’s Registration Statement on Form S-8 filed on
January 28, 2015, File No. 333-201737).

Medtronic plc Puerto Rico Employees’ Savings and Investment Plan (as amended and restated generally
effective January 26, 2015) (incorporated by reference to Exhibit 4.23 to Medtronic plc’s Registration
Statement on Form S-8 filed on January 28, 2015, File No. 333-201737).

Medtronic plc Capital Accumulation Plan Deferral Program (as amended and restated generally effective
January 26, 2015) (incorporated by reference to Exhibit 10.13 to Medtronic plc’s Current Report on Form 8-K,
filed on January 27, 2015, File No. 001-36820).

Covidien Savings Related Share Plan (incorporated by reference to Exhibit 99.3 to Covidien plc’s Post-
Effective Amendment No. 1 to Registration Statement on Form S-8 filed with the Commission on June 5,
2009, File No. 333-144309).

Covidien Stock and Incentive Plan (incorporated by reference to Exhibit 10.5 to Covidien plc’s Current Report
on Form 8-K filed on March 26, 2013, File No. 001-33259).

Covidien Separation and Distribution Agreement Equity Awards under the Separation and Distribution
Agreement, dates as of June 29, 2007, by and among Tyco International Ltd., Covidien Ltd., and Tyco
Electronics Ltd. (incorporated by reference to Exhibit 2.1 to Covidien plc’s Current Report on Form 8-K filed
on July 5, 2007, File No. 001-33259).

Covidien Severance Plan for U.S. Officers and Executives, as amended and restated (incorporated by reference
to Exhibit 10.1 to Covidien plc’s Current Report on Form 8-K filed on September 23, 2014, File No. 001-
33259).

Covidien Change in Control Severance Plan for Certain U.S. Officers and Executives (incorporated by
reference to Exhibit 10.1 to Covidien plc’s Current Report on Form 8-K filed on March 26, 2013, File No. 001-
33259).

158

*10.92

*10.93

*10.94

*10.95

*10.96

*10.97

*10.98

*10.99

*10.100

*10.101

*10.102

*10.103

*10.104

*10.105

*10.106

Covidien Supplemental Savings and Retirement Plan, as amended and restated (incorporated by reference to
Exhibit 10.1 to Covidien plc’s Quarterly Report on Form 10-Q for the quarter ended December 25, 2009, filed
on January 26, 2010, File No. 001-33259).

Form of Non-Competition, Non-Solicitation and Confidentiality Agreement for executive officers and certain
key employees (incorporated by reference to Exhibit 10.4 to Covidien plc’s Quarterly Report on Form 10-Q for
the quarter ended December 26, 2008, filed on January 29, 2009, File No. 001-33259).

FY09 Grant U.S. Option Terms and Conditions (incorporated by reference to Exhibit 10.3 to Covidien plc’s
Current Report on Form 8-K filed on September 23, 2014, File No. 001-33259).

FY09 Grant U.S. Restricted Stock Unit Terms and Conditions (incorporated by reference to Exhibit 10.2 to
Covidien plc’s Current Report on Form 8-K filed on November 25, 2008, File No. 001-33259).

Deed Poll of Assumption relating to Covidien Ltd. Employee Equity Plans, dated June 4, 2009 (incorporated
by reference to Exhibit 10.3 to Covidien plc’s Current Report on Form 8-K12G3 filed on June 5, 2009, File
No. 001-33259).

Director Grant Restricted Stock Unit Terms and Conditions (incorporated by reference to Exhibit 10.2 to
Covidien plc’s Current Report on Form 8-K filed on March 23, 2009, File No. 001-33259).

Founders’ Grant Standard Option Terms and Conditions (incorporated by reference to Exhibit 10.4 to Covidien
plc’s Current Report on Form 8-K filed on September 23, 2014, File No. 001-33259).

Founders’ Grant Standard Option Terms and Conditions for Directors (incorporated by reference to Exhibit
10.13 to Covidien plc’s Current Report on Form 8-K filed on July 5, 2007, File No. 001-33259).

Form of Deed of Indemnification by and between Covidien plc and Covidien plc’s Directors and Secretary
(incorporated by reference to Exhibit 10.4 to Covidien plc’s Form 10-Q for the quarter ended June 28, 2013,
filed on August 5, 2013, File No. 001-33259).

Form of Terms and Conditions of Option Award (incorporated by reference to Exhibit 10.2 to Covidien plc’s
Current Report on Form 8-K filed on September 23, 2014, File No. 001-33259).

Form of Terms and Conditions of Restricted Unit Award (incorporated by reference to Exhibit 10.3 to
Covidien plc’s Quarterly Report on Form 10-Q for the quarter ended December 25, 2009, filed on January 26,
2010, File No. 001-33259).

Form of Terms and Conditions of Performance Unit Award (incorporated by reference to Exhibit 10.4 to
Covidien plc’s Quarterly Report on Form 10-Q for the quarter ended December 25, 2009, filed on January 26,
2010, File No. 001-33259).

Amended Terms and Conditions of Performance Unit Awards FY12-FY14 (incorporated by reference to
Exhibit 10.3 to Covidien plc’s Current Report on Form 8-K filed on March 26, 2013, File No. 001-33259).

Amended Terms and Conditions of Performance Unit Awards FY13-FY15 (incorporated by reference to
Exhibit 10.4 to Covidien plc’s Current Report on Form 8-K filed on March 26, 2013, File No. 001-33259).

Form of Indemnification Agreement between Covidien Ltd. and Covidien plc’s Directors and Secretary
(incorporated by reference to Exhibit 10.5 to Covidien plc’s Form 10-Q for the quarter ended June 28, 2013,
filed on August 5, 2013, File No. 001-33259).

12.1

Computation of Ratio of Earnings to Fixed Charges.

31.1

31.2

32.1

32.2

List of Subsidiaries of Medtronic plc.

Consent of Independent Registered Public Accounting Firm.

Power of Attorney.

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

159

101

The following materials from Medtronic plc’s Annual Report on Form 10-K for the year ended April 29, 2016,
formatted in Extensible Business Reporting Language (XBRL): (i) consolidated statements of income, (ii)
consolidated statements of comprehensive income, (iii) consolidated balance sheets, (iv) consolidated
statements of cash flows, (v) consolidated statements of shareholders’ equity, and (vi) the notes to the
consolidated financial statements.

*Exhibits that are management contracts or compensatory plans or arrangements.

160

MEDTRONIC PLC AND SUBSIDIARIES
SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS

(in millions)

Additions

Balance at
Beginning of
Fiscal Year

Charges to
Income

Charges to
Other Accounts

Deductions

Other
Changes
(Debit) Credit

Balance
at End of
Fiscal Year

Allowance for doubtful accounts:
Year ended 4/29/16

Year ended 4/24/15

Year ended 4/25/14

Deferred tax valuation allowance:
Year ended 4/29/16

Year ended 4/24/15

Year ended 4/25/14

144

115

5,607

397

313

49 $

35 $

43 $

1,194 $

40 $

104 $

—

$
$
34 (a) $
$
$
$

—

(28) (b) $
(4) (c)
(36) (b) $
(4) (c)
(30) (b) $
4 (c)

4 (a) $
$
5,660 (a) $
$
$
$

(88) (d) $
315 (c)
(56) (d) $
(434) (c)
(29) (d) $
4 (c)

161

144

115

7,032

5,607

397

(a) Reflects the impact from acquisitions
(b) Uncollectible accounts written off, less recoveries.
(c) Reflects primarily the effects of currency fluctuations.
(d) Decrease in deferred tax valuation allowance due to carryover attribute utilization and expiration.

161

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.

SIGNATURES

Dated: June 28, 2016

MEDTRONIC PUBLIC LIMITED COMPANY

By: /s/ Omar Ishrak
Omar Ishrak
Chairman and
Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, the report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates indicated.

MEDTRONIC PUBLIC LIMITED COMPANY

Dated: June 28, 2016

By: /s/ Omar Ishrak
Omar Ishrak
Chairman and
Chief Executive Officer
(Principal Executive Officer)

By: /s/ Gary L. Ellis
Gary L. Ellis
Principal Financial and
Accounting Officer

Directors

Richard H. Anderson*
Craig Arnold*
Scott C. Donnelly*
Randall J. Hogan, III*
Omar Ishrak*
Shirley Ann Jackson, Ph.D*
Michael O. Leavitt*
James T. Lenehan*
Elizabeth G. Nabel*
Denise M. O’Leary*
Kendall J. Powell*
Robert C. Pozen*
Preetha Reddy*

*Bradley E. Lerman, by signing his name hereto, does hereby sign this document on behalf of each of the above named
directors of the registrant pursuant to powers of attorney duly executed by such persons.

Dated: June 28, 2016

By: /s/ Bradley E. Lerman
Bradley E. Lerman

162

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MEDTRONIC PUBLIC LIMITED COMPANY
Principal Executive Office
20 On Hatch, Lower Hatch Street
Dublin 2, Ireland
+353 1 438-1700

www.medtronic.com