Medtronic Annual Report 2017

FY2017 Annual Report · Medtronic

Loading PDF…

ANNUAL
REPORT

Fiscal Year 2017

2017 LETTER TO SHAREHOLDERS

Dear Shareholder,

As CEO of Medtronic, I have often reflected on the unique opportunity and responsibility we have to improve the health of people around
the world. Healthcare inherently is an area of enormous opportunity, because the need and desire for better health will always exist.
Medtronic remains focused on addressing the universal needs of all healthcare systems: to continuously improve clinical outcomes,
provide access to quality healthcare when needed, and to optimize costs and efficiencies in the delivery of care.

Our core growth strategies of Therapy Innovation, Globalization and Economic Value help us to systematically address these universal
healthcare needs, thereby creating a distinct competitive advantage for Medtronic. We made meaningful progress in each of our growth
strategies in fiscal year 2017 (FY17), while also improving our operational productivity, and meeting our commitments to you, our
shareholders.

But most importantly in FY17, together with our physician partners, we served 70 million patients – more patients, in more places around
the world, than in any year in our history. It is incredible that every second, two patients somewhere in the world are benefitting from
Medtronic therapies and services. I am very proud of our global team of dedicated employees for all they accomplished in FY17, and all
that we can accomplish going forward, as we continue to fulfill the Medtronic Mission.

FY17 – A SOLID YEAR

Overall, FY17 was a solid year for Medtronic. We delivered record revenue of $29.7 billion, growing approximately 5% on a constant currency,
constant week basis, which marks our fifth consecutive year of mid-single digit constant currency, constant week growth. The integration
of Covidien progressed as planned. We have now realized more than $600 million in synergy savings, and remain on track to deliver our
goal of $850 million of total cost savings by the end of FY18. This operational productivity, coupled with our revenue growth, were key
contributors to delivering constant currency, constant week EPS growth of approximately 11% and generating $5.6 billion of free cash flow.

Of note, our Minimally Invasive Therapies Group recorded its highest ever growth in FY17. Preserving revenue growth was among our
highest priorities of the Covidien integration, so this result was particularly significant. In the Restorative Therapies Group, Spine, Brain and
Specialty Therapies all made strong contributions to our overall performance; our Spine division delivered its best performance in seven
years, benefitting from our “Speed to Scale” initiative as we launched a series of new products. In our Cardiac & Vascular Group and our
Diabetes Group, we launched the Micra® Transcatheter Pacing System and the MiniMed® 670G hybrid closed loop system respectively –
both revolutionary platforms that promise to fundamentally change the way these types of therapies are delivered.

We strategically deployed our capital in line with our stated priorities, balancing the return of cash to our shareholders with disciplined
reinvestment in our businesses. We met our commitment of returning greater than 50% of our free cash flow to our shareholders
in the form of dividends and net share repurchases, returning a total of $5.5 billion to shareholders in FY17. In addition, we allocated
approximately $1.5 billion of our capital to tuck-in acquisitions and strategic investments, which we expect will further enhance our
revenue growth and improve returns over time.

Finally, late in the fiscal year, we announced the sale of a portion of our Patient Monitoring and Recovery division to Cardinal Health for
$6.1 billion as part of our disciplined portfolio management strategy. Not only does this divestiture help the company’s flexibility with capital
allocation, but it also is expected to provide meaningful increases in revenue growth and operating margin rates. The process was executed
in a thoughtful and organized manner. Given our strategic focus on areas where we can make the most meaningful contributions, we
believe these businesses will be better served under Cardinal Health, which can bring prioritization and investment to this product portfolio,
as well as continued strong commitment to patients and employees, very much in line with our own values. We closed on this transaction
on July 29, 2017, and remain focused on ensuring a smooth transition of these businesses in the coming months.

OUR GROWTH STRATEGIES

We continue to develop technologies and solutions in line with our Mission to alleviate pain, restore health and extend life for people; this
underpins our Therapy Innovation strategy. We executed a steady cadence of meaningful product launches throughout the year that
advanced clinical and economic outcomes across our therapeutic areas, from cardiac and vascular, to brain, spine and pain, to diabetes,
and minimally invasive therapies.

Among the many new therapies introduced in FY17, two groundbreaking new products are particularly noteworthy. The Micra®
Transcatheter Pacemaker is a miniature pacemaker that promises to re-invent pacemaker therapy and eventually transform all cardiac
rhythm management. This market was generally assumed to have matured, and it is pleasing to note that our company, which was
founded with the invention of the original battery-powered pacemaker, is now positioned to reignite the field through disruptive organic
technology development.

In addition, the MiniMed® 670G hybrid closed-loop system was launched after more than 15 years of organic development within our
Diabetes team. This revolutionary product has the potential to create new standards of care for diabetes patients under intensive insulin
management. The outcomes we are seeing with the first patients to receive the 670G are outstanding, reinforcing clinical trial results. Our
team is working diligently to meet the demand for this transformative step in diabetes management.

Our Economic Value strategy focuses on developing new solutions and value-based business models that improve patient outcomes and
lower costs. In Hospital Solutions, we had more than 130 long-term contracts in place around the world at the end of the fiscal year. Our
Europe, Middle East & Africa (EMEA) region continues to lead our efforts, and we are now beginning to establish accounts in new geographies,
including our first contract in the U.S. We have also expanded our presence to operating room management in addition to cath labs.

We continue to play a leading role in the shift of healthcare from fee-for-volume to fee-for-value, and extended our industry leadership in
developing value-based healthcare (VBHC) offerings. Several outcomes-based business models are now in operation. Of note is the TYRX®
anti-bacterial pouch; this product is an excellent example of technology that directly creates clear and measurable value to the healthcare
system. Since the launch of this program earlier this calendar year, we have completed risk-based contracts in over 325 accounts.

We are also applying value-based healthcare principles to drive global growth. We believe that establishing and building relationships
directly with hospitals and physicians will facilitate the development of new VBHC business models. We also believe that by leading
value-based healthcare efforts in broad-based healthcare forums around the world, we can achieve great strides in the transformation of
healthcare globally, making high-quality healthcare both accessible and affordable.

Turning to our Globalization growth strategy, both our China and Asia Pacific (APAC) regions are building a track record of consistent
execution. Both offset multiple external pressures to deliver strong top and bottom line performances. The APAC team offset significant
market pressures in the India coronary market with strong growth in other businesses and geographies. In addition, Latin America
and Russia also had outstanding years, both growing in the high-teens on a constant currency, constant week basis and significantly
outperforming their local medical device markets. Growth in these geographies offset a decline in the Middle East & Africa, where we
faced challenges in the macroeconomic environment in Saudi Arabia. However, as we exited the year, we started to see improvement in
this important region and expect a return to growth in FY18.

Our FY17 Emerging Markets revenue was approximately $4 billion, and is well diversified amongst the different regions. This diversification
has allowed us to balance risks and opportunities and deliver consistent double-digit growth on a constant currency, constant week basis
over the past seven years.

OUR COMMITMENT TO SHAREHOLDERS

As we conclude our third year of delivering Covidien synergies in FY18, we are shifting to longer-term strategies for continued operating
leverage and margin expansion. Our strong technology leadership, together with our unmatched breadth and scale, are our greatest
competitive advantages. We are focused on driving more efficient and effective use of enterprise-wide Medtronic resources to fuel
our growth, operate at scale and meet customer, employee and shareholder expectations. To this end, we are preparing to implement
enterprise efficiency programs that are intended to streamline our operations, enhance our functional excellence and optimize our
commercial models.

In addition to our focus on delivering strong revenue and EPS growth, we are driving and measuring ourselves against longer-term, value-
creating metrics, including free cash flow growth and return on invested capital. At the same time, we will continue to balance our capital
allocation between disciplined reinvestment to fuel future growth and delivering meaningful returns to our shareholders.

Our Board of Directors is actively engaged in strategic oversight of the company and the evaluation of risks. The Board consistently
reviews the strategy for long-term value creation, including a regular review of the strategic plans for each of our business groups and
geographic regions, financial results, merger and acquisition-related activities, legal and regulatory matters, and public filings. They
provide meaningful input into our plans to increase operating efficiency.

In addition, the Board uses its committees to assist in its oversight of company strategy. We regularly review our committee composition
and re-appoint committee members on an annual basis with the chair rotation occurring approximately every 5 years; recently, we
appointed a new lead independent director. We also split our Quality and Technology Committee into two new committees, one focused
on Technology and Value, and one focused on Quality.

ADVANCING OUR MISSION

We would not be able to achieve our growth goals and continuously improve our organization without the commitment and contributions
of our employees around the world. As members of the Medtronic team, we are the beneficiaries of the hard work and dedication of the
generations of leaders and employees who came before us, including our co-founder Earl Bakken.

Not only did Earl begin a legacy of innovation for Medtronic and the entire medtech industry with his invention of the first battery-
powered wearable pacemaker in 1958, but he and a handful of early Medtronic leaders also wrote an enduring Mission that provides a
shared sense of purpose for all employees. It inspires us, defines us, and provides a consistent set of guiding principles.

Even though the Mission was written more than 50 years ago, we still use it as a guide for our business every day. Here are a few ways our
strategic decision-making, including how and where we invest, was influenced by our Mission in FY17:

THE MEDTRONIC
MISSION

1. To contribute to human
welfare by application of
biomedical engineering
in the research, design,
manufacture, and sale of
instruments or appliances that
alleviate pain, restore health,
and extend life.

2. To direct our growth in
the areas of biomedical
engineering where we display
maximum strength and
ability; to gather people and
facilities that tend to augment
these areas; to continuously
build on these areas through
education and knowledge
assimilation; to avoid
participation in areas where
we cannot make unique and
worthy contributions.
3. To strive without reserve
for the greatest possible
reliability and quality in
our products; to be the
unsurpassed standard
of comparison and to be
recognized as a company of
dedication, honesty, integrity,
and service.

4. To make a fair profit on

current operations to meet our
obligations, sustain our growth,
and reach our goals.
5. To recognize the personal
worth of employees by
providing an employment
framework that allows
personal satisfaction in work
accomplished, security,
advancement opportunity,
and means to share in the
company’s success.

6. To maintain good citizenship

as a company.

Tenet 1: “To contribute to human welfare through application of biomedical engineering…
to alleviate pain, restore health, and extend life.”

At our core, we are a technology company focused on improving patient outcomes. We
introduced hundreds of advanced technologies to further meet the needs of customers and
patients, and invested $2.2 billion in global research and development. The move to value-
based healthcare, which links payment for our technologies to achieving the promised patient
outcomes, is consistent with this tenet.

Tenet 2: “To direct our growth in the areas of biomedical engineering where we display
maximum strength and ability…”

Our decision to divest a portion of the Patient Monitoring & Recovery division within our
Minimally Invasive Therapies Group not only allows us to direct our focus on products and
solutions more aligned with our three growth strategies, but also to invest in technologies and
acquisitions that more directly complement our strengths.

Tenet 3: “To strive without reserve for the greatest possible reliability and quality in our
products…”

Patient safety, quality and integrity are non-negotiables, and we have robust systems to ensure
not only compliance, but also a culture that encourages and expects accountability for all
employees. In FY17, we were pleased that 93% of global regulatory inspections resulted in no
major findings, and our global team continued to embrace the Quality Begins with Me program.

Tenet 4: “To make a fair profit…”

We believe a “fair” profit is reflected by pricing our technologies in line with the value they create.
We do this through evidence generation, and our continued leadership in the movement to
value-based healthcare that we exhibited in FY17 further supports this notion.

Tenet 5: “To recognize the personal worth of employees…”

We are strongly committed to having an inclusive and diverse workplace where all employees
feel that they can be themselves at work – no matter their race, gender, nationality, religion or
sexual orientation – and we hold ourselves accountable for ensuring we are a company that
reflects the diversity of the patients and customers we serve. We believe all employees should
have opportunities for meaningful career development, are engaged in achieving our goals and
are recognized for their contributions. In FY17, we invested more than $76 million in employee
training and development programs to help our employees expand their skills and achieve their
career aspirations.

Tenet 6: “To maintain good citizenship as a company.”

Our philanthropic goals support our Mission by leading in global health, community well-
being, and volunteer engagement. We made a multi-year, $100 million donation to the
Medtronic Foundation in the third quarter of the fiscal year, as well as an additional $2 million
to other charitable causes through corporate cash contributions, product donations, and
employee volunteering. We also launched Medtronic Labs to transform access to healthcare
for underserved patients in emerging geographies by bringing locally-appropriate services,
solutions, and products to market.

As you can see, the six tenets of the Medtronic Mission are a comprehensive and forward-
looking guide, and provide an ongoing framework for us as we address the enormous
opportunities to transform healthcare while meeting our responsibilities to all our stakeholders.

As I look ahead to the future, I remain grateful to the passionate employees who work as a team and with our partners to take healthcare
Further, Together. It is a true honor to lead this organization, and I look forward to everything we can achieve together.

Omar Ishrak
Chairman and Chief Executive Officer

iii

Reconciliations of Non-GAAP Financial Measures

The Shareholder Letter set forth in this Annual Report includes
financial measures that are not prepared in accordance with
U.S. generally accepted accounting principles (U.S. GAAP).
Management believes that such non-GAAP financial measures
provide useful information to investors regarding the underlying
business trends and performance of Medtronic’s ongoing
operations. Investors should consider non-GAAP measures
set forth in the Shareholder Letter to be in addition to, and not

MEDTRONIC PLC
WORLD WIDE REVENUE: GEOGRAPHIC(1)
(UNAUDITED)

as a substitute for, financial performance measures prepared in
accordance with U.S. GAAP. In addition, such non-GAAP financial
measures may not be the same as, or similar to, measures
presented by other companies. Reconciliations of the non-GAAP
financial measures referenced in the Shareholder Letter to the
most directly comparable GAAP financial measures are included in
the following financial schedules.

(in millions)

U.S.

Non-U.S. Developed

Emerging Markets
TOTAL

FISCAL YEAR AS REPORTED

FISCAL YEAR CONSTANT CURRENCY ADJUSTED

FY17
Total

FY16
Total

Reported
Growth(3)

Currency Impact
on Revenue

FY17
Total

Constant Currency
Growth(2)(3)

16,663

16,422

9,085

3,962
29,710

8,708

3,703
28,833

7
3%

—

(78)
(34)

16,663

9,041

4,040
29,744

9
3%

(1) U.S. includes the United States and U.S. territories. Non-U.S. developed markets include Japan, Australia, New Zealand, Korea, Canada, and the

countries of Western Europe. Emerging Markets include the countries of the Middle East, Africa, Latin America, Eastern Europe, and the countries of
Asia that are not included in the non-U.S. developed markets, as previously defined.

(2) Constant currency growth, a non-GAAP financial measure, measures the change in revenue between current and prior year periods using average

exchange rates in effect during the applicable prior year period.

(3) Due to its 52/53 week fiscal year calendar, the Company had an additional selling week in the first quarter fiscal year 2016 results. While it is difficult

to calculate the impact of the extra week, the Company estimates that the extra week impact on worldwide, fiscal year 2016 first quarter revenue
was approximately $450 million. Excluding the approximately $450 million from fiscal year 2016 total revenue would result in approximately 5 percent
growth on a constant currency, constant week basis.

MEDTRONIC PLC
RECONCILIATION OF OPERATING CASH FLOW TO FREE CASH FLOW
(UNAUDITED)

(in millions)

Net cash provided by operating activities

Additions to property, plant, and equipment

FREE CASH FLOW(1)

FY17

6,880

(1,254)
5,626

FY16

5,218

(1,046)
4,172

Investors should consider these non-GAAP measures in addition to, and not as a substitute for, financial performance measures prepared in accordance
with U.S. GAAP.
(1) Free cash flow represents operating cash flows less property, plant, and equipment additions.

MEDTRONIC PLC
RETURN OF FREE CASH FLOW PERCENTAGE
(UNAUDITED)

(in millions)

Net cash provided by operating activities

Additions to property, plant, and equipment

Free Cash Flow(1)

Dividends

Share repurchases, net

Return of Free Cash Flow Percentage

FY17

6,880

(1,254)

5,626

2,376

3,116

98%

MEDTRONIC PLC
NET INCOME AND DILUTED EPS GAAP TO NON-GAAP RECONCILIATIONS
(UNAUDITED)

(in millions, except per share
data)

GAAP

Non-GAAP Adjustments:(2)

Impact of inventory step-
up(a)
Special charge(b)

Restructuring charges, net

Certain litigation charges
Acquisition-related items(c)

Amortization of intangible
assets

Certain tax adjustments,
net(d)
Non-GAAP

Foreign currency impact
CONSTANT CURRENCY
ADJUSTED

Fiscal year ended April 28, 2017

Cost of
Products
Sold

Gross
Margin
Percent

Net
Sales

Operating
Profit

Operating
Profit
Percent

Income Before
Provision for
Income Taxes

Net Income
attributable to
Medtronic

Diluted
EPS(1)

Effective Tax
Rate

$ 29,710 $ 9,291

68.7% $ 5,330

17.9%

4,602

4,028

$ 2.89

12.6%

—

(38)

—

(10)

—

(10)

—

100

373

300

230

1,980

—

100

373

300

230

272

190

156

1,980

1,460

—

202

0.02

0.05

0.20

0.14

0.11

1.05

0.15

36.8

37.0

27.1

36.7

32.2

26.3

—

$ 29,710 $ 9,233

68.9% $ 8,351

(65)
$ 29,744 $ 9,168

0.3

289
69.2% $ 8,640

28.1%

0.9
29.0%

7,623

6,395

$ 4.60

16.2%

0.17
$ 4.77

(in millions, except per share
data)

Net
Sales

Cost of
Products
Sold

Gross
Margin
Percent

Operating
Profit

Operating
Profit
Percent

Income
Before
Provision for
Income Taxes

Net Income
attributable to
Medtronic

Diluted
EPS(1)

Effective Tax
Rate

Fiscal year ended April 29, 2016

GAAP

Non-GAAP Adjustments:(2)

Impact of inventory step-
up(e)
Special charge(f)

Restructuring charges, net

Certain litigation charges

Acquisition-related items

Amortization of intangible
assets

Loss on previously held
forward starting interest
rate swaps

Debt tender premium

Certain tax adjustments,
net(g)
NON-GAAP

$ 28,833 $ 9,142

68.3% $ 5,291

18.4%

4,336

3,538

$ 2.48

18.4%

—

(226)

—

(9)

—

226

299

283

1,931

—

226

299

283

165

221

212

1,931

1,467

183

—

118

417

0.12

0.03

0.15

0.01

0.15

1.03

0.02

0.08

0.29

27.0

37.1

26.1

34.6

25.1

24.0

35.6

35.5

—

$ 28,833 $ 8,907

69.1% $ 8,126

28.2%

7,399

6,228

$ 4.37

15.8%

Year over year percent change:

GAAP

Non-GAAP
Constant Currency Adjusted Non-GAAP(3)

Net Income

Diluted EPS

14%

17%

See description of non-GAAP financial measures contained in this release.
(1) The data in this schedule has been intentionally rounded to the nearest $0.01 and, therefore, may not sum.
(2) Non-GAAP adjustments relate to charges or benefits that management believes may or may not recur with similar materiality or impact on results in

future periods.
(a) Represents amortization of step-up in fair value of inventory acquired in connection with the HeartWare acquisition.
(b) The charge represents a contribution to the Medtronic Foundation.
(c)

Integration-related costs incurred in connection with the Covidien acquisition, and charges incurred in connection with the pending divestiture of a
portion of our Patient Monitoring & Recovery division to Cardinal Health.

(d) The net charge primarily relates to the tax effect from the recognition of the outside basis difference of certain subsidiaries which are included in
the expected divestiture of a portion of our Patient Monitoring & Recovery division to Cardinal Health, certain tax charges recorded in connection
with the redemption of an intercompany minority interest, and the resolution of various tax matters from prior periods.

(e) Represents amortization of step-up in fair value of inventory acquired in connection with the Covidien acquisition.
(f) The impairment of a debt investment.
(g) Primarily relates to U.S. income tax expense resulting from the Company’s completion of an internal reorganization of the ownership of certain
legacy Covidien businesses that reduced the cash and investments held by Medtronic’s U.S.- controlled non-U.S. subsidiaries. Also includes a
benefit related to the establishment of a deferred tax asset on the tax basis in excess of book basis of a wholly owned U.S. subsidiary of which the
Company disposed.

(3) Due to its 52/53 week fiscal year calendar, the Company had an additional selling week in the first quarter of fiscal year 2016. While it is difficult to

calculate an exact impact from the extra week, the Company estimates an $0.08 to $0.10 benefit to non-GAAP diluted earnings per share (EPS) in
the first quarter of fiscal year 2016. The Company estimates that, adjusting for the extra week, non-GAAP earnings and diluted EPS increases were
approximately 8 to 9 percent and approximately 11 to 12 percent, respectively, on a constant currency, constant week basis when compared to the
prior fiscal year.

MEDTRONIC PLC
RECONCILIATION OF EMERGING MARKETS REVENUE GROWTH TO NON-GAAP GROWTH
(UNAUDITED)

(in millions)

Revenue

Reported Growth(3)

Currency Impact on
Growth

Covidien Alignment
Adjustment(1)

Non-GAAP Growth(3)

FY17(2)
FY16(2)

FY15

FY14

FY13

FY12

FY11

3,962

3,703

2,584

2,106

1,897

1,666

1,377

43%

23%

11%

14%

21%

22%

(78)

(433)

(196)

(46)

—

Low Double Digits

1,063

1,335

—

Low Double Digits

12%

14%

17%

20%

19%

Investors should consider these non-GAAP measures in addition to, and not as a substitute for, financial performance measures prepared in accordance
with U.S. GAAP.
(1) Adjusted to align legacy Covidien’s monthly revenue to Medtronic’s fiscal quarters throughout full year FY15 baseline.
(2) Due to the 52/53 week fiscal year calendar, the Company had an additional selling week in the first quarter of fiscal year 2016. Fiscal year 2016 was
a 53-week year, with the extra week included in the first quarter results. While it is difficult to calculate an exact impact from the extra week, the
Company estimates that it benefited reported growth in fiscal year 2016 by approximately $450 million. The Company estimates that, adjusting for
the extra week, non-GAAP revenue growth in emerging markets was in the low double digits for fiscal years 2016 and 2017.

(3) Growth percentages are rounded to the nearest whole percent.

vii

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 28, 2017

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ______________
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

YES

•• if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
•• if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.
•• 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.

•• 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).
•• 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.
•• whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth
company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and ”emerging growth company” in Rule
12b-2 of the Exchange Act.

Accelerated filer

Non-accelerated filer

Smaller reporting company

Large accelerated filer
•• If an emerging growth company, indicated by check mark if the registrant has elected not to use the extended
transition period for complying with any new or revised financial accounting standards provided pursuant to
Section 13(a) of the Exchange Act.
•• whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Aggregate market value of voting and non-voting common equity of Medtronic PLC held by non-affiliates of the registrant as of October 28, 2016,
based on the closing price of $81.93, as reported on the New York Stock Exchange: approximately $112.4 billion. Number of Ordinary Shares
outstanding on June 21, 2017: 1,359,026,669

Emerging growth company

Portions of Registrant’s Proxy Statement for its 2017 Annual General Meeting are incorporated by reference into Part III hereto.

DOCUMENTS INCORPORATED BY REFERENCE

TABLE OF CONTENTS

PART I
ITEM 1

ITEM 1A

ITEM 1B

ITEM 2

ITEM 3

ITEM 4

PART II
ITEM 5

ITEM 6

ITEM 7

ITEM 7A

ITEM 8

ITEM 9

ITEM 9A

ITEM 9B

PART III
ITEM 10

ITEM 11

ITEM 12

ITEM 13

ITEM 14

PART IV
ITEM 15

Business ...............................................................................................................................................................................................................1

Risk Factors ...................................................................................................................................................................................................... 15

Unresolved Staff Comments ....................................................................................................................................................................... 30

Properties ......................................................................................................................................................................................................... 30

Legal Proceedings .......................................................................................................................................................................................... 30

Mine Safety Disclosures................................................................................................................................................................................ 30

Market for Medtronic’s Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity Securities .......... 31

Selected Financial Data ................................................................................................................................................................................. 33

Management’s Discussion and Analysis of Financial Condition and Results of Operations ...................................................... 34

Quantitative and Qualitative Disclosures About Market Risk ............................................................................................................. 54

Financial Statements and Supplementary Data .................................................................................................................................... 55

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ..................................................124

Controls and Procedures ............................................................................................................................................................................124

Other Information ........................................................................................................................................................................................124

125

Directors, Executive Officers, and Corporate Governance ...............................................................................................................125

Executive Compensation ...........................................................................................................................................................................125

Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters ............................125

Certain Relationships and Related Transactions, and Director Independence ............................................................................125

Principal Accounting Fees and Services .................................................................................................................................................125

Exhibits and Financial Statement Schedules.........................................................................................................................................126

Signatures .......................................................................................................................................................................................................134

126

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 2017 Annual General Meeting of Shareholders
(2017 Annual Meeting) on Friday, December 8, 2017 at 8:00 a.m.,

local Dublin time at the Conrad Dublin Hotel Earlsfort Terrace Dublin
2, Ireland. The record date for the 2017 Annual Meeting is October
10, 2017 and all shareholders of record at the close of business on
that day will be entitled to vote at the 2017 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, 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 may 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,

Direct Stock Purchase Plan

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.

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 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.”

MEDTRONIC PLC 2017 Form 10-K
PART I

Item 1 Business

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 in 1960 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:
■■

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

provides us 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 the Minimally Invasive Therapies Group.
For more information on our segments, please see Note 22 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 2017, along with their related divisions, are as follows:
Cardiac and Vascular Group (Fiscal year 2017 net sales of
$10.5 billion)
■■

Cardiac Rhythm & Heart Failure

■■

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

■■

Coronary & Structural Heart

Aortic & Peripheral Vascular

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.

Minimally Invasive Therapies Group (Fiscal year 2017 net sales of
$9.9 billion)
■■

Surgical Solutions

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. On a pro forma basis, as if the Covidien merger
had occurred at the beginning of fiscal year 2015, our combined
net sales would have been $28.4 billion. The merger with Covidien

■■

Patient Monitoring & Recovery

Restorative Therapies Group (Fiscal year 2017 net sales of
$7.4 billion)
■■

Spine

■■

Brain Therapies

Specialty Therapies

Pain Therapies

Diabetes Group (Fiscal year 2017 net sales of $1.9 billion)

■■

Intensive Insulin Management

Non-Intensive Diabetes Therapies

Diabetes Service & Solutions

MEDTRONIC PLC 2017 Form 10-KPART I
Item 1 Business

CARDIAC AND VASCULAR GROUP

Cardiac Rhythm & Heart Failure Disease
Management (CRHF)

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, ventricular assist systems, 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 a conventional pacemaker, and the Advisa MRI
SureScan models have received United States (U.S.) Food and
Drug Administration (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 12 years of proven performance
with active monitoring.

Implantable Cardiac Resynchronization Therapy
Devices (CRT-Ds and CRT-Ps)

Our latest generation of CRTs, the Claria/Amplia/Compia family
of MRI Quad CRT-D SureScan systems and the Percepta/Serena/
Solara family of MRI Quad CRT-P SureScan systems, have received
U.S. FDA approval and CE Mark. The Claria CRT-D MRI and Percepta
CRT-P MRI devices feature EffectivCRT, which is a new algorithm
that verifies left ventricular pacing effectiveness and automatically
tailors the therapy to individual patients. These devices also include
the proprietary AdaptivCRT algorithm, which reduces a patient’s
odds of a 30-day heart failure readmission and has demonstrated
a reduction in AF risk compared to echo-optimized biventricular
pacing.

AF Products

Our portfolio of AF products includes the Arctic Front Advance
Cardiac Cryoballoon System, which includes the U.S. FDA approved
Arctic 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.

Mechanical Circulatory Support Products (MCS)

Our MCS products include miniaturized implantable heart pumps,
or ventricular assist devices, patient accessories and surgical tools
to treat patients suffering from advanced heart failure.

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 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 second-generation
recapturable TCV system, CoreValve Evolut R, has received
U.S. FDA approval and CE Mark approval for the 23, 26, 29, and
34 millimeter sizes of the valve. Our third-generation system,
CoreValve Evolut PRO has received U.S. FDA approval.

MEDTRONIC PLC 2017 Form 10-KPART I
Item 1 Business

Percutaneous Coronary Intervention (PCI)

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

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

Heart Surgery

Our Heart Surgery business offers 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 balloons,
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.

MINIMALLY INVASIVE THERAPIES GROUP

Surgical Solutions

Our Surgical Solutions division 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

Our Surgical Innovations 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

Endovascular Stent Grafts (Aortic)

Our Aortic 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, the Valiant Captivia Thoracic
Aortic Aneurysm (TAA) stent graft system, and the Aptu Heli-FX
EndoAnchor System.

Peripheral Vascular (PV)

Our primary PV products include percutaneous angioplasty
balloons including the IN.PACT family of drug-coated balloons,
vascular stents, such as the Protégé & Everflex self-expanding
stents and Visi-Pro balloon expandable stents, directional
atherectomy products, such as the HawkOne plaque excision
system, and other procedure support tools.

EndoVenous (EV)

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

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 Early Technologies 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.

MEDTRONIC PLC 2017 Form 10-KPART I
Item 1 Business

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

Patient Monitoring

Our Patient Monitoring 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.

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.

Deep Vein Thrombosis

Our Deep Vein Thrombosis business primarily includes sales of
compression product lines. Key Deep Vein Thrombosis products
include Kendall SDC compression system, A-V Impulse Foot
Compression System, and T.E.D. anti-embolism stockings.

Airway & Ventilation

Nutritional Insufficiency

Our Airway & Ventilation 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,
Shiley Endotracheal Tubes, Shiley Tracheostomy Tubes, DAR Filters,
and resuscitation bags.

Patient Care

Our Patient Care products include medical surgical products,
such as operating room supply products and electrodes, as well
as incontinence, wound care, urology, suction products, and
SharpSafety products, which includes needles, syringes, and sharps
disposal products. In addition, we manufacture Original Equipment

Our Nutritional Insufficiency business primarily includes sales of
enteral feeding products. Key nutritional insufficiency products
include Kangaroo enteral feeding systems.

Renal Care Solutions

Our Renal Care Solutions business delivers a broad portfolio of
meaningful innovations and solutions for the treatment of renal
disease. Our global portfolio of products include dialysis catheters
for renal therapy access, fistula cannula for cannulation during
dialysis treatment, and a comprehensive portfolio of equipment
and consumables for performing dialysis treatment for both acute
and chronic renal failure conditions.

RESTORATIVE THERAPIES GROUP

Spine

Biologics Products

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 Neurosurgery 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:

Core Spine

Our Core Spine products include the CD HORIZON SOLERA
and LEGACY Systems, and the CAPSTONE, CLYDESDALE, and
ELEVATE 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. Products used
to treat conditions in the cervical 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.

Our Biologics 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.

Brain Therapies

Our Brain Therapies division offers an integrated portfolio of
devices and therapies for the treatment of neurological disorders
and diseases, as well as surgical technologies designed to improve
the precision and workflow of neuro procedures.

The following are the principal products offered by our Brain
Therapies division:

Neurovascular

Our Neurovascular business 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. Our products also include the 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.

MEDTRONIC PLC 2017 Form 10-KPART I
Item 1 Business

Brain Modulation

ENT

Our Brain Modulation portfolio of products include those 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 Brain Modulation
includes Activa SC (single-channel primary cell battery), Activa PC
(dual channel primary cell battery), and Activa RC (dual channel
rechargeable battery).

Neurosurgery

Our Neurosurgery portfolio of products include both platform
technologies and implant therapies. The StealthStation 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.

Specialty Therapies

Our Specialty Therapies division is comprised of Pelvic Health
& Gastric Therapies, ENT, and Advanced Energy. ENT develops,
manufactures, and markets products and therapies to treat
diseases of the ear, nose and throat (ENT). 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 Specialty
Therapies division:

Our products for the treatment of ENT diseases and conditions
include Straightshot M5 Microdebrider Handpiece, the IPC
system, NIM Nerve Monitoring Systems, Fusion ENT Navigation
System, as well as products for hearing restoration 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.

Pain Therapies

Our Pain Therapies division includes neurostimulation systems
and implantable drug infusion systems for chronic pain, as well as
interventional products.

The following are the principal products offered by our Pain
Therapies division:

Neurostimulation Systems for Chronic Pain

Our portfolio of neurostimulation systems includes 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.

Pelvic Health & Gastric Therapies

Implantable Drug Infusion Systems

Our sacral neuromodulation uses InterStim, a neurostimulator, to
help control the systems of overactive bladder, (non-obstructive)
urinary retention, and chronic fecal incontinence. In addition, our
percutaneous tibial neuromodulation uses the NURO device for
the treatment of overactive bladder and associated symptoms
of urinary urge incontinence, urinary urgency, urinary frequency.
Currently, Enterra Therapy is the only gastric electrical stimulation
therapy approved in the U.S. (under a HDE), Europe, Australia, 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.

DIABETES GROUP

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.

Interventional Products

Our interventional products include the Xpander II Balloon
Kyphoplasty system, the Kyphon-V vertebroplasty system and the
OsteoCool RF Tumor ablation system.

Our Diabetes group consists of three divisions (Intensive Insulin Management, Non-Intensive Diabetes Therapies, and Diabetes Services &
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.

MEDTRONIC PLC 2017 Form 10-KPART I
Item 1 Business

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

Integrated Diabetes Management Solutions

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,
leading to more informed treatment decisions.

Our Integrated Diabetes Management Solutions business has the first
hybrid closed loop system in the world - the MiniMed 670G System -
which received U.S. FDA approval during the second quarter of fiscal
year 2017, and launched in the U.S. in June 2017. Additionally, in the U.S.,
we offer the MiniMed 630G System with SmartGuard predictive low-
glucose management. 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

Our Professional CGM business offers physicians a product
called the iPro2/iPro Professional CGM System. Patients wear the

CUSTOMERS AND COMPETITORS

Connected Care

Our Connected Care business continues 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 CareLink Therpay Management Software business offers
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.

Cardiac and Vascular Group

Restorative Therapies 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 Abbott Laboratories (Abbott), Boston
Scientific Corporation (Boston Scientific), LivaNova plc, Edwards
Lifesciences Corporation (Edwards), and C.R. Bard, Inc. (Bard).

Minimally Invasive Therapies Group

The primary medical specialists who use the products and
therapies of this group include 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.

The primary medical specialists who use the products of this
group include spinal surgeons, neurosurgeons, neurologists, pain
management specialists, anesthesiologists, orthopedic surgeons,
urologists, colorectal surgeons, urogynecologists, interventional
radiologists, and ear, nose, and throat specialists. Our primary
competitors include Johnson & Johnson, Boston Scientific, Abbott,
Stryker Corporation (Stryker), NuVasive, Inc., and Zimmer Biomet
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 may 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 2017, 2016, and 2015, we spent $2.2 billion
(7.4 percent of net sales), $2.2 billion (7.7 percent of net sales),
and $1.6 billion (8.1 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.

MEDTRONIC PLC 2017 Form 10-KAcquisitions and Divestitures

Our strategy to provide a broad range of therapies to restore
patients’ health and extend lives requires a wide variety of
technologies, products, and capabilities. The rapid pace of
technological development in the medical industry and the
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.

We expect to make future investments or acquisitions where
we believe that we are able to 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 may 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.

For additional information, see Note 2 to the consolidated financial
statements in “Item 8. Financial Statements and Supplementary
Data” in this Annual Report on Form 10-K, “Item 1A. Risk Factors
- Failure to integrate acquired businesses into our operations
successfully could adversely affect our business,” and “Item 1A.
Risk Factors - We may not complete the planned disposition of the
Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency
businesses within the Patient Monitoring & Recovery division of our
Minimally Invasive Therapies Group on the anticipated timeline or
at all, and, even if completed, we may not achieve the benefits we
anticipate.”

Acquisition of HeartWare International, Inc.

On August 23, 2016, the Cardiac and Vascular Group acquired
HeartWare International, Inc. (HeartWare), a medical device
company that develops and manufactures miniaturized
implantable heart pumps, or ventricular assist devices, to treat
patients around the world suffering from advanced heart failure.
Total consideration for the transaction was approximately
$1.1 billion. Based upon a preliminary acquisition valuation, we
acquired $602 million of technology-based and customer-related
intangible assets and $23 million of tradenames, and $427 million
of goodwill. In addition, we acquired $245 million of debt through
the acquisition, of which we redeemed $203 million as part of a
cash tender offer in August 2016. The remaining $42 million of
debt acquired is due December 2017.

Acquisition of Smith & Nephew’s Gynecology
Business

On August 5, 2016, the Minimally Invasive Therapies Group
acquired Smith & Nephew’s gynecology business, which expands
and strengthens our minimally invasive surgical offerings and
further complements its existing global gynecology business. Total

PART I
Item 1 Business

consideration for the transaction was approximately $350 million.
We acquired $167 million of customer-related and technology-
related intangible assets and $180 million of goodwill.

Anticipated Divestiture of Patient Care, Deep
Vein Thrombosis, and Nutritional Insufficiency
Businesses

On April 18, 2017, we announced that we entered into a definitive
agreement with Cardinal Health Inc. to sell the Patient Care,
Deep Vein Thrombosis, and Nutritional Insufficiency businesses
within the PMR division of our Minimally Invasive Therapies Group.
Among the product lines included in the transaction are the dental/
animal health, chart paper, wound care, incontinence, electrodes,
SharpSafety, thermometry, perinatal protection, blood collection,
compression, and enteral feeding offerings. The transaction also
will include 17 dedicated manufacturing facilities. We will retain our
Respiratory & Monitoring Solutions business, which includes airway,
ventilators, monitors, sensors, and health informatics product
lines, as well as our Renal Care Solutions business, both of which
are within the PMR division. The transaction is expected to close
in the second quarter of fiscal year 2018, subject to the receipt of
regulatory approvals and satisfaction of other customary closing
conditions. Under the terms of the definitive agreement, we will
receive $6.1 billion in cash, subject to certain adjustments, with
total after-tax proceeds estimated to be approximately $5.5 billion.

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 20 to the consolidated
financial statements in “Item 8. Financial Statements and
Supplementary Data” in this Annual Report on Form 10-K.

MEDTRONIC PLC 2017 Form 10-KPART I
Item 1 Business

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, 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, 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 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. Currency exchange rate fluctuations may
affect revenues, earnings, and cash flows from operations. 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 9 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 22 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 products at manufacturing facilities located in
various countries throughout the world. We purchase many of the
components and raw materials used in manufacturing our 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,

MEDTRONIC PLC 2017 Form 10-Kor 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 2016 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.

For additional information related to our manufacturing facilities
refer to “Item 2. Properties” in this Annual Report on Form 10-K.

Working Capital Practices

Our goal is to carry sufficient levels of inventory to 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 28, 2017, we employed more than 91,000 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 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
may 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.

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

PART I
Item 1 Business

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 are able to
commercially distribute the new medical device or technology.
Modifications to cleared medical devices or technologies may
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 sell 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,
some 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. We
are subject to inspection by notified bodies for compliance. The
competent authorities of the E.U. countries, generally in the form

MEDTRONIC PLC 2017 Form 10-KPART I
Item 1 Business

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. A new Medical Device Regulation has
been published by the E.U. in 2017 which will impose significant
additional premarket and postmarket requirements. The regulation
has a three-year implementation period, and after that time all
products marketed in the E.U. will require certification according to
these new 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 may
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 may
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 Pain Therapies division’s SynchroMed
drug infusion system and the Neuromodulation quality
system. The consent decree requires us to complete certain
corrections and enhancements to the SynchroMed pump and
the Neuromodulation quality system. The consent decree
limits our 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 our
products, but we 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, we 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. We are taking action to address the Warning
Letter and upon successful reinspection by the U.S. FDA, the
Warning Letter will be lifted.

In June 2014, HeartWare Inc. received a Warning Letter from the
U.S. FDA following an inspection at the HeartWare facility in Miami
Lakes, Florida. Medtronic acquired HeartWare in August 2016, and
is implementing actions and process improvements to address the
items in the Warning Letter. Upon successful reinspection by FDA,
the Warning Letter will be lifted.

Governmental Trade Regulations

The sale and shipment of our products and services across
borders, as well as the purchase of components and products
from different countries, subject us to extensive governmental

MEDTRONIC PLC 2017 Form 10-Ktrade regulations. A variety of laws and regulations in the countries
in which we transact business apply to the sale, shipment, and
provision of goods, services and technology across 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 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, sales of our
medical devices to customers outside of the U.S. for 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 distribution and sales of products which may materially
impact our business activities.

PART I
Item 1 Business

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 countries outside of the U.S. 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

As a business with a significant global footprint, compliance
with evolving regulations and standards in data privacy and
cybersecurity (relating to the confidentiality and security of our
information technology systems, products such as medical
devices, and other services provided by us) may result in increased
costs, lower revenue, new complexities in compliance, new
challenges for competition, and the threat of increased regulatory
enforcement activity. Our business relies on the secure electronic
transmission, storage and hosting of sensitive information,
including personal information, protected health information,
financial information, intellectual property, and other sensitive
information related to our customers and workforce.

For example, in the U.S. the collection, maintenance, protection,
use, transmission, disclosure and disposal of certain personal
information and the security of medical devices 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. Privacy and Security Rules under the
Health Insurance Portability and Accountability Act of 1996
(HIPAA), as amended, and the Health Information Technology for
Economic and Clinical Health Act of 2009 (HITECH), 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)
and by 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). Rules under HIPAA and HITECH
include specific security standards and breach notification
requirements. U.S. Department of Health and Human Services
(HHS) (through the Office of Civil Rights) has direct enforcement
authority against Covered Entities and Business Associates

MEDTRONIC PLC 2017 Form 10-KPART I
Item 1 Business

with regard to both the Security and Privacy Rules, including civil
and criminal liability. Medtronic is generally not a Covered Entity,
with a few exceptions such as our Diabetes business, Medtronic
Monitoring, Inc., Beacon IDTF, and our health insurance plans.
Medtronic also 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. There are comparable state level laws governing the
use and protection of personal health information by health care
providers, and Medtronic may be subject to these laws in certain of
its businesses.

The U.S. FDA has issued guidance advising manufacturers to take
cybersecurity risks into account in product design for connected
medical devices and systems, to assure that appropriate
safeguards are in place to reduce the risk of unauthorized access
or modification to medical devices that contain software and
reduce the risk of introducing threats into hospital systems that are
connected to such devices. The U.S. FDA also issued guidance on
post market management of cyber security in medical devices.

In addition to the regulation of personal health information, a
number of states have also adopted laws and regulations that
may affect our privacy and data security practices for other kinds
of personally identifiable information, such as state laws that
govern the use, disclosure and protection of sensitive personal
information such as 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 48 U.S. states now enacting laws requiring
businesses to notify individuals of security breaches involving
personal information. State consumer protection laws may also
establish privacy and security standards for use and management
of personally identifiable information, including information related
to consumers and care providers.

Outside the U.S., we are impacted by the privacy and data security
requirements at the international, national and regional level, and
on an industry specific basis. We serve customers in approximately
160 countries. Legal requirements in these countries relating to
the collection, storage, handling and transfer of personal data and
potentially intellectual property continue to evolve with increasingly
strict enforcement regimes. More privacy and security laws and
regulations are being adopted, and more are being enforced, with
potential for significant financial penalties. In the E.U., increasingly
stringent data protection and privacy rules that will have substantial
impact on the use of patient data across the healthcare industry
are scheduled to go into effect in May 2018.

These laws and regulations impact the ways in which we use and
manage personal data, protected health information, and our
information technology systems. They also impact our ability
to move, store, and access data across geographic boundaries.
Compliance with these requirements may require changes in
business practices, complicate our operations, and add complexity
and additional management and oversight needs. They also
may complicate our clinical research activities, as well as product
offerings that involve transmission or use of clinical data.

Because the laws and regulations continue to expand, differ from
jurisdiction to jurisdiction, and are subject to evolving (and at times
inconsistent) governmental interpretation, compliance with these

laws and regulations may require significant cost expenditures
or changes in products or business that reduce revenue.
Noncompliance could result in the imposition of fines, penalties, or
orders to stop noncompliant activities.

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
may 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. Examples of cost containment
initiatives and health care reforms in markets significant to
Medtronic’s business outside of the U.S. 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 from government or private payers
or decisions, or other reforms, making it difficult for us to predict
the potential impact of cost-containment trends on future
operating results.

MEDTRONIC PLC 2017 Form 10-KRegulations 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 may 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) may 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 or Medicaid. 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

PART I
Item 1 Business

and decisions as well as changes to private payer reimbursement
coverage and payment decisions and policies. Implementation
of further legislative or administrative reforms to reimbursement
systems, 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 may 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 20 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

MEDTRONIC PLC 2017 Form 10-KPART I
Item 1 Business

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, products, and services, could
lead to recalls or safety alerts, harm to our reputation, or adverse
verdicts or costly settlements, and could have a material adverse
effect on our business, results of operations, financial condition
and our cash flows” and Note 20 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, 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 our
directors and officers. 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.

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 61, 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 55, 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.
Hooman C. Hakami, age 47, 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 50, 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.
Richard Kuntz, M.D., age 60, has been Senior Vice President and
Chief Scientific, Clinical and Regulatory Officer of the Company
since January 2015 and of Medtronic, Inc. since August 2009.
Prior to that, he was Senior Vice President and President,
Neuromodulation from October 2005 to August 2009; and prior to
that, he was an interventional cardiologist and Chief of the Division
of Clinical Biometrics at Brigham and Women’s Hospital and
Associate Professor of Medicine and Chief Scientific Officer of the
Harvard Clinical Research Institute.
Bradley E. Lerman, age 60, 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 47, 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.

MEDTRONIC PLC 2017 Form 10-KPART I
Item 1A Risk Factors

Karen L. Parkhill, age 51, 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 51, 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 56, 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 us.

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:
■■

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.

MEDTRONIC PLC 2017 Form 10-KPART I
Item 1A Risk Factors

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 will 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:
■■

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. If the U.S. FDA were
to conclude that we are not in compliance with applicable laws or

MEDTRONIC PLC 2017 Form 10-Kregulations, 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 2016
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, a new Medical
Device Regulation was published in 2017 which, when it enters
into full force, will impose significant additional premarket and

PART I
Item 1A Risk Factors

post-market requirements. Penalties for a company’s non-
compliance with governmental regulation could be severe,
including fines and 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 health and safety of our
employees, 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 products and end-of-life disposal and take-back programs
for medical devices. 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

MEDTRONIC PLC 2017 Form 10-KPART I
Item 1A Risk Factors

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 claiming 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 outside of the U.S., 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 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
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.

MEDTRONIC PLC 2017 Form 10-KQuality problems with, and product liability
claims in connection with, our processes,
products, and services, could lead to recalls or
safety alerts, harm to our reputation, or adverse
verdicts or costly settlements, and could 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 and resolve. 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, 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

PART I
Item 1A Risk Factors

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 (the “ACA”) and
the Health Care and Education Affordability Reconciliation Act of
2010 (together “the law” or “the legislation”) provide for a number
of healthcare policy changes that are or will be applicable to us.
However, there are many programs and requirements under the
law for which the consequences are not fully understood, and it is
unclear what the full impacts will ultimately 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.

Currently, the U.S. Congress is considering legislation to repeal
and replace the ACA. We cannot predict whether the ACA will be
repealed, replaced, or modified or how such repeal, replacement
or modification may be timed or structured. As a result, we cannot
quantify or predict the effect of such repeal, replacement, or
modification might have on our business and results of operations.
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

MEDTRONIC PLC 2017 Form 10-KPART I
Item 1A Risk Factors

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 44 percent of our net sales for
fiscal year 2017, 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:
■■

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, tariffs and other border taxes, 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. Similarly, from time to time
proposals are made in the U.S. to significantly change existing
trade agreements and relationships between the U.S. and other

MEDTRONIC PLC 2017 Form 10-Kcountries, although we cannot currently predict whether or how
these changes will be implemented. Changes to trade policy 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,

PART I
Item 1A Risk Factors

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

MEDTRONIC PLC 2017 Form 10-KPART I
Item 1A Risk Factors

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 outside of the U.S., 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 GPOs
and 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 in the medical 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.

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.

Cyber-attacks or other disruptions to our
information technology systems could lead
to reduced revenue, increased costs, liability
claims, or harm to our competitive position.

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. We rely on information technology systems to collect
and process customer orders, manage product manufacturing
and shipping, and support regulatory compliance, and we routinely
process, store, and transmit large amounts of data, including
sensitive personal information, protected health information,
and business information. Many of our products and services
incorporate software and information technology that allow
patients and physicians to be connected and collect data regarding
a patient and the therapy he or she is receiving, or that otherwise
allow the products or services to operate as intended. We could
experience, and in the past have experienced, attempted or
actual interference with the integrity of, and interruptions in, our
technology systems, as well as data breaches. We could also
experience attempted or actual interference with the integrity of
our products and data. These incidents could materially harm our
business and our reputation.

As is the case with other large enterprises, the size and complexity
of our products, services, and information technology systems can
make them vulnerable to cyber-attacks, breakdown, interruptions,
destruction, loss or compromise of data, obsolescence or
incompatibility among systems, or other significant disruptions.

MEDTRONIC PLC 2017 Form 10-KUnauthorized persons may attempt to inappropriately access
our products or systems in order to disrupt, disable or degrade
such products or services, or to obtain proprietary or confidential
information. Such unauthorized access or interference with our
products or services could create issues with product functionality
which could pose a risk to patient safety, and a risk of product recall
or field activity.

We have programs, processes and technologies in place to
prevent, detect, contain, respond to and mitigate security related
threats and potential incidents. We undertake considerable
ongoing improvements to our systems, connected devices and
information-sharing products in order to minimize vulnerabilities,
in accordance with industry and regulatory standards. Because the
techniques used to obtain unauthorized access change frequently
and can be difficult to detect, anticipating, identifying or preventing
these intrusions or mitigating them if and when they occur, may
be challenging.

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 result in system disruption or unexpectedly
compromise the information security of our own systems, and we
are dependent on these third parties to provide reliable systems
and software and to deploy appropriate security programs to
protect their systems.

In addition, we continue to grow in part through new business
acquisitions. As a result of acquisitions, we may face risks due to
implementation, modification, or remediation of controls, procedures,
and policies relating to data privacy and cybersecurity at the acquired
company. We 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 disruptions, outages, or data breaches,
we may suffer regulatory consequences in addition to business
consequences. Our worldwide operations mean that we are
subject to laws and regulations, including data protection and
cyber security laws and regulations, in many jurisdictions. The
variety of U.S. and international privacy and cybersecurity laws
and regulations impacting our operations are described in “Item 1.
Business - Other Factors Impacting Our Operations - Data Privacy
and Cybersecurity Laws and Regulations.” We have programs
to ensure compliance with such laws and regulations. However,
there is no guarantee that we will avoid enforcement actions by
governmental bodies. Enforcement actions may 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 or incidents
arising from other cyber attacks. While Medtronic has not been
named in any such suits, if a substantial breach or loss of data were
to occur, we could become a target of such litigation.

Our information technology 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

PART I
Item 1A Risk Factors

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, protecting, upgrading and expanding our systems
and capabilities, continuing to build security into the design of
our products, 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 our information technology systems, products or services or
sensitive data are compromised, patients or employees could be
exposed to financial or medical identity theft or suffer a loss of
product functionality, and we could 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
or an impairment in our ability to conduct our operations, incur
expenses or lose revenues as a result of a data privacy breach,
product failure, information technology outages or disruptions, or
suffer other adverse consequences including lawsuits or other legal
action and damage to our reputation.

Negative conditions in global credit markets
may impair our ability to issue debt securities
and impact the liquidity and/or market value
of investments in marketable debt 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
other debt securities or may negatively impact our ability to borrow
from financial institutions.

MEDTRONIC PLC 2017 Form 10-KPART I
Item 1A Risk Factors

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:
■■

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.

We may not complete the planned disposition
of the Patient Care, Deep Vein Thrombosis,
and Nutritional Insufficiency businesses within
the Patient Monitoring & Recovery division
of our Minimally Invasive Therapies Group on
the anticipated timeline or at all, and, even if
completed, we may not achieve the benefits we
anticipate.

In April 2017, we announced that we had entered into a definitive
agreement to sell the Patient Care, Deep Vein Thrombosis, and
Nutritional Insufficiency businesses within the Patient Monitoring
& Recovery division of our Minimally Invasive Therapies Group
to Cardinal Health, Inc. for $6.1 billion in cash, subject to certain
adjustments, with total after-tax proceeds estimated to be
approximately $5.5 billion. We expect the transaction to close in the
second quarter of our 2018 fiscal year, subject to satisfaction of
customary closing conditions. In connection with the transaction,
we announced that we anticipate a number of benefits from the
disposition, including improvements in our revenue growth rate
and operating margin, a lower debt leverage ratio, and an increased
ability to fund potential investments in higher growth and higher
margin opportunities.

The disposition transaction is complex in nature, subject to various
conditions, and may be adversely affected by unanticipated
developments and unexpected changes in market or other
conditions. If any closing conditions are not met, the closing of
the disposition transaction may be delayed or fail to occur, and we
may not achieve the intended benefits we anticipate. Moreover, if
the disposition is not completed on the anticipated timeline or at
all, our ongoing operation of the Patient Monitoring & Recovery
division may be harmed.

Even if the disposition transaction is completed, we may not
achieve some or all of the anticipated benefits, including the
financial and operational benefits described above, and our future
investments and other business opportunities that we anticipate
will be facilitated by the disposition may not be successful and may
prove not to be superior alternatives to the continued operation
of our current Patient Monitoring & Recovery division. Further,
execution of the proposed disposition will require significant time
and attention from management and other employees, including
following the closing of the disposition transaction, which may
divert the attention of our management and other employees from
the execution of our other initiatives and could affect our financial
condition, results of operations, or cash flows.

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

MEDTRONIC PLC 2017 Form 10-Kmanaged 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.

PART I
Item 1A Risk Factors

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

At April 28, 2017, our total consolidated external debt was
approximately $33.4 billion. We may also incur additional
indebtedness in the future. Our substantial indebtedness could
have adverse consequences, including:
■■

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 since the interest rate
on borrowings under our floating rate notes and revolving credit
facility is variable.

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. If our operating
cash flow and capital resources are insufficient to service our debt
obligations, we may be forced to sell assets, seek additional equity
or debt financing or restructure our debt, which could harm our
long-term business prospects. Our failure to comply with the terms
of our revolving credit facility and other indebtedness could result
in an event of default which, if not cured or waived, could result in
the acceleration of all of our debt. Our ability to generate cash in
the future 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 PLC 2017 Form 10-KPART I
Item 1A Risk Factors

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

In March 2009, the IRS issued its audit report for Medtronic Inc. for
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 that 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. 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. During November 2016,
Medtronic and the IRS entered into a Stipulation of Settled Issues
with the Tax Court which resolved the one-time repatriation holiday
as an outstanding issue unless either party decided to appeal
the Tax Court Opinion and a final decision is inconsistent with
the U.S. Tax Court Opinion. The U.S. Tax Court entered their final
decision on January 25, 2017. On April 21, 2017 the IRS filed their
Notice of Appeal to the U.S. Court of Appeals for the 8th Circuit
regarding the Tax Court Opinion. A hearing date for the Appeal
has not been set. A decision by the 8th Circuit Court of Appeals
overturning the Tax Court Opinion could have a material adverse
impact on our financial condition.

Examination and audits by tax authorities could
result in additional tax payments, which could
have a material adverse effect on our 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

MEDTRONIC PLC 2017 Form 10-KPART I
Item 1A Risk Factors

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 Act
2014, which differs 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.

As an Irish public limited company, certain
capital structure decisions require shareholder
approval, which may limit Medtronic’s flexibility
to manage its capital structure.

Under Irish law, our authorized share capital can be increased by an
ordinary resolution of our shareholders and the directors may issue
new ordinary or preferred shares up to a maximum amount equal
to the authorized but unissued share capital, without shareholder
approval, once authorized to do so by our articles of association or
by an ordinary resolution of our shareholders. Additionally, subject
to specified exceptions, Irish law grants statutory preemption
rights to existing shareholders where shares are being issued

for cash consideration but allows shareholders to disapply such
statutory preemption rights either in our articles of association
or by way of special resolution. Such disapplication can either
be generally applicable or be in respect of a particular allotment
of shares. Accordingly, our articles of association contain, as
permitted by Irish company law, provisions authorizing the board to
issue new shares, and to disapply statutory preemption rights. The
authorization of the directors to issue shares and the disapplication
of statutory preemption rights must both be renewed by the
shareholders at least every five years, and we cannot provide any
assurance that these authorizations will always be approved, which
could limit our ability to issue equity and thereby adversely affect
the holders of our securities.

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

MEDTRONIC PLC 2017 Form 10-KPART I
Item 1A Risk Factors

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:
■■

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

MEDTRONIC PLC 2017 Form 10-Kpurposes. 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 could make 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
cannot assess the potential impact of any such possible changes, if
adopted, until they are announced.

PART I
Item 1A Risk Factors

On April 4, 2016, the U.S. Treasury Department and the IRS
issued proposed and temporary 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.”
Such regulations generally apply to transactions completed on
or after September 22, 2014, although in some cases they have
a later effective date of April 4, 2016. The regulations 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 also impose additional U.S. taxes on certain
transactions involving the acquired U.S. corporation’s CFC’s. The
regulations do not 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 limit our ability to engage in various
intercompany transactions involving non-U.S. subsidiaries. In
addition, the U.S. Treasury Department and the IRS issued final and
temporary regulations on October 1, 2016, which might limit our
ability to deduct interest expense on certain intercompany debt for
U.S federal income tax purposes.

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 are unable to 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.

MEDTRONIC PLC 2017 Form 10-KPART I
Item 1B Unresolved Staff Comments

Item 1B Unresolved Staff Comments

None.

Item 2 Properties

Medtronic’s principal executive office is located in Ireland and is leased by the Company, while its main operational offices are located in the
Minneapolis, Minnesota metropolitan area and are owned by the Company.

The Company’s total manufacturing and research space is approximately 13 million square feet. Approximately 70 percent of the
manufacturing or research facilities is owned by Medtronic and the balance is leased. The following is a summary of the Company’s largest
manufacturing or research facilities by location:

Location Country or State

Square Feet (in thousands)

South Carolina

Connecticut

Minnesota

Mexico

Puerto Rico

China

Florida

Ireland

Massachusetts

Illinois

Texas

California

Switzerland

Dominican Republic

Arizona

Indiana

Colorado

Nebraska

Georgia

Japan

Canada

Italy

1,146

1,098

1,024

983

831

821

649

640

549

501

431

364

347

304

294

291

287

281

236

223

206

200

Medtronic also maintains sales and administrative offices in the U.S. at 12 locations in 10 states and outside the U.S. at 177 locations in 67
countries. Most of these locations are leased. The Company is using substantially all of its currently available productive space to develop,
manufacture, and market its products. The Company’s facilities are well maintained, 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 20 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.

MEDTRONIC PLC 2017 Form 10-KPART 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.”

The following table provides information about the shares repurchased by the Company during the fourth quarter of fiscal year 2017:

Fiscal Period

1/28/2017-2/24/2017

2/25/2017-3/31/2017

4/1/2017-4/28/2017

TOTAL

Total Number of Shares
Purchased

Average Price Paid per Share

Total Number of Shares
Purchased as a Part of
Publicly Announced
Program(1)

Maximum Number
of Shares that may
yet be Purchased
Under the Program(1)

393,134

458,013

839,332
1,690,479

76.31

81.88

80.42
79.86

393,134

458,013

839,332
1,690,479

30,494,376

30,036,363

29,197,031
29,197,031

(1)

In June 2015, the Company’s Board of Directors authorized, subject to the ongoing existence of sufficient distributable reserves, the repurchase of
80 million of the Company’s ordinary shares (2015 Repo Authorization). In June 2017, the Company’s Board of Directors replaced the existing 2015
Repo Authorization to redeem up to an aggregate number of ordinary shares with an authorization to expend up to an aggregate amount of $5 billion
beginning June 26, 2017 to redeem the Company’s ordinary shares.

On June 21, 2017, there were approximately 32,550 shareholders
of record of the Company’s ordinary shares. Ordinary cash
dividends declared and paid totaled 43.0 cents per share for each
quarter of fiscal year 2017 and 38.0 cents per share for each

quarter of fiscal year 2016. The following prices are the high and
low market sales quotations per share of the Company’s ordinary
shares for the fiscal years and quarters indicated:

Fiscal year

2017 High

2017 Low

2016 High

2016 Low

1st Quarter

2nd Quarter

3rd Quarter

4th Quarter

89.27

78.63

79.08

72.20

88.65

80.71

78.91

55.54

85.09

69.35

78.92

72.28

84.00

74.27

80.74

71.03

MEDTRONIC PLC 2017 Form 10-KPART II
Item 5 Market for Medtronic’s Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity Securities

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 27, 2012 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.

$300

$250

$200

$150

100

$100

100

$50

100

2012

126

116
115

2013

Shaded region represents +/-50%

161

138
139

219

182
161

228

193
160

245

226
189

2014

2015

2016

2017

Medtronic, Inc. / Medtronic plc

S&P 500 Health Care Equipment Index

S&P 500 Index

Company/Index

Medtronic, Inc. / Medtronic plc

S&P 500 Index

S&P 500 Health Care Equipment Index

April 2012

April 2013

April 2014

April 2015

April 2016

April 2017

100.00 $

126.02 $

161.43 $

219.09 $

228.05 $

244.52

100.00

115.32

115.94

138.69

138.08

160.85

181.85

160.35

192.69

189.08

225.75

For information on the Company’s 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

Except as indicated below, there are no restrictions on non-
residents of Ireland dealing in Irish domestic securities, which
includes ordinary shares of Irish companies. Except as indicated
below, dividends and redemption proceeds also continue to be
freely transferable to non-resident holders of such securities.
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.

Any transfer of, or payment in respect of, a share or interest in a
share involving the government of any country that is currently the
subject of United Nations sanctions, any person or body controlled
by any of the foregoing, or by any person acting on behalf of
the foregoing, may be subject to restrictions pursuant to such
sanctions as implemented into Irish law.

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:

■■

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

MEDTRONIC PLC 2017 Form 10-KPART II
Item 6 Selected Financial Data

■■

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)

2017

2016

2015(1)

2014

2013

Fiscal Year

Operating Results:

Net sales

Cost of products sold

Research and development expense

Selling, general, and administrative expense

Special charge (gain), net

Restructuring charges, net

Certain litigation charges

Acquisition-related items

Amortization of intangible assets

Other expense, net

Operating profit

Operating profit margin percent

Interest expense, net

Income before provision for income taxes

Provision for income taxes

Net income

Net loss attributable to noncontrolling interests

Net income attributable to Medtronic
Per Ordinary Share:

Basic - Net income attributable to Medtronic

Diluted - Net income attributable to Medtronic

Cash dividends declared per ordinary share
Financial Position at Fiscal Year-end:

Working capital
Current ratio(2)

Total assets

Long-term debt

Shareholders’ equity
Additional Information:

Full-time employees at year-end

Full-time equivalent employees at year-end

$ 29,710

$ 28,833

$ 20,261

$17,005

$ 16,590

9,291

2,193

9,711

100

363

300

220

1,980

222

5,330

9,142

2,224

9,469

290

283

1,931

107

5,291

6,309

1,640

6,904

(38)

237

550

733

118

4,333

1,477

5,847

770

117

349

181

4,126

1,557

5,698

—

172

245

(49)

331

108

3,766

3,813

4,402

17.9%

18.4%

18.6%

22.4%

26.5%

728

4,602

578

4,024

955

4,336

798

3,538

—

280

3,486

811

2,675

—

108

3,705

640

3,065

—

151

4,251

784

3,467

—

4,028

$ 3,538

2,675

$ 3,065

$ 3,467

2.92

2.89

1.72

2.51

2.48

1.52

2.44

2.41

1.22

3.06

3.02

1.12

3.40

3.37

1.04

$ 10,316

$ 16,435

$ 21,671

$15,651

$ 13,902

1.7:1.0

99,816

25,921

50,294

91,267

102,688

3.3:1.0

99,644

30,109

52,063

88,063

98,017

3.4:1.0

106,685

33,752

53,230

85,573

92,500

3.8:1.0

37,943

10,315

19,443

43,305

49,247

4.5:1.0

34,900

9,741

18,671

42,466

46,659

(1) Covidien was acquired on January 26, 2015. As such, 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 acquisition, which affects comparability.

(2) The ratio of current assets to current liabilities, excluding current assets and current liabilities held for sale at April 28, 2017.

MEDTRONIC PLC 2017 Form 10-KPART II

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

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. You should
read this discussion and analysis along with our consolidated
financial statements and related notes thereto at April 28, 2017
and April 29, 2016 and for each of the three fiscal years ended
April 28, 2017 (fiscal year 2017), April 29, 2016 (fiscal year 2016),
and April 24, 2015 (fiscal year 2015). Our fiscal year-end is the last
Friday in April, and therefore, the total weeks in a fiscal year may
fluctuate between 52 and 53 weeks. Fiscal years 2017 and 2015
were 52-week years. Fiscal year 2016 was a 53-week year, with the
additional week occurring in the first quarter.

Early in the week of June 19, 2017, we experienced a global
information technology systems interruption that affected our
ability to manufacture devices and fulfill orders from customers in
a large portion of our business. Our systems have now been fully
restored. At this time, we do not believe our fiscal year 2018 results
of operations or financial condition will be materially affected by this
incident.

On January 26, 2015, 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 fiscal year 2015, the results
of operations of Covidien are reflected in the Company’s results
of operations for only the fourth quarter due to the timing of the
acquisition of Covidien, which affects comparability throughout 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. Financial Statements and Supplementary Data” in 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 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.) (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 that 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. Because the effective rate may
be significantly affected by the Non-GAAP Adjustments that
take place during the period, we often refer to our tax rate using
both the effective rate and the non-GAAP nominal tax rate
(Non-GAAP Nominal Tax Rate). The Non-GAAP Nominal Tax Rate
is calculated as the 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 additions to property, plant, and equipment from net
cash provided by operating activities.

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 financial measures considered by
management.

MEDTRONIC PLC 2017 Form 10-KPART II
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations

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 91,000 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 attributable to Medtronic for fiscal year 2017 was
$4.0 billion, $2.89 per diluted share, as compared to net income
attributable to Medtronic of $3.5 billion, $2.48 per diluted share,
for fiscal year 2016, representing an increase of 14 percent and
17 percent, respectively.

The table below illustrates net sales by operating segment for fiscal years 2017, 2016, and 2015:

(in millions)

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

Diabetes Group

TOTAL NET SALES

Net Sales

Fiscal Year

Net Sales

Fiscal Year

2017

2016 % Change

2016

2015 % Change

$ 10,498

$ 10,196

9,361

9,919

7,366

9,563

7,210

1,927
$ 29,710

1,864
$ 28,833

3
3%

9,563

7,210

2,387

6,751

1,864
$ 28,833

1,762
$ 20,261

301

6
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.

Currency translation had an unfavorable impact of $34 million on
net sales for fiscal year 2017, as compared to fiscal year 2016 when
using the average exchange rates in effect during fiscal year 2016.
Net sales growth for fiscal year 2017 was also unfavorably affected
by an additional selling week during the first quarter of fiscal
year 2016, resulting from our 52/53 week fiscal year calendar.
In addition, the fiscal year 2017 acquisitions of HeartWare and
Smith & Nephew’s gynecology business contributed $200 million
to our total net sales growth.

Our performance continues to be fueled by our three growth
strategies: therapy innovation, globalization, and economic value.
We are creating competitive advantages and capitalizing on the
long-term trends in healthcare: namely, the desire to improve
clinical outcomes; the growing demand for expanded access to
care; and the optimization of cost and efficiency within healthcare
systems. In our therapy innovation growth strategy, we continue
to see strong adoption of our products across all our operating
segments. Further discussion about our products is included
within the operating segment sections below. In globalization, net
sales in emerging markets and non-U.S. developed markets grew
7 percent and 4 percent, respectively, in fiscal year 2017 compared
to fiscal year 2016. In our third growth strategy, economic value,
we continue to execute our value-based healthcare signature
programs and remain focused on leading the shift to healthcare

payment systems that reward value and improved patient
outcomes over volume. 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.

GAAP to Non-GAAP Reconciliation

We have provided 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 its review of our operational performance 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
our ongoing operations and are useful for period over period
comparisons of such operations. Refer to our discussion in
the “Costs and Expenses” and “Income Taxes” sections of this
Management’s Discussion and Analysis for more information
on the Non-GAAP Adjustments. 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 should be cautioned that we may calculate
results reflecting non-GAAP financial measures in a manner that is
different from other companies.

MEDTRONIC PLC 2017 Form 10-KPART II
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations

(in millions)

GAAP
Non-GAAP Adjustments:

Impact of inventory step-up

Special charge

Restructuring charges, net

Certain litigation charges

Acquisition-related items

Amortization of intangible assets

Certain tax adjustments, net

Income Before Provision
for Income Taxes

Diluted EPS(2)

Provision for
Income Taxes(1)

Effective Tax Rate

Fiscal year ended April 28, 2017

4,602

2.89

100

373

300

230

1,980

—

7,623

0.02

0.05

0.20

0.14

0.11

1.05

0.15

4.60

578

101

110

520

(202)

1,232

12.6%

36.8

37.0

27.1

36.7

32.2

26.3

—

16.2%

Non-GAAP

(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.

(2) The data in this schedule has been intentionally rounded to the nearest $0.01 and, therefore, may not sum.

(in millions)

GAAP
Non-GAAP Adjustments:

Impact of inventory step-up

Special charge

Restructuring charges, net

Certain litigation charges

Acquisition-related items

Amortization of intangible assets

Loss on previously held forward starting interest
rate swaps

Debt tender premium

Certain tax adjustments, net

Non-GAAP

Fiscal year ended April 29, 2016

Income Before Provision
for Income Taxes

Diluted EPS(2)

Provision for
Income Taxes(1)

Effective Tax Rate

4,336

2.48

798

18.4%

226

299

283

1,931

183

—

7,399

0.12

0.03

0.15

0.01

0.15

1.03

0.02

0.08

0.29

4.37

464

(417)

1,171

27.0

37.1

26.1

34.6

25.1

24.0

35.6

35.5

—

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.

(2) The data in this schedule has been intentionally rounded to the nearest $0.01 and, therefore, may not sum.

MEDTRONIC PLC 2017 Form 10-KPART II
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations

Fiscal year ended April 24, 2015

Income Before Provision
for Income Taxes

Diluted EPS(2)

Provision for
Income Taxes(1)

Effective Tax Rate

3,486

2.41

811

23.3%

623

(38)

252

550

733

—

5,799

0.41

0.06

(0.02)

0.16

0.02

0.39

0.49

0.04

0.31

4.28

168

(15)

117

195

(349)

1,055

27.0

17.6

39.5

28.6

35.7

21.3

26.6

36.4

—

18.2%

(in millions)

GAAP
Non-GAAP Adjustments:

Impact of inventory step-up

Impact of product technology upgrade commitment

Special gain, net

Restructuring charges, net

Certain litigation charges

Acquisition-related items

Amortization of intangible assets

Impact of acquisition on interest expense

Certain tax adjustments

Non-GAAP

(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.

(2) The data in this schedule has been intentionally rounded to the nearest $0.01 and, therefore, may not sum.
GAAP diluted EPS and Non-GAAP diluted EPS for fiscal year 2017
were $2.89 and $4.60 per diluted share, respectively, as compared
to $2.48 and $4.37 per diluted share, respectively, for fiscal year
2016, representing an increase of 17% and 5%, respectively. GAAP

diluted EPS and Non-GAAP diluted EPS growth key contributors
included realization of over $600 million in synergy savings since
the acquisition of Covidien, coupled with our revenue growth.

CRITICAL ACCOUNTING ESTIMATES

We have used various accounting policies to prepare the
consolidated financial statements in accordance with U.S. GAAP.
Our most significant accounting policies are disclosed in Note
1 to the consolidated financial statements in “Item 8. Financial
Statements and Supplementary Data” in this Annual Report on
Form 10-K.

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 management’s best judgment about
economic and market conditions and the potential effects on the
valuation and/or carrying value of assets and liabilities based upon
relevant information available. We base our estimates on historical
experience and on various assumptions that are believed to be
reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources.

Our critical accounting estimates include the following:

Revenue Recognition

Rebates are estimated based on sales terms, historical experience,
and trend analysis. In estimating rebates, we consider 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. We adjust reserves to reflect differences
between estimated and actual experience and recognize 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 were $3.0 billion
and $2.9 billion in fiscal years 2017 and 2016, respectively, and
$679 million for the fourth quarter of fiscal year 2015.

Litigation Contingencies

We are involved in a number of legal actions involving product
liability, intellectual property disputes, shareholder related
matters, environmental proceedings, income tax disputes, and
governmental proceedings and investigations in the U.S. and
around the world. 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 enforcement agencies or
private claimants seek damages, as well as other civil or criminal
remedies (including injunctions barring the sale of products that
are the subject of the proceeding), that could require significant
expenditures or result in lost revenues or limit our ability to conduct
business in the applicable jurisdictions. Estimates of probable
losses resulting from litigation and governmental proceedings
involving us 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 20 to the
consolidated financial statements in “Item 8. Financial Statements
and Supplementary Data” in this Annual Report on Form 10-K
and while it is not possible to predict the outcome for most of the
matters discussed, 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.

MEDTRONIC PLC 2017 Form 10-KPART II
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations

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. 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 there is (i) a completion of a tax audit,
(ii) effective settlement of an issue (iii) a change in applicable tax
law including a tax case or legislative guidance, or (iv) 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 at 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

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
divisions), the Minimally Invasive Therapies Group (composed of
Surgical Solutions and Patient Monitoring & Recovery divisions), the
Restorative Therapies Group, and the Diabetes Group.

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. We assess the impairment of goodwill at the
reporting unit level annually in the third quarter and whenever an
event occurs or circumstances change that would indicate that the
carrying amount may be impaired. Goodwill was $38.5 billion and
$41.5 billion at April 28, 2017 and April 29, 2016, 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 rates, 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. Definite-lived intangible
assets, net of accumulated amortization, were $22.8 billion and
$26.2 billion at April 28, 2017 and April 29, 2016, respectively.

We assess 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 us to make several estimates about fair value, including
projected future cash flows and the appropriate discount rates.
Indefinite-lived intangible assets were $594 million and $721 million
at April 28, 2017 and April 29, 2016, respectively.

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 within acquisition-related
items in our consolidated statements of income. Changes to the
fair value of contingent consideration may result from changes
in the estimated timing and amount of revenue, in the timing or
probability of achieving the milestones which trigger payment, or
in discount rates. The fair value of contingent consideration was
$246 million and $377 million at April 28, 2017 and April 29, 2016,
respectively.

In the first quarter of fiscal year 2017, we realigned the divisions
within the Restorative Therapies Group. The Restorative Therapies
Group consists of the following divisions: Spine, Brain Therapies,
Pain Therapies, and Specialty Therapies. See Note 22 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.

MEDTRONIC PLC 2017 Form 10-KPART II
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations

The table below illustrates net sales by operating segment and division for fiscal years 2017, 2016, and 2015:

(dollars in millions)

Cardiac Rhythm & Heart Failure

Coronary & Structural Heart
Aortic & Peripheral Vascular(1)
Cardiac and Vascular Group

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

Minimally Invasive Therapies Group(1)

Spine
Brain Therapies(1)

Specialty Therapies

Pain Therapies

Restorative Therapies Group

Diabetes Group
TOTAL(1)

Net Sales

Fiscal Year

Net Sales

Fiscal Year

2017

2016 % Change

2016

2015 % Change

5,465

5,245

5,649

3,113

1,736

10,498

5,511

4,408

9,919

2,641

2,098

1,491

1,136

7,366

5,465

3,093

1,638

10,196

5,265

4,298

9,563

2,629

1,980

1,419

1,182

7,210

—

(4)

3,093

1,638

10,196

5,265

4,298

9,563

2,629

1,980

1,419

1,182

7,210

3,038

1,078

9,361

1,293

1,094

2,387

2,663

1,483

1,342

1,263

6,751

1,927
$ 29,710

1,864
$ 28,833

3
3%

1,864
$ 28,833

1,762
$ 20,261

307

293

301

(1)

(6)

6
42%

(1) Growth rates are affected 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 include pacemakers,
insertable and external cardiac monitors, cardiac resynchronization
therapy devices (CRT-D), implantable cardioverter defibrillators
(ICD), leads and delivery systems, ventricular assist 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, balloons, and related delivery
systems, endovascular stent graft systems, heart valve
replacement technologies, cardiac tissue ablation systems, and
open heart and coronary bypass grafting surgical products. The
Cardiac and Vascular Group also includes Care Management
Services and Cath Lab Managed Services (CLMS) within the
Cardiac Rhythm & Heart Failure division. The Cardiac and Vascular
Group’s net sales for fiscal year 2017 were $10.5 billion, an increase
of 3 percent compared to fiscal year 2016. Currency translation
had an unfavorable impact on net sales of $37 million as a result of
the change in exchange rates from the prior year. The Cardiac and
Vascular Group’s net sales for fiscal year 2017 were unfavorably
affected by an additional selling week during the first quarter of
fiscal year 2016. The Cardiac and Vascular Group’s net sales for
fiscal year 2017, as compared to the same period in fiscal year
2016, benefited from strong net sales in Arrhythmia Management
within Cardiac Rhythm & Heart Failure, largely due to growth in AF
Solutions and Diagnostics, Coronary & Structural Heart, largely due
to transcatheter aortic heart valve in the U.S. and Europe, and in
Aortic & Peripheral Vascular, as well as the acquisition of HeartWare
in the second quarter of fiscal year 2017. See the more detailed
discussion of each division’s performance below.

Cardiac Rhythm & Heart Failure net sales for fiscal year 2017
were $5.6 billion, an increase of 3 percent compared to fiscal year
2016. Cardiac Rhythm & Heart Failure net sales growth for fiscal
year 2017 was driven by strong growth in Arrhythmia Management,

largely due to growth in AF Solutions and Diagnostics. The
strong growth in AF Solutions was driven by the continued global
acceptance of our Arctic Front Advance Cardiac CryoAblation
Catheter (Arctic Front) system, including strong growth in Japan.
The strong growth in Diagnostics was driven by the continued
adoption of the Reveal LINQ insertable cardiac monitor. Cardiac
Rhythm & Heart Failure also benefited from the acquisition of
HeartWare, which was acquired during the second quarter of
fiscal year 2017.

Coronary & Structural Heart net sales for fiscal year 2017 were
$3.1 billion, an increase of 1 percent compared to fiscal year 2016.
Coronary & Structural Heart net sales growth for fiscal year 2017
was largely driven by the continued launch of the Evolut R 34mm
transcatheter aortic heart valve in the U.S. and Europe. Net sales
growth was partially offset by challenges with drug-eluting stents
in both the U.S. and Japan due to competitive pressures related to
the anticipated approval of the Resolute Onyx drug-eluting stents
in these countries, which received U.S. FDA approval during the first
quarter of fiscal year 2018 and is expected to receive approval in
Japan during the summer of fiscal year 2018. Net sales growth was
also partially offset by continued pricing pressures and competition
worldwide in our Coronary business.

Aortic & Peripheral Vascular net sales for fiscal year 2017 were
$1.7 billion, an increase of 6 percent compared to fiscal year 2016.
Aortic & Peripheral Vascular net sales growth for fiscal year 2017
was driven by the continued strong worldwide growth of the
IN.PACT Admiral drug-coated balloon as well as success of the
Heli-FX EndoAnchor System and the Endurant IIs aortic stent graft.
Net sales growth as compared to fiscal year 2016 was also driven
by the launch of the HawkOne 6 French directional atherectomy
system in the third quarter of fiscal year 2017.

The Cardiac and Vascular Group’s net sales for fiscal year 2016
were $10.2 billion, an increase of 9 percent compared to fiscal
year 2015. The Cardiac and Vascular Group’s fiscal year 2016
performance was favorably affected by an additional selling

MEDTRONIC PLC 2017 Form 10-KPART II
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations

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 in the fourth quarter of fiscal
year 2015 and strong net sales across all three divisions.

Cardiac Rhythm & Heart Failure net sales for fiscal year 2016 were
$5.5 billion, an increase of 4 percent compared to fiscal year 2015.
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 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 of 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 fiscal year 2015.
Net 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 fiscal year 2015.
The Aortic & Peripheral Vascular division net sales performance
benefited from the addition of the Covidien Peripheral business
in the fourth quarter of fiscal year 2015. 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.

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

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

■■

Integration of our acquisition of HeartWare, a leading innovator
of the HeartWare Ventricular Assist System (HVAD System), to
treat patients around the world suffering from advanced heart
failure. The acquisition of HeartWare in August 2016 broadened
the Medtronic portfolio of therapies, diagnostic tools and services
for patients suffering from heart failure and is part of our therapy
innovation strategy to surround the physician with innovative
products while focusing on patients and disease states.

■■

Acceptance and future growth of the CRT-P quadripolar pacing
system, which received CE Mark approval in February 2017 and
launched in Europe during the fourth quarter of fiscal year 2017.
In the U.S., we received FDA approval in May 2017, and launched
in the first quarter of fiscal year 2018.

Acceptance and future growth of the Claria MRI CRT-D system
with EffectivCRT Diagnostic and Effective CRT during AF
algorithm, which launched in the U.S. late in the third quarter
of fiscal year 2017 and is expected to launch in Japan in fiscal
year 2018.

Continued future growth from the Reveal LINQ insertable
cardiac monitor, which launched in Japan in the second quarter
of fiscal year 2017.

Continued future growth of our Micra transcatheter pacing
system, which we started shipping and physician training in the U.S.
in the first quarter of fiscal year 2017. 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. During the fourth quarter of fiscal year 2017, we received
final approval for reimbursement in the U.S. from the Centers for
Medicare & Medicaid Services for this transformative therapy,
which we expect will accelerate sales in the U.S.

Continued acceptance and future growth from Care
Management Services as post-acute care services become
even more critical in bundled payment models for different
interventions or therapies.

Continued acceptance and future growth from Evolut R
34mm transcatheter aortic heart valve, our next-generation
recapturable system with differentiated 16 French equivalent
delivery system, which was launched in the U.S. in the third
quarter of fiscal year 2017.

Acceptance and future growth from Evolut PRO Transcatheter
Aortic Valve system (Evolut PRO), which provides control during
deployment to assist with accurate positioning with the ability to
recapture and reposition the valve. Evolut PRO received U.S. FDA
approval and launched in the fourth quarter of fiscal year 2017.
Evolut PRO is expected to receive CE Mark approval and launch
in Europe late summer 2017.

Acceptance and future growth from the market release of
Resolute Onyx, which received U.S. FDA approval early in the first
quarter of fiscal year 2018 and is expected to receive approval
in Japan during the summer of fiscal year 2018. 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 procedures.

Continued acceptance and future growth of the IN.PACT Admiral
drug-coated balloon, including the longer length 150mm sizes,
for the treatment of peripheral artery disease in the upper leg.

Continued acceptance and future growth from the HawkOne 6
French (6F) for treating patients with peripheral artery disease
(PAD), which launched in the U.S. in the third quarter of fiscal
year 2017. The HawkOne system is designed to remove plaque
from the vessel wall and restore blood flow. The new HawkOne
6F provides an effective and easy-to-use treatment option for
patients with PAD both above and below the knee with a single
device at a lower profile.

MEDTRONIC PLC 2017 Form 10-KPART II
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations

Minimally Invasive Therapies Group

The Minimally Invasive Therapies Group’s products span the entire
continuum of care with a focus on diseases of the gastrointestinal
tract, lungs, pelvic region, kidneys, obesity, and preventable
complications. The products include those for advanced and
general surgical care, wound closure, electrosurgery products,
hernia mechanical devices, mesh implants, advanced ablation,
interventional lung, ventilators, capnography, airway products,
sensors, monitors, compression, dialysis, enteral feeding, wound
care, and medical surgical products. The Minimally Invasive
Therapies Group’s net sales for fiscal year 2017 were $9.9 billion,
an increase of 4 percent compared to fiscal year 2016. Currency
translation had a favorable impact on net sales of $17 million as
a result of the change in exchange rates from the prior year. The
Minimally Invasive Therapies Group’s net sales growth in fiscal
year 2017 was unfavorably affected by an additional selling week
during the first quarter of fiscal year 2016. The Minimally Invasive
Therapies Group’s net sales for fiscal year 2017, as compared to
the same period in fiscal year 2016, benefited from strong net sales
in Surgical Solutions, largely due to growth in Advanced Stapling and
Advanced Energy, and Patient Monitoring & Recovery, largely due
to Airways and Ventilation Management, as well as the acquisition
of Smith & Nephew’s gynecology business in the second quarter of
fiscal year 2017 and Bellco in the fourth quarter of fiscal year 2016.
See the more detailed discussion of each division’s performance
below.

Surgical Solutions net sales for fiscal year 2017 were $5.5 billion,
an increase of 5 percent compared to fiscal year 2016. Surgical
Solutions net sales growth was driven by Advanced Stapling
and Advanced Energy. Advanced Stapling growth resulted from
strong adoption of endo stapling specialty reloads with Tri-Staple
technology, growth in emerging markets and the release of the
Signia power stapling system. Advanced Energy growth resulted
from the launch of the LigaSure vessel sealing instruments and
continued adoption of the Valleylab FT10 energy platform. The
launch of new LigaSure vessel sealing instruments along with
the Valleylab FT10 energy platform helped mitigate the negative
impact of reprocessing. Surgical Solutions also benefited from the
acquisition of Smith & Nephew’s gynecology business, which was
acquired during the second quarter of fiscal year 2017.

Patient Monitoring & Recovery net sales for fiscal year 2017 were
$4.4 billion, an increase of 3 percent compared to fiscal year 2016.
Patient Monitoring & Recovery net sales growth was driven by
strong Airways and Ventilation Management sales of the Puritan
Bennett 980, strength in Patient Monitoring Nellcor pulse oximetry
products, and growth in emerging markets. Patient Monitoring &
Recovery also benefited from the acquisition of Bellco, which was
acquired during the fourth quarter of fiscal year 2016.

Surgical Solutions net sales for fiscal year 2016 were $5.3 billion.
The net sales performance in Surgical Solutions was mainly
attributable to Advanced Stapling and Advanced Energy. Advanced
Stapling products benefited from continued worldwide market
adoption of the Endo GIA Reinforced Reload. Advanced Energy
products benefited from continued strong adoption of the
LigaSure Maryland Jaw and Valleylab FT10 energy platform.
Further, Early Technologies product performance was driven
primarily by our gastrointestinal 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 Airways and
Ventilation Management, Patient Monitoring, Patient Care,
Nutritional Insufficiency, Deep Vein Thrombosis, and Renal Care
Solutions. Airways and Ventilation Management and Patient
Monitoring performance was attributable to airway products, acute
ventilator sales, and sensors. Patient Care net sales results were
primarily due to sales of incontinence, wound care and SharpSafety
product lines and sales within our electrode products. The
Nutritional Insufficiency and Deep Vein Thrombosis net sales were
largely driven by sales of enteral feeding, and compression product
lines. Renal Care Solutions results were primarily due to sales of
dialysis products.

Looking ahead, we expect our Minimally Invasive Therapies Group
could be affected by the following:
■■

The planned divestiture of the Patient Care, Deep Vein
Thrombosis, and Nutritional Insufficiency businesses within
the Patient Monitoring & Recovery division. The transaction
is expected to close in the second quarter of fiscal year 2018,
subject to receipt of customary regulatory approvals and
satisfaction of other customary closing conditions. Clearance
from the U.S. Federal Trade Commission was obtained in May
2017. Net sales of the businesses included in the planned
divestiture were $2.4 billion in fiscal years 2017 and 2016.

■■

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

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
including robotics. To achieve this transition, we are focused
on product training, surgical skill training and continued therapy
innovation to advance MIS.

Continued acceptance and future growth of the powered
stapling and energy platform.

Our ability to execute ongoing strategies in order to address
the competitive pressure of reprocessing of our vessel sealing
disposables in the U.S.

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 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 while investing in
vascular creation and maintenance technologies. Our efforts

MEDTRONIC PLC 2017 Form 10-KPART II
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations

around end stage renal disease benefited from the fiscal year
2016 acquisition of Bellco, a pioneer in hemodialysis treatment
solutions. In addition, the HD multi-pass system, expected to
launch in fiscal year 2019, reduces infrastructure by requiring
less water, less start-up costs, and offers high quality ultrapure
dialysate treatment.

Continued elevation of the standard of care for respiratory
compromise, a progressive condition impacting a patient’s ability
to breathe effectively.

Continued acceptance and growth in Respiratory Care,
Airway and Ventilation 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 and
creation of less invasive standards of care, including the areas
of GI solutions, advanced ablation, and interventional lung
solutions. Recently launched products include the PillCam
COLON capsule endoscopy, the Barrx platform through ablation
with the Barrx 360 Express catheter, the Emprint ablation
system with Thermosphere Technology which maintains
predictable spherical ablation zones throughout procedures
reducing procedure time and cost, the superDimension GenCut
core biopsy system and the Triple Needle Cytology Brush, a lung
tissue biopsy tool 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 may aid in the diagnosis of lung cancer.

Expanding the use of less invasive treatments and furthering our
commitment to improving options for women with abnormal
uterine bleeding with our fiscal year 2017 acquisition of Smith
and Nephew’s gynecology business. The addition expands
and strengthens the surgical offerings and complements the
existing global gynecology business.

■■

Restorative Therapies Group

The Restorative Therapies Group’s products focus on 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 (OCD), overactive bladder, urinary
retention, fecal incontinence and gastroparesis, as well as products
to treat conditions of the ear, nose, and throat, and systems that
incorporate advanced energy surgical instruments. The Restorative
Therapies Group also manufactures and sells image-guided
surgery and intra-operative imaging systems and therapies to treat
diseases of the vasculature in and around the brain including coils,
neurovascular stents and flow diversion products. The Restorative
Therapies Group’s net sales for fiscal year 2017 were $7.4 billion,
an increase of 2 percent as compared to fiscal year 2016.
Currency translation had an unfavorable impact on net sales of
approximately $1 million as a result of the change in exchange rates
from the prior year. The Restorative Therapies Group’s net sales
were unfavorably affected by an additional selling week during the
first quarter of fiscal year 2016. The Restorative Therapies Group’s
performance for fiscal year 2017 was driven by solid growth in

Brain and Specialty Therapies, partially offset by declines in Pain
Therapies. See the more detailed discussion of each division’s
performance below.

Spine net sales for fiscal year 2017 were $2.6 billion, flat compared
to fiscal year 2016. Spine net sales were driven by growth in BMP
due to strong U.S. sales, offset by declines in Europe due to the
InductOs stop shipment due to suspension in the E.U. Core Spine
had net sales growth in the U.S due to new product launches
including the Solera Voyager and Elevate expandable cage in
conjunction with the “Speed to Scale” initiative, which involves
faster innovation cycles and launching a steady cadence of new
products at scale with sets immediately available for the entire
market, and growth in implants due to the success of our Surgical
Synergy strategy, offset by market softness in Europe and the
Middle East driven by the macro-economic conditions. InductOs
returned to the European market in the first quarter of fiscal
year 2018.

Brain Therapies net sales for fiscal year 2017 were $2.1 billion, an
increase of 6 percent as compared to fiscal year 2016. The increase
in net sales was driven by strong growth in both Neurovascular
and Neurosurgery. Neurovascular net sales growth was driven
by growth in coils from the Axium Prime Extra Soft detachable
coil, growth in flow diversion from the Pipeline Flex embolization
device, and growth in stents due to the Solitaire revascularization
device, partially offset by declines due to a voluntary recall of
certain product lines in the second quarter. Neurosurgery net sales
growth was driven by strong sales of navigation capital equipment,
disposables, and the O-arm O2 surgical imaging system. Despite
competitive pressure, Brain Modulation drove net sales growth with
U.S. sales of the MR Conditional Activa DBS portfolio and through
updated Parkinson’s Disease labeling for patients with Recent
Onset of Motor Complications.

Specialty Therapies net sales for fiscal year 2017 were $1.5 billion,
an increase of 5 percent as compared to fiscal year 2016. The
increase in net sales was driven by strong growth in Advanced
Energy and Pelvic Health and growth in ENT. Net sales growth
in Advanced Energy was driven by the sales of the Aquamantys
Transcollation and PEAK PlasmaBlade products. Net sales growth
in Pelvic Health was driven by strong InterStim implant growth in
the U.S. Net sales growth in ENT continues to benefit from strong
adoption of new products, including NuVent balloons and Fusion
Compact navigation.

Pain Therapies net sales for fiscal year 2017 were $1.1 billion,
a decrease of 4 percent as compared to fiscal year 2016. The
decrease in net sales was driven by declines in sales of spinal cord
stimulation products due to competitive pressures in the U.S.,
partially offset by growth in Interventional from the OsteoCool RF
Spinal Tumor ablation system.

Spine net sales for fiscal year 2016 were $2.6 billion, a decrease
of 1 percent compared to fiscal year 2015. The decrease in Spine
net sales was driven by declines in Core Spine 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 saw incremental revenue from our
differentiated OLIF procedures, as well as from the recent Solera,

MEDTRONIC PLC 2017 Form 10-KPART II
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations

Voyager, Elevate, and PTC Interbody launches for TLIF and MIDLF
procedures. In Core Spine, we are realized some early benefits from
our “Speed to Scale” initiative, which accelerates innovation and
enables rapid deployment of these products and procedures to the
market. In BMP, strong growth in the U.S. was offset by declines in
international BMP due to the InductOs stop shipment in Europe.

Brain Therapies net sales for fiscal year 2016 were $2.0 billion, an
increase of 34 percent compared to fiscal year 2015. The growth
rate reflected the addition of the Neurovascular division as a result
of the Covidien acquisition in the fourth quarter of fiscal year 2015.
Neurovascular contributed revenue from the strength of its coils,
stents, flow diversion, and access product lines and the Solitaire
FR mechanical thrombectomy device delivered strong results,
solidifying our leadership position in the rapidly expanding ischemic
stroke market. Additionally, our flow diversion products for the
treatment of intracranial aneurysms, Pipeline Flex in the U.S. and
Japan and Pipeline Shield in Europe, continued to lead the market.
Neurosurgery contributed revenue from growth of the O-arm
imaging systems. Growth in Neurovascular and Neurosurgery was
partially offset by declines in DBS due to competitive headwinds.

Specialty Therapies net sales for fiscal year 2016 were $1.4 billion,
an increase of 6 percent compared to fiscal year 2015. The
increase in net sales was driven by continued worldwide net sales
growth across the portfolio of Advanced Energy, Pelvic Health, and
ENT. Performance was driven by strong growth of power systems,
Aquamantys Transcollation, and PEAK PlasmaBlade technologies,
as well as solid implant growth of our InterStim therapy for
overactive bladder, urinary retention, and bowel incontinence.

Pain Therapies net sales for fiscal year 2016 were $1.2 billion, a
decrease of 6 percent compared to fiscal year 2015. Net sales
declined for Drug Pumps and Pain Stimulation. 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,
declines were driven by increased competition in the market.
Interventional spine net sales also declined driven by continued
pricing pressures.

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

■■

Continued market acceptance of our new integrated solutions
through the Surgical Synergy program, which integrates our
spinal implants and imaging and navigation equipment.

Continued success of “Speed to Scale” program product
launches, which involves faster innovation cycles and launching a
steady cadence of new products at scale with sets immediately
available for the entire market.

Market acceptance and continued global adoption of innovative
new Spine products, such as our CD Horizon Solera Voyager
system, our ELEVATE expandable interbody cages, and our
OLIF25 and OLIF51 procedural solutions and the return of the
InductOs products to European markets in the first quarter of
fiscal year 2018.

■■

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

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.

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
the U.S.

Continued acceptance and growth of our Specialty Therapies,
including InterStim therapy for the treatment of the symptoms
of overactive bladder, urinary retention, and bowel incontinence,
and Advanced Energy products and strategies to focus on its
four core markets of orthopedic, spine, breast surgery, and
Cardiac Rhythm Disease Management device replacements.

Continued growth from Neurosurgery StealthStation 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, including launch of the StealthStation S8 surgical
navigation system. Additionally, continued growth in nerve
monitoring utilizing the NIM Eclipse system during spinal surgical
procedures.

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

Continued successful placement of robotic units and associated
market adoption of robot-assisted spine procedures, under a
co-promotion agreement with Mazor Robotics.

Diabetes Group

The Diabetes Group’s 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 2017 were $1.9 billion, an increase of 3 percent
as compared to fiscal year 2016, and were unfavorably affected by
an additional selling week during the first quarter of fiscal year 2016.
Currency translation had an unfavorable impact on net sales for
fiscal year 2017 of $13 million as a result of the change in exchange
rates from the prior year. The Diabetes Group’s net sales for fiscal
year 2017 benefited from growth in both the U.S. and international
markets due to strong U.S. sales of the MiniMed 630G system and
interest in the Priority Access Program for the MiniMed 670G hybrid
closed loop system, as well as strong international sales in Europe,
Latin America, and Asia Pacific of the MiniMed 640G system with
the Enhanced Enlite sensor.

MEDTRONIC PLC 2017 Form 10-KPART II
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations

The Diabetes Group’s net sales for fiscal year 2016 were
$1.9 billion, an increase of 6 percent over fiscal year 2015, and were
favorably affected by the additional selling week during the first
quarter of fiscal year 2016. The increase in net sales was primarily
driven by the MiniMed 530G system with Enlite sensor, along with
strong performance in international markets by the MiniMed 640G.

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

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.

■■

Continued acceptance and growth in international markets of
the MiniMed 630G system, which includes the insulin pump
and Enlite CGM sensor. This system launched in the U.S. in
August 2016 and combines proprietary SmartGuard technology
featured in the MiniMed 530G system with a brand new hardware
platform and user-friendly design.

Acceptance and future growth of the MiniMed 670G system, the
first hybrid closed loop system in the world. The system features

OPERATIONS BY MARKET GEOGRAPHY

our most advanced SmartGuard HCL algorithm, which enables
improved glucose control with reduced user input. The MiniMed
670G system received U.S. FDA approval during the second
quarter of fiscal year 2017 and launched in the U.S. in June 2017.

■■

Changes in medical reimbursement policies and programs,
along with payor coverage of the MiniMed 670G system.

Continued acceptance and future growth of 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.

Continued acceptance and future growth of Guardian Connect
continuous glucose monitoring (CGM) system which displays
information directly to a smartphone, and received CE mark in
2016 and has launched internationally, with an expected U.S.
launch in the second half of fiscal year 2018.

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

The charts below illustrate net sales by market geography for fiscal years 2017, 2016, and 2015:

FISCAL YEAR 2017
(in millions)

FISCAL YEAR 2016
(in millions)

FISCAL YEAR 2015
(in millions)

Emerging
Markets
$3,962

13%

U.S.
$16,663

Emerging
Markets
$3,703

13%

U.S.
$16,422

Emerging
Markets
$2,584

13%

U.S.
$11,305

31%

56%

Non-U.S.
Developed
$8,708

Non-U.S.
Developed
$9,085

30% 57%

31%

56%

Non-U.S.
Developed
$6,372

Consolidated Net Sales
$29,710

Consolidated Net Sales
$28,833

Consolidated Net Sales
$20,261

The table below illustrates net sales by market geography for each of our operating segments for fiscal years 2017, 2016, and 2015:

(in millions)

Fiscal Year 2017

Fiscal Year 2016

Fiscal Year 2015

Non-U.S.
Developed
Markets(2)

U.S.(1)

Emerging
Markets(3)

U.S.(1)

Non-U.S.
Developed
Markets(2)

Emerging
Markets(3)

Non-U.S.
Developed
Markets(2)

U.S.(1)

Emerging
Markets(3)

Cardiac and Vascular Group

$ 5,454 $

Minimally Invasive Therapies Group

Restorative Therapies Group

Diabetes Group

TOTAL

5,049

5,012

1,148
$ 16,663 $

3,393

3,479

1,588

625
9,085

$ 1,651

$ 5,347

$ 3,283 $

1,566 $

4,435 $ 3,412

$ 1,514

1,391

766

5,014

4,921

154
$ 3,962

1,140
$ 16,422

3,299

1,542

584

$ 8,708 $

1,250

747

1,230

4,569

856

1,556

301

626

140

548
1,071
3,703 $ 11,305 $ 6,372

143
$ 2,584

(1) U.S. includes the United States and U.S. territories.
(2) Non-U.S. developed markets include Japan, Australia, New Zealand, Korea, Canada, and the countries of Western Europe.
(3) Emerging markets include the countries of the Middle East, Africa, Latin America, Eastern Europe, and the countries of Asia that are not included in the

non-U.S. developed markets, as defined above.

For fiscal year 2017, net sales for the U.S. increased 1 percent,
developed markets outside the U.S. increased 4 percent, and
emerging markets increased 7 percent compared to fiscal
year 2016. Net sales growth across all markets was driven by
meaningful product launches and introduction of groundbreaking

new technologies, partially offset by an unfavorable impact of an
additional selling week during the first quarter of fiscal year 2016.
Net sales growth in the U.S. was led by strong growth in the Cardiac
and Vascular Group and Minimally Invasive Therapies Group and
solid growth in the Restorative Therapies Group and Diabetes. In

MEDTRONIC PLC 2017 Form 10-KPART II
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations

Emerging Markets, net sales growth was also attributable to the
expansion of access to our therapies.

For fiscal year 2016, net sales for the U.S increased 45 percent,
non-U.S. developed markets increased 37 percent, and emerging
markets increased 43 percent over fiscal year 2015. 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 affected by an additional selling week during
the first quarter of 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.

Net sales in non-U.S. developed and emerging markets 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 and the average length of
time it takes to collect our outstanding accounts receivable from
our international customers. 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 the countries we serve.

COSTS AND EXPENSES
Cost of Products Sold

(in millions)

Net sales

Cost of products sold
GROSS PROFIT

Gross margin percent

2017

Fiscal Year

2016

2015

$ 29,710

$ 28,833

$ 20,261

9,291
$ 20,419

9,142
$ 19,691

6,309
$ 13,952

68.7%

68.3%

68.9%

We continue to focus on reducing our costs of products sold,
thus increasing gross profit, through supply chain management
and changes to our manufacturing network. Gross margin
percent was 68.7 percent, 68.3 percent, and 68.9 percent in fiscal
years 2017, 2016, and 2015, respectively. Gross margin percent in
fiscal years 2017 and 2016 decreased as compared to the same
period in fiscal year 2015 largely due to the change in product mix
as a result of the Covidien acquisition in the fourth quarter of fiscal

year 2015. Gross margin percent changes in fiscal years 2017 and
2016 as compared to the same periods in the respective prior
fiscal year were also affected by a $38 million charge during fiscal
year 2017 related to the recognition of the fair value step-up of
acquired Heartware inventory, as compared to a $226 million
charge and $623 million charge during fiscal years 2016 and 2015,
respectively, related to the recognition of the fair value step-up of
acquired Covidien inventory.

Research and Development & Selling, General, and Administrative Expense

The following is a summary of research and development and selling, general, and administrative expenses as a percent of net sales:

Research and development expense

Selling, general, and administrative expense

Fiscal Year

2017

2016

2015

7.4%

32.7%

7.7%

32.8%

8.1%

34.1%

Research and Development

Selling, General, and Administrative

We remain committed to accelerating the development of
meaningful innovations to deliver better patient outcomes at
appropriate costs, that lead to enhanced quality of life, and may be
validated by clinical and economic evidence. We are also focused
on expanding access to quality healthcare.

Research and development expense for both fiscal years 2017
and 2016 was $2.2 billion, as compared to $1.6 billion in fiscal year
2015. Research and development expense decreased slightly as a
percentage of net sales over the three-year period due, in part, to
the timing of clinical trials and product approvals. During fiscal year
2017, we continued to invest in new technologies to support our
mission through continued product growth.

Our goal is to continue to leverage selling, general, and
administrative expense initiatives and to continue to realize cost
synergies expected from our acquisitions. Selling, general, and
administrative expense primarily consist of salaries and wages, as
well as other administrative costs such as professional fees and
marketing expenses.

Selling, general, and administrative expense was $9.7 billion,
$9.5 billion, and $6.9 billion during fiscal years 2017, 2016, and 2015,
respectively. Selling, general, and administrative expense remained
fairly flat as a percentage of net sales from fiscal year 2016 to 2017,
with a slight decrease due to cost savings associated with selling,
general, and administrative expense initiatives. We continue to
execute on our cost synergies from the Covidien acquisition and
transition to centers of excellence in our enabling functions.

MEDTRONIC PLC 2017 Form 10-KPART II
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations

Other Costs and Expenses

(in millions)

Special charge (gain), net

Restructuring charges, net

Certain litigation charges

Acquisition-related items

Amortization of intangible assets

Other expense, net

Interest expense, net

Special Charge

During fiscal year 2017, in continuing our commitment to improve
the health of people and communities throughout the world, we
made a $100 million charitable cash contribution to meet the
multi-year funding needs of the Medtronic Foundation, a related
party non-profit organization.

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 ENT division and a $97 million gain on the sale of an equity
method investment. These special gains were partially offset by a
$100 million charitable contribution that we made to the Medtronic
Foundation.

Restructuring Charges

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.

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
acquisition through fiscal year 2018, including administrative office
optimization, manufacturing and supply chain 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.

Our restructuring reserve balances at April 28, 2017, April 29,
2016, and April 24, 2015 were $291 million, $250 million, and
$143 million, respectively. During fiscal years 2017, 2016, and
2015, we recognized restructuring charges of $441 million,
$332 million, and $248 million, respectively. For fiscal year 2017,
the restructuring charges included $73 million of incremental
defined benefit pension and post-retirement related expenses
for employees that accepted voluntary early retirement packages.
For further discussion on the incremental defined benefit pension

2017

100

363

300

220

1,980

222

728

Fiscal Year

2016

290

283

1,931

107

955

2015

(38)

237

550

733

118

280

and post-retirement related expenses, see Note 17 to the
consolidated financial statements in “Item 8. Financial Statements
and Supplementary Data” in this Annual Report on Form 10-K.

The restructuring charges during fiscal years 2017 and 2016 were
partially offset by reversals of excess restructuring reserves of
$68 million and $18 million, respectively. Reversals of restructuring
reserves relate to certain employees identified for termination
finding other positions within the Company, cancellations of
employee terminations, and employee termination costs being
less than initially estimated. For fiscal years 2017, 2016, and 2015,
restructuring charges of $10 million, $9 million, and $15 million,
respectively, were recognized within cost of products sold in the
consolidated statements of income.

For additional information, see Note 4 to the consolidated financial
statements in “Item 8. Financial Statements and Supplementary
Data” in this Annual Report on Form 10-K.

Certain Litigation Charges

We classify litigation charges and gains related to significant legal
proceedings as certain litigation charges. During the fiscal years
2017, 2016, and 2015, we recognized $300 million, $26 million,
and $42 million, respectively, of certain litigation charges related to
probable and estimable damages.

For additional information, see Note 20 to the consolidated
financial statements in “Item 8. Financial Statements and
Supplementary Data” in this Annual Report on Form 10-K for
additional information.

Acquisition-Related Items

During fiscal year 2017, we recognized acquisition-related items
expense of $230 million, including $10 million recognized within
cost of products sold in the consolidated statements of income.
Acquisition-related items expenses primarily include integration-
related expenses incurred in connection with the Covidien
acquisition. The expenses incurred in connection with the Covidien
acquisition include $225 million of professional services and
integration expenses and $23 million of accelerated or incremental
stock compensation expense. Acquisition-related items expense
also includes expenses incurred in connection with the HeartWare
acquisition and planned divestiture of a portion of the Patient
Monitoring and Recovery business, partially offset by the change in
fair value of contingent consideration as a result of revised revenue
forecasts and the timing of anticipated regulatory milestones.

MEDTRONIC PLC 2017 Form 10-KPART II
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

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

Amortization of Intangible Assets

Amortization of intangible assets includes the amortization expense
of our definite-lived intangible assets, consisting of purchased
patents, trademarks, tradenames, customer relationships, and
purchased technology. Amortization expense was $2.0 billion,
$1.9 billion, and $733 million in fiscal years 2017, 2016, and 2015,
respectively. The increase in amortization expense from fiscal
year 2016 to fiscal year 2017 is primarily due to the acquisition
of amortizable intangible assets as a result of the acquisition of
HeartWare. The increase in amortization expense from fiscal year
2015 to fiscal year 2016 is primarily due to recognizing a full year of
amortization of the intangible assets acquired with Covidien in the
fourth quarter of fiscal year 2015.

Other Expense, Net

Other expense, net includes royalty income and expense, realized
equity security gains and losses, currency transaction and derivative
gains and losses, impairment charges on equity securities, Puerto
Rico excise tax, and U.S. medical device excise tax. In fiscal year
2017, other expense, net was $222 million as compared to $107

million in fiscal year 2016. The largest contributor to the change in
other expense, net was a decrease in net currency gains, partially
offset by the decrease in U.S. medical device tax due to the
suspension of the U.S. medical device tax beginning January 1,
2016. Total net currency gains recognized in other expense, net were
$81 million in fiscal year 2017 compared to gains of $314 million in
fiscal year 2016.

In fiscal year 2016, other expense, net was $107 million, a decrease
of $11 million from $118 million in fiscal year 2015. The largest
contributor to the change in other expense, net was was an increase
in net currency gains, partially offset by increased royalty expense
within Minimally Invasive Therapies Group. Total net currency gains
recognized in other expense, net were $314 million in fiscal year 2016
compared to gains of $196 million in fiscal year 2015.

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,
and ineffectiveness on interest rate derivative instruments. In fiscal
year 2017, interest expense, net was $728 million compared to $955
million in fiscal year 2016. The decrease in interest expense, net for
fiscal year 2017 was the result of a $183 million charge recorded in
connection with the cash tender offer and redemption of certain
debt securities in fiscal year 2016 and a $45 million loss on interest
rate swaps which were entered into in advance of a planned debt
issuance that was no longer anticipated in fiscal year 2016.

In fiscal year fiscal year 2016, interest expense, net was $955 million
compared to $280 million in fiscal year 2015. The increase in interest
expense, net for fiscal year 2016 was driven by an increase in total
debt, primarily resulting from the Covidien acquisition, a $183 million
charge recorded in connection with the cash tender offer and
redemption of certain debt securities, and a $45 million loss on
interest rate swaps which were entered into in advance of a planned
debt issuance that was no longer anticipated in fiscal year 2016.

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

Our effective tax rate for fiscal year 2017 was 12.6 percent
compared to 18.4 percent in fiscal year 2016. The decrease in
our effective tax rate for fiscal year 2017 as compared to fiscal
year 2016 was due to the net tax impact of inventory step-up,
debt tender premium, certain litigation payments, certain tax
adjustments, operational tax benefits described below, and
year-over-year changes in operational results by jurisdiction.

2017

Fiscal Year

2016

2015

578

798

811

4,602

12.6%

4,336

18.4%

3,486

23.3%

$ 1,232

$ 1,171

$ 1,055

7,623

7,399

5,799

16.2%

3.6%

15.8%

(2.6)%

18.2%

(5.1)%

Our Non-GAAP Nominal Tax Rate for fiscal year 2017 was 16.2
percent compared to 15.8 percent in fiscal year 2016. The increase
in our Non-GAAP Nominal Tax Rate for fiscal year 2017 as compared
to fiscal year 2016 was primarily due to operational tax benefits and
year-over-year changes in operational results by jurisdiction.

MEDTRONIC PLC 2017 Form 10-KA charge of $86 million associated with the IRS’s disallowance
of the utilization of certain net operating losses, along with the
recognition of a valuation allowance against the net operating
loss deferred tax asset, was recognized during the year.

A charge of $18 million as a result of the redemption of an
intercompany minority interest during the year.

A benefit of $431 million as the result of the resolution
of Covidien’s previously disclosed Tyco International plc
intercompany debt issues with the U.S. Tax Court and the Appeals
Division of the IRS.

The $202 million net certain tax adjustment was recognized in
provision for income taxes in the consolidated statement of income
for fiscal year 2017.

During fiscal year 2016, we recognized certain tax adjustments of
$417 million, which included the following:
■■

A charge of $442 million 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.

■■

A $25 million tax benefit associated with the disposition of a
wholly owned U.S. subsidiary.

The $417 million net certain tax adjustment was recognized in
provision for income taxes in the consolidated statement of income
for fiscal year 2016.

During fiscal year 2015, we recognized certain tax adjustments of
$349 million, which included the following:
■■

A charge of $329 million related to the resolution of the Kyphon
Inc. (Kyphon) acquisition-related issues with the U.S. Internal
Revenue Service (IRS).

■■

A charge of $20 million related to a taxable gain associated with
the Covidien acquisition.

The $349 million certain tax adjustment was recognized in provision
for income taxes in the consolidated statement of income for fiscal
year 2015.

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.

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

During fiscal year 2017, we recognized $95 million of operational tax
benefits. The operational tax benefits included a $44 million benefit
from the reversal of a valuation allowance associated with foreign
net operating losses and a $51 million net benefit associated with
the resolution of certain income tax audits, finalization of certain tax
returns, changes to uncertain tax position reserves, and changes to
certain deferred income tax balances.

■■

Our effective tax rate for fiscal year 2016 was 18.4 percent
compared to 23.3 percent in fiscal year 2015. 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 fiscal year 2015. The
decrease in our Non-GAAP Nominal Tax Rate for fiscal year 2016 as
compared to fiscal year 2015 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 recognized $97 million of 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 recognized 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.

An increase in our Non-GAAP Nominal Tax Rate of 1 percent would
result in an additional income tax provision for fiscal years 2017,
2016, and 2015 of approximately $76 million, $74 million, and
$58 million, respectively.

Certain Tax Adjustments

During fiscal year 2017, we recognized certain tax adjustments of
$202 million, which included the following:
■■

A charge of $404 million associated with the IRS resolution for
the Ardian, CoreValve, Inc., Ablation Frontiers, Inc., PEAK Surgical,
Inc. and Salient Surgical Technologies, Inc. acquisition-related
issues and the allocation of income between Medtronic, Inc. and
its wholly owned subsidiary operating in Puerto Rico for certain
businesses. This resolution does not include the businesses that
are the subject of the Medtronic, Inc. U.S. Tax Court case for fiscal
years 2005 and 2006.

■■

A net charge of $125 million associated with the expected
divestiture of a portion of our Patient Monitoring & Recovery
division to Cardinal Health. The net charge primarily relates to the
tax effect from the recognition of the outside basis difference
of certain subsidiaries which are included in the expected
divestiture.

MEDTRONIC PLC 2017 Form 10-KPART II
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations

LIQUIDITY AND CAPITAL RESOURCES

(in millions)

Working capital
Current ratio(1)
Cash, cash equivalents, and current investments

Current debt obligations and long-term debt

April 28, 2017

April 29, 2016

10,316

1.7:1.0

13,708

33,441

$ 16,435

3.3:1.0

$ 12,634

31,102

(1) The ratio of current assets to current liabilities, excluding current assets and current liabilities held for sale at April 28, 2017.

We believe our balance sheet and liquidity provide us with
flexibility in the future. Approximately $6 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 ($901 million outstanding at April 28, 2017), will satisfy
our foreseeable operating needs for at least the next 12 months,
including repayment of current debt obligations. We regularly review
our capital needs and consider various investing and financing
alternatives to support our requirements.

In March 2017, Medtronic Luxco issued two tranches of Senior
Notes with an aggregate face value of $1.850 billion, resulting in
cash proceeds of approximately $1.850 billion, net of premiums,
discounts, and issuance costs. The first tranche consisted of $1.0
billion of 1.700 percent Senior Notes due 2019. The second tranche
consisted of $850 million of 3.350 percent Senior Notes due 2027.
Concurrent with the offering by Medtronic Luxco, Medtronic, Inc.

issued $150 million in principal amount of its 4.625 percent Senior
Notes due 2045 (the Reopening Notes). The Reopening Notes are
a further issuance of, and form a single series with, the $4.0 billion
principal amount of the previously outstanding 4.625 percent Senior
Notes due 2045. We intend to use the net proceeds for general
corporate purposes.

In April 2016, we 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 recognized in 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 were terminated at the time of original
debt issuances, relating to the portion of debt extinguished in the
tender offer.

Standard & Poor’s Ratings Services

Long-term debt

Short-term debt

Moody’s Investors Service

Long-term debt

Short-term debt

Agency Rating(1)

April 28, 2017

April 29, 2016

A-1

P-2

A-1

P-2

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

Standard & Poor’s Ratings Services (S&P) and Moody’s Investors
Service (Moody’s) long-term debt ratings and short-term debt
ratings at April 28, 2017 were unchanged as compared to the ratings
at April 29, 2016. We do not expect the S&P and Moody’s ratings to
have a significant impact on our liquidity or future flexibility to access
additional liquidity given our balance sheet and 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.

Note 20 to the consolidated financial statements in “Item 8. Financial
Statements and Supplementary Data” in this Annual Report on Form
10-K provides 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 matters when a loss is known or considered probable and the
amount may 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 record tax liabilities in our consolidated financial statements
for 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

MEDTRONIC PLC 2017 Form 10-KPART II
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations

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 fiscal year 2017, 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 recognized

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

Operating Activities

The $1.7 billion increase in net cash provided by operating activities
in fiscal year 2017 as compared to fiscal year 2016 was primarily
attributable to an increase in accounts receivable collections, as
well as a decrease in cash paid for income taxes and interest of
$350 million and $132 million, respectively, and a $191 million
payment in fiscal year 2016 related to the Covidien tax sharing
agreement. The increase in cash from accounts receivable was
primarily attributable to an increase in revenue. The decrease in
cash paid for income taxes was primarily a result of payments made
for the resolution of the Kyphon acquisition-related matters, as
well as Covidien income tax extension payments in fiscal year 2016.
We did not make any significant tax audit settlement payments or
significant extension payments in fiscal year 2017. The decrease
in cash paid for interest was the result of less debt, on average, in
fiscal year 2017 as compared to fiscal year 2016.

The $316 million increase in net cash provided by operating
activities in fiscal year 2016 as compared to fiscal year 2015
was primarily attributable to 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, Covidien
income tax extension payments, 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

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,
at April 28, 2017, we have $242 million of gross unrealized losses
on our aggregate current and non-current available-for-sale debt
securities of $8.7 billion. If market conditions deteriorate, some of
these holdings may experience other-than-temporary impairment
in the future which could adversely impact 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 6 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.

Fiscal Year

2017

2016

2015

6,880

5,218

4,902

(1,571)

(3,283)

65
2,091

2,245

(9,543)

113
$ (1,967)

(17,058)

15,949

(353)
3,440

the Covidien acquisition as well as the interest payments on the
outstanding debt assumed as part of the Covidien acquisition.
The increase in net cash provided by operating activities was also
higher due to the impact of a full year of operations post-Covidien
acquisition.

Investing Activities

The $3.8 billion increase in net cash used in investing activities
in fiscal year 2017 as compared to fiscal year 2016 was primarily
attributable to a decrease in net proceeds from purchases and
sales and maturities of investments in fiscal year 2017.

The $19.3 billion increase in net cash provided by investing
activities in fiscal year 2016 as compared to fiscal year 2015 was
primarily attributable to the Covidien acquisition in fiscal year 2015,
as well as an increase in the net proceeds from purchases and sales
of investments in fiscal year 2016.

Financing Activities

The $6.3 billion decrease in net cash used in financing activities
in fiscal year 2017 as compared to fiscal year 2016 was primarily
attributable to the issuance of $2.0 billion of Senior Notes, an
increase in commercial paper borrowings, and lower payments
on maturing and extinguished debt, partially offset by increases in
dividends to shareholders and repurchases of ordinary shares.

The $25.4 billion increase in net cash used in financing activities
in fiscal year 2016 as compared to fiscal year 2015 was primarily
attributable to higher issuances of debt in fiscal year 2015,
primarily related to the Covidien acquisition. Further contributing
to the increase in net cash used in financing activities in fiscal year

MEDTRONIC PLC 2017 Form 10-KPART II
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations

2016 were higher payments on maturing and extinguished debt,
increased dividends to shareholders, and increased repurchases of
ordinary shares.

Free Cash Flow

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

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

(in millions)

Net cash provided by operating activities

Net cash (used in) provided by 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

Our capital structure consists of equity and interest-bearing debt.
We use a combination of bank borrowings and commercial paper
issuances to fund our short-term financing needs. Current debt,
including the current portion of our long-term debt and capital
lease obligations, at April 28, 2017 was $7.5 billion compared to
$993 million at April 29, 2016. We utilize Senior Notes to meet our
long-term financing needs. Long-term debt at April 28, 2017 was
$25.9 billion compared to $30.1 billion at April 29, 2016.

Total debt at April 28, 2017 was $33.4 billion, compared to
$31.1 billion at April 29, 2016. The increase in total debt was
primarily driven by the issuance of three tranches of the 2017
Senior Notes with an aggregate face value of $2.0 billion in March
2017. We will use these funds for general corporate purposes.

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. At April 28, 2017, we
had $901 million of commercial paper outstanding. No amount
of commercial paper was outstanding under this program at
April 29, 2016. During fiscal years 2017 and 2016, the weighted
average original maturity of the commercial paper outstanding
was approximately 39 and 49 days, respectively, and the weighted
average interest rate was 0.89 percent and 0.57 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 our borrowing capacity

Fiscal Year

2017

6,880

(1,571)

(3,283)

6,880

(1,254)

5,626

2,376

3,544

(428)

2016

5,218

2,245

(9,543)

5,218

(1,046)

4,172

2,139

2,830

(491)

2015

4,902

(17,058)

15,949

4,902

(571)

4,331

1,337

1,920

(649)

5,492

4,478

2,608

80%

98%

86%

107%

53%

60%

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,
we could also request a one-year extension of the maturity date. At
April 28, 2017 and April 29, 2016, 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 and Moody’s. For additional
information on our credit ratings status by S&P 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 at April 28, 2017.

Interest-bearing debt as a percentage of total interest-bearing
debt and equity was 40 percent at April 28, 2017 and 37 percent
at April 29, 2016. For further discussion on debt, see 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 at April 28, 2017.

We repurchase shares from time to time as part of our focus on
returning value to our shareholders. In January 2015, our Board
of Directors authorized, subject to the ongoing existence of
sufficient distributable reserves, the adoption of the existing
Medtronic Inc. share redemption program. At April 29, 2016, we
had used all of the 80 million shares authorized under the January
2015 share redemption program. In June 2015, our Board of
Directors authorized, subject to the ongoing existence of sufficient
distributable reserves, the redemption of an additional 80 million
of our ordinary shares. At April 29, 2016, we had used 8 million
of the 80 million shares authorized under the June 2015 share
redemption program. During fiscal years 2017 and 2016, we

MEDTRONIC PLC 2017 Form 10-KPART II
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations

repurchased a total of 43 million and 38 million shares, respectively,
under these programs at an average price of $83.03 and $74.92,
respectively. At April 28, 2017, we had approximately 29 million
shares remaining under share repurchase programs authorized
by our Board of Directors. In June 2017, our Board of Directors
replaced the existing June 2015 authorization to redeem up to
an aggregate number of ordinary shares with an authorization to

expend up to an aggregate amount of $5 billion beginning June 26,
2017 to redeem ordinary shares.

For more information on credit arrangements, see the “Liquidity
and Capital Resources” section of this Management’s Discussion
and Analysis and Note 8 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 our off-balance sheet contractual
obligations and other minimum commercial commitments at April
28, 2017, as well as long-term contractual obligations reflected in
the balance sheet at April 28, 2017.

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. In
situations where we have no ability to influence the achievement
of the milestone or otherwise avoid the payment, we have
included the milestone or minimum royalty payments in the table
below. The majority of the 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. Due to the contingent nature of
these payments, they are not included in the table of contractual
obligations.

In the normal course of business, we periodically enter into
agreements that require us to 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 are unable to be estimated, and we
have not accrued any liabilities within our consolidated financial
statements or included any indemnification provisions in the table
below. Historically, we have not experienced significant losses on
these types of indemnification agreements.

See Notes 8 and 18 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
Notes 15 and 17 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 and defined benefit plan obligations, which are not
reflected in the table below.

(in millions)

Total

2018

2019

2020

2021

2022 Thereafter

Contractual obligations related to off-balance sheet arrangements:

Operating leases
Commitments to fund minority investments/royalty payments(1)
Interest payments(2)
Other(3)

646

308

13,488

513

215

125

1,077

304

158

110

967

929

806

772

8,937

Maturity by Fiscal Year

Contractual obligations related to off-balance sheet
arrangements subtotal
Contractual obligations reflected in the balance sheet:

Long-term debt, including current portion(4)
Capital leases

Contractual obligations reflected in the balance sheet subtotal
TOTAL CONTRACTUAL OBLIGATIONS

$ 14,955

1,721

1,264

$ 1,136

945

859

9,030

$ 32,438

$ 32,461
$ 47,416

$
$

6,588

6,593
8,314

$
$

1,402

$ 3,779

$ 1,126

1,406
2,670

$ 3,781
$ 4,917

$ 1,128
$ 2,073

$
$

3,273

$ 16,270

3,275
4,134

$ 16,278
$ 25,308

(1) We have included commitments related to the funding of cost or equity method investments, estimated milestone payments and royalty obligations in

(2)

the table above. 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.
Interest payments in the table above reflect the contractual interest payments on our outstanding debt, and exclude the impact of the debt premium
and discount amortization and impact of interest rate swap agreements. See Note 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 our debt agreements.

(3) We have included inventory purchase commitments which are legally binding and specify minimum purchase quantities or amounts. 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 with a remaining term of less than one year. These obligations also include certain research and development arrangements.

(4) Long-term debt in the table above includes the $3.0 billion Term Loan Credit Agreement, $3.1 billion of CIFSA Senior Notes, $1.8 billion of 2017 Senior
Notes, $17.0 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, $700 million of 2009 Senior Notes, $42 million of Heartware Senior Notes, and $535 million
of bank borrowings. 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 8 and 9 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.

MEDTRONIC PLC 2017 Form 10-KPART II
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations

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.

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,
therapies and services, 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, therapies and
services, accounting estimates, financing activities, ongoing
contractual obligations, working capital adequacy, value of our
investments, our effective tax rate, our expected returns to
shareholders, and sales efforts. Such statements may be identified
by the use of terminology such as “anticipate,” “believe,” “could,”
“estimate,” “expect,” “forecast,” “intend,” “looking ahead,” “may,”
“plan,” “possible,” “potential,” “project,” “should,” “will,” and similar
words or expressions. Forward-looking statements in this 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, therapies and services 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; divestitures and
the potential benefits thereof; the costs and benefits of integrating
previous acquisitions; anticipated timing for 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, including potential
changes to reimbursement policies and pricing pressures; our
expectations regarding changes to patient standards of care; our
ability to identify and maintain successful business partnerships;
the elimination of certain positions or costs related to restructuring
initiatives; outcomes in our litigation matters and 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, delays in regulatory approvals, litigation results,
self-insurance, commercial insurance, health care policy changes,
international operations, failure to complete or achieve the
intended benefits of acquisitions or divestitures, or disruption of
our current plans and operations.

Consequently, no forward-looking statement may 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.

MEDTRONIC PLC 2017 Form 10-KPART II

Item 7A Quantitative and Qualitative Disclosures About Market Risk

PART II
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 periods in which the U.S. dollar,
our functional currency, is strengthening/weakening as compared
to other currencies, our revenues, expenses, assets, and liabilities
denominated in other currencies may be 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 transactions
in other currencies 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 our derivative instruments are the Euro

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 at April 28, 2017 was comprised of debt
predominately denominated in U.S. dollars, of which approximately
85% is fixed rate debt and approximately 15% 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 at April 28,

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 28, 2017 and April 29, 2016
was $10.8 billion. At April 28, 2017, these contracts were in a net
unrealized gain position of $118 million. A sensitivity analysis of
changes in the fair value of all currency exchange rate derivative
contracts at April 28, 2017 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 $836 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.

2017, indicates that the fair value of these instruments would
correspondingly change by $67 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 the Management’s
Discussion and Analysis in “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 6 and 9 to the consolidated financial statements
in “Item 8. Financial Statements and Supplementary Data” in this
Annual Report on Form 10-K.

MEDTRONIC PLC 2017 Form 10-KPART II
Item 8 Financial Statements and Supplementary Data

Item 8 Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of Medtronic plc:

In our opinion, the accompanying consolidated balance sheets and
the related consolidated statements of income, comprehensive
income, equity and cash flows present fairly, in all material respects,
the financial position of Medtronic plc and its subsidiaries (the
Company) at April 28, 2017 and April 29, 2016, and the results of
their operations and their cash flows for each of the three years
in the period ended April 28, 2017 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 28, 2017, 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

/s/ PricewaterhouseCoopers LLP

Minneapolis, Minnesota
June 27, 2017

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.

MEDTRONIC PLC 2017 Form 10-KPART II
Item 8 Consolidated Statements of Income

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 charge (gain), net

Restructuring charges, net

Certain litigation charges

Acquisition-related items

Amortization of intangible assets

Other expense, net

Operating profit

Interest income

Interest expense

Interest expense, net

Income before provision for income taxes

Provision for income taxes

Net income

Net loss attributable to noncontrolling interests

Net income attributable to Medtronic

Basic earnings per share

Diluted earnings per share

Basic weighted average shares outstanding

Diluted weighted average shares outstanding

Cash dividends declared per ordinary share

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

Fiscal Year

2017

2016

2015

29,710

28,833

20,261

9,291

2,193

9,711

100

363

300

220

1,980

222

5,330

(366)

1,094

728

4,602

578

4,024

4,028

2.92

2.89

9,142

2,224

9,469

290

283

1,931

107

5,291

(431)

1,386

955

4,336

798

3,538

—

3,538

2.51

2.48

6,309

1,640

6,904

(38)

237

550

733

118

3,766

(386)

666

280

3,486

811

2,675

—

2,675

2.44

2.41

1,378.9

1,391.4

1,409.6

1,425.9

1,095.5

1,109.0

1.72

1.52

1.22

MEDTRONIC PLC 2017 Form 10-KPART II
Item 8 Consolidated Statements of Comprehensive Income

Medtronic plc
Consolidated Statements of Comprehensive Income

(in millions)

Net income

Other comprehensive loss, net of tax:

Unrealized gain (loss) on available-for-sale securities

Translation adjustment

Net change in retirement obligations

Unrealized gain (loss) on derivatives

Other comprehensive loss

Comprehensive income including noncontrolling interests

Comprehensive loss attributable to noncontrolling interests

Comprehensive income attributable to Medtronic

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

Fiscal Year

2017

2016

2015

4,024

3,538

2,675

(977)

127

(744)

3,280

(121)

(197)

(66)

(300)

(684)

2,854

—

(495)

(366)

254

(587)

2,088

—

3,283

2,854

2,088

MEDTRONIC PLC 2017 Form 10-KPART II
Item 8 Consolidated Balance Sheets

Medtronic plc
Consolidated Balance Sheets

(in millions)

ASSETS

Current assets:

Cash and cash equivalents

Investments

Accounts receivable, less allowances of $155 and $161, respectively

Inventories, net

Prepaid expenses and other current assets

Current assets held for sale

TOTAL CURRENT ASSETS

Property, plant, and equipment, net

Goodwill

Other intangible assets, net

Tax assets

Other assets

Noncurrent assets held for sale

TOTAL ASSETS

LIABILITIES AND EQUITY

Current liabilities:

Current debt obligations

Accounts payable

Accrued compensation

Accrued income taxes

Other accrued expenses

Current liabilities held for sale
Total current liabilities

Long-term debt

Accrued compensation and retirement benefits

Accrued income taxes

Deferred tax liabilities

Other liabilities

Noncurrent liabilities held for sale

TOTAL LIABILITIES

Commitments and contingencies (Notes 2, 18, and 20)

Shareholders’ equity:

Ordinary shares— par value $0.0001, 2.6 billion shares authorized, 1,369,424,818 and
1,399,018,022 shares issued and outstanding, respectively

Additional paid-in capital

Retained earnings

Accumulated other comprehensive loss

Total shareholders’ equity

Noncontrolling interests

Total equity

TOTAL LIABILITIES AND EQUITY

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

April 28, 2017

April 29, 2016

4,967

8,741

5,591

3,338

1,865

371
24,873

4,361

38,515

23,407

1,509

1,232

5,919
99,816

7,520

1,731

1,860

633

2,442

14,220

25,921

1,641

2,405

2,978

1,515

720
49,400

—

29,551

23,356

(2,613)

50,294

122

50,416
99,816

2,876

9,758

5,562

3,473

1,931

—
23,600

4,841

41,500

26,899

1,383

1,421

—
99,644

993

1,709

1,712

566

2,185

—

7,165

30,109

1,759

2,903

3,729

1,916

—
47,581

—

32,227

21,704

(1,868)

52,063

—

52,063
99,644

MEDTRONIC PLC 2017 Form 10-KMedtronic plc
Consolidated Statements of Equity

PART II
Item 8 Consolidated Statements of Equity

(in millions)

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

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

APRIL 29, 2016

Net income (loss)

Other comprehensive (loss) income

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

Additions of noncontrolling
ownership interests

APRIL 28, 2017

Ordinary Shares

Number Par Value

Additional
Paid-in
Capital

Retained
Earnings

Accumulated
Other
Comprehensive
Loss

Total
Shareholders’
Equity

Noncontrolling
Interests

Total
Equity

999

100

— $ 19,940

(597)

19,443

— $ 19,443

—

2,675

—

(587)

436

—

33,787

—

(30)

—

(99)

—

(3)

—

(1,337)

—

(973)

—

647

(944)

—

2,675

(587)

33,787

—

(1,337)

649

(1,920)

—

2,675

(587)

33,787

—

(1,337)

649

(1,920)

1,422

—
439
—
— $ 34,109 $ 20,305

—
(1,184)

439
53,230

439
—
— $ 53,230

—

(38)

—

—
1,399

—

(43)

—

3,538

—

(2,139)

491

(2,830)

—

(684)

—

3,538

(684)

(2,139)

491

(2,830)

—

3,538

(684)

(2,139)

491

(2,830)

—
—
375
— $ 32,227 $ 21,704

—
(1,868)

375
52,063

—
375
— $ 52,063

—

4,028

—

(2,376)

428

(3,544)

348

—

(745)

—

4,028

(745)

(2,376)

428

(3,544)

348

(4)

—

4,024

(744)

(2,376)

428

(3,544)

348

—
1,369

—
—
—
— $ 29,551 $ 23,356

—
(2,613)

—
50,294

125
122

125
$ 50,416

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

MEDTRONIC PLC 2017 Form 10-KPART II
Item 8 Consolidated Statements of Cash Flows

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, net

Accounts payable and accrued liabilities

Other operating assets and liabilities
Net cash provided by operating activities

Investing Activities:

Acquisitions, net of cash acquired

Additions to property, plant, and equipment

Purchases of investments

Sales and maturities of investments

Other investing activities, net

Net cash (used in) provided by investing activities

Financing Activities:

Acquisition-related contingent consideration

Change in current debt obligations, 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

2017

2016

2015

4,024

3,538

2,675

2,917

2,820

1,306

(46)

(459)

348

—

(93)

(75)

(227)

356

218

(460)

375

163

(111)

(435)

(186)

(379)

(403)

634

(926)

439

—

(134)

(413)

(282)

849

643

6,880

5,218

4,902

(1,324)

(1,254)

(4,371)

5,356

(1,571)

(69)

906

(2)

2,140

(863)

(2,376)

428

(3,544)

(3,283)

2,091

2,876

4,967

(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

1,029

1,134

1,379

1,266

(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

MEDTRONIC PLC 2017 Form 10-KPART II
Item 8 Notes to Consolidated Financial Statements

Medtronic plc
Notes to Consolidated Financial Statements

Note 1

Summary of Significant Accounting Policies

Nature of Operations

Cash Equivalents

Medtronic plc (Medtronic or the Company) is a 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.

Principles of Consolidation

The consolidated financial statements include the accounts of
Medtronic plc, its wholly-owned subsidiaries, entities for which
the Company has a controlling financial interest, and variable
interest entities for which the Company is the primary beneficiary.
Intercompany transactions and balances have been fully eliminated
in consolidation. Certain reclassifications have been made to prior
year financial statements to conform to classifications used in the
current year.

In connection with the preparation of the Form 10-K for the year
ended April 28, 2017, the Company revised its consolidated
balance sheet and consolidated statements of equity to properly
present additional paid-in capital separate from retained earnings
for the prior periods. The revision, which the Company determined
is not material, had no impact on total equity, results of operations,
or cash flows.

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 amounts reported in
the consolidated financial statements and accompanying notes.
Estimates are used when accounting for items such as income
taxes, contingencies, and intangible asset and liability valuations.
Actual results may or may not differ from those estimates.

Fiscal Year-End

The Company utilizes a 52/53-week fiscal year, ending the last
Friday in April, for the presentation of its consolidated financial
statements and related notes thereto at April 28, 2017 and April 29,
2016 and for each of the three fiscal years ended April 28, 2017
(fiscal year 2017), April 29, 2016 (fiscal year 2016), and April 24,
2015 (fiscal year 2015). Fiscal years 2017 and 2015 were 52-week
years. Fiscal year 2016 was a 53-week year, with the additional
week occurring in the first quarter.

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, which include corporate debt securities, government
and agency securities, mortgage-backed securities, other
asset-backed securities, debt funds, and auction rate securities,
are classified and accounted for as available-for-sale. 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 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.
Management has used trading securities when seeking to offset
changes in liabilities related to equity and other market risks of
certain deferred compensation arrangements.

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. If an
investment has no quoted market price, 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

MEDTRONIC PLC 2017 Form 10-KPART II
Item 8 Notes to Consolidated Financial Statements

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 6 for
discussion of the gains and losses recognized on equity and other
securities.

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.

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 asset groupings may not be recoverable. The
company utilizes the straight-line method of depreciation over the
estimated useful lives of the various assets. The cost of interest
that is incurred in connection with ongoing construction projects is
capitalized using a weighted average interest rate. These costs are
included in property, plant, and equipment and amortized over the
useful life of the related asset.

Acquired IPR&D represents the fair value assigned to those
research and development (R&D) projects in development that
were acquired in a business combination for which the related
products have not received regulatory approval and have no
alternative future use.

IPR&D is capitalized at its fair value as an indefinite-lived intangible
asset, and any development costs incurred after the acquisition
are expensed as incurred. 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. Upon achieving regulatory approval or commercial
viability for the related technology or product, the indefinite-lived
intangible asset is accounted for as a definite-lived asset and is
amortized on a straight-line basis over the estimated useful life
of the related technology or product. If the R&D project is not
completed or the related R&D project is terminated or abandoned,
the Company may have an impairment related to the IPR&D which
is charged to expense.

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. 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.

Goodwill and Intangible Assets

Derivatives

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.

Intangible assets include patents, trademarks, 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.

The Company recognizes all derivative financial instruments in
its consolidated financial statements at fair value in accordance
with authoritative guidance on derivatives and hedging, and
presents assets and liabilities associated with its derivative
financial instruments on a gross basis in the consolidated financial
statements. For those derivative instruments that are designated
and qualify as hedging instruments, the hedging instrument must
be designated, based upon the exposure being hedged, as a fair
value hedge, a cash flow hedge, or a hedge of a net investment
in a foreign operation. See Note 9 for more information on the
Company’s derivative instruments and hedging programs.

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. 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

MEDTRONIC PLC 2017 Form 10-Kmarket 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:
■■

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 and marketable equity securities 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,
other asset-backed securities, debt funds, and mortgage-
backed securities whose value is determined using inputs that
are observable in the market or may 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. Financial assets that
are classified as Level 3 financial assets include certain investment
securities for which there is limited market activity such that
the determination of fair value requires significant judgment
or estimation, certain corporate debt securities and auction
rate securities. With the exception of auction rate securities,
these securities are 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

PART II
Item 8 Notes to Consolidated Financial Statements

and the illiquidity premium that is incorporated into the discount
rate. Significant increases (decreases) in any of those inputs in
isolation could result in a significantly lower (higher) fair value of the
securities.

Certain investments for which the fair value is measured using the
net asset value per share (or its equivalent) practical expedient are
excluded from the fair value hierarchy. Financial assets for which the
fair value is measured using the net asset value per share practical
expedient include certain debt funds, equity and fixed income
commingled trusts, and registered investment companies.

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.

Self-Insurance

It is the Company’s policy to self-insure the majority of its
insurable risks including medical and dental 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
are 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, post-retirement medical plans,
defined contribution savings plans, and termination indemnity
plans, covering substantially all U.S. employees and many
employees outside the U.S. See Note 17 for assumptions used in
determining pension and post-retirement benefit costs.

The Company changed the methodology used to estimate the
service and interest cost components of net periodic pension
cost and net periodic post-retirement benefit cost for the
Company’s pension and other post-retirement benefits, effective
April 30, 2016. Prior to April 30, 2016, 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 current methodology utilizes a full yield curve approach in
the estimation of these cost components by applying the specific

MEDTRONIC PLC 2017 Form 10-KPART II
Item 8 Notes to Consolidated Financial Statements

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 change
does not affect the measurement of the Company’s pension
obligation or accumulated post-retirement benefit obligation.
The Company 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, 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,
revenue is recognized 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 recognizes 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 multiple deliverables are provided to customers. Under
multiple deliverable arrangements, the Company recognizes
revenue in accordance with the principles described above and
allocates the revenue based on the relative selling price of each
deliverable, which is based on vendor specific objective evidence.

Shipping and Handling

Shipping and handling costs not included in cost of products sold
are included in selling, general, and administrative expense in the
consolidated statements of income and were $370 million, $316
million, and $284 million in fiscal years 2017, 2016, and 2015,
respectively.

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.

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 may be reasonably
estimated. If the reasonable estimate of a known or probable loss
is a range, and no amount within the range is a better estimate
than any other, the minimum amount of the range is accrued.
If a loss is reasonably possible but not known or probable, and
may be reasonably estimated, the estimated loss or range of
loss is disclosed. 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.

Income Taxes

The Company has deferred taxes that 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 assets and deferred tax liabilities. Deferred tax assets
generally represent items that may 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.

Other Expense, Net

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 currency impacts arising from the translation of the assets
and liabilities are recorded as a cumulative translation adjustment,
a component of accumulated other comprehensive loss 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. Currency
transaction gains and losses are included in other expense, net in
the consolidated statements of income.

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,

MEDTRONIC PLC 2017 Form 10-Kwhich 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
and revises those estimates in subsequent periods. The total
expense recognized over the vesting period equals the fair value of
awards that vest.

New Accounting Standards

Recently Adopted

In April 2015, the Financial Accounting Standards Board (FASB)
issued accounting guidance that requires debt issuance costs to
be presented in the balance sheet as a direct deduction from the
related debt liability. Prior to this amendment, debt issuance costs
were recognized as an asset in the balance sheet and did not offset
the related debt liability. The Company retrospectively adopted
this guidance in the first quarter of fiscal year 2017. Its adoption
resulted in a reduction of both assets and liabilities of $138 million
on the Company’s consolidated balance sheet at April 29, 2016 as
previously filed in the Company’s Annual Report on Form 10-K for
the year ended April 29, 2016.

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, and may be applied
either retrospectively to each prior reporting period presented
(full retrospective method), or retrospectively with the cumulative
effect of the change recognized at the date of initial application
(modified retrospective method). Early adoption is permitted.
The Company intends to adopt this guidance under the modified
retrospective method. The Company is continuing to evaluate
the impact of the guidance and will continue to monitor any
modifications, clarifications, and interpretations communicated by
the FASB.

PART II
Item 8 Notes to Consolidated Financial Statements

In January 2016, the FASB issued guidance which requires equity
investments (except those accounted for under the equity method
of accounting or those that result in consolidation of the investee)
to be measured at fair value with changes in fair value recognized
in net income. The guidance also includes a simplified impairment
assessment of equity investments without readily determinable fair
values and presentation and disclosure changes. This accounting
guidance is required for the Company to adopt beginning in the
first quarter of fiscal year 2019. The Company is unable to estimate
the impact of the future adoption of this standard on its financial
statements as it will depend on the equity investments at the
adoption date.

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 and anticipates
recording additional assets and corresponding liabilities on its
consolidated balance sheet related to operating leases within its
lease portfolio upon adoption of the guidance.

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; eliminating the requirement to classify the
excess tax benefits and deficiencies as additional paid-in capital.
Under the new guidance, an entity makes an 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. The Company recognized excess tax benefits
of $92 million, $82 million and $81 million in excess tax benefits
in additional paid-in capital in fiscal years 2017, 2016, and 2015,
respectively.

In October 2016, the FASB issued guidance that requires the tax
effect of inter-entity transactions, other than sales of inventory, to
be recognized when the transaction occurs. This would eliminate
the exception under the current guidance in which the tax effects
of inter-entity asset transactions are deferred until the transferred
asset is sold to a third party or otherwise recovered through use.
This accounting guidance is required for the Company to adopt
beginning in the first quarter of fiscal year 2019. Early adoption is
permitted. The Company is currently evaluating the impact of the
guidance on the Company’s consolidated financial statements.

Note 2 Acquisitions and Acquisition-Related Items

The Company had various acquisitions and other acquisition-
related activity during fiscal year 2017. The Company accounted
for the acquisitions noted below as business combinations
using the acquisition method of accounting. In accordance with
authoritative guidance on business combination accounting, the
assets and liabilities of the businesses acquired were recorded
and consolidated on the acquisition date at their respective
fair values. Goodwill resulting from business combinations is
largely attributable to future yet to be defined technologies,

new customer relationships, existing workforce of the acquired
businesses, and synergies expected to arise after the Company’s
acquisition of these businesses. The pro forma impact of these
acquisitions was not significant, either individually or in the
aggregate, to the results of the Company for fiscal year 2017. The
results of operations of acquired businesses have been included in
the Company’s consolidated statements of income since the date
each business was acquired.

MEDTRONIC PLC 2017 Form 10-KPART II
Item 8 Notes to Consolidated Financial Statements

The fair values of the assets acquired and liabilities assumed from acquisitions during fiscal year 2017 are as follows:

(in millions)

Other current assets

Property, plant, and equipment

Other intangible assets

Goodwill

Other assets

TOTAL ASSETS ACQUIRED

Current liabilities

Deferred tax liabilities

Long-term debt

Other liabilities

TOTAL LIABILITIES ASSUMED

HeartWare
International, Inc.

Smith & Nephew’s
Gynecology Business

All Other

351

625

427

55
1,472

143

245

6
400

—

167

180

—
350

—

—
—

125

16
233

—

4
21

Total

374

857

732

71
2,055

153

245

10
421

Net assets acquired

1,072

350

212

1,634

HeartWare International, Inc.

Acquisition-Related Items

On August 23, 2016, the Company’s Cardiac and Vascular Group
acquired HeartWare International, Inc. (HeartWare), a medical
device company that develops and manufactures miniaturized
implantable heart pumps, or ventricular assist devices, to treat
patients around the world suffering from advanced heart failure.
Total consideration for the transaction was approximately
$1.1 billion. Based upon a preliminary acquisition valuation,
the Company acquired $602 million of technology-based and
customer-related intangible assets and $23 million of tradenames,
with estimated useful lives of 15 and 5 years, respectively, and
$427 million of goodwill. The acquired goodwill is not deductible
for tax purposes. In addition, the Company acquired $245 million
of debt through the acquisition, of which the Company redeemed
$203 million as part of a cash tender offer in August 2016. The
remaining $42 million of debt acquired is due December 2017 and
is recorded within current debt obligations on the consolidated
balance sheets. The allocation of consideration is considered
preliminary, primarily with respect to certain contingencies. The
Company expects to finalize the allocation of purchase price
within the one-year measurement period. Sales attributable to
HeartWare were $155 million for fiscal year 2017.

Smith & Nephew’s Gynecology Business

On August 5, 2016, the Company’s Minimally Invasive Therapies
Group acquired Smith & Nephew’s gynecology business, which
expands and strengthens Medtronic’s minimally invasive surgical
offerings and further complements its existing global gynecology
business. Total consideration for the transaction was approximately
$350 million. The Company acquired $167 million of customer-
related and technology-related intangible assets with useful
lives of 13 years and $180 million of goodwill. The acquired
goodwill is deductible for tax purposes. Sales attributable to
Smith & Nephew’s gynecology business were $45 million for fiscal
year 2017.

For information on the Company’s fiscal year 2016 acquisitions,
refer to Note 2 to the consolidated financial statements included
in the Company’s Annual report on Form 10-K for the fiscal year
ended April 29, 2016.

During fiscal year 2017, the Company recognized acquisition-
related items expense of $230 million, including $10 million
recognized within cost of products sold in the consolidated
statements of income, primarily related to integration-related
expenses incurred in connection with the Covidien acquisition.
The expenses incurred in connection with the Covidien acquisition
include $225 million of professional services and integration
expenses and $23 million of accelerated or incremental stock
compensation expense. Acquisition-related items expense also
includes expenses incurred in connection with the HeartWare
acquisition and planned divestiture of a portion of the Patient
Monitoring and Recovery business, partially offset by the change in
fair value of contingent consideration as a result of revised revenue
forecasts and the timing of anticipated regulatory milestones.

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

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

Contingent Consideration

Certain of the Company’s business combinations involve potential
payment of future consideration that is contingent upon the
achievement of certain product development milestones and/or
contingent on the acquired business reaching certain performance
milestones. A liability is recorded for the estimated fair value of
the contingent consideration on the acquisition date. The fair
value of the contingent consideration is remeasured at each
reporting period using Level 3 inputs, and the change in fair value
is recognized within acquisition-related items in the consolidated

MEDTRONIC PLC 2017 Form 10-KPART II
Item 8 Notes to Consolidated Financial Statements

statements of income. Contingent consideration payments related
to the acquisition date fair value are 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 fair value of contingent consideration is measured using
projected payment dates, discount rates, probabilities of payment,

and projected revenues (for revenue-based considerations).
Projected revenues are based on the Company’s most recent
internal operational budgets and long-range strategic plans.
Changes in projected revenues, probabilities of payment, discount
rates, and projected payment dates may result in adjustments
to the fair value measurements. The recurring Level 3 fair value
measurements of contingent consideration include the following
significant unobservable inputs:

(in millions)

Revenue-based payments

Product development-based payments

Fair Value at
April 28, 2017

Valuation
Technique

Unobservable Input

Range

Discount rate

11%-32.5%

106

Discounted cash flow

Probability of payment

30%-100%

Projected fiscal year of payment

2018-2026

Discount rate

0.3%-5.5%

140

Discounted cash flow

Probability of payment

75%-100%

Projected fiscal year of payment

2018-2025

The fair value of contingent consideration at April 28, 2017 and
April 29, 2016 was $246 million and $377 million, respectively. At
April 28, 2017, $180 million was reflected in other liabilities and
$66 million was reflected in other accrued expenses in the

consolidated balance sheets. At April 29, 2016, $311 million was
reflected in other liabilities and $66 million was reflected in other
accrued expenses in the consolidated balance sheets.

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

(in millions)

Beginning Balance

Purchase price contingent consideration

Contingent consideration payments

Change in fair value of contingent consideration

Ending Balance

Fiscal Year

2017

2016

377

(76)

(83)

246

264

149

(22)

(14)

377

Note 3 Assets and Liabilities Held for Sale

In April 2017, the Company entered into a definitive agreement for
the sale of the Patient Care, Deep Vein Thrombosis, and Nutritional
Insufficiency businesses within the Minimally Invasive Therapies
Group segment. The transaction is expected to close in the second
quarter of fiscal year 2018, subject to the receipt of regulatory
approvals and satisfaction of other customary closing conditions.

As a result, the Patient Care, Deep Vein Thrombosis, and
Nutritional Insufficiency businesses met the criteria to be classified
as held for sale at April 28, 2017, which requires the Company to
present the related assets and liabilities as separate line items in
our consolidated balance sheet.

The following table presents information related to the assets and liabilities that were classified as held for sale in our consolidated balance sheet:

(in millions)

Inventories, net

Property, plant, and equipment, net

Goodwill

Other intangible assets, net
TOTAL ASSETS HELD FOR SALE

Other accrued expenses

Accrued compensation and retirement benefits

Deferred tax liabilities

Other liabilities
TOTAL LIABILITIES HELD FOR SALE

April 28, 2017

371

689

2,910

2,320
6,290

707

1
754

There were no assets or liabilities classified as held for sale at April 29, 2016. The Company determined that the divestiture of the Patient
Care, Deep Vein Thrombosis, and Nutritional Insufficiency businesses does not meet the criteria to be classified as discontinued operations.

MEDTRONIC PLC 2017 Form 10-KPART II
Item 8 Notes to Consolidated Financial Statements

Note 4

Restructuring Charges

Cost Synergies Initiative

The cost synergies initiative is the Company’s restructuring
program primarily related to the integration 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 integration of the Covidien acquisition through fiscal year
2018, including administrative office optimization, manufacturing
A summary of the restructuring accrual, recorded within other accrued expenses and other liabilities in the consolidated balance sheets, and
related activity is presented below:

and supply chain infrastructure, certain program cancellations,
and reduction of general and administrative redundancies.
Restructuring charges are primarily related to employee
termination costs and costs related to manufacturing and facility
closures and affect all reportable segments. Cash outlays for the
cost synergies initiative restructuring program are scheduled to be
substantially complete by the end of fiscal year 2019.

(in millions)

APRIL 24, 2015

Charges

Cash payments

Settled non cash

Reversal of excess reserves

APRIL 29, 2016

Charges

Cash payments

Settled non cash

Reversal of excess reserves

APRIL 28, 2017

Employee
Termination Costs

Asset
Write-downs

Other
Costs

136

248

(153)

—

(18)
213

287

(179)

—

(60)
261

— $

—

(23)

—
— $

—

(27)

—
— $

(31)

—

—
37

(53)

—

(8)
30

Total

143

332

(184)

(23)

(18)
250

368

(232)

(27)

(68)
291

As part of the cost synergies initiative, for fiscal year 2017, the
Company recognized $441 million in charges, which included
$73 million of incremental defined benefit pension and post-
retirement related expenses for employees that accepted
voluntary early retirement packages. These costs are not included
in the table summarizing the restructuring costs above, because
they are associated with costs that are accounted for under
the pension and post-retirement rules. See Note 17 for further
discussion on the incremental defined benefit pension and post-
retirement related expenses. The charges recognized during fiscal
year 2017 were partially offset by reversals of excess restructuring
reserves of $68 million. Reversals of restructuring reserves
relate to certain employees identified for termination finding
other positions within the Company, cancellations of employee
terminations, and employee termination costs being less than
initially estimated. Fiscal year 2017 asset write-downs included

$17 million of property, plant, and equipment impairments. Fiscal
year 2017 asset write-downs also included $10 million of inventory
write-offs of discontinued product lines recognized within cost of
products sold in the consolidated statements of income.

As part of the cost synergies initiative, for fiscal year 2016, the
Company recognized $332 million in charges, which were partially
offset by reversals of excess restructuring reserves of $18 million.
Reversals of restructuring reserves relate to certain employees
identified for termination finding other positions within the
Company and revisions to severance provisions. Fiscal year 2016
asset write-downs included $14 million related to property, plant,
and equipment impairments. Fiscal year 2016 asset write-downs
also inclued $9 million of inventory write-offs of discontinued
product lines recognized within cost of products sold in the
consolidated statements of income.

Note 5

Special Charge

During fiscal year 2017, in continuing the Company’s commitment
to improve the health of people and communities throughout the
world, the Company recognized a special charge of $100 million for
a charitable contribution to meet the multi-year funding needs of
the Medtronic Foundation, a related party non-profit organization.

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 special gains of
$138 million, which consisted of a $41 million gain on the sale of a
product line in the ENT division, and a $97 million gain on the sale
of an equity method investment. These special gains were partially
offset by a $100 million charitable contribution that the Company
made to the Medtronic Foundation.

MEDTRONIC PLC 2017 Form 10-KPART II
Item 8 Notes to Consolidated Financial Statements

Note 6

Financial Instruments

The Company holds investments such as marketable debt and
equity securities that are classified and accounted for as trading
and available-for-sale and are remeasured on a recurring basis.
The Company also holds cost method, equity method, and other
investments which are measured at fair value on a nonrecurring
basis. Refer to Note 1 for information regarding valuation
techniques and inputs used in the fair value measurements.

In accordance with authoritative guidance adopted in fiscal year
2017, certain investments for which the fair value is measured
using the net asset value per share (or its equivalent) practical
expedient are not presented within the fair value hierarchy. The
fair value amounts presented for these investments are intended
to permit reconciliation to the consolidated balance sheets.
The revised presentation has been applied retrospectively and
fiscal year 2016 values have been reclassified to conform to
classifications used in the current year.

The following table summarizes the Company’s investments by significant investment category and the consolidated balance sheet
classification at April 28, 2017:

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

Foreign government and agency securities

Other asset-backed securities

Debt funds

Total Level 2

Level 3:

Corporate debt securities

Auction rate securities

Total Level 3

Investments measured at net asset value(1):

Debt funds

Total available-for-sale securities
Cost method, equity method, and other investments:

Level 3:

Cost method, equity method, and other investments

Total Level 3:

613

671

4,643

860

766

228

1,246

7,792

497

9,008

589

(5)

(4)

(9)

(23)

(10)

(16)

—

(1)

(178)

(228)

—

(3)

(6)

(246)

—

127

—

—
127

610

103

713

610

—

610

—

103

4,682

850

759

228

1,072

7,640

491

8,889

N/A

850

759

228

1,072

7,640

—

491

8,741

—

Total cost method, equity method, and other investments
TOTAL INVESTMENTS

589
9,597

—
(246)

N/A
8,889

—
8,741

(1)

Certain investments that are measured at the net asset value per share (or its equivalent) as a practical expedient are excluded from the fair value
hierarchy. The fair value amounts presented herein are intended to permit reconciliation to the consolidated balance sheets.

—

148

589

589
737

MEDTRONIC PLC 2017 Form 10-KPART II
Item 8 Notes to Consolidated Financial Statements

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

Investments measured at net asset value(1):

Debt funds

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

792

867

3,935

902

1,016

192

2,306

8,351

734

10,000

506

Total cost method, equity method, and other investments
TOTAL INVESTMENTS

506
$ 10,571

112

—

147

—

—
162

(1)

(11)

(12)

(24)

—

(18)

—

(247)

(289)

—

(3)

(34)

(338)

(1)

—

805

890

3,996

904

1,015

195

2,064

8,174

700

9,809

N/A

805

—

805

3,996

904

1,015

195

2,064

8,174

—

700

9,679

—

—
(339)

N/A
9,888

—
9,758

—

130

—

506

506
636

(1) Certain investments that are measured at the net asset value per share (or its equivalent) as a practical expedient are excluded from the fair value

hierarchy. The fair value amounts presented herein are intended to permit reconciliation to the consolidated balance sheets.

MEDTRONIC PLC 2017 Form 10-KPART II
Item 8 Notes to Consolidated Financial Statements

Marketable Debt and Equity Securities:

The following tables present 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 at April 28, 2017 and April 29, 2016:

Less than 12 months

More than 12 months

April 28, 2017

(in millions)

Corporate debt securities

Auction rate securities

Mortgage-backed securities

U.S. government and agency securities

Other asset-backed securities

Debt funds

Marketable equity securities

TOTAL

(in millions)

Corporate debt securities

Auction rate securities

Mortgage-backed securities

U.S. government and agency securities

Debt funds

Marketable equity securities

TOTAL

Fair Value

1,263

—

276

896

127

173

14
2,749

Unrealized
Losses

Fair Value

Unrealized
Losses

(19)

—

(4)

(15)

(1)

(3)
(43)

—

1,125

2
1,312

(4)

(3)

(12)

—

(183)

(1)
(203)

Less than 12 months

More than 12 months

April 29, 2016

Fair Value

Unrealized
Losses

756

—

196

308

670

45
1,975

(18)

—

(5)

(4)

(26)

(11)
(64)

Fair Value

136

1,601

—
1,940

Unrealized
Losses

(6)

(3)

(5)

(256)

—
(275)

The following table presents the unobservable inputs utilized in the fair value measurement of the auction rate securities classified as
Level 3 at April 28, 2017:

Valuation Technique

Unobservable Input

Range (Weighted Average)

Auction rate securities

Discounted cash flow

Years to principal recovery
Illiquidity premium

2 yrs. - 12 yrs. (3 yrs.)
6%

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 fiscal years
2017 or 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 2017 Form 10-KPART II
Item 8 Notes to Consolidated Financial Statements

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)

April 29, 2016

Unrealized gains/(losses) included in other comprehensive income

Settlements
APRIL 28, 2017

(in millions)

April 24, 2015

Unrealized gains/(losses) included in other comprehensive income

Settlements
APRIL 29, 2016

Activity related to the Company’s investment portfolio is as follows:

2017

Total Level 3
Investments

Corporate debt
securities

Auction rate
securities

—

—
45

—

—
1

Total Level 3
Investments

Corporate debt
securities

—

—
1

106

(3)

(58)
45

Fiscal Year

2016

—

—
44

Auction rate
securities

105

(3)

(58)
44

2015

(in millions)

Proceeds from sales

Gross realized gains

Gross realized losses

Impairment losses recognized

Debt(1)

Equity(2)(3)

Debt(1)

Equity(2)(4)

Debt(1)

Equity(2)(5)

5,224

132

9,881

(56)

—

(30)

(53)

—

(114)

5,640

(19)

—

250

164

—

(29)

Includes available-for-sale debt securities.
Includes marketable equity securities, cost method, equity method, exchange-traded funds, and other investments.

(1)
(2)
(3) As a result of certain acquisitions that occurred during fiscal year 2017, the Company recognized a non-cash realized gain of $20 million on its

previously-held minority investment included in other expense, net in the consolidated statement of income.

(4) As a result of certain acquisitions that occurred during fiscal year 2016, the Company recognized a non-cash realized gain of $9 million on its

previously-held minority investment included in other expense, net in the consolidated statement of income.

(5) As a result of certain acquisitions that occurred during fiscal year 2015, the Company recognized a non-cash realized gain of $41 million on its

previously-held minority investments included in other expense, net in the consolidated statement of income. Also, a realized gain on an equity method
investment totaling $97 million is included in special charge (gain), net in 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 the
Company is invested, the Company believes it has recognized 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.

At April 28, 2017 and April 29, 2016, the credit loss portion of
other-than temporary impairments on debt securities was

not significant. The total reductions for available-for-sale debt
securities sold during fiscal years 2017 and 2016 were not
significant.

The April 28, 2017 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
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 28, 2017

1,110

2,855

3,177

81
7,223

MEDTRONIC PLC 2017 Form 10-KPART II
Item 8 Notes to Consolidated Financial Statements

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 $103 million and $85 million at April 28, 2017 and April 29,
2016, respectively. The Company did not recognize any significant
impairment charges related to marketable equity securities during
fiscal year 2017. During the fiscal years 2016 and 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.

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. At
April 28, 2017 and April 29, 2016, the aggregate carrying amount
of equity and other securities without a quoted market price and
accounted for using the cost or equity method was $589 million
and $506 million, respectively. Cost and equity method
investments are measured at fair value on a nonrecurring basis.
Changes in circumstance or the occurrence of events that suggest

the Company’s investment may not be recoverable are assessed
quarterly. If there are identified events or changes in circumstances
that may have a material adverse effect on the fair value of the
investment, the investment is assessed for impairment.

Cost and equity method 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 in privately-held
entities without quoted market prices. To determine the fair value
of these investments, the Company uses all pertinent financial
information available related to the entities, including financial
statements and market participant valuations from recent and
proposed equity offerings. During the fiscal years 2017, 2016,
and 2015 the Company determined that the fair values of certain
cost and/or equity 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 $30 million of impairment charges
during fiscal year 2017, which were recognized in other expense,
net in the consolidated statements of income. During fiscal year
2016, the Company recognized $23 million of impairment charges,
which were recognized in other expense, net and $70 million of
impairment charges which were recognized in special charge (gain),
net in the consolidated statements of income. During fiscal year
2015 the Company recognized $7 million of impairment charges,
which were recognized in other expense, net in the consolidated
statements of income.

Note 7 Goodwill and Other Intangible Assets

Goodwill

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

(in millions)

APRIL 24, 2015

Cardiac and
Vascular Group

Minimally Invasive
Therapies Group

Restorative
Therapies Group

Diabetes Group

5,855

23,399

9,424

1,852

Goodwill as a result of acquisitions

Measurement period adjustments related to
Covidien

Other adjustments, net

Currency adjustment, net

APRIL 29, 2016

Goodwill as a result of acquisitions

Currency adjustment, net

Goodwill reclassified to noncurrent assets
held for sale
APRIL 28, 2017

393

—

(26)
6,243

457

(49)

—
6,651

264

346

(34)

(191)
23,784

242

(705)

(2,910)
20,411

199

(32)
9,620

(53)

—
9,600

—

1
1,853

—

—
1,853

Total

40,530

856

393

(31)

(248)
41,500

732

(807)

(2,910)
38,515

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. There were no changes in reporting units
during fiscal year 2017. 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. The Company did not recognize any goodwill
impairments during fiscal years 2017, 2016, and 2015.

MEDTRONIC PLC 2017 Form 10-KItem 8 Notes to Consolidated Financial Statements

Part II
Item 8 Notes to Consolidated Financial Statements

Intangible Assets

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

(in millions)

Definite-lived:

Customer-related

Purchased technology and patents

Trademarks and tradenames

Other

tOtaL

Indefinite-lived:

IPR&D

april 28, 2017

april 29, 2016

Gross Carrying
amount

accumulated
amortization

Gross Carrying
amount

accumulated
amortization

(2,166)

(3,690)

(461)

(42)
(6,359)

16,862

11,461

772

77
29,172

594

(1,331)

(2,976)

(403)

(31)
(4,741)

18,596

11,397

854

72
30,919

721

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 recognized
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 recognize any
definite-lived intangible asset impairments during fiscal years 2017,
2016 and 2015.

The Company assesses indefinite-lived intangibles 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. The Company calculates the excess
of indefinite-lived intangible assets fair values over their carrying
values utilizing a discounted future cash flow analysis. The
Company did not recognize any significant indefinite-lived asset

impairments during fiscal years 2017 and 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 recognized in acquisition-related items in the consolidated
statements of income. 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 recognize impairment losses in the future.

Amortization

Intangible asset amortization expense for fiscal years 2017, 2016,
and 2015 was $2.0 billion, $1.9 billion, and $733 million, respectively.
Estimated aggregate amortization expense by fiscal year based
on the current carrying value of definite-lived intangible assets
at April 28, 2017, excluding any possible future amortization
associated with acquired IPR&D which has not met technological
feasibility and amortization associated with definite-lived intangible
assets classified as held for sale at April 28, 2017, is as follows:

amortization
Expense

1,809

1,725

1,680

1,666

1,624

(in millions)

2018

2019

2020

2021

2022

MEDTRONIC PLC 2017 Form 10-KNote 8

Financing Arrangements

Current debt obligations consisted of the following:

(in millions)

Bank borrowings

Capital lease obligations

Commercial paper

Three-year term loan

6.000 percent ten-year 2008 CIFSA senior notes

1.500 percent three-year 2015 senior notes

1.375 percent five-year 2013 senior notes

3.500 percent seven-year 2010 HTWR senior notes

Floating rate three-year 2014 senior notes

0.875 percent three-year 2014 senior notes

Debt premium, net

CUrrENt DEBt OBLIGatIONS

Part II
Item 8 Notes to Consolidated Financial Statements

april 28, 2017

april 29, 2016

396

901

3,000

1,150

1,000

—

26
7,520

387

106

—

250

—
993

Commercial Paper

Line of Credit

On January 26, 2015, Medtronic Global Holdings S.C.A. (Medtronic
Luxco), an entity organized under the laws of Luxembourg, 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. At
April 28, 2017, the Company had $901 million of commercial paper
outstanding. No amount of commercial paper was outstanding at
April 29, 2016.

During fiscal years 2017 and 2016, the weighted average original
maturity of the commercial paper outstanding was approximately
39 days and 49 days, respectively, and the weighted average
interest rate was 0.89 percent and 0.57 percent, respectively.
The issuance of commercial paper reduces the amount of credit
available under the Company’s existing line of credit.

Bank Borrowings

Outstanding bank borrowings at April 28, 2017 were short-term
advances to certain non-U.S. subsidiaries under credit agreements
with various banks. Bank borrowings consist primarily of borrowings
in Japanese Yen at interest rates ranging from 0.17% to 0.18%, and
the borrowing is a natural hedge of currency and exchange rate risk.

The Company has a $3.5 billion five year revolving syndicated line
of credit facility ($3.5 Billion 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 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 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. At
April 28, 2017 and April 29, 2016, no amounts were outstanding on
the committed line of credit.

Interest rates on advances on the Credit Facility are determined by
a pricing matrix, based on the Company’s long-term debt ratings,
assigned by Standard & Poor’s Ratings Services and Moody’s
Investors Service. Facility fees are payable on the Credit Facility
and are determined in the same manner as the interest rates. The
agreements also contain customary covenants, all of which the
Company remained in compliance with at April 28, 2017.

MEDTRONIC PLC 2017 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

Long-term debt consisted of the following:

(in millions, except interest rates)

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

1.700 percent two-year 2017 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

3.150 percent seven-year 2015 senior notes

3.200 percent ten-year 2012 CIFSA 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

3.350 percent ten-year 2017 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

Capital lease obligations

Bank borrowings

Debt premium, net

Deferred financing costs
LONG-TERM DEBT

Senior Notes

april 28, 2017

april 29, 2016

Maturity by
Fiscal Year

Payable

Effective
Interest rate

Payable

1.41%

2018

2019

2020

2021

2022

2023

2024

2025

2027

2035

2038

2039

2040

2042

2043

2044

2045

2018

2021-2022

2019-2025

2019-2022

2019-2045

—

400

1,000

766

2,500

500

600

500

675

2,500

650

530

310

850

4,000

850

2,382

374

300

500

400

325

650

4,150

—

139

135

(128)
25,921

1.41

1.59

5.61

1.74

4.47

2.52

1.98

2.22

4.19

3.16

3.18

2.66

2.78

2.67

3.65

3.61

3.35

4.44

3.75

6.52

5.56

4.51

4.12

4.67

4.62

—

4.81

1.28

—

1,150

1,000

400

—

766

2,500

500

600

500

675

2,500

650

530

310

850

4,000

—

2,382

374

300

500

400

325

650

4,000

3,000

214

Effective
Interest rate

1.41 %

1.41

1.59

5.61

—

4.47

2.52

1.04

2.22

4.19

3.16

3.18

2.66

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

—

The Company had outstanding unsecured senior obligations,
including those described 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 remained in compliance with at April 28, 2017.
The Company used the net proceeds from the sale of the Senior
Notes primarily for general corporate purposes, which includes the
repayment of other indebtedness of the Company.

(138)
30,109

In March 2017, Medtronic Luxco issued two tranches of Senior
Notes with an aggregate face value of $1.850 billion (collectively,
the 2017 Senior Notes). The first tranche consisted of $1.0 billion
of 1.700 percent Senior Notes due 2019. The second tranche
consisted of $850 million of 3.350 percent Senior Notes due 2027.
Concurrent with the offering by Medtronic Luxco, Medtronic, Inc.
issued $150 million in principal amount of its 4.625 percent Senior
Notes due 2045 (the Reopening Notes). The Reopening Notes are
a further issuance of, and form a single series with, the $4.0 billion
principal amount of Medtronic, Inc.’s previously outstanding 4.625
percent Senior Notes due 2045. Interest on the 2017 Senior Notes
and the Reopening Notes is payable semi-annually. The Company
used the net proceeds from the sale of the 2017 Senior Notes and
the Reopening Notes for general corporate purposes.

MEDTRONIC PLC 2017 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

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 recognized in
interest expense, net in the consolidated statements 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 were terminated at
the time of original debt issuances relating to the portion of debt
extinguished in the tender offer.

At April 28, 2017 and April 29, 2016, 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. Refer to Note 9 for additional
information regarding the interest rate swap agreements.

Term Loan

On January 26, 2015, Medtronic, Inc. borrowed $3.0 billion for
a term of three years under a 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. The Term Loan Credit Agreement was entered into to
finance, in part, the cash component of the acquisition of Covidien
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 deferred financing costs, debt premium, net, and the fair
value of outstanding interest rate swap agreements are as follows:

(in millions)

2018

2019

2020

2021

2022

Thereafter

Total debt

Less: Current portion of debt
LONG-TERM PORTION OF DEBT

7,494

1,403

3,778

1,127

3,276

16,290

33,368

7,494
25,874

Financial Instruments Not Measured at Fair Value

At April 28, 2017, the estimated fair value of the Company’s Senior
Notes, including the current portion, was $30.4 billion compared to
a principal value of $28.9 billion. At April 29, 2016 the estimated fair
value was $29.8 billion compared to a principal value of $27.4 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.

Note 9 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 was $10.8 billion at both April 28, 2017
and April 29, 2016.

The information that follows explains the various types of
derivatives and financial instruments used by the Company,
reasons the Company uses such instruments, and the impact such
instruments have on 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 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 foreign currency
denominated assets, liabilities, and cash flows. The gross notional
amount of these contracts outstanding at April 28, 2017 and
April 29, 2016 was $4.9 billion and $5.0 billion, respectively.

MEDTRONIC PLC 2017 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

The amounts and classification of the gains in the consolidated statements of income related to derivative instruments, not designated as
hedging instruments, for fiscal years 2017, 2016, and 2015 are as follows:

(in millions)

Classification

2017

2016

Fiscal Year

Currency exchange rate contracts

Other expense, net

2015

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. 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. 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.

No gains or losses relating to ineffectiveness of cash flow hedges
were recognized in earnings during fiscal years 2017, 2016, or
2015. No components of the hedge contracts were excluded in
the measurement of hedge ineffectiveness and no hedges were
derecognized or discontinued during fiscal years 2017, 2016, or
2015. The gross notional amount of these contracts, designated
as cash flow hedges, outstanding at April 28, 2017 and April 29,
2016 was $5.8 billion and $5.7 billion, respectively, and will mature
within the subsequent three-year period.

The amount of gross gains (losses), classification of the gains
(losses) in the consolidated statements of income, and the
accumulated other comprehensive (loss) income (AOCI) related to
the effective portion of currency exchange rate contract derivative
instruments designated as cash flow hedges for fiscal years 2017,
2016, and 2015 were as follows:

(in millions)

Currency exchange rate contracts
tOtaL

(in millions)

Currency exchange rate contracts

tOtaL

(in millions)

Currency exchange rate contracts

tOtaL

recognized in aOCI

recognized in Income

Fiscal Year 2017

amount

342
342

$
$

Classification

Other expense, net

recognized in aOCI

recognized in Income

amount

Classification

Fiscal Year 2016

(165)

Other expense, net

Cost of products sold

recognized in aOCI

recognized in Income

amount

Classification

Fiscal Year 2015

707

Other expense, net

Cost of products sold

$
$

amount

173
173

amount

405

(37)
368

amount

221

(65)
156

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. The effective portion of the gains or losses on 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. 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.

No gains or losses relating to ineffectiveness of forward
starting interest rate derivative instruments were recognized
in interest expense, net during fiscal years 2017, 2016, or 2015.
No components of the hedge contracts were excluded in the
measurement of hedge ineffectiveness. At 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. During fiscal year 2017,
in connection with the issuance of the 2017 Senior Notes, these
swaps were terminated. Upon termination, there was no material
ineffectiveness on the contracts which were in a net liability
position, resulting in a cash payment of $27 million. During fiscal
year 2016, the Company terminated forward starting interest rate
derivatives with a consolidated notional amount of $500 million,

MEDTRONIC PLC 2017 Form 10-Kwhich were previously entered into in advance of a planned debt
issuance that was no longer expected. Upon termination, these
swaps were in a net liability position, resulting in a cash payment of
$45 million.

For fiscal years 2017 and 2016, the reclassification of the effective
portion of the net losses on forward starting interest rate derivative
instruments from accumulated other comprehensive loss to interest
expense, net was not significant.

There were no unrealized gains or losses on outstanding forward
starting interest rate swap derivative instruments at April 28,
2017, as compared to unrealized losses of $48 million at April 29,
2016. Unrealized losses on outstanding forward starting interest
rate swap derivative instruments were recorded in other liabilities,
with the offset recorded in accumulated other comprehensive
loss in the consolidated balance sheets. For fiscal years 2017 and
2016, the Company recorded $363 million and $(164) million ,
respectively, of unrealized gains (losses) in accumulated other
comprehensive loss.

At April 28, 2017 and April 29, 2016, the Company had $37 million
and $(90) million, respectively, in after-tax net unrealized gains
(losses) associated with cash flow hedging instruments recorded in
accumulated other comprehensive loss. The Company expects that
$73 million of after-tax net unrealized gains at April 28, 2017 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.

Changes in the fair value of the derivative instrument are
recognized in interest expense, net, and are offset by changes in

Part II
Item 8 Notes to Consolidated Financial Statements

the fair value of the underlying debt instrument. The gains (losses)
from terminated interest rate swap agreements are recognized 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.

At April 28, 2017 and April 29, 2016, the Company had interest
rate swaps in gross notional amounts of $1.2 billion designated as
fair value hedges of underlying fixed-rate senior note 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.

At April 28, 2017 and April 29, 2016, the market value of
outstanding interest rate swap agreements was an unrealized gain
of $41 million and $89 million, respectively, and the market value
of the hedged items was an unrealized loss of $41 million and
$89 million, respectively, which was recorded in other assets with
the offsets recorded in long-term debt on the consolidated balance
sheets.

No significant hedge ineffectiveness was recorded as a result of
these fair value hedges for fiscal years 2017, 2016, and 2015. In
addition, the Company did not recognize any gains or losses during
fiscal years 2017, 2016, or 2015 on firm commitments that no
longer qualify as fair value hedges.

Balance Sheet Presentation

The following tables summarize the balance sheet classification
and fair value of derivative instruments included in the consolidated
balance sheets at April 28, 2017 and April 29, 2016. 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.

(in millions)

Balance Sheet Classification

Fair Value

Balance Sheet Classification

Fair Value

Derivative Assets

Derivative Liabilities

april 28, 2017

Derivatives designated as hedging instruments

Currency exchange rate contracts

Prepaid expenses and other
current assets

Interest rate contracts

Currency exchange rate contracts

Other assets

Total derivatives designated as hedging
instruments

Derivatives not designated as hedging
instruments

Currency exchange rate contracts

Prepaid expenses and other
current assets

Cross currency interest rate contracts

Other assets

Total derivatives not designated as hedging
instruments
tOtaL DErIVatIVES

$
$

152

Other accrued expenses

Other liabilities

Other accrued expenses

Other liabilities

241

21
262

$
$

—

47
104

MEDTRONIC PLC 2017 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

(in millions)

Balance Sheet Classification

Fair Value

Balance Sheet Classification

Fair Value

Derivative Assets

Derivative Liabilities

april 29, 2016

Derivatives designated as hedging instruments

Currency exchange rate contracts

Prepaid expenses and other
current assets

Interest rate contracts

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

Cross currency interest rate contracts

Other assets

Total derivatives not designated as hedging
instruments
tOtaL DErIVatIVES

$
$

123

Other accrued expenses

Other liabilities

221

— Other accrued expenses

Other accrued expenses

Other liabilities

27
248

$
$

191

28
219

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

(in millions)

Derivative assets

Derivative liabilities

april 28, 2017

april 29, 2016

Level 1

Level 2

Level 1

Level 2

216 $

145 $

166

103

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.

(in millions)

Derivative assets:

Currency exchange rate contracts

Interest rate contracts

Cross currency interest rate contracts

Derivative liabilities:

Currency exchange rate contracts

Cross currency interest rate contracts

tOtaL

april 28, 2017

Gross Amount Not Offset on the Balance Sheet

Gross amount of recognized
assets (Liabilities)

Financial
Instruments

Collateral (Received)
Posted

Net
amount

216 $

262 $

(93) $

(11)

(104)
158 $

(58)

(15)

(2)

(75)

75
—

(55) $

(5)

—

(60) $

— $

—

—
(60) $

103

127

(20)

(9)

(29)
98

MEDTRONIC PLC 2017 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

(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 29, 2016

Gross Amount Not Offset on the Balance Sheet

Gross amount of recognized
assets (Liabilities)

Financial
Instruments

Collateral (Received)
Posted

Net
amount

145 $

248 $

(166) $

(48)

(4)

(1)

(219)

29 $

(98)

(20)

—

(118)

—

119
1

(1) $

—

(1) $

—

26
25

129

(55)

(14)

(4)

(1)

(74)
55

Concentrations of Credit Risk

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. 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.

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. At April 28, 2017, the Company received net cash
collateral of $60 million from its counterparties. At April 29,
2016, the Company posted net cash collateral of $25 million to
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.

Note 10

Inventories

Inventory balances, net of reserves, were as follows:

(in millions)

Finished goods

Work in-process

Raw materials

tOtaL

april 28, 2017

april 29, 2016

2,211

458

669
3,338

2,242

499

732
3,473

MEDTRONIC PLC 2017 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

Note 11 Property, Plant, and Equipment

Property, plant, and equipment balances and corresponding estimated useful lives were 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

Estimated Useful Lives
(in years)

Up to 20

Up to 40

Generally 3-7, up to 15

—

april 28, 2017

april 29, 2016

186

2,175

6,435

895

9,691

(5,330)

4,361

215

2,394

6,328

777

9,714

(4,873)

4,841

Depreciation is recognized using the straight-line method over
the estimated useful lives of the assets. Depreciation expense
of $937 million, $889 million, and $573 million was recognized in
fiscal years 2017, 2016, and 2015, respectively. Upon retirement
or disposal of property, plant, and equipment, the costs and

related amounts of accumulated depreciation or amortization
are eliminated from the asset and accumulated depreciation
accounts. The difference, if any, between the net asset value and
the proceeds, is recognized in earnings.

Note 12 Warranty Obligations

The following table presents the changes in the Company’s product warranty obligations:

(in millions)

April 24, 2015

Warranty claims provision

Settlements

April 29, 2016

Warranty claims provision

Settlements

aPrIL 28, 2017

Warranty Obligation

135

(91)

108

(68)

101

Note 13 Shareholders’ Equity

Share Capital

A Preferred Shares

Medtronic plc is authorized to issue 2.6 billion Ordinary Shares,
$0.0001 par value; 40 thousand Euro Deferred Shares, €1.00
par value; 127.5 million Preferred Shares, $0.20 par value; and
500 thousand A Preferred Shares, $1.00 par value.

Euro Deferred Shares

The authorized share capital of the Company includes 40
thousand Euro Deferred Shares, with a par value of €1.00 per
share. As of April 28, 2017, no Euro Deferred Shares were issued or
outstanding.

Preferred Shares

The authorized share capital of the Company includes 127.5 million
of Preferred Shares, with a par value of $0.20 per share. As of
April 28, 2017, no Preferred Shares were issued or outstanding.

The Company issued 624 A Preferred Shares, par value $1.00,
each to three of its advisors in connection with the transaction
agreement associated with the Covidien acquisition dated June 15,
2014, 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.

MEDTRONIC PLC 2017 Form 10-KDividends

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 2017 and 2016, the
Company repurchased approximately 43 million and 38 million

Note 14 Stock Purchase and Award Plans

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 2017, 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. At April 28, 2017, there were
approximately 21 million shares available for future grants under
the 2013 Plan.

Share Options

Options are granted at the exercise price, which is 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
2017, the Company granted share options under the 2013 Plan.
The Company also grants shares of performance-based share
options 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.

Restricted Stock

Restricted stock awards and restricted stock units (collectively
referred to as restricted stock) are granted to officers and key
employees. At April 28, 2017, the Company does not have any
outstanding restricted stock awards. The Company grants
restricted stock units that typically cliff vest after four years. The
expense recognized for restricted stock units is equal to the grant
date fair value, which is equal to the closing stock price on the date
of grant. Restricted stock units 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 units that typically cliff vest
after three years only if the Company has also achieved certain

Part II
Item 8 Notes to Consolidated Financial Statements

shares, respectively, at an average price of $83.03 and $74.92,
respectively. In June 2015, the Company’s Board of Directors
authorized, subject to the ongoing existence of sufficient
distributable reserves, the redemption of 80 million of the
Company’s ordinary shares. As of April 28, 2017, the Company
had used 51 million of the 80 million shares authorized under
the repurchase program, leaving approximately 29 million shares
available for future repurchases. In June 2017, the Company’s
Board of Directors replaced the existing June 2015 authorization
to redeem up to an aggregate number of ordinary shares with an
authorization to expend up to an aggregate amount of $5 billion
beginning June 26, 2017 to redeem the Company’s ordinary
shares. The Company accounts for repurchases of ordinary shares
using the par value method and shares repurchased are canceled.

performance objectives. Performance awards are expensed over
the performance period based on the probability of achieving the
performance objectives.

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 2017, the Company granted restricted stock units under
the 2013 Plan. At April 28, 2017, all restricted stock 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 may 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 $68.68 per share in fiscal year 2017.
At April 28, 2017, plan participants had approximately $11 million
withheld to purchase the Company’s ordinary shares at 85 percent
of its market value on June 30, 2017, the last trading day before
the end of the calendar quarter purchase period. At April 28, 2017,
approximately 18 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 at 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.

MEDTRONIC PLC 2017 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

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

14.70

13.72

25.39

Fiscal Year

2017

2016

2015

Assumptions used:

Expected life (years)

(1)

Risk-free interest rate

(2)

(3)

Volatility

Dividend yield

(4)

6.18

1.26%

21.07%

1.97%

5.94

1.79%

21.00%

1.96%

4.24

0.99%

21.29%

1.66%

(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.

(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

Pursuant to the transaction agreement associated with the
Covidien acquisition dated June 15, 2014, 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 $23 million and $58 million of incremental expense
related to these modifications during fiscal year 2017 and 2016,
respectively, within acquisition-related items in the consolidated
statements of income. Except for the conversion of share options
and restricted stock units discussed herein, the material terms of
these awards remained unchanged.

The following table presents the components and classification of stock-based compensation expense for stock options, restricted stock,
and ESPP shares recognized for fiscal years 2017, 2016, and 2015:

(in millions)

Stock options

Restricted stock

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

TOTAL STOCK-BASED COMPENSATION EXPENSE, NET OF TAX

Fiscal Year

2017

2016

2015

157

169

22
348

233

348

(98)
250

206

148

21
375

212

375

(108)
267

140

284

15
439

128

189

439

(138)
301

MEDTRONIC PLC 2017 Form 10-KStock Options

The following table summarizes all stock option activity, including activity from options assumed or issued as a result of acquisitions, during
fiscal year 2017:

Part II
Item 8 Notes to Consolidated Financial Statements

Wtd. Avg.
remaining
Contractual
term
(in years)

aggregate
Intrinsic Value
(in millions)

6.30

7.89

4.14

952

194

735

2015

609

329

106

Outstanding at April 29, 2016

Granted

Exercised

Expired/Forfeited

Outstanding at April 28, 2017

Vested and expected to vest at April 28, 2017

Exercisable at April 28, 2017

Options
(in thousands)

Wtd. Avg.
Exercise
Price

52,970

4,061

(9,488)

(2,349)

45,194

22,929

19,138

57.09

87.35

40.56

73.90

62.41

75.32

44.71

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 2017, 2016, and 2015:

(in millions)

Cash proceeds from options exercised

Intrinsic value of options exercised

Tax benefit related to options exercised

Fiscal Year

2017

367

403

140

2016

452

374

131

Unrecognized compensation expense related to outstanding stock options at April 28, 2017 was $178 million and is expected to be
recognized over a weighted average period of 1.6 years.

Restricted Stock

The following table summarizes restricted stock activity, including activity from restricted stock assumed or issued as a result of acquisitions,
during fiscal year 2017:

Nonvested at April 29, 2016

Granted

Vested

Forfeited

Nonvested at April 28, 2017

awards
(in thousands)

8,820

3,198

(2,727)

(503)

8,788

Wtd. Avg.
Grant
Price

64.33

85.07

48.17

71.32

76.49

The following table summarizes the weighted-average grant date fair value of restricted stock granted, total fair value of restricted stock
vested and related tax benefit during fiscal years 2017, 2016, and 2015:

(in millions, except per share data)

Fiscal Year

2017

2016

Weighted-average grant-date fair value per restricted stock

85.07

77.68

Fair value of restricted stock vested

Tax benefit related to restricted stock vested

131

276

2015

69.30

174

Unrecognized compensation expense related to restricted stock as of April 28, 2017 was $334 million and is expected to be recognized over
a weighted average period of 2.5 years.

MEDTRONIC PLC 2017 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

Note 15

Income Taxes

The provision for income taxes is based on income before income taxes reported for financial statement purposes. The components of
income before provision for income taxes, based on tax jurisdiction, are as follows:

(in millions)

U.S.

International

INCOME BEFORE PROVISION FOR INCOME TAXES

The provision for income taxes 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

2017

(234)

4,836
4,602

2017

614

840

1,454

(399)

(477)

(876)
578

Fiscal Year

2016

333

4,003
4,336

Fiscal Year

2016

440

835

1,275

(67)

(410)

(477)
798

2015

639

2,847
3,486

2015

1,128

502

1,630

(705)

(114)

(819)
811

Deferred taxes arise because of the different treatment of
transactions under U.S. GAAP and income tax accounting, known
as temporary differences. The Company records the tax effect of
these temporary differences as deferred tax assets and deferred
tax liabilities. Deferred tax assets generally represent items
that may 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:

april 28, 2017

april 29, 2016

Net operating loss, capital loss, and credit carryforwards

6,800

7,568

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

658

427

456

278

308

277

191

—

9,395

(6,311)

3,084

619

358

530

316

341

225

308

107

10,372

(7,032)

3,340

MEDTRONIC PLC 2017 Form 10-K(in millions)

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

Outside basis difference of subsidiaries

Total deferred tax liabilities

Prepaid income taxes

Income tax receivables
TAX LIABILITIES, NET

Reported as (after valuation allowance and jurisdictional netting):

Prepaid expenses and other current assets

Tax assets

Deferred tax liabilities

Noncurrent liabilities held for sale

TAX LIABILITIES, NET

At April 28, 2017, the Company had approximately $24.9 billion of
net operating loss carryforwards in certain non-U.S. jurisdictions, of
which $22.0 billion have no expiration, and the remaining $2.9 billion
will expire during fiscal 2018 through 2037. Included in these net
operating loss carryforwards are $17.6 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 remaining non-U.S. net operating loss carryforwards
of $7.3 billion have a valuation allowance recorded against the
carryforwards, as management does not believe that it is more
likely than not that these net operating losses will be utilized.

At April 28, 2017, the Company had $1.0 billion of U.S. federal net
operating loss carryforwards, which will expire during fiscal year 2018
through fiscal year 2036. For U.S. state purposes, the Company had
$690 million of net operating loss carryforwards at April 28, 2017,
which will expire during fiscal year 2018 through fiscal year 2037.

At April 28, 2017, the Company also had $392 million of tax
credits available to reduce future income taxes payable, of which
$75 million have no expiration, and the remaining credits expire
during fiscal year 2018 through fiscal year 2037.

Part II
Item 8 Notes to Consolidated Financial Statements

april 28, 2017

april 29, 2016

(4,943)

(5,173)

—

(112)

(74)

(149)

(18)

(112)

(5,408)

475

218
(1,631)

545

1,509

(2,978)

(707)
(1,631)

(230)

(112)

(179)

(189)

—

(5,883)

365

529
(1,649)

697

1,383

(3,729)

—
(1,649)

The Company has established valuation allowances of $6.3 billion
and $7.0 billion at April 28, 2017 and April 29, 2016, respectively,
primarily related to the uncertainty of the utilization of certain
deferred tax assets and primarily comprised of tax loss and credit
carryforwards in various jurisdictions. The decrease in the valuation
allowance during fiscal year 2017 is primarily driven by carryover
attribute utilization and expiration, as well as the effects of currency
fluctuations. 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 28, 2017, the Company had certain potential non-U.S.
tax attributes that had not been recorded in the consolidated
financial statements, including $12.0 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 expects to
recognize a small portion of the special deduction annually based on
meeting the defined economic factors. The Company continues to
analyze whether the utilization of such benefits may be accelerated.

MEDTRONIC PLC 2017 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

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)

Valuation allowance release

Other, net

EFFECTIVE TAX RATE

2017

35.0%

1.0

(0.9)

(0.4)

(27.1)

(1.5)

5.7

(1.0)

1.8
12.6%

Fiscal Year

2016

35.0%

0.9

(1.2)

(0.3)

(23.4)

(1.6)

11.4

(0.9)

(1.5)
18.4%

2015

35.0%

0.8

(0.7)

(0.4)

(24.3)

(1.7)

13.3

—

1.3
23.3%

(1) Adjustments include the impact of inventory step-up, impact of product technology upgrade commitment, special charge (gain), net, restructuring

charges, net, certain litigation charges, acquisition-related items, amortization of intangible assets, loss on previously held forward starting interest rate
swaps, debt tender premium, impact of acquisition on interest expense, and certain tax adjustments, net.

During fiscal year 2017, the Company recognized certain tax
adjustments of $202 million, including the following:
■■

A charge of $404 million associated with the IRS resolution
for the Ardian, CoreValve, Inc., Ablation Frontiers, Inc., PEAK
Surgical, Inc. and Salient Surgical Technologies, Inc. acquisition-
related issues and the allocation of income between Medtronic,
Inc. and its wholly owned subsidiary operating in Puerto Rico
for certain businesses. This resolution does not include the
businesses that are the subject of the Medtronic, Inc. U.S. Tax
Court case for fiscal years 2005 and 2006.

■■

A net charge of $125 million associated with the expected
divestiture of a portion of our Patient Monitoring & Recovery
division to Cardinal Health. The net charge primarily relates
to the tax effect from the recognition of the outside basis
difference of certain subsidiaries, which are included in the
expected divestiture.

A charge of $86 million associated with the IRS’s disallowance
of the utilization of certain net operating losses, along with the
recognition of a valuation allowance against the net operating
loss deferred tax asset, which were recognized during the year.

A charge of $18 million as a result of the redemption of an
intercompany minority interest during the year.

The $202 million of net certain tax adjustments were recognized
in provision for income taxes in the consolidated statements of
income for fiscal year 2017.

During fiscal year 2016 the Company recognized certain tax
adjustments of $417 million, which included the following:
■■

A charge of $442 million primarily related to the U.S. income
tax expense resulting from the Company’s completion of an
internal reorganization of the ownership of certain legacy
Covidien businesses that reduced the cash and investments
held by its 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.

■■

A $25 million tax benefit associated with the disposition of a
wholly owned U.S. subsidiary.

The $417 million of net certain tax adjustments were recorded in
the provision for income taxes in the consolidated statements of
income for fiscal year 2016.

During fiscal year 2015, the Company recognized certain tax
adjustments of $349 million, which included the following:
■■

A charge of $329 million related to the resolution of the Kyphon
Inc. (Kyphon) acquisition-related issues with the U.S. Internal
Revenue Service (IRS).

■■

A charge of $20 million related to a taxable gain associated with
the Covidien acquisition.

The $349 million of certain tax adjustments were recognized
in provision for income taxes in the consolidated statements of
income for fiscal year 2015.

MEDTRONIC PLC 2017 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

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 by $475 million,
$474 million, and $414 million in fiscal years 2017, 2016, and 2015,
respectively, and earnings per diluted share by $0.34, $0.33, and
$0.37 in fiscal years 2017, 2016, and 2015, respectively. Unless
these grants are extended, they will expire between fiscal years
2018 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.

No deferred taxes have been provided for any portion of the
approximately $31.8 billion and $29.0 billion of undistributed
earnings of the Company’s subsidiaries at April 28, 2017 and
April 29, 2016, respectively, since these earnings have been, and
under current plans will continue to be, permanently reinvested
in these subsidiaries. During fiscal year 2017, the Company
removed its permanently reinvested assertion on $200 million of
undistributed earnings of certain subsidiaries in anticipation of
the divestiture of a portion of its Patient Monitoring & Recovery
division to Cardinal Health. 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
undistributed earnings.

The Company had $1.9 billion, $2.7 billion, and $2.9 billion of gross unrecognized tax benefits at April 28, 2017, April 29, 2016, and April 24,
2015, respectively. A reconciliation of the beginning and ending amount of unrecognized tax benefits for fiscal years 2017, 2016, and 2015 is
as follows:

(in millions)

Gross unrecognized tax benefits at beginning of fiscal year
Gross increases:

Prior year tax positions

Current year tax positions

Acquisitions
Gross decreases:

Prior year tax positions

Settlements

Statute of limitation lapses

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

If all of the Company’s unrecognized tax benefits at April 28, 2017,
April 29, 2016, and April 24, 2015 were recognized, $1.8 billion,
$2.1 billion, and $2.2 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 these tax authorities
could have a material impact on the Company’s effective tax rate
in future periods. The Company has recorded gross unrecognized
tax benefits of $1.9 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 $225 million, net as a result of the resolution of tax
matters with the IRS and other taxing authorities as well as statute
of limitation lapses.

The Company recognizes interest and penalties related to income
tax matters in 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 $360 million,

2017

2,703

147

(538)

(467)

(28)

1,896

—

Fiscal Year

2016

2,860

202

—

(116)

(275)

(4)

2,703

(384)

2015

1,172

331

231

1,199

(40)

(33)

—

2,860

(378)

1,896

2,319

2,482

$609 million, and $656 million of accrued gross interest and
penalties at April 28, 2017, April 29, 2016, and April 24, 2015,
respectively. During the fiscal years ended April 28, 2017, April 29,
2016, and April 24, 2015, the Company recognized gross interest
(income) expense of approximately $(208) million, $80 million,
and $142 million, respectively, in 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.

MEDTRONIC PLC 2017 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

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

1997

2012

2008

2009

2013

2011

2010

2001

2011

2010

2005

2010

2012

2005

2009

2011

2014

See Note 20 for additional information regarding the status of current tax audits and proceedings.

Note 16 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 the 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 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 ordinary shares. Potentially
dilutive ordinary shares include stock options and other stock-
based awards granted under the stock-based compensation plans
and shares committed to be purchased under the employee stock
purchase plan.

MEDTRONIC PLC 2017 Form 10-KThe table below sets forth the computation of basic and diluted earnings per share:

(in millions, except per share data)

Numerator:

Part II
Item 8 Notes to Consolidated Financial Statements

Fiscal Year

2017

2016

2015

Net income attributable to ordinary shareholders

4,028

3,538

2,675

Denominator:

Basic — weighted average shares outstanding

1,378.9

1,409.6

1,095.5

Effect of dilutive securities:

Employee stock options

Employee restricted stock units

Other

9.0

3.4

0.1

12.2

4.0

0.1

9.1

4.3

0.1

Diluted — weighted average shares outstanding

1,391.4

1,425.9

1,109.0

Basic earnings per share

Diluted earnings per share

2.92

2.89

2.51

2.48

2.44

2.41

The calculation of weighted average diluted shares outstanding excludes options to purchase approximately 7 million, 4 million, and 2 million
ordinary shares in fiscal years 2017, 2016, and 2015, respectively, because their effect would be anti-dilutive on the Company’s earnings per
share.

Note 17 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 $602 million,
$584 million, and $433 million in fiscal years 2017, 2016, and 2015,
respectively.

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.

At April 28, 2017 and April 29, 2016, the net underfunded status
of the Company’s benefit plans was $1.3 billion and $1.4 billion,
respectively. The $1.3 billion underfunded status at April 28, 2017
included $12 million of liabilities classified as held for sale. The
liabilities classified as held for sale consisted of $9 million related to
pension benefits and $3 million related to post-retirement benefits.

During fiscal year 2017, the Company offered certain eligible U.S.
employees voluntary early retirement packages. The acceptance
of this offer by eligible U.S. employees caused incremental
expenses of $73 million to be recognized during fiscal year 2017.
Of this amount, $60 million related to U.S. pension benefits,
$7 million related to U.S. post-retirement benefits, $4 million
related to defined contribution plans, and $2 million related to cash
payments and administrative fees.

MEDTRONIC PLC 2017 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

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

(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

Employee contributions

Plan curtailments and settlements

Actuarial (gain) loss

Benefits paid

Special termination benefits

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

Employer contributions

Employee contributions

Plan settlements

Benefits paid

Currency exchange rate changes and other

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:

Prior service cost (benefit)

Net actuarial loss

ENDING BaLaNCE

2017

2,879

3,048

117

109

—

(22)

(80)

—
3,232

2,138

238

183

—

(80)

—
2,479

2,479

3,232

(753)
(753)

—

(13)

(740)
(753)

1,212
1,215

2016

2,757

2,956

120

122

—

(28)

(42)

(80)

—

—
3,048

2,204

(70)

112

—

(28)

(80)

—
2,138

2,138

3,048

(910)
(910)

—

(12)

(898)
(910)

1,361
1,365

2017

1,518

1,535

182

(43)

—

(57)
1,734

1,113

109

(1)

(43)

(34)
1,235

1,235

1,734

(499)
(499)

(7)

(497)
(499)

(6)

450
444

2016

1,367

1,647

(133)

(103)

(49)

—

45
1,535

1,189

(44)

(118)

(49)

26
1,113

1,113

1,535

(422)
(422)

(8)

(434)
(422)

(14)

359
345

MEDTRONIC PLC 2017 Form 10-KItem 8

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 at April 28, 2017 and April 29, 2016. U.S. and non-U.S. plans with accumulated
benefit obligations in excess of plan assets consist of the following:

Part II
Item 8 Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

(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

2017

4,188

4,677

3,454

Fiscal Year

2017

4,903

3,646

The net periodic benefit cost of the plans include the following components:

(in millions)

Service cost

Interest cost

Expected return on plan assets

Amortization of prior service cost

Amortization of net actuarial loss

Settlement gain

Special termination benefits

NEt PErIODIC BENEFIt COSt

U.S. Pension Benefits

Fiscal Year

2017

117

109

(195)

—

60
180

2016

120

122

(180)

—

(1)

—
159

2015

104

105

(160)

—

—
114

Non-U.S. Pension Benefits

Fiscal Year

2017

2016

(48)

(1)

—

—
64

(48)

—

(10)

—
74

2016

3,922

4,333

2,981

2016

4,362

3,009

2015

(41)

—

—
64

The other changes in plan assets and projected benefit obligations recognized in accumulated other comprehensive loss for fiscal year 2017
are as follows:

(in millions)

Net actuarial (gain) loss

Amortization of prior service cost

Amortization of net actuarial loss

Prior service cost

Effect of exchange rates

TOTAL (GAIN) LOSS RECOGNIZED IN ACCUMULATED OTHER COMPREHENSIVE LOSS

TOTAL LOSS RECOGNIZED IN NET PERIODIC BENEFIT COST AND
ACCUMULATED OTHER COMPREHENSIVE LOSS

U.S. Pension
Benefits

(61)

(1)

(88)

—

—
(150)

Non-U.S.
Pension
Benefits

121

(17)

(13)
100

164

The estimated net actuarial loss that will be amortized from accumulated other comprehensive loss into net periodic benefit cost, before tax,
in fiscal year 2018 for U.S. and non-U.S. pension benefits is expected to be $83 million and $17 million, respectively.

MEDTRONIC PLC 2017 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

The actuarial assumptions are as follows:

Critical assumptions – projected benefit
obligation:

U.S. Pension Benefits

Fiscal Year

Non-U.S. Pension Benefits

Fiscal Year

2017

2016

2015

2017

2016

2015

Discount rate

3.70%-4.30% 3.60%-4.30%

4.20% 0.45%-11.40% 0.25%-10.20%

Rate of compensation increase

3.90%

2.89%

2.83%

Critical assumptions – net periodic benefit cost:

Discount rate – benefit obligation

3.55%-4.30% 4.20%-4.80%

4.75% 0.25%-10.20% 0.80%-9.00%

Discount rate – service cost

Discount rate – interest cost

Expected return on plan assets

Rate of compensation increase

3.60%-4.45% 4.20%-4.80%

4.75% 0.05%-10.20% 0.80%-9.00%

2.90%-3.80% 4.20%-4.80%

4.75% 0.30%-10.20% 0.80%-9.00%

8.20%

3.90%

8.20%

3.90%

8.25%

3.90%

4.45%

2.83%

4.35%

2.92%

1.88%

2.92%

3.32%

4.77%

2.80%

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 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 sponsors trusts that hold the assets for U.S. pension
plans and other U.S. post-retirement benefit plans, primarily retiree
medical benefits. For investment purposes, the legacy Medtronic
U.S. pension and other U.S. post-retirement benefit 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 plans
and other U.S. post-retirement benefit plans with the assistance
of external consultants. 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 portfolios contain a diversified allocation of
investment categories, including equities, fixed income securities,
hedge funds, and private equity. Securities are also diversified in
terms of domestic and international, short- and long-term, 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,
funding rules, and financial and tax considerations are part of the
funding and investment allocation process in each country. The
weighted average target asset allocations at April 28, 2017 for the
plans are 37% equity securities, 29% debt securities, and 34%
other.

MEDTRONIC PLC 2017 Form 10-KThe plans did not hold any investments in the Company’s ordinary shares at April 28, 2017 or April 29, 2016.

The Company’s U.S. plans target asset allocations at April 28, 2017, compared to the U.S. plans actual asset allocations at April 28, 2017 and
April 29, 2016 by asset category, are as follows:

Part II
Item 8 Notes to Consolidated Financial Statements

U.S. Plans

Asset Category:

Equity securities

Debt securities

Other

tOtaL

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.
Equity commingled trusts: Comprised of investments in equity
securities held in pooled investment vehicles. The valuations of
equity commingled trusts are based on the respective net asset
values which are determined by the fund daily at market close.
The net asset values are calculated based on the valuation of the
underlying assets which are determined using observable inputs.
The net asset values are not publicly reported and funds are valued
at the net asset value practical expedient.
Fixed income commingled trusts: Comprised of investments in
fixed income securities held in pooled investment vehicles. The
valuations of fixed income commingled trusts are based on the
respective net asset values which are determined by the fund daily
at market close. The net asset values are calculated based on the
valuation of the underlying assets which are determined using
observable inputs. The net asset values are not publicly reported
and funds are valued at the net asset value practical expedient.
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.

Target Allocation

Actual Allocation

april 28, 2017

april 29, 2016

40%

24
100%

45%

18
100%

43%

22
100%

These investments may be redeemed monthly with notice periods
ranging from 45 to 95 days. At April 28, 2017, there is one absolute
return strategy fund totaling $2 million that is in the process of
liquidation. The Company expects to receive the proceeds over
the next year. Private equity investments consist of common stock
and debt instruments of private companies. For private equity
funds, the sum of the unfunded commitments at April 28, 2017 is
$158 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. At April 28,
2017,there is one real estate investment totaling $1 million that is
in the process of liquidation. The Company expects to receive the
proceeds over the next year. 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 net asset values which
are not publicly reported. The net asset values are calculated based
on the valuation of the underlying assets. The underlying assets
are 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 2017 or 2016.

MEDTRONIC PLC 2017 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

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. In accordance with authoritative
guidance adopted in fiscal year 2017, certain investments for which
the fair value is measured using the net asset value per share (or
its equivalent) practical expedient are not presented within the

fair value hierarchy. The fair value amounts presented for these
investments are intended to permit reconciliation to the total fair
value of plan assets at April 28, 2017 and April 29, 2016. The revised
presentation has been applied retrospectively and fiscal year 2016
values have been reclassified to conform to classifications used in
the current year.

U.S. Pension Benefits

(in millions)

Short-term investments

U.S. government securities

Corporate debt securities

Equity commingled trusts

Fixed income commingled trusts

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 at
april 28, 2017

Fair Value Measurements
Using Inputs Considered as

Level 1

Level 2

Level 3

Investments
Measured at Net
Asset Value

168

167

250

1,127

299

468
2,479

Fair Value at
april 29, 2016

127

146

216

956

231

462
2,138

168

138

—

—
306

—

250

—

—
279

—

468
468

—

1,127

299

—
1,426

Fair Value Measurements
Using Inputs Considered as

Level 1

Level 2

Level 3

Investments
Measured at Net
Asset Value

127

137

—

—
264

—

216

—

—
225

—

462
462

—

956

231

—
1,187

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)

April 29, 2016

Total realized gains included in income

Total unrealized gains included in accumulated other comprehensive (loss) income

Purchases and sales, net

aPrIL 28, 2017

(in millions)

April 24, 2015

Total realized gains included in income

Total unrealized losses included in accumulated other comprehensive (loss) income

Purchases and sales, net

aPrIL 29, 2016

Total Level 3
Investments

473

(144)

123
462

Total Level 3
Investments

Partnership
Units

462

(47)
468

Corporate
Debt
Securities

—

(1)

—
— $

462

(47)
468

Partnership
Units

472

(143)

123
462

MEDTRONIC PLC 2017 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

Non-U.S. Pension Benefits

(in millions)

Registered investment companies

Insurance contracts

(in millions)

Registered investment companies

Insurance contracts

Fair Value at
april 28, 2017

1,191

44
1,235

Fair Value at
april 29, 2016

1,037

76
1,113

Fair Value Measurements
Using Inputs Considered as

Level 1

Level 2

Level 3

—

—
—

—

—
—

—

44
44

Fair Value Measurements
Using Inputs Considered as

Level 1

Level 2

Level 3

—

—
—

—

—
—

—

76
76

Investments
Measured at Net
Asset Value

1,191

—
1,191

Investments
Measured at Net
Asset Value

1,037

—
1,037

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)

April 29, 2016

Total unrealized gains included in accumulated other comprehensive (loss) income

Purchases and sales, net

Currency exchange rate changes

aPrIL 28, 2017

(in millions)

April 24, 2015

Purchases and sales, net

Currency exchange rate changes

aPrIL 29, 2016

Retirement Benefit Plan Funding

Total Level 3
Investments

Insurance
Contracts

(31)

(3)
44

Insurance
Contracts

2
76

(31)

(3)
44

Partnership
Units

(16)

—
—

Total Level 3
Investments

(2)

2
76

It is the Company’s policy to fund retirement costs within the limits of allowable tax deductions. During fiscal year 2017, the Company made
discretionary contributions of approximately $183 million to the U.S. pension plan. Internationally, the Company contributed approximately
$76 million for pension benefits during fiscal year 2017. The Company anticipates that it will make contributions of $302 million to its
pension benefits in fiscal year 2018. 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 2018 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

2018

2019

2020

2021

2022

2023 – 2027
tOtaL

U.S. Pension Benefits

Non-U.S. Pension Benefits

Gross Payments

101

110

121

131

143

901
1,507

298
523

MEDTRONIC PLC 2017 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

Post-retirement Benefit Plans

The net periodic benefit cost associated with the Company’s
post-retirement benefit plans was $11 million, $12 million, and
$14 million in fiscal years 2017, 2016, and 2015, respectively. The
Company’s projected benefit obligation for all post-retirement
benefit plans was $323 million and $369 million at April 28, 2017
and April 29, 2016, respectively. The Company’s fair value of plan
assets for all post-retirement benefit plans was $289 million and
$269 million at April 28, 2017 and April 29, 2016, respectively. The
decrease in the Company’s projected benefit obligation during
fiscal year 2017 was due to the U.S. post-retirement benefit plan
being frozen, effective January 1, 2018. The activity during fiscal
year 2016 related to the change in projected benefit obligation was
not material. The activity during fiscal years 2017 and 2016 related
to the change in 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. Expense recognized under these plans was $347
million, $269 million, and $188 million in fiscal years 2017, 2016, and
2015, respectively.

Note 18 Leases

Effective May 1, 2005, the Company froze participation in the
original defined benefit pension plan in the U.S. and implemented
two new plans: an additional defined benefit pension plan, the
Personal Pension Account (PPA), and a new defined contribution
plan, the Personal Investment Account (PIA). Employees in the U.S.
hired on or after May 1, 2005 but before January 1, 2016 had 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 in U.S. Pension Benefits in the tables presented
earlier. The defined contribution cost associated with the PIA was
approximately $58 million, $58 million, and $53 million in fiscal years
2017, 2016, and 2015, 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 defined contribution cost associated with the
MCC was approximately $45 million and $12 million in fiscal years
2017 and 2016, respectively.

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 28, 2017 are:

(in millions)

Fiscal Year

2018

2019

2020

2021

2022

Thereafter

Total minimum lease payments

Less amounts representing interest

PRESENT VALUE OF NET MINIMUM LEASE PAYMENTS

Capitalized
Leases

Operating
Leases

(5)
23

215

158

110

646

N/A
N/A

Rent expense for all operating leases was $294 million, $269 million, and $195 million in fiscal years 2017, 2016, and 2015, respectively. The
increase in fiscal year 2016 rent expense is primarily related to the Covidien acquisition.

MEDTRONIC PLC 2017 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

Note 19 Accumulated Other Comprehensive (Loss) Income

The following table provides changes in AOCI, net of tax and by component.

(in millions)

aPrIL 24, 2015

Other comprehensive (loss) income
before reclassifications

Reclassifications

Other comprehensive (loss) income
aPrIL 29, 2016

Other comprehensive (loss) income
before reclassifications

Reclassifications

Other comprehensive (loss) income
aPrIL 28, 2017

Unrealized
Gain (Loss) on
available-for-
Sale Securities

Cumulative
Translation
Adjustments

Net Change
in Retirement
Obligations

Unrealized
Gain (Loss)
on Derivative
Financial
Instruments

Total Accumulated
Other
Comprehensive
(Loss) Income

(277)

(1,131)

210

(107)

(14)

(121)
(107)

(14)

38
(69)

(197)

—

(197)
(474)

(978)

—

(978)
(1,452)

(141)

(66)
(1,197)

(17)

68
(1,129)

(94)

(206)

(300)
(90)

233

(106)

127
37

(1,184)

(539)

(145)

(684)
(1,868)

(710)

(35)

(745)
(2,613)

The income tax on gains and losses on available-for-sale securities
in other comprehensive income before reclassifications during
fiscal years 2017, 2016, and 2015 was an expense of $41 million, a
benefit of $94 million, and an expense of $60 million, respectively.
During fiscal years 2017, 2016, and 2015, realized gains and
losses on available-for-sale securities reclassified from AOCI were
reduced by income taxes of $8 million in fiscal years 2017 and
2016 and $49 million in fiscal year 2015. When realized, gains and
losses on available-for-sale securities reclassified from AOCI are
recognized within other expense, net. Refer to Note 6 for additional
information.

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.

The net change in retirement obligations in other comprehensive
income includes net amortization of prior service costs and
actuarial losses included in net periodic benefit cost. The
income tax on the net change in retirement obligations in other
comprehensive income before reclassifications during fiscal years

2017, 2016, and 2015 was an expense of $41 million, a benefit
of $85 million, and a benefit of $198 million, respectively. During
fiscal years 2017, 2016, and 2015, the gains and losses on defined
benefit and pension items reclassified from AOCI were reduced
by income taxes of $23 million, $39 million, and $25 million,
respectively. Refer to Note 17 for additional information.

The income tax on unrealized gains and losses on derivative
financial instruments in other comprehensive income before
reclassifications during fiscal years 2017, 2016, and 2015 was an
expense of $130 million, a benefit of $51 million, and an expense of
$199 million, respectively. During fiscal years 2017, 2016, and 2015,
gains and losses on derivative financial instruments reclassified
from AOCI were reduced by income taxes of $61 million,
$121 million, and $53 million, respectively. When realized, cash
flow hedge gains and losses reclassified from AOCI are recognized
within other expense, net or cost of products sold, and forward
starting interest rate derivative financial instrument gains and
losses reclassified from AOCI are recognized within interest
expense, net. Note 9 for additional information.

Note 20 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, and governmental proceedings and investigations
in the United States and around the world, including those
described below. With respect to governmental proceedings
and investigations, like other companies in our industry, the
Company is subject to extensive regulation by national, state and
local governmental agencies in the United States and in other
jurisdictions in which the Company and its affiliates operate. As
a result, interaction with governmental agencies is ongoing. The
Company’s 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 civil or criminal remedies (including
injunctions barring the sale of products that are the subject of the
proceeding), that could require significant expenditures, result in
lost revenues or limit the Company’s ability to conduct business
in the applicable jurisdictions. The Company records a liability in
the consolidated financial statements on an undiscounted basis
for loss contingencies related to legal actions when a loss is
known or considered probable and the amount may be reasonably
estimated. If the reasonable estimate of a known or probable loss
is a range, and no amount within the range is a better estimate
than any other, the minimum amount of the range is accrued. If
a loss is reasonably possible but not known or probable, and may

MEDTRONIC PLC 2017 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

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. At April 28, 2017 and April 29, 2016, accrued certain
litigation charges were approximately $1.1 billion and $1.0 billion,
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
liabilities on the consolidated balance sheets.

In addition to litigation contingencies, the Company also has
certain income tax and guarantee obligations that may potentially
result in future charges. While it is not possible to predict the
outcome for most of the matters discussed below, the Company
believes it is possible that charges associated with these
matters could have a material adverse impact on the Company’s
consolidated earnings, financial position, 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 recognized 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 is unable to reasonably estimate the
range of loss, if any, that may result from this matter.

INFUSE Litigation

The Company estimated law firms representing approximately
6,000 claimants asserted or intended 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, 2017, the
Company has reached agreements to settle substantially all of
these claims, resolving this litigation. The Company’s accrued
expenses for this matter are included within accrued certain
litigation charges in other accrued expenses and other 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

100

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 recognized
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. 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 fiscal year 2016, Bard paid the
Company $121 million towards the settlement of 11,000 of these
claims. In May 2017, the agreement with Bard was amended to
extend the terms to apply to up to an additional 5,000 claims. 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, 2017, the Company has
reached agreements to settle approximately 12,300 of these
claims. The Company’s accrued expenses for this matter are
included within accrued certain litigation charges in other accrued
expenses and other 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.
Following consolidation of the cases, Ethicon dismissed 6 of the
asserted patents, leaving a single asserted patent. In addition to
claims of non-infringement, the Company asserts an affirmative

MEDTRONIC PLC 2017 Form 10-Kdefense of invalidity. The case is currently in the discovery stage.
The Company has not recognized 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 is unable to 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 District Court dismissed
the case without prejudice, and Kokocinski subsequently filed an
amended complaint. On March 30, 2015, the District 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 District Court denied
Kokocinski’s request for reconsideration. Kokocinski appealed the
District Court’s decision to the U.S. Court of Appeals for the Eighth
Circuit. On March 1, 2017, the Eighth Circuit Court of Appeals
affirmed the lower Court’s dismissal of the case with prejudice, and
on April 11, 2017, the Eighth Circuit rejected Kokocinski’s request
for reconsideration.

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 and engaged in a
scheme to defraud 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 District Court granted defendants’ motion for summary
judgment in the consolidated matters. Plaintiffs appealed the
dismissal to the U.S. Court of Appeals for the Eighth Circuit,
and in December of 2016 the Eighth Circuit Court reversed and
remanded the case to the District Court for further proceedings.

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
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

Part II
Item 8 Notes to Consolidated Financial Statements

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.

HEARTWARE

On January 22, 2016, the St. Paul Teachers’ Retirement Fund
Association filed a putative class action complaint (the “Complaint”)
in the United States District Court for the Southern District of
New York against HeartWare on behalf of all persons and entities
who purchased or otherwise acquired shares of HeartWare from
June 10, 2014 through January 11, 2016 (the “Class Period”). The
Complaint was amended on June 29, 2016 and claims HeartWare
and one of its executives violated Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934 by making false and misleading
statements about, among other things, HeartWare’s response
to a June 2014 U.S. FDA warning letter, the development of the
Miniaturized Ventricular Assist Device (MVAD) System and the
proposed acquisition of Valtech Cardio Ltd. The Complaint seeks
to recover damages on behalf of all purchasers or acquirers of
HeartWare’s stock during the Class Period. In August of 2016 the
Company acquired HeartWare.

The Company has not recognized an expense related to damages
in connection with the shareholder related matters, because any
potential loss is not currently probable or reasonably estimable
under U.S. GAAP. Additionally, the Company is unable to reasonably
estimate the range of loss, if any, that may result from these
matters.

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

101

MEDTRONIC PLC 2017 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

Maine Department of Environmental Protection (MDEP). MDEP
served a compliance order on Mallinckrodt LLC and U.S. Surgical
Corporation, subsidiaries of Covidien, in December 2008, which
included a directive to remove a significant volume of soils at the
site. After a hearing on the compliance order before the Maine
Board of Environmental Protection (Maine Board) to challenge
the terms of the compliance order, 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.

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 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 calendar
year 2017.

The Company’s accrued expenses for environmental proceedings
are included within accrued certain litigation charges in other
accrued expenses and other 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. In the third quarter of fiscal year 2017, the Company
accrued expenses in connection with these matters, which are

102

included within accrued certain litigation charges in other accrued
expenses and other liabilities on the consolidated balance sheets as
discussed above.

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 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 recognized 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 is unable to reasonably
estimate the range of loss, if any, that may result from this matter.

Income Taxes

In March 2009, the IRS issued its audit report on Medtronic, Inc. for
fiscal years 2005 and 2006. Medtronic, Inc. reached agreement
with the IRS on some, but not all matters related to these fiscal
years. 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. 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. During November 2016,
Medtronic and the IRS entered into a Stipulation of Settled Issues
with the Tax Court which resolved the one-time repatriation holiday
as an outstanding issue unless, either party decided to appeal the
Tax Court Opinion and a final decision is inconsistent with the U.S.
Tax Court Opinion. The U.S. Tax Court entered their final decision
on January 25, 2017. On April 21, 2017, the IRS filed their Notice of
Appeal to the U.S. Court of Appeals for the 8th Circuit regarding the
Tax Court Opinion. A hearing date for the Appeal has not been set.

MEDTRONIC PLC 2017 Form 10-KIn 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. During the first quarter of fiscal year 2017, an expected
settlement was reached with the IRS for all outstanding issues
for fiscal years 2007 and 2008 except for the allocation of income
between Medtronic, Inc. and its wholly-owned subsidiary operating
in Puerto Rico for the businesses that are the subject of the U.S.
Tax Court Case for fiscal years 2005 and 2006.

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. During the first quarter of fiscal year 2017, an
expected settlement was reached with the IRS for all outstanding
issues for fiscal years 2009, 2010, and 2011 except for the
allocation of income between Medtronic, Inc. and its wholly-owned
subsidiary operating in Puerto Rico for the businesses that are
the subject of the U.S. Tax Court Case for fiscal years 2005 and
2006. During the fourth quarter of fiscal year 2017, an expected
settlement was reached with the IRS associated with the tax
effects of the Company’s acquisition of PEAK Surgical, Inc. and
Salient Surgical Technologies, Inc. However, 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.

The IRS 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 appealed certain of the tax adjustments
proposed by the IRS and had resolved all but one of the matters
associated with the proposed tax adjustments. The IRS 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
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 disagreed
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 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 this intercompany debt issue 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

Part II
Item 8 Notes to Consolidated Financial Statements

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.

See Note 15 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 Ltd. (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 the Company 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 the Company’s liability to Tyco
International and TE Connectivity, nor in the receivable that the
Company 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.

103

MEDTRONIC PLC 2017 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

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 for fiscal years 1997 through
2007 were finalized during May 2016. However, the Tax Sharing
Agreement remains in place with respect to income tax liabilities
that are not the subject of such resolution.

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 recognized 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 is unable to 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 is unable to
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.

Note 21 Quarterly Financial Data (unaudited)

(in millions, except per share data)

Net sales

Gross profit

Net income

Net income attributable to Medtronic

Basic earnings per share

Diluted earnings per share

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Fiscal Year

2017

2016

2017

2016

2017

2016

2017

2016

2017

2016

2017

2016

7,166

7,345

7,283

7,916

29,710

7,274

7,058

6,934

7,567

28,833

4,905

5,019

5,015

5,480

20,419

4,818

4,876

4,793

5,204

19,691

929

820

929

820

0.67

0.58

0.66

0.57

1,111

520

1,115

520

0.81

0.37

0.80

0.36

820

1,095

821

1,095

0.60

0.78

0.59

0.77

1,164

4,024

1,104

3,538

1,163

4,028

1,104

3,538

0.85

0.79

0.84

0.78

2.92

2.51

2.89

2.48

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.

104

MEDTRONIC PLC 2017 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

Note 22 Segment and Geographic Information

The Company’s management evaluates performance and
allocates resources based on income before interest expense,
net, the provision for income taxes and amortization of intangible
assets, not including centralized distribution costs and corporate
charges, as presented in the table below. The accounting policies
of the reportable segments are the same as those described in
Note 1. The financial information that is regularly reviewed by the
Company’s chief operating decision maker to assess performance
and allocate resources changed during fiscal year 2017. As a result,
the Company has revised the disclosure for prior periods to align
with current presentation.

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 divisions.

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, patient care, renal care, and
airway and ventilation. Further, the regulatory approval process for
the Minimally Invasive Therapies Group is similar across all divisions.

In the first quarter of fiscal year 2017, the Company realigned the
divisions within the Restorative Therapies Group. The Company’s
Restorative Therapies Group consists of four divisions: Spine,
Brain Therapies, Specialty Therapies, and Pain Therapies. 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 divisions.

The primary products sold by the Company’s Diabetes Group
include those for diabetes management, and the regulatory approval
process for the Diabetes Group is similar across all divisions.

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. Segment
disclosures are on a performance basis consistent with internal
management reporting. Certain items are at corporate and centralized
and are not allocated to the segments. Net sales and earnings before
other adjustments by reportable segment are as follows:

(in millions)

Cardiac and Vascular Group

Minimally Invasive Therapies Group

Restorative Therapies Group

Diabetes Group

tOtaL

2017

Fiscal Year

2016

10,498

10,196

9,919

7,366

1,927
29,710

9,563

7,210

1,864
28,833

2015

9,361

2,387

6,751

1,762
20,261

105

MEDTRONIC PLC 2017 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

(in millions)

Cardiac and Vascular Group

Minimally Invasive Therapies Group

Restorative Therapies Group

Diabetes Group

Reportable segments' EBITA before other adjustments(1)

Impact of inventory step-up

Impact of product technology upgrade commitment

Special charge (gain), net
Restructuring charges, net(2)

Certain litigation charges
Acquisition-related items(2)

Amortization of intangible assets

Centralized distribution costs

Interest expense, net

Corporate

INCOME BEFORE PROVISION FOR INCOME TAXES

2017

4,134

3,434

2,868

690

Fiscal Year

2016

3,986

3,373

2,671

667

11,126

10,697

(38)

—

(100)

(373)

(300)

(230)

(1,980)

(1,543)

(728)

(1,232)
4,602

(226)

—

(70)

(299)

(26)

(283)

(1,931)

(1,177)

(955)

(1,394)
4,336

2015

3,836

775

2,445

663

7,719

(623)

(74)

(252)

(42)

(550)

(733)

(794)

(280)

(923)
3,486

(1) Represents earnings by segment before interest expense, net, amortization of intangible assets, corporate charges, and centralized distribution costs.
(2) Restructuring charges, net and acquisition-related items within this table include the impact of amounts recognized 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(1)

Restorative Therapies Group

Diabetes Group

Total assets of reportable segments

Corporate

tOtaL aSSEtS

april 28, 2017

april 29, 2016

15,192

13,563

49,249

15,441

2,641

82,523

17,293
99,816

52,227

14,564

2,592

82,946

16,698
99,644

(1) Assets of $6.3 billion classified as held for sale were included within Minimally Invasive Therapies Group at April 28, 2017.
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

Net sales to external customers

Property, plant, and equipment, net

2017

2016

2015

april 28, 2017

april 29, 2016

17,939

17,578

12,125

3,270

3,728

6,739

3,443

1,589
29,710

6,700

3,060

1,495
28,833

5,064

2,059

1,013
20,261

709

192

190
4,361

708

220

185
4,841

(1) The U.S., which is included in the Americas, had net sales to external customers of $16.7 billion, $16.4 billion, and $11.3 billion in fiscal years 2017, 2016,
and 2015, respectively. Property, plant, and equipment, net includes $2.5 billion and $3.3 billion in the U.S. in fiscal years 2017 and 2016, 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 $171 million and $169 million in Ireland in fiscal years 2017 and 2016, respectively.

No single customer represented over 10 percent of the Company’s consolidated net sales in fiscal years 2017, 2016, or 2015.

106

MEDTRONIC PLC 2017 Form 10-KNote 23 Guarantor Financial Information

On January 26, 2015, Medtronic plc and Medtronic Global Holdings
S.C.A. (Medtronic Luxco), a wholly-owned subsidiary guarantor,
each provided a full and unconditional guarantee of the obligations
of Medtronic, Inc. under the Medtronic 2015 Senior Notes
(Medtronic 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. The guarantees of the CIFSA Senior
Notes were in addition to the guarantees of the CIFSA Senior
Notes by acquired Covidien holding companies Covidien Ltd.
(formerly known as Covidien plc) and Covidien Group Holdings Ltd.
(formerly known as Covidien Ltd.), both of which remain wholly-
owned guarantors of the CIFSA Senior Notes.

Medtronic Luxco issued two tranches of Senior Notes (Medtronic
Luxco Senior Notes) in March 2017. Effective March 28, 2017,
Medtronic plc and Medtronic, Inc. each provided a full and
unconditional guarantee of the obligations of Medtronic Luxco
under the Medtronic Luxco Senior Notes.

A summary of the guarantees is as follows:
Guarantees of Medtronic Senior Notes

■■

Parent Company Guarantor - Medtronic plc

Subsidiary Issuer - Medtronic, Inc.

Subsidiary Guarantor - Medtronic Luxco

Guarantees of Medtronic Luxco Senior Notes

■■

Parent Company Guarantor - Medtronic plc

Subsidiary Issuer - Medtronic Luxco

Subsidiary Guarantor - Medtronic, Inc.

Guarantees of CIFSA Senior Notes

■■

Parent Company Guarantor - Medtronic plc

Subsidiary Issuer - CIFSA

Subsidiary Guarantors - Medtronic Luxco, Covidien Ltd., and
Covidien Group Holdings Ltd. (CIFSA Subsidiary Guarantors)

The following 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 28, 2017,
April 29, 2016, and April 24, 2015, and condensed consolidating
balance sheets at April 28, 2017 and April 29, 2016. 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.,
CIFSA, and CIFSA Subsidiary Guarantors, on a stand-alone basis, is
presented using the equity method of accounting for subsidiaries.

During fiscal year 2017, 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.

Part II
Item 8 Notes to Consolidated Financial Statements

The Company made revisions to its consolidating statements of
comprehensive income of the guarantees of the Medtronic Senior
Notes and CIFSA Senior notes as previously presented in Note 19
in the Company’s Annual Report on 10-K for fiscal year 2016 due
to an incorrect presentation of the equity in net (income) loss of
subsidiaries balances for the fiscal year ended April 29, 2016. In
the consolidating statements of comprehensive income of the
guarantees of the Medtronic Senior Notes, the $7.1 billion revision
resulted in additional income reported in the equity in net (income)
loss of subsidiaries line item in the Medtronic, Inc. column. In
the consolidating statements of comprehensive income of the
guarantees of the CIFSA Senior Notes, the $7.1 billion revision
resulted in reduced income reported in the equity in net (income)
loss of subsidiaries line item in the CIFSA column. There is no
impact to the consolidated financial statements of Medtronic
plc as previously filed in the 2016 Annual Report on Form 10-K or
Quarterly Reports on Form 10-Q.

The Company made revisions to its condensed consolidating
balance sheets of the guarantees of the Medtronic Senior Notes
and CIFSA Senior Notes as previously presented in Note 19 in the
Company’s Annual Report on Form 10-K for fiscal year 2016 primarily
due to an income statement error recognized in the second quarter
of fiscal year 2016, resulting in an incorrect presentation of the
investment in subsidiaries balances. In the condensed consolidating
balance sheet of the guarantees of the Medtronic Senior Notes, the
$5.1 billion revision increased the line items investment in subsidiaries
and total equity in the Medtronic, Inc. column. In the condensed
consolidating balance sheet of the guarantees of the CIFSA Senior
Notes, the $5.1 billion revision decreased the line items investment
in subsidiaries and total equity in the CIFSA column. There is no
impact to the consolidated financial statements of Medtronic plc as
previously filed in the 2016 Annual Report on Form 10-K or Quarterly
Reports on Form 10-Q.

The Company made revisions to the condensed consolidating
balance sheets of the guarantees of the Medtronic Senior Notes
and CIFSA Notes as previously presented in Note 19 in the
Company’s Annual Report on Form 10-K for fiscal year 2016 due
to an incorrect presentation of intercompany capital contributions.
The $20.5 billion revision decreased the investment in subsidiaries
and intercompany payable balances in the Medtronic plc column
and decreased the investment in subsidiaries and total equity
balances in the Medtronic Luxco and CIFSA Subsidiary Guarantors
column in the condensed consolidating balance sheets of the
guarantees of the Medtronic Senior Notes and CIFSA Senior
Notes, respectively, decreased the intercompany receivable and
total equity balances in Medtronic, Inc. column in the condensed
consolidating balance sheets of the guarantees of the Medtronic
Senior Notes, and decreased the intercompany receivable and total
equity balances in the Subsidiary Non-Guarantors column. There
is no impact to the consolidated financial statements of Medtronic
plc as previously filed in the 2016 Annual Report on Form 10-K or
Quarterly Reports on Form 10-Q.

107

MEDTRONIC PLC 2017 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

Consolidating Statement of Comprehensive Income

Fiscal Year Ended April 28, 2017
Medtronic Senior Notes and Medtronic Luxco Senior Notes

(in millions)

Net sales

Costs and expenses:

Cost of products sold

Research and development expense

Selling, general, and administrative expense

Special charge (gain), net

Restructuring charges, net

Certain litigation charges

Acquisition-related items

Amortization of intangible assets

Other expense (income), net

Operating (loss) profit

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

Net loss attributable to noncontrolling interests
Net income attributable to Medtronic

Other comprehensive (loss) income, net of tax

Other comprehensive loss attributable to
non-controlling interests

TOTAL COMPREHENSIVE INCOME (LOSS)
ATTRIBUTABLE TO MEDTRONIC

Medtronic
plc

Medtronic,
Inc.

Medtronic
Luxco

Subsidiary
Non-
guarantors

Consolidating
Adjustments

Total

— $

1,296 $

— $

29,708 $

(1,294) $

29,710

—

(30)

—

113

(4,163)

4,020

(8)

4,028

—

4,028

(745)

932

636

1,163

100

114

—

133

(2,954)

1,161

(250)

1,652

1,402

(2,484)

2,243

(1)

2,244

—

2,244

111

—

(649)

(587)

(3,576)

4,163

—

4,163

—

4,163

(745)

9,676

1,557

8,536

—

249

300

1,969

3,158

4,176

(1,065)

865

(200)

—

4,376

587

3,789

3,793

(928)

(1,317)

—

1,598

(1,598)

—

10,223

(10,200)

—

(10,200)

—

(10,200)

1,563

9,291

2,193

9,711

100

363

300

220

1,980

222

5,330

(366)

1,094

728

—

4,602

578

4,024

4,028

(744)

—

3,283 $

2,355 $

3,418 $

2,864 $

(8,637) $

3,283

108

MEDTRONIC PLC 2017 Form 10-KConsolidating Statement of Comprehensive Income

Part II
Item 8 Notes to Consolidated Financial Statements

Fiscal Year Ended April 29, 2016
Medtronic Senior Notes

(in millions)

Net sales

Costs and expenses:

Cost of products sold

Research and development expense

Selling, general, and administrative expense

Special charge (gain), net

Restructuring charges, net

Certain litigation charges

Acquisition-related items

Amortization of intangible assets

Other expense (income), net

Operating (loss) profit

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

Medtronic
plc

Medtronic,
Inc.

Medtronic
Luxco

Subsidiary
Non-
guarantors

Consolidating
Adjustments

Total

— $

1,411 $

— $

28,832 $

(1,410) $

28,833

—

112

(122)

—

(3,676)

3,529

(9)

3,538

991

627

991

—

135

(2,329)

897

(237)

1,906

1,669

(2,447)

1,675

(96)

1,771

—

(706)

(696)

(2,980)

3,676

—

3,676

9,561

1,597

8,468

—

273

148

1,919

2,324

4,516

(448)

405

(43)

—

4,559

903

3,656

(1,410)

—

960

(960)

—

9,103

(9,103)

—

(9,103)

Other comprehensive (loss) income, net of tax

TOTAL COMPREHENSIVE INCOME (LOSS)

(684)
2,854 $

(493)
1,278 $

(684)
2,992 $

(673)
2,983 $

1,850
(7,253) $

9,142

2,224

9,469

290

283

1,931

107

5,291

(431)

1,386

955

—

4,336

798

3,538

(684)
2,854

109

MEDTRONIC PLC 2017 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

Consolidating Statement of Comprehensive Income

Fiscal Year Ended April 24, 2015
Medtronic Senior Notes

(in millions)

Net sales

Costs and expenses:

Cost of products sold

Research and development expense

Selling, general, and administrative expense

Special charge (gain), net

Restructuring charges, net

Certain litigation charges

Acquisition-related items

Amortization of intangible assets

Other expense (income), net

Operating (loss) profit

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

Medtronic
plc

Medtronic,
Inc.

Medtronic
Luxco

Subsidiary
Non-
guarantors

Consolidating
Adjustments

Total

— $

1,261 $

— $

20,261 $

(1,261) $

20,261

—

103

(104)

—

(2,790)

2,686

2,675

895

552

857

100

—

312

(1,618)

145

(56)

762

706

(5,500)

4,939

(44)

4,983

—

(170)

—

(170)

(2,620)

2,790

—

2,790

6,659

1,088

6,046

(138)

230

238

722

1,633

3,741

(387)

131

(256)

—

3,997

844

3,153

(1,245)

—

(16)

227

(227)

—

10,910

(10,926)

—

(10,926)

6,309

1,640

6,904

(38)

237

550

733

118

3,766

(386)

666

280

—

3,486

811

2,675

(587)
2,088

Other comprehensive income (loss), net of tax

TOTAL COMPREHENSIVE INCOME (LOSS)

(587)
2,088 $

(542)
4,441 $

(587)
2,203 $

(232)
2,921 $

1,361
(9,565) $

110

MEDTRONIC PLC 2017 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

Condensed Consolidating Balance Sheet

April 28, 2017
Medtronic Senior Notes and Medtronic Luxco Senior Notes

(in millions)

ASSETS

Current assets:

Medtronic
plc

Medtronic,
Inc.

Medtronic
Luxco

Subsidiary
Non-
guarantors

Consolidating
Adjustments

Cash and cash equivalents

— $

45 $

5 $

4,917 $

— $

Investments

Accounts receivable, net

Inventories, net

Intercompany receivable

Prepaid expenses and other current assets

Current assets held for sale

Total current assets

Property, plant and equipment, net

Goodwill

Other intangible assets, net

Tax assets

Investment in subsidiaries

Intercompany loans receivable

Other assets

Noncurrent assets held for sale

TOTAL ASSETS

LIABILITIES AND EQUITY

Current liabilities:

Current debt obligations

Accounts payable

Intercompany payable

Accrued compensation

Accrued income taxes

Other accrued expenses

Current liabilities held for sale

Total current liabilities

Long-term debt

Accrued compensation and retirement benefits

Accrued income taxes

Intercompany loans payable

Deferred tax liabilities

Other liabilities

Noncurrent liabilities held for sale

Total liabilities

Shareholders’ equity

Noncontrolling interests

Total equity

TOTAL LIABILITIES AND EQUITY

—

(178)

(12,681)

—

(12,859)

—

(180,382)

(64,050)

—

(257,291) $

— $

—

(12,681)

—

(12,681)

—

55,833

3,000

—

155

—

227

—

427

1,311

—

727

71,931

12,162

434

—

52,618

16,114

—

8,741

5,591

3,361

12,618

1,628

371

37,227

3,050

38,515

23,387

782

—

32,774

798

—
58,906 $

—
87,012 $

—
68,737 $

5,919
142,452 $

— $

5,000 $

901 $

1,619 $

—

8,568

—

8,612

50,294

—

304

12,669

734

—

352

—

19,059

21,782

1,120

1,658

13,151

—

153

—

56,923

30,089

—

905

1,842

—

1,427

—

1,117

620

2,086

6,903

2,297

521

737

17,160

25,171

(64,050)

—

19,907

48,830

—

2,978

1,362

720

40,689

101,641

122

—

(76,731)

(180,560)

—

50,294
58,906 $

30,089
87,012 $

48,830
68,737 $

101,763
142,452 $

(180,560)
(257,291) $

Total

4,967

8,741

5,591

3,338

—

1,865

371

24,873

4,361

38,515

23,407

1,509

—

1,232

5,919
99,816

7,520

1,731

—

1,860

633

2,442

14,220

25,921

1,641

2,405

—

2,978

1,515

720

49,400

50,294

122

50,416
99,816

111

MEDTRONIC PLC 2017 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

Condensed Consolidating Balance Sheet

April 29, 2016
Medtronic Senior Notes

(in millions)

ASSETS

Current assets:

Medtronic
plc

Medtronic,
Inc.

Medtronic
Luxco

Subsidiary
Non-
guarantors

Consolidating
Adjustments

Cash and cash equivalents

— $

55 $

— $

2,821 $

— $

—

(200)

(304,049)

—

(304,249)

—

(171,209)

(40,227)

—

(515,685) $

— $

—

(304,049)

—

403

427

—

52,608

3,000

—

162

141,368

271

141,856

1,139

—

690

68,903

8,884

—

49,698

10,203

9,758

5,562

3,511

162,278

1,636

185,566

3,702

41,500

26,868

693

—

18,140

—
56,035 $

506
222,009 $

—
59,901 $

915
277,384 $

— $

493 $

1,421

152,362

1,064

555

1,941

— $

—

3,918

—

500 $

288

151,687

616

—

243

153,334

26,646

1,258

1,422

10,128

—

202

—

14,297

—

157,836

(304,049)

3,463

501

1,471

11,884

3,729

1,714

—

(40,227)

—

3,972

192,990

14,297

180,598

(344,276)

52,063
56,035 $

29,019
222,009 $

45,604
59,901 $

96,786
277,384 $

(171,409)
(515,685) $

Investments

Accounts receivable, net

Inventories, net

Intercompany receivable

Prepaid expenses and other current assets

Total current assets

Property, plant and equipment, net

Goodwill

Other intangible assets, net

Tax assets

Investment in subsidiaries

Intercompany loans receivable

Other assets

TOTAL ASSETS

LIABILITIES AND EQUITY

Current liabilities:

Current debt obligations

Accounts payable

Intercompany payable

Accrued compensation

Accrued income taxes

Other accrued expenses
Total current liabilities

Long-term debt

Accrued compensation and retirement benefits

Accrued income taxes

Intercompany loans payable

Deferred tax liabilities

Other liabilities

Total liabilities

Total equity

TOTAL LIABILITIES AND EQUITY

112

Total

2,876

9,758

5,562

3,473

—

1,931

23,600

4,841

41,500

26,899

1,383

—

1,421
99,644

993

1,709

—

1,712

566

2,185

7,165

30,109

1,759

2,903

—

3,729

1,916

47,581

52,063
99,644

MEDTRONIC PLC 2017 Form 10-KItem 8 Notes to Consolidated Financial

Statements

Part II
Item 8 Notes to Consolidated Financial Statements

Condensed Consolidating Statement of Cash Flows

Fiscal Year Ended April 28, 2017
Medtronic Senior Notes and Medtronic Luxco Senior Notes

(in millions)

Operating Activities:

Medtronic
plc

Medtronic,
Inc.

Medtronic
Luxco

Subsidiary
Non-
guarantors

Consolidating
adjustments

total

Net cash provided by operating activities

842 $

1,902 $

302 $

4,721 $

(887) $

6,880

(940)

(369)

—

210

(3,278)

(248)

—

(5,911)

—

(384)

(885)

(4,533)

5,308

(4,624)

—

162

(162)

13,813

248

—

(1,324)

(1,254)

(4,371)

5,356

—

(4,625)

(5,911)

(5,096)

14,061

(1,571)

Investing Activities:

Acquisitions, net of cash acquired

Additions to property, plant, and equipment

Purchases of investments

Sales and maturities of investments

Net (increase) decrease in intercompany loans receivable

Capital contributions paid

Other investing activities, net

Net cash (used in) provided by investing activities

Financing Activities:

Acquisition-related contingent consideration

Change in current debt obligations, 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

Capital contributions received

Other financing activities

—

(2,376)

428

(3,544)

4,650

—

150

(500)

—

901

—

1,850

—

3,023

2,863

—

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

(842)

2,713

5,614

—

—
— $

—

(10)

55
45 $

—

—
5 $

(69)

(2)

140

(363)

—

3,277

(887)

248

2,406

2,096

2,821
4,917 $

—

(13,813)

887

(248)

—

(69)

906

(2)

2,140

(863)

(2,376)

428

(3,544)

—

(13,174)

(3,283)

—

—
— $

2,091

2,876
4,967

113

MEDTRONIC PLC 2017 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

Condensed Consolidating Statement of Cash Flows

Fiscal Year Ended April 29, 2016
Medtronic Senior Notes

(in millions)

Operating Activities:

Medtronic
plc

Medtronic,
Inc.

Medtronic
Luxco

Subsidiary
Non-
guarantors

Consolidating
adjustments

total

Net cash provided by 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 investments

Sales and maturities of investments

Net (increase) decrease in intercompany loans receivable

Capital contributions paid

Other investing activities, net

Net cash (used in) provided by investing activities

Financing Activities:

Acquisition-related contingent consideration

Change in current debt obligations, net

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

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

Payments on long-term debt

Dividends to shareholders

Issuance of ordinary shares

Repurchase of ordinary shares

Net intercompany loan borrowings (repayments)

Intercompany dividends paid

Capital contributions received

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

—

(2,139)

491

(2,830)

3,918

—

(560)

—

(263)

263

(526)

(334)

—

(2,368)

(11)

—

(203)

(4,959)

—

(3,239)

(5,162)

—

(2,988)

—

(91)

—

4,900

—

1,821

—

(1,016)

1,071

—

(139)

139

—

4,296

—

4,296

—

(170)

170

— $

55 $

— $

(687)

(712)

(5,406)

9,924

(7,921)

(4,900)

(14)

(9,716)

(22)

—

(2,144)

—

2,369

(812)

4,970

4,450

113

(518)

3,339
2,821 $

—

10,492

9,870

—

(1,213)

(1,046)

(5,406)

9,924

—

(14)

20,362

2,245

—

(10,492)

812

(9,870)

—

(22)

(139)

139

(5,132)

(2,139)

491

(2,830)

—

(19,550)

(9,543)

—

113

(1,967)

—
— $

4,843
2,876

114

MEDTRONIC PLC 2017 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

Condensed Consolidating Statement of Cash Flows

Fiscal Year Ended April 24, 2015
Medtronic Senior Notes

(in millions)

Operating Activities:

Medtronic
plc

Medtronic,
Inc.

Medtronic
Luxco

Subsidiary
Non-
guarantors

Consolidating
adjustments

total

Net cash provided by operating activities

26 $

1,479 $

170 $

3,640 $

(413) $

4,902

Investing Activities:

Acquisitions, net of cash acquired

Additions to property, plant, and equipment

Purchases of investments

Sales and maturities of investments

Net (increase) decrease in intercompany loans receivable

Other investing activities, net

Net cash (used in) provided by investing activities

Financing Activities:

Acquisition-related contingent consideration

Change in current debt obligations, 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 (used in) provided by financing activities

Effect of exchange rate changes on cash and cash equivalents
Net change in cash and cash equivalents

(9,700)

—

(65)

(187)

—

(16,996)

—

(9,700)

(17,248)

—

(435)

172

(300)

10,500

—

9,937

—

263

—

(150)

150

19,942

(1,268)

(902)

477

(1,620)

(53)

—

16,576

—

807

Cash and cash equivalents at beginning of period
CaSH aND CaSH EQUIVaLENtS at END OF PErIOD

—
263 $

264
1,071 $

—

170

—
170 $

(5,119)

(384)

(7,582)

5,890

— (14,884)

—

16,943

—

(571)

(7,582)

5,890

—

(7,053)

16,943

(17,058)

(85)

(1)

—

6,496

(413)

(31)

5,966

(353)

2,200

1,139
3,339 $

—

(16,943)

413

—

(85)

(1)

(150)

150

19,942

(1,268)

(1,337)

649

(1,920)

—

(31)

(16,530)

15,949

—

—
— $

(353)

3,440

1,403
4,843

115

MEDTRONIC PLC 2017 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

Consolidating Statement of Comprehensive Income

Fiscal Year Ended April 28, 2017
CIFSA Senior Notes

(in millions)

Net sales

Costs and expenses:

Cost of products sold

Research and development expense

Selling, general, and administrative expense

Special charge (gain), net

Restructuring charges, net

Certain litigation charges

Acquisition-related items

Amortization of intangible assets

Other expense (income), net

Operating (loss) profit

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

Net loss attributable to noncontrolling interests
Net income attributable to Medtronic

Other comprehensive (loss) income, net of tax

Other comprehensive loss attributable to non-controlling
interests

TOTAL COMPREHENSIVE INCOME (LOSS)
attrIBUtaBLE tO MEDtrONIC

Medtronic
plc

CIFSa

CIFSa
Subsidiary
Guarantors

Subsidiary
Non-
guarantors

Consolidating
adjustments

total

— $

29,710 $

— $ 29,710

—

(30)

—

113

(4,163)

4,020

(8)

4,028

—

4,028

(745)

—

(2)

(82)

104

(2,329)

2,305

—

2,305

—

2,305

(84)

—

(6)

(656)

(594)

(3,575)

4,163

—

4,163

—

4,163

(745)

9,291

2,193

9,696

100

363

300

220

1,980

199

5,368

(433)

1,620

1,187

—

4,181

586

3,595

3,599

(744)

—

805

(805)

—

10,067

(10,067)

—

(10,067)

—

(10,067)

1,574

9,291

2,193

9,711

100

363

300

220

1,980

222

5,330

(366)

1,094

728

—

4,602

578

4,024

4,028

(744)

—

3,283 $

2,221

3,418 $

2,854 $

(8,493) $

3,283

116

MEDTRONIC PLC 2017 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

Consolidating Statement of Comprehensive Income

Fiscal Year Ended April 29, 2016
CIFSA Senior Notes

Medtronic
plc

CIFSa

CIFSa
Subsidiary
Guarantors

Subsidiary
Non-
guarantors

Consolidating
adjustments

total

— $

28,833 $

— $ 28,833

(in millions)

Net sales

Costs and expenses:

Cost of products sold

Research and development expense

Selling, general, and administrative expense

Special charge (gain), net

Restructuring charges, net

Certain litigation charges

Acquisition-related items

Amortization of intangible assets

Other expense (income), net

Operating (loss) profit

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

—

112

(122)

—

(3,676)

3,529

(9)

3,538

Other comprehensive (loss) income, net of tax

TOTAL COMPREHENSIVE INCOME (LOSS)

(684)
2,854 $

—

(2)

(434)

138

(296)

(2,043)

2,337

—

2,337

(102)
2,235

—

(18)

(710)

(700)

(2,961)

3,676

—

3,676

9,142

2,224

9,455

290

283

1,931

5,400

(464)

2,390

1,926

—

3,474

807

2,667

—

1,177

(1,177)

—

8,680

(8,680)

—

(8,680)

9,142

2,224

9,469

290

283

1,931

107

5,291

(431)

1,386

955

—

4,336

798

3,538

(684)
2,992 $

(684)
1,983 $

1,470
(7,210) $

(684)
2,854

117

MEDTRONIC PLC 2017 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

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 charge (gain), net

Restructuring charges, net

Certain litigation charges

Acquisition-related items

Amortization of intangible assets

Other expense (income), net

Operating (loss) profit

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

Medtronic
plc

CIFSa

CIFSa
Subsidiary
Guarantors

Subsidiary
Non-
guarantors

Consolidating
adjustments

total

— $

20,261 $

— $ 20,261

—

103

(104)

—

(2,790)

2,686

2,675

—

(149)

(120)

1,085

(965)

—

(965)

—

(47)

(170)

—

(170)

(2,667)

2,790

—

2,790

6,309

1,640

6,882

(38)

237

550

733

(11)

3,917

(386)

956

570

—

3,347

800

2,547

—

319

(319)

—

4,372

(4,372)

—

(4,372)

6,309

1,640

6,904

(38)

237

550

733

118

3,766

(386)

666

280

—

3,486

811

2,675

Other comprehensive (loss) income, net of tax

TOTAL COMPREHENSIVE INCOME (LOSS)

(587)
2,088 $

200
(765) $

(587)
2,203 $

(587)
1,960 $

974
(3,398) $

(587)
2,088

118

MEDTRONIC PLC 2017 Form 10-KCondensed Consolidating Balance Sheet

Part II
Item 8 Notes to Consolidated Financial Statements

April 28, 2017
CIFSA Senior Notes

(in millions)

ASSETS

Current assets:

Cash and cash equivalents

Investments

Accounts receivable, net

Inventories, net

Intercompany receivable

Prepaid expenses and other current assets

Current assets held for sale

Total current assets

Property, plant and equipment, net

Goodwill

Other intangible assets, net

Tax assets

Investment in subsidiaries

Intercompany loans receivable

Other assets

Noncurrent assets held for sale

TOTAL ASSETS

LIABILITIES AND EQUITY

Current liabilities:

Current debt obligations

Accounts payable

Intercompany payable

Accrued compensation

Accrued income taxes

Other accrued expenses

Current liabilities held for sale

Total current liabilities

Long-term debt

Accrued compensation and retirement benefits

Accrued income taxes

Intercompany loans payable

Deferred tax liabilities

Other liabilities

Noncurrent liabilities held for sale

Total liabilities

Shareholders’ equity

Noncontrolling interests

Total equity

TOTAL LIABILITIES AND EQUITY

Medtronic
plc

CIFSa

CIFSa
Subsidiary
Guarantors

Subsidiary
Non-
guarantors

Consolidating
adjustments

total

— $

5 $

4,929 $

— $

4,967

—

55,833

3,000

—

31,033

2,978

—

51,294

17,383

—

8,741

5,591

3,338

1,855

371

24,837

4,361

38,515

23,407

1,509

—

17,260

1,232

—

(135)

—

8,741

5,591

3,338

—

1,865

371

(135)

24,873

—

(138,160)

(40,621)

4,361

38,515

23,407

1,509

—

1,232

—
58,906 $

—
34,044

—
68,742 $

5,919
117,040 $

—

5,919
(178,916) $ 99,816

— $

1,176

901 $

5,443 $

— $

7,520

—

1,199

2,133

—

909

1,842

—

8,568

1,369

17,161

—

8,612

50,294

—

4,701

29,343

—

19,912

48,830

—

1,731

123

1,851

620

2,411

12,213

21,946

1,641

2,395

13,523

2,978

1,515

720

56,931

59,987

122

—

(135)

—

(135)

—

(40,621)

—

(40,756)

(138,160)

—

1,731

—

1,860

633

2,442

14,220

25,921

1,641

2,405

—

2,978

1,515

720

49,400

50,294

122

50,294
58,906 $

29,343
34,044

48,830
68,742 $

60,109
117,040 $

(138,160)
50,416
(178,916) $ 99,816

119

MEDTRONIC PLC 2017 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

Condensed Consolidating Balance Sheet

April 29, 2016
CIFSA Senior Notes

(in millions)

ASSETS

Current assets:

Cash and cash equivalents

Investments

Accounts receivable, net

Inventories, net

Intercompany receivable

Prepaid expenses and other current assets

Total current assets

Property, plant and equipment, net

Goodwill

Other intangible assets, net

Tax assets

Investment in subsidiaries

Intercompany loans receivable

Other assets

tOtaL aSSEtS

LIABILITIES AND EQUITY

Current liabilities:

Current debt obligations

Accounts payable

Intercompany payable

Accrued compensation

Accrued income taxes

Other accrued expenses
Total current liabilities

Long-term debt

Accrued compensation and retirement benefits

Accrued income taxes

Intercompany loans payable

Deferred tax liabilities

Other liabilities

Total liabilities

Total equity

tOtaL LIaBILItIES aND EQUItY

120

Medtronic
plc

CIFSa

CIFSa
Subsidiary
Guarantors

Subsidiary
Non-
guarantors

Consolidating
adjustments

total

— $

208

— $

2,668 $

— $

2,876

—

403

427

—

208

—

52,608

3,000

—
56,035 $

36,476

8,253

—
44,937

—

48,375

11,465

9,758

5,562

3,473

—

1,907

23,368

4,840

41,500

26,899

1,383

—

27,724

—

(464)

—

9,758

5,562

3,473

—

1,931

(464)

23,600

—

(137,459)

(50,442)

4,841

41,500

26,899

1,383

—

—
59,902 $

1,421
127,135 $

—

1,421
(188,365) $ 99,644

— $

993 $

— $

993

—

3,382

—

3,918

14,689

14,298

—

3,972

52,063
56,035 $

—

18,095

26,842
44,937

—

14,298

1,709

464

1,680

555

2,160

7,561

26,727

1,759

2,893

17,537

3,729

1,916

62,122

—

(464)

—

(464)

—

(50,442)

—

1,709

—

1,712

566

2,185

7,165

30,109

1,759

2,903

—

3,729

1,916

(50,906)

47,581

45,604
59,902 $

65,013
127,135 $

(137,459)
52,063
(188,365) $ 99,644

MEDTRONIC PLC 2017 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

Condensed Consolidating Statement of Cash Flows

Fiscal Year Ended April 28, 2017
CIFSA Senior Notes

Medtronic
plc

CIFSa

CIFSa
Subsidiary
Guarantors

Subsidiary
Non-
guarantors

Consolidating
adjustments

total

842 $

1,904

302 $

5,829 $

(1,997) $

6,880

(in millions)

Operating Activities:

Net cash provided by operating activities

Investing Activities:

Acquisitions, net of cash acquired

Additions to property, plant, and equipment

Purchases of investments

Sales and maturities of investments

Net (increase) decrease in intercompany loans receivable

Capital contributions paid

Other investing activities, net

Net cash (used in) provided by investing activities

Financing Activities:

Acquisition-related contingent consideration

Change in current debt obligations, 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 (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

—

(2,376)

428

(3,544)

4,650

—

5,275

(537)

—

4,738

—

(5,911)

—

(1,324)

(1,254)

(4,371)

5,356

3,956

—

(3,320)

537

—

(1,324)

(1,254)

(4,371)

5,356

—

(5,911)

2,385

(2,783)

(1,571)

—

901

—

1,850

—

(69)

(2)

290

(863)

—

(4,016)

(1,997)

537

—

3,320

1,997

(537)

—

(69)

906

(2)

2,140

(863)

(2,376)

428

(3,544)

—

(6,817)

2,863

—

(842)

(6,817)

5,614

(6,018)

4,780

(3,283)

—

—
— $

—

(175)

208
33

—

—
5 $

2,261

2,668
4,929 $

—

—
— $

2,091

2,876
4,967

121

MEDTRONIC PLC 2017 Form 10-KMedtronic
plc

CIFSa

CIFSa
Subsidiary
Guarantors

Subsidiary
Non-
guarantors

Consolidating
adjustments

total

297 $

4,208

604 $

4,114 $

(4,005) $

5,218

Part II
Item 8 Notes to Consolidated Financial Statements

Condensed Consolidating Statement of Cash Flows

Fiscal Year Ended April 29, 2016
CIFSA Senior Notes

(in millions)

Operating Activities:

Net cash provided by operating activities

Investing Activities:

Acquisitions, net of cash acquired

Additions to property, plant, and equipment

Purchases of investments

Sales and maturities of investments

Net (increase) decrease in intercompany loans receivable

Sale of subsidiaries

Capital contributions paid

Other investing activities, net

Net cash (used in) provided by investing activities

Financing Activities:

Acquisition-related contingent consideration

Change in current debt obligations, net

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

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

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

—

(8,193)

—

(720)

—

(8,913)

—

(2,121)

—

(164)

(4,959)

—

(5,070)

—

(139)

139

—

6,306

4,296

—

Net cash (used in) provided by financing activities

(560)

4,185

4,296

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

—

(263)

263

— $

—

(520)

728
208

—

(170)

170

— $

122

(1,266)

(1,046)

(5,406)

9,924

(3,302)

—

(14)

—

11,659

(53)

5,679

—

(1,213)

(1,046)

(5,406)

9,924

—

(14)

(1,110)

17,338

2,245

(22)

—

(3,011)

—

(2,861)

(4,005)

5,679

(4,131)

113

(1,014)

3,682
2,668 $

—

(11,659)

4,005

(5,679)

—

(22)

(139)

139

(5,132)

(2,139)

491

(2,830)

—

(13,333)

(9,543)

—

113

(1,967)

—
— $

4,843
2,876

MEDTRONIC PLC 2017 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

Condensed Consolidating Statement of Cash Flows

Fiscal Year Ended April 24, 2015
CIFSA Senior Notes

Medtronic
plc

CIFSa

CIFSa
Subsidiary
Guarantors

Subsidiary
Non-
guarantors

Consolidating
adjustments

total

26 $

1,238

142 $

4,596 $

(1,100) $

4,902

(in millions)

Operating Activities:

Net cash provided by operating activities

Investing Activities:

Acquisitions, net of cash acquired

Additions to property, plant, and equipment

Purchases of investments

Sales and maturities of investments

Net (increase) decrease in intercompany loans receivable

Capital contributions paid

Other investing activities, net

Net cash (used in) provided by investing activities

Financing Activities:

Acquisition-related contingent consideration

Change in current debt obligations, 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 (used in) provided by financing activities

Effect of exchange rate changes on cash and cash
equivalents
Net change in cash and cash equivalents

(9,700)

—

(9,700)

—

(435)

172

(300)

10,500

—

9,937

—

263

Cash and cash equivalents at beginning of period
CASH AND CASH EQUIVALENTS AT END OF PERIOD

—
263 $

440

—

(59)

(937)

—

(556)

—

(51)

—

(1)

—

(150)

150

—

(5,624)

(570)

(7,582)

5,890

— (14,884)

—

(571)

(7,582)

5,890

—

(10,626)

10,656

—

937

—

(18,423)

11,593

(17,058)

(85)

(1)

—

19,942

(1,217)

(902)

477

(1,620)

(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

—

728

—
728

—

170

—
170 $

(353)

2,279

1,403
3,682 $

—

—
— $

(353)

3,440

1,403
4,843

123

MEDTRONIC PLC 2017 Form 10-KPart II
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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
at April 28, 2017. Our internal control over financial reporting at

April 28, 2017, 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 at April 28, 2017, 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

The Company is deploying an enterprise resource planning (ERP)
software program, SAP, to the Minimally Invasive Therapies Group.
During fiscal year 2017, Medtronic continued the deployment
of this software along with other enterprise systems, which
resulted in a material change to the internal controls over financial
reporting for the Minimally Invasive Therapies Group. The internal
controls were updated to reflect these changes. These system

deployments will continue with projected completion in fiscal year
2020. There have been no other changes in our internal control
over financial reporting (as defined in Rules 13a-15(f) under the
Exchange Act) during the period covered by this Annual Report on
Form 10-K that have materially affected, or are reasonably likely
to materially affect, the Company’s internal control over financial
reporting.

Item 9B Other Information

None.

124

MEDTRONIC PLC 2017 Form 10-KPart III

Part III of this Annual Report on Form 10-K incorporates information by reference from the Company’s 2017 definitive proxy statement,
which will be filed no later than 120 days after April 28, 2017.

Item 10 Directors, Executive Officers, and Corporate Governance

The sections entitled “Proposal 1 — Election of Directors —
Directors and Nominees,” “Corporate Governance — Committees
of the Board and Meetings,” and “Share Ownership Information —
Section 16(a) Beneficial Ownership Reporting Compliance” in
the Company’s Proxy Statement for our 2017 Annual General
Meeting of Shareholders, which will be filed no later than 120 days
after April 28, 2017, are incorporated herein by reference. See also
“Executive Officers of Medtronic” herein.

Medtronic has adopted a written Code of Ethics that applies to
the Company’s Chief Executive Officer, Chief Financial Officer,
Corporate Treasurer, Corporate Controller, and other senior
financial officers performing similar functions who are identified

Item 11 Executive Compensation

The sections entitled “Corporate Governance — Director
Compensation,” “Corporate Governance — Committees of
the Board and Meetings,” “Compensation Discussion and
Analysis,” and “Executive Compensation” in Medtronic’s Proxy
Statement for the Company’s 2017 Annual General Meeting
of Shareholders, which will be filed no later than 120 days after

from time to time by the Chief Executive Officer. The Company
has 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 Medtronic’s 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 the Company’s website promptly following the
date of such amendment or waiver.

April 28, 2017, are incorporated herein by reference. The section
entitled “Compensation Committee Report” in Medtronic’s Proxy
Statement for the Company’s 2017 Annual General Meeting
of Shareholders, which will be filed no later than 120 days after
April 28, 2017, 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 Medtronic’s Proxy Statement for the Company’s
2017 Annual General Meeting of Shareholders, which will be filed no later than 120 days after April 28, 2017, are incorporated herein by reference.

Item 13 Certain Relationships and Related Transactions,

and Director Independence

The sections entitled “Corporate Governance — Director Independence” and “Corporate Governance — Related Party Transactions and
Other Matters” in Medtronic’s Proxy Statement for the Company’s 2017 Annual General Meeting of Shareholders, which will be filed no later
than 120 days after April 28, 2017, are incorporated herein by reference.

Item 14 Principal Accounting Fees and Services

The sections entitled “Corporate Governance — Committees of the Board and Meetings” and “Audit and Non-Audit Fees” in Medtronic’s
Proxy Statement for the Company’s 2017 Annual General Meeting of Shareholders, which will be filed no later than 120 days after April 28,
2017, are incorporated herein by reference.

125

MEDTRONIC PLC 2017 Form 10-KPart IV

Item 15 Exhibits and Financial Statement Schedules

(a) 1. Financial Statement Schedules

Schedule II. Valuation and Qualifying Accounts — years ended April 28, 2017, April 29, 2016, and April 24, 2015.

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

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 3.2 to Medtronic plc’s
Registration Statement on Form S-3, filed on February 6, 2017, File No. 333-215895).
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).
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).

2.1

2.2

2.3

2.4

2.5

3.1

3.2

4.1

4.2

4.3

4.4

4.5

4.6

4.7

126

MEDTRONIC PLC 2017 Form 10-KPart IV
Item 15 Exhibits and Financial Statement Schedules

Exhibit
No.

Description

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

4.21

4.22

4.23

4.24

4.25

4.26

4.27

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).
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 Covidien 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).

127

MEDTRONIC PLC 2017 Form 10-KPart IV
Item 15 Exhibits and Financial Statement Schedules

Exhibit
No.

Description

4.28

4.29

4.30

4.31

10.1

10.2

10.3

10.4

10.5

10.6

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

Form of Senior Indenture by and among Medtronic plc, Medtronic Global Holdings S.C.A., Medtronic, Inc., and the trustee (incorporated by
reference to Exhibit 4.1 to Medtronic plc’s Registration Statement on Form S-3, filed on February 6, 2017, File No. 333-215895).
Form of Junior Indenture by and among Medtronic plc, Medtronic Global Holdings S.C.A., Medtronic, Inc., and the trustee (incorporated by
reference to Exhibit 4.3 to Medtronic plc’s Registration Statement on Form S-3, filed on February 6, 2017, File No. 333-215895).
Senior Indenture, dated as of March 28, 2017, by and among Medtronic plc, Medtronic Global Holdings S.C.A., Medtronic, Inc., and
Wells Fargo Bank, N.A. (incorporated by reference to Exhibit 4.1 to Medtronic plc’s Current Report on Form 8-K, filed on March 28, 2017,
File No. 001-36820).
First Supplemental Indenture, dated as of March 28, 2017, by and among Medtronic plc, Medtronic Global Holdings S.C.A., Medtronic, Inc.,
and Wells Fargo Bank, N.A. (incorporated by reference to Exhibit 4.2 to Medtronic plc’s Current Report on Form 8-K, filed on March 28, 2017,
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).
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).

128

MEDTRONIC PLC 2017 Form 10-KPart IV
Item 15 Exhibits and Financial Statement Schedules

Exhibit
No.

*10.21

*10.22

*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

*10.41

*10.42

*10.43

*10.44

*10.45

*10.46

*10.47

*10.48

Description

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)
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).
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).

129

MEDTRONIC PLC 2017 Form 10-KPart IV
Item 15 Exhibits and Financial Statement Schedules

Exhibit
No.

*10.49

*10.50

*10.51

*10.52

*10.53

*10.54

*10.55

*10.56

*10.57

*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

Description

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).
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).

130

MEDTRONIC PLC 2017 Form 10-KPart IV
Item 15 Exhibits and Financial Statement Schedules

Exhibit
No.

*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

*10.92

*10.93

*10.94

*10.95

*10.96

*10.97

*10.98

*10.99

*10.100

Description

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).
Capital Accumulation Plan Deferral Program (as amended and restated generally effective January 1, 2017) (incorporated by reference
to Exhibit 10.1 to Medtronic plc’s Quarterly Report on Form 10-Q for the quarter ended October 28, 2016, filed on December 5, 2016,
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).
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).

131

MEDTRONIC PLC 2017 Form 10-KPart IV
Item 15 Exhibits and Financial Statement Schedules

Exhibit
No.

*10.101

*10.102

*10.103

*10.104

*10.105

*10.106

*10.107

*10.108

*10.109

Description

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).
Consulting Agreement, dated as of December 15, 2016, by and between Medtronic plc and Gary Ellis (incorporated by reference to Exhibit 10.1
to Medtronic plc’s Quarterly Report on Form 10-Q for the quarter ended January 27, 2017, filed on March 3, 2017, File No. 001-001-36820).
Form of Restricted Stock Award Agreement under Amended and Restated 2013 Stock Award and Incentive Plan.#

12.1

Computation of Ratio of Earnings to Fixed Charges.

31.1

31.2

32.1

32.2

101

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.

The following materials from Medtronic plc’s Annual Report on Form 10-K for the year ended April 28, 2017, 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.
# Filed herewith.

132

MEDTRONIC PLC 2017 Form 10-KMEDTRONIC PLC AND SUBSIDIARIES
SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS

Part IV
Item 15 Exhibits and Financial Statement Schedules

Balance at
Beginning of
Fiscal Year

additions

Charges to
Income

Charges to
Other accounts

Deductions

Other Changes
(Debit) Credit

Balance at End of
Fiscal Year

(in millions)

Allowance for doubtful accounts:

Year ended 4/28/17

Year ended 4/29/16

Year ended 4/24/15

161

144

115

Deferred tax valuation allowance:

Year ended 4/28/17

7,032

101

Year ended 4/29/16

5,607

1,194

Year ended 4/24/15

397

—

34(a)

6(a)

4(a)

5,660(a)

(46)(b)
1(c)
(28)(b)
(4)(c)
(36)(b)
(4)(c)

(524)(d)
(304)(c)
(88)(d)
315(c)
(56)(d)
(434)(c)

155

161

144

$ 6,311

$ 7,032

$ 5,607

(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.

133

MEDTRONIC PLC 2017 Form 10-KPart IV
Signatures

Signatures

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.

Dated: June 27, 2017

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 27, 2017

By:

/s/ OMAR ISHRAK
Omar Ishrak
Chairman and
Chief Executive Officer
(Principal Executive Officer)

/s/ KAREN L. PARKHILL
Karen L. Parkhill
Executive Vice President and
Chief Financial Officer
(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*

*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 27, 2017

By:

/s/ BRADLEY E. LERMAN
Bradley E. Lerman

134

MEDTRONIC PLC 2017 Form 10-K710 Medtronic Parkway
Minneapolis, MN 55432-5604
USA
Tel: (763) 514-4000
Fax: (763) 514-4879