Medtronic Annual Report 2018

FY2018 Annual Report · Medtronic

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ANNUAL
REPORT

Fiscal Year 2018

2018 LETTER TO SHAREHOLDERS

Dear Shareholder,

As outlined in our Mission, Medtronic serves a unique and important purpose in improving the health of millions of people around the
world – using technology to alleviate pain, restore health, and extend life. To fulfill this shared purpose, we must be the industry leader
in technology. Technology to improve lives is where everything begins at Medtronic. It is what has driven our company over the past 69
years, and it continues to be the core strategy of our company today.

Technology to improve lives is also what will drive value for our shareholders going forward. It is in our DNA – and more importantly – we’re
getting even better at it by allocating capital efficiently across our businesses. We are committed to bringing resources to bear across the
technology landscape in a strategic and impactful fashion. This is the most important thing we do, and it is my number one focus. When
we get technology right, everything else follows.

In many ways, fiscal year 2018 was a challenging year – but it was also a rewarding one. Our ability to overcome multiple challenges reflects
the dedication of our more than 86,000 employees around the world, each of whom make a difference to benefit patients and fulfill the
Medtronic Mission.

In FY18, together with our physician partners, our technology and associated therapies improved the lives of more than 71 million people
– more than two people every second. We have a focused approach to further refine our technology leadership to improve the lives of
even more people in the years ahead, while delivering enhanced value to you, our shareholders.

OUR COMMITMENT AS THE TECHNOLOGY LEADER

To lead in technology, Medtronic must lead in all three areas of technology: innovation, invention, and disruption. We balance our
investments across these three areas to drive future growth, protect our businesses, and advance the standard of care. And, we invest
differently depending on where a technology sits in its lifecycle. Our ability to accelerate access to life-saving technologies has an
enormous impact on the lives of patients who need it.
Continuous innovation provides the base. We are committed to staying ahead of our competition by enhancing technology to improve
clinical outcomes and economic value for patients, providers, and payers. This is not about iteration for iteration’s sake – rather, Medtronic
is constantly innovating with a clear goal of generating better outcomes and better value.
Invention requires that we create new therapies and develop new markets—something that Medtronic has been doing for decades, and
something we believe we are better at today than at any time in our past. Examples include the recent success of products such as the
Solitaire™ revascularization therapy to retrieve clots and restore blood flow for patients experiencing acute ischemic stroke, and the
Reveal LINQ™ insertable cardiac monitor, which collects heart rhythm data for physicians to determine underlying conditions that require
treatment.
Medtronic is also focused on disruption of our existing markets. An example of this is our development and introduction of the world’s
smallest pacemaker, the Micra™ transcatheter pacing system, which is delivered directly into the right ventricle of the heart using a
minimally invasive procedure. We are still in the early phases of this journey, and we believe strongly that Micra™ has the potential to
revolutionize the entire pacemaker market – one that was previously viewed as mature.

When we develop new markets or disrupt existing ones, we create significant new growth drivers for the company and dramatically
increase our competitive advantage, while establishing new standards of care for patients. We have an incredibly robust technology
pipeline across all three areas of technology development, the best in our company’s history. We are excited by what we are bringing to
market today, in the near future, and what we continue to invest in for the long-term. We spend more than $2 billion a year on R&D to
invest in the platforms that will sustain our growth into the future and further advance our position as the technology leader in healthcare.

OUR GLOBALIZATION & ECONOMIC VALUE STRATEGIES ACCELERATE GROWTH

When we lead in technology – when we innovate, invent, and disrupt – our other growth strategies, globalization and economic value,
further enhance our growth profile and increase our competitiveness. They create long-term avenues for growth and widen the distance
between us and the competition.

Let’s start with globalization, where our ability to improve access to our technologies in emerging markets has been a strong contributor
to our growth. We grew our emerging market business 13 percent on a comparable, constant currency basis in FY18, and emerging
markets now represent 15 percent of our overall sales. The strength of our performance in emerging markets reflects our diversification,
with multiple geographies and multiple growth drivers contributing. Medtronic is much more sophisticated in our approach to emerging
markets than we were even five years ago, and we are much better at understanding and executing locally in markets around the world.

Another area where we leverage our position as the leader in continuous innovation is through the development of new business
models that focus on the economic value and improved patient outcomes of our technology. These new business models are important
because they align incentives to the specific value we create, both by improving patient outcomes as well as delivering cost efficiencies to
healthcare systems. Importantly, they also drive improved market share and deliver incremental growth.

For our hospital customers, in particular, we provide a line of sight for how their costs are reduced through new business models; it is a
method through which they can realize the full economic value of our technology. These programs, like those that include our TYRX™
infection control products in our Cardiac Rhythm & Heart Failure business, also provide distinct value for patients and payers by reducing
overall costs and improving outcomes for patients meaningfully.

OUR FOCUS ON EXECUTION TO DRIVE CONSISTENT PERFORMANCE

Next, let’s turn to the financials. FY18 revenue of $29.953 billion grew 5 percent on a comparable, constant currency basis. FY18 non-
GAAP diluted earnings per share grew 9 percent on a comparable basis, or 10 percent on a comparable, constant currency basis. The
second half of the year was particularly strong, overcoming several first half challenges – including an IT disruption, multiple hurricanes,
wildfires in Santa Rosa, and supply constraints in Diabetes. We delivered on our revenue and EPS guidance we established at the start of
the year. We also continued to drive margin expansion, reduced debt leverage, and returned $4.3 billion to shareholders in the form of
dividends and share repurchases.

We followed our FY18 full year performance with strong first quarter fiscal year 2019 results, completing three consecutive quarters
of 6.5 percent or greater organic revenue growth. This growth includes expanding our markets and driving share gains across multiple
businesses and geographies. We know how important it is to consistently execute and it is a major focus for the company. Looking ahead,
we feel good about the growth opportunities and our competitive position in our markets. Driving operating margin and free cash flow are
also critically important areas of focus, and we plan to execute consistently here as well.

OUR COMMITMENT TO CREATING LONG-TERM SHAREHOLDER VALUE

The message underlying all our strategies is our commitment to creating shareholder value. We are doing this by leading in technology
and allocating capital efficiently across our businesses. We are also creating shareholder value by driving operating leverage through
our Enterprise Excellence program. Finally, we are improving our cash flow conversion, creating additional capital that can be returned to
shareholders as well as reinvested in technology to drive future growth.

We also reached an important milestone in cost management by achieving our commitment of $850 million in Covidien cost synergies
ahead of schedule in January 2018. We have now transitioned our specific cost management efforts to achieving Enterprise Excellence,
which leverages the full size, scale and breadth of our organization to improve our effectiveness and drive sustained productivity.
Successfully executing on these initiatives is the basis for margin expansion, as well as to enable further investment in increased R&D,
fueling our long-term growth.

Another strong area of focus for me, our management team, and our entire organization is free cash flow. We have yet to deliver on the
promise of strong free cash generation from the combined Medtronic and Covidien organization; however, we have taken meaningful
steps to improve. First, we have made free cash flow a key performance metric for all employees who participate in our annual incentive
program. As an organization, we are focused on improving our working capital metrics and reducing one-time impacts to our free cash
flow. We expect to achieve free cash flow conversion of 80 percent on our non-GAAP net income over the next two to three years,
putting us above our peer average. This requires a culture shift in the company, but I am confident in our ability to achieve it.

With respect to capital allocation, we remain committed to returning a minimum of 50 percent of our free cash flow to you, our
shareholders. Our primary method of return is through dividends. We target roughly a 40 percent payout ratio and expect to grow our
dividend every year with earnings. We are proud of the fact that we have grown our dividend for the past 41 years and are part of the elite
S&P 500 Dividend Aristocrats.

We paid down a significant amount of debt in fiscal year 2018, and are comfortable with our current debt leverage, such that further debt
paydown is no longer a priority. We are actively looking to supplement our organic growth with mergers and acquisitions, focusing on tuck-
in acquisitions that can leverage our scale and resources, including manufacturing, regulatory affairs, and commercial distribution. That
said, we are extremely disciplined when evaluating merger and acquisition opportunities. Any deal must fit strategically and meet the right
financial benchmarks; we also ensure that we have the internal management bandwidth to execute the integration. To the extent there
are periods of time where there are fewer opportunities for disciplined tuck-ins, we will return cash to our shareholders through share
repurchases. We do not intend to stockpile cash on our balance sheet.

Finally, our capital allocation strategy reflects a keen focus on improving our return on invested capital, which constitutes one-third of
management’s long-term incentive plan, with the remainder split between revenue growth and total shareholder return.

To accomplish our goals, the senior leadership team and I realize the importance of an inclusive and diverse global workforce, which
accelerates innovation and business performance. We have diversity and inclusion goals that we regularly measure ourselves against
and formally hold our management team accountable for achieving. We are on track to exceed our 2020 goals for inclusive and diverse
representation across all leadership levels. I am particularly proud of our four Diversity Networks and 13 Employee Resource Groups with
115+ global hubs, which help to foster an inclusive culture and diverse perspectives across the business. Nearly 16,000 employees in 60

countries participate in these networks and ERGs, contributing a broad range of talent and experience. This creates a vibrant workplace
with a sense of belonging while offering unique insights to best serve customers and patients.

Before closing, it is important to share our philosophy on strong corporate governance. We seek to maximize our Board of Directors’
engagement. Our Board is deeply involved with providing strategic oversight for the company. At each of our quarterly meetings, the
Board reviews the strategies of our business groups and global regions in detail. Our Board also regularly visits Medtronic facilities and
our customers in markets around the world. At each Board meeting, we make a point of bringing managers and leaders within our
organization to engage with the Board and present on specific topics that allow directors to go deep in areas of strategic importance.
These activities are designed to give the Board the insights it needs to provide detailed advice and oversight of our strategic initiatives.

All of these initiatives are squarely focused on driving long-term value for our shareholders. We know there is much work to be done, but
we are excited about the future—our direction is clear, our technology pipeline is robust, and our team has never been stronger.

GOING FURTHER, TOGETHER TO ADVANCE OUR MISSION

In closing, I would like to circle back to where we started—the Medtronic Mission. At its core, the Medtronic Mission states that we are a
technology company that aims to improve outcomes. This alone is a noble sense of purpose, but our Mission is much more.
Our Mission inspires us to improve the lives of millions of people around the world. It defines our strategy to innovate, invent, and disrupt,
with a clear goal of improving outcomes. And it calls upon us to be a leader and partner in finding ways to better serve our customers,
employees, communities, and you, our shareholders. When we adhere to this shared sense of purpose, we cannot go wrong.

From the time I joined Medtronic as CEO in 2011, I have been truly honored to lead this organization of highly talented and dedicated
employees who are working to advance our Mission. Yet looking to our future, I have never been more excited about our technology, our
strategy and the impact we can make in taking healthcare Further, Together with our partners around the world.

Sincerely,

Omar Ishrak

Chairman and Chief Executive Officer

iii

Reconciliations of Non-GAAP and Other 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 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.

References throughout the Shareholder Letter to organic growth exclude the impact of material acquisitions, divestitures, and currency.
References to comparable growth rates exclude the impact of material divestitures, and references to comparable, constant currency
growth rates exclude the impact of material divestitures and currency.

MEDTRONIC PLC
WORLD WIDE REVENUE: GEOGRAPHIC(1) - FY18
(UNAUDITED)

REPORTED

COMPARABLE
CONSTANT CURRENCY

(in millions)

U.S.

Non-U.S. Developed

Emerging Markets

Cardiac & Vascular Group

U.S.

Non-U.S. Developed

Emerging Markets

Minimally Invasive Therapies
Group

U.S.

Non-U.S. Developed

Emerging Markets

Restorative Therapies Group

U.S.

Non-U.S. Developed

Emerging Markets
Diabetes Group

U.S.

Non-U.S. Developed

Emerging Markets

TOTAL

FY18

5,681

3,790

1,883
11,354

3,804

3,378

1,534
8,716

5,164

1,720

859
7,743

1,226

739

175
2,140

15,875

9,627

4,451
29,953

FY17

5,454

3,393

1,651
10,498

5,049

3,479

1,391
9,919

5,012

1,588

766
7,366

1,148

625

154
1,927

16,663

9,085

3,962
29,710

Growth

Currency Impact(2)

4%
12
14
8

(25)

(3)
10
(12)

3
8
12
5
7
18
14
11

(5)
6
12
1%

177

38
215

122

25
147

17
85

3
47

411

83
494

Revised(3)
FY17

5,454

3,393

1,651
10,498

3,781

3,178

1,296
8,255

5,012

1,588

766
7,366

1,148

625

154
1,927

15,395

8,784

3,867
28,046

Growth

4%
6

12
6

16
4

10
4

12
9

(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) The currency impact to revenue measures the change in revenue between current and prior year periods using constant exchange rates.
(3) Revised revenue excludes revenue related to the divested Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency businesses for the second,

third, and fourth quarters of fiscal year 2017.

Net Income
attributable
to Medtronic

Diluted
EPS (1)
3,104 $ 2.27

MEDTRONIC PLC
GAAP TO NON-GAAP RECONCILIATIONS - FY18
(UNAUDITED)

(in millions, except per share data)

Net Sales

Fiscal year ended April 27, 2018

Cost of
Products
Sold

Gross
Margin
Percent

Operating
Profit

Operating
Profit
Percent

Income
Before
Income
Taxes

GAAP

Non-GAAP Adjustments:

Restructuring and associated costs(2)

Acquisition-related items
Debt redemption premium(3)
Divestiture-related items(4)

Certain litigation charges
Investment loss(5)

IPR&D impairment
Gain on sale of businesses(6)
Hurricane Maria(7)
Special charge(8)

Amortization of intangible assets
Certain tax adjustments, net(9)

Non-GAAP

Currency impact
CURRENCY ADJUSTED

$ 29,953 $ 9,055

69.8% $

6,651

22.2% $ 5,675 $

—

(40)

(28)

—

0.1

—

(17)

0.1

—

107

132

—

115

—

(697)

0.4

—

0.4

0.2

—

0.1

(2.3)

0.1

0.3

6.1

107

132

115

227

(697)

1,823

—

1,823

—

$ 29,953 $ 8,970

70.1% $

8,352

27.9% $ 7,641 $

(494)

(148)

$ 29,459 $ 8,822

—
70.1% $

75
8,427

0.7
28.6%

228

103

0.06
0.07
0.02
0.08
0.04
0.17
0.03
(0.51)
0.02
0.04
1.10
1.39
1,907
6,530 $ 4.77
0.04
$ 4.81

1,501

(697)

Effective
Tax Rate

45.5%

18.7

31.8

31.6

10.4

13.1

(0.4)

10.9

—

2.9
32.5
17.7
—
14.7%

(in millions, except per share data)

Net Sales

Fiscal year ended April 28, 2017

Cost of
Products
Sold

Gross
Margin
Percent

Operating
Profit

Operating
Profit
Percent

Income
Before
Income
Taxes

Net Income
attributable
to Medtronic

Diluted
EPS (1)

Effective
Tax Rate

GAAP

Non-GAAP Adjustments:

Impact of inventory step-up (10)
Special charge(8)

Restructuring charges, net

Certain litigation charges

Acquisition-related items

Amortization of intangible assets
Certain tax adjustments, net(11)

NON-GAAP(12)

$ 29,710 $ 9,291

68.7% $

5,330

17.9% $ 4,602 $

4,028 $ 2.89

12.6%

—

(38)

—

(10)

—

(10)

0.1

—

100

373

300

230

—

1,980

0.1

0.3

1.3

1.0

0.8

6.7

100

373

300

230

0.02

0.05

272

0.20

190

0.14

156

0.11

1,980

1,460

1.05

36.8

37.0

27.1

36.7

32.2

26.3

—
—
$ 29,710 $ 9,233

—
68.8% $

—
8,351

—

—
28.1% $ 7,623 $

202

0.15
6,395 $ 4.60

—
16.2%

(1) The data in this schedule has been intentionally rounded to the nearest $0.01 and, therefore, may not sum.
(2) Associated costs include costs incurred as a direct result of the restructuring program, such as salaries for employees supporting the program and

consulting expenses.

(3) The charge, included within interest expense, net in our consolidated statements of income, was recognized in connection with the early redemption of

approximately $1.2 billion of Medtronic Inc. senior notes.

(4) The transaction expenses incurred in connection with the divestiture of the Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency

businesses.

(5) The charge was recognized in connection with the impairment of certain cost and equity method investments.
(6) The gain on the divestiture of our Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency businesses.
(7) The charges represent idle facility costs, asset write-downs, and humanitarian efforts related to Hurricane Maria.
(8) The charge represents a contribution to the Medtronic Foundation.

(9) The net charge primarily relates to the impact of U.S. tax reform, inclusive of the transition tax, remeasurement of deferred tax assets and liabilities,
and the decrease in the U.S. statutory tax rate. Additionally, the net charge includes the impacts from the divestiture of the Patient Care, Deep Vein
Thrombosis, and Nutritional Insufficiency businesses, and the net tax cost associated with an internal reorganization, which were partially offset by the
tax effects from the intercompany sale of intellectual property.

(10) The charge represents the amortization of the step-up in fair value of inventory acquired in connection with the HeartWare acquisition.
(11) The net charge primarily relates to the tax effect from the recognition of the outside basis of certain subsidiaries which were included in the divestiture

of the Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency businesses completed during the second quarter of fiscal year 2018, along with
certain tax charges recorded in connection with the redemption of an intercompany minority interest, and the resolution of various tax matters from
prior periods.

(12) The growth rates referenced in the shareholder letter utilize the revised baselines for full year FY18 financial results, which represent management’s best
estimate to exclude the impact of the Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency divestiture to Cardinal Health, as disclosed in the
Form 8-K issued on May 15, 2018.

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 27, 2018.

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

Large accelerated filer
•• If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting standards provided pursuant to Section 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 27, 2017,
based on the closing price of $81.30, as reported on the New York Stock Exchange: approximately $110.0 billion. Number of Ordinary Shares
outstanding on June 20, 2018: 1,351,709,097

Smaller reporting company

Emerging growth company

Portions of the registrant’s Proxy Statement for its 2018 Annual General Meeting are incorporated by reference into Part III hereof.

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

ITEM 16

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

Risk Factors ...................................................................................................................................................................................................... 10

Unresolved Staff Comments ....................................................................................................................................................................... 20

Properties ......................................................................................................................................................................................................... 20

Legal Proceedings .......................................................................................................................................................................................... 20

Mine Safety Disclosures................................................................................................................................................................................ 20

Market for Medtronic’s Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity Securities .......... 21

Selected Financial Data ................................................................................................................................................................................. 24

Management’s Discussion and Analysis of Financial Condition and Results of Operations ...................................................... 25

Quantitative and Qualitative Disclosures About Market Risk ............................................................................................................. 46

Financial Statements and Supplementary Data .................................................................................................................................... 47

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ..................................................116

Controls and Procedures ............................................................................................................................................................................116

Other Information ........................................................................................................................................................................................116

Directors, Executive Officers, and Corporate Governance ...............................................................................................................117

Executive Compensation ...........................................................................................................................................................................118

Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters ............................118

Certain Relationships and Related Transactions, and Director Independence ............................................................................118

Principal Accounting Fees and Services .................................................................................................................................................118

117

Exhibits and Financial Statement Schedules.........................................................................................................................................119

Form 10-K Summary ...................................................................................................................................................................................124

Signatures .......................................................................................................................................................................................................125

119

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K, and other written reports of
Medtronic public limited company, organized under the laws of
Ireland (together with its consolidated subsidiaries, Medtronic, the
Company, or we, us, or our), and oral statements made by or with
the approval of one of the Company’s executive officers from time
to time, may include “forward-looking” statements. All statements
other than statements of historical fact contained in this Annual
Report on Form 10-K, including statements regarding our future
results of operations and financial position, business strategy and
plans, objectives of management for future operations and current
expectations or forecasts of future results, are forward-looking
statements. These statements involve known and unknown risks,
uncertainties, and other important factors that may cause our
actual results, performance or achievements to be materially
different from any future results, performance, or achievements
expressed or implied by the forward-looking statements. Our
forward-looking statements may include statements related to
our growth and growth strategies, developments in the markets
for our products, therapies and services, financial results,
product development launches and effectiveness, research and
development strategy, regulatory approvals, competitive strengths,
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. In some cases, such statements
may be identified by the use of terminology such as “anticipate,”
“believe,” “could,” “estimate,” “expect,” “forecast,” “intend,” “looking
ahead,” “may,” “plan,” “possible,” “potential,” “project,” “should,” “will,”
and similar words or expressions. Forward-looking statements
in this 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
segments; expected timing for completion of research studies
relating to our products; market positioning and performance of
our products, including stabilization of certain product markets;
divestitures and the potential benefits thereof; the costs and
benefits of integrating previous acquisitions; anticipated timing
for United States (U.S.) Food and Drug Administration (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.

We have based these forward-looking statements largely on our
current expectations and projections about future events and
financial trends that we believe may affect our business, financial
condition and results of operations. These forward-looking
statements speak only as of the date of this Annual Report on
Form 10-K and are subject to a number of risks, uncertainties and
assumptions described in the “Risk Factors” section and elsewhere
in this Annual Report on Form 10-K. Because forward-looking
statements are inherently subject to risks and uncertainties,
some of which cannot be predicted or quantified, you should
not rely on these forward-looking statements as predictions
of future events. One must carefully consider forward-looking
statements and understand that such forward-looking statements
are inherently subject to risks and uncertainties, some of which
cannot be predicted or quantified, and involve a variety of risks
and uncertainties, known and unknown, including, among others,
those discussed in the sections entitled “Government Regulation
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;

cybersecurity incidents;

failure to complete or achieve the intended benefits of
acquisitions or divestitures; or

disruption of our current plans and operations.

MEDTRONIC PLC 2018 Form 10-K
Consequently, no forward-looking statement may be guaranteed
and actual results may vary materially from those projected in the
forward-looking statements. We intend to take advantage of the
Safe Harbor provisions of the Private Securities Litigation Reform
Act of 1995 regarding our forward-looking statements, and are
including this sentence for the express purpose of enabling us to

use the protections of the safe harbor with respect to all
forward-looking statements. While we may elect to update these
forward-looking statements at some point in the future, whether
as a result of any new information, future events, or otherwise, we
have no current intention of doing so except to the extent required
by applicable law.

MEDTRONIC PLC 2018 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 more than 150 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.

■■

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

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

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

Medtronic plc is the successor to Medtronic, Inc., a Minnesota
corporation. Medtronic, Inc. and Covidien plc (Covidien) were
combined under and became subsidiaries of Medtronic plc on
January 26, 2015.

On July 29, 2017, we completed the divestiture of our Patient Care,
Deep Vein Thrombosis, and Nutritional Insufficiency businesses.
Among the product lines included in the divestiture were the
dental and animal health, chart paper, wound care, incontinence,
electrodes, SharpSafety, thermometry, perinatal protection, blood
collection, compression, and enteral feeding offerings. Prior to the
divestiture, these businesses were included within the Minimally
Invasive Therapies Group segment.

We have four operating and reportable segments that primarily
develop, manufacture, distribute, and sell device-based medical
therapies and services. Our segments and their portion of our total
reported net sales for fiscal year 2018 of $30.0 billion are as follows:
■■ Cardiac and Vascular Group ($11.4 billion)
■■ Minimally Invasive Therapies Group ($8.7 billion)
■■ Restorative Therapies Group ($7.7 billion)
■■ Diabetes Group ($2.1 billion)
For more information regarding our segments, please see Note 21
to the consolidated financial statements in “Item 8. Financial
Statements and Supplementary Data” in this Annual Report on
Form 10-K.

MEDTRONIC PLC 2018 Form 10-KPART I
Item 1 Business

CARDIAC AND VASCULAR GROUP

The Cardiac and Vascular Group is made up of the Cardiac
Rhythm & Heart Failure, Coronary & Structural Heart, and
Aortic & Peripheral Vascular divisions. The primary medical
specialists who use our Cardiac and Vascular products include
electrophysiologists, implanting cardiologists, heart failure
specialists, cardiovascular, cardiothoracic, and vascular surgeons,
and interventional cardiologists and radiologists.

■■

are designed to stabilize electronic implantable devices and
help prevent infection associated with implantable pacemakers,
defibrillators, and spinal cord neurostimulators.

Remote monitoring services and patient-centered software to
enable efficient care coordination and specialized telehealth
nurse support as well as services related to hospital operational
efficiency.

Cardiac Rhythm & Heart Failure

Coronary & Structural Heart

Our Cardiac Rhythm & Heart Failure 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 Cardiac Rhythm & Heart
Failure devices, ventricular assist systems, and an integrated health
solutions business. Principal products and services offered include:
■■

Implantable cardiac pacemakers including the Azure, Adapta,
Advisa MRI SureScan, and Micra Transcatheter Pacing System,
which is leadless and does not have a subcutaneous device
pocket like a conventional pacemaker.

■■

Implantable cardioverter defibrillators (ICDs), including the Visia
AF and Evera MRI SureScan, which 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) including 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. The Claria CRT-D
MRI and Percepta CRT-P MRI devices feature EffectivCRT, which
is an algorithm that verifies left ventricular pacing effectiveness
and automatically tailors the therapy to individual patients, and
the 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 ablation products including the Arctic Front Advance Cardiac
Cryoballoon System, which includes the Arctic Front Advance
ST Cryoablation Catheter, designed for pulmonary vein isolation
in the treatment of patients with drug refractory paroxysmal
AF and the second-generation 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.

Insertable cardiac monitor systems including the Reveal
LINQ, which 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 including miniaturized
implantable heart pumps, or ventricular assist devices, patient
accessories and surgical tools to treat patients suffering from
advanced heart failure.

TYRX products including the Absorbable Antibacterial Envelope
and the TYRX Neuro Absorbable Antibacterial Envelope, which

Our Coronary & Structural Heart division includes therapies to treat
coronary artery disease 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. Principal
products and services offered include:
■■

CoreValve family of aortic valves, including our second-
generation recapturable TCV system, CoreValve Evolut R, and
our third-generation system, CoreValve Evolut PRO.

■■

Percutaneous Coronary Intervention stent products including
our Resolute Integrity and Resolute Onyx drug-eluting stent
systems.

Surgical valve replacement and repair products for damaged
or diseased heart valves, including both tissue and mechanical
valves, 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, and surgical ablation systems and
positioning and stabilization technologies.

Aortic & Peripheral Vascular

Our Aortic & Peripheral Vascular 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, and venous disease. 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, and products for superficial and deep venous disease.
Principal products and services offered include:
■■

Endovascular stent grafts and accessories including the
Endurant Abdominal Aortic Aneurysm Stent Graft System family
of products, the Valiant Captivia Thoracic Aortic Aneurysm stent
graft system, and the Heli-FX EndoAnchor System.

■■

Percutaneous angioplasty balloons including the IN.PACT
family of drug-coated balloons, vascular stents, such as the
Protégé and 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.

Products to treat superficial venous diseases in the lower
extremities including the ClosureFast RF ablation system and
the VenaSeal medical adhesive closure system.

MEDTRONIC PLC 2018 Form 10-KMINIMALLY INVASIVE THERAPIES GROUP

The Minimally Invasive Therapies Group is made up of the Surgical
Innovations and Respiratory, Gastrointestinal, & Renal divisions.
Products and therapies of this group are used primarily by
hospitals, physicians’ offices, ambulatory care centers, and other
alternate site healthcare providers. While less frequent, some
products and therapies are also used in home settings.

Surgical Innovations

Our Surgical Innovations division develops, manufactures, and
markets advanced and general surgical products including surgical
stapling devices, vessel sealing instruments, wound closure,
electrosurgery products, hernia mechanical devices, mesh
implants, and gynecology products and therapies to treat diseases
and conditions that are typically, but not exclusively, addressed by
surgeons. Principal products and services offered include:
■■

Advanced stapling products, including 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 Signia and iDrive powered stapling
systems, the LigaSure vessel sealing system with nano-coating,
and the Sonicision cordless ultrasonic dissection system.

■■

Electrosurgical hardware and instruments, including the Valleylab
FT10 energy platform, and the Force TriVerse electrosurgical
pencil.

Products designed for the treatment of hernias, including the
AbsorbaTack absorbable mesh fixation device for hernia repair,
the Symbotex composite mesh for surgical laparoscopic and
open ventral hernia repair, and Parietex ProGrip, a self-gripping,
biocompatible solution for inguinal hernias.

RESTORATIVE THERAPIES GROUP

The Restorative Therapies Group is made up of the Spine, Brain,
Specialty Therapies and Pain Therapies divisions. 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.

Spine

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 Spine
division also provides biologic solutions for the orthopedic and
dental markets and, in concert with our Neurosurgery business,
offers unique and highly differentiated imaging, navigation, power
instruments, nerve monitoring, and Mazor robotics integrated
for our spine procedures. Principal products and services offered
include:
■■

Products to treat a variety of conditions affecting the spine,
including degenerative disc disease, spinal deformity, spinal

PART I
Item 1 Business

Respiratory, Gastrointestinal, & Renal

Our Respiratory, Gastrointestinal, & Renal division develops,
manufactures, and markets products in the emerging fields of
minimally invasive gastrointestinal diagnostics and therapies,
respiratory monitoring, airway management and ventilation
therapies, and for the treatment of renal disease. Principal
products and services offered include:
■■

Gastrointestinal and endoscopy products, including the PillCam
COLON, the Emprint ablation system with Thermosphere
Technology, the HET Bipolar System, the Cool-tip radiofrequency
ablation system, the Barrx platform with the Barrx 360 Express
catheter, and the HALO ablation catheters for treatment of
Barrett’s esophagus.

■■

Airway, ventilation, and inhalation therapies products, including
the Puritan Bennett 980 ventilator, the Newport e360 and HT70
ventilators, the TaperGuard Evac tube, Shiley Endotracheal
Tubes, Shiley Tracheostomy Tubes, and DAR Filters.

Products focused on patient monitoring, including the
Capnostream with Microstream technology capnography
monitors, the Nellcor Bedside SpO2 patient monitoring system,
the Bispectral Index (BIS) brain monitoring technology, and the
INVOS Cerebral/Somatic Oximeter.

Products providing solutions for the treatment of renal
disease, including Palindrome, Mahurkar and Mahurkar Elite
Dialysis Access Catheters for renal therapy, and other products
designed for use in treatment of both acute and chronic renal
failure conditions.

tumors, fractures of the spine, and stenosis. These products
include our CD HORIZON SOLERA and LEGACY Systems, and
the CAPSTONE, CLYDESDALE, and ELEVATE interbody spacers.

Products that facilitate less invasive thoracolumbar surgeries,
including the CD HORIZON VOYAGER, SOLERA SEXTANT and
LONGITUDE Percutaneous Fixation Systems.

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

Biologic solutions products, including our 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 products, including MagniFuse,
Grafton/Grafton Plus, and PROGENIX, and the MASTERGRAFT
family of synthetic bone graft products - Matrix, Putty, and
Granules.

MEDTRONIC PLC 2018 Form 10-K■■

■■

the NURO device for the treatment of overactive bladder
and associated symptoms of urinary urge incontinence,
urinary urgency, and urinary frequency. The Enterra gastric
neurostimulator is approved as a humanitarian device and
is used for the treatment of chronic, intractable nausea and
vomiting due to gastroparesis.

ENT products, including the Straightshot M5 Microdebrider
Handpiece, the IPC system, NIM Nerve Monitoring Systems,
ENT Navigation System, as well as products for hearing
restoration and obstructive sleep apnea.

Transformative solutions products, including our PEAK Surgery
System and Aquamantys System. 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 develops, manufactures, and markets
spinal cord stimulation systems, implantable drug infusion systems
for chronic pain, as well as interventional products. Principal
products and services offered include:
■■

Spinal cord stimulation products for chronic pain, including
rechargeable and non-rechargeable devices and a large
selection of leads used to treat chronic back and/or limb pain.
This includes systems with SureScan MRI Technology and the
Evolve workflow algorithm, including the Intellis (rechargeable)
SureScan MRI. Products also include our RestoreSensor
(rechargeable) SureScan MRI, with its proprietary AdaptiveStim
technology.

■■

Implantable drug infusion systems, including our SynchroMed II
Implantable Infusion System, that deliver small quantities of drug
directly into the intrathecal space surrounding the spinal cord.

Interventional products, including the Xpander II Balloon
Kyphoplasty system, the Kyphon-V vertebroplasty system and
the OsteoCool RF Tumor ablation system.

PART I
Item 1 Business

Brain Therapies

Our Brain Therapies division develops, manufactures, and markets
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. Principal products and services offered include:
■■

Neurovascular products to treat diseases of the vasculature in
and around the brain. This includes coils, neurovascular stents,
and flow diversion products, as well as access and delivery
products to support procedures. Products also include the
Pipeline Flex Embolization Devices, endovascular treatments
for large or giant wide-necked brain aneurysms, the portfolio
of Solitaire revascularization devices for treatment of acute
ischemic stroke, and a portfolio of access catheters.

■■

Brain modulation products, including those for the treatment
of the disabling symptoms of Parkinson’s disease, essential
tremor, 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.). Specifically, this includes our family of Activa
Neurostimulators, including Activa SC (single-channel primary
cell battery), Activa PC (dual channel primary cell battery), and
Activa RC (dual channel rechargeable battery).

Neurosurgery products, including platform technologies and
implant therapies. Our StealthStation S8 Navigation System
and O-arm Imaging System are both platforms used in cranial,
spinal, sinus, and orthopedic procedures. Our Midas Rex Surgical
Drills are used in cranial, spinal, and orthopedic procedures. Our
CSF Management Portfolio is used in treating hydrocephalus
and other conditions impacting the intracranial pressure,
and our Visualase MRI-guided laser ablation is used in cranial
procedures. The Mazor X robotic guidance systems are used in
robot-assisted spine procedures under an exclusive worldwide
distributor agreement with Mazor Robotics.

Specialty Therapies

Our Specialty Therapies division develops, manufactures, and
markets products and therapies to treat diseases of the ear, nose
and throat (ENT), help control the systems of overactive bladder,
(non-obstructive) urinary retention, and chronic fecal incontinence.
Additionally, our Specialty Therapies division includes products
in the emerging field of transformative solutions surgical incision
technology, as well as the haemostatic sealing of soft tissue and
bone. Principal products and services offered include:
■■

Pelvic health and gastric therapies products, including InterStim,
a neurostimulator, to help control the systems of overactive
bladder, (non-obstructive) urinary retention, and chronic fecal
incontinence. Our percutaneous tibial neuromodulation uses

MEDTRONIC PLC 2018 Form 10-KDIABETES GROUP

The Diabetes Group develops, manufactures, and markets
products and services for the management of Type I and Type II
diabetes. The primary medical specialists who use and/or prescribe
our Diabetes products are endocrinologists and primary care
physicians. Principal products and services offered include:
■■

Insulin pumps, including the MiniMed 670G system, featuring
the first hybrid closed loop system in the world and the
most advanced SmartGuard algorithm. The MiniMed 640G
system, offered outside the U.S., is 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.

PART I
Item 1 Business

■■

Continuous glucose monitoring (CGM) systems, including
the Guardian Connect standalone CGM system and the iPro2
professional CGM, is a product worn by patients to capture
glucose data that is later uploaded in a physician’s office to reveal
glucose patterns and potential problems, such as hyperglycemic
and hypoglycemic episodes.

Therapy management software, including CareLink software
for patients and for healthcare professionals, with advanced
web technology to help patients and their health care providers
control their diabetes and improve engagement.

OTHER FACTORS IMPACTING OUR OPERATIONS

Research and Development

The chart below illustrates our research and development (R&D) expense and R&D expense as a percentage of net sales during fiscal years
2018, 2017, and 2016:

s
e
a
S
t
e
N

f
o
e
g
a
t
n
e
c
r
e
P

$3,000

$2,500

$2,000

$1,500

$1,000

$500

)
s
n
o

i
l
l
i

m
n
i
(
e
s
n
e
p
x
E
D
&
R

2018

2016

2017

Fiscal Year

Percentage of Net Sales

R&D Expense

The markets in which we participate are subject to rapid
technological advances. Constant improvement of existing
products and introduction of new products are necessary to
maintain market leadership. Our 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.

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 2018 Form 10-K

PART I
Item 1 Business

Intellectual Property

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.
In addition, we have entered into exclusive and non-exclusive
licenses relating to a wide array of third-party technologies. 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 or to
our business as a whole.

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. For additional information, see Note 19
to the consolidated financial statements in “Item 8. Financial
Statements and Supplementary Data” in this Annual Report on
Form 10-K.

Sales and Distribution

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 four largest markets are the U.S.,
Western Europe, Japan, and China. 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. 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 are not dependent on any single customer for more than
10 percent of our total net sales.

Competition, Industry and Cost Containment

with multiple business lines to small manufacturers offering a
limited selection of products. In addition, we face competition
from providers of other medical therapies, such as pharmaceutical
companies.

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 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.

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 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. Hospitals,
which purchase implants, are also seeking to reduce costs through
a variety of mechanisms, including, for example, centralized
purchasing, 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
changes in practice patterns such as device standardization.
This has created an increasing level of price sensitivity among
customers for our 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. Exchange rate fluctuations may affect
revenues, earnings, and cash flows from operations. We use
operational and economic hedges, as well as 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.

Net sales and property, plant, and equipment attributable to
significant geographic areas are presented in Note 21 to the
consolidated financial statements in “Item 8. Financial Statements
and Supplementary Data” in this Annual Report on Form 10-K.

MEDTRONIC PLC 2018 Form 10-KProduction 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. 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. Generally, we have
been able to obtain adequate supplies of such raw materials and
components. However, due to the U.S. FDA’s manufacturing
requirements, we may not be able to quickly establish additional
or replacement sources for certain components or materials if we
experience a sudden or unexpected reduction or interruption in
supply and are unable to develop alternative sources.

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

Quality Management and Product Liability

Our business success depends on the quality of our products, and
we have global processes, procedures and programs, including
our “Quality Begins with Me” program, that are intended to help
us maintain the highest possible level of quality in all products. 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.

Working Capital

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 27, 2018, we employed more than 86,000 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.

Government Regulation

Our operations and products are subject to extensive regulation
by numerous government agencies, including the U.S. FDA,
European regulatory authorities such as the Medicines and
Healthcare Products Regulatory Agency in the United Kingdom
(U.K.) and the Federal Institute for Drugs and Medical Devices

PART I
Item 1 Business

in Germany, the China Food and Drug Administration (CFDA),
and other government agencies inside and 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, distribution and
post- marketing surveillance of our products. Our business is
also affected by patient privacy laws and government payer cost
containment initiatives, as well as environmental health and safety
laws and regulations.

Product Approval and Monitoring

Many countries where we sell medical devices subject such
medical devices and technologies to their own approval and other
regulatory requirements regarding performance, safety, and
quality of our products. Authorization to commercially distribute a
new medical device in the U.S. is generally obtained 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 is
substantially equivalent to a legally marketed medical device. The
second, more rigorous process, known as pre-market approval,
requires us to independently demonstrate that a medical device
is safe and effective for its intended use. This process is generally
much more time-consuming and expensive than the 510(k)
process.

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.
The competent authorities of the E.U. countries separately
regulate the clinical research for medical devices and the market
surveillance of products once they are placed on the market. A
new Medical Device Regulation was published by the E.U. in 2017
which will impose significant additional premarket and postmarket
requirements. The regulation has a three-year implementation
period to May 2020. After that time, medical devices marketed
in the E.U. will require certification according to these new
requirements, except that devices with valid CE certificates, issued
pursuant to the Medical Device Directives before May 2020, can be
placed on the market until May 2024.

The global regulatory environment is increasingly stringent and
unpredictable. 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, their existing regulations. 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 the cost, the time needed to approve, and ultimately, our
ability to maintain existing approvals or obtain future approvals for
our products. Regulations of the U.S. FDA and other regulatory
agencies in and outside the U.S. impose extensive compliance and
monitoring obligations on our business. These agencies review
our design and manufacturing practices, labeling, record keeping,
and manufacturers’ required reports of adverse experiences and
other information to identify potential problems with marketed

MEDTRONIC PLC 2018 Form 10-KPART I
Item 1 Business

medical devices. We are also subject to periodic inspections for
compliance with applicable quality system regulations, which
govern the methods used in, and the facilities and controls used
for, the design, manufacture, packaging, and servicing of finished
medical devices intended for human use. In addition, the U.S. FDA
and other regulatory bodies, both in and outside the U.S. (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 promotion and advertising of our products. Any
adverse regulatory action, depending on its magnitude, may limit
our ability to effectively market and sell our products, limit our
ability to obtain future premarket approvals or result in a substantial
modification to our business practices and operations. For
additional information, see “Item 1A. Risk Factors” 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.

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’s limitations
on our ability to manufacture and distribute the SynchroMed drug
infusion system were lifted by the U.S. FDA in September 2017.
Following the successful completion of the required third-party
expert audits, and in coordination with the FDA, the consent decree
will be vacated. The Company must undergo third-party audits and
submit audit reports to the U.S. FDA through 2020.

In June 2016, TYRX received a Warning Letter from the U.S. FDA
following an inspection at the TYRX facility in Monmouth Junction,
New Jersey. The U.S. FDA completed its follow up inspection
to the Warning Letter in March 2018 and issued a 483 with
observations, although the U.S. FDA noted in its closing meeting
that there had been significant improvements made since the prior
inspection. We continue to make progress on our commitments
and continuously report the progress to the U.S. FDA. 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. We acquired HeartWare in August 2016, and have been
implementing actions and process improvements to address the
items in the Warning Letter. Upon completing implementation of
actions and process improvements to address the items in the
Warning Letters and reinspection by the U.S. FDA, we expect that
the TYRX and HeartWare Warning Letters will be lifted.

Trade Regulations

The movement of products, services, and investment across
borders subject us to extensive trade 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. These laws and regulations govern,
among other things, our import, export and other business
activities. We are also subject to the risk that these laws and
regulations could change in a way that would expose us to
additional costs, penalties or liabilities. Some governments 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 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 we, or the third parties through which we do business,
are not in compliance with applicable import, export control or
economic sanctions laws and regulations, we may be subject to
civil or criminal enforcement action, and varying degrees of liability.
Such actions may disrupt or delay sales of our products or services
or result in restrictions on our distribution and sales of products or
services that may materially impact our business.

Anti-Boycott Laws

Under U.S. laws and regulations, U.S. companies and their
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. If we, or certain third parties through which we
sell or provide goods or services, violate anti-boycott laws and
regulations, we may be subject to civil or criminal enforcement
action and varying degrees of liability.

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 has resulted, and may continue to result, in increased
costs, new compliance challenges, 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. The 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 with regard to both
the Security and Privacy Rules, including civil and criminal liability.
With the exception of certain of its operations in its Diabetes and
care management services businesses, Medtronic is generally

MEDTRONIC PLC 2018 Form 10-Knot a Covered Entity. Medtronic also operates as a Business
Associate to Covered Entities in a limited number of instances.
There are comparable state 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.

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 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 more than
150 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
became effective in May 2018. The new E.U. General Data
Protection Regulation (GDPR) applies uniformly across the E.U.
and includes, among other things, a requirement for prompt notice
of data breaches to data subjects and supervisory authorities in
certain circumstances and significant fines for non-compliance.
The GDPR also requires companies processing personal data of
individuals residing in the E.U. to comply with E.U. privacy and data
protection rules.

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 additional cost
expenditures or changes in products or business that increase
competition or reduce revenue. Noncompliance could result in
the imposition of fines, penalties, or orders to stop noncompliant
activities.

Regulations Governing Reimbursement

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

U.S. federal health care laws apply when we or customers submit
claims for items or services that are reimbursed under Medicare,
Medicaid, or other federally-funded health care programs, including
laws related to kickbacks, false claims, self-referrals and health care

PART I
Item 1 Business

fraud. 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. In some circumstances, insurance companies can attempt
to bring a private cause of action 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 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. Any failure to
comply with these laws and regulations could subject us or our
officers and employees to criminal and civil financial penalties.

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. Further, as a result of the
Patient Protection and Affordable Care Act (the “ACA”), the U.S. is
implementing value-based payment methodologies and seeking
to create alternate payment models, such as bundled payments, to
continue to drive improved value.

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. Like 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.

Available Information

We maintain a website at www.medtronic.com. 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 made available under the
“About Medtronic - Investors” caption and “Financial Information -
SEC Filings” subcaption of our website free of charge as soon as
reasonably practicable after we electronically file them with, or
furnish them to, the Securities and Exchange Commission (SEC).

Information relating to our corporate governance, 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.

MEDTRONIC PLC 2018 Form 10-KPART I
Item 1A Risk Factors

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

Our website and the information contained on or connected to our
website are not incorporated by reference into this Form 10-K.

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 we file with the SEC at
http://www.sec.gov. We file 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
we file 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.

Item 1A Risk Factors

Investing in our securities 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,
together with all the other information included in this Annual Report
on Form 10-K, including our consolidated financial statements and
the related notes and in our other filings with the SEC. Furthermore,

additional risks and uncertainty not presently known to us or that
we currently believe to be immaterial may also adversely affect our
business. Our business, financial condition, operating results, cash
flow and prospects could be materially and adversely affected by any
of these risks or uncertainties.

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 more than 150 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 range of competitors from
large companies with multiple business lines to small, specialized
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 existing or planned products
less competitive. In addition, we face competition from providers of
alternative medical therapies, such as pharmaceutical companies.

We believe our ability to compete depends upon many factors both
within and beyond our control, including:
■■

product performance and reliability,

■■

product technology and innovation,

product quality and safety,

breadth of product lines,

product support services,

customer support,

cost-effectiveness and price, and

reimbursement approval from health care insurance providers.

Competition may increase as additional companies enter our
markets or modify their existing products to compete directly with
ours. In addition, academic institutions, governmental agencies and
other public and private research organizations also may conduct
research, seek patent 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. From time to time we have lost,
and may in the future lose, market share in connection with product
problems, physician advisories, safety alerts and publications about
our products, which highlights the importance of product quality,
product efficacy and quality systems to our business. 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. Further, our continued growth and success depend on
our ability to develop, acquire and market new and differentiated
products, technologies and intellectual property, and as a result we
also face competition for marketing, distribution, and collaborative
development agreements, establishing relationships with
academic and research institutions and licenses to intellectual
property. 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.

Reduction or interruption in 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 the majority of our products at
numerous manufacturing facilities worldwide. We purchase many

MEDTRONIC PLC 2018 Form 10-Kof 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, certain components
and raw materials used in our products are obtained from a sole
supplier. Although we work closely with our suppliers to try to
ensure continuity of supply while maintaining high quality and
reliability, the supply of these components and raw materials may
be interrupted or insufficient. In addition, due to the stringent
regulations and requirements of regulatory agencies, including
the U.S. FDA, regarding the manufacture of our products, we may
not be able to quickly establish additional or replacement sources.
Furthermore, the prices of commodities and other materials used
in our products, which are often volatile and outside of our control,
could adversely impact our supply. We use resins, other petroleum-
based materials and pulp as raw materials in some of our products,
and the prices of oil and gas also significantly affect our costs
for freight and utilities. 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 could result in lost sales.

Other disruptions in the manufacturing process or product sales
and fulfillment systems for any reason, including equipment
malfunction, failure to follow specific protocols and procedures,
defective raw materials, natural disasters such as hurricanes,
tornadoes or wildfires, and other environmental factors, could
lead to launch delays, product shortage, unanticipated costs, lost
revenues and damage to our reputation. For example, in June
2017 we experienced a global information technology systems
interruption that affected our customer ordering, distribution, and
manufacturing processes. Furthermore, any failure to identify and
address manufacturing problems prior to the release of products
to our customers could result in quality or safety issues.

In addition, several of our key products are manufactured at a
particular manufacturing facility, with limited alternate facilities.
If an event occurs that results in damage to one or more of such
facilities, such as the damage caused by Hurricane Maria in Puerto
Rico in September 2017, 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.

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 and technologies, as well as our business
activities, are subject to a complex set of regulations and rigorous
enforcement, 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. To varying degrees, each of these
agencies requires us to comply with laws and regulations governing
the development, testing, manufacturing, labeling, marketing and

PART I
Item 1A Risk Factors

distribution of our products. 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 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, results of operations and cash flows. 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 condition and cash flows.
Even if we are able to obtain 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

limit the proposed uses of our products.

Both before and after a product is commercially released, we
have ongoing responsibilities under U.S. FDA and other applicable
non-U.S. government agency regulations. For instance, 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 applicable regulations. The results of these
inspections can include inspectional observations on U.S. FDA’s
Form-483, warning letters, or other forms of enforcement. 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
products are ineffective or pose an unreasonable health risk,
the U.S. FDA could ban such medical products, detain or seize
adulterated or misbranded medical products, order a recall, repair,
replacement, or refund of such products, 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 and
other non-U.S. government agencies may also assess civil or
criminal penalties against us, our officers or employees and impose
operating restrictions on a company-wide basis. 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. Furthermore, we occasionally
receive subpoenas or other requests for information from state
and federal governmental agencies, and while these investigations
typically relate primarily to financial arrangements with health
care providers, regulatory compliance and product promotional
practices, we cannot predict the timing, outcome or impact of
any such investigations. Any adverse outcome in one or more of
these investigations could include the commencement of civil
and/or criminal proceedings, substantial fines, penalties, and/or

MEDTRONIC PLC 2018 Form 10-KPART I
Item 1A Risk Factors

administrative remedies, including exclusion from government
reimbursement programs and/or entry into Corporate Integrity
Agreements (CIAs) with governmental agencies. In addition,
resolution of any of these matters could involve the imposition
of additional, costly compliance obligations. These potential
consequences, as well as any adverse outcome from government
investigations, could have a material adverse effect on our
business, results of operations, financial condition, and cash flows.

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, and any failure to comply could subject us to significant
civil or criminal exposure, administrative obligations and costs, and/
or other potential penalties from, and/or agreements with, the
federal government.

Governmental regulations outside the U.S. have, and may continue
to, become increasingly stringent and common. In the European
Union, for example, a new Medical Device Regulation was published
in 2017 which, when it enters into full force in 2020, will include
significant additional premarket and post-market requirements.
Penalties for regulatory non-compliance could be severe, including
fines and revocation or suspension of a company’s business
license, mandatory price reductions and criminal sanctions. Future
laws and regulations may have a material adverse effect on us.

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,
results of operations, financial condition and
cash flows.

Our devices, products and therapies are purchased principally
by hospitals or physicians that typically bill various third-party
payers, such as governmental programs (e.g., Medicare, Medicaid
and comparable non-U.S. programs), private insurance plans
and managed care plans, for the healthcare services provided to
their patients. The ability of our customers to obtain appropriate
reimbursement for products and services from third-party payers
is critical because it affects which products customers purchase
and the prices they are willing to pay. As a result, our devices,
products and therapies are subject to regulation regarding quality
and cost by HHS, including the Centers for Medicare & Medicaid
Services (CMS), as well as comparable state and non-U.S. agencies
responsible for reimbursement and regulation of health care goods
and services, including laws and regulations related to kickbacks,
false claims, self-referrals and health care fraud. 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.
In certain circumstances, insurance companies can attempt to
bring a private cause of action against a manufacturer for causing
a false claim to be filed under the federal Racketeer Influenced
and Corrupt Organizations Act. 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. Any failure to comply with these laws and

regulations could subject us or our officers and employees to
criminal and civil financial penalties.

We are also 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 these reimbursement systems, or adverse decisions
relating to coverage of or reimbursement for our products by
administrators of these systems, 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.

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 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, it is possible that the results of such
litigation could require us to pay 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, any of which could have a material
adverse impact on our business, results of operations, financial
condition, and 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 may not result in patents being issued to
us, patents issued to or licensed by us may be challenged or
circumvented by competitors and such patents may be found
invalid, unenforceable or insufficiently broad to protect our
technology or provide us with any competitive advantage. Third
parties could obtain patents that may require us to negotiate
licenses to conduct our business, and these 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

MEDTRONIC PLC 2018 Form 10-KPART I
Item 1A Risk Factors

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.

Any of the foregoing problems, including future product liability
claims or recalls, 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.

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 those countries.
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, results of operations, financial
condition, and cash flows.

Quality problems and product liability
claims could lead to recalls or safety alerts,
reputational harm, adverse verdicts or costly
settlements, and could have a material adverse
effect on our business, results of operations,
financial condition and 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 can depend on our
ability to manufacture to exact specification 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.

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 mission is to provide a broad range of therapies to restore
patients to fuller, healthier lives, which 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 business, results of operations, financial
condition and cash flows.

Health care policy changes may have a material
adverse effect on us.

In response to perceived increases in health care costs in recent
years, there have been and continue to be proposals by the federal
government, state governments, regulators and third-party payers
to control these costs and, more generally, to reform the health
care system, including U.S. health care reform legislation. Certain of
these proposals could, among other things, 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 business,
results of operations, financial condition and cash flows.

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

MEDTRONIC PLC 2018 Form 10-KPART I
Item 1A Risk Factors

to evaluate the value of obtaining insurance coverage for other
categories of losses in the future. Although we believe, based on
historical loss trends, that our self-insurance program accruals and
our existing insurance coverage will be adequate to cover future
losses, historical trends may not be indicative of future losses. The
absence of third-party insurance coverage for other categories of
losses increases our exposure to unanticipated claims and these
losses could have a material adverse impact on our business,
results of operations, financial condition and cash flows.

If we experience decreasing prices for our
goods and services and we are unable to reduce
our expenses, there may be a material adverse
effect on our business, results of operations,
financial condition and cash flows.

We have experienced, and may continue to experience, decreasing
prices for our goods and services due to pricing pressure from
managed care organizations and other third-party payers on our
customers, 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 business, results of operations,
financial condition and cash flows will be adversely affected.

We are subject to a variety of risks associated
with global operations that could adversely
affect our profitability and operating results.

We develop, manufacture, distribute and sell our products globally.
Operations in countries outside of the U.S. are accompanied by
certain risks. We intend to continue to expand our operations
and to pursue growth opportunities outside the U.S., especially in
emerging markets, which could expose us to additional and greater
risks. Our profitability and global 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,

the need to comply with different regulatory regimes worldwide
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 and economic instability,

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.

On June 23, 2016, the 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 countries, although
we cannot currently predict whether or how these changes will be
implemented. Changes to trade policy may adversely affect our
business, results of operations, financial condition and cash flows.

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. Failure to receive payment of all or a significant portion
of these receivables could adversely affect our business, results of
operations, financial condition and cash flows.

Finally, changes in currency exchange rates may impact the
reported value of our revenues, 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 anti-bribery laws
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-administered healthcare systems in many
jurisdictions 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. We also participate
in public-private partnerships and other commercial and policy
arrangements with governments around the globe.

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. It is our policy
to implement safeguards to educate our employees and agents
on these legal requirements and prohibit improper practices.
However, 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 could
be held responsible. In addition, the government may seek to hold
us liable for FCPA violations committed by companies in which we
invest or that we acquire. Any alleged or actual violations of these

MEDTRONIC PLC 2018 Form 10-Kregulations may subject us to government scrutiny, criminal or civil
sanctions and other liabilities, including exclusion from government
contracting, and could disrupt our business, adversely affect our
reputation and result in a material adverse effect on our business,
results of operations, financial condition and cash flows.

Laws and regulations governing international
business operations could adversely impact our
business.

The U.S. Department of the Treasury’s Office of Foreign Assets
Control (OFAC), and the Bureau of Industry and Security at the
U.S. Department of Commerce (BIS), administer certain laws and
regulations that restrict U.S. persons and, in some instances, non-
U.S. persons, in conducting activities, transacting business with or
making investments in certain countries, governments, entities and
individuals subject to U.S. economic sanctions. Our international
operations subject us to these 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 the region of Crimea. Certain of our
subsidiaries sell medical devices, 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 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.

Many health care industry companies, including health care
systems, distributors, manufacturers, providers, and insurers, are
consolidating or have formed strategic alliances. As the health care
industry consolidates, competition to provide goods and services
to industry participants will become more intense. Further, this
consolidation creates larger enterprises with greater negotiating
power, which they can use to negotiate price concessions. If we
must reduce our prices because of industry consolidation, or if we
lose customers as a result of consolidation, our business, financial
condition, results of operations and cash flows could be adversely
affected.

PART I
Item 1A Risk Factors

Health care industry cost-containment
measures could result in reduced sales of
our medical devices and medical device
components.

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

MEDTRONIC PLC 2018 Form 10-KPART I
Item 1A Risk Factors

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, results of operations, financial condition,
and 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 depends on 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 strong relationships with these professionals, the
development and marketing of our products could suffer, which
could have a material adverse effect on our business, financial
condition, results of operations and cash flows.

We rely on the proper function, security and
availability of our information technology
systems and data to operate our business,
and a breach, cyber-attack or other disruption
to these systems or data could materially
and adversely affect our business, results of
operations, financial condition, cash flows,
reputation or competitive position.

We are increasingly dependent on sophisticated information
technology systems to operate our business, including to process,
transmit and store sensitive data, and many of our products
and services include integrated software and information
technology that collects data regarding patients or connects
to our systems. Like other large multi-national corporations, 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, such as cyber-
attacks, malicious intrusions, breakdowns, interference with the
integrity of our products and data or other significant disruptions.
Furthermore, we rely on third-party vendors to supply and/or
support certain aspects of our information technology systems.
These third-party systems could also become vulnerable to
cyber-attack, malicious intrusions, breakdowns, interference or
other significant disruptions, and may contain defects in design
or manufacture or other problems that could result in system
disruption or compromise the information security of our own
systems. In addition, we continue to grow in part through new
business acquisitions and, as a result, may face risks associated
with defects and vulnerabilities in their systems, or difficulties or

other breakdowns or disruptions in connection with the integration
of the acquisitions into our information technology systems.

Our worldwide operations mean that we are subject to laws and
regulations, including data protection and cybersecurity 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. For example, in the E.U.
the Data Protection Directive requires us to manage individually
identifiable information in the E.U., and the new General Data
Protection Regulation may impose fines of up to four percent
of our global revenue in the event of violations occurring after
its implementation in May 2018. Furthermore, 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. Any data security breaches,
cyber-attacks, malicious intrusions or significant disruptions
could result in actions by regulatory bodies and/or civil litigation,
any of which could materially and adversely affect our business,
results of operations, financial condition, cash flows, reputation or
competitive position.

In addition, 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 protect patient and customer information, changes in the
techniques used to obtain unauthorized access to data and
information systems, 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.

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.

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

At April 27, 2018, we had approximately $2.1 billion of current
debt obligations and $23.7 billion of long-term debt outstanding.
We may also incur additional indebtedness in the future. Our

MEDTRONIC PLC 2018 Form 10-Ksubstantial 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 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.

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 significant acquisitions in
recent years, 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
acquired companies 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 FCPA liability,

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

PART I
Item 1A Risk Factors

■■

the ability to achieve synergies among acquired companies,
such as increasing sales of the integrated company’s products,
achieving cost savings, and effectively combining technologies
to develop new products.

We also could experience negative effects on our business,
financial condition, results of operations and cash flows 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.

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

We are subject to income taxes, as well as non-income based
taxes, in the U.S., Ireland, and various other jurisdictions in which
we operate. 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 and our effective tax
rate. For example, on December 22, 2017, the U.S. enacted
comprehensive tax legislation, commonly referred to as the Tax
Cuts and Jobs Act (the “Tax Act”), which resulted in a significant
charge to tax expense during our quarter ending January 2018
associated with the U.S. taxation of accumulated foreign earnings
as well as the requirement to revalue U.S. deferred tax assets and
liabilities resulting from the reduction in the U.S. corporate tax rate.

Certain elements of the Tax Act impact fiscal year 2018 while other
portions of the legislation are not effective until future fiscal years.
The U.S. Treasury has issued additional guidance subsequent to
the enactment of the Tax Act, and we expect ongoing guidance to
be provided which could change the impact on our tax reserves.
We made reasonable estimates of the effect of the Tax Act and
recorded provisional amounts in the financial statements for fiscal
year 2018. Additional guidance, as well as future changes to these
rules, may result in adjustments to these estimates which could
materially affect our financial results.

In 2013, the Organization for Economic Cooperation and
Development (OECD) published an action plan called Base Erosion
and Profit Shifting (BEPS) with a view to tackling perceived tax
abuse and inconsistency between taxing authorities and their
approach to International tax matters. The final BEPS Action report
was published in October 2015 and subsequently many taxing
authorities have adopted the guidelines provided within their
local laws. The EU expanded upon these guidelines with Anti-Tax
Avoidance Directives (ATAD) to be applied by its member states.
We continue to monitor any and all changes to local country
legislation resulting from this guidance. One specific change is a
requirement for increased disclosures of financial information on a
local and global basis. This information could lead to disagreements
between jurisdictions associated with the proper allocation of
profits between such jurisdictions.

We are subject to ongoing tax audits in the various jurisdictions
in which we operate. 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

MEDTRONIC PLC 2018 Form 10-KPART I
Item 1A Risk Factors

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 business, financial condition, results of
operations, and cash flows.

We have recorded 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 our estimate of tax liabilities proves to be less than the
amount for which it is ultimately liable, we would incur additional
charges, and such charges could have a material adverse effect on
our business, financial condition, results of operations, and cash
flows.

The 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. 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 our key manufacturing sites. An adverse outcome in this
matter could materially and adversely affect our business, financial
condition, results of operations and cash flows. See Note 19 to the
consolidated financial statements in “Item 8. Financial Statements
and Supplementary Data” in this Annual Report on Form 10-K.

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 Medtronic plc is organized under the laws of Ireland, 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 Covidien transaction held 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 did not have substantial business activities in
Ireland relative to its worldwide activities (the substantial business
activities test), we would have been treated as a U.S. corporation
for U.S. federal income tax purposes. Based on the rules for
determining share ownership under Section 7874 of the Code,
Medtronic, Inc.’s shareholders received approximately 70% of our
ordinary shares (by both vote and value) by reason of holding stock
in Medtronic, Inc. Therefore, under current law, we should not be
treated as a U.S. corporation for U.S. federal income tax purposes.
However, there is limited guidance regarding the application of
Section 7874, including the application of the ownership test. If we
were to be treated as a U.S. corporation for federal tax purposes,
we could be subject to substantially greater U.S. tax liability than
currently contemplated as a non-U.S. corporation.

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.

RISKS RELATING TO OUR JURISDICTION OF INCORPORATION

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

Our shareholders may have more difficulty protecting their
interests than would shareholders of a corporation incorporated
in a jurisdiction of the United States. 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.

MEDTRONIC PLC 2018 Form 10-KPART I
Item 1A Risk Factors

of 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 shares.

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

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

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

Shareholders entitled to an exemption from Irish dividend
withholding tax on dividends received from us will not be subject
to Irish income tax in respect of those dividends unless they have
some connection with Ireland other than their shareholding in our
Company (for example, they are resident in Ireland). Shareholders
who receive dividends subject to Irish dividend withholding tax
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.

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 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 a shareholder holds our
shares directly rather than beneficially through DTC, any transfer

MEDTRONIC PLC 2018 Form 10-K
PART I
Item 1B Unresolved Staff Comments

Item 1B Unresolved Staff Comments

None.

Item 2 Properties

Medtronic’s principal executive office is located in Dublin, 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 10 million square feet. Approximately 36 percent of the
manufacturing and research facilities are owned by Medtronic and the balance is leased. The following is a summary of the Company’s
largest manufacturing and research facilities by location:

Location Country or State

Square Feet (in thousands)

Connecticut

China

Minnesota

Puerto Rico

Mexico

California

Italy

Ireland

Texas

Dominican Republic

Arizona

Switzerland

Colorado

1,098

985

969

831

762

495

454

446

431

304

294

283

276

Medtronic also maintains sales and administrative offices in the U.S. at 12 locations in 10 states and outside the U.S. at 168 locations in
70 countries. Most of these locations are leased. The Company is using substantially all of its currently available productive space to develop,
manufacture, and market 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 19 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 2018 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 2018:

Fiscal Period

1/27/2018-2/23/2018

2/24/2018-3/30/2018

3/31/2018-4/27/2018

TOTAL

Total Number of Shares
Purchased

Average Price Paid per Share

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

Maximum Approximate
Dollar Value of Shares
that may yet be Purchased
Under the Program

232,323

1,007,445

1,270,691
2,510,459

86.09

79.58

78.70
79.74

232,323

1,007,445

1,270,691
2,510,459

4,166,826,968

4,086,673,551

3,986,698,992
3,986,698,992

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. As authorized by the Board of Directors, the Company’s
share repurchase program expires when the total number of
authorized shares have been repurchased. This repurchase
authorization was replaced in June 2017 with the repurchase
authorization described below. As such, the maximum number
of shares that may yet be purchased under the June 2015 share
repurchase program is no longer applicable to the repurchase
program in place.

In June 2017, the Company’s Board of Directors authorized the
repurchase of $5.0 billion of the Company’s ordinary shares. This
authorization replaces the June 2015 authorization described
above. There is no specific time-period associated with this
repurchase authorization.

On June 20, 2018, there were approximately 29,965 shareholders
of record of the Company’s ordinary shares. Ordinary cash
dividends declared and paid totaled 46.0 cents per share for each
quarter of fiscal year 2018 and 43.0 cents per share for each
quarter of fiscal year 2017. 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

2018 High

2018 Low

2017 High

2017 Low

1st Quarter

2nd Quarter

3rd Quarter

4th Quarter

89.72

81.50

89.27

78.63

85.07

76.52

88.65

80.71

87.93

77.06

85.09

69.35

87.30

76.41

84.00

74.27

MEDTRONIC PLC 2018 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 26, 2013 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

2013

128

119
120

2014

Shaded region represents +/-50%

174

157
139

181

166
139

194

195
164

194

234
187

2015

2016

2017

2018

Medtronic, Inc. / Medtronic plc

S&P 500 Health Care Equipment Index

S&P 500 Index

Company/Index

April 2013

April 2014

April 2015

April 2016

April 2017

April 2018

Medtronic, Inc. / Medtronic plc

100.00

128.10

173.85

180.96

194.03

194.16

S&P 500 Index

S&P 500 Health Care Equipment Index

100.00

120.27

119.09

139.48

156.85

139.05

166.19

163.96

194.71

187.24

234.34

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 EU if they had been made between
Member States of the EU. 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, Syria, Tunisia and Ukraine.

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 2018 Form 10-KPART II
Item 5 Market for Medtronic’s Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity Securities

■■

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.

MEDTRONIC PLC 2018 Form 10-KPART II
Item 6 Selected Financial Data

Item 6 Selected Financial Data

Our fiscal year-end is the last Friday in April, and therefore, the total weeks in a fiscal year fluctuates between 52 and 53 weeks. Fiscal years
2018, 2017, 2015, and 2014 were 52-week years. Fiscal year 2016 was a 53-week year, with the additional week occurring in the first quarter.
The table below illustrates operating results and other selected financial data for fiscal years 2014 to 2018:

(in millions, except per share data and additional information)

2018

2017

2016

2015(1)

2014

Fiscal Year

Operating Results:

Net sales

Cost of products sold

Research and development expense

Selling, general, and administrative expense

Amortization of intangible assets

Restructuring charges, net

Acquisition-related items

Certain litigation charges

Divestiture-related items

Gain on sale of businesses

Special charge (gain), net

Other expense, net

Operating profit

Operating profit margin percent

Investment loss

Interest expense, net

Income before income taxes

Income tax provision

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(2)
Current ratio(2)(3)
Total assets(2)

Long-term debt
Shareholders’ equity(2)
Additional Information:

Full-time employees at year-end

Full-time equivalent employees at year-end

$ 29,953

$ 29,710

$ 28,833

$ 20,261

$ 17,005

9,055

2,253

9,974

1,823

104

114

(697)

505

6,651

22.2%

227

749

5,675

2,580

3,095

9,291

2,193

9,711

1,980

363

220

300

—

100

222

5,330

9,142

2,224

9,469

1,931

290

283

—

107

5,361

17.9%

18.6%

—

728

4,602

578

4,024

955

4,336

798

3,538

—

6,309

1,640

6,904

733

237

550

—

(38)

118

3,766

18.6%

—

280

3,486

811

2,675

—

4,333

1,477

5,847

349

117

770

—

181

3,813

22.4%

—

108

3,705

640

3,065

—

3,104

4,028

3,538

2,675

3,065

2.29

2.27

1.84

2.92

2.89

1.72

2.51

2.48

1.52

2.44

2.41

1.22

3.06

3.02

1.12

$ 12,896

$ 10,272

$ 16,391

$ 21,627

$ 15,607

2.3:1.0

91,393

23,699

50,720

86,368

98,003

1.7:1.0

99,857

25,921

50,208

91,267

102,688

3.3:1.0

99,685

30,109

51,977

88,063

98,017

3.3:1.0

106,726

33,752

53,144

85,573

92,500

3.8:1.0

37,984

10,315

19,357

43,305

49,247

(1) Covidien plc 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) Amounts and ratios have been immaterially revised as necessary for prior periods, as discussed in Note 1 to the consolidated financial statements in

“Item 8. Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.

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

MEDTRONIC PLC 2018 Form 10-KPART II

Item 7 Management’s Discussion and Analysis of Financial Condition

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

and Results of Operations

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 27, 2018
and April 28, 2017 and for each of the three fiscal years ended
April 27, 2018 (fiscal year 2018), April 28, 2017 (fiscal year 2017),
and April 29, 2016 (fiscal year 2016), which are presented within
"Item 8. Financial Statements and Supplementary Data" in this
Annual Report on Form 10-K. Our fiscal year-end is the last Friday
in April, and therefore, the total weeks in a fiscal year fluctuates
between 52 and 53 weeks. Fiscal years 2018 and 2017 were
52-week years. Fiscal year 2016 was a 53-week year, with the
additional week occurring in the first quarter.

Throughout this Management’s Discussion and Analysis, we
present certain financial measures that we use 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 U.S. (U.S.
GAAP). These financial measures are considered "non-GAAP
financial measures" and are intended to supplement, and should
not be considered as superior to, financial measures presented in
accordance with U.S. GAAP. We generally use non-GAAP financial
measures to facilitate management's review of the operational
performance of the Company and as a basis for strategic
planning. We believe that non-GAAP financial measures provide
information useful to investors in understanding the Company's

EXECUTIVE LEVEL OVERVIEW

underlying operational performance and trends and may facilitate
comparisons with the performance of other companies in the
medical technologies industry.

As presented in the GAAP to Non-GAAP Reconciliations section
below, our non-GAAP financial measures exclude the impact of
certain charges or gains that contribute to or reduce earnings and
that may affect financial trends, and include certain charges or
benefits that result from transactions or events that we believe
may or may not recur with similar materiality or impact to our
operations in future periods (Non-GAAP Adjustments).

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

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

Refer to the “GAAP to Non-GAAP Reconciliations," "Income Taxes,"
and "Free Cash Flow" sections for reconciliations of the non-GAAP
financial measures to their most directly comparable financial
measures prepared in accordance with U.S. GAAP.

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.
Our primary products include those for cardiac rhythm disorders,
cardiovascular disease, advanced and general surgical care,

respiratory and monitoring solutions, renal care, neurological
disorders, spinal conditions and musculoskeletal trauma, urological
and digestive disorders, and ear, nose, and throat and diabetes
conditions.

The table below presents net income attributable to Medtronic and diluted earnings per share for fiscal years 2018, 2017, and 2016:

(in millions, except per share data)

Net income attributable to Medtronic

Diluted earnings per share

Diluted earnings per share (EPS) for fiscal year 2018 as compared
to fiscal year 2017 was unfavorably affected by the net $2.4 billion
tax charge related to the enactment of U.S. comprehensive tax
legislation, commonly referred to as the Tax Cuts and Jobs Act
(the Tax Act), which had a significant effect on the income tax
provision in fiscal year 2018. Further, diluted EPS for fiscal year
2018 was unfavorably affected by an investment loss related to
the impairment of certain cost and equity method investments
of $227 million, along with impairments of IPR&D of $68 million.

2018

3,104

2.27

Fiscal Year

2017

4,028

2.89

Percent Change

2016

2018

2017

3,538

2.48

(23)%

(21)%

14%

17%

Additionally, for fiscal year 2018, diluted EPS was unfavorably
affected by the July 29, 2017 sale of the Patient Care, Deep Vein
Thrombosis, and Nutritional Insufficiency businesses within the
Minimally Invasive Therapies Group. Net sales of these businesses
for fiscal years 2018 and 2017 were $0.6 billion and $2.4 billion,
respectively. For fiscal year 2018, diluted EPS was partially offset
by a $697 million gain on the sale of the Patient Care, Deep Vein
Thrombosis, and Nutritional Insufficiency businesses.

MEDTRONIC PLC 2018 Form 10-KPART II
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations

Diluted EPS for fiscal year 2017 as compared to 2016 was
favorably affected by the recognition of certain tax adjustments of
$417 million, including a charge of $442 million in fiscal year 2016
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, partially offset by 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 we disposed. Further, diluted EPS was also affected by a
$226 million charge in fiscal year 2016 related to the recognition of
the fair value step-up of acquired Covidien inventory.

GAAP to Non-GAAP Reconciliations

The tables below present reconciliations of our Non-GAAP
financial measures to the most directly comparable financial
measures prepared in accordance with U.S. GAAP for fiscal years
2018, 2017, and 2016:

(in millions, except per share data)

GAAP
Non-GAAP Adjustments:

Restructuring and associated costs(2)

Acquisition-related items
Debt redemption premium(3)
Divestiture-related items(4)

Certain litigation charges
Investment loss(5)

IPR&D impairment
Gain on sale of businesses(6)
Hurricane Maria(7)
Special charge(8)

Amortization of intangible assets
Certain tax adjustments, net(9)
NON-GAAP

Fiscal year ended April 27, 2018

Income Before
Income Taxes

Income Tax Provision
(Benefit)

Net Income
Attributable to
Medtronic

Diluted EPS(1)

Effective Tax
Rate

5,675

2,580

3,104

2.27

45.5%

107

132

115

227

(697)

1,823

—
7,641

(1)

—

322

(1,907)
1,120

103

228

(697)

1,501

1,907
6,530

0.06

0.07

0.02

0.08

0.04

0.17

0.03

(0.51)

0.02

0.04

1.10

1.39
4.77

18.7

31.8

31.6

10.4

13.1

(0.4)

10.9

—

2.9

32.5

17.7

—
14.7 %

Fiscal year ended April 28, 2017

Income Before
Income Taxes

Income Tax Provision
(Benefit)

Net Income
Attributable to
Medtronic

Diluted EPS(1)

Effective Tax
Rate

4,602

578

4,028

2.89

12.6%

373

230

300

100

1,980

—
7,623

101

110

520

(202)
1,232

272

156

190

1,460

202
6,395

0.20

0.11

0.14

0.05

0.02

1.05

0.15
4.60

27.1

32.2

36.7

37.0

36.8

26.3

—
16.2%

(in millions, except per share data)

GAAP
Non-GAAP Adjustments:

Restructuring charges, net

Acquisition-related items

Certain litigation charges
Special charge(8)

Impact of inventory step-up(10)

Amortization of intangible assets
Certain tax adjustments, net(11)

NON-GAAP

MEDTRONIC PLC 2018 Form 10-KPART II
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations

Fiscal year ended April 29, 2016

Income Before
Income Taxes

Income Tax
Provision (Benefit)

Net Income
Attributable to
Medtronic

Diluted EPS(1)

Effective Tax
Rate

4,336

798

3,538

2.48

18.4%

299

283

183

226

1,931

—
7,399

464

(417)
1,171

221

212

118

165

1,467

417
6,228

0.15

0.08

0.01

0.03

0.12

0.02

1.03

0.29
4.37

26.1

25.1

35.5

34.6

37.1

27.0

35.6

24.0

—
15.8%

(in millions, except per share data)

GAAP
Non-GAAP Adjustments:

Restructuring charges, net

Acquisition-related items

Debt tender premium

Certain litigation charges
Investment loss(12)
Impact of inventory step-up(13)

Loss on previously held forward starting
interest rate swaps

Amortization of intangible assets
Certain tax adjustments, net(14)

NON-GAAP

(1) Amounts in this column have been intentionally rounded to the nearest $0.01 and, therefore, may not sum.
(2) Associated costs include costs incurred as a direct result of the restructuring program, such as salaries for employees supporting the program and

consulting expenses.

(3) The charge, included within interest expense, net in our consolidated statements of income, was recognized in connection with the early redemption of

approximately $1.2 billion of Medtronic Inc. senior notes.

(4) The transaction expenses incurred in connection with the divestiture of the Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency

businesses.

(5) The charge was recognized in connection with the impairment of certain cost and equity method investments.
(6) The gain on the divestiture of the Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency businesses.
(7) The charges represent idle facility costs, asset write-downs, and humanitarian efforts related to Hurricane Maria.
(8) The charge represents a contribution to the Medtronic Foundation.
(9) The net charge primarily relates to the impact of U.S. tax reform, inclusive of the transition tax, remeasurement of deferred tax assets and liabilities,
and the decrease in the U.S. statutory tax rate. Additionally, the net charge includes the impacts from the divestiture of our Patient Care, Deep Vein
Thrombosis, and Nutritional Insufficiency businesses, and the tax cost associated with an internal reorganization, which were partially offset by the tax
effects from the intercompany sale of intellectual property.

(10) The charge represents the amortization of step-up in fair value of inventory acquired in connection with the HeartWare acquisition.
(11) The net charge primarily relates to the tax effect from the recognition of the outside basis of certain subsidiaries which were included in the divestiture
of our Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency businesses completed during the second quarter of fiscal year 2018, along
with certain tax charges recorded in connection with the redemption of an intercompany minority interest, and the resolution of various tax matters
from prior periods.

(12) The charge represents the impairment of a debt investment.
(13) The charge represents the amortization of step-up in fair value of inventory acquired in connection with the Covidien acquisition.
(14) The net charge primarily relates to 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 Medtronic’s U.S.-controlled non-U.S. subsidiaries, partially offset by 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 we
disposed.

MEDTRONIC PLC 2018 Form 10-KPART II
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations

NET SALES

Segment and Division

The table below illustrates net sales by segment and division for fiscal years 2018, 2017, and 2016:

Net Sales by Fiscal Year

Percent Change

(in millions)

Cardiac Rhythm & Heart Failure

Coronary & Structural Heart

Aortic & Peripheral Vascular

Cardiac and Vascular Group

Surgical Innovations(1)
Respiratory, Gastrointestinal, & Renal(1)

Minimally Invasive Therapies Group

Spine

Brain Therapies

Specialty Therapies

Pain Therapies

Restorative Therapies Group

Diabetes Group
TOTAL

2018

5,947

3,562

1,845

2017

5,649

3,113

1,736

2016

5,465

3,093

1,638

11,354

10,498

10,196

5,537

3,179

8,716

2,668

2,354

1,556

1,165

7,743

5,145

4,774

9,919

2,641

2,098

1,491

1,136

7,366

4,851

4,712

9,563

2,629

1,980

1,419

1,182

7,210

2018

(33)

(12)

2,140
$ 29,953

1,927
29,710

1,864
28,833

1 %

2017

—

(4)

3
3%

(1) During the second quarter of fiscal year 2018, the Surgical Solutions and Patient Monitoring & Recovery divisions of the Minimally Invasive Therapies

Group were realigned into the Surgical Innovations and Respiratory, Gastrointestinal, & Renal divisions. Refer to the "Minimally Invasive Therapies Group"
discussion within this Management's Discussion and Analysis for more information on the composition of the Surgical Innovations and Respiratory,
Gastrointestinal, & Renal divisions.

For fiscal year 2018, total net sales were unfavorably affected
by the divestiture of the Patient Care, Deep Vein Thrombosis,
and Nutritional Insufficiency businesses within the Minimally
Invasive Therapies Group which closed on the first day of the
second quarter of fiscal year 2018. 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 clear acceleration in our
innovation cycle, with several meaningful new product launches
during fiscal year 2018 across all of our segments. We advanced

a pipeline of groundbreaking medical technology, and we are
creating new markets, disrupting existing markets, and leading
in several of the fastest growth markets. In globalization, net
sales in emerging markets grew 12% during fiscal year 2018 as
compared to fiscal year 2017. Our consistent emerging market
performance continues to benefit from geographic diversification,
with strong, balanced results around the world. In our third growth
strategy, economic value, we continue to execute our value-based
healthcare signature programs and aggressively develop unique,
value-based healthcare solutions that directly link our therapies
to improving outcomes across each of our segments. We remain
focused on leading the shift to healthcare payment systems that
reward value and improved patient outcomes over volume.

Segment and Market Geography
FISCAL YEAR 2018
(in millions)

FISCAL YEAR 2017
(in millions)

FISCAL YEAR 2016
(in millions)

Emerging
Markets(3)
$4,451

15%

U.S. (1)
$15,875

Emerging
Markets(3)
$3,962

13%

U.S. (1)
$16,663

Emerging
Markets(3)
$3,703

13%

U.S. (1)
$16,422

32%

53%

Non-U.S.
Developed(2)
$9,085

Non-U.S.
Developed(2)
$9,627

31% 56%

30%

57%

Non-U.S.
Developed(2)
$8,708

Consolidated Net Sales
$29,953

Consolidated Net Sales
$29,710

Consolidated Net Sales
$28,833

MEDTRONIC PLC 2018 Form 10-KPART II
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations

The tables below include net sales by market geography for each of our segments for fiscal years 2018, 2017, and 2016:

(in millions)

Fiscal Year
2018

U.S.(1)

Fiscal Year

2017 % Change

Non-U.S. Developed Markets(2)

Emerging Markets(3)

Fiscal Year
2018

Fiscal Year

2017 % Change

Fiscal Year
2018

Fiscal Year

2017 % Change

Cardiac and Vascular Group

5,681 $

5,454

4% $

3,790

$ 3,393

12% $

1,883 $

1,651

Minimally Invasive Therapies
Group

Restorative Therapies Group

Diabetes Group

TOTAL

3,804

5,164

5,049

5,012

1,226

1,148
$ 15,875 $ 16,663

(25)

7
(5)% $

3,378

1,720

739
9,627

3,479

1,588

625
$ 9,085

(3)

6% $

1,534

859

175
4,451 $

1,391

766

154
3,962

14%

14
12%

(in millions)

Fiscal Year
2017

U.S.(1)

Fiscal Year

2016 % Change

Non-U.S. Developed Markets(2)

Emerging Markets(3)

Fiscal Year
2017

Fiscal Year

2016 % Change

Fiscal Year
2017

Fiscal Year

2016 % Change

Cardiac and Vascular Group

5,454 $

5,347

2% $

3,393

$ 3,283

3% $

1,651 $

1,566

Minimally Invasive Therapies
Group

Restorative Therapies Group

Diabetes Group

TOTAL

5,049

5,012

5,014

4,921

1,148

1,140
$ 16,663 $ 16,422

1
1% $

3,479

1,588

625
9,085

3,299

1,542

584
$ 8,708

1,391

766

7
4% $

154
3,962 $

1,250

747

140
3,703

(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 2018, net sales for the U.S. decreased 5 percent,
developed markets outside the U.S. increased 6 percent, and
emerging markets increased 12 percent as compared to fiscal year
2017. Net sales declines in the U.S. were impacted by the July 29,
2017 divestiture of our Patient Care, Deep Vein Thrombosis, and
Nutritional Insufficiency businesses within the Minimally Invasive
Therapies Group, partially offset by growth in the other segments.
Net sales growth in non-U.S. developed markets was led by strong
performance in Western Europe. Emerging market sales growth
was driven by solid performance in all of our segments, with strong
performance in China, Latin America, Eastern Europe and the
Middle East & Africa. Currency had a favorable effect of $494 million
on net sales for fiscal year 2018.

For fiscal year 2017, net sales for the U.S. increased 1 percent,
non-U.S. developed markets increased 4 percent, and emerging
markets increased 7 percent as 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 Group. In Emerging
Markets, net sales growth was also attributable to the expansion of
access to our therapies.

Looking ahead, our segments are likely to face competitive product
launches 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. Additionally, changes in procedural volumes could
affect our Cardiac and Vascular, Minimally Invasive Therapies, and
Restorative Therapies Groups.

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 2018 were $11.4 billion, an increase
of 8 percent as compared to fiscal year 2017. Currency had a
favorable impact on net sales for fiscal year 2018 of $215 million.
Cardiac and Vascular Group's net sales for fiscal year 2018, as
compared to fiscal year 2017, benefited from strong net sales in all
three divisions. See the more detailed discussion of each division's
performance below.

Cardiac Rhythm & Heart Failure net sales for fiscal year 2018
were $5.9 billion, an increase of 5 percent as compared to fiscal
year 2017. Cardiac Rhythm & Heart Failure net sales growth
for fiscal year 2018 was driven by strong growth in Arrhythmia
Management and Heart Failure. The strong growth in Arrhythmia
Management was largely due to growth in AF Solutions, driven
by the continued global acceptance of our Arctic Front Advance
Cardiac CryoAblation Catheter (Arctic Front) system, growth in
Diagnostics, driven by the continued adoption of the Reveal LINQ
insertable cardiac monitor, as well as strong adoption of the Micra

MEDTRONIC PLC 2018 Form 10-KPART II
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations

transcatheter pacing system and TYRX absorbable antibacterial
envelope. The strong growth in Heart Failure was driven by growth
in Mechanical Circulatory Support from sales of the HVAD system,
as well as continued demand for the CRT-P quadripolar pacing
system, which launched in the U.S. in the first quarter of fiscal
year 2018.

Coronary & Structural Heart net sales for fiscal year 2018 were
$3.6 billion, an increase of 14 percent as compared to fiscal year
2017. Coronary & Structural Heart net sales growth for fiscal
year 2018 was largely driven by the continued strong customer
adoption of the Evolut PRO Transcatheter Aortic Valve system
(Evolut PRO) and the Evolut R 34mm transcatheter aortic heart
valve, as well as continued penetration into intermediate risk in the
U.S., which received approval late in the first quarter of fiscal year
2018. Net sales growth was also driven by the continued strong
demand for the Resolute Onyx drug-eluting stent in the U.S. and
Japan, which launched in the first quarter of fiscal year 2018.

Aortic & Peripheral Vascular net sales for fiscal year 2018 were
$1.8 billion, an increase of 6 percent as compared to fiscal year
2017. Aortic & Peripheral Vascular net sales growth for fiscal
year 2018 was driven by growth in Valiant Captivia Thoracic stent
grafts, Percutaneous Transluminal Angioplasty (PTA) balloons
and drug-coated balloons, as well as success of the Heli-FX
EndoAnchor System. Net sales growth was further driven by
strong performance in EndoVenous due to accelerated growth
of the VenaSeal vein closure system, for which approval for
reimbursement payment in the U.S. from the Centers for Medicare
& Medicaid Services (CMS) was initiated in January 2018.

The Cardiac and Vascular Group's net sales for fiscal year 2017
were $10.5 billion, an increase of 3 percent as compared to fiscal
year 2016. The Cardiac and Vascular Group’s net sales for fiscal
year 2017 were unfavorably affected by an additional selling week
during the first quarter fiscal year 2016. The Cardiac and Vascular
Group's net sales for fiscal year 2017, as compared to 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 the 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 as 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 as 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,
as well as approval in Japan, during the first quarter 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 as 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.

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

Continued acceptance and 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 Food and Drug Administration
(FDA) approval in May 2017, and launched in the first quarter of
fiscal year 2018.

■■

Continued acceptance and growth of the Claria MRI CRT-D
system with EffectivCRT Diagnostic and Effective CRT during
AF algorithm, which launched in Japan during the third quarter of
fiscal year 2018.

Continued growth from the Reveal LINQ insertable cardiac
monitor.

Continued growth of our Micra transcatheter pacing system.
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. We received final
approval for reimbursement in the U.S. from the CMS and in
Japan from the Ministry of Health, Labour, and Welfare during
the fourth quarter of fiscal year 2017 and during the second
quarter of fiscal year 2018, respectively, for this transformative
therapy, which we expect will continue to accelerate sales in the
U.S. and in Japan.

Acceptance and growth from the Azure XT and S SureScan
pacing systems, which launched in the U.S. during the third
quarter of fiscal year 2018. Azure pacemakers feature
Medtronic-exclusive BlueSync technology, which enables
automatic, secure wireless remote monitoring with increased
device longevity.

Continued acceptance and growth of the HVAD System as a
Destination Therapy for patients with advanced heart failure
who are not candidates for heart transplants. The HVAD
System, a left ventricular assist device or LVAD, helps the heart
pump and increases the amount of blood that flows through
the body. In the U.S., we received FDA approval in September

MEDTRONIC PLC 2018 Form 10-KPART II
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations

2017 for this Destination Therapy indication, and expect to
receive thoracotomy indication during fiscal year 2019. Further,
we expect to launch the HVAD system in Japan during fiscal
year 2019.

Continued acceptance and 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 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 growth from penetration of the self-expanding
CoreValve Evolut Transcatheter Aortic Valve Replacement
platform into intermediate risk indication in the U.S., which
received FDA approval during the first quarter of fiscal year 2018.

Continued acceptance and growth from 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 also received CE
Mark approval at the end of the first quarter of fiscal year 2018
and launched in Europe during the second quarter of fiscal year
2018. Further, Evolut PRO is expected to launch in Japan during
the first half of fiscal year 2019.

Continued acceptance and growth from the market release
of Resolute Onyx, which launched in the first quarter of fiscal
year 2018 in the U.S. and in Japan. 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 growth of the IN.PACT Admiral drug-
coated balloon for the treatment of peripheral artery disease in
the upper leg.

Continued acceptance and growth from the VenaSeal vein
closure system in the United States, for which reimbursement
payment was established in January 2018 and payer coverage
has been gradually increasing. The VenaSeal system is a unique
non-thermal solution to address superficial venous disease that
provides improved patient comfort, reduces the recovery time,
and eliminates the risk of thermal nerve injury.

Continued acceptance and growth from the Valiant family of
thoracic stent grafts. Building on the success of Valiant Captivia,
we expect to launch the next generation Valiant Navion in the
United States and Europe during fiscal year 2019.

Continued acceptance and growth from the expansion of the
Endurant II used with the Heli-FX EndoAnchor for the short
neck indication in the U.S., which received FDA approval in
October 2017.

■■

Minimally Invasive Therapies Group

The Minimally Invasive Therapies Group’s products span the
entire continuum of patient 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 products including surgical stapling
devices, vessel sealing instruments, wound closure, electrosurgery
products, hernia mechanical devices, mesh implants, advanced
ablation, interventional lung, ventilators, capnography, airway
products, sensors, dialysis, and monitors. Net sales for the three
months ended July 28, 2017 and fiscal years 2017 and 2016 also
include sales of dental and animal health, chart paper, wound care,
incontinence, electrodes, SharpSafety, thermometry, perinatal
protection, blood collection, compression, and enteral feeding
offerings, which were divested on July 29, 2017.

The Minimally Invasive Therapies Group’s net sales for fiscal year
2018 were $8.7 billion, a decrease of 12 percent as compared
to fiscal year 2017. Currency had a favorable impact on net
sales of $147 million for fiscal year 2018. The Minimally Invasive
Therapies Group's net sales for fiscal year 2018 were affected by
the divestiture of the Patient Care, Deep Vein Thrombosis, and
Nutritional Insufficiency businesses on July 29, 2017.

Subsequent to the divestiture, during the second quarter of
fiscal year 2018, the Surgical Solutions and Patient Monitoring &
Recovery divisions were realigned into the Surgical Innovations
and Respiratory, Gastrointestinal, & Renal divisions. The Surgical
Innovations division consists of the Advanced Surgical and General
Surgical businesses. The Advanced Surgical business includes the
Advanced Stapling, Advanced Energy, Hernia, Gynecology, and
Interventional Lung product lines. The General Surgical business
includes the Wound Closure, Electrosurgery, and Instrument
product lines.

The Respiratory, Gastrointestinal, & Renal division consists of
the Respiratory & Monitoring Solutions and Renal Care Solutions
businesses. The Respiratory & Monitoring Solutions business
includes the Patient Monitoring, Respiratory Solutions, Advanced
Ablation, and GI Solutions product lines. The Renal Care Solutions
business includes the Renal Access and Dialyzers product lines.

Surgical Innovations net sales for fiscal year 2018 were $5.5 billion,
an increase of 8 percent as compared to fiscal year 2017. Surgical
Innovations net sales growth was driven by new products in
Advanced Stapling and Advanced Energy, including the Signia
powered surgical stapling system and endo stapling specialty
reloads. Also driving net sales was our Valleylab FT10 energy
platform and new iterations of our LigaSure vessel sealing
instruments, and growth in emerging markets.

Respiratory, Gastrointestinal, & Renal net sales for fiscal year 2018
were $3.2 billion, a decrease of 33 percent as compared to fiscal
year 2017. Respiratory, Gastrointestinal, & Renal net sales declined
as a result of the July 29, 2017 divestiture of the Patient Care,
Deep Vein Thrombosis, and Nutritional Insufficiency businesses.
Apart from the decline in net sales due to the divestiture, net sales
performance in Respiratory, Gastrointestinal, & Renal benefited
from growth in GI Solutions, the strength in Nellcor pulse oximetry
products due to the intensity of the flu season in the U.S., the
continued adoption of MicroStream capnography monitoring
product, and growth in Airway and Ventilation net sales.

Surgical Innovations net sales for fiscal year 2017 were $5.1 billion,
an increase of 6 percent as compared to fiscal year 2016. Surgical
Innovations 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

MEDTRONIC PLC 2018 Form 10-KPART II
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations

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 the LigaSure vessel sealing instruments along with the
Valleylab FT10 energy platform helped mitigate the negative
impact of reprocessing. Surgical Innovations also benefited from
the acquisition of Smith & Nephew's gynecology business, which
was acquired during the second quarter of fiscal year 2017.

Respiratory, Gastrointestinal, & Renal net sales for fiscal year 2017
were $4.8 billion, an increase of 1 percent as compared to fiscal
year 2016. Respiratory, Gastrointestinal, & Renal net sales growth
was driven by strong Respiratory & Monitoring Services sales of the
Puritan Bennett 980 and Nellcor pulse oximetry products, along
with growth in emerging markets. Respiratory, Gastrointestinal,
& Renal also benefited from the acquisition of Bellco, which was
acquired during the fourth quarter of fiscal year 2016.

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

Continued acceptance and 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.

■■

Our ability to execute ongoing strategies to develop, gain
regulatory approval, and commercialize new products, including
our surgical robotics platform.

The July 29, 2017 divestiture of the Patient Care, Deep Vein
Thrombosis, and Nutritional Insufficiency businesses. Net sales
of the businesses included in the divestiture were $2.4 billion
for fiscal years 2017 and 2016. We have entered into Transition
Manufacturing Agreements (TMAs) with Cardinal Health,
Inc. (Cardinal). The TMAs will contribute to net sales and are
designed to ensure and facilitate an orderly transfer of business
operations for a transition period of two to five years, with the
ability to extend upon mutual agreement of the parties.

Continued acceptance and 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 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. In addition, the HD multi-pass
system reduces infrastructure by requiring less water, less start-
up costs, and offers high quality ultrapure dialysate treatment.
The system is expected to launch in late fiscal year 2020, but
timing may shift depending on regulatory requirements.

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, and Patient Monitoring. 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 acceptance of less invasive standards of care,
including the areas of GI Solutions and Advanced Ablation.
Recently launched products include the PillCam COLON
capsule endoscopy, the Barrx platform through ablation with the
Barrx 360 Express catheter, and the Emprint ablation system
with Thermosphere Technology, which maintains predictable
spherical ablation zones throughout procedures reducing
procedure time and cost.

Continued acceptance of Interventional Lung Solutions.
Products include 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
& Nephew's gynecology business. The addition expanded and
strengthened the surgical offerings and complemented our
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 2018 were $7.7 billion,
an increase of 5 percent as compared to fiscal year 2017. Currency
had a favorable impact on net sales for fiscal year 2018 of
$85 million. The Restorative Therapies Group’s performance for
fiscal year 2018 was driven by strong growth in Brain Therapies and
solid growth in Specialty Therapies and Pain Therapies. See the
more detailed discussion of each division's performance below.

MEDTRONIC PLC 2018 Form 10-KPART II
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations

Spine net sales for fiscal year 2018 were $2.7 billion, an increase of
1 percent as compared to fiscal year 2017. Spine net sales growth
was driven by growth in bone morphogenetic protein (composed
of INFUSE bone graft (InductOs in the European Union)), partially
offset by a slight decline in Core Spine. Core Spine net sales
declined due to continued overall market softness in the U.S. and
Europe, partially offset by the continued success of our Surgical
Synergy strategy, which integrates our spinal implants with enabling
technologies such as imaging, navigation, power instruments,
nerve monitoring and Mazor robotics sold by our Neurosurgery
business, and our "Speed-to-Scale" initiative, which involves
faster innovation cycles and the launching of a steady cadence
of new products at scale with sets immediately available for the
entire market.

Brain Therapies net sales for fiscal year 2018 were $2.4 billion,
an increase of 12 percent as compared to fiscal year 2017. Brain
Therapies net sales growth was driven by strong growth in both
Neurovascular and Neurosurgery. Neurovascular net sales growth
was driven by strength across our stroke portfolio, specifically in
stents, as a result of our leading role in the development of the
endovascular therapy market for treatment of ischemic stroke.
Neurosurgery net sales growth was driven by strong sales of the
StealthStation S8 surgical navigation system, O-arm O2 surgical
imaging system, Visualase MRI-guided laser ablation system, Midas
disposables, as well as disposables revenue from placement of
capital equipment through our distributor agreement with Mazor.
Net sales growth in Neurovascular and Neurosurgery for fiscal year
2018 was partially offset by slight declines in Brain Modulation due
to competitive pressures in major markets.

Specialty Therapies net sales for fiscal year 2018 were $1.6 billion,
an increase of 4 percent as compared to fiscal year 2017. Specialty
Therapies net sales growth was driven by growth in ENT, Pelvic
Health, and Transformative Solutions.

Pain Therapies net sales for fiscal year 2018 were $1.2 billion,
an increase of 3 percent as compared to fiscal year 2017. Pain
Therapies net sales growth was driven by Interventional from the
OsteoCool RF Spinal Tumor ablation system. Within Spinal Cord
Stimulation, the Intellis Platform launch and ongoing roll-out of
the Evolve workflow algorithm contributed to net sales in fiscal
year 2018 and helped mitigate competitive pressures in the U.S.
and Europe.

Spine net sales for fiscal year 2017 were $2.6 billion, flat as
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, 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 Transformative
Solutions and Pelvic Health and growth in ENT. Net sales growth
in Transformative Solutions 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 benefited 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.

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

■■

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

Continued growth from Neurosurgery StealthStation and
O-Arm Imaging Systems, Midas, and ENT power systems.

Continued sales of robotic units and associated market
adoption of robot-assisted spine procedures, under an exclusive
worldwide distributor agreement with Mazor Robotics.

Continued market acceptance of our new integrated solutions
through the Surgical Synergy strategy, which integrates our
spinal implants with enabling technologies such as imaging,
navigation, power instruments, nerve monitoring and
Mazor robotics.

Continued success of our "Speed-to-Scale" program 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.

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.

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

MEDTRONIC PLC 2018 Form 10-KPART II
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations

■■

the world. Our Intellis spinal cord stimulator and Evolve workflow
algorithm have received positive customer reaction since their
launch in the second quarter of fiscal year 2018.

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. The U.S. FDA lifted
its distributor requirements on our implantable drug pump in
October and its warning letter in November 2017.

Continued acceptance of our devices for the treatment of
Parkinson's Disease and other movement disorders.

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 Transformative Solutions products and strategies to focus
on its four core markets of orthopedic, spine, breast surgery, and
Cardiac Rhythm Disease Management device replacements.

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 2018 were $2.1 billion, an increase of 11 percent
as compared to fiscal year 2017. The Diabetes Group's net sales
increased for fiscal year 2018, primarily as a result of an increase
in sales in the U.S. due to continued growth in our customer base
through the continued adoption of the MiniMed 670G hybrid
closed loop system. Further, we experienced continued growth
in international markets due to strong sales of the MiniMed 640G
system in Europe and Asia Pacific.

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. 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.

CRITICAL ACCOUNTING ESTIMATES

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

Continued increases in sensor manufacturing capacity to
benefit from rapidly growing demands. In the fourth quarter of
2018, sensor expansion efforts were met with unconstrained
capacity and completed with no back orders. We expect to keep
sensor utilization strong and continue commercial expansion
into the new fiscal year.

■■

Continued acceptance and growth of the MiniMed 670G system,
the first hybrid closed loop system in the world. The system
features our most advanced SmartGuard 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 growth of the MiniMed 640G system
with SmartGuard Suspend before Low technology, which has
launched in Europe, Australia, and select countries in Latin
America and Asia, and the MiniMed 620G system, the first
integrated system customized for the Japanese market. The
MiniMed 640G system received regulatory approval in Japan in
the fourth quarter of fiscal year 2018.

Continued acceptance and growth of Guardian Connect CGM
system which displays information directly to a smartphone.
This system received CE mark in 2016 and has launched both
internationally and now in the U.S. after receiving FDA approval in
the fourth quarter 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.

Continued partnership and growth of our outcomes-based
agreement with Aetna, where a component of our pump
reimbursement is based on successfully meeting clinical
improvement thresholds as part of our value-based healthcare
solutions.

We have used various accounting policies to prepare the
consolidated financial statements in accordance with U.S. GAAP.
Our significant accounting policies are disclosed in Note 1 to the
consolidated financial statements 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 us to use judgment in making
estimates and assumptions that affect the reported amounts of
assets, liabilities, revenues, and expenses. These estimates reflect
our best judgment about economic and market conditions and the
potential effects on the valuation and/or carrying value of assets
and liabilities based upon relevant information available. We base
our estimates on historical experience and on various assumptions
that are believed to be reasonable under the circumstances, the

results of which form the basis for making judgments about the
carrying values of assets and liabilities that are not readily apparent
from other sources.

Our critical accounting estimates include the following:

Litigation Contingencies

We are involved in a number of legal actions involving product
liability, intellectual property and commercial disputes, shareholder
related matters, environmental proceedings, income tax disputes,
and governmental proceedings and investigations. The outcomes
of these legal actions are not completely within our control and
may not be known for prolonged periods of time. In some actions,
the enforcement agencies or private claimants seek damages, as

MEDTRONIC PLC 2018 Form 10-KPART II
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations

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.
Estimating probable losses from our litigation and governmental
proceedings is inherently difficult, 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 19 to the consolidated financial
statements in "Item 8. Financial Statements and Supplementary
Data" in this Annual Report on Form 10-K.

Income Tax Reserves and U.S. Tax Reform

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) the expiration
of the applicable 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.

On December 22, 2017, the U.S. government enacted the Tax
Act, which significantly revises U.S. corporate income taxation by,
among other things, lowering the U.S. corporate income tax rate,
broadening the base of taxation, and implementing a territorial tax
system. We have a measurement period of up to one year after
the enactment date of the Tax Act to finalize the recognition of
the related tax impacts. The final impact of the Tax Act may differ
from the provisional amounts recognized in the current period,
possibly materially, due to, among other things, changes in our
interpretation of the Tax Act, legislative or administrative actions to
clarify the intent of the statutory language provided that differ from
our current interpretation, any changes in accounting standards

ACQUISITIONS AND DIVESTITURES

for income taxes or related interpretations in response to the Tax
Act, or any updates or changes to estimates we have utilized to
calculate the impacts, including changes to current year earnings
estimates and applicable foreign exchange rates.

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 primarily 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 to determine fair value, most of which are based on
projected future cash flows. Our estimates associated with the
goodwill impairment test are considered critical due to the amount
of goodwill recorded on our consolidated balance sheets and the
judgment required in determining fair value, including projected
future cash flows. 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.

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's 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.

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 to determine fair value,
including projected future cash flows and discount rates.

Information regarding acquisitions and divestitures is included in Notes 2 and 3, respectively, to the consolidated financial statements in
“Item 8. Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.

MEDTRONIC PLC 2018 Form 10-KPART II
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations

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.

COSTS AND EXPENSES

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

Cost of products sold

Research and development expense

Selling, general, and administrative expense

Cost of Products Sold

We continue to focus on reducing our costs of production through
supplier management, manufacturing improvements, and
optimizing our manufacturing network.

Cost of products sold was $9.1 billion, $9.3 billion, and $9.1 billion
during fiscal years 2018, 2017, and 2016, respectively. The
decrease in cost of products sold as a percentage of sales from
fiscal year 2018 as compared to 2017 was due primarily to the
divestiture of lower-margin products in conjunction with the
divestiture of our Patient Care, Deep Vein Thrombosis, and
Nutritional Insufficiency businesses during fiscal year 2018 and a
$38 million charge during fiscal year 2017 related to the recognition
of the fair value step-up taken on inventory acquired in connection
with the HeartWare acquisition. The decrease in cost of products
sold as a percentage of sales due to the divestiture and fair-value
step-up on HeartWare inventory was partially offset by $17 million
of costs recognized in relation to restoring operations at four
Puerto Rico manufacturing sites after Hurricane Maria, including
idle facility costs, asset write-downs, and other facility-related
costs, and the infusion set recall in our Diabetes Group. The
decrease in fiscal year 2017 as compared to fiscal year 2016 was
largely due to a $226 million charge in fiscal year 2016 related to the
recognition of the fair value step-up of acquired Covidien inventory.

Research and Development Expense

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 was $2.3 billion, $2.2 billion,
and $2.2 billion during fiscal years 2018, 2017, and 2016,
respectively. Research and development expense remained fairly

Fiscal Year

2018

2017

2016

30.2%

7.5%

33.3%

31.3%

7.4%

32.7%

31.7%

7.7%

32.8%

consistent as a percentage of net sales with a slight decrease from
fiscal year 2016 to 2018 due, in part, to the timing of clinical trials
and product approvals, as well as our sales increasing at a slower
rate than the increase in research and development following
the divestiture of our Patient Care, Deep Vein Thrombosis, and
Nutritional Insufficiency businesses.

Selling, General, and Administrative Expense

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 $10.0 billion,
$9.7 billion, and $9.5 billion during fiscal years 2018, 2017, and
2016, respectively. Selling, general, and administrative expense
increased a percentage of net sales from fiscal year 2017 to 2018,
as we incurred expenses associated with new product launches
and Transition Service Agreements (TSAs). In conjunction with
the divestiture of our Patient Care, Deep Vein Thrombosis, and
Nutritional Insufficiency businesses on July 29, 2017, we entered
into TSAs with Cardinal to ensure and facilitate an orderly transfer
of business operations. Expenses associated with the TSA
agreements are recognized in selling, general, and administrative
expenses; however, TSA revenue is recognized in other expense,
net, thereby contributing to an increase in selling, general, and
administrative expense as a percentage of revenue.

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.

MEDTRONIC PLC 2018 Form 10-KPART II
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following is a summary of other costs and expenses:

(in millions)

Amortization of intangible assets

Restructuring charges, net

Acquisition-related items

Certain litigation charges

Divestiture-related items

Gain on sale of businesses

Special charge

Other expense, net

Investment loss

Interest expense, net

Fiscal Year

2018

2017

2016

$ 1,823

1,980

$ 1,931

104

114

(697)

505

227

749

363

220

300

—

100

222

—

728

290

283

—

107

955

Amortization of Intangible Assets

Amortization of intangible assets includes the amortization
expense of our definite-lived intangible assets, consisting
of purchased patents, trademarks, tradenames, customer
relationships, purchased technology, and other intangible assets.
Amortization expense was $1.8 billion, $2.0 billion, and $1.9 billion
in fiscal years 2018, 2017, and 2016, respectively. The decrease
in amortization expense from fiscal year 2017 to fiscal year 2018
is primarily attributable to the discontinuation of amortization
on the definite-lived intangible assets classified as assets held
for sale at April 28, 2017 and through the first quarter of fiscal
year 2018 related to the divestiture of our Patient Care, Deep
Vein Thrombosis, and Nutritional Insufficiency businesses. This
divestiture was completed during the second quarter of fiscal
year 2018.

Restructuring

Enterprise Excellence

In the third quarter of fiscal year 2018, we announced a multi-year
global Enterprise Excellence Program designed to drive long-
term business growth and sustainable efficiency. The Enterprise
Excellence Program is expected to further leverage our global
size and scale as well as enhance the customer and employee
experience.

The Enterprise Excellence Program is focused on three objectives:
■■

Global Operations - integrating and enhancing global
manufacturing and supply processes, systems and site presence
to improve quality, delivery cost and cash flow

■■

Functional Optimization - enhancing and leveraging global
operating models and systems across several enabling functions
to improve productivity and employee experience

Commercial Optimization - optimizing certain processes,
systems and models to improve productivity and the
customer experience

The Enterprise Excellence Program is designed to drive operating
margin improvement, as well as fund investment in strategic
growth initiatives, with expected annual gross savings of more
than $3.0 billion from cost reductions and leverage of our fixed
infrastructure by the end of fiscal year 2022. Approximately

$500 million to $700 million of gross annual savings are expected to
be achieved each fiscal year through the end of fiscal year 2022.

The Enterprise Excellence Program is expected to result in pre-tax
restructuring charges of approximately $1.6 billion to $1.8 billion,
the vast majority of which are expected to be incurred by the end
of fiscal year 2022 and result in cash outlays to be substantially
complete by the end of fiscal year 2023. Approximately half of
the estimated restructuring charges are related to employee
termination benefits. The remaining restructuring charges are
costs associated with the restructuring program, such as salaries
for employees supporting the program and consulting expenses.
We expect these costs to be recognized within restructuring
charges, net, cost of products sold, and selling, general and
administrative expense in the consolidated statements of income.

During fiscal year 2018, we recognized restructuring charges of
$96 million. For fiscal year 2018, restructuring charges included
$35 million of employee termination benefits recognized within
restructuring charges, net in the consolidated statements of
income. For fiscal year 2018, restructuring charges also included
costs incurred as a direct result of the restructuring program,
such as salaries for employees supporting the program and
consulting expenses, including $28 million recognized within cost of
products sold and $33 million recognized within selling, general and
administrative expense in the consolidated statements of income.

Cost Synergies

In the third quarter of fiscal year 2018, we achieved $850 million
in cost synergies related to the acquisition of Covidien. The
cost synergies related to administrative office optimization,
manufacturing and supply chain infrastructure, and certain general
and administrative savings. Cash outlays for the cost synergies
program are scheduled to be substantially complete by the end of
fiscal year 2019.

During fiscal year 2018, we recognized restructuring charges of
$45 million, partially offset by accrual adjustments of $34 million.
Accrual adjustments relate to certain employees identified
for termination finding other positions within Medtronic,
cancellations of employee terminations, and employee termination
benefits being less than initially estimated. For fiscal year 2018,
restructuring charges included $29 million of employee termination
benefits and contract termination costs recognized within

MEDTRONIC PLC 2018 Form 10-KPART II
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations

restructuring charges, net in the consolidated statements of income.
Restructuring charges also included other costs of $12 million
recognized within cost of products sold and $4 million recognized
within selling, general and administrative expense.

For fiscal years 2017 and 2016, we recognized restructuring charges
of $441 million and $332 million, respectively, partially offset by
accrual adjustments of $68 million and $18 million, respectively.
Accrual adjustments relate to certain employees identified for
termination finding other positions within Medtronic, cancellations
of employee terminations, and employee termination benefits
being less than initially estimated. For fiscal years 2017 and 2016,
restructuring charges included asset write-downs of $17 million and
$14 million, respectively, related to property, plant, and equipment
impairments, and $10 million and $9 million, respectively, related
to inventory write-offs recognized within cost of products sold in
the consolidated statements of income. Additionally, fiscal year
2017 restructuring charges included $73 million of incremental
defined benefit pension and post-retirement related expenses for
employees that accepted voluntary early retirement packages.

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.

Acquisition-Related Items

Acquisition-related items includes expenses incurred in connection
with the integration of Covidien, our $50.0 billion acquisition
completed in the fourth quarter of fiscal year 2015, transaction
expenses incurred in connection with business combinations, and
changes in fair value of contingent consideration. During fiscal
year 2018, we recognized acquisition-related items expense of
$132 million, including $28 million recognized within cost of products
sold in the consolidated statements of income. During fiscal year
2018, acquisition-related items expense includes $172 million of
costs associated with the integration of Covidien manufacturing,
distribution, and administrative facilities as well as information
technology system implementation and benefits harmonization,
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 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.
During fiscal year 2017, acquisition-related items expense primarily
includes $225 million of costs associated with the integration of
Covidien manufacturing, distribution, and administrative facilities
as well as information technology system implementation and
benefits harmonization, $23 million of accelerated or incremental
stock compensation expense, and expenses incurred in connection
with the HeartWare acquisition and planned divestiture of the
Patient Care, Deep Vein, Thrombosis, and Nutritional Insufficiency
businesses, 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, we recognized acquisition-related items
expense of $283 million, including $219 million of costs associated
with the integration of Covidien manufacturing, distribution, and
administrative facilities as well as information technology system

implementation and benefits harmonization and $58 million of
accelerated or incremental stock compensation expense.

Certain Litigation Charges

We classify litigation charges and gains related to significant legal
matters as certain litigation charges. During fiscal years 2018, 2017,
and 2016, we recognized $61 million, $300 million, and $26 million,
respectively, of certain litigation charges related to probable and
estimable damages for significant legal matters.

Divestiture-Related Items

Divestiture-related items include expenses incurred in connection
with the divestiture of the Patient Care, Deep Vein Thrombosis,
and Nutritional Insufficiency businesses. During fiscal year 2018,
we recognized divestiture-related items expense of $114 million,
primarily comprised of expenses incurred for professional services,
including banker, legal, tax, and advisory fees, and $16 million
of accelerated stock compensation expense related to the
acceleration of the vesting period for employees that transferred
with the divestiture. There was no divestiture-related items expense
for fiscal years 2017 and 2016.

Gain on Sale of Businesses

We recognized a pre-tax gain of $697 million on the sale of the
Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency
businesses during fiscal year 2018. No businesses were sold during
fiscal years 2017 or 2016.

Special Charge

Continuing our commitment to improve the health of people and
communities throughout the world, we recognized a charge of
$80 million in fiscal year 2018 and $100 million in fiscal year 2017 for
charitable contributions to the Medtronic Foundation.

Other Expense, Net

Other expense, net includes royalty income and expense, realized
equity security gains and losses, TSA income, intangible asset
impairments, currency transaction and derivative gains and losses,
and Puerto Rico excise tax. In fiscal year 2018, other expense, net
was $505 million as compared to $222 million in fiscal year 2017.
The increase from fiscal year 2017 to fiscal year 2018 was primarily
attributable to remeasurement and our hedging programs, which
resulted in a $176 million loss for fiscal year 2018 as compared
to an $81 million gain in fiscal year 2017, losses of $68 million
related to the impairment of IPR&D assets in fiscal year 2018, and
$15 million of humanitarian aid provided to our employees affected
by Hurricane Maria in fiscal year 2018. The increase from fiscal year
2017 to 2018 was partially offset by $74 million of TSA income.

In fiscal year 2017, other expense, net was $222 million as compared
to $107 million in fiscal year 2016. The increase from fiscal year
2016 to 2017 was primarily attributable to remeasurement and
our hedging programs, which resulted in an $81 million gain for
fiscal year 2017 as compared to a $314 million gain in fiscal year
2018, 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.

MEDTRONIC PLC 2018 Form 10-KPART II
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations

Investment Loss

We recognized losses of $227 million and $70 million during fiscal
years 2018 and 2016, respectively, related to the impairment of
certain cost and equity method investments. We remain committed
to future strategic and focused investments in the areas of medical
device technologies, services, and solutions.

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 premiums
or discounts, amortization of gains or losses on terminated or de-
designated interest rate derivative instruments, charges recognized
in connection with the early redemption of senior notes, and
ineffectiveness on interest rate derivative instruments. In fiscal year

2018, interest expense, net was $749 million as compared to
$728 million in fiscal year 2017. The increase in interest expense, net
for fiscal year 2018 was primarily driven by modestly higher average
interest rates on total debt obligations outstanding and a $38 million
charge recognized in connection with the early redemption of
approximately $1.2 billion of Medtronic Inc. senior notes, partially
offset by a slight increase in interest income as compared to fiscal
year 2017.

In fiscal year fiscal year 2017, interest expense, net was $728 million
as 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.

INCOME TAXES

(in millions)

Income tax provision

Income before income taxes

Effective tax rate

Non-GAAP income tax provision

Non-GAAP income before income taxes

Non-GAAP Nominal Tax Rate

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

Many of the countries we operate in have statutory tax rates lower
than our blended U.S. statutory rate, thereby resulting in an overall
effective tax rate less than the U.S. statutory rate of 30.5 percent for
fiscal year 2018. A significant portion of our earnings are generated
from operations in Puerto Rico, Switzerland, and Ireland. The
statutory tax rates for these jurisdictions range from 12.5 percent
to 45.1 percent. Our earnings in Puerto Rico and Switzerland are
subject to certain tax incentive grants which provide for tax rates
lower than the country statutory tax rates. Unless our tax incentive
grants are extended, they expire between fiscal years 2019 and
2029. The tax incentive grants which expired during fiscal year 2018
did not have a material impact on our financial results. See Note 14
to the consolidated financial statements for additional information.

Our effective tax rate for fiscal year 2018 was 45.5 percent, as
compared to 12.6 percent in fiscal year 2017. The increase in the
effective tax rate was primarily due to the impacts from U.S. tax
reform, the divestiture of our Patient Care, Deep Vein Thrombosis,

2018

Fiscal Year

2017

2016

$ 2,580

578

798

5,675

45.5%

$ 1,120

7,641

14.7%

(30.8)%

4,602

12.6%

4,336

18.4%

$ 1,232

$ 1,171

7,623

16.2%

3.6%

7,399

15.8%

(2.6)%

and Nutritional Insufficiency businesses, the utilization of non-U.S.
special deductions, the net tax cost associated with an internal
reorganization, excess tax benefits associated with stock-based
compensation, and the tax effect from the intercompany sales of
certain intellectual property.

Our Non-GAAP Nominal Tax Rate for fiscal year 2018 was
14.7 percent, as compared to 16.2 percent in fiscal year 2017. The
decrease in our Non-GAAP Nominal Tax Rate for fiscal year 2018
as compared to fiscal year 2017 was primarily due to operational
tax benefits and year-over-year changes in operational results by
jurisdiction.

During fiscal year 2018, we recognized $135 million of operational
tax benefits. The operational tax benefits included a $61 million
benefit from excess tax benefits associated with stock-based
compensation and a $74 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 2017 was 12.6 percent, as
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.

MEDTRONIC PLC 2018 Form 10-KPART II
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations

Our Non-GAAP Nominal Tax Rate for fiscal year 2017 was
16.2 percent, as 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.

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.

An increase in our Non-GAAP Nominal Tax Rate of 1 percent would
result in an additional income tax provision for fiscal years 2018,
2017, and 2016 of approximately $77 million, $76 million, and
$74 million, respectively.

Certain Tax Adjustments

During fiscal year 2018, certain tax adjustments of $1.9 billion,
recognized in income tax provision in the consolidated statement of
income, included the following:
■■

A net charge of $2.4 billion associated with U.S. tax reform,
inclusive of the transition tax, remeasurement of U.S. Federal
deferred tax assets and liabilities, and the decrease in the U.S.
statutory tax rate. Our income tax provision associated with the
impact of the Tax Act for fiscal year 2018 is based on a reasonable
estimate and will be finalized within the measurement period
in accordance with U.S. GAAP. See Note 14 to the consolidated
financial statements for additional information.

A charge of $73 million associated with an internal reorganization
of certain foreign subsidiaries.

■■

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 divestiture of our
Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency
businesses to Cardinal. The net charge primarily relates to the
tax effect from the recognition of the outside basis difference of
certain subsidiaries which were included in the 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, 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.

■■

During fiscal year 2016, certain tax adjustments of $417 million,
recognized in income tax provision in the consolidated statement of
income, 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. As a result of this
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 net benefit of $579 million associated with the intercompany
sale of intellectual property.

■■

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

During fiscal year 2017, certain tax adjustments of $202 million,
recognized in income tax provision in the consolidated statement of
income, included the following:
■■

A charge of $404 million associated with the IRS resolution for
the Ardian, CoreValve, Inc., Ablation Frontiers, Inc., PEAK Surgical,

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
discussion of these adjustments.

LIQUIDITY AND CAPITAL RESOURCES

Our liquidity and capital structure is evaluated regularly within the
context of our annual operating and strategic planning process.
We consider the liquidity necessary to fund our operations, which
includes working capital needs, investments in research and
development, property, plant, and equipment, and other operating

costs. We also consider capital allocation alternatives that balance
returning value to shareholders through dividends and share
repurchases, satisfying maturing debt, and acquiring businesses and
technology.

MEDTRONIC PLC 2018 Form 10-KPART II
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations

Summary of Cash Flows

The following is a summary of cash provided by (used in) operating, investing, and financing activities, the effect of exchange rate changes
on cash and cash equivalents, and the net change in cash and cash equivalents:

(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 $2.2 billion decrease in net cash provided in fiscal year 2018 as
compared to fiscal year 2017 was primarily driven by an increase in
cash paid for taxes of $1.5 billion, an increase in net cash outflows
for collateral related to our derivative instruments of $145 million,
cash paid for divestiture-related expenses of approximately
$100 million, an increase in certain litigation payments of
$60 million, and a decrease in cash collected from customers.
The increase in cash paid for income taxes was primarily a result
of a $1.1 billion pre-payment we elected to make to the U.S. IRS
related to in-process litigation on Puerto Rico transfer pricing,
tax payments related to the intercompany sale of intellectual
property and sale of the Patient Care, Deep Vein Thrombosis,
and Nutritional Insufficiency businesses as well as settlement
payments for U.S. federal income taxes for fiscal years 2012 to
2014 and audit settlements outside of the U.S.

The $1.7 billion increase in net cash provided in fiscal year 2017
as compared to fiscal year 2016 was primarily attributable to an
increase in cash collected from customers, 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 collected from customers 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.

Investing Activities

The $7.4 billion increase in net cash provided in fiscal year 2018
as compared to fiscal year 2017 was primarily attributable to the
sale of the Patient Care, Deep Vein Thrombosis, and Nutritional
Insufficiency businesses on July 29, 2017, resulting in net
proceeds of $6.1 billion, a decrease in cash paid for acquisitions
of $1.2 billion, primarily due to the acquisition of Heartware during
fiscal year 2017, and a decrease in additions to property, plant,
and equipment.

Fiscal Year

2018

2017

2016

4,684

6,880

5,858

(11,954)

114
$ (1,298)

(1,571)

(3,283)

65
2,091

5,218

2,245

(9,543)

113
(1,967)

The $3.8 billion increase in net cash used 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.

Financing Activities

The $8.7 billion increase in net cash used in fiscal year 2018 as
compared to fiscal year 2017 was primarily attributable to the
repayment of our senior unsecured term loan, including accrued
interest, for $3.0 billion in August 2017, the repayment of our
6.000 percent ten-year 2008 CIFSA senior notes, including
accrued interest, for $1.2 billion in October 2017, the repayment
of our 3.500 percent seven-year 2010 HTWR senior notes,
including accrued interest, for $43 million in December 2017,
the repayment of our 1.500 percent three-year 2015 senior
notes, including accrued interest, for $1.0 billion in March 2018,
repayment of our 1.375 percent five-year 2013 senior notes,
including accrued interest, for $1.0 billion in April 2018, repayment
of our 4.450 percent ten-year 2010 senior notes, including accrued
interest and early redemption premium, for $795 million in April
2018, and repayment of our 5.600 percent ten-year 2009 senior
notes, including accrued interest and early redemption premium,
for $413 million in April 2018. The increase in net cash used was
also due to the issuance of $2.0 billion of Senior Notes in fiscal year
2017 and a reduction of commercial paper borrowings in fiscal
year 2018 as compared to fiscal year 2017, partially offset by a
decrease in share repurchases of $1.4 billion.

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 in fiscal
year 2017, 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.

Free Cash Flow

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

MEDTRONIC PLC 2018 Form 10-KPART II
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations

measures, to evaluate our operating results. Free cash flow should
be considered supplemental to, and not a substitute for, our
reported financial results prepared in accordance with U.S. GAAP.

Reconciliations between net cash provided by operating activities
(the most comparable U.S. GAAP measure) and free cash flow are
as follows:

(in millions)

Net cash provided by operating activities

Net cash provided by (used in) investing activities

Net cash used in 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 27, 2018 was $2.1 billion as compared
to $7.5 billion at April 28, 2017. Historically, we have issued Senior
Notes to meet our long-term financing needs. Long-term debt
at April 27, 2018 was $23.7 billion as compared to $25.9 billion at
April 28, 2017.

Total debt at April 27, 2018 was $25.8 billion, as compared to
$33.4 billion at April 28, 2017. The decrease in total debt was
primarily driven by the repayment of our senior unsecured term
loan and senior notes detailed below, along with a reduction in our
commercial paper borrowings of $203 million.

During fiscal year 2018, we repaid our senior unsecured term
loan, including accrued interest, for $3.0 billion, our 6.000 percent
ten-year 2008 CIFSA senior notes, including accrued interest,
for $1.2 billion, our 3.500 percent seven-year 2010 HTWR senior
notes, including interest, for $43 million, our 1.500 percent three-
year 2015 senior notes, including accrued interest, for $1.0 billion,
our 1.375 percent five-year 2013 senior notes, including accrued
interest, for $1.0 billion, our 4.450 percent ten-year 2010 senior
notes, including accrued interest and early redemption premium,
for $795 million, and our 5.600 percent ten-year 2009 senior notes,
including accrued interest and early redemption premium, for
$413 million.

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 27, 2018, we had
$698 million of commercial paper outstanding as compared to
$901 million at April 28, 2017. During fiscal years 2018 and 2017,
the weighted average original maturity of the commercial paper
outstanding was approximately 28 and 39 days, respectively,
and the weighted average interest rate was 1.46 percent and
0.89 percent, respectively. The issuance of commercial paper

2018

4,684

5,858

(11,954)

4,684

(1,068)

3,616

2,494

2,171

(403)

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)

4,262

5,492

4,478

91%

118%

80%

98%

86%

107%

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 (Credit
Facility) which expires in January 2020. The Credit Facility provides
backup funding for the commercial paper program and may also be
used for general corporate purposes. The Credit Facility provides us
with the ability to increase our borrowing capacity by an additional
$500 million at any time during the term of the agreement. At each
anniversary date of the 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 27, 2018 and April 28, 2017, no amounts
were outstanding on the committed line of credit.

Interest rates on advances of our 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 the "Liquidity" 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 were in compliance with at April 27, 2018.

We repurchase our ordinary shares from time to time as part
of our focus on returning value to our shareholders. In June
2015, our Board of Directors authorized, subject to the ongoing
existence of sufficient distributable reserves, the repurchase of
80 million of our ordinary shares. At April 28, 2017, we had used
51 million of the 80 million shares authorized under the June 2015
share repurchase program. In June 2017, our Board of Directors
authorized the expenditure of up to $5.0 billion for new share
repurchases, replacing the previous 2015 repurchase authorization
to redeem up to an aggregate number of ordinary shares. During
fiscal years 2018 and 2017, we repurchased a total of 25 million and
43 million shares, respectively, under these programs at an average
price of $83.71 and $83.03, respectively. At April 27, 2018, we had
approximately $4.0 billion remaining under the share repurchase
program authorized by our Board of Directors.

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

MEDTRONIC PLC 2018 Form 10-KPART II
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations

Liquidity

The following table is a summary of our cash, cash equivalents, and current investments, working capital, and current ratio:

(in millions)

Cash, cash equivalents, and current investments

April 27, 2018

April 28, 2017

11,227

$ 13,708

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

12,896

2.3:1.0

10,272

1.7:1.0

Our liquidity sources at April 27, 2018 include $3.7 billion of cash
and cash equivalents and $7.6 billion of current investments.
Additionally, we maintain a commercial paper program ($698 million
of commercial paper outstanding at April 27, 2018) and Credit
Facility. See discussion above regarding changes in our cash and
cash equivalents and commercial paper program and Credit Facility.

Our current investments include marketable debt and equity
securities that are classified and accounted for as available-for-
sale. Our debt and equity securities include U.S. and non-U.S.
government and agency securities, corporate debt securities,
mortgage-backed securities, other asset-backed securities, debt
funds, equity securities, 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 2018, the total other-than-temporary impairment
losses on available-for-sale debt securities and funds 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 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.
At April 27, 2018, we have $321 million of gross unrealized losses
on our aggregate available-for-sale debt securities and funds
of $7.6 billion. If market conditions deteriorate, some of these
holdings may experience other-than-temporary impairment in
the future, which could adversely affect our financial results. We
are required to use estimates and assumptions in our valuation
of investments, which requires a high degree of judgment, and
therefore, actual results could differ materially from 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.

Our working capital and current ratio at April 27, 2018 increased
as compared to April 28, 2017, primarily due to the receipt of
$6.1 billion of cash proceeds from the sale of our Patient Care,
Deep Vein Thrombosis, and Nutritional Insufficiency businesses on
July 29, 2017, partially offset by repayments of current and long-
term debt obligations and a $1.1 billion income tax pre-payment we
elected to make to the U.S. IRS related to in-process litigation on
Puerto Rico transfer pricing in fiscal year 2018.

The following table is a summary of our Standard and Poor's Rating
Services (S&P) and Moody's Investors Service (Moody's) long-term
debt ratings and short-term debt ratings:

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 27, 2018

April 28, 2017

A-1

P-2

A-1

P-2

(1) Agency ratings are subject to change, and there is no assurance that an agency will continue to provide ratings and/or maintain its current ratings. A

security rating is not a recommendation to buy, sell or hold securities, and may be subject to revision or withdrawal at any time by the rating agency, and
each rating should be evaluated independently of any other rating.

S&P and Moody's long-term debt ratings and short-term debt
ratings at April 27, 2018 were unchanged as compared to the ratings
at April 28, 2017. 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 Credit Facility and
related commercial paper program.

arrangements do not have a material current or anticipated future
effect on our consolidated earnings, financial position, and/or
cash flows. Refer to the "Off-Balance Sheet Arrangements and
Long-Term Contractual Obligations" section of this Management's
Discussion and Analysis for more information on these obligations
and commitments.

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

Note 19 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

MEDTRONIC PLC 2018 Form 10-KPART II
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations

we have accrued related to legal matters. 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 can be reasonably estimated. Actual settlements may
be different than estimated and could have a material effect on our
consolidated earnings, financial position, and/or cash flows.

legal entities. We expect to have access to the majority of our
cash flows in the future. In addition, we continue to 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 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. As a result of the Tax Act, we
have removed our permanently reinvested assertion on the
historical earnings through April 27, 2018 for legal entities with
accumulated earnings subject to the transition tax. We continue
to evaluate our permanently reinvested assertion for certain

We believe our balance sheet and liquidity provide us with flexibility,
and that our cash, cash equivalents, and current investments,
as well as our $3.5 billion revolving credit facility and related
commercial paper program ($698 million of commercial paper
outstanding at April 27, 2018), will satisfy our foreseeable operating
needs for at least the next 12 months. We regularly review our
capital needs and consider various investing and financing
alternatives to support our requirements.

OFF-BALANCE SHEET ARRANGEMENTS AND LONG-TERM 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
as a result 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 is 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.

Presented below is a summary of our off-balance sheet
contractual obligations and other minimum commercial
commitments at April 27, 2018, as well as long-term contractual
obligations reflected in the balance sheet at April 27, 2018.

(in millions)

Total

2019

2020

2021

2022

2023 Thereafter

Maturity by Fiscal Year

Contractual obligations related to off-balance sheet arrangements:

Operating leases

Commitments to fund minority investments, milestone
payments, and royalty obligations(1)
Interest payments(2)
Other(3)

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

Debt obligations(4)
Capital leases
Contingent consideration(5)
Tax obligations(6)

753

252

12,331

608

234

182

133

914

355

901

146

806

773

662

8,275

$ 13,944

1,578

1,305

$ 1,042

914

714

8,391

$ 25,026

1,355

3,005

$ 1,120

$ 3,275

1,180

$ 15,091

173

2,145

108

198

160

3,210
4,515

160

$ 1,297
$ 2,339

$ 3,443
$ 4,357

$
$

160

1,343
2,057

1,307

$ 16,407
$ 24,798

Contractual obligations reflected in the balance sheet subtotal(7)
TOTAL CONTRACTUAL OBLIGATIONS

$ 27,365
$ 41,309

$
$

1,665
3,243

$
$

(1)

(2)

(3)

Includes commitments related to the funding of cost or equity method investments, estimated milestone payments, and royalty obligations. While it is
not certain if and/or when payments will be made, the maturity dates included in the table reflect our best estimates.
Includes the contractual interest payments on our outstanding debt and excludes the impacts of debt premium and discount amortization and 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 on our debt agreements.
Includes inventory purchase commitments and research and development arrangements which are legally binding and specify minimum purchase
quantities or spending amounts. These purchase commitments do not exceed our projected requirements and are in the normal course of business.
Excludes open purchase orders with a remaining term of less than one year.

MEDTRONIC PLC 2018 Form 10-KPART II
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations

(4)

(5)

Includes the current and non-current portion of our Senior Notes and bank borrowings. Excludes debt premium and discount, the fair value impact of
outstanding interest rate swap agreements, unamortized gains from terminated interest rate swap agreements, and commercial paper. 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 on our debt agreements and interest rate swap agreements, respectively.
Includes the fair value of our current and non-current portions of contingent consideration. While it is not certain if and/or when payments will be made,
the maturity dates included in this table reflect our best estimates.

(6) Represents the tax obligations associated with the transition tax that resulted from U.S. Tax Reform. The transition tax will be paid over an eight-year
period and will not accrue interest. See Note 14 to the consolidated financial statements in “Item 8. Financial Statements and Supplementary Data” in
this Annual Report on Form 10-K for further information.

(7) Excludes defined benefit plan obligations, guarantee obligations, uncertain tax positions, non-current tax liabilities, and litigation settlements for which
we cannot make a reliable estimate of the period of cash settlement. For further information, see Notes 14, 16, and 19 to the consolidated financial
statements in “Item 8. Financial Statements and Supplementary Data” in this Annual Report on Form 10-K for further information.

MEDTRONIC PLC 2018 Form 10-KPART II
Item 7A Quantitative and Qualitative Disclosures About Market Risk

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 which may cause fluctuations
in earnings and cash flows. We use operational and economic
hedges, as well as currency exchange rate derivative instruments,
to manage the impact of currency exchange rate fluctuations. 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,
Japanese Yen, and British Pound. Fluctuations in the currency
exchange rates of currency exposures that are unhedged, such

INTEREST RATE RISK

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 27, 2018 and April 28, 2017 was
$11.5 billion and $10.8 billion, respectively. At April 27, 2018, these
contracts were in a net unrealized loss position of $159 million.
A sensitivity analysis of changes in the fair value of all currency
exchange rate derivative contracts at April 27, 2018 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 $879 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.

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 27, 2018 was comprised of debt
predominately denominated in U.S. dollars, of which approximately
95% is fixed rate debt and approximately 5% 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 interest rate-sensitive
financial instruments of a hypothetical 10 basis point change

in interest rates, as compared to interest rates at April 27,
2018, indicates that the fair value of these instruments would
correspondingly change by $81 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 2018 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:

Opinions on the Financial Statements and
Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets
of Medtronic plc and its subsidiaries as of April 27, 2018 and
April 28, 2017, and the related consolidated statements of income,
comprehensive income, equity and cash flows for each of the three
years in the period ended April 27, 2018, including the related notes
and schedule of valuation and qualifying accounts for each of the
three years in the period ended April 27, 2018 appearing under
Item 15(a)(1) (collectively referred to as the “consolidated financial
statements”). We also have audited the Company’s internal control
over financial reporting as of April 27, 2018, based on criteria
established in Internal Control - Integrated Framework (2013) issued
by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).

In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position
of the Company as of April 27, 2018 and April 28, 2017, and
the results of its operations and its cash flows for each of the
three years in the period ended April 27, 2018 in conformity with
accounting principles generally accepted in the United States
of America. Also in our opinion, the Company maintained, in all
material respects, effective internal control over financial reporting
as of April 27, 2018, based on criteria established in Internal
Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company’s management is responsible for these consolidated
financial statements, for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of
internal control over financial reporting, included in Management’s
Annual Report on Internal Control over Financial Reporting appearing
under Item 9A. Our responsibility is to express opinions on the
Company’s consolidated financial statements and on the Company’s
internal control over financial reporting based on our audits. We are a
public accounting firm registered with the Public Company Accounting
Oversight Board (United States) (“PCAOB”) and are required to be
independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of
the PCAOB. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether
the consolidated financial statements are free of material

misstatement, whether due to error or fraud, and whether
effective internal control over financial reporting was maintained in
all material respects.

Our audits of the consolidated financial statements included
performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether
due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included
evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation
of the consolidated financial statements. 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.

Definition and Limitations of Internal Control
over Financial Reporting

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.

/s/ PricewaterhouseCoopers LLP

Minneapolis, Minnesota
June 22, 2018

We have served as the Company’s auditor since 1963.

MEDTRONIC PLC 2018 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

Amortization of intangible assets

Restructuring charges, net

Acquisition-related items

Certain litigation charges

Divestiture-related items

Gain on sale of businesses

Special charge

Other expense, net

Operating profit

Investment loss

Interest income

Interest expense

Interest expense, net

Income before income taxes

Income tax provision

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

2018

2017

2016

29,953

29,710

28,833

9,055

2,253

9,974

1,823

104

114

(697)

505

6,651

227

(397)

1,146

749

5,675

2,580

3,095

3,104

2.29

2.27

9,291

2,193

9,711

1,980

363

220

300

—

100

222

5,330

—

(366)

1,094

728

4,602

578

4,024

4,028

2.92

2.89

9,142

2,224

9,469

1,931

290

283

—

107

5,361

(431)

1,386

955

4,336

798

3,538

—

3,538

2.51

2.48

1,356.7

1,368.2

1,378.9

1,391.4

1,409.6

1,425.9

1.84

1.72

1.52

MEDTRONIC PLC 2018 Form 10-KPART II
Item 8 Consolidated Statements of Comprehensive Income

Medtronic plc
Consolidated Statements of Comprehensive Income

(in millions)

Net income

Other comprehensive gain (loss), net of tax:

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

Translation adjustment

Net change in retirement obligations

Unrealized (loss) gain on derivatives

Other comprehensive gain (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

2018

2017

2016

3,095

4,024

3,538

(103)

1,184

167

(218)

1,030

4,125

(977)

127

(744)

3,280

(121)

(197)

(66)

(300)

(684)

2,854

—

4,134

3,283

2,854

MEDTRONIC PLC 2018 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 $193 and $155, respectively

Inventories, net

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, 17, and 19)

Shareholders’ equity:

Ordinary shares— par value $0.0001, 2.6 billion shares authorized, 1,354,218,154 and
1,369,424,818 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 27, 2018

April 28, 2017

3,669

7,558

5,987

3,579

2,187

—
22,980

4,604

39,543

21,723

1,465

1,078

—
91,393

2,058

1,628

1,988

979

3,431

—
10,084

23,699

1,425

3,051

1,423

889

4,967

8,741

5,591

3,338

1,865

371
24,873

4,361

38,515

23,407

1,550

1,232

5,919
99,857

7,520

1,555

1,904

633

2,618

34
14,264

25,921

1,724

2,405

2,978

1,515

—
40,571

720
49,527

—

28,127

24,379

(1,786)
50,720

102
50,822

91,393

—

29,551

23,270

(2,613)
50,208

122
50,330

99,857

MEDTRONIC PLC 2018 Form 10-KPART II
Item 8 Consolidated Statements of Equity

Medtronic plc
Consolidated Statements of Equity

(in millions)

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

Ordinary Shares

Number Par Value

Additional
Paid-in
Capital

Retained
Earnings

Accumulated
Other
Comprehensive
Loss

Total
Shareholders’
Equity

Noncontrolling
Interests

Total
Equity

1,422

— $ 34,109 $ 20,219

(1,184)

53,144

— $ 53,144

—

(38)

—

3,538

—

(2,139)

491

(2,830)

—

(684)

—

3,538

(684)

(2,139)

491

(2,830)

—

3,538

(684)

(2,139)

491

(2,830)

Stock-based compensation

APRIL 29, 2016

1,399

—
—
375
— $ 32,227 $ 21,618

—
(1,868)

375
51,977

—
375
— $ 51,977

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

Changes to noncontrolling
ownership interests

APRIL 28, 2017

Net income (loss)

Other comprehensive income

Dividends to shareholders

Issuance of shares under stock
purchase and award plans

Repurchase of ordinary shares

Stock-based compensation

Changes to noncontrolling
ownership interests

Cumulative effect of change in
accounting principle(1)

APRIL 27, 2018

—

(43)

—

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 $ 23,270

—
(2,613)

—
50,208

125
122

125
$ 50,330

—

(25)

—

3,104

—

(2,494)

329

(2,097)

344

—

1,030

—

3,104

1,030

(2,494)

329

(2,097)

344

(9)

—

3,095

1,030

(2,494)

329

(2,097)

344

—

(11)

—
1,354

—
499
—
— $ 28,127 $ 24,379

(203)
(1,786)

296
50,720

—
102

296
$ 50,822

(1) See Note 1 to the consolidated financial statements for discussion regarding the adoption of accounting standards during fiscal year 2018.

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

MEDTRONIC PLC 2018 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 premium, discount, and issuance costs

Acquisition-related items

Provision for doubtful accounts

Deferred income taxes

Stock-based compensation

Loss on debt extinguishment

Gain on sale of businesses

Investment loss

Other, net

Change in operating assets and liabilities, net of acquisitions and divestitures:

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

Proceeds from sale of businesses

Additions to property, plant, and equipment

Purchases of investments

Sales and maturities of investments

Other investing activities, net

Net cash provided by (used in) 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 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

2018

2017

2016

3,095

4,024

3,538

2,644

2,917

2,820

(13)

(31)

(919)

344

(697)

227

117

(275)

(192)

229

(46)

(459)

348

—

(93)

(75)

(227)

356

4,684

6,880

(137)

6,058

(1,068)

(3,200)

4,227

(22)

5,858

(48)

(249)

(45)

(7,370)

(2,494)

403

(2,171)

(2)

(11,954)

114

(1,298)

4,967

3,669

(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

2,542

1,147

1,029

1,134

218

(460)

375

163

—

(181)

(435)

(186)

(379)

(403)

5,218

(1,213)

—

(1,046)

(5,406)

9,924

(14)

2,245

(22)

(139)

139

—

(5,132)

(2,139)

491

(2,830)

(9,543)

113

(1,967)

4,843

2,876

1,379

1,266

MEDTRONIC PLC 2018 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

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.

Certain consolidated balance sheet amounts related to prior
periods have been revised to correct the Company’s application

of Accounting Standards Codification (ASC) 605, Revenue
Recognition, with respect to its accrual for the costs of post-
implant support services which are inconsequential deliverables
within the arrangements. In accordance with Securities and
Exchange Commission Staff Accounting Bulletin (SAB) No. 99,
Materiality, and ASC 250, Presentation of Financial Statements,
the Company assessed the materiality of this correction and
concluded that the accrual for the costs of post-implant support
services was not material to prior periods, and therefore,
amendments of previously filed reports are not required.

As such, in accordance with ASC 250, the Company revised the
previously reported consolidated balance sheets and consolidated
statements of equity. The correction had no impact on the previously
reported consolidated statements of income, consolidated
statements of comprehensive income, or consolidated statements
of cash flows for the periods presented, as this error originates
in periods prior to those presented. The table below presents
the impact of the revision on the Company’s previously reported
consolidated balance sheets, consolidated statements of equity, and
related amounts disclosed in Notes 14, 21, and 22 as follows:

(in millions)

Tax assets

Total assets

Accrued compensation

Current liabilities

Accrued compensation and retirement benefits

Total liabilities

Retained earnings

Total shareholders' equity

Total equity

Total liabilities and equity

April 28, 2017

As Reported Adjustments

As Revised

1,509

99,816

1,860

14,220

1,641

49,400

23,356

50,294

50,416

99,816

127

(86)

1,550

99,857

1,904

14,264

1,724

49,527

23,270

50,208

50,330

99,857

As this error originates in periods prior to those presented,
previously reported amounts at April 24, 2015 and April 29, 2016 of
retained earnings ($20,305 million and $21,704 million, respectively),
total shareholders’ equity ($53,230 million and $52,063 million,
respectively) and total equity ($53,230 million and $52,063 million,
respectively), have been reduced by $86 million to reflect the
correction above within the consolidated statements of equity.

Use of Estimates

The preparation of the consolidated financial statements in
conformity with generally accepted accounting principles in the
United States (U.S.) (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, 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 27, 2018 and April 28,
2017 and for each of the three fiscal years ended April 27, 2018
(fiscal year 2018), April 28, 2017 (fiscal year 2017), and April 29,
2016 (fiscal year 2016). Fiscal years 2018 and 2017 were 52-week
years. Fiscal year 2016 was a 53-week year, with the additional
week occurring in the first quarter.

MEDTRONIC PLC 2018 Form 10-KPART II
Item 8 Notes to Consolidated Financial Statements

Cash Equivalents

Inventories

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 the availability for use in
current operations consistent with the Company’s management of
its capital structure and liquidity.

Certain of the Company’s investments in equity and other
securities are long-term, strategic investments in companies
that are in various 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. Certain of these investments are publicly traded
companies and are 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 statement of income in the
period the determination is made. Equity securities accounted for
under the equity method are initially recorded at the amount of
the Company’s investment and are adjusted each period for the
Company’s share of the investee’s income or loss and dividends
paid. Securities accounted for under 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 a discussion of the gains and
losses recognized on equity and other securities.

Accounts Receivable and Allowance for
Doubtful Accounts

The Company grants credit to customers in the normal course
of business and maintains an allowance for doubtful accounts for
potential credit losses. When evaluating allowances for doubtful
accounts, the Company considers various factors, including
historical experience and customer-specific information.
Uncollectible accounts are written-off against the allowance when
it is deemed that a customer account is uncollectible.

Inventories are stated at the lower of cost or net realizable value, with
cost determined on a first-in, first-out basis. The Company reduces
the carrying value of inventories for 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.

Goodwill and Intangible Assets

Goodwill is the excess of the purchase price over the estimated
fair value of net assets of acquired businesses. In accordance with
U.S. GAAP, goodwill is not amortized. The Company assesses
goodwill for impairment annually in the third quarter of the fiscal
year and whenever an event occurs or circumstances change that
would indicate the carrying amount may be impaired. Impairment
testing for goodwill is performed at a reporting unit level. There
were no changes in reporting units during fiscal year 2018. 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. 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.

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. Amortization
is recognized within amortization of intangible assets in the
consolidated statements of income. 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. 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. Indefinite-lived intangible assets are tested
for impairment annually in the third quarter of the fiscal year and

MEDTRONIC PLC 2018 Form 10-Kwhenever 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.

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

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. The Company records 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 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. The discount rate used
is determined at the time of measurement in accordance with
accepted valuation methodologies. Changes in projected revenues,
probabilities of payment, discount rates, and projected payment
dates may result in adjustments to the fair value measurements.
Contingent consideration is remeasured each reporting period
using Level 3 inputs, and the change in fair value, including accretion
for the passage of time, is recognized as income or expense
within acquisition-related items in the consolidated statements
of income. Contingent consideration payments made soon after
the acquisition date are classified as investing activities in the
consolidated statements of cash flows. Contingent consideration
payments not made soon after the acquisition date that are related
to the acquisition date fair value are reported as financing activities
in the consolidated statements of cash flows, and amounts paid
in excess of the original acquisition date fair value are reported as
operating activities in the consolidated statements of cash flows.

Derivatives

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 derivative financial

PART II
Item 8 Notes to Consolidated Financial Statements

instruments on a gross basis in the consolidated financial
statements. For 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 or a cash flow hedge. 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 market data obtained
from sources independent of the Company. Unobservable inputs
are inputs that reflect the Company’s assumptions about the
factors market participants would use in valuing the asset or
liability developed based upon the best information available in the
circumstances. The categorization of financial assets and financial
liabilities within the valuation hierarchy is based upon the lowest
level of input that is significant to the fair value measurement. The
hierarchy is broken down into three levels defined as follows:
■■

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 and total return 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.

MEDTRONIC PLC 2018 Form 10-KPART II
Item 8 Notes to Consolidated Financial Statements

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 and the illiquidity premium that is incorporated into the
discount rate.

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.

Self-Insurance

The Company self-insures 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 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.

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 16 for assumptions used in
determining pension and post-retirement benefit costs.

The Company utilizes a full yield curve approach methodology 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. The
full yield curve approach applies specific spot rates along the yield
curve to their underlying projected cash flows in estimation of the
cost components.

Revenue Recognition

The Company sells its products through direct sales
representatives and independent distributors. Additionally, a
portion of the Company’s revenue is generated from consignment

inventory maintained at hospitals or with field representatives.
The Company recognizes revenue when control is transferred to a
customer. For products sold through direct sales representatives
and independent distributors, control is transferred upon
shipment or upon delivery, based on the contract terms and legal
requirements. For consignment inventory, revenue is recognized at
the time the product has been used or implanted.

The amount of revenue recognized reflects estimated sales
rebates and returns, which 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 increases or
decrease of revenue 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 incurred to physically move product
from the Company’s premises to the customer’s premises are
recognized in selling, general, and administrative expense in the
consolidated statements of income and were $363 million,
$370 million, and $316 million in fiscal years 2018, 2017, and 2016,
respectively. Other shipping and handling costs incurred to store,
move, and prepare products for shipment are recognized in cost of
products sold in the consolidated statements of income.

Research and Development

Research and development costs are expensed when incurred.
Research and development costs include costs of other research,
engineering, and technical activities 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.

MEDTRONIC PLC 2018 Form 10-KIncome Taxes

The Company has deferred taxes that arise as a result of the
different treatment of transactions for 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 recognized 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 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

Other expense, net includes royalty income and expense, realized
equity security gains and losses, intangible asset impairments,
currency transaction and derivative gains and losses, Puerto
Rico excise tax, and other income not central to the Company’s
operations.

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,
which is generally the vesting period. The amount of stock-based
compensation expense recognized during a period is based on
the portion of the awards that are expected to vest. The Company
estimates pre-vesting forfeitures at the time of grant and revises
the estimates in subsequent periods.

New Accounting Standards

Recently Adopted

In March 2016, the Financial Accounting Standards Board (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. Cash flows
related to excess tax benefits are to be classified in operating

PART II
Item 8 Notes to Consolidated Financial Statements

activities in the statement of cash flows rather than financing.
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. The standard also allows
an entity to withhold up to the maximum statutory tax rate and
classify the awards as equity. The Company prospectively adopted
this guidance in the first quarter of fiscal year 2018. The Company
has elected to continue to estimate forfeitures.

In October 2016, the FASB issued guidance that requires the tax
effect of intra-entity transactions, other than sales of inventory,
to be recognized when the transaction occurs. Previously, U.S.
GAAP prohibited the recognition of current and deferred income
taxes associated with an intra-entity asset transfer until an asset
had been sold to a third-party. This update requires an entity to
recognize the income tax consequences of an intra-entity transfer
of an asset, such as equipment or intangibles, when the transfer
occurs. The adoption of this guidance is to be applied on a modified
retrospective basis through a cumulative-effect adjustment
directly to retained earnings as of the beginning of the period
of adoption. The Company has early-adopted this guidance, as
permitted, in the first quarter of fiscal year 2018. As a result of this
adoption, the Company increased its beginning retained earnings
by $296 million.

In February 2018, the FASB issued accounting guidance which
allows for reclassification from accumulated other comprehensive
income (AOCI) to retained earnings for stranded tax effects
resulting from the enactment of comprehensive U.S. tax
legislation, commonly referred to as the Tax Cuts and Jobs Act
(the Tax Act), and can be applied either in the period of adoption
or retrospectively to all applicable periods. The Company early-
adopted this guidance in the fourth quarter of fiscal year 2018
and reclassified the stranded income tax effects of the Tax
Act, increasing the accumulated other comprehensive loss by
$203 million with a corresponding increase to retained earnings.
The reclassification was primarily comprised of amounts relating
to retirement benefit plans and available-for-sale securities. In
accordance with its accounting policy, the Company releases
other disproportionate income tax effects from accumulated
other comprehensive loss once the reason the tax effects were
established ceases to exist.

In March 2018, the FASB issued accounting guidance which
incorporates Securities and Exchange Commission Staff
Accounting Bulletin No. 118 into U.S. GAAP, allowing a
measurement period, not to exceed one year, to finalize the
accounting for the income tax impacts of the Tax Act. This
guidance is effective immediately and requires adjustments
to provisional amounts that were previously recorded as new
information becomes available. The Company has adopted this
standard and will continue to evaluate indicators that may give rise
to a change in the tax provision as a result of the Tax Act.

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

MEDTRONIC PLC 2018 Form 10-KPART II
Item 8 Notes to Consolidated Financial Statements

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). The Company will adopt this guidance
under the modified retrospective method. The Company does not
expect the adoption of the amended guidance to have a material
impact on the Company’s consolidated financial statements. The
Company will make additional revenue related disclosures in the
footnotes to the Company’s consolidated financial statements
upon adoption in the first quarter of fiscal year 2019.

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 effective for the Company beginning in the first quarter
of fiscal year 2019. The Company expects a reclassification of
approximately $83 million, net of taxes, from accumulated other
comprehensive loss to the opening balance of retained earnings
upon adoption in the first quarter of fiscal year 2019.

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 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 sheets related to operating leases within its
lease portfolio upon adoption of the guidance.

Note 2 Acquisitions and Acquisition-Related Items

The Company accounts for acquisitions of businesses using
the acquisition method of accounting. The assets and liabilities
of businesses acquired are 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 the business. The
pro forma impact of acquisitions during fiscal year 2018 was not
significant, either individually or in the aggregate, to the results of
the Company. 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.

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 an 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 $481 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, and the remaining
$42 million of debt acquired was repaid in December 2017. During
the measurement period, which ended on August 22, 2017,
adjustments were made to finalize the allocation of purchase price
related to other assets, goodwill, and contingent liabilities.

The acquisition date fair values of the assets acquired and liabilities acquired were 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

Net assets acquired

HeartWare
International, Inc.

All Other

351

625

481

84
1,555

143

245

89
483

—
156

—

—
4

1,072

152

For additional information on acquisitions in fiscal year 2017, see Note 2 to the consolidated financial statements included in the Company’s
Annual report on Form 10-K for the fiscal year ended April 28, 2017.

MEDTRONIC PLC 2018 Form 10-KPART II
Item 8 Notes to Consolidated Financial Statements

Acquisition-Related Items

Acquisition-related items includes expenses incurred in
connection with the integration of Covidien, the Company’s
$50.0 billion acquisition completed in the fourth quarter of
fiscal year 2015, transaction expenses incurred in connection
with business acquisitions, and changes in the fair value of
contingent consideration. During fiscal year 2018, the Company
recognized acquisition-related items expense of $132 million,
including $28 million recognized within cost of products sold, in
the consolidated statements of income. During fiscal year 2018,
acquisition-related items expense includes $172 million of costs
associated with the integration of Covidien manufacturing,
distribution, and administrative facilities, as well as information
technology system implementation and benefits harmonization,
partially offset by changes in fair value of contingent consideration
as a result of revised revenue forecasts and the timing of
anticipated regulatory milestones.

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. During fiscal year 2017, acquisition-
related items expense includes $225 million of costs associated
with the integration of Covidien manufacturing, distribution,

and administrative facilities, as well as information technology
system implementation and benefits harmonization, $23 million
of accelerated or incremental stock compensation expense, and
expenses incurred in connection with the HeartWare acquisition and
planned divestiture of the Patient Care, Deep Vein, Thrombosis, and
Nutritional Insufficiency businesses, partially offset by changes 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, including $219 million of
costs associated with the integration of Covidien manufacturing,
distribution, and administrative facilities, as well as information
technology system implementation and benefits harmonization,
and $58 million of accelerated or incremental stock compensation
expense.

Contingent Consideration

The fair value of contingent consideration at April 27, 2018 and
April 28, 2017 was $173 million and $246 million, respectively.
At April 27, 2018, $65 million was reflected in other liabilities
and $108 million was reflected in other accrued expenses in the
consolidated balance sheets. 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.

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

2018

2017

246

(72)

(29)

173

377

(76)

(83)

246

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 27, 2018

Valuation
Technique

Unobservable Input

Range

Discount rate

11.5%-32.5%

Discounted cash flow

Probability of payment

30%-100%

Projected fiscal year of payment

2019-2026

Discount rate

5.5%

Discounted cash flow

Probability of payment

75%-100%

Projected fiscal year of payment

2019-2026

Note 3 Divestiture and Divestiture-Related Items

Patient Care, Deep Vein Thrombosis, and
Nutritional Insufficiency Businesses

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 to Cardinal Health, Inc. (Cardinal). The divestiture
was completed on July 29, 2017. As a result of the transaction, the
Company received proceeds of $6.1 billion, which was recorded in
proceeds from sale of businesses in the consolidated statements

of cash flows and recognized a before-tax gain of $697 million,
which was recognized within gain on sale of businesses in the
consolidated statements of income. Among the product lines
included in the divestiture were the dental and animal health,
chart paper, wound care, incontinence, electrodes, SharpSafety,
thermometry, perinatal protection, blood collection, compression,
and enteral feeding offerings. The divestiture also included 17
dedicated manufacturing sites. In connection with the transaction,
the Company entered into Transition Service Agreements (TSAs)
and Transition Manufacturing Agreements (TMAs) with Cardinal

MEDTRONIC PLC 2018 Form 10-KPART II
Item 8 Notes to Consolidated Financial Statements

designed to ensure and facilitate an orderly transfer of business
operations. The TSAs are primarily related to administrative
services and continue for 12 months from the divestiture date,
with some TSAs extendable beyond the original 12 month period
per the original agreement. Certain of the TSAs have been
extended beyond the initial 12 month period in accordance with
the provisions of the original agreement. Under the TMAs, both
the Company and Cardinal will manufacture and supply certain
products to each other for a transition period of up to 5 years.

The divestiture of the Patient Care, Deep Vein Thrombosis, and
Nutritional Insufficiency businesses did not meet the criteria to be

classified as discontinued operations, and as such, the results of
operations of these businesses were included within net income
through the date of the divestiture. The Patient Care, Deep Vein
Thrombosis, and Nutritional Insufficiency businesses met the
criteria to be classified as held for sale in the fourth quarter of
fiscal year 2017, at which time the Company ceased depreciation
and amortization of property, plant, and equipment and intangible
assets classified as held for sale. The following table presents
information related to the assets and liabilities that were classified
as held for sale in the consolidated balance sheets:

(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

Divestiture-Related Items

Note 4

Restructuring Charges

Enterprise Excellence

In the third quarter of fiscal year 2018, the Company announced
its Enterprise Excellence restructuring program, which is expected
to leverage the Company’s global size and scale, as well as
enhance the customer and employee experience, with a focus on
three objectives: global operations, functional optimization, and
commercial optimization. Primary activities of the restructuring
program include integrating and enhancing global manufacturing
and supply processes, systems and site presence, enhancing and
leveraging global operating models across several enabling functions,
and optimizing certain commercial processes, systems, and models.

April 28, 2017

371

689

2,910

2,320
6,290

707

1
754

of $114 million, primarily comprised of expenses incurred for
professional services, including banker, legal, tax, and advisory
fees, and $16 million of accelerated stock compensation expense
related to the acceleration of the vesting period for employees that
transferred with the divestiture. There was no divestiture-related
items expense for fiscal years 2017 or 2016.

The Company estimates that, in connection with its Enterprise
Excellence restructuring program, it will recognize pre-tax exit and
disposal costs and other costs associated with the restructuring
program across all segments of approximately $1.6 billion to
$1.8 billion, the majority of which are expected to be incurred by the end
of fiscal year 2022. Approximately half of the estimated charges are
related to employee termination benefits. The remaining restructuring
charges are costs associated with the restructuring program, such
as salaries for employees supporting the program and consulting
expenses. These charges are recognized within restructuring charges,
net, cost of products sold, and selling, general, and administrative expense
in the consolidated statements of income. During fiscal year 2018, the
Company recognized $96 million in charges.

The following table summarizes the activity related to the Enterprise Excellence restructuring program for fiscal year 2018:

(in millions)

APRIL 28, 2017

Charges

Cash payments

APRIL 27, 2018

Employee

Termination Benefits Associated Costs(1)

Total

—

(8)
27

— $

(59)
2

—

(67)
29

(1) Associated costs include costs incurred as a direct result of the restructuring program, such as salaries for employees supporting the program and

consulting expenses. For fiscal year 2018, $28 million was recognized within cost of products sold and $33 million was recognized within selling, general, and
administrative expense in the consolidated statements of income.

MEDTRONIC PLC 2018 Form 10-KPART II
Item 8 Notes to Consolidated Financial Statements

Cost Synergies

The cost synergies program related to administrative office optimization, manufacturing and supply chain infrastructure, and certain
general and administrative savings was achieved as part of the Covidien integration and completed in the third quarter of fiscal year 2018.
Restructuring charges incurred throughout the life of the initiative affecting all segments were primarily related to employee termination
costs and costs related to manufacturing and facility closures.

A summary of the restructuring accrual and related activity is presented below:

(in millions)

APRIL 24, 2015

Charges

Cash payments

Settled non-cash

Accrual adjustments

APRIL 29, 2016

Charges

Cash payments

Settled non-cash

Accrual adjustments

APRIL 28, 2017

Charges

Cash payments

Accrual adjustments

APRIL 27, 2018

For fiscal year 2018, the Company recognized $45 million in
charges, partially offset by accrual adjustments of $34 million.
Accrual adjustments related to certain employees identified
for termination finding other positions within the Company,
cancellations of employee terminations, and employee termination
benefits being less than initially estimated. For fiscal year 2018,
charges included $12 million recognized within cost of products sold
and $4 million recognized within selling, general and administrative
expense in the consolidated statements of income.

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 16 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 accrual
adjustments of $68 million. Accrual adjustments relate to certain

Note 5

Special Charge

Employee
Termination Benefits

Asset
Write-downs

Other
Costs

136

248

(153)

—

(18)
213

287

(179)

—

(60)
261

(132)

(38)
116

— $

—

(23)

—
— $

—

(27)

—
— $

—

—
— $

(31)

—

—
37

(53)

—

(8)
30

(32)

4
22

Total

143

332

(184)

(23)

(18)
250

368

(232)

(27)

(68)
291

(164)

(34)
138

employees identified for termination finding other positions
within the Company, cancellations of employee terminations, and
employee termination benefits being less than initially estimated.
For 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.

For fiscal year 2016, the Company recognized $332 million in
charges, partially offset by accrual adjustments of $18 million.
Accrual adjustments relate to certain employees identified
for termination finding other positions within the Company,
cancellations of employee terminations, and employee termination
benefits being less than initially estimated. For fiscal year 2016,
asset write-downs included $14 million of property, plant, and
equipment impairments. Fiscal year 2016 assets write-downs also
included $9 million of inventory write-offs of discontinued product
lines recognized within cost of products sold in the consolidated
statements of income.

Continuing the Company’s commitment to improve the health of people and communities throughout the world, the Company recognized
a charge of $80 million in fiscal year 2018 and $100 million in fiscal year 2017 for charitable contributions to the Medtronic Foundation.

MEDTRONIC PLC 2018 Form 10-KPART II
Item 8 Notes to Consolidated Financial Statements

Note 6

Financial Instruments

The Company holds investments, including marketable debt and equity securities, that are classified and accounted for as 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.

The following table summarizes the Company’s investments by significant investment category and consolidated balance sheet
classification at April 27, 2018:

Valuation

Balance Sheet Classification

Cost

Unrealized
Gains

Unrealized
Losses

Fair Value

Investments Other Assets

(in millions)

Available-for-sale securities

Level 1:

U.S. government and agency securities

Marketable equity securities

Total Level 1

Level 2:

Corporate debt securities

U.S. government and agency securities

Mortgage-backed securities

Non-U.S. government and agency securities

Other asset-backed securities

Debt funds

Total Level 2

Level 3:

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:

732

795

4,179

848

725

358

739

6,923

199

7,964

353

(26)

—

(26)

(75)

(24)

(34)

(1)

(2)

(154)

(290)

(3)

(2)

(321)

—

121

—

—
121

706

162

868

706

—

706

—

162

4,124

824

693

356

585

824

693

356

585

6,655

197

7,764

N/A

—

197

7,558

—

206

353

353
559

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

353
8,317

—
(321)

N/A
7,764

—
7,558

(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 2018 Form 10-KThe following table summarizes the Company’s investments by significant investment category and consolidated balance sheet
classification at April 28, 2017:

PART II
Item 8 Notes to Consolidated Financial Statements

Valuation

Balance Sheet Classification

Cost

Unrealized
Gains

Unrealized
Losses

Fair Value

Investments Other Assets

(in millions)

Available-for-sale securities:

Level 1:

U.S. government and agency securities

Marketable equity securities

Total Level 1

Level 2:

Corporate debt securities

U.S. government and agency securities

Mortgage-backed securities

Non-U.S. government and agency securities

Other asset-backed securities

Debt funds

Total Level 2

Level 3:

Auction rate securities

Corporate debt 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)

—

(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

—

148

589

589
737

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.

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 27, 2018 and April 28, 2017:

Less than 12 months

More than 12 months

April 27, 2018

(in millions)

Corporate debt securities

U.S. government and agency securities

Mortgage-backed securities

Non-U.S. government and agency securities

Other asset-backed securities

Debt funds

Auction rate securities

TOTAL

Fair Value

2,620

762

442

238

—
4,101

Unrealized
Losses

Fair Value

Unrealized
Losses

(58)

(33)

(15)

—

(1)

—

—
(107)

272

374

102

775

44
1,666

(17)

(19)

(1)

(156)

(3)
(214)

MEDTRONIC PLC 2018 Form 10-KPART II
Item 8 Notes to Consolidated Financial Statements

(in millions)

Corporate debt securities

U.S. government and agency securities

Mortgage-backed securities

Other asset-backed securities

Debt funds

Auction rate securities

Marketable equity securities

TOTAL

Less than 12 months

More than 12 months

April 28, 2017

Fair Value

1,263

896

276

127

173

—

14
2,749

Unrealized
Losses

Fair Value

Unrealized
Losses

(19)

(15)

(4)

(1)

—

(3)
(43)

—

1,125

2
1,312

(4)

—

(12)

—

(183)

(3)

(1)
(203)

The following table presents the unobservable inputs utilized in the fair value measurement of the auction rate securities classified as
Level 3 at April 27, 2018:

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
2018 or 2017. 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.

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

Settlements

April 28, 2017

Settlements
APRIL 27, 2018

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

2018

Total Level 3
Investments

Corporate Debt
Securities

Auction Rate
Securities

—

(1)
44

Fiscal Year

2017

—

—
44

—

(1)
—

2016

(in millions)

Proceeds from sales

Gross realized gains

Gross realized losses

Recognized impairment losses

Debt(1)

Equity(2)

Debt(1)

Equity(2)

Debt(1)

Equity(2)

4,114

113

5,224

132

9,881

(25)

—

(231)

(56)

—

(30)

(53)

—

(114)

(1)
(2)

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

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 27, 2018 and April 28, 2017, 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 2018 and 2017 were not
significant.

MEDTRONIC PLC 2018 Form 10-KPART II
Item 8 Notes to Consolidated Financial Statements

The April 27, 2018 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

The Company holds investments in marketable equity securities,
which are classified as other assets in the consolidated balance
sheets. At April 27, 2018 and April 28, 2017, the aggregate carrying
amount of these investments was $162 million and $103 million,
respectively. The Company did not recognize any significant
impairment charges related to marketable equity securities during
fiscal years 2018, 2017, or 2016.

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 27, 2018 and April 28, 2017, the aggregate carrying amount
of equity and other securities accounted for using the cost or
equity method was $353 million and $589 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 events or changes in
circumstances are identified 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
are included within Level 3 of the fair value hierarchy due to the
use of significant unobservable inputs to determine fair value. To
determine the fair value of these investments, the Company uses
all pertinent financial information available related to the investees,
including financial statements, market participant valuations from
recent and proposed equity offerings, and other third-party data.

April 27, 2018

887

2,687

3,138

108
6,820

During fiscal year 2018, the Company received bids from potential
buyers and investors for some or all of its ownership in a portfolio
of selected investments, which indicated that the fair values of
certain of the underlying cost and equity method investments
in the portfolio may be below the respective carrying values.
The Company determined that the decline in the fair values
was other-than-temporary given the uncertainty regarding the
Company’s intent to hold the investments for a period of time
that would be sufficient to recover the carrying values. As a result,
the Company recognized impairment charges of $227 million
during fiscal year 2018, which were recognized within investment
loss in the consolidated statements of income. The fair values
of the investments were determined based on Level 3 inputs.
The carrying value of the investments prior to recognizing the
impairment charges was $317 million. In April 2018, the Company
transferred the portfolio of investments into a newly created,
wholly-owned entity. In a subsequent transaction, the Company
sold a significant interest in the new entity in exchange for cash
proceeds of $72 million. The Company’s remaining investment in
the entity of $18 million is accounted for using the equity method.
No gain or loss was recognized on the transaction.

During fiscal year 2016, the Company recognized an impairment
charge of $70 million related to the impairment of a debt
investment accounted for using the cost method, which was
recognized within investment loss in the consolidated statements
of income. There were no other significant impairment charges
recognized during fiscal years 2018, 2017, and 2016.

MEDTRONIC PLC 2018 Form 10-KPART II
Item 8 Notes to Consolidated Financial Statements

Note 7 Goodwill and Other Intangible Assets

Goodwill

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

(in millions)

APRIL 29, 2016

Cardiac and
Vascular Group

Minimally Invasive
Therapies Group

Restorative
Therapies Group

Diabetes Group

6,243

23,784

9,620

1,853

Total

41,500

732

(807)

(2,910)

—

1,853

38,515

—

—
1,880

922
39,543

Goodwill as a result of acquisitions

Currency translation

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

Goodwill as a result of acquisitions

Purchase accounting adjustments

Currency translation

APRIL 27, 2018

457

(49)

—

6,651

80
6,791

242

(705)

(2,910)

20,411

—

734
21,155

(53)

—

9,600

—

108
9,717

The Company did not recognize any goodwill impairments during fiscal years 2018, 2017, or 2016.

MEDTRONIC PLC 2018 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 27, 2018

april 28, 2017

Gross Carrying
amount

accumulated
amortization

Gross Carrying
amount

accumulated
amortization

(3,139)

(4,441)

(569)

(52)
(8,201)

16,949

11,569

822

94
29,434

490

16,862

11,461

772

77
29,172

594

(2,166)

(3,690)

(461)

(42)
(6,359)

The Company did not recognize any definite-lived intangible
asset impairments during fiscal years 2018, 2017, or 2016.
During fiscal year 2018, the Company recognized impairment
losses on indefinite-lived intangibles of $68 million as a result of the
discontinuation of certain IPR&D projects within the Restorative
Therapies Group segment, which were recognized within other
expense, net in the consolidated statements of income. The
Company did not recognize any significant indefinite-lived asset
impairments during fiscal years 2017 or 2016. 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, or the discontinuation of certain projects, and as a result,
may recognize impairment losses in the future.

Amortization

Intangible asset amortization expense for fiscal years 2018, 2017,
and 2016 was $1.8 billion, $2.0 billion, and $1.9 billion, respectively.
Estimated aggregate amortization expense by fiscal year based
on the current carrying value and remaining estimated useful lives
of definite-lived intangible assets at April 27, 2018, excluding any
possible future amortization associated with acquired IPR&D which
has not met technological feasibility, is as follows:

(in millions)

2019

2020

2021

2022

2023

amortization
Expense

1,633

1,583

1,568

1,548

1,481

MEDTRONIC PLC 2018 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

Note 8

Financing Arrangements

Current debt obligations consisted of the following:

(in millions)

Bank borrowings

Capital lease obligations

Commercial paper

1.700 percent two-year 2017 senior notes

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

Debt premium, net

CUrrENt DEBt OBLIGatIONS

Bank Borrowings

Outstanding bank borrowings at April 27, 2018 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 0.21%, and
the borrowing is a natural hedge of currency and exchange rate risk.

Commercial Paper

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.

Commercial paper outstanding at April 27, 2018 was $698 million,
as compared to $901 million at April 28, 2017. During fiscal years
2018 and 2017, the weighted average original maturity of the
commercial paper outstanding was approximately 28 days and
39 days, respectively, and the weighted average interest rate
was 1.46 percent and 0.89 percent, respectively. The issuance of
commercial paper reduces the amount of credit available under the
Company’s existing Credit Facility, defined below.

Line of Credit

The Company has a $3.5 billion five year revolving syndicated line of
credit facility (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

april 27, 2018

april 28, 2017

355

698

1,000

—

—
2,058

396

901

—

3,000

1,150

1,000

26
7,520

bank, which expires in January 2020. The 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 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 27, 2018 and April 28, 2017, 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 27, 2018.

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
provided guarantees of the obligations of Medtronic, Inc. under
the Term Loan Credit Agreement. During fiscal year 2018, the
Company repaid its senior unsecured term loan, including interest,
for $3.0 billion.

MEDTRONIC PLC 2018 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

april 27, 2018

april 28, 2017

Maturity by
Fiscal Year

amount

Effective
Interest rate

amount

5.61%

Long-term debt consisted of the following:

(in millions, except interest rates)

5.600 percent ten-year 2009 senior notes

1.700 percent two-year 2017 senior notes

4.450 percent ten-year 2010 senior notes

Floating rate five-year 2015 senior notes

2.500 percent five-year 2015 senior notes

4.200 percent ten-year 2010 CIFSA senior notes

4.125 percent ten-year 2011 senior notes

3.150 percent seven-year 2015 senior notes

3.125 percent ten-year 2012 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

Bank borrowings

Debt premium, net

Capital lease obligations

Interest rate swaps

Deferred financing costs
LONG-TERM DEBT

Senior Notes

2019

2020

2021

2022

2023

2024

2025

2027

2035

2038

2039

2040

2042

2043

2044

2045

2020-2022

2020-2045

2020-2025

2021-2022

2020-2045

—

500

2,500

600

500

2,500

675

650

530

310

850

4,000

850

2,382

374

300

500

400

325

650

4,150

125

120

(6)

(107)
23,699

The Company has outstanding unsecured senior obligations,
described as senior notes in the tables above (collectively, the
Senior Notes). The Senior Notes rank equally with all other
unsecured and unsubordinated indebtedness of the Company.
The indentures under which the Senior Notes were issued contain
customary covenants, all of which the Company remained in
compliance with at April 27, 2018. 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.

In April 2018, the Company completed an early redemption of
approximately $1.2 billion of Senior Notes for $1.2 billion of total
consideration. The Company recognized a loss on the debt
redemption of $38 million, which included cash premiums and
accelerated amortization of deferred financing costs. The loss was
recognized in interest expense, net in the consolidated statements
of income.

400

1,000

766

500

2,500

600

500

2,500

675

650

530

310

850

4,000

850

2,382

374

300

500

400

325

650

4,150

139

135

Effective
Interest rate

5.61 %

1.74

4.47

1.98

2.52

2.22

4.19

3.18

3.16

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

4.63

1.28

—

4.81

—

1.74

4.47

2.92

2.52

2.22

4.19

3.18

3.16

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

4.63

3.99

—

4.46

—

(128)
25,921

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 in fiscal year 2019. The second
tranche consisted of $850 million of 3.350 percent Senior Notes
due in fiscal year 2027. Concurrent with the offering by Medtronic
Luxco, Medtronic, Inc. issued $150 million in principal amount of its
4.625 percent Senior Notes due in fiscal year 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
in fiscal year 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.

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. The Company recognized a loss on debt
extinguishment of $163 million, which included cash premiums

MEDTRONIC PLC 2018 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

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 a loss of $20 million 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, which was

recognized in interest expense, net in the consolidated statements
of income.

At April 27, 2018 and April 28, 2017, 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.

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)

2019

2020

2021

2022

2023

Thereafter

Total debt

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

2,058

3,006

1,122

3,275

1,192

15,097

25,750

2,058
23,692

Financial Instruments Not Measured at Fair Value

At April 27, 2018, the estimated fair value of the Company’s
Senior Notes was $25.1 billion compared to a principal value
of $24.5 billion. At April 28, 2017 the estimated fair value was
$30.4 billion compared to a principal value of $28.9 billion. The fair

value was estimated using quoted market prices for the publicly
registered Senior Notes, which are classified as Level 2 within the
fair value hierarchy. The fair values and principal values consider
the terms of the related debt and exclude the impacts of debt
discounts and hedging activity.

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 cash
flows related to all of the Company’s derivative instruments are
reported as operating activities in the consolidated statements of
cash flows. The primary currencies of the derivative instruments
are the Euro, Japanese Yen, and British Pound. 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 $11.5 billion
and $10.8 billion at April 27, 2018 and April 28, 2017, respectively.

The following information 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 and
statements of income.

Freestanding Derivative Contracts

Freestanding derivative contracts are primarily 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 foreign currencies. The gross notional amount of
the Company’s currency exchange rate contracts outstanding at
April 27, 2018 and April 28, 2017 was $5.2 billion and $4.9 billion,
respectively. The Company’s freestanding currency exchange rate
contracts 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 Company also entered into total return swaps in fiscal year
2018, which are used to hedge the liability of a non-qualified,
deferred compensation plan. The gross notional amount of the
Company’s total return swaps outstanding at April 27, 2018
was $210 million. The Company’s total return swaps are not
designated as hedges, and therefore, changes in the value of these
instruments are recognized in earnings.

MEDTRONIC PLC 2018 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

The amounts and classification of the gains (losses) in the consolidated statements of income related to derivative instruments, not
designated as hedging instruments, for fiscal years 2018, 2017, and 2016 are as follows:

(in millions)

Currency exchange rate contracts

Total return swaps
tOtaL

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 in the same period
or periods during which the hedged transaction affects earnings.

Classification

Other expense, net

Fiscal Year

2018

(253)

27
(226)

2017

2016

—
54

—
33

No gains or losses relating to ineffectiveness of cash flow hedges
were recognized in earnings during fiscal years 2018, 2017, or
2016. No components of the hedge contracts were excluded in
the measurement of hedge ineffectiveness, and no hedges were
derecognized or discontinued during fiscal years 2018, 2017, or
2016. The gross notional amount of these contracts, designated
as cash flow hedges, outstanding at April 27, 2018 and April 28,
2017 was $6.3 billion and $5.8 billion, respectively, and will mature
within the subsequent two-year period.

The amount of gross gains (losses), classification of the gains
(losses) in the consolidated statements of income, and the AOCI
related to the effective portion of currency exchange rate contract
derivative instruments designated as cash flow hedges for fiscal
years 2018, 2017, and 2016 were as follows:

(in millions)

recognized in aOCI

recognized in Income

amount

Classification

Fiscal Year 2018

Currency exchange rate contracts

(404)

Other expense, net

(in millions)

Currency exchange rate contracts

(in millions)

Currency exchange rate contracts

tOtaL

Fiscal Year 2017

recognized in aOCI

recognized in Income

amount

342

Classification

Other expense, net

recognized in aOCI

recognized in Income

amount

Classification

Fiscal Year 2016

(165)

Other expense, net

Cost of products sold

amount

(69)

amount

173

amount

405

(37)
368

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 is immediately recognized in interest
expense, net.

During fiscal year 2017, in connection with the issuance of the
2017 Senior Notes, the Company terminated $300 million of

fixed pay, forward starting interest rate swaps with a weighted
average fixed rate of 3.10 percent. During fiscal year 2016, the
Company terminated forward starting interest rate derivatives
with a consolidated notional amount of $500 million, which were
previously entered into in advance of a planned debt issuance that
was no longer expected. During fiscal years 2017 and 2016, there
were $21 million and $23 million, respectively, of unrealized gains
recorded in accumulated other comprehensive loss.

No gains or losses related to the ineffectiveness of forward
starting interest rate derivative instruments were recognized
in interest expense, net during fiscal years 2017 and 2016.
Additionally, during fiscal years 2017 and 2016, no components
of the forward starting interest rate derivative instruments were
excluded in the measurement of hedge ineffectiveness and no
hedges were derecognized or discontinued. The reclassification

MEDTRONIC PLC 2018 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

of the effective portion of the net losses from accumulated other
comprehensive loss to interest expense, net was not significant.

At April 27, 2018 and April 28, 2017, the Company had $(207)
million and $37 million, respectively, in after-tax net unrealized
(losses) gains associated with cash flow hedging instruments
recorded in accumulated other comprehensive loss. The Company
expects that $111 million of after-tax net unrealized losses at
April 27, 2018 will be recognized in the consolidated statements of
income 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
the fair value of the underlying debt instrument. The gains (losses)
from terminated interest rate swap agreements are recorded in
long-term debt, increasing (decreasing) the outstanding balances
of the debt, and amortized as a reduction of (addition to) interest
expense, net over the remaining life of the related debt.

At both April 27, 2018 and April 28, 2017, the Company had
interest rate swaps with 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 fiscal year 2021 and the $675 million
3.125 percent 2012 Senior Notes due fiscal year 2022.

At April 27, 2018, the market value of outstanding interest rate
swap agreements was an unrealized loss of $6 million, as compared
to an unrealized gain of $41 million at April 28, 2017. At April 27,
2018, the market value of the hedged items was an unrealized gain
of $6 million, as compared to an unrealized loss of $41 million. The
amounts were recorded in other assets with the offsets recorded in
long-term debt on the consolidated balance sheets.

No significant hedge ineffectiveness was recognized as a result
of these fair value hedges for fiscal years 2018, 2017, or 2016. In
addition, the Company did not recognize any gains or losses during
fiscal years 2018, 2017, or 2016 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 27, 2018 and April 28, 2017. The fair value
amounts are presented on a gross basis, and are segregated
between derivatives that are designated and qualify as hedging
instruments and those that are not designated and do not qualify
as hedging instruments, and are further segregated by type of
contract within those two categories.

(in millions)

Balance Sheet Classification

Fair Value

Balance Sheet Classification

Fair Value

Derivative Assets

Derivative Liabilities

april 27, 2018

Derivatives designated as hedging instruments

Currency exchange rate contracts

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

Other current assets

Total return swaps

Stock warrants

Cross currency interest rate contracts

Total derivatives not designated as hedging
instruments
tOtaL DErIVatIVES

Other current assets

Other assets

Other accrued expenses

Other liabilities

Other accrued expenses

Other liabilities

62
118

162

227

—

31
258

MEDTRONIC PLC 2018 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 28, 2017

Derivatives designated as hedging instruments

Currency exchange rate contracts

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

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

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 27, 2018

april 28, 2017

Level 1

Level 2

Level 1

Level 2

79 $

238

216 $

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

Total return swaps

Stock warrants

Cross currency interest rate contracts

Derivative liabilities:

Currency exchange rate contracts

Interest rate contracts

Cross currency interest rate contracts

tOtaL

april 27, 2018

Gross Amount Not Offset on the Balance Sheet

Gross amount of
recognized assets
(Liabilities)

Financial
Instruments

Cash Collateral
(Received)
Posted

Securities
Collateral
(Received)
Posted

Net
amount

79 $

(61) $

— $

(6)

—

(4)

—

118 $

(71) $

— $

(238) $

61 $

— $

(103)

(14)

(6)

(258)
(140) $

71
— $

—

—
— $

—

76
76

(6)

(2)

(111)
(64)

MEDTRONIC PLC 2018 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

Cross currency interest rate contracts

tOtaL

Concentrations of Credit Risk

april 28, 2017

Gross Amount Not Offset on the Balance Sheet

Gross amount of
recognized assets
(Liabilities)

Financial
Instruments

Cash Collateral
(Received)
Posted

Securities
Collateral
(Received)
Posted

Net
amount

216 $

262 $

(93) $

(11)

(104)

158 $

(58) $

(15)

(2)

(75) $

73 $

75
— $

(55) $

(5)

—

(60) $

— $

—

—
(60) $

— $

—

— $

—

—
— $

103

127

(20)

(9)

(29)
98

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 27,
2018, the Company posted net securities collateral of $76 million
to its counterparties. At April 28, 2017, the Company received net
cash collateral of $60 million from its counterparties. The cash
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 security collateral posted remained
in investments on the consolidated balance sheets.

april 27, 2018

april 28, 2017

2,407

496

676
3,579

2,211

458

669
3,338

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

Note 10

Inventories

Inventory balances, net of reserves, were as follows:

(in millions)

Finished goods

Work-in-process

Raw materials

tOtaL

MEDTRONIC PLC 2018 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

Property, plant, and equipment

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 27, 2018

april 28, 2017

187

2,265

6,749

1,058

10,259

(5,655)

4,604

186

2,175

6,435

895

9,691

(5,330)

4,361

Depreciation is recognized using the straight-line method over
the estimated useful lives of the assets. Depreciation expense
of $821 million, $937 million, and $889 million was recognized in
fiscal years 2018, 2017, and 2016, 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 Shareholders’ Equity

Share Capital

Dividends

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. At April 27, 2018, 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. At April 27,
2018, no Preferred Shares were issued or outstanding.

A Preferred Shares

The authorized share capital of the Company includes
500 thousand A Preferred Shares, with a par value of $1.00 per
share. At April 27, 2018, 1,872 A Preferred Shares were
outstanding. 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.

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 2018 and 2017, the
Company repurchased approximately 25 million and 43 million
shares, respectively, at an average price of $83.71 and $83.03,
respectively.

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. As described below, this authorization was replaced in June
2017. During fiscal year 2018, prior to the June 2017 repurchase
program which became effective on June 26, 2017, the Company
purchased approximately 13 million shares authorized under the
June 2015 repurchase program.

In June 2017, the Company’s Board of Directors replaced the June
2015 authorization to repurchase up to an aggregate number of
ordinary shares with an authorization to expend up to an aggregate
amount of $5.0 billion beginning June 26, 2017 to repurchase the
Company’s ordinary shares. At April 27, 2018, the Company had
used approximately $1.0 billion of the $5.0 billion authorized under
the repurchase program, leaving approximately $4.0 billion available
for future repurchases. The Company accounts for repurchases
of ordinary shares using the par value method and shares
repurchased are canceled.

MEDTRONIC PLC 2018 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

Note 13 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 Medtronic, Inc. 2013 Stock
Award and Incentive Plan, which created the Medtronic plc 2013
Stock Award and Incentive Plan (2013 Plan). In fiscal year 2018, 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 27, 2018, there were approximately 63 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
2018, 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 27, 2018, the Company does not have any
outstanding restricted stock awards. Beginning in fiscal year 2018,
restricted stock units have a 4-year ratable vesting term. Restricted
stock units issued prior to fiscal year 2018 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
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 2018, the Company granted restricted stock units under
the 2013 Plan. At April 27, 2018, 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 $69.41 per share in fiscal year 2018. At April 27,
2018, plan participants had approximately $11 million withheld to
purchase the Company’s ordinary shares at 85 percent of its market
value on June 29, 2018, the last trading day before the end of the
calendar quarter purchase period. At April 27, 2018, approximately
16 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 2018 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

13.71

14.70

13.72

Fiscal Year

2018

2017

2016

Assumptions used:

Expected life (years)(1)
Risk-free interest rate(2)
Volatility(3)
Dividend yield(4)

6.16

2.00%

19.51%

2.19%

6.18

1.26%

21.07%

1.97%

5.94

1.79%

21.00%

1.96%

(1) 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) 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) 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) 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

The following table presents the components and classification of stock-based compensation expense recognized for stock options,
restricted stock, and ESPP in fiscal years 2018, 2017, and 2016:

(in millions)

Stock options

Restricted stock

Employee 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

Divestiture-related items

Total stock-based compensation expense

Income tax benefits

TOTAL STOCK-BASED COMPENSATION EXPENSE, NET OF TAX

Fiscal Year

2018

2017

2016

132

185

27
344

242

—

344

(82)
262

157

169

22
348

233

—

348

(98)
250

206

148

21
375

212

—

375

(108)
267

MEDTRONIC PLC 2018 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

Stock Options

The following table summarizes all stock option activity, including activity from options assumed or issued as a result of acquisitions, during
fiscal year 2018:

Wtd. Avg.
remaining
Contractual
term
(in years)

aggregate
Intrinsic Value
(in millions)

5.94

7.12

4.25

637

115

520

2016

452

374

131

Outstanding at April 28, 2017

Granted

Exercised

Expired/Forfeited

Outstanding at April 27, 2018

Vested and expected to vest at April 27, 2018

Exercisable at April 27, 2018

Options
(in thousands)

Wtd. Avg.
Exercise
Price

45,194

3,773

(6,145)

(1,783)

41,039

23,093

17,136

62.41

83.92

43.72

76.93

66.56

77.30

51.43

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 2018, 2017, and 2016:

(in millions)

Cash proceeds from options exercised

Intrinsic value of options exercised

Tax benefit related to options exercised

Fiscal Year

2018

250

248

2017

367

403

140

Unrecognized compensation expense related to outstanding stock options at April 27, 2018 was $72 million and is expected to be
recognized over a weighted average period of 2.0 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 2018:

Nonvested at April 28, 2017

Granted

Vested

Forfeited

Nonvested at April 27, 2018

Units
(in thousands)

8,788

2,683

(2,589)

(646)

8,236

Wtd. Avg.
Grant
Price

76.49

83.88

61.73

78.90

83.35

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 2018, 2017, and 2016:

(in millions, except per share data)

Fiscal Year

2018

2017

Weighted-average grant-date fair value per restricted stock

83.88

85.07

Fair value of restricted stock vested

Tax benefit related to restricted stock vested

160

131

2016

77.68

276

Unrecognized compensation expense related to restricted stock as of April 27, 2018 was $307 million and is expected to be recognized over
a weighted average period of 2.4 years.

MEDTRONIC PLC 2018 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

Note 14

Income Taxes

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

(in millions)

U.S.

International

INCOME BEFORE INCOME TAXES

The income tax provision consists of the following:

(in millions)

Current tax expense:

U.S.

International

Total current tax expense

Deferred tax expense (benefit):

U.S.

International

Net deferred tax benefit
INCOME TAX PROVISION

Fiscal Year

2018

(958)

6,633
5,675

2017

(234)

4,836
4,602

Fiscal Year

2018

2017

2,899

796

3,695

(1,160)

(1,115)
2,580

614

840

1,454

(399)

(477)

(876)
578

2016

333

4,003
4,336

2016

440

835

1,275

(67)

(410)

(477)
798

On December 22, 2017, the U.S. government enacted the Tax
Act, which significantly revises U.S. corporate income taxation
by, among other things, lowering the U.S. corporate income tax
rate from 35.0 percent to 21.0 percent effective January 1, 2018,
broadening the base of taxation, implementing a territorial tax
system, and imposing a repatriation tax on deemed repatriated
earnings of foreign subsidiaries. U.S. GAAP requires that the impact
of tax legislation be recognized in the period in which the law
was enacted. The decrease in the U.S. federal corporate tax rate
from 35.0 percent to 21.0 percent results in a blended statutory
tax rate of 30.5 percent for the Company’s fiscal year 2018. As
discussed in Note 1, the Company adopted guidance related to
the finalization of the accounting for the income tax impacts of the
Tax Act. Until the accounting for the income tax impacts of the Tax
Act is complete, the reported amounts are based on reasonable
estimates and are disclosed as provisional.

As of April 27, 2018, the Company had not fully completed its
accounting for the tax effects of the enactment of the Tax Act. The
Company’s income tax provision for fiscal year 2018 is based on
a reasonable estimate of the transition tax and expected reversal
of existing deferred tax balances. As a result of the Tax Act, the
Company has removed its permanently reinvested assertion on
historical earnings through April 27, 2018 for legal entities with
accumulated earnings subject to the transition tax. The Company
continues to evaluate its permanently reinvested assertion for
certain legal entities. For the amounts which the Company was
able to reasonably estimate, the Company recognized a provisional
net tax charge of $2.4 billion within income tax provision in the
consolidated statements of income. The components of the
provisional tax amounts are as follows:
■■

A provisional tax charge of $2.6 billion for the transition tax
liability. The Company has not yet completed the calculation

of the total post-1986 foreign earnings & profits (E&P) and
the income tax pools for all foreign subsidiaries. Further, the
transition tax is based in part on the amount of those earnings
held in cash and other specified assets. This amount may
change when the Company finalizes the calculation of post-
1986 foreign E&P previously deferred from U.S. federal taxation
and finalizes the amounts held in cash or other specified assets.
In addition, further interpretations from U.S. federal and state
governments and regulatory organizations may change the
provisional tax liability or the accounting treatment of the
provisional tax liability.

A provisional net tax benefit of $114 million associated with the
change in the U.S. Federal statutory tax rate for the year and the
remeasurement of certain deferred tax assets, liabilities, and
valuation allowances.

■■

Because of the complexity of the new Global Intangible Low-Taxed
Income (GILTI) tax rules, the Company continues to evaluate
this provision of the Tax Act. The Company is allowed to make
an accounting policy election of either (1) treating taxes due
on future U.S. inclusions in taxable income related to GILTI as a
current period expense when incurred (the “period cost method”)
or (2) factoring such amounts into the Company’s measurement
of its deferred taxes (the “deferred method”). The Company’s
selection of an accounting policy with respect to the new GILTI
tax rules will depend, in part, on analyzing its global income to
determine whether it can reasonably estimate the tax impact.
The Company is currently in the process of analyzing its structure
and is not yet able to determine the effect of this provision of
the Tax Act. Therefore, the Company has not yet made a policy
decision regarding whether to record deferred tax on GILTI and
has not made any adjustments related to potential GILTI tax in its
consolidated financial statements.

MEDTRONIC PLC 2018 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

Tax assets (liabilities), shown before jurisdictional netting of deferred tax assets (liabilities), are comprised of the following:

(in millions)

Deferred tax assets:

april 27, 2018

april 28, 2017

Net operating loss, capital loss, and credit carryforwards

7,463

6,800

Other accrued liabilities

Accrued compensation

Pension and post-retirement benefits

Stock-based compensation

Other

Inventory

Federal and state benefit on uncertain tax positions

Unrealized loss on available-for-sale securities and derivative financial instruments

Gross deferred tax assets

Valuation allowance

Total deferred tax assets

Deferred tax liabilities:

Intangible assets

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 ASSETS (LIABILITIES), NET

Reported as (after valuation allowance and jurisdictional netting):

Other current assets

Tax assets

Deferred tax liabilities

Noncurrent liabilities held for sale

TAX ASSETS (LIABILITIES), NET

410

209

256

190

332

207

9,227

(7,166)

2,061

658

427

456

278

349

277

191

—

9,436

(6,311)

3,125

(1,697)

(4,943)

(69)

(143)

(38)

—

(131)

(2,078)

406

315
704

662

1,465

(1,423)

—
704

(112)

(74)

(149)

(18)

(112)

(5,408)

475

218
(1,590)

545

1,550

(2,978)

(707)
(1,590)

No deferred taxes have been provided on the approximately
$61.0 billion and $31.8 billion of undistributed earnings of the
Company’s subsidiaries at April 27, 2018 and April 28, 2017,
respectively, since these earnings have been, and under current plans
will continue to be, permanently reinvested in these subsidiaries.
During fiscal year 2018, the Company removed its permanently
reinvested assertion on the undistributed earnings of certain foreign
subsidiaries with a U.S. parent which were subject to the transition
tax. The assertion was removed for all earnings of such subsidiaries
through April 27, 2018. Due to the number of legal entities and
jurisdictions involved, the complexity of the legal entity structure
of the Company, and the complexity of the tax laws in the relevant
jurisdictions, 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.

At April 27, 2018, the Company had approximately $28.4 billion of
net operating loss carryforwards in certain non-U.S. jurisdictions, of
which $25.2 billion have no expiration, and the remaining $3.2 billion
will expire during fiscal years 2019 through 2038. Included in these
net operating loss carryforwards are $19.7 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 $8.7 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 27, 2018, the Company had $963 million of U.S. federal net
operating loss carryforwards, which will expire during fiscal years
2019 through 2036. For U.S. state purposes, the Company had
$981 million of net operating loss carryforwards at April 27, 2018,
which will expire during fiscal years 2019 through 2038.

At April 27, 2018, the Company also had $174 million of tax credits
available to reduce future income taxes payable, of which $58 million
have no expiration. The remaining credits expire during fiscal years
2019 through 2038.

MEDTRONIC PLC 2018 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

The Company has established valuation allowances of $7.2 billion
and $6.3 billion at April 27, 2018 and April 28, 2017, respectively,
primarily related to the uncertainty of the utilization of certain
deferred tax assets which are primarily comprised of tax loss and
credit carryforwards in various jurisdictions. The increase in the
valuation allowance during fiscal year 2018 is primarily related to
the establishment of a valuation allowance against current year
generated losses, as well as the effects of currency fluctuations.
These valuation allowances would result in a reduction to the
income tax provision in the consolidated statements of income if
they are ultimately not required.

During fiscal year 2018, the Company received a tax ruling
confirming the treatment of various intercompany transactions,
which have the effect of utilizing the $12.0 billion of non-U.S. special
deductions previously disclosed. The ruling allowed the Company to
offset some of the gain on the sale of the Patient Care, Deep Vein
Thrombosis, and Nutritional Insufficiency businesses within the
Minimally Invasive Therapies Group segment, as well as recognize
an income tax benefit associated with the intercompany sale of
intellectual property and the associated elimination of a deferred tax
liability.

The Company’s effective income tax rate 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)

U.S. Tax Reform

Valuation allowance release

Stock based compensation

Other, net

EFFECTIVE TAX RATE

2018

30.5%

0.8

(0.8)

(0.1)

(18.8)

(1.1)

(8.5)

43.0

(0.1)

(1.0)

1.6
45.5%

Fiscal Year

2017

35.0%

1.0

(0.9)

(0.4)

(27.1)

(1.5)

5.7

—

(1.0)

—

1.8
12.6%

2016

35.0%

0.9

(1.2)

(0.3)

(23.4)

(1.6)

11.4

—

(0.9)

—

(1.5)
18.4%

(1) Adjustments include the impact of restructuring charges, net, acquisition- and divestiture-related items, certain litigation charges, special charge, debt

redemption premium, inventory step-up, loss on previously held forward starting interest rate swaps, interest expense, net, and certain tax adjustments, net.

During fiscal year 2018, certain tax adjustments of $1.9 billion,
recognized in income tax provision in the consolidated statements
of income, included the following:
■■

A net charge of $2.4 billion associated with U.S. tax reform,
inclusive of the transition tax, remeasurement of U.S. Federal
deferred tax assets and liabilities, and the decrease in the
U.S. statutory tax rate. The Company’s income tax provision
associated with the impact of the Tax Act for fiscal year 2018 is
based on a reasonable estimate and will be finalized within the
measurement period.

■■

A charge of $73 million associated with an internal reorganization
of certain foreign subsidiaries.

A net benefit of $579 million associated with the intercompany
sale of intellectual property.

During fiscal year 2017, certain tax adjustments of $202 million,
recognized in income tax provision in the consolidated statements
of income, 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 divestiture
of a portion of the Patient Care, Deep Vein Thrombosis, and
Nutritional Insufficiency businesses to Cardinal. 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 $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.

During fiscal year 2016, certain tax adjustments of $417 million,
recognized in income tax provision in the consolidated statements
of income, 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

MEDTRONIC PLC 2018 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

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.

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 $446 million,
$475 million, and $474 million in fiscal years 2018, 2017, and 2016,
respectively, and earnings per diluted share by $0.33, $0.34, and
$0.33 in fiscal years 2018, 2017, and 2016, respectively. Unless
these grants are extended, they will expire between fiscal years
2019 and 2029. The Company’s historical practice has been to
renew, extend, or obtain new tax incentive grants upon expiration
of existing tax incentive grants. If the Company is not able to renew,
extend, or obtain new tax incentive grants, the expiration of existing
tax incentive grants could have a material impact on the Company’s
financial results in future periods. The tax incentive grants which
expired during fiscal year 2018 did not have a material impact on
the Company’s consolidated financial statements.

The Company had $1.7 billion, $1.9 billion, and $2.7 billion of gross unrecognized tax benefits at April 27, 2018, April 28, 2017, and April 29,
2016, respectively. A reconciliation of the beginning and ending amount of unrecognized tax benefits for fiscal years 2018, 2017, and 2016 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 to taxing authorities

GROSS UNRECOGNIZED TAX BENEFITS AT END OF FISCAL YEAR,
NEt OF CaSH aDVaNCE

If all of the Company’s unrecognized tax benefits at April 27, 2018,
April 28, 2017, and April 29, 2016 were recognized, $1.7 billion,
$1.8 billion, and $2.1 billion would impact the Company’s effective
tax rate, respectively. Although the Company believes that it has
adequately provided for liabilities resulting from tax assessments
by taxing authorities, positions taken by 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, net of cash advance, of $868 million as a noncurrent
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 $25 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 income tax provision in the consolidated statements
of income and records the liability in the current or noncurrent
accrued income taxes in the consolidated balance sheets, as
appropriate. The Company had $128 million, $360 million, and
$609 million of accrued gross interest and penalties at April 27,
2018, April 28, 2017, and April 29, 2016, respectively. During
fiscal years 2018, 2017, and 2016, the Company recognized

Fiscal Year

2018

1,896

2017

2,703

—

(120)

(80)

(45)

1,727

(859)

147

(538)

(467)

(28)

1,896

—

2016

2,860

202

—

(116)

(275)

(4)

2,703

(384)

868

1,896

2,319

gross interest expense (income) of approximately $84 million,
$(208) million, and $80 million, respectively, in income tax provision
in the consolidated statements of income.

During fiscal year 2018, the Company made a $1.1 billion advance
payment to the IRS in connection with certain tax matters for
fiscal years 2005 through 2014. This payment is comprised of
$859 million of tax and $285 million of interest.

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 2018 Form 10-KThe major tax jurisdictions where the Company conducts business which remain subject to examination are as follows:

Part II
Item 8 Notes to Consolidated Financial Statements

Jurisdiction

United States - federal and state

Brazil

Canada

China

Costa Rica

Dominican Republic

Germany

India

Ireland

Israel

Italy

Japan

Luxembourg

Mexico

Puerto Rico

Singapore

Switzerland

United Kingdom

Earliest Year Open

1998

2013

2010

2009

2014

2013

2010

2002

2012

2010

2005

2015

2013

2005

2011

2013

2012

2016

See Note 19 for additional information regarding the status of current tax audits and proceedings.

Note 15 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-based awards granted under
the stock-based compensation plans and shares committed to be
purchased under the employee stock purchase plan.

MEDTRONIC PLC 2018 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

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

(in millions, except per share data)

Numerator:

Fiscal Year

2018

2017

2016

Net income attributable to ordinary shareholders

3,104

4,028

3,538

Denominator:

Basic — weighted average shares outstanding

1,356.7

1,378.9

1,409.6

Effect of dilutive securities:

Employee stock options

Employee restricted stock units

Other

7.9

3.3

0.3

9.0

3.4

0.1

12.2

4.0

0.1

Diluted — weighted average shares outstanding

1,368.2

1,391.4

1,425.9

Basic earnings per share

Diluted earnings per share

2.29

2.27

2.92

2.89

2.51

2.48

The calculation of weighted average diluted shares outstanding excludes options to purchase approximately 10 million, 7 million, and 4 million
ordinary shares in fiscal years 2018, 2017, and 2016, respectively, because their effect would have been anti-dilutive on the Company’s
earnings per share.

Note 16 Retirement Benefit Plans

The Company sponsors various retirement benefit plans, including
defined benefit pension plans, post-retirement medical plans,
defined contribution savings plans, and termination indemnity
plans, covering substantially all U.S. employees and many
employees outside the U.S. The expense related to these plans
was $552 million, $602 million, and $584 million in fiscal years 2018,
2017, and 2016, 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 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. U.S. and Puerto Rico employees are
also eligible to receive a medical benefit component, in addition
to normal retirement benefits, through the Company’s post-
retirement benefits.

At April 27, 2018 and April 28, 2017, the net underfunded status
of the Company’s benefit plans was $942 million and $1.3 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.
Pension and post-retirement benefit liabilities held for sale at
April 28, 2017 were divested during fiscal year 2018 as part of the
sale of the Patient Care, Deep Vein Thrombosis, and Nutritional
Insufficiency businesses.

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 2018 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

Divestiture

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

Divestiture

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

2018

2,943

3,232

116

117

—

(168)

(107)

—

—
3,202

2,479

243

215

—

(168)

(108)

—

—
2,661

2,661

3,202

(541)
(541)

—

(17)

(524)
(541)

1,088
1,090

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

2018

1,580

1,734

(8)

(74)

(51)

—

146

(63)
1,791

1,235

(4)

(51)

108

(54)
1,404

1,404

1,791

(387)
(387)

(8)

(395)
(387)

(9)

380
371

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

MEDTRONIC PLC 2018 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

Item 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 27, 2018 and April 28, 2017. U.S. and non-U.S. plans with accumulated
benefit obligations in excess of plan assets consist of the following:

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

2018

4,110

4,282

3,472

Fiscal Year

2018

4,736

3,793

2017

4,188

4,677

3,454

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 loss (gain)

Special termination benefits

NEt PErIODIC BENEFIt COSt

U.S. Pension Benefits

Fiscal Year

Non-U.S. Pension Benefits

Fiscal Year

2018

116

117

(205)

—
127

2017

117

109

(195)

—

60
180

2016

120

122

(180)

—

(1)

—
159

2018

(53)

—

—
60

2017

2016

(48)

(1)

—

—
64

(48)

—

(10)

—
74

The other changes in plan assets and projected benefit obligations recognized in accumulated other comprehensive loss for fiscal year 2018
are as follows:

(in millions)

Net actuarial gain

Amortization of prior service cost

Amortization of net actuarial loss

Prior service cost

Effect of exchange rates

Settlement loss

tOtaL rECOGNIZED IN aCCUMULatED OtHEr COMPrEHENSIVE LOSS

tOtaL rECOGNIZED IN NEt PErIODIC BENEFIt COSt aND
aCCUMULatED OtHEr COMPrEHENSIVE LOSS

U.S. Pension
Benefits

(27)

(1)

(82)

—

(17)
(127)

— $

Non-U.S.
Pension
Benefits

(88)

—

(18)

(4)

—
(73)

(13)

The estimated net actuarial loss that will be amortized from accumulated other comprehensive loss into net periodic benefit cost, before tax,
in fiscal year 2019 for U.S. and non-U.S. pension benefits is expected to be $77 million and $11 million, respectively.

MEDTRONIC PLC 2018 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

2018

2017

2016

2018

2017

2016

Discount rate

4.20%-4.35 % 3.70%-4.30% 3.60%-4.30% 0.70%-11.00% 0.45%-11.40% 0.25%-10.20%

Rate of compensation increase

3.90%

2.88%

2.89%

2.83%

Critical assumptions – net periodic benefit cost:

Discount rate – benefit obligation

4.00%-4.30% 3.55%-4.30% 4.20%-4.80% 0.45%-11.40% 0.25%-10.20% 0.80%-9.00%

Discount rate – service cost

3.70%-4.45% 3.60%-4.45% 4.20%-4.80% 0.20%-11.40% 0.05%-10.20% 0.80%-9.00%

Discount rate – interest cost

3.45%-3.80% 2.90%-3.80% 4.20%-4.80% 0.45%-11.40% 0.30%-10.20% 0.80%-9.00%

Expected return on plan assets

Rate of compensation increase

7.90%

3.90%

8.20%

3.90%

8.20%

3.90%

4.20%

2.89%

4.45%

2.83%

4.35%

2.92%

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 27, 2018 for the
plans are 38% equity securities, 29% debt securities, and 33%
other.

MEDTRONIC PLC 2018 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

The plans did not hold any investments in the Company’s ordinary shares at April 27, 2018 or April 28, 2017.

The Company’s U.S. plans target asset allocations at April 27, 2018, compared to the U.S. plans actual asset allocations at April 27, 2018 and
April 28, 2017 by asset category, are as follows:

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

Target Allocation

Actual Allocation

april 27, 2018

april 28, 2017

49%

19
100%

49%

19
100%

45%

18
100%

primarily include long/short equity and absolute return strategies.
These investments may be redeemed monthly with notice periods
ranging from 45 to 95 days. At April 27, 2018, there are no funds
in the process of liquidation. 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 27, 2018 is $168 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 27, 2018, there are no real
estate investments 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 2018 or 2017.

MEDTRONIC PLC 2018 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 27, 2018 and April 28, 2017.

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 27, 2018

Fair Value Measurements
Using Inputs Considered as

Level 1

Level 2

Level 3

Investments
Measured at Net
Asset Value

181

142

1,322

298

537
2,661

Fair Value at
april 28, 2017

168

167

250

1,127

299

468
2,479

181

—

—
362

—

142

—

—
142

—

537
537

—

1,322

298

—
1,620

Fair Value Measurements
Using Inputs Considered as

Level 1

Level 2

Level 3

Investments
Measured at Net
Asset Value

168

138

—

—
306

—

250

—

—
279

—

468
468

—

1,127

299

—
1,426

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 28, 2017

Total realized losses

Total unrealized gains

Purchases and sales, net

aPrIL 27, 2018

(in millions)

April 29, 2016

Total realized gains

Total unrealized gains

Purchases and sales, net

aPrIL 28, 2017

Partnership
Units

468

(42)

141

(30)
537

Partnership
Units

462

(47)
468

MEDTRONIC PLC 2018 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 27, 2018

1,362

42
1,404

Fair Value at
april 28, 2017

1,191

44
1,235

Fair Value Measurements
Using Inputs Considered as

Level 1

Level 2

Level 3

—

—
—

—

—
—

—

42
42

Fair Value Measurements
Using Inputs Considered as

Level 1

Level 2

Level 3

—

—
—

—

—
—

—

44
44

Investments
Measured at Net
Asset Value

1,362

—
1,362

Investments
Measured at Net
Asset Value

1,191

—
1,191

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 28, 2017

Total unrealized gains

Purchases and sales, net

Currency exchange rate changes

aPrIL 27, 2018

(in millions)

April 29, 2016

Total unrealized gains

Purchases and sales, net

Currency exchange rate changes

aPrIL 28, 2017

Retirement Benefit Plan Funding

Insurance
Contracts

(7)

3
42

Insurance
Contracts

(31)

(3)
44

It is the Company’s policy to fund retirement costs within the limits of allowable tax deductions. During fiscal year 2018, the Company made
discretionary contributions of approximately $215 million to the U.S. pension plan. Internationally, the Company contributed approximately
$90 million for pension benefits during fiscal year 2018. The Company anticipates that it will make contributions of $91 million and $85 million
to its U.S. pension benefit plans and non-U.S. pension benefit plans, respectively, in fiscal year 2019. 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 2019 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

2019

2020

2021

2022

2023

2024 – 2028
tOtaL

U.S. Pension Benefits

Non-U.S. Pension Benefits

Gross Payments

106

115

123

133

143

890
1,510

323
574

MEDTRONIC PLC 2018 Form 10-KPost-retirement Benefit Plans

The net periodic benefit cost associated with the Company’s
post-retirement benefit plans was income of $9 million in fiscal
year 2018 and expense of $11 million and $12 million in fiscal years
2017 and 2016, respectively. The Company’s projected benefit
obligation for all post-retirement benefit plans was $317 million
and $323 million at April 27, 2018 and April 28, 2017, respectively.
The Company’s fair value of plan assets for all post-retirement
benefit plans was $303 million and $289 million at April 27, 2018
and April 28, 2017, respectively. The activity during fiscal year
2018 related to the change in projected benefit obligation was not
material. The decrease of $46 million 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 years 2018 and 2017 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
$374 million, $347 million, and $269 million in fiscal years 2018,
2017, and 2016, respectively.

Note 17 Leases

Part II
Item 8 Notes to Consolidated Financial Statements

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 $56 million, $58 million, and $58 million in fiscal years
2018, 2017, and 2016, 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 $49 million, $45 million, and $12 million
and in fiscal years 2018, 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 27, 2018 are:

(in millions)

Fiscal Year

2019

2020

2021

2022

2023

Thereafter

Total minimum lease payments

Less amounts representing interest

PrESENt VaLUE OF NEt MINIMUM LEaSE PaYMENtS

Capitalized
Leases

Operating
Leases

(5)
21

234

182

133

753

N/A
N/A

Rent expense for all operating leases was $319 million, $294 million, and $269 million in fiscal years 2018, 2017, and 2016, respectively.

MEDTRONIC PLC 2018 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

Note 18 Accumulated Other Comprehensive (Loss) Income

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

(in millions)

aPrIL 29, 2016

Other comprehensive (loss) income
before reclassifications

Reclassifications

Other comprehensive (loss) income
aPrIL 28, 2017

Other comprehensive (loss) income
before reclassifications

Reclassifications

Other comprehensive (loss) income

Cumulative effect of change in
accounting principle(1)
aPrIL 27, 2018

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

(107)

(474)

(1,197)

(90)

(1,868)

(14)

38
(69)

(95)

(8)

(103)

(978)

—

(17)

(978)
(1,452)

68
(1,129)

1,218

(34)

1,184

100

167

233

(106)

127
37

(272)

(218)

(22)
(194)

—
(268)

(155)
(1,117)

(26)
(207)

(710)

(35)

(745)
(2,613)

951

1,030

(203)
(1,786)

(1) See Note 1 to the consolidated financial statements for discussion regarding the adoption of accounting standards during fiscal year 2018.

The income tax on gains and losses on available-for-sale securities
in other comprehensive income before reclassifications during
fiscal years 2018, 2017, and 2016 was an expense of $26 million,
an expense of $41 million, and a benefit of $94 million, respectively.
During fiscal years 2018, 2017, and 2016, realized gains and losses
on available-for-sale securities reclassified from AOCI were reduced
by income taxes of $4 million fiscal year 2018 and $8 million in fiscal
years 2017 and 2016. 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.

During fiscal year 2018, there was no tax impact on cumulative
translation adjustments. However, due to recently enacted U.S. Tax
Reform and change in permanently reinvested assertion with
respect to certain earnings, the Company continues to evaluate
the tax impact these events may have on cumulative translation
adjustments. During fiscal years 2017 and 2016, taxes were not
provided on cumulative translation adjustments as substantially all
translation adjustments relate to earnings that were intended to be
definitely 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 2018, 2017, and 2016 was an expense of $14 million, an
expense of $41 million, and a benefit of $85 million, respectively.
During fiscal years 2018, 2017, and 2016, the gains and losses on
defined benefit and pension items reclassified from AOCI were
reduced by income taxes of $27 million, $23 million, and $39 million,
respectively. Refer to Note 16 for additional information.

The income tax on unrealized gains and losses on derivative
financial instruments in other comprehensive income before
reclassifications during fiscal years 2018, 2017, and 2016 was a
benefit of $132 million, an expense of $130 million, and a benefit of
$51 million, respectively. During fiscal years 2018, 2017, and 2016,
gains and losses on derivative financial instruments reclassified
from AOCI were reduced by income taxes of $22 million,
$61 million, and $121 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. Refer to Note 9 for additional information.

Note 19 Commitments and Contingencies

Legal Matters

The Company and its affiliates are involved in a number of
legal actions involving product liability, intellectual property and
commercial disputes, shareholder related matters, environmental
proceedings, income tax disputes, and governmental proceedings

and investigations, including those described below. With respect
to governmental proceedings and investigations, like other
companies in our industry, the Company is subject to extensive
regulation by national, state and local governmental agencies in

MEDTRONIC PLC 2018 Form 10-Kthe 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 legal actions are not within the
Company’s complete control and may not be known for prolonged
periods of time. In some actions, the enforcement agencies or
private claimants seek damages, as well as other civil or criminal
remedies (including injunctions barring the sale of products that
are the subject of the proceeding), that could require significant
expenditures, result in lost revenues or limit the Company’s ability
to conduct business in the applicable jurisdictions.

The Company records a liability in the consolidated financial
statements on an undiscounted basis for loss contingencies
related to legal actions when a loss is known or considered probable
and the amount may be reasonably estimated. If the reasonable
estimate of a known or probable loss is a range, and no amount
within the range is a better estimate than any other, the minimum
amount of the range is accrued. If a loss is reasonably possible
but not known or probable, and may be reasonably estimated, the
estimated loss or range of loss is disclosed. When determining
the estimated loss or range of loss, significant judgment is
required. Estimates of probable losses resulting from litigation
and governmental proceedings involving the Company are
inherently difficult to predict, particularly when the matters are in
early procedural stages, with incomplete scientific facts or legal
discovery, involve unsubstantiated or indeterminate claims for
damages, potentially involve penalties, fines or punitive damages,
or could result in a change in business practice. At April 27, 2018
and April 28, 2017, accrued litigation was approximately $0.9 billion
and $1.1 billion, respectively. The ultimate cost to the Company
with respect to accrued litigation could be materially different than
the amount of the current estimates and accruals and could have a
material adverse impact on the Company’s consolidated earnings,
financial position, and/or cash flows. The Company includes
accrued litigation in other accrued expenses and other liabilities on
the consolidated balance sheets. While it is not possible to predict
the outcome for most of the legal matters discussed below, the
Company believes it is possible that the costs associated with these
matters could have a material adverse impact on the Company’s
consolidated earnings, financial position, and/or cash flows.

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 recognized an expense for probable and estimable
damages related to this matter, and accrued expenses for this
matter are included within accrued litigation as discussed above.

INFUSE Litigation

The Company estimated law firms representing approximately
6,000 claimants asserted or intended to assert personal injury

Part II
Item 8 Notes to Consolidated Financial Statements

claims against Medtronic in the U.S. state and federal courts
involving the INFUSE bone graft product. As of June 1, 2017, the
Company had reached agreements to settle substantially all of
these claims, resolving this litigation. The Company’s accrued
expenses for this matter are included within accrued litigation as
discussed above.

Pelvic Mesh Litigation

The Company 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, 2018, the Company had reached agreements to
settle approximately 14,400 of these claims. The Company’s
accrued expenses for this matter are included within accrued
litigation 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 six of the asserted
patents, leaving a single asserted patent. In addition to claims of
non-infringement, the Company asserts an affirmative defense of
invalidity. 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.

MEDTRONIC PLC 2018 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

Shareholder Related Matters

HEARTWARE

INFUSE

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.
On January 30, 2018, the District Court issued an order certifying a
class for the period of September 8, 2010 through June 28, 2011.

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 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. In August
of 2017, the Minnesota Supreme Court affirmed the decision of
the Minnesota State Court of Appeals, sending the matter back
to the trial court for further proceedings. 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 these matters.

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’s accrued expenses for this
matter are included within accrued litigation as discussed above.

Environmental Proceedings

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

The Company is a successor to a company which owned
and operated a chemical manufacturing facility in Orrington,
Maine from 1967 until 1982, and is responsible for the costs of
completing an environmental site investigation as required by the
Maine Department of Environmental Protection (MDEP). MDEP
served a compliance order on Mallinckrodt LLC and U.S. Surgical
Corporation, 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

MEDTRONIC PLC 2018 Form 10-Kcost 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 in calendar
year 2018.

The Company’s accrued expenses for environmental proceedings
are included within accrued litigation as discussed above.
Government Matters

Since 2011, the Company has responded to requests from
the U.S. Department of Justice for information about business
practices relating to several neurovascular products. The requests
seek information dating back to 2010, in connection with
neurovascular products developed and first marketed by Covidien
or one of its predecessors, including ev3. The Company has fully
cooperated and continues to cooperate with the requests, which
are at various stages. The Company’s accrued expenses for the
matters are included within accrued litigation as discussed above.

Since 2014, the Company has responded to requests from
the U.S. Department of Health and Human Services and the
U.S. Department of Justice for information about business
practices relating to several peripheral vascular products. The
requests seek information dating back to 2009, in connection
with peripheral vascular products developed and first marketed by
Covidien or one of its predecessors, including ev3. The Company
has fully cooperated and continues to cooperate with the requests,
which are at various stages. 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. 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

Part II
Item 8 Notes to Consolidated Financial Statements

Court reviewed this dispute, and on June 9, 2016, issued its opinion
with respect to the allocation of income between the parties 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. On April 21, 2017, the IRS filed
their Notice of Appeal to the U.S. Court of Appeals (the Court) for
the 8th Circuit regarding the Tax Court Opinion. Oral argument for
the Appeal occurred on March 14, 2018.

In October 2011, the IRS issued its audit report on Medtronic, Inc.
for fiscal years 2007 and 2008. Medtronic, Inc. reached agreement
with the IRS on some, but not all matters related to these fiscal
years. During the first quarter of fiscal year 2016, the Company
finalized its agreement with the IRS on the proposed adjustments
associated with the tax effects of the Company’s acquisition of
Kyphon Inc. (Kyphon). The settlement was consistent with the
certain tax adjustment recorded during the fourth quarter of fiscal
year 2015. 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.

In May 2017, the IRS issued its audit report on Medtronic, Inc.
for fiscal years 2012, 2013, and 2014. Medtronic, Inc. reached
agreement with the IRS on some but not all matters related to
these fiscal years. The significant issues that remain unresolved
relate to the allocation of income between Medtronic, Inc. and its
wholly-owned subsidiary operating in Puerto Rico, and proposed
adjustments associated with the utilization of certain net operating
losses. The Company disagrees with the IRS and will attempt to
resolve these matters at the IRS Appellate level.

Medtronic, Inc.’s fiscal years 2015 and 2016 U.S. federal income tax
returns are currently being audited by the IRS.

Covidien and the IRS have concluded and reached agreement on
its audit of Covidien’s U.S. federal income tax returns for all tax
years through 2012. The statute of limitations for Covidien’s 2013
U.S. federal income tax returns lapsed during the first quarter of
fiscal year 2018. Covidien’s fiscal year 2015 U.S. federal income tax
returns are currently being audited by the IRS.

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

See Note 14 for additional discussion of income taxes.

MEDTRONIC PLC 2018 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

Guarantees

As a result of the acquisition of Covidien, the Company has a
guarantee commitment related to certain contingent tax liabilities
as a party to the Tax Sharing Agreement that was entered into on
June 29, 2007, between Covidien, Tyco International (now Johnson
Controls), and Tyco Electronics (now TE Connectivity), associated
with the spin-off from Tyco. The Tax Sharing Agreement covers
certain income tax liabilities for periods prior to and including the
spin-off. Medtronic’s share of the income tax liabilities for these
periods is 42 percent, with Johnson Controls and TE Connectivity
share being 27 percent and 31 percent, respectively. If Johnson
Controls 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. The most significant amounts at
risk under this Tax Sharing Agreement were resolved with the U.S. Tax
Court and IRS Appeals resolutions reached in May 2016. However,
the Tax Sharing Agreement remains in place with respect to income
tax liabilities that are not the subject of such resolution, including
certain state and international tax matters that remain open.

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 tax years that remain 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 Tyco
Electronics legal entities for periods prior to the 2007 separation.

As part of the Company’s Minimally Invasive Therapies Group
sale of the Patient Care, Deep Vein Thrombosis, and Nutritional
Insufficiency businesses to Cardinal on July 29, 2017, the Company
has indemnified Cardinal for certain contingent tax liabilities
related to the divested businesses that existed prior to the date
of divestiture. The actual amounts that the Company may be
required to ultimately accrue or pay could vary depending upon the
outcome of the unresolved tax matters.

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

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

Note 20 Quarterly Financial Data (unaudited)

(in millions, except per share data)

Net sales

Gross profit

Net income (loss)

Net income (loss) attributable to Medtronic

Basic earnings (loss) per share

Diluted earnings (loss) per share

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Fiscal Year

2018

2017

2018

2017

2018

2017

2018

2017

2018

2017

2018

2017

7,390

7,050

7,369

8,144

29,953

7,166

7,345

7,283

7,916

29,710

5,041

4,930

5,178

5,749

20,898

4,905

5,019

5,015

5,480

20,419

1,009

2,013

(1,392)

1,465

3,095

929

1,111

820

1,164

4,024

1,016

2,017

(1,389)

1,460

3,104

929

0.75

0.67

0.74

0.66

1,115

821

1,163

4,028

1.49

0.81

1.48

0.80

(1.03)

0.60

(1.03)

0.59

1.08

0.85

1.07

0.84

2.29

2.92

2.27

2.89

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.

MEDTRONIC PLC 2018 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

Note 21 Segment and Geographic Information

The Company’s organizational structure is based upon four
principal operating and reportable segments: the Cardiac and
Vascular Group, the Minimally Invasive Therapies Group, the
Restorative Therapies Group, and the Diabetes Group. The
Company’s management has chosen to organize the entity based
upon therapy solutions. The four principal segments are strategic
businesses that are managed separately, as each one develops
and manufactures products and provides services oriented toward
targeted therapy solutions.

The primary products and services from which the Cardiac and
Vascular Group segment derives its revenues include products
for the diagnosis, treatment, and management of cardiac rhythm
disorders and cardiovascular disease, as well as services to
diagnose, treat, and manage heart- and vascular-related disorders
and diseases.

The primary products and services from which the Minimally
Invasive Therapies Group segment derives its revenues
include those focused on diseases of the respiratory system,
gastrointestinal tract, renal system, lungs, pelvic region, kidneys,
obesity, and other preventable complications.

The primary products and services from which the Restorative
Therapies Group segment derives its revenues include those
focused on neurostimulation therapies and drug delivery systems
for the treatment of chronic pain, as well as various areas of the
spine and brain, along with pelvic health and conditions of the ear,
nose, and throat.

The primary products from which the Diabetes Group segment
derives its revenues include those focused on diabetes
management, including insulin pumps, continuous glucose
monitoring systems, insulin pump consumables, and diabetes
therapy management software.

Segment disclosures are on a performance basis, consistent
with internal management reporting. Net sales of the Company’s
segments include end-customer revenues from the sale of
products the segment develops, manufactures, and distributes.
There are certain corporate and centralized expenses that are not
allocated to the segments. The Company’s management evaluates
the performance of the segments and allocates resources based
on net sales and segment earnings before interest, taxes, and
amortization (“Segment EBITA”). Segment EBITA represents
income before income taxes, excluding interest expense, net,
amortization of intangible assets, centralized distribution costs,
certain corporate charges, and other items not allocated to the
segments.

The accounting policies of the segments are the same as those
described in Note 1. Certain depreciable assets may be recorded
by one segment, while the depreciation expense is allocated to
another segment. The allocation of depreciation expense is based
on the proportion of the assets used by each segment.

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

Net Sales

(in millions)

Cardiac and Vascular Group

Minimally Invasive Therapies Group

Restorative Therapies Group

Diabetes Group

tOtaL

Segment EBITA

(in millions)

Cardiac and Vascular Group

Minimally Invasive Therapies Group

Restorative Therapies Group

Diabetes Group

Segment EBITA

Interest expense, net

Amortization of intangible assets

Corporate

Centralized distribution costs

Restructuring and associated costs

Acquisition-related items

2018

Fiscal Year

2017

2016

11,354

10,498

10,196

8,716

7,743

2,140
29,953

9,919

7,366

1,927
29,710

2018

4,460

3,346

3,058

634

Fiscal Year

2017

4,134

3,434

2,868

690

9,563

7,210

1,864
28,833

2016

3,986

3,373

2,671

667

11,498

11,126

10,697

(749)

(1,823)

(1,437)

(1,936)

(107)

(132)

(728)

(1,980)

(1,232)

(1,543)

(373)

(230)

(955)

(1,931)

(1,464)

(1,177)

(299)

(283)

MEDTRONIC PLC 2018 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

(in millions)

Certain litigation charges

Divestiture-related items

Gain on sale of businesses

Special charge

IPR&D impairment

Hurricane Maria

Impact of inventory step-up

INCOME BEFOrE INCOME taXES

Total Assets and Depreciation Expense

(in millions)

Cardiac and Vascular Group
Minimally Invasive Therapies Group(1)

Restorative Therapies Group

Diabetes Group

Segments

Corporate
tOtaL

Total Assets

april 27, 2018

april 28, 2017

15,407

43,002

15,245

2,900

76,554

14,839
91,393

15,192

49,249

15,441

2,641

82,523

17,334
99,857

2018

(61)

(115 )

697

(80 )

(46)

(34)

—
5,675

Fiscal Year

2017

(300)

—

(100)

—

(38)
4,602

Depreciation Expense

2018

2017

183

217

146

575

246
821

180

358

167

734

203
937

2016

(26)

—

(226)
4,336

2016

172

383

135

721

168
889

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

Net sales are attributed to the country based on the location of the customer taking possession of the products or in which the services are
rendered. Geographic property, plant, and equipment are attributed to the country based on the physical location of the assets.

The following table presents net sales for fiscal years 2018, 2017, and 2016, and property, plant, and equipment, net at April 27, 2018 and
April 28, 2017 for the Company’s country of domicile, countries with significant concentrations, and all other countries:

(in millions)

Ireland

United States

Rest of world

Total other countries, excluding Ireland

tOtaL

2018

Net sales

2017

15,875

13,993

29,868
29,953

16,663

12,978

29,641
29,710

2016

16,422

12,332

28,754
28,833

Property, plant, and equipment, net

april 27, 2018

april 28, 2017

149

2,927

1,528

4,455
4,604

143

2,434

1,784

4,218
4,361

No single customer represented over 10 percent of the Company’s consolidated net sales in fiscal years 2018, 2017, or 2016.

MEDTRONIC PLC 2018 Form 10-KNote 22 Guarantor Financial Information

Medtronic plc and Medtronic Global Holdings S.C.A. (Medtronic
Luxco), a wholly-owned subsidiary guarantor, each have provided
full and unconditional guarantees of the obligations of Medtronic,
Inc., a wholly-owned subsidiary issuer, under the Senior Notes
(Medtronic Senior Notes) and full and unconditional guarantees
of the obligations of Covidien International Finance S.A. (CIFSA),
a wholly-owned subsidiary issuer, under the Senior Notes (CIFSA
Senior Notes). The guarantees of the CIFSA Senior Notes are in
addition to the guarantees of the CIFSA Senior Notes by Covidien
Ltd. and Covidien Group Holdings Ltd., both of which are wholly-
owned subsidiary guarantors of the CIFSA Senior Notes. Effective
March 28, 2017, Medtronic plc and Medtronic, Inc. each have
provided a full and unconditional guarantee of the obligations of
Medtronic Luxco under the Medtronic Luxco Senior Notes.

The following is a summary of these guarantees:
Guarantees of Medtronic Senior Notes

■■

Parent Company Guarantor - Medtronic plc

Subsidiary Issuer - Medtronic, Inc.

Subsidiary Guarantor - Medtronic Luxco

Guarantees of Medtronic Luxco Senior Notes

■■

Parent Company Guarantor - Medtronic plc

Subsidiary Issuer - Medtronic Luxco

Subsidiary Guarantor - Medtronic, Inc.

Guarantees of CIFSA Senior Notes

■■

Parent Company Guarantor - Medtronic plc

Subsidiary Issuer - CIFSA

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

The following presents the Company’s consolidating statements of
comprehensive income and condensed consolidating statements

Part II
Item 8 Notes to Consolidated Financial Statements

of cash flows as of and for the fiscal years ended April 27, 2018,
April 28, 2017, and April 29, 2016, and condensed consolidating
balance sheets at April 27, 2018 and April 28, 2017. 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. The Company has presented the provisional tax
impacts related to the Tax Act within the condensed consolidating
financial statements for the fiscal year ended April 27, 2018, at the
subsidiary which the Company reasonably expects to be affected
by the Tax Act. Certain reclassifications have been made to prior
year financial statements to conform to classifications used in the
current year.

The Company made revisions to its condensed consolidating
balance sheets of the guarantees of the Medtronic Senior Notes,
Medtronic Luxco Senior Notes and the CIFSA Senior Notes, as
previously presented in Note 23 in the Company’s Annual Report
on Form 10-K for the year ended April 28, 2017. An approximate
$16.0 billion revision was made to decrease the investment in
subsidiaries and shareholders’ equity balances in the Medtronic,
Inc. column for the Medtronic Senior Notes and Medtronic Luxco
Senior Notes, as well as an approximate $16.0 billion revision to
increase the investment in subsidiaries and shareholders’ equity
balances in the CIFSA column for the CIFSA Senior Notes. Both
revisions were primarily related to an incorrect presentation of an
intercompany asset sale. There is no impact to the consolidated
financial statements of Medtronic plc.

During fiscal year 2018, the Company undertook certain steps to
reorganize ownership of various subsidiaries. The transactions
were entirely among subsidiaries under the common control
of Medtronic. The reorganization has been reflected as of the
beginning of the earliest period presented.

MEDTRONIC PLC 2018 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

Consolidating Statement of Comprehensive Income

Fiscal Year Ended April 27, 2018
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

Amortization of intangible assets

Restructuring charges, net

Acquisition-related items

Certain litigation charges

Divestiture-related items

Gain on sale of businesses

Special charge

Other expense (income), net

Operating (loss) profit

Investment loss

Interest income

Interest expense

Interest expense (income), net

Equity in net (income) loss of subsidiaries

Income (loss) before income taxes

Income tax (benefit) provision

Net income

Net loss attributable to noncontrolling interests
Net income attributable to Medtronic

Other comprehensive gain (loss), net of tax

Other comprehensive loss attributable to non-
controlling interests

COMPREHENSIVE INCOME (LOSS)
ATTRIBUTABLE TO MEDTRONIC

Medtronic
plc

Medtronic,
Inc.

Medtronic
Luxco

Subsidiary
Non-
guarantors

Consolidating
Adjustments

Total

— $

1,198 $

— $

29,952 $

(1,197) $

29,953

—

(64)

—

247

(3,408)

3,097

(7)

3,104

—

3,104

1,030

—

959

653

1,329

(7)

—

(2,329)

406

172

(353)

1,897

1,544

(830)

(480)

(521)

—

(521)

788

—

(482)

234

(248)

(3,160)

3,408

—

3,408

—

3,408

1,030

—

8,884

1,600

8,633

1,815

(697)

—

3,190

6,310

(1,582)

788

(794)

—

7,049

2,546

4,503

4,512

954

(788)

—

(408)

(1)

—

2,020

(2,020)

—

7,398

(7,399)

—

(7,399)

—

(7,399)

(2,772)

9,055

2,253

9,974

1,823

104

114

(697)

505

6,651

227

(397)

1,146

749

—

5,675

2,580

3,095

3,104

1,030

—

4,134 $

267 $

4,438 $

5,466 $

(10,171) $

4,134

100

MEDTRONIC PLC 2018 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

Amortization of intangible assets

Restructuring charges, net

Acquisition-related items

Certain litigation charges

Special charge

Other expense (income), net

Operating (loss) profit

Interest income

Interest expense

Interest expense (income), net

Equity in net (income) loss of subsidiaries

Income (loss) before income taxes

Income tax (benefit) provision

Net income

Net loss attributable to noncontrolling interests
Net income attributable to Medtronic

Other comprehensive gain (loss), net of tax

Other comprehensive loss attributable to non-
controlling interests

COMPREHENSIVE INCOME (LOSS)
ATTRIBUTABLE TO MEDTRONIC

Medtronic
plc

Medtronic,
Inc.

Medtronic
Luxco

Subsidiary
Non-
guarantors

Consolidating
Adjustments

Total

— $

1,199 $

— $

29,708 $

(1,197) $

29,710

—

(30)

—

113

(4,163)

4,020

(8)

4,028

—

4,028

(745)

—

932

636

1,163

114

133

—

100

(2,472)

582

(250)

1,652

1,402

(1,712)

892

(124)

1,016

—

1,016

(340)

—

(649)

(587)

(3,576)

4,163

—

4,163

—

4,163

(745)

—

9,152

1,557

8,536

1,969

249

300

—

3,099

4,759

(1,065)

865

(200)

—

4,959

710

4,249

4,253

(928)

(793)

—

(423)

1,598

(1,598)

—

9,451

(9,432)

—

(9,432)

—

(9,432)

2,014

—

9,291

2,193

9,711

1,980

363

220

300

100

222

5,330

(366)

1,094

728

—

4,602

578

4,024

4,028

(744)

3,283 $

676 $

3,418 $

3,324 $

(7,418) $

3,283

101

MEDTRONIC PLC 2018 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

Consolidating Statement of Comprehensive Income

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

Amortization of intangible assets

Restructuring charges, net

Acquisition-related items

Certain litigation charges

Other expense (income), net

Operating (loss) profit

Investment loss

Interest income

Interest expense

Interest expense (income), net

Equity in net (income) loss of subsidiaries

Income (loss) before income taxes

Income tax (benefit) provision

Net income

Medtronic
plc

Medtronic,
Inc.

Medtronic
Luxco

Subsidiary
Non-
guarantors

Consolidating
Adjustments

Total

— $

1,282 $

— $

28,832 $

(1,281) $

28,833

—

109

(119)

—

(3,673)

3,529

(9)

3,538

991

627

991

135

—

(1,784)

293

(237)

1,906

1,669

(1,405)

(41)

(279)

238

—

(706)

(696)

(2,977)

3,673

—

3,673

9,045

1,597

8,468

1,919

273

148

2,169

5,187

—

(448)

405

(43)

—

5,230

1,086

4,144

(894)

—

(387)

—

960

(960)

—

8,055

(8,055)

—

(8,055)

9,142

2,224

9,469

1,931

290

283

107

5,361

(431)

1,386

955

—

4,336

798

3,538

(684)
2,854

Other comprehensive gain (loss), net of tax
COMPREHENSIVE INCOME (LOSS)

(684)
2,854 $

(854)
(616) $

(684)
2,989 $

(673)
3,471 $

2,211
(5,844) $

102

MEDTRONIC PLC 2018 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

Condensed Consolidating Balance Sheet

April 27, 2018
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

— $

20 $

1 $

3,648 $

— $

Investments

Accounts receivable, net

Inventories, net

Intercompany receivable

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

Shareholders’ equity

Noncontrolling interests

Total equity

TOTAL LIABILITIES AND EQUITY

—

60,381

3,000

—

165

23,480

178

23,919

1,426

1,883

385

73,594

6,519

—

7,482

5,987

3,539

33,929

2,003

56,588

3,178

37,660

21,711

1,080

—

(125)

(57,446)

—

(57,571)

—

61,457

19,337

—

(195,432)

34,196

(63,052)

—
63,424 $

223
107,961 $

—
80,795 $

855
155,268 $

—

(316,055) $

1,078
91,393

— $

1,696 $

362 $

—

381

28,401

787

—

359

29,928

20,598

902

531

—

5,542

—

7,242

844

—

12,675

14,339

19,335

—

12,704

50,720

—

66,366

41,595

—

27,421

53,374

—

1,247

23,503

1,198

979

3,052

— $

—

(57,446)

—

30,341

(57,446)

2,257

523

2,510

16,703

1,423

821

54,578

100,588

102

—

(63,052)

—

(120,498)

(195,557)

—

50,720
63,424 $

41,595
107,961 $

53,374
80,795 $

100,690
155,268 $

(195,557)
(316,055) $

Total

3,669

7,558

5,987

3,579

—

2,187

22,980

4,604

39,543

21,723

1,465

—

2,058

1,628

—

1,988

979

3,431

10,084

23,699

1,425

3,051

—

1,423

889

40,571

50,720

102

50,822
91,393

103

MEDTRONIC PLC 2018 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

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

104

—

(133)

(46,827)

—

(46,960)

—

(160,579)

(51,265)

—

(258,804) $

— $

—

(46,827)

—

(46,827)

—

55,747

3,000

—

155

16,301

227

—

16,728

1,311

1,883

727

52,300

6,530

434

—

52,532

16,114

—

8,741

5,591

3,316

30,475

1,628

371

55,039

3,050

36,632

23,387

823

—

25,621

798

—
58,808 $

—
79,933 $

—
68,651 $

5,919
151,269 $

— $

5,000 $

901 $

1,619 $

—

8,568

—

8,600

50,208

—

295

23,380

734

—

361

—

29,770

21,782

1,120

1,658

13,109

—

153

—

67,592

12,341

—

7,111

—

8,016

1,842

—

1,260

16,336

1,161

620

2,253

23,283

2,297

604

737

10,049

19,539

(51,265)

—

19,907

48,744

—

2,978

1,362

720

51,520

99,627

122

—

(98,092)

(160,712)

—

50,208
58,808 $

12,341
79,933 $

48,744
68,651 $

99,749
151,269 $

(160,712)
(258,804) $

Total

4,967

8,741

5,591

3,338

—

1,865

371

24,873

4,361

38,515

23,407

1,550

—

1,232

5,919
99,857

7,520

1,555

—

1,904

633

2,618

14,264

25,921

1,724

2,405

—

2,978

1,515

720

49,527

50,208

122

50,330
99,857

MEDTRONIC PLC 2018 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 27, 2018
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

155 $

(1,567) $

249 $

16,419 $

(10,572) $

4,684

—

(340)

(98)

(59)

—

(25)

—

(4,200)

—

(137)

6,058

(728)

(3,124)

4,249

—

(22)

—

(137)

6,058

(1,068)

(3,200)

(47)

4,227

4,259

—

(22)

(472)

(4,225)

6,296

4,259

5,858

Investing Activities:

Acquisitions, net of cash acquired

Proceeds from sale of businesses

Additions to property, plant, and equipment

Purchases of investments

Sales and maturities of investments

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

—

(2,494)

403

(2,171)

4,107

—

(6,166)

—

(205)

—

8,180

4,177

—

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

(155)

2,014

3,972

—

—
— $

—

(25)

45
20 $

—

(4)

5
1 $

(48)

(44)

(45)

(1,204)

—

(16,464)

(10,572)

4,259

(2)

(24,098)

114

(1,269)

4,917
3,648 $

—

10,572

(4,259)

—

(48)

(249)

(45)

(7,370)

(2,494)

403

(2,171)

—

(2)

6,313

(11,954)

—

114

(1,298)

—
— $

4,967
3,669

105

MEDTRONIC PLC 2018 Form 10-KPart 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

Investing Activities:

Acquisitions, net of cash acquired

Additions to property, plant, and equipment

Purchases of investments

Sales and maturities of investments

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

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

—

(2,376)

428

(3,544)

4,650

—

(842)

—

(940)

(369)

—

210

(248)

—

(1,347)

—

150

(500)

—

901

—

1,850

—

(255)

(3,048)

—

(565)

—

(10)

—

(297)

—

(384)

(885)

(4,533)

5,308

—

(472)

(69)

(2)

140

(363)

—

(1,347)

(887)

248

(2,218)

2,096

—

162

(162)

248

—

248

—

887

(248)

—

639

—

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

—
— $

55
45 $

—
5 $

2,821
4,917 $

—
— $

(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

106

MEDTRONIC PLC 2018 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

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)

—

(11)

—

(4,959)

—

(871)

(4,959)

—

(2,988)

—

(2,459)

—

4,900

—

(547)

—

(1,016)

1,071

—

(139)

139

—

4,093

—

4,093

—

(170)

170

— $

55 $

— $

(687)

(712)

(5,406)

9,924

(4,900)

(14)

(1,795)

(22)

—

(2,144)

—

(5,552)

(812)

4,970

(3,471)

113

(518)

3,339
2,821 $

—

9,870

—

9,870

—

812

(9,870)

—

(1,213)

(1,046)

(5,406)

9,924

—

(14)

2,245

(22)

(139)

139

(5,132)

(2,139)

491

(2,830)

—

(9,058)

(9,543)

—

—
— $

113

(1,967)

4,843
2,876

107

MEDTRONIC PLC 2018 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

Consolidating Statement of Comprehensive Income

Fiscal Year Ended April 27, 2018
CIFSA Senior Notes

(in millions)

Net sales

Costs and expenses:

Cost of products sold

Research and development expense

Selling, general, and administrative expense

Amortization of intangible assets

Restructuring charges, net

Acquisition-related items

Certain litigation charges

Divestiture-related items

Gain on sale of businesses

Special charge

Other expense (income), net

Operating (loss) profit

Investment loss

Interest income

Interest expense

Interest expense (income), net

Equity in net (income) loss of subsidiaries

Income (loss) before income taxes

Income tax (benefit) provision

Net income

Net loss attributable to noncontrolling interests
Net income attributable to Medtronic

Other comprehensive gain (loss), net of tax

Other comprehensive loss attributable to non-controlling
interests

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE
tO MEDtrONIC

Medtronic
plc

CIFSa

CIFSa
Subsidiary
Guarantors

Subsidiary
Non-
guarantors

Consolidating
adjustments

total

— $

29,953 $

— $ 29,953

—

(64)

—

247

(3,408)

3,097

(7)

3,104

—

3,104

1,030

—

(2)

—

(60)

(4,233)

4,208

—

4,208

—

4,208

228

—

(2)

—

(498)

234

(264)

(3,146)

3,408

—

3,408

—

3,408

1,030

—

9,055

2,253

9,959

1,823

104

114

(697)

452

6,719

227

(562)

1,305

743

—

5,749

2,587

3,162

3,171

1,030

—

723

(723)

—

10,787

(10,787)

—

(10,787)

—

(10,787)

(2,288)

9,055

2,253

9,974

1,823

104

114

(697)

505

6,651

227

(397)

1,146

749

—

5,675

2,580

3,095

3,104

1,030

—

4,134 $

4,436

4,438 $

4,201 $

(13,075) $

4,134

108

MEDTRONIC PLC 2018 Form 10-K
Part 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

Amortization of intangible assets

Restructuring charges, net

Acquisition-related items

Certain litigation charges

Special charge

Other expense (income), net

Operating (loss) profit

Interest income

Interest expense

Interest expense (income), net

Equity in net (income) loss of subsidiaries

Income (loss) before income taxes

Income tax (benefit) provision

Net income

Net loss attributable to noncontrolling interests
Net income attributable to Medtronic

Other comprehensive gain (loss), net of tax

Other comprehensive loss attributable to non-controlling
interests

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

(3,581)

3,557

—

3,557

—

3,557

(324)

—

(6)

(656)

(594)

(3,575)

4,163

—

4,163

—

4,163

(745)

9,291

2,193

9,696

1,980

363

220

300

100

199

5,368

(433)

1,620

1,187

—

4,181

586

3,595

3,599

(744)

—

805

(805)

—

11,319

(11,319)

—

(11,319)

—

(11,319)

1,814

9,291

2,193

9,711

1,980

363

220

300

100

222

5,330

(366)

1,094

728

—

4,602

578

4,024

4,028

(744)

—

3,283 $

3,233

3,418 $

2,854 $

(9,505) $

3,283

109

MEDTRONIC PLC 2018 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

(in millions)

Net sales

Costs and expenses:

Cost of products sold

Research and development expense

Selling, general, and administrative expense

Amortization of intangible assets

Restructuring charges, net

Acquisition-related items

Certain litigation charges

Other expense (income), net

Operating (loss) profit

Investment loss

Interest income

Interest expense

Interest expense (income), net

Equity in net (income) loss of subsidiaries

Income (loss) before income taxes

Income tax (benefit) provision

Net income

Medtronic
plc

CIFSa

CIFSa
Subsidiary
Guarantors

Subsidiary
Non-
guarantors

Consolidating
adjustments

total

— $

28,833 $

— $ 28,833

—

109

(119)

—

(3,673)

3,529

(9)

3,538

—

(2)

—

(434)

138

(296)

(2,716)

3,010

—

3,010

59
3,069

—

(17)

—

(710)

(700)

(2,990)

3,673

—

3,673

9,142

2,224

9,455

1,931

290

283

(17)

5,499

(464)

2,390

1,926

—

3,503

807

2,696

—

1,177

(1,177)

—

9,379

(9,379)

—

(9,379)

9,142

2,224

9,469

1,931

290

283

107

5,361

(431)

1,386

955

—

4,336

798

3,538

(684)
2,989 $

(684)
2,012 $

1,309
(8,070) $

(684)
2,854

Other comprehensive gain (loss), net of tax

COMPREHENSIVE INCOME (LOSS)

(684)
2,854 $

110

MEDTRONIC PLC 2018 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

Condensed Consolidating Balance Sheet

April 27, 2018
CIFSA Senior Notes

(in millions)

ASSETS

Current assets:

Cash and cash equivalents

Investments

Accounts receivable, net

Inventories, net

Intercompany receivable

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

Shareholders’ equity

Noncontrolling interests

Total equity

TOTAL LIABILITIES AND EQUITY

Medtronic
plc

CIFSa

CIFSa
Subsidiary
Guarantors

Subsidiary
Non-
guarantors

Consolidating
adjustments

total

— $

1 $

3,668 $

— $

3,669

—

60,381

3,000

—
63,424 $

31,144

1,291

—
32,435

—

1,343

—

1,344

—

60,118

19,337

7,558

5,987

3,579

5,560

2,181

28,533

4,604

39,543

21,723

1,465

—

19,436

—

(6,940)

—

7,558

5,987

3,579

—

2,187

(6,940)

22,980

—

(151,643)

(43,064)

4,604

39,543

21,723

1,465

—

—
80,799 $

1,078
116,382 $

—

1,078
(201,647) $ 91,393

— $

1,696 $

362 $

— $

2,058

—

12,675

—

12,704

50,720

—

1,283

—

1,304

2,111

—

100

—

3,515

28,920

—

5,542

—

7,246

844

—

19,335

—

27,425

53,374

—

1,628

115

1,985

979

3,386

8,455

20,744

1,425

3,041

10,954

1,423

889

46,931

69,349

102

—

(6,940)

—

(6,940)

—

(43,064)

—

(50,004)

(151,643)

—

1,628

—

1,988

979

3,431

10,084

23,699

1,425

3,051

—

1,423

889

40,571

50,720

102

50,720
63,424 $

28,920
32,435

53,374
80,799 $

69,451
116,382 $

50,822
(151,643)
(201,647) $ 91,393

111

MEDTRONIC PLC 2018 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

Condensed Consolidating Balance Sheet

April 28, 2017
CIFSA Senior Notes

(in millions)

ASSETS

Current assets:

Cash and cash equivalents

Investments

Accounts receivable, net

Inventories, net

Intercompany receivable

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

112

Medtronic
plc

CIFSa

CIFSa
Subsidiary
Guarantors

Subsidiary
Non-
guarantors

Consolidating
adjustments

total

— $

—

55,747

3,000

—

50,580

2,978

—

5 $

4,929 $

— $

4,967

—

1,329

—

1,334

—

51,208

16,114

—

8,741

5,591

3,338

7,111

1,855

371

31,936

4,361

38,515

23,407

1,550

—

10,149

1,232

—

(8,491)

—

8,741

5,591

3,338

—

1,865

371

(8,491)

24,873

—

(157,535)

(32,241)

4,361

38,515

23,407

1,550

—

1,232

—
58,808 $

—
53,591

—
68,656 $

5,919
117,069 $

—

5,919
(198,267) $ 99,857

— $

1,176

901 $

5,443 $

—

8,568

—

8,600

50,208

—

1,269

—

2,468

2,133

—

100

—

4,701

48,890

—

7,111

—

8,020

1,842

—

10,050

—

19,912

48,744

—

1,555

111

1,895

620

2,587

12,245

21,946

1,724

2,395

13,523

2,978

1,515

720

57,046

59,901

122

— $

7,520

—

1,555

(8,491)

—

1,904

633

2,618

(8,491)

14,264

—

(32,241)

—

25,921

1,724

2,405

—

2,978

1,515

720

(40,732)

49,527

(157,535)

50,208

—

122

50,208
58,808 $

48,890
53,591

48,744
68,656 $

60,023
117,069 $

(157,535)
50,330
(198,267) $ 99,857

MEDTRONIC PLC 2018 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

Condensed Consolidating Statement of Cash Flows

Fiscal Year Ended April 27, 2018
CIFSA Senior Notes

(in millions)

Operating Activities:

Medtronic
plc

CIFSa

CIFSa
Subsidiary
Guarantors

Subsidiary
Non-
guarantors

Consolidating
adjustments

total

Net cash provided by operating activities

155 $

974

264 $

4,339 $

(1,048) $

4,684

Investing Activities:

Acquisitions, net of cash acquired

Proceeds from sale of businesses

Additions to property, plant, and equipment

Purchases of investments

Sales and maturities of investments

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

—

(2,494)

403

(2,171)

4,107

—

(155)

—

—
— $

—

(1,557)

—

(1,557)

—

(1,150)

—

(25)

—

(4,200)

—

(4,225)

—

(205)

—

1,700

4,162

—

550

—

(33)

33
— $

(137)

6,058

(1,068)

(3,200)

4,252

—

(22)

5,883

(48)

(44)

(45)

(6,220)

—

(9,969)

(1,048)

5,757

(2)

—

(25)

5,757

—

5,757

—

1,048

(5,757)

—

(137)

6,058

(1,068)

(3,200)

4,227

—

(22)

5,858

(48)

(249)

(45)

(7,370)

(2,494)

403

(2,171)

—

(2)

3,957

(11,597)

(4,709 )

(11,954)

—

(4)

5
1 $

114

(1,261)

4,929
3,668 $

—

114

(1,298)

—
— $

4,967
3,669

113

MEDTRONIC PLC 2018 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

—

(2,376)

428

(3,544)

4,650

—

(537)

—

(537)

—

901

—

1,850

—

(1,542)

(3,048)

—

(1,324)

(1,254)

(4,371)

5,356

—

(1,571)

(69)

(2)

290

(863)

—

(60)

(1,997)

537

—

537

—

537

—

1,997

(537)

—

(1,324)

(1,254)

(4,371)

5,356

—

(1,571)

(69)

906

(2)

2,140

(863)

(2,376)

428

(3,544)

—

(842)

(1,542)

(297)

(2,062)

1,460

(3,283)

—

—
— $

—

(175)

208
33

—

—
5 $

2,261

2,668
4,929 $

—

—
— $

2,091

2,876
4,967

(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

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

114

MEDTRONIC PLC 2018 Form 10-KPart II
Item 8 Notes to Consolidated Financial Statements

Condensed Consolidating Statement of Cash Flows

Fiscal Year Ended April 29, 2016
CIFSA Senior Notes

Medtronic
plc

CIFSa

CIFSa
Subsidiary
Guarantors

Subsidiary
Non-
guarantors

Consolidating
adjustments

total

297 $

4,208

604 $

4,114 $

(4,005) $

5,218

(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

Sales 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

—

(720)

—

(720)

—

(2,121)

—

(4,959)

—

(4,906)

—

(139)

139

—

(1,887)

4,132

—

Net cash (used in) provided by financing activities

(560)

(4,008)

4,132

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

— $

(1,266)

(1,046)

(5,406)

9,924

—

(14)

2,192

(22)

—

(3,011)

—

(6,163)

(4,005)

5,679

(7,433)

113

(1,014)

3,682
2,668 $

—

(53)

5,679

—

5,679

—

4,005

(5,679)

—

(1,213)

(1,046)

(5,406)

9,924

—

(14)

2,245

(22)

(139)

139

(5,132)

(2,139)

491

(2,830)

—

(1,674)

(9,543)

—

113

(1,967)

—
— $

4,843
2,876

115

MEDTRONIC PLC 2018 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 27, 2018. Our internal control over financial reporting at

April 27, 2018, 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 27, 2018, 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 began deployment of an enterprise resource
planning (ERP) software program, SAP, to the Minimally Invasive
Therapies Group during fiscal year 2017. Although no specific
implementation activity or related changes in internal controls
occurred during the period covered by this Annual Report on Form
10-K, the system deployments will continue in the coming year

with a projected completion in fiscal year 2020. There have been no
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.

116

MEDTRONIC PLC 2018 Form 10-KPart III

Part III of this Annual Report on Form 10-K incorporates information by reference from the Company’s 2018 definitive proxy statement,
which will be filed no later than 120 days after April 27, 2018.

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 2018 Annual General Meeting
of Shareholders, which will be filed no later than 120 days after
April 27, 2018, are incorporated herein by reference.

Set forth below are the names and ages of our 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 62, has been Chairman and Chief Executive
Officer of Medtronic since 2011. Prior to joining Medtronic,
Mr. Ishrak served as President and Chief Executive Officer of
GE Healthcare Systems, a comprehensive provider of medical
imaging and diagnostic technology, from 2009 to 2011. Before
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. Mr. Ishrak is also a current member of the Board of
Directors of Intel Corporation.
Michael J. Coyle, age 56, 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 48, 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.
Richard Kuntz, M.D., age 61, 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 61, 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. Mr. Lerman is
also a current member of the Board of Directors of McKesson
Corporation.
Geoffrey S. Martha, age 48, has been Executive Vice President
and President, Restorative Therapies Group since June 2015.
Mr. Martha previously served as Senior Vice President of
Strategy and Business Development of the Company beginning
in January 2015 and of Medtronic, Inc. beginning in August
2011. Prior to that, he served as Managing Director of Business
Development at GE Healthcare from April 2007 to July 2011;
General Manager for GE Capital Technology Finance Services from
November 2003 to March 2007; Senior Vice President, Business
Development for GE Capital Vendor Financial Services from
February 2002 to October 2003; General Manager for GE Capital
Colonial Pacific Leasing from February 2001 to January 2002; and
Vice President, Business Development for Potomac Federal, the
GE Capital federal financing investment bank from May 1998 to
January 2001.
Karen L. Parkhill, age 52, has been Executive Vice President and
Chief Financial Officer since June 2016. From 2011 to 2016,
Ms. Parkhill served as Vice Chairman and Chief Financial Officer of

117

MEDTRONIC PLC 2018 Form 10-KPart III
Item 11 Executive Compensation

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 52, 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 57, has been Executive Vice President
and President, EMEA of the Company since January 2015 and of

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 2018 Annual General Meeting
of Shareholders, which will be filed no later than 120 days after

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.
Robert J. White, age 55, has been Executive Vice President
and President, Minimally Invasive Therapies Group since
December 2017. Prior to that, he was Senior Vice President and
President, Asia Pacific from January 2015 to December 2017.
Mr. White held various leadership positions at Covidien from
2010 to 2015 including President, Emerging Markets; President,
Respiratory and Monitoring Solutions; and Vice President and
General Manager, Patient Monitoring. Mr. White also held various
leadership positions at GE Healthcare and IBM.

April 27, 2018, are incorporated herein by reference. The section
entitled “Compensation Committee Report” in Medtronic’s Proxy
Statement for the Company’s 2018 Annual General Meeting
of Shareholders, which will be filed no later than 120 days after
April 27, 2018, 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 2018 Annual General Meeting of Shareholders, which will be filed no later than 120 days after April 27, 2018, 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 2018 Annual General Meeting of Shareholders, which will be filed no later
than 120 days after April 27, 2018, 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 2018 Annual General Meeting of Shareholders, which will be filed no later than 120 days after
April 27, 2018, are incorporated herein by reference.

118

MEDTRONIC PLC 2018 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 27, 2018, April 28, 2017, and April 29, 2016.

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

3.1

3.2

4.1

4.2

4.3

4.4

4.5

4.6

4.7

4.8

4.9

4.10

4.11

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 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).
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).

119

MEDTRONIC PLC 2018 Form 10-KPart IV
Item 15 Exhibits and Financial Statement Schedules

Exhibit
No.

4.12

4.13

4.14

4.15

4.16

4.17

4.18

4.19

4.20

4.21

4.23

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

120

Description

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).
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).
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).
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).
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).
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).
Form of Deed of Indemnification (incorporated by reference to Exhibit 10.1 to Medtronic plc’s Current Report on Form 8-K12B, filed on
January 27, 2015, File No. 001-36820).
Form of Indemnification Agreement (incorporated by reference to Exhibit 10.2 to Medtronic plc’s Current Report on Form 8-K12B, filed on
January 27, 2015, File No. 001-36820).
Letter Agreement by and between Medtronic, Inc. and Omar Ishrak dated May 11, 2011 (incorporated by reference to Exhibit 10.1 to
Medtronic, Inc.’s Current Report on Form 8-K, filed on May 11, 2011, File No. 001-07707).
Change of Control Severance Plan - Section 16B Officers (as amended and restated as of January 26, 2015) (incorporated by reference to
Exhibit 10.14 to Medtronic plc’s Current Report on Form 8-K, filed on January 27, 2015, File No. 001-36820).
Amendment to Letter Agreement dated May 11, 2011 by and between Medtronic, Inc. and Omar Ishrak (incorporated by reference to Exhibit
10.1 to Medtronic, Inc.’s Quarterly Report on Form 10-Q for the quarter ended July 29, 2011, filed September 7, 2011, File No. 001-07707).
Amendment dated February 12, 2015 to the Letter Agreement by and between Medtronic, Inc. and Omar Ishrak dated May 11, 2011
(incorporated by reference to Exhibit 10.24 to Medtronic plc’s Quarterly Report on Form 10-Q for the quarter ended January 23, 2015, filed on
February 27, 2015, File No. 001-36820).
Letter Agreement by and between Medtronic, Inc. and Michael J. Coyle dated November 19, 2009 (incorporated by reference to Exhibit 10.55
to Medtronic, Inc.’s Annual Report on Form 10-K for the year ended April 27, 2012, filed on June 26, 2012, File No. 001-07707).
Letter Agreement by and between Medtronic, Inc. and Carol Surface dated August 22, 2013 (incorporated by reference to Exhibit 10.44 to
Medtronic, Inc.’s Annual Report on Form 10-K for the year ended April 25, 2014, filed on June 20, 2014, File No. 001-07707).
Letter Agreement by and between Medtronic, Inc. and Hooman Hakami dated April 29, 2014 (incorporated by reference to Exhibit 10.5 of
Medtronic, Inc.’s Quarterly Report on Form 10-Q for the quarter ended July 25, 2014, filed on August 29, 2014, File No. 001-07707).
Letter Agreement by and between Medtronic, Inc. and Bradley E. Lerman dated May 2, 2014 (incorporated by reference to Exhibit 10.4 of
Medtronic, Inc.’s Quarterly Report on Form 10-Q for the quarter ended July 25, 2014, filed on August 29, 2014, File No. 001-07707).

MEDTRONIC PLC 2018 Form 10-KPart IV
Item 15 Exhibits and Financial Statement Schedules

Exhibit
No.

*10.14

*10.15

*10.16

*10.17

*10.18

*10.19

*10.20

*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

Description

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).
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 Quarterly Report on Form 10-Q for the quarter ended January 25, 2008, filed on, filed on March 4, 2008,
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).
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).
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).

121

MEDTRONIC PLC 2018 Form 10-KPart IV
Item 15 Exhibits and Financial Statement Schedules

Exhibit
No.

*10.43

*10.44

*10.45

*10.46

*10.47

*10.48

*10.49

*10.50

*10.51

*10.52

*10.53

*10.54

*10.55

*10.56

*10.57

*10.58

*10.59

*10.60

*10.61

*10.62

*10.63

*10.64

*10.65

*10.66

*10.67

Description

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).
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 Restricted Stock Award Agreement under Amended and Restated 2013 Stock Award and Incentive Plan (incorporated by reference
to Exhibit 10.1 to Medtronic plc’s Quarterly Report on Form 10-K for the quarter ended July 28, 2017, filed on September 1, 2017,
File No. 001-36820).
Medtronic plc Amended and Restated 2013 Stock Award and Incentive Plan (as amended and restated generally effective December 8, 2017)
(incorporated by reference to Exhibit 10.1 to Medtronic plc’s Current Report on Form 8-K, filed on December 12, 2017, File No. 001-36820).
Form of Non-qualified Stock Option Agreement Amended and Restated 2013 Stock Award and Incentive Plan.#

Form of Restricted Stock Unit Award Agreement Amended and Restated 2013 Stock Award and Incentive Plan.#

Form of Restricted Stock Award Agreement Amended and Restated 2013 Stock Award and Incentive Plan.#

Form of Long Term Performance Award Agreement under Amended and Restated 2013 Stock Award and Incentive Plan#

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 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-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).
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).

122

MEDTRONIC PLC 2018 Form 10-KPart IV
Item 15 Exhibits and Financial Statement Schedules

Exhibit
No.

*10.68

*10.69

*10.70

*10.71

*10.72

*10.73

12.1

31.1

31.2

32.1

32.2

101

Description

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).
Computation of Ratio of Earnings to Fixed Charges.

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 27, 2018, 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 equity, and (vi) the notes to the consolidated
financial statements.

* Exhibits that are management contracts or compensatory plans or arrangements.
# Filed herewith.

123

MEDTRONIC PLC 2018 Form 10-KPart IV
Item 16 Form 10-K Summary

MEDTRONIC PLC AND SUBSIDIARIES
SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS

(in millions)

Allowance for doubtful accounts:

Year ended 4/27/18

Year ended 4/28/17

Year ended 4/29/16

Inventory reserve:

Year ended 4/27/18

Year ended 4/28/17

Year ended 4/29/16

Deferred tax valuation allowance:

Year ended 4/27/18

Year ended 4/28/17

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

155

161

144

443

426

413

6,311

7,032

170

155

164

434

101

—

21(c)

6(c)

4(c)

(14)(a)

(45)(a)

(32)(a)

(161)(b)

(166)(b)

(161)(b)

(171)(d)
571(e)
(524)(d)
(304)(e)
(88)(d)
315(e)

193

155

161

452

443

426

$ 7,166

$ 6,311

$ 7,032

Year ended 4/29/16

5,607

1,194

(a) Primarily consists of uncollectible accounts written off, less recoveries.
(b) Primarily reflects utilization of the inventory reserve.
(c) Reflects the impact from acquisitions.
(d) Reflects carryover attribute utilization and expiration.
(e) Primarily reflects the effects of currency fluctuations.

Item 16 Form 10-K Summary

Registrants may voluntarily include a summary of information required by Form 10-K under this Item 16. The Company has not elected to
include such summary information.

124

MEDTRONIC PLC 2018 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 22, 2018

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 22, 2018

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 22, 2018

By:

/s/ BRADLEY E. LERMAN
Bradley E. Lerman

125

MEDTRONIC PLC 2018 Form 10-KThis page intentionally left blank

710 Medtronic Parkway
Minneapolis, MN 55432-5604
USA
Tel: (763) 514-4000
Fax: (763) 514-4879