Medtronic 2021 Annual Report - bookmarked 10.26.pdf

Fiscal Year 2021

2021 LETTER TO SHAREHOLDERS

Dear Shareholders,

Our Mission – to alleviate pain, restore health, and extend life – moves us to do extraordinary things.

While the pandemic continued to impact economies, healthcare systems, companies, and people around the world in FY21, our Mission

endured as our North Star. It enabled us to remain resolute and focused on serving patients as we navigated the year. And as Medtronic

evolved, we remained committed to creating long-term value for our stakeholders around the world.

Focused on creating better patient outcomes, we strive to advance healthcare technology by combining a passion for innovation with a

broad and deep understanding of the human body. By harnessing technologies to create products and solutions, we expand what’s

possible. Our efforts to meet the needs of patients put us at the forefront of turning data and insights into action to make dramatic and

dynamic improvements across care.

Our Board of Directors is actively engaged in strategic oversight, including tracking our progress on our long-term strategies. I want to

thank the Board and our Executive Committee for their guidance and focus, particularly throughout a tumultuous FY21 and the

significant investments and changes we have made to adapt, be nimble, and persevere.

REFLECTING ON A DYNAMIC YEAR

The year behind us held many hurdles, but we didn’t slow down. Our FY21 financial results were strong in light of impacts from the

pandemic. We reported over $30 billion in revenue, an increase of 4 percent as reported or approximately 2 percent on an organic basis.

Our non-GAAP earnings were over $6 billion and diluted EPS was $4.44. While our bottom line decreased 3 percent due to pandemic

pressures, I’m proud of, and grateful for, the 90,000+ employees around the world who dedicated so much time and energy to deliver

these results.

The resolve and dedication of our employees inspires me every day. Thanks to their efforts, we entered FY22 with positive momentum

and strong positions in our markets. And, perhaps more importantly, we started the new year with a renewed commitment to our

Mission and a deepened understanding of the impact we can have during times of great adversity.

ADVANCING OUR BOLD AMBITION

A year ago, we declared a bold ambition: to become the global healthcare technology leader. Medtronic remains committed to

tackling the most complex health and societal challenges facing our world today. In this quest, we’ve made progress, going beyond

devices to develop technology that serves more people in more ways than ever before.

Driven by this ambition, we’re focused on a number of key strategic areas, including creating and disrupting markets, and accelerating

and sustaining innovation-driven revenue growth. By investing in innovation and allocating capital to promising growth opportunities, we

are building our businesses strategically in emerging markets. And we’re maximizing technology’s potential – in areas like AI, data, and

automation – to deliver superior outcomes and experiences for patients.

To enhance the connection between our business and long-term strategies, we introduced a new, streamlined Operating Model to get

closer to our customers and move with greater speed. Our Operating Model created 20 highly focused, empowered, and accountable

Operating Units organized around specific therapies, customers, and markets. With its heightened ownership mindset, this model allows

our teams to be agile, decisive, and move quickly, while enhancing accountability. As a result, we are more competitive, closer to patients

and customers, and more focused on therapy-specific innovation and growth.

To deliver on this transformational structure, we reinvigorated and revived Medtronic’s culture. The Medtronic Mindset builds on our

Mission and core values of integrity, quality, inclusion, and collaboration. It urges us to act boldly, compete to win, move with speed and

decisiveness, foster belonging, and deliver results… the right way. Any transformation of this size takes time, but I’m pleased and

encouraged by the progress to date.

Across the company, employees embraced the transformation. In fact, engagement survey results early in FY22 are among the

strongest we’ve ever seen. The Mindset, coupled with our Operating Model and a reinvigorated brand introduced in late 2021, provides

new energy, enthusiasm, and drive to accomplish our day-to-day work, develop careers, and ultimately, excel in our business

performance.

A ROBUST PIPELINE AND DEEP INVESTMENTS IN R&D

In a unique year, Medtronic remained competitive and focused on growth. By meaningfully investing in R&D, our organic pipeline

advanced with more than 230 regulatory approvals in the US, Europe, Japan, and China. Now in FY22, we plan to increase R&D spend by

more than 10 percent, the greatest annual increase on a dollar basis in our history.

Programmatic, multi-year investments in new areas and high-growth potential markets, such as pulsed-field ablation for atrial fibrillation,

are major focuses as we look to the future. We’re building capabilities in data and AI and applying this technology to products in

development, such as our PillCam

Genius. And accelerating progress from acquired technologies – including the recent integration of

Digital Surgery and Medicrea – will further broaden our capabilities to bring data-driven solutions to more patients and caregivers.

To take advantage of significant growth opportunities, we’re allocating capital across our businesses in earnest. Our renal denervation

program for hypertension is expected to be a $2-3 billion market by the end of the decade. Medtronic is poised to disrupt the expected

$1 billion implantable cardiac defibrillator (ICD) market opportunity with our unique extravascular ICD, or EV-ICD. And continued

disruption in the pacemaker market – a market that Medtronic created and first disrupted with our breakthrough leadless pacemaker,

Micra

™

– is expected to grow to a $2 billion opportunity by 2030. By leveraging capabilities and investing in technologies to capitalize on

these exciting opportunities, we’ll create value and accelerate growth.

TAKING CARE OF OUR COMMUNITIES

Global challenges continued to impact people everywhere this year. As the pandemic rolled into another year, it pressure-tested health

systems, social justice struggles remained, and the ongoing climate crisis grew more intense. The Medtronic Mission guided our

response, and patient and employee welfare remained front-and-center.

Safety and quality: Few things are as integral to our ability to serve patients than our high safety and quality standards. Our role

delivering life-transforming innovation comes with significant responsibility to maintain the trust of our patients, customers, and

stakeholders. Our Mission calls on us “to strive without reserve for the greatest possible reliability and quality in our products; and to be

the unsurpassed standard of comparison,” to improve human welfare. There is nothing more important than patient safety and well-

being.

We recently made the decision to stop HVAD sales based on a body of evidence suggesting our device had a higher frequency of

adverse events. Our focus was on future patients and our desire that they receive a device with demonstrated fewer adverse events,

even if it meant that they would receive a competitor’s device.

Upholding patient safety is our objective every day, and so we continue to invest resources and put the full force of our leadership team

behind accelerated initiatives to evaluate and improve quality and safety systems. Our most recent patient safety improvement initiative

is a priority for our executive team and is notable for its transparency to regulators and stakeholders. This is our most serious

responsibility.

Inclusion, diversity, and equity (ID&E): Medtronic is focused on becoming a more inclusive, diverse, and equitable place to work. While

it was great to be recognized as #11 on Diversity Inc.’s Top 50 Companies for Diversity – moving up 22 spots from the prior year – there

is always room to improve.

To be a company that attracts, develops, and retains top talent from all backgrounds and life experiences, we’re regularly evaluating and

improving hiring practices to foster a more inclusive environment. Incorporating ID&E metrics into our management incentive plans for

FY22 is one way to accelerate progress, because shifting responsibility to business leaders fosters greater accountability to deliver

results. Our goal is to be a global leader and role model in ID&E, not just because it’s good for our business, but it’s good for our people,

and quite simply, it’s the right thing to do.

Climate: Human health hinges upon the health of our environment, which is why climate commitments remain a top priority as

Medtronic continues to evolve and grow. We’ve set aggressive targets around sustainability, including the goal to be carbon neutral in

our operations by 2030. Caring for our planet makes good business sense and meets the expectations of employees and partners. We

have adopted globally recognized disclosure standards and guidelines, including the Global Reporting Initiative (GRI), Sustainability

Accounting Standards Board (SASB) and the Task Force on Climate-related Financial Disclosures (TCFD). By reducing our carbon

footprint, we are investing in the long-term health of our company, our people, and our planet.

COVID-19 response: Medtronic and the Medtronic Foundation invested tens of millions of dollars in global COVID relief efforts in FY21.

New partnerships were forged to significantly increase ventilator production to supply hospitals around the world. As a key member of

the Global Task Force on Pandemic Response, organized by the U.S. Chamber of Commerce and the Business Roundtable, we

collaborated with other Task Force members to supply ventilators to India during a particularly devastating outbreak. And our employees

– many of whom were side-by-side with front-line workers, working diligently to manufacture and deliver life-saving technology – were at

the center of our actions.

Several initiatives, including the Medtronic Employee Assistance Program, were implemented and maintained to help our employees

keep themselves and their families safe. Where permitted, we pursued strategies to increase employee vaccinations globally, including

providing education, ensuring our workforce received vaccinations at no cost to them, and supplementing vaccination offerings with

clinics at some of our large facilities. Paid emergency leave and flexible worktime options, including resources to support caregiving

needs, back-to-school toolkits, and remote learning resources for working parents, ensured our benefit offerings evolved to help our

employees put their families first.

Healthcare technology access: Though we serve millions of patients annually, millions more are left out. To do our part in combatting

pervasive and systemic healthcare inequities, we invested in relief efforts, training, and R&D to better enable technology to drive

improved outcomes for all. It is our duty – both to our patients and those we have not yet reached – to dismantle global disparities in care.

From the beginning, our Mission has rooted us in purpose and guided Medtronic’s decisions. It’s clear that what is best for our world, and

what is best for our business, are the same. Strengthening and advancing our environmental, social, and governance (ESG) strategy is

increasingly important to achieving our bold ambition to be the global healthcare technology leader.

ADVANCING THE MISSION

We’re proud to say we transform the lives of two people every second. But we must do more. The world today demands that

companies help more people, in more meaningful ways, more quickly. While some are benefiting, too many are not.

This past year, we laid the groundwork to seize the vast opportunity ahead of us. Our transformation to achieve our vision is underway,

and I could not be more excited for what’s ahead. Driven by growth strategies, we’re rethinking the speed and scale at which we can

serve the world. We’re resetting our expectations of what innovation and technology can achieve.

Most importantly, we will deliver extraordinary solutions to more patients around the globe, all with an eye on the most important

outcome: to fulfill our Mission to alleviate pain, restore health, and extend life.

Geoff Martha

Chairman and Chief Executive Officer

October 28, 2021

iii

Reconciliation of Non-GAAP Financial Measures

The Shareholder Letter set forth in this Annual Report includes financial measures that are not prepared in accordance with U.S.

generally accepted accounting principles (U.S. GAAP). Management believes that such non-GAAP financial measures provide useful

information to investors regarding the underlying business trends and performance of Medtronic’s ongoing operations. Investors should

consider non-GAAP measures set forth in the Shareholder Letter to be in addition to, and not 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.

MEDTRONIC PLC

WORLD WIDE REVENUE

(1)

(Unaudited)

YEAR-TO-DATE

(2)

REPORTED CONSTANT CURRENCY

(in millions) FY21 FY20 Growth

Currency

Impact

(5)

FY21 Growth

Cardiovascular

(3)

$ 10,772 $ 10,468 2.9% $ 131 $ 10,641 1.7%

Cardiac Rhythm & Heart Failure 5,584 5,141 8.6 79 5,505 7.1

Structural Heart & Aortic 2,834 2,842 (0.3) 38 2,796 (1.6)

Coronary & Peripheral Vascular 2,354 2,486 (5.3) 13 2,341 (5.8)

Medical Surgical 8,737 8,352 4.6 87 8,650 3.6

Surgical Innovations 5,438 5,513 (1.4) 66 5,372 (2.6)

Respiratory, Gastrointestinal, & Renal 3,298 2,839 16.2 22 3,276 15.4

Neuroscience

(4)

8,195 7,725 6.1 75 8,120 5.1

Cranial & Spinal Technologies 4,288 4,082 5.0 34 4,254 4.2

Specialty Therapies 2,307 2,147 7.5 26 2,281 6.2

Neuromodulation 1,601 1,497 6.9 16 1,585 5.9

Diabetes 2,413 2,368 1.9 37 2,376 0.3

TOTAL $ 30,117 $ 28,913 4.2% $ 331 $ 29,786 3.0%

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

(2) Fiscal year 2021 was a 53-week fiscal year, with the extra week occurring in the first fiscal month of the first quarter and included in reported

year-to-date results. While it is difficult to calculate the impact of the extra week, the Company estimates the extra week benefited year-to-date

constant currency growth by approximately $360 to $390 million. Year-to-date revenue also includes $15 million of inorganic revenue related to the

Titan Spine acquisition, which is included in the reported results of the Cranial & Spinal Technologies division within Neuroscience. When excluding

the impact of currency, inorganic Titan Spine revenue, and the estimated impact of the extra week, year-to-date revenue for fiscal year 2021

increased approximately 2 percent organic.

(3) In the fourth quarter of fiscal year 2021, the Company realigned its divisions within Cardiovascular. As a result, fiscal year 2020 results have been

recast to adjust for this realignment.

(4) In the first quarter of fiscal year 2021, the Company realigned its divisions with Neuroscience. As a result, fiscal year 2020 results have been recast to

adjust for this realignment.

(5) The currency impact to revenue measures the change in revenue between current and prior year periods using constant exchange rates.

MEDTRONIC PLC

GAAP TO NON-GAAP RECONCILIATIONS

(1)

(Unaudited)

Fiscal year ended April 30, 2021

(in millions, except per share data) Net Sales

Cost of

Products

Sold

Gross

Margin

Percent

Operating

Profit

Operating

Profit

Percent

Income

Before

Income

Taxes

Net Income

attributable

to Medtronic

Diluted

EPS

Effective

Tax Rate

GAAP $ 30,117 $ 10,483 65.2% $ 4,484 14.9% $ 3,895 $ 3,606 $ 2.66 6.8%

Non-GAAP Adjustments:

Restructuring and associated

costs

(2)

— (128) 0.4 617 2.0 617 489 0.36 20.7

Acquisition-related items

(3)

— (15) — (15) — (15) 4 — 126.7

Certain litigation charges — — — 118 0.4 118 95 0.07 19.5

(Gain)/loss on minority

investments

(4)

— — — — — (61) (57) (0.04) —

IPR&D charges

(5)

— — — 31 0.1 31 25 0.02 19.4

Impairment charges

(6)

— — — 76 0.3 76 68 0.05 10.5

Medical device regulations

(7)

— (45) 0.1 83 0.3 83 68 0.05 18.1

Debt tender premium and other

charges

(8)

— — — — — 308 248 0.18 19.5

Amortization of intangible

assets — — — 1,783 5.9 1,783 1,500 1.11 15.9

Certain tax adjustments, net

(9)

— — — — — — (41) (0.03) —

Non-GAAP $ 30,117 $ 10,295 65.8% $ 7,177 23.8% $ 6,835 $ 6,005 $ 4.44 11.8%

Currency impact (331) (191) 0.3 296 1.3 0.19

Currency Adjusted $ 29,786 $ 10,104 66.1% $ 7,473 25.1% $ 4.63

Fiscal year ended April 24, 2020

(in millions, except per share data) Net Sales

Cost of

Products

Sold

Gross

Margin

Percent

Operating

Profit

Operating

Profit

Percent

Income

Before

Income

Taxes

Net Income

attributable

to Medtronic

Diluted

EPS

Effective

Tax Rate

GAAP $ 28,913 $ 9,424 67.4% $ 4,791 16.6% $ 4,055 $ 4,789 $ 3.54 (18.5)%

Non-GAAP Adjustments:

Restructuring and associated costs

(2)

— (155) 0.6 441 1.5 441 372 0.28 15.6

Acquisition-related items

(10)

— (5) — 66 0.2 66 53 0.04 19.7

Certain litigation charges — — — 313 1.1 313 254 0.19 18.8

(Gain)/loss on minority investments

(4)

— — — — — 19 22 0.02 (15.8)

Debt tender premium and other charges

(11)

— — — (7) — 406 320 0.24 21.2

Medical device regulations

(7)

— (20) 0.1 48 0.2 48 42 0.03 12.5

Exit of businesses

(12)

— — — 52 0.2 52 40 0.03 23.1

IPR&D charges

(5)

— — — 25 0.1 25 22 0.02 12.0

Contribution to Medtronic Foundation — — — 80 0.3 80 62 0.05 22.5

Amortization of intangible assets — — — 1,756 6.1 1,756 1,472 1.09 16.2

Certain tax adjustments, net

(13)

— — — — — — (1,242) (0.92) —

Non-GAAP $ 28,913 $ 9,244 68.0% $ 7,565 26.2% $ 7,261 $ 6,206 $ 4.59 14.3%

(1) The data in this schedule has been intentionally rounded to the nearest million or $0.01 for EPS figures, 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 charges primarily include business combination transaction-related costs, changes in fair value of contingent consideration, and a change in

amounts accrued for certain contingent liabilities for recent acquisitions.

(4) We exclude unrealized and realized gains and losses on our minority investments as we do not believe that these components of income or expense

have a direct correlation to our ongoing or future business operations.

(5) The charges represent acquired IPR&D in connection with asset acquisitions and certain license payments for unapproved technology.

(6) The charges relate to the abandonment of certain intangible assets in our Neuroscience segment.

(7) The charges represent estimated incremental costs of complying with the new European Union medical device regulations for previously registered

products and primarily include charges for contractors supporting the project and other direct third-party expenses.

(8) The charges relate to the early redemption of approximately $6.0 billion of debt.

(9) The net benefit primarily relates to the finalization of an audit at the IRS Appellate level for fiscal years 2012 through 2014 and the capitalization of

certain research and development costs for U.S. income tax purposes, which are partially offset by the impact of an intercompany sale of assets, and

a tax basis adjustment and amortization of previously established deferred tax assets from intercompany intellectual property transactions.

(10) The charges primarily include costs incurred in connection with legacy-Covidien enterprise resource planning deployment activities, business

combination related costs, and changes in fair value of contingent consideration.

(11) The charges, which include $413 million recognized in interest expense and ($7 million) recognized in other operating expense, net, primarily relate to

the early redemption of approximately $5.2 billion of debt.

(12) The net charges relate to the exit of businesses and are primarily comprised of intangible asset impairments.

(13) The net benefit primarily relates to the release of a valuation allowance on certain net operating losses and the impact of tax reform in Switzerland

and the United States.

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 30, 2021.

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 plc

(Exact name of registrant as specified in its charter)

Ireland 98-1183488

(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

20 On Hatch, Lower Hatch Street Dublin 2, Ireland

(Address of principal executive offices)

+353 1 438-1700

(Registrant’s telephone number, including area code)

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

Title of each class Trading Symbol Name of each exchange on which registered

Ordinary shares, par value $0.0001 per share

MDT New York Stock Exchange

0.00% Senior Notes due 2022

MDT/22B New York Stock Exchange

0.375% Senior Notes due 2023

MDT/23B New York Stock Exchange

0.000% Senior Notes due 2023

MDT/23C New York Stock Exchange

0.25% Senior Notes due 2025

MDT/25 New York Stock Exchange

0.000% Senior Notes due 2025

MDT/25A New York Stock Exchange

1.125% Senior Notes due 2027

MDT/27 New York Stock Exchange

0.375% Senior Notes due 2028

MDT/28 New York Stock Exchange

1.625% Senior Notes due 2031

MDT/31 New York Stock Exchange

1.00% Senior Notes due 2031

MDT/31A New York Stock Exchange

0.750% Senior Notes due 2032

MDT/32 New York Stock Exchange

2.250% Senior Notes due 2039

MDT/39A New York Stock Exchange

1.50% Senior Notes due 2039

MDT/39B New York Stock Exchange

1.375% Senior Notes due 2040

MDT/40A New York Stock Exchange

1.75% Senior Notes due 2049

MDT/49 New York Stock Exchange

1.625% Senior Notes due 2050

MDT/50 New York Stock Exchange

Securities registered pursuant to section 12(g) of the Act:

None

Indicate by check mark Yes No

• 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 every Interactive Data File required to be submitted

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 such files).

• 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.

Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company Emerging growth company

• If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period

for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

• whether the registrant has filed a report on and attestation to its management’s assessment of the

effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15

U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

• 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 30, 2020,

based on the closing price of $100.57 as reported on the New York Stock Exchange: approximately $135.3 billion. Number of Ordinary Shares

outstanding on June 23, 2021: 1,343,904,180

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s Proxy Statement for its 2021 Annual General Meeting are incorporated by reference into Part III hereof.

TABLE OF CONTENTS

Item Description Page

PART I 11

1. Business ...............................................................................................11

1A. Risk Factors ............................................................................................21

1B. Unresolved Staff Comments .............................................................................33

2. Properties ..............................................................................................34

3. Legal Proceedings .......................................................................................34

4. Mine Safety Disclosures ..................................................................................34

PART II 35

5. Market for Medtronic’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities ....35

6. (Reserved) .............................................................................................36

7. Management’s Discussion and Analysis of Financial Condition and Results of Operations .........................37

7A. Quantitative and Qualitative Disclosures About Market Risk ...................................................56

8. Financial Statements and Supplementary Data ..............................................................57

9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure .......................109

9A. Controls and Procedures ................................................................................109

9B. Other Information ......................................................................................109

PART III

111

10. Directors, Executive Officers, and Corporate Governance ...................................................111

11. Executive Compensation ...............................................................................112

12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters .............113

13. Certain Relationships and Related Transactions, and Director Independence ..................................113

14. Principal Accounting Fees and Services ...................................................................113

PART IV

114

15. Exhibits and Financial Statement Schedules ...............................................................114

16. Form 10-K Summary ...................................................................................119

Signatures ............................................................................................120

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, the potential or anticipated direct or indirect impact of

COVID-19 on our business, results of operations and/or financial

condition, restructuring and cost-saving initiatives, intellectual

property rights, litigation and tax matters, governmental

proceedings and 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 (U.S. FDA) and non-U.S. regulatory approval of

new products; increased presence in new markets, including

markets outside the U.S.; changes in the market and our market

share; acquisitions and investment initiatives, as well as

integration of acquired companies into our operations; the

resolution of tax matters; the effectiveness of our development

activities in reducing patient care costs and hospital stay lengths;

our approach towards cost containment; our expectations

regarding healthcare 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 governmental

proceedings and 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, results

of operations, financial condition, and cash flows. 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” within “Item 1.

Business” and “Item 1A. Risk Factors” in this Annual Report on

Form 10-K, as well as those related to:

䡲 the COVID-19 pandemic;

䡲 competition in the medical device industry;

䡲 reduction or interruption in our supply;

䡲 laws and governmental regulations;

䡲 quality problems;

䡲 liquidity shortfalls;

䡲 decreasing prices and pricing pressure;

䡲 fluctuations in currency exchange rates;

䡲 changes in applicable tax rates;

䡲 positions taken by taxing authorities;

䡲 adverse regulatory action;

䡲 delays in regulatory approvals;

MEDTRONIC PLC 2021 Form 10-K 9

䡲 litigation results;

䡲 self-insurance;

䡲 commercial insurance;

䡲 healthcare policy changes;

䡲 international operations;

䡲 cybersecurity incidents;

䡲 failure to complete or achieve the intended benefits of

acquisitions or divestitures; or

䡲 disruption of our current plans and operations.

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 2021 Form 10-K

PART I

Item 1. Business

72 Million +

Patients

Served

Employees PatentsResearch and

Development

Spend

Countries in

Which We

Operate

150+ 90,000+ 49,000+$2.5 Billion

Medtronic plc, headquartered in Dublin, Ireland, is among the

world’s largest medical technology, services, and solutions

companies. Medtronic was founded in 1949 and today serves

healthcare systems, 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.”

Our Mission – to alleviate pain, restore health, and extend life – is

one of our most powerful assets. We remain committed to being

recognized as a company of dedication, honesty, integrity, and

service. Building on this strong foundation, we are embracing our

role as a healthcare technology leader and evolving our business

strategy in four key areas:

䡲 Leveraging our pipeline to win market share: The combination

of our strong base business, recent product launches and

robust pipeline is expected to continue accelerating our

growth over both the near-and long-term. We aim to bring

inventive and disruptive technology to large healthcare

opportunities which enables us to better meet patient needs.

Patients around the world deserve access to our life-saving

products, and we are driven to use our local presence and

scale to increase the adoption of our products and services in

markets around the globe.

䡲 Serving more patients by accelerating innovation driven

growth and delivering shareholder value: We listen to our

patients, customers, and employees to better understand the

challenges they face. From the patient journey, to creating

agile partnerships that produce novel solutions, to making it

easier for our customers to deploy our therapies – everything

we do is anchored in deep insight, and creates simpler,

superior experiences for everyone.

䡲 Creating and disrupting markets with our technology by

putting the “tech” in medtech: We are confident in our ability

to maximize new technology, artificial intelligence (AI), and

data and analytics to tailor therapies in real-time, facilitating

remote monitoring and care delivery that conveniently

manages conditions, and creates new standards of care.

䡲 Empowering our operating units to become more nimble and

more competitive: Our new operating model simplifies our

organization in order to accelerate decision making, improve

commercial execution, and more effectively leverage the

scale of our company.

Our new operating model was effective February 1, 2021. The

new operating model moved from a Group structure to a

Portfolio structure: Cardiovascular Portfolio (formerly Cardiac

and Vascular Group), Neuroscience Portfolio (formerly

Restorative Therapies Group), Medical Surgical Portfolio

(formerly Minimally Invasive Therapies Group), and Diabetes

Operating Unit (formerly Diabetes Group). There were no

changes to the operating and reportable segments as a result of

this new operating model.

We have four operating and reportable segments that primarily

develop, manufacture, distribute, and sell device-based medical

therapies and services: the Cardiovascular Portfolio, the Medical

Surgical Portfolio, the Neuroscience Portfolio, and the Diabetes

Operating Unit. For more information regarding our segments,

please see Note 19 to the consolidated financial statements in

“Item 8. Financial Statements and Supplementary Data” in this

Annual Report on Form 10-K.

MEDTRONIC PLC 2021 Form 10-K 11

PART I

Item 1 Business

CARDIOVASCULAR PORTFOLIO

The Cardiovascular Portfolio is made up of the Cardiac Rhythm & Heart Failure, Structural Heart & Aortic, and Coronary & Peripheral

Vascular divisions. The primary medical specialists who use our Cardiovascular products include electrophysiologists, implanting

cardiologists, heart failure specialists, cardiovascular, cardiothoracic, and vascular surgeons, and interventional cardiologists and

radiologists.

Cardiac Rhythm & Heart Failure

Our Cardiac Rhythm & Heart Failure division includes the

following Operating Units: Cardiac Rhythm Management,

Cardiac Ablation Solutions, Cardiovascular Diagnostics, and

Mechanical Circulatory Support. The 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, and an integrated health

solutions business. Principal products and services offered

include:

䡲 Implantable cardiac pacemakers including the Azure MRI

SureScan, Adapta, Advisa MRI SureScan, and the Micra

Transcatheter Pacing System. The Micra Transcatheter

Pacing System, which is leadless and does not have a

subcutaneous device pocket like a conventional pacemaker,

includes the MicraVR and the Micra AV which can treat

patients with atrioventricular block.

䡲 Implantable cardioverter defibrillators (ICDs), including the

Visia AF, Evera MRI SureScan, and the Cobalt and Crome

portfolio of BlueSync-enabled ICDs, as well as defibrillator

leads, including the Sprint Quattro Secure lead.

䡲 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 Cobalt

and Crome portfolio of BlueSync-enabled CRT-Ds, as well as

the Percepta/Serena/Solara family of MRI Quad CRT-P

SureScan systems.

䡲 AF ablation products including the Arctic Front Cardiac

CryoAblation Catheter System, designed for pulmonary vein

isolation in the treatment of patients with drug refractory

paroxysmal AF, as well as the DiamondTemp Ablation system,

which is the first U.S. FDA-approved, temperature controlled,

irrigated radiofrequency ablation system with diamonds

available to deliver ablations.

䡲 Insertable cardiac monitoring systems including the Reveal

LINQ and LINQ II. These devices are for patients with

abnormal heart rhythms who experience infrequent

symptoms including dizziness, palpitations, syncope (fainting)

and chest pain, thereby requiring long-term monitoring or

ongoing management. The LINQ II device offers remote

programming, improved device longevity, and enhanced

accuracy to correctly detect abnormal heart rhythms,

simplifying diagnosis and monitoring of patients.

䡲 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.

䡲 TYRX products including the Cardiac and Neuro Absorbable

Antibacterial Envelopes, which are designed to stabilize

electronic implantable devices and help prevent infection

associated with implantable pacemakers, and defibrillators.

䡲 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.

Structural Heart & Aortic

Our Structural Heart & Aortic division includes the following

Operating Units: Structural Heart & Aortic and Cardiac Surgery.

The division includes therapies to treat heart valve disorders and

aortic disease. Our devices include products for the repair and

replacement of heart valves, perfusion systems, positioning and

stabilization systems for beating heart revascularization surgery,

surgical ablation products, and comprehensive line of products

and therapies to treat aortic disease, such as aneurysms,

dissections, and transections. Principal products offered include:

䡲 CoreValve family of aortic valves, including the Evolut R, Evolut

PRO, and Evolut PRO+ systems for transcatheter aortic valve

replacement.

䡲 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.

MEDTRONIC PLC 2021 Form 10-K

PART I

Item 1 Business

䡲 Endovascular stent grafts and accessories including the

Endurant II Stent Graft System for the treatment of abdominal

aortic aneurysms, the Valiant Captivia Thoracic Stent Graft

System for thoracic endovascular aortic repair procedures,

and the Heli-FX EndoAnchor System.

Coronary & Peripheral Vascular

Our Coronary & Peripheral Vascular division includes the

following Operating Units: Coronary & Renal Denervation and

Peripheral Vascular Health. The division is comprised of a

comprehensive line of products and therapies to treat coronary

artery disease as well as peripheral vascular disease and venous

disease. 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, peripheral drug coated balloons, stent and

angioplasty systems, carotid embolic protection systems for the

treatment of vascular disease outside the heart, and products

for superficial and deep venous disease. Principal products

offered include:

䡲 Percutaneous Coronary Intervention products including our

Resolute Onyx drug-eluting stent, Euphoria balloons, and

Launcher guide catheters.

䡲 Percutaneous angioplasty balloons including the IN.PACT

family of drug-coated balloons, vascular stents including the

Abre venous stent, directional atherectomy products

including the HawkOne directional atherectomy system, and

other procedure support tools.

䡲 Products to treat superficial venous diseases in the lower

extremities including the ClosureFast radiofrequency ablation

system and the VenaSeal Closure System.

MEDICAL SURGICAL PORTFOLIO

The Medical Surgical Portfolio is made up of the Surgical Innovations and Respiratory, Gastrointestinal, & Renal divisions. Products and

therapies of this group are used primarily by healthcare systems, 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 includes the following

Operating Units: Surgical Innovations and Surgical Robotics. The

division develops, manufactures, and markets advanced and

general surgical products including surgical stapling devices,

vessel sealing instruments, wound closure, electrosurgery

products, surgical artificial intelligence (AI) and robotic-assisted

surgery products, hernia mechanical devices, mesh implants,

gynecology and lung products, and therapies to treat diseases

and conditions that are typically, but not exclusively, addressed

by surgeons. Principal products and services offered include:

䡲 Advanced stapling and energy 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 Powered Stapling System, the LigaSure Exact

Dissector and L-Hook Laparoscopic Sealer/Divider, and the

Sonicision curved jaw cordless ultrasonic dissection system.

䡲 Electrosurgical hardware and instruments, including the

Valleylab FT10 energy platform, and the Force TriVerse

electrosurgical pencils, and surgical AI, data and analytics, and

digital education and training to support robotic assisted

surgery platform.

䡲 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.

Respiratory, Gastrointestinal, & Renal

Our Respiratory, Gastrointestinal, & Renal division includes the

following Operating Units: Respiratory Interventions, Patient

Monitoring, Gastrointestinal, and Renal Care Solutions. The

division develops, manufactures, and markets products in the

emerging fields of minimally invasive gastrointestinal and

hepatologic diagnostics and therapies, patient monitoring,

respiratory interventions including airway management and

ventilation therapies, and for the treatment of renal disease.

Principal products and services offered include:

䡲 Gastrointestinal and endoscopy products, including the

PillCam capsule endoscopy systems, the Bravo calibration-

free reflux testing systems, the EndoFLIP imaging systems,

the Emprint ablation system with Thermosphere Technology,

the ManoScan Bravo system, the Barrx platform through

ablation with the Barrx 360 Express catheter, the GI Genius

intelligent endoscopy module, the Cool-tip radiofrequency

ablation system, and the HET Bipolar System.

MEDTRONIC PLC 2021 Form 10-K 13

PART I

Item 1 Business

䡲 Airway, ventilation, and inhalation therapies products, including

the Puritan Bennett 980 and 840 ventilators, the Newport

e360 and HT70 ventilators, the TaperGuard Evac tube, Shiley

Endotracheal Tubes, Shiley Tracheostomy Tubes, McGRATH

MAC video laryngoscopes, and DAR Filters.

䡲 Products focused on patient monitoring, including

Microstream capnography monitors, Nellcor pulse oximetry

monitors, INVOS cerebral/somatic oximetry systems, Vital

Sync remote monitoring, WarmTouch convective warming,

and Bispectral Index (BIS) brain monitoring technology.

䡲 Products providing solutions for the treatment of renal

disease, including Palindrome, Mahurkar and Mahurkar Elite

Dialysis Access Catheters for renal therapy, Argyle peritoneal

dialysis catheters, and other products designed for use in

treatment of both acute and chronic renal failure conditions.

NEUROSCIENCE PORTFOLIO

The Neuroscience Portfolio is made up of the Cranial & Spinal Technologies, Specialty Therapies, and Neuromodulation divisions. The

primary medical specialists who use the products of this group include spinal surgeons, neurosurgeons, neurologists, pain management

specialists, anesthesiologists, orthopedic surgeons, urologists, urogynecologists, interventional radiologists, and ear, nose, and throat

specialists.

Cranial & Spinal Technologies

Our Cranial & Spinal Technologies division and Operating Unit

develops, manufactures, and markets an integrated portfolio of

devices and therapies for surgical technologies designed to

improve the precision and workflow of neuro procedures, and a

comprehensive line of medical devices and implants used in the

treatment of the spine and musculoskeletal system. The division

also provides biologic solutions for the orthopedic and dental

markets and offers unique and highly differentiated imaging,

navigation, power instruments, nerve monitoring, and robotic

guidance systems used in spine and cranial procedures. Principal

products and services offered include:

䡲 Neurosurgery products, including platform technologies,

implant therapies, and advanced energy products. Our

StealthStation S8 Navigation System, Stealth Autoguide

cranial robotic guidance platform, and O-arm Imaging System

are platforms used in cranial, spinal, sinus, and orthopedic

procedures. Our Mazor X robotic guidance systems are used

in robot-assisted spine procedures and combine the

best-in-class robotics and navigation capability. Our Midas Rex

Surgical Drills, including our new MR8 high-speed drill system,

are used in cranial, spinal, ENT, and orthopedic procedures.

Our cerebrospinal fluid (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. 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 Sealers use patented transcollation technology

to provide haemostatic sealing of soft tissue and bone and are

cleared for use in a variety of surgical procedures, including

orthopedic surgery, spine, solid organ resection and thoracic

procedures.

䡲 Products to treat a variety of conditions affecting the spine,

including degenerative disc disease, spinal deformity, spinal

tumors, fractures of the spine, and stenosis. These products

include our CD HORIZON SOLERA system, T2

STRATOSPHERE, and the CLYDESDALE, and ELEVATE

interbody spacers. These products also include titanium

interbody implants and surface technologies, such as our

Adaptix interbody system and the Titan Interbody Fusion

Device with NanoLOCK technology.

䡲 Products that facilitate less invasive thoracolumbar surgeries,

including the CD HORIZON SOLERA VOYAGER and

LONGITUDE Percutaneous Fixation Systems.

䡲 Products to treat conditions in the cervical region of the spine,

including the ZEVO Anterior Cervical Plate System, the

INFINITY OCT System, and PRESTIGE LP Cervical Artificial

Discs.

䡲 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.

䡲 Demineralized Bone Matrix products, including MAGNIFUSE,

GRAFTON/GRAFTON PLUS, COREX, and PROGENIX, and the

MASTERGRAFT family of synthetic bone graft products –

Matrix, Putty, and Granules.

MEDTRONIC PLC 2021 Form 10-K

PART I

Item 1 Business

Specialty Therapies

Our Specialty Therapies division includes the following Operating

Units: Neurovascular, Ear, Nose, and Throat (ENT), and Pelvic

Health. The division develops, manufactures, and markets

products and therapies to treat diseases of ENT, patients

afflicted with Acute Ischemic and Hemorrhagic stroke, and help

control the systems of overactive bladder, (non-obstructive)

urinary retention, and chronic fecal incontinence. Principal

products and services offered include:

䡲 Pelvic health and gastric therapies products, including our

InterStim, InterStim Micro, and InterStim II neurostimulators,

and InterStim SureScan MRI leads, to help control the systems

of overactive bladder, (non-obstructive) urinary retention, and

chronic fecal incontinence. Our NURO System delivers

Percutaneous Tibial Neuromodulation therapy to treat

overactive bladder and associated symptoms of urinary

urgency, urinary frequency, and urge incontinence. Our

Enterragastric neurostimulator (approved under a

Humanitarian Device Exemption (HDE) in the U.S.) is used for

the treatment of chronic, intractable nausea and vomiting due

to gastroparesis.

䡲 ENT products, including the Straightshot M5 Microdebrider

Handpiece, the IPC system, NIM Nerve Monitoring Systems,

FUSION Compact and StealthStation ENT Navigation System,

as well as products for hearing restoration and obstructive

sleep apnea.

䡲 Neurovascular products to treat diseases of the vasculature in

and around the brain. This includes coils, neurovascular stent

retrievers, 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 revascularizationdevices for

treatment of acute ischemic stroke, the Riptide Aspiration

System and a portfolio of associated access catheters

including our React aspiration catheters also for the treatment

of acute ischemic stroke.

Neuromodulation

Our Neuromodulation division and Operating Unit 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:

䡲 Spinal cord stimulation products, including rechargeable and

non-rechargeable devices and a large selection of leads used

to treat chronic back and/or limb pain. This includes the Intellis

Spinal Cord Stimulation System, with AdaptiveStim and

SureScan MRI Technology, DTM (differential target

multiplexed) proprietary waveform, the Evolve workflow

algorithm, and Snapshot reporting. Products also include our

RestoreSensor (rechargeable) SureScan MRI neurostimulation

system, with its proprietary AdaptiveStim technology.

䡲 Brain modulation products, including those for the treatment

of the disabling symptoms of Parkinson’s disease, essential

tremor, refractory epilepsy, severe, treatment-resistant

obsessive compulsive disorder (approved under a 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).

This also includes our Percept PC Neurostimulator DBS

system with BrainSense technology.

䡲 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.

䡲 Interventional products, including the Xpander II Balloon

Kyphoplasty system, the Kyphon-V vertebroplasty system

and the OsteoCool RF Tumor ablation system.

䡲 The Accurian nerve ablation system, which conducts radio

frequency ablation of nerve tissues.

DIABETES OPERATING UNIT

The Diabetes Operating Unit develops, manufactures, and markets products and services for the management of Type 1 and Type 2

diabetes. The primary medical specialists who use and/or prescribe our Diabetes products are endocrinologists and primary care

physicians.

MEDTRONIC PLC 2021 Form 10-K 15

PART I

Item 1 Business

Principal products and services offered include:

䡲 Insulin pumps and consumables, including the MiniMed 770G

system and MiniMed 780G system, which are all powered by

SmartGuard technology. The MiniMed 770G system provides

smartphone and Bluetooth connectivity, continuously delivers

background insulin, monitors sugar levels, and an expanded

age indication to ages two and up. The MiniMed 780G

enhances the insulin pump systems by including automatic

correction boluses and an adjustable glucose target down to

100 mg/dl.

䡲 Continuous glucose monitoring (CGM) systems and sensors,

including the Guardian Connect smart CGM system and the

Guardian Sensor 3, are products worn by patients capturing

glucose data to reveal patterns and potential problems, such

as hyperglycemic and hypoglycemic episodes.

䡲 The InPen smart insulin pen system that combines a reusable

Bluetooth-enabled insulin pen with an intuitive mobile app that

helps users administer the appropriate insulin dose. The InPen

application was integrated with our CGM data to provide real-

time CGM readings alongside insulin dose information.

䡲 Consumables and supplies, including infusion sets.

HUMAN CAPITAL

Medtronic Workforce Overview

Medtronic’s employees deliver on our Mission every day. We

strive to be the employer of choice for the best and brightest

global talent, where employees can grow and develop fulfilling

careers. We aspire to create a truly inclusive, diverse, and

equitable workplace that fosters innovation and creativity, and

where every employee feels a sense of belonging and well-being.

More than 99 percent of Medtronic’s 90,000+ employees work

full-time. Forty-four percent of our employees are based in the

U.S. or Puerto Rico.

Inclusion, Diversity & Equity

We believe that improving health for people from all walks of life

depends on our ability to unleash the creative power of our

diverse global employees. By breaking down barriers to Inclusion,

Diversity and Equity, we open doors for everyone, driving

progress and prosperity around the world. As of the end of fiscal

year 2021, 38 percent of our U.S. workforce is ethnically diverse;

women comprise 50 percent of our global workforce; and

40 percent of our people leaders, manager level and above, are

women. Additionally, Medtronic employee resource groups

(ERGs) are employee-led affinity groups that provide career

development and networking opportunities for members and

strengthen ties between employees of many different

backgrounds, cultures, and interests. In fiscal year 2021, there

were 12 ERGs across 70 countries with more than 26,000

members.

Pay Equity

For fiscal year 2021, in the United States we have achieved 100%

pay equity for gender and 99% pay equity for ethnically diverse

employees. Globally we have achieved 99% pay equity for

gender. We are actively working to close any remaining pay gaps

by continuing to expand the annual pay equity analyses for each

country in which we operate.

Workforce Compensation

Our compensation framework is designed to celebrate the value

and contributions of our employees. We aim to create a feeling

of personal and professional security at Medtronic and are

committed to transparent communications on compensation.

Our competitive approach to compensation reflects industry

benchmarks and local market standards. Our programs include

annual and long-term incentives that provide the means to share

in the company’s success. To attract the best leaders, we offer

competitive benefits and cash and equity incentives. We reward

high-performing employees with an ownership stake in the

company through restricted stock, and all employees have the

opportunity to purchase stock at a discount.

Learning & Development

The skills and dedication of our employees drive our business

performance. Our comprehensive professional development

programs empower our people to build rewarding careers and

help us attract world-class talent. Our suite of professional

development programs ensures that our employees, regardless

of level, location, language or learning preferences, have access

to opportunities to develop and grow. Our investment in

employee development has contributed to more than

30 percent of our open roles being filled with internal employees.

Employee Engagement

Through our organizational health survey, we gain valuable

insight into the Medtronic employee experience and identify

areas where we can improve in four key priority areas: 1)

Employee Engagement, 2) Inclusion, 3) Innovation, and 4) Ethics.

In our most recent survey ending in May 2021, more than

83 percent of our employees responded, an increase in

participation over prior year (79 percent). Medtronic carefully

reviews and implements actions based on employee feedback in

order to partner and create an inclusive, innovative and

supportive environment.

Health & Safety

As a large, global employer, it is our responsibility to maintain a

safe workplace and support the well-being of our employees. As

we navigate the COVID-19 pandemic, we have placed a high

priority on employee health, providing accommodations and

resources to support our workforce through this challenging

time.

To help limit exposure to the coronavirus, we acted to ensure

employees in business-critical functions who cannot work from

MEDTRONIC PLC 2021 Form 10-K

PART I

Item 1 Business

home are protected, including those in research and

development, quality, manufacturing, distribution, and sales.

Personal protective equipment, increased sanitation, social

distancing guidance, and facility updates (one-way hallways,

cafeteria partitions and extra sinks) are provided to protect our

employees.

The Medtronic Employee Assistance Program and the

Medtronic Employee Emergency Assistance Fund have

historically supported employees and their families when faced

with difficult times by providing a variety of services such as

mental health and financial counseling and support at no cost.

Both programs have proven invaluable in navigating our

employees through unique challenges during the pandemic.

For more information on Human Capital Management at

Medtronic, please refer to our 2020 Integrated Report as well as

Medtronic’s 2020 Global Inclusion, Diversity and Equity Report

available on our company website.

OTHER FACTORS IMPACTING OUR OPERATIONS

COVID-19 Pandemic

The global COVID-19 pandemic (“COVID-19” or the

“pandemic”), together with the preventative and precautionary

measures taken by businesses, communities and governments,

has impacted, and may continue to impact significant aspects of

our Company and business, including demand for our products,

our operations, supply chains and distribution systems, and our

ability to research and develop and bring new products and

services to market. See “Item 1A. Risk Factors” in this Annual

Report on Form 10-K.

Research and Development

The markets in which we participate are subject to rapid

technological advances. Constant improvement of existing

products and introduction of new products is necessary to

maintain market leadership. Our research and development

(R&D) efforts are directed toward maintaining or achieving

technological leadership in each of the markets we serve 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,

developing new therapies and procedures, and entering into

arrangements with third parties to fund the development of

certain technologies. We continue to focus on optimizing

innovation, improving our R&D productivity, driving growth in

emerging markets, generating clinical evidence, and assessing

our R&D programs based on their ability to address unmet

clinical needs, produce better patient outcomes, and create new

standards of care.

Intellectual Property

We rely on a combination of patents, trademarks, tradenames,

copyrights, trade secrets, and agreements (non-disclosure and

non-competition agreements) to protect our business and

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 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 18 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. Additionally, a portion of the

Company’s revenue is generated from consignment inventory

maintained at hospitals. Our medical supplies products are used

primarily in hospitals, surgical 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). 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,

China, and Japan. Emerging markets are an area of increasing

focus and opportunity, as we believe they remain under-

penetrated.

MEDTRONIC PLC 2021 Form 10-K 17

PART I

Item 1 Business

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, our marketing

and sales teams are organized 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

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. Our product

lines face a mix of competitors ranging from large manufacturers

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, results of clinical trials to support superiority claims, 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

healthcare providers, increased competition, declining

reimbursement rates, and national tender pricing, competitively

priced product offerings are essential to our business. 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

healthcare 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

initiatives put increased emphasis on the delivery of more cost-

effective medical devices and therapies. Government programs,

including Medicare and Medicaid, private healthcare 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 our technology, are also

seeking to reduce costs through a variety of mechanisms,

including, for example, centralized purchasing, and in some cases,

limitingthenumberofvendorsthatmayparticipateinthe

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 increased level

of price sensitivity among customers for our products.

Production and Availability of Raw Materials

We manufacture products at manufacturing facilities located in

various countries throughout the world. We purchase many of

the components and raw materials used in manufacturing our

products from numerous suppliers in various countries. 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.

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

Republic of Ireland and the Federal Institute for Drugs and

Medical Devices in Germany, the China National Medical Product

Administration (NMPA), 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 and data 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 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

MEDTRONIC PLC 2021 Form 10-K

PART I

Item 1 Business

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 imposes significant

additional premarket and postmarket requirements (EU MDR).

The regulation provided an implementation period and became

effective on May 26, 2021. 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 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 extensive 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 II drug

infusion system and its associated 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. The final required third-party expert audit is

complete, and following a successful U.S. FDA inspection, and in

coordination with the U.S. FDA, Medtronic can move to have the

consent decree vacated.

Trade Regulations

The movement of products, services, and investment across

borders subjects 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

MEDTRONIC PLC 2021 Form 10-K 19

PART I

Item 1 Business

healthcare 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 healthcare providers that

submit electronic claims, health plans, and healthcare

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 respect to both the

Security and Privacy Rules, including civil and criminal liability.

Except for certain of its operations in its Diabetes and care

management services businesses, Medtronic is generally not a

Covered Entity. Medtronic also operates as a Business Associate

to Covered Entities in several instances. There are comparable

state laws governing the use and protection of personal health

information by healthcare 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.

Outside the U.S., we are impacted by the privacy and data

security requirements at the international, federal 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., stringent data protection and privacy rules

which substantially impact the use of patient data across the

healthcare industry became effective in May 2018. The 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

based outside of the E.U. but 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 healthcare items and services.

U.S. laws and regulations are imposed primarily in connection

with federally funded healthcare programs, such as the Medicare

and Medicaid programs, as well as the government’s interest in

regulating the quality and cost of healthcare. Other

governments also impose regulations in connection with their

healthcare reimbursement programs and the delivery of

healthcare items and services.

U.S. federal healthcare laws apply when we or customers submit

claims for items or services that are reimbursed under federally-

funded healthcare programs, including laws related to kickbacks,

false claims, self-referrals and healthcare fraud. There are often

similar state false claims, anti-kickback, and anti-self-referral and

insurance laws that apply to state Medicaid and other healthcare

programs and private third-party payers. In some circumstances,

insurance companies attempt to bring a private cause of action

against a manufacturer for a pattern of causing false claims. 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 legislative or regulatory reforms to

reimbursement systems, or adverse decisions relating to our

products by administrators of these systems in coverage or

reimbursement, could significantly reduce reimbursement or

result in the denial of coverage, which could have an impact on

the acceptance of and demand for our products and the prices

that our customers are willing to pay for them.

Environmental Health and Safety Laws

We are also subject to various environmental health and safety

laws and regulations both within and outside the U.S. 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 as soon as reasonably practicable after we

electronically file them with, or furnish them to, the Securities

and Exchange Commission (SEC).

MEDTRONIC PLC 2021 Form 10-K

PART I

Item 1A Risk Factors

Information relating to our corporate governance, including our

Principles of Corporate Governance, Code of Conduct (including

our Code of Ethics for Senior Financial Officers and any related

amendments or waivers), 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.

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.

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, results of operations, financial condition, and cash

flow and prospects could be materially and adversely affected by

any of these risks or uncertainties.

Business and Operational Risks

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:

䡲 product performance and reliability,

䡲 product technology and innovation,

䡲 product quality and safety,

䡲 breadth of product lines,

䡲 product support services,

䡲 customer support,

䡲 cost-effectiveness and price,

䡲 reimbursement approval from healthcare insurance providers,

and

䡲 changes to the regulatory environment.

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 healthcare providers, increased

competition, declining reimbursement rates, and national tender

pricing, as recently experienced in China, competitively priced

product offerings are essential to our success. 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.

MEDTRONIC PLC 2021 Form 10-K 21

PART I

Item 1A Risk Factors

The ongoing global COVID-19 pandemic has

had, and may continue to have, an adverse

effect on certain aspects of our business,

results of operations, financial condition and

cash flows. The nature and extent of future

impacts are highly uncertain and

unpredictable.

Our global operations and interactions with healthcare systems,

providers and patients around the world expose us to risks

associated with public health crises, including epidemics and

pandemics such as COVID-19. In particular, the continuing

preventative and precautionary measures that we and other

businesses, communities, and governments have taken to

mitigate the spread of the disease has led to restrictions on,

disruptions in, and other related impacts on business and

personal activities, including reduced customer demand for

certain of our products and has resulted in many of our

employees working remotely. We expect medical procedure

rates to continue to vary by therapy and country, and could be

impacted by regional COVID-19 case volumes, hospital and

clinical occupancy and staffing levels, patient’s willingness to

schedule deferrable procedures, travel restrictions,

transportation limitations, quarantine restrictions, vaccine

immunization rates, and new COVID-19 variants. While

COVID-19 case volumes appear to be decreasing in the U.S and

certain other countries as a result of higher vaccination rates, the

global COVID-19 outlook remains uncertain as vaccination rates

remain low in much of the world.

Together with the preventative and precautionary measures

being taken, as well as the corresponding need to adapt to new

and improved methods of conducting business, such as

increased remote monitoring, COVID-19 is having, and may

continue to have, an adverse impact on certain aspects of our

Company and business, including the demand for and supply of

certain of our products, operations, supply chains and

distribution systems, impacts or delays to product development

milestones, clinical trials, or regulatory clearances and approval

timing, and our ability to generate cash flow, and may have an

adverse impact on our ability to access capital. Some of our

products are more sensitive to reductions in deferrable and

emergent medical procedures, and, as hospital systems

prioritize treatment of COVID-19 patients and otherwise comply

with government guidelines, certain medical procedures have

been and may continue to be suspended or postponed. The

Company has certain product lines that are in higher demand as

a result of COVID-19 such as ventilators, pulse oximetry,

capnography, advanced parameter monitoring, and

extracorporeal life support products. It is not possible to predict

the timing of deferrable medical procedures and, to the extent

individuals and hospital systems de-prioritize, delay or cancel

these procedures, or if unemployment or loss of insurance

coverage adversely impacts an individual’s ability to pay for our

products and services, our business, results of operations,

financial condition, and cash flows could continue to be

negatively affected. Further, the COVID-19 pandemic has

strained hospital systems around the world, resulting in adverse

financial impacts to those systems that could result in reduced

future expenditures for certain capital equipment and other

products and services we provide, as well as potential disruption

of product launches of our recently approved products.

A number of our global suppliers, vendors, and distributors have

been adversely affected by the COVID-19 pandemic, including

employee absenteeism. These impacts could impair our ability to

move our products through distribution channels to end

customers, and any such delay or shortage in the supply of

components or materials may result in our inability to satisfy

consumer demand for certain of our products in a timely manner

or at all, which could harm our reputation, future sales and

profitability.

COVID-19 has impacted and may further impact the global

economy and capital markets, including by negatively impacting

demand for a number of our products, access to capital markets

(including the commercial paper market), foreign currency

exchange rates, and interest rates, each of which may adversely

impact our business and liquidity. We could experience loss of

sales and profits due to delayed payments or insolvency of

healthcare professionals, hospitals and other customers,

suppliers and vendors facing liquidity issues. As a result, we may

be compelled to take additional measures to preserve our cash

flow.

COVID-19 could adversely impact our ability to retain key

employees and the continued service and availability of skilled

personnel necessary to run our complex productions and

operations, including our executive officers and other key

members of our management team.

While the impact of COVID-19 has had, and may continue to

have, an adverse effect on our business, results of operations,

financial condition and cash flows, the nature and extent of such

impact is highly uncertain and unpredictable, as we cannot

predict with confidence the duration of the pandemic.

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

a 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 and

procure important third-party services, such as sterilization

services, at numerous facilities worldwide. We purchase many of

the components, raw materials and services needed to

manufacture these products from numerous suppliers in various

countries. We seek to maintain continuity of supply by use of

multiple options for sourcing where possible. We have generally

been able to obtain adequate supplies of such raw materials,

components and services. However, for reasons of quality

assurance, cost effectiveness, or availability, certain

components, raw materials and services needed to manufacture

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, raw materials and services may be

MEDTRONIC PLC 2021 Form 10-K

PART I

Item 1A Risk Factors

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. Additionally, many regulatory agencies are imposing

regulatory requirements on safe use of chemicals and their

potential impact on health and the environment which also may

impact supply constraints. 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,

supplier facility shut-downs, defective raw materials, natural

disasters such as hurricanes, tornadoes or wildfires, property

damage or facility closures from riots or public protests, and

other environmental factors and the impact of epidemics or

pandemics, such as the COVID-19 pandemic, and actions by

businesses, communities and governments in response, could

lead to launch delays, product shortage, unanticipated costs, lost

revenues and damage to our reputation. For example, in the past

we have experienced a global information technology systems

interruption that affected our customer ordering, distribution,

and manufacturing processes, and we have been adversely

impacted by, and may continue to be adversely impacted by, the

global COVID-19 pandemic and the responses of governments

and of our partners, including suppliers, manufacturers,

distributors and other businesses. 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, many of our products require sterilization before sale

and several of our key products are manufactured or sterilized at

a particular facility, with limited alternate facilities. If an event

occurs that results in damage to or closure of one or more of

such facilities, such as the damage caused by Hurricane Maria in

Puerto Rico in September 2017 or Illinois Environmental

Protection Agency’s decision to close a supplier’s sterilization

facility in February 2019, we may be unable to manufacture or

sterilize the relevant products to the required quality

specifications or at all. Because of the time required to approve

and license a manufacturing or sterilization facility, a third-party

may not be available on a timely basis to replace production

capacity in the event manufacturing or sterilization capacity is

lost.

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.

The continuing development of many of our

products depends upon us maintaining strong

relationships with healthcare professionals.

If we fail to maintain our working relationships with healthcare

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 healthcare 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. In addition,

as a result of the COVID-19 pandemic, our access to these

professionals has been limited at times, and travel restrictions,

shutdowns and similar measures have impacted our ability to

maintain these relationships, thereby affecting our ability to

develop, market and sell new and improved products. 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,

results of operations, financial condition, and cash flows.

MEDTRONIC PLC 2021 Form 10-K 23

PART I

Item 1A Risk Factors

Our substantial leverage and debt service

obligations could adversely affect our

business.

At April 30, 2021, we had approximately $26.4 billion of debt, of

which all is noncurrent except $11.0 million. We may also incur

additional indebtedness in the future. Our substantial

indebtedness could have adverse consequences, including:

䡲 making it more difficult for us to satisfy our financial

obligations,

䡲 increasing our vulnerability to adverse economic, regulatory

and industry conditions, and placing us at a disadvantage

compared to our competitors that are less leveraged,

䡲 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,

䡲 limiting our ability to borrow additional funds for working

capital, capital expenditures, acquisitions and general

corporate or other purposes, and

䡲 exposing us to greater interest rate risk since the interest rate

on floating rate borrowings 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, as well as

liabilities or claims relating to such acquired

businesses, 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. Further, acquired businesses

may have liabilities, or be subject to claims, litigation or

investigations that we did not anticipate or which exceed our

estimates at the time of the acquisition. 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:

䡲 the presence or absence of adequate internal controls and/or

significant fraud in the financial systems of acquired

companies,

䡲 our ability or inability to integrate information technology

systems of acquired companies in a secure and reliable

manner,

䡲 liabilities, claims, litigation, investigations, or other adverse

developments relating to acquired businesses or the business

practices of acquired companies, including investigations by

governmental entities, potential FCPA or product liability

claims or other unanticipated liabilities,

䡲 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,

䡲 our ability to retain key employees, and

䡲 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,

results of operations, financial condition, 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.

Legal and Regulatory Risks

Climate change, or legal, regulatory or market

measures to address climate change may

materially adversely affect our financial

condition and business operations.

Climate change resulting from increased concentrations of

carbon dioxide and other greenhouse gases in the atmosphere

could present risks to our future operations from natural

disasters and extreme weather conditions, such as hurricanes,

tornadoes, earthquakes, wildfires or flooding. Such extreme

weather conditions could pose physical risks to our facilities and

disrupt operation of our supply chain and may impact operational

costs. The impacts of climate change on global water resources

may result in water scarcity, which could in the future impact our

ability to access sufficient quantities of water in certain locations

and result in increased costs. Concern over climate change could

result in new legal or regulatory requirements designed to

mitigate the effects of climate change on the environment. If

such laws or regulations are more stringent than current legal or

regulatory requirements, we may experience increased

compliance burdens and costs to meet the regulatory

obligations and may adversely affect raw material sourcing,

manufacturing operations and the distribution of our products.

MEDTRONIC PLC 2021 Form 10-K

PART I

Item 1A Risk Factors

We are subject to extensive 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 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

clinical data from existing or future clinical trials may adversely

impact our ability to obtain product approvals, our position in,

and share of, the markets in which we participate, and our

business, results of operations, financial condition, 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:

䡲 take a significant amount of time,

䡲 require the expenditure of substantial resources,

䡲 involve stringent clinical and pre-clinical testing, as well as

increased post-market surveillance,

䡲 involve modifications, repairs or replacements of our

products, and

䡲 limit the proposed uses of our products.

Both before and after a product is commercially released, we

have ongoing responsibilities under the 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

the 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 healthcare

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

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

which became effective in May 2021, includes 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

healthcare 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 healthcare 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

MEDTRONIC PLC 2021 Form 10-K 25

PART I

Item 1A Risk Factors

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 are goods and services,

including laws and regulations related to kickbacks, false claims,

self-referrals and healthcare 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 attempt to bring a private

cause of action against a manufacturer for causing false claims.

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 impacting our ability to sell current

or future products.

We are substantially dependent on patent and other proprietary

rights and rely on a combination of patents, trademarks,

tradenames, copyrights, trade secrets, and agreements (such as

employee, non-disclosure and non-competition agreements) to

protect our business and 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 that enforcement actions to protect our patent and

proprietary rights against others could be unsuccessful, 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, trademarks, tradenames, copyrights,

trade secrets or agreements (such as employee, non-disclosure

and non-competition 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 too limited in scope 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 such licenses may not be available on

reasonable terms or at all. We also rely on non-disclosure and

non-competition agreements with certain employees,

consultants and other parties to protect, in part, trade secrets

and other proprietary rights. We cannot be certain that these

agreements will not be breached, that we will have adequate

remedies for any breach, that others will not independently

develop substantially equivalent proprietary information, or that

third parties will not otherwise gain access to our trade secrets or

proprietary knowledge.

In addition, the laws of certain countries in which we market or

manufacture 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. Competitors also may harm our sales by

designing products that substantially 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 impact on patients, and the serious and potentially costly

consequences of product failure. 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 nonconformances, design defects, off-label use,

or inadequate disclosure of product-related risks or product-

related information with respect to our products, if they were to

occur, could result in an unsafe condition or injury to, or death of,

MEDTRONIC PLC 2021 Form 10-K

PART I

Item 1A Risk Factors

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. Further,

we may be exposed to additional potential product liability risks

related to products designed, manufactured and/or marketed in

response to the COVID-19 pandemic, and unpredictable or

accelerated changes in demand for certain of our products in

connection with COVID-19 and its related impacts could impact

development and production of products and services and could

increase the risk of regulatory enforcement actions, product

defects or related claims, as well as adversely impact our

customer relationships and reputation.

Strong product quality is critical to the success of our goods and

services. If we fall short of 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.

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.

Healthcare policy changes may have a

material adverse effect on us.

In response to perceived increases in healthcare costs in recent

years, there have been and continue to be proposals by several

governments, regulators and third-party payers globally,

including the U.S. federal and state governments, to control

these costs and, more generally, to reform healthcare systems.

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 third-party

insurers that provides coverage for the directors and officers of

the Company. We continue to monitor the insurance

marketplace to evaluate the value of obtaining insurance

coverage for other categories of losses in the future. Although

we believe, based on historical loss trends, that our self-

insurance program accruals and our existing insurance coverage

will be adequate to cover future losses, historical trends may not

be indicative of future losses. The absence of third-party

insurance coverage for other categories of losses increases our

exposure to unanticipated claims and these losses could have a

material adverse impact on our business, results of operations,

financial condition and cash flows.

The failure to comply with anti-corruption

laws could materially adversely affect our

business and result in civil and/or criminal

sanctions.

The U.S. Foreign Corrupt Practices Act (FCPA), the Irish Criminal

Justice (Corruption Offences) Act 2018, and similar anti-

corruption laws in other jurisdictions generally prohibit

companies and their intermediaries from making improper

payments to 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 in

recent years, including investigations and enforcement

proceedings leading to assessment of significant fines and

penalties against companies and individuals. Our international

operations create a risk of unauthorized payments or offers of

payments by one of our employees, consultants, sales agents, or

distributors. We maintain policies and programs to implement

safeguards to educate our employees and agents on these legal

requirements, and to prevent 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, regulators could seek to hold us

liable for conduct committed by companies in which we invest or

that we acquire. Any alleged or actual violations of these

regulations 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.

MEDTRONIC PLC 2021 Form 10-K 27

PART I

Item 1A Risk Factors

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, governments, entities, 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, results of operations, financial condition,

and cash flows.

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 and those of

certain third-party suppliers involve the use of substances

subject to these laws and regulations, primarily those used in

manufacturing and sterilization processes. If we or our suppliers

violate these environmental laws and regulations, facilities could

be shut down and violators 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.

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.

We rely on the proper function, security and

availability of our information technology

systems and data, as well as those of third

parties throughout our global supply chain, 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. That technology

includes systems that could be used to process, transmit and

store sensitive data. Additionally, many of our products and

services include integrated software and information technology

that collects data regarding patients or connects to other

internal systems. Like all organizations, we routinely experience

attempted interference with the integrity of, and interruptions in,

our technology systems via events such as cyber-attacks,

malicious intrusions, or other breakdowns. The consequences

could mean data breaches, 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 and resulting

products. As we have seen with recent “Supply Chain Attacks,”

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. Lastly, 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.

MEDTRONIC PLC 2021 Form 10-K

PART I

Item 1A Risk Factors

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

Security Laws and Regulations. For example, GDPR prefers that

we manage personal data in the E.U. and may impose fines of up

to four percent of our global revenue in the event of certain

violations. 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. This enables us 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

extensive efforts (including, but not limited to, 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. Further, the COVID-19 pandemic and related

government actions continues to mandate that our employees

work remotely, which could expose us to greater risks related to

cybersecurity and our information technologies systems.

If our information technology systems, products or services or

sensitive data are compromised, there are many consequences

that could result. Consequences include, but are not limited to

patients or employees could be exposed to financial or medical

identity theft or suffer a loss of product functionality, losing

existing customers or have difficulty attracting new customers,

experiencing difficulty preventing, detecting, and controlling

fraud, be exposed to the loss or misuse of confidential

information, have disputes with customers, physicians, and other

healthcare 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.

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 fiscal year 2018 associated

with 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. While

the U.S. Treasury has issued a significant amount of guidance to

date on the interpretation of the Tax Act, there remains

regulations that have not yet been issued in final form. In

addition, the Biden Administration has provided a framework for

proposed U.S. tax law changes, which if enacted could have a

material impact on our business, results of operations, financial

condition, and cash flows.

In 2015, the Organization for Economic Cooperation and

Development (OECD) published an action plan called Base

Erosion and Profit Shifting (BEPS) with the purpose of tackling

perceived tax abuses, inconsistency between taxing authorities,

and their respective approach to international tax matters.

Thereafter, many taxing authorities have adopted the BEPS

guidelines into their local laws. In addition, the European Union

(EU) expanded upon these guidelines with their Anti-Tax

Avoidance Directive (ATAD 1 & 2) to be applied by all member

states by 2020. In 2018, the OECD announced its intention to

expand the scope of BEPS (BEPS 2.0) to provide a long-term

solution to taxing right challenges arising from the global digital

economy. The OECD expects to release the final agreed BEPS

2.0 guidelines in the summer of 2021. Jurisdictions would then

need to enact legislation to adopt the guidelines into law. The

proposals, as currently drafted, are categorized into two groups

(commonly referred to as Pillars). Pillar One is focused on

providing a mechanism for taxing rights more closely with market

engagement; generally where people or consumers are located.

Pillar Two is focused on establishing a global minimum tax and

would apply when a country’s income tax rate is below a

still-to-be determined, minimum tax rate. These proposals are

wide ranging and could affect all multinational enterprises across

all industries without regard to their level of engagement with the

digital economy. The aggressive nature of the timeline set by the

OECD may mean that all implications for business may not have

been fully worked through or fully understood by the OECD

before final guidelines are issued. We continue to monitor the

implications potentially resulting from this guidance. This action

together with other legislative changes in many countries on the

mandatory sharing of company information (financial and

operational) with taxing authorities on a local and global basis

under various information sharing initiatives, could lead to

disagreements between jurisdictions associated with the proper

allocation of profits between such jurisdictions.

MEDTRONIC PLC 2021 Form 10-K 29

PART I

Item 1A Risk Factors

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 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, results of

operations, financial condition, 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 laws, regulations and treaties (where

applicable) 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, results of operations, financial

condition, 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, results of operations, financial condition, and

cash flows. See Note 18 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). In addition, a retroactive change to U.S. tax

laws in this area could change this classification. 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. 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,

MEDTRONIC PLC 2021 Form 10-K

PART I

Item 1A Risk Factors

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, 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, at our 2020 Annual General

Meeting, our Shareholders authorized our Board of Directors to

issue up to 33% of our issued ordinary shares and further

authorized our Board of Directors to issue up to 10% of such

shares for cash without first offering them to our existing

shareholders (provided that with respect to 5% of such shares,

such allotment is to be used for the purposes of a specified

capital investment). Both of these authorizations will expire on

June 11, 2022, unless renewed by shareholders for a further

period. We anticipate seeking new authorizations at our 2021

Annual General Meeting and in subsequent years. 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 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 25%) 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 that have a tax treaty with Ireland

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 of

€335,000 in respect of taxable gifts or inheritances received

from their parents. Irish Revenue typically updates the amount of

this tax-free threshold on an annual basis.

MEDTRONIC PLC 2021 Form 10-K 31

PART I

Item 1A Risk Factors

Economic and Industry Risks

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 certain of 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. We intend to continue to expand our operations and to

pursue growth opportunities outside the U.S., especially in

emerging markets. Operations in different countries including

emerging markets could expose us to additional and greater

risks and potential costs, including:

䡲 fluctuations in currency exchange rates,

䡲 healthcare reform legislation,

䡲 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,

䡲 local product preferences and product requirements,

䡲 longer-term receivables than are typical in the U.S.,

䡲 trade protection measures, tariffs and other border taxes, and

import or export licensing requirements,

䡲 less intellectual property protection in some countries outside

the U.S. than exists in the U.S.,

䡲 different labor regulations and workforce instability,

䡲 political and economic instability,

䡲 the expiration and non-renewal of foreign tax rulings and/or

grants,

䡲 potentially negative consequences from changes in or

interpretations of tax laws, and

䡲 economic instability and inflation, recession or interest rate

fluctuations.

The ongoing global economic competition and trade tensions

between the U.S. and China present risk to Medtronic. Although

we have been able to mitigate some of the impact on Medtronic

from increased duties imposed by both sides (through

petitioning both governments for tariff exclusions and other

mitigations), the risk remains of additional tariffs and other kinds

of restrictions. Tariff exclusions awarded to Medtronic by the

U.S. Government require annual renewal, and policies for

granting exclusions could shift. The U.S. and China could impose

other types of restrictions such as limitations on government

procurement or technology export restrictions, which could

affect Medtronic’s access to the markets. China comprises

approximately eight percent of our total revenues.

More generally, several governments including the U.S. have

raised the possibility of policies to induce “re-shoring” of supply

chains, less reliance on imported supplies, and greater national

production. Examples include potential “Buy America”

requirements in the U.S. or U.S. withdrawal from the World Trade

Organization Agreement on Government Procurement (GPA). If

such steps triggered retaliation in other markets restricting

access to foreign products in purchases by their government-

owned healthcare systems, the result could be a significant

impact on Medtronic.

Other significant changes or disruptions to international trade

arrangements, such as termination or modifications of other

existing trade agreements or the final implementation of the

“Brexit” agreement between the United Kingdom and European

Union, 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 healthcare 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.

In addition, COVID-19, and the responses of business and

governments to the pandemic, have at times resulted in reduced

availability of air transport, port closures, increased border

controls or closures, increased transportation costs and

increased security threats to our supply chain, and countries may

continue to close borders, impose prolonged quarantines, and

further restrict travel and other activities. Our business could be

adversely impacted if we are unable to successfully manage

these and other risks of global operations.

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.

MEDTRONIC PLC 2021 Form 10-K

PART I

Item 1B Unresolved Staff Comments

Consolidation in the healthcare industry could

have an adverse effect on our revenues and

results of operations.

Many healthcare industry companies, including healthcare

systems, distributors, manufacturers, providers, and insurers,

are consolidating or have formed strategic alliances. As the

healthcare 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, results of operations, financial

condition, and cash flows could be adversely affected.

Healthcare industry cost-containment

measures could result in reduced sales of our

medical devices and medical device

components.

Most of our customers, and the healthcare 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 healthcare 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 healthcare 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.

Item 1B. Unresolved Staff Comments

None.

MEDTRONIC PLC 2021 Form 10-K 33

PART I

Item 2 Properties

Item 2. Properties

Medtronic’s principal executive office is located in Ireland and is leased by the Company, while its main operational offices are located in

the Minneapolis, Minnesota metropolitan area and are owned by the Company.

The Company’s total manufacturing and research space is approximately 9.6 million square feet. Approximately 35 percent of the

manufacturing or 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 1,138

Puerto Rico

811

Mexico

762

China

735

Minnesota

623

Italy

454

Ireland

446

Dominican Republic

304

Arizona

294

Switzerland

283

France

270

Colorado

259

California 204

Medtronic also maintains sales and administrative offices in the U.S. at six locations in six states and outside the U.S. at 138 locations in

63 countries. Most of these locations are leased. The Company is using substantially all of its currently available productive space to

develop, manufacture, and market its products. The Company’s facilities are well-maintained, suitable for their respective uses, and

adequate for current needs.

Item 3. Legal Proceedings

A discussion of the Company’s legal proceedings is contained in Note 18 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 2021 Form 10-K

PART II

Item 5. Market for Medtronic’s Common Equity, Related Shareholder

Matters, and Issuer Purchases of Equity Securities

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

The following table provides information about the shares repurchased by the Company during the fourth quarter of fiscal year 2021:

Fiscal Period

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

1/30/2021-2/26/2021

— $ — — $ 5,950,169,124

2/27/2021-4/2/2021

— — — 5,950,169,124

4/3/2021-4/30/2021

4,404,719 126.80 4,404,719 5,391,654,170

Total 4,404,719 $ 126.80 4,404,719 5,391,654,170

In March 2019, the Company’s Board of Directors authorized the

repurchase of $6.0 billion of the Company’s ordinary shares.

There is no specific time-period associated with these

repurchase authorizations.

On June 23, 2021, there were approximately 23,394

shareholders of record of the Company’s ordinary shares.

Ordinary cash dividends declared and paid totaled 58.0 cents per

share for each quarter of fiscal year 2021 and 54.0 cents per

share for each quarter of fiscal year 2020. On May 27, 2021, the

Company announced an increase in Medtronic’s cash dividends

for the first quarter of fiscal year 2022, raising the amount to

$0.63.

STOCK PERFORMANCE GRAPH

The following graph compares the cumulative total shareholder return on Medtronic’s ordinary shares with the cumulative total

shareholder return on the Standard & Poor’s (S&P) 500 Index and the S&P 500 Health Care Equipment Index for the last five fiscal years.

The graph assumes that $100 was invested at market close on April 29, 2016 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.

$50

$100

$150

$200

$300

$250

April 2017

April 2016

April 2018 April 2019 April 2020 April 2021

Medtronic plc

S&P 500 Health Care Equipment Index

S&P 500 Index

100

107

118

137

185

100

117

141

165

188

250

118

135

151

149

223

100

MEDTRONIC PLC 2021 Form 10-K 35

PART II

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

Company/Index April 2016 April 2017 April 2018 April 2019 April 2020 April 2021

Medtronic plc $ 100.00 $ 107.23 $ 107.29 $ 117.86 $ 136.89 $ 184.54

S&P 500 Index 100.00 117.92 134.66 151.27 148.91 223.20

S&P 500 Health Care Equipment Index 100.00 117.16 141.00 165.48 188.33 249.74

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 E.U. if

they had been made between Member States of the E.U. 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, Iran, Iraq, Ivory Coast,

Lebanon, Liberia, Libya, Republic of Guinea, Somalia, Sudan,

Syria, Tunisia, Ukraine and Zimbabwe.

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 (currently at a rate of 25 percent) unless

an exemption applies.

Dividends paid to U.S. residents will not be subject to Irish

dividend withholding tax provided that:

䡲 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

䡲 in the case of a record owner, the record owner has provided

to the Company’s transfer agent a valid U.S. Certification of

Residence (Form 6166) or valid Irish Non-Resident Form V2.

Irish income tax may also arise with respect to dividends paid on

Medtronic’s ordinary shares. A U.S. resident who meets one of

the exemptions from dividend withholding tax described above

and who does not hold Medtronic shares through a branch or

agency in Ireland through which a trade is carried on generally will

not have any Irish income tax liability on a dividend paid by

Medtronic. In addition, if a U.S. shareholder is subject to the

dividend withholding tax, the withholding payment discharges

any Irish income tax liability, provided the shareholder furnishes

to the Irish Revenue authorities a statement of the dividend

withholding tax imposed.

While the U.S./Ireland Double Tax Treaty contains provisions

regarding withholding, due to the wide scope of the exemptions

from dividend withholding tax available under Irish domestic law,

it would generally be unnecessary for a U.S. resident shareholder

to rely on the treaty provisions.

Item 6. Reserved

36 MEDTRONIC PLC 2021 Form 10-K

PART II

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

Item 7. Management’s Discussion and Analysis of Financial

Condition and Results of Operations

The following discussion and analysis provides information

management believes to be relevant to understanding the

financial condition and results of operations of the Company.

The discussion focuses on our financial results for the fiscal year

ended April 30, 2021 (fiscal year 2021) and the fiscal year ended

April 24, 2020 (fiscal year 2020). A discussion on our results of

operations for fiscal year 2020 as compared the year ended

April 26, 2019 (fiscal year 2019) is included in Part II, Item 7.

“Management’s Discussion and Analysis of Financial Condition

and Results of Operations” of our Annual Report on Form 10-K

for the year ended April 24, 2020, filed with the SEC on June 19,

2020, and is incorporated by reference into this Form 10-K. You

should read this discussion and analysis along with our

consolidated financial statements and related notes thereto at

April 30, 2021 and April 24, 2020 and for fiscal years 2021, 2020,

and 2019, which are presented within “Item 8. Financial

Statements and Supplementary Data” in this Annual Report on

Form 10-K. Amounts reported in millions within this annual

report are computed based on the amounts in thousands, and

therefore, the sum of the components may not equal the total

amount reported in millions due to rounding. Additionally, certain

columns and rows within tables may not sum due to rounding.

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 accounting principles generally accepted 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 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 benefits 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.

EXECUTIVE LEVEL OVERVIEW

The global healthcare system faces an unprecedented challenge

as a result of the Covid-19 pandemic. COVID-19 had an adverse

impact on certain aspects of our Company and business,

including the demand for and supply of certain of our products,

operations, supply chains and distribution systems, impacts or

delays to product development milestones, clinical trials, or

regulatory clearances and approval timing. Most of our

businesses were affected by a decline in procedural volumes as a

result of COVID-19 largely during the fourth quarter of fiscal year

2020 and the first two quarters of fiscal year 2021. However, we

have seen a recovery in most of our businesses during the third

and fourth quarters of fiscal year 2021 from the depths of the

pandemic that we experienced in the fourth quarter of fiscal year

2020.

We expect medical procedure recovery rates to continue to vary

by therapy and country and could be impacted by regional

COVID-19 case volumes, vaccine immunization rates, and new

COVID-19 variants. As a result, we cannot predict with

confidence the duration of the pandemic or the impact it may

have on our Company.

MEDTRONIC PLC 2021 Form 10-K 37

PART II

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

The following is a summary of revenue, diluted earnings per share, and cash flow for fiscal years 2021 and 2020:

$30.1B $2.66 $4.44

$6.2B

GAAP

Revenue increase of 4% reflects our recovery to

date from the depths of COVID-19 experienced in

the fourth quarter of fiscal year 2020.

Diluted EPS decreased

$0.88 or 25% primarily

attributable to the

decrease in tax benefit

driven by the prior year

release of a valuation

allowance, decrease in

gross margin, increase in

restructuring and

associated costs, and the

impact of currency

exchange rate changes.

Non-GAAP Diluted EPS

decreased $0.15 or 3%

primarily due to the

decrease in gross margin

and the impact of

currency exchange rate

changes.

Operating cash flow decrease of $1B primarily

driven by a decrease in cash collected from

customers and increase in cash paid for income

taxes.

GAAP GAAPNon-GAAP

REVENUE

(in billions)

Fiscal Year 2021

$30.1

$28.9

Fiscal Year 2020

DILUTED EPS

Fiscal Year 2021 Fiscal Year 2020

$2.66

$4.44

$3.54

$4.59

GAAP Non-GAAP

OPERATING

CASH FLOW

(in billions)

Fiscal Year 2021 Fiscal Year 2020

$7.2

$6.2

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 2021 and 2020:

Fiscal year ended April 30, 2021

(in millions, except per share data)

Income Before

Income Taxes

Income Tax

Provision

(Benefit)

Net Income

Attributable to

Medtronic Diluted EPS

Effective Tax

Rate

GAAP $ 3,895 $ 265 $ 3,606 $ 2.66 6.8%

Non-GAAP Adjustments:

Restructuring and associated costs

(1)

617 128 489 0.36 20.7

Acquisition-related items

(2)

(15) (20) 4 — 126.7

Certain litigation charges 118 23 95 0.07 19.5

(Gain)/loss on minority investments

(3)

(61) — (57) (0.04) —

IPR&D charges

(4)

31 7 25 0.02 19.4

Impairment charges

(5)

76 7 68 0.05 10.5

Medical device regulations

(6)

83 15 68 0.05 18.1

Debt tender premium and other charges

(7)

308 60 248 0.18 19.5

Amortization of intangible assets 1,783 283 1,500 1.11 15.9

Certain tax adjustments, net

(8)

— 41 (41) (0.03) —

Non-GAAP $ 6,835 $ 809 $ 6,005 $ 4.44 11.8%

38 MEDTRONIC PLC 2021 Form 10-K

PART II

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

Fiscal year ended April 24, 2020

(in millions, except per share data)

Income Before

Income Taxes

Income Tax

(Benefit)

Provision

Net Income

Attributable to

Medtronic Diluted EPS

Effective Tax

Rate

GAAP $ 4,055 $ (751) $ 4,789 $ 3.54 (18.5)%

Non-GAAP Adjustments:

Restructuring and associated costs

(1)

441 69 372 0.28 15.6

Acquisition-related items

(9)

66 13 53 0.04 19.7

Certain litigation charges 313 59 254 0.19 18.8

(Gain)/loss on minority investments

(3)

19 (3) 22 0.02 (15.8)

Debt tender premium and other charges

(10)

406 86 320 0.24 21.2

Medical device regulations

(6)

48 6 42 0.03 12.5

Exit of businesses

(11)

52 12 40 0.03 23.1

IPR&D charges

(4)

25 3 22 0.02 12.0

Contribution to Medtronic Foundation 80 18 62 0.05 22.5

Amortization of intangible assets 1,756 284 1,472 1.09 16.2

Certain tax adjustments, net

(12)

— 1,242 (1,242) (0.92) —

Non-GAAP $ 7,261 $ 1,038 $ 6,206 $ 4.59 14.3%

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

consulting expenses.

(2) The charges primarily include business combination transaction-related costs, changes in fair value of contingent consideration, and a change in

amounts accrued for certain contingent liabilities for recent acquisitions.

(3) We exclude unrealized and realized gains and losses on our minority investments as we do not believe these components of income or expense

have a direct correlation to our ongoing or future business operations.

(4) The charges represent acquired IPR&D in connection with asset acquisitions and certain license payments for unapproved technology.

(5) The charges relate to the abandonment of certain intangible assets in our Neuroscience segment.

(6) The charges represent estimated incremental costs of complying with the new European Union medical device regulations for previously

registered products and primarily include charges for contractors supporting the project and other direct third-party expenses.

(7) The charges relate to the early redemption of approximately $6.0 billion of debt.

(8) The net benefit primarily relates to the finalization of an audit at the IRS Appellate level for fiscal years 2012 through 2014 and the capitalization of

certain research and development costs for U.S. income tax purposes, which are partially offset by the impact of an intercompany sale of assets,

and a tax basis adjustment and amortization of previously established deferred tax assets from intercompany intellectual property transactions.

(9) The charges primarily include costs incurred in connection with legacy-Covidien enterprise resource planning deployment activities, business

combination related costs, and changes in fair value of contingent consideration.

(10) The charges, which include $413 million recognized in interest expense and ($7 million) recognized in other operating expense, net, primarily relates

to the early redemption of approximately $5.2 billion of debt.

(11) The net charges relate to the exit of businesses and are primarily comprised of intangible asset impairments.

(12) The net benefit primarily relates to the release of a valuation allowance on certain net operating losses, the impact of an intercompany sale of

intellectual property, and the impact of tax reform in Switzerland and the United States.

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 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:

Fiscal Year

(in millions) 2021 2020

Net cash provided by operating activities $ 6,240 $ 7,234

Additions to property, plant, and equipment (1,355) (1,213)

Free cash flow $ 4,885 $ 6,021

MEDTRONIC PLC 2021 Form 10-K 39

PART II

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

NET SALES

Segment and Division

The charts below illustrate the percent of net sales by segment for fiscal years 2021 and 2020:

Fiscal Year 2021 Fiscal Year 2020

36%

27%

29%

Cardiovascular

Diabetes

Medical Surgical

Neuroscience

36%

27%

29%

Cardiovascular

Diabetes

Medical Surgical

Neuroscience

The table below includes net sales by segment and division for fiscal years 2021 and 2020:

Net Sales by Fiscal Year

Percent Change(in millions) 2021 2020

Cardiac Rhythm & Heart Failure $ 5,584 $ 5,141 9%

Structural Heart & Aortic 2,834 2,842 —

Coronary & Peripheral Vascular 2,354 2,486 (5)

Cardiovascular 10,772 10,468 3

Surgical Innovations 5,438 5,513 (1)

Respiratory, Gastrointestinal, & Renal 3,298 2,839 16

Medical Surgical 8,737 8,352 5

Cranial & Spinal Technologies 4,288 4,082 5

Specialty Therapies 2,307 2,147 7

Neuromodulation 1,601 1,497 7

Neuroscience 8,195 7,725 6

Diabetes 2,413 2,368 2

Total $ 30,117 $ 28,913 4%

Segment and Market Geography

The charts below illustrate the percent of net sales by market geography for fiscal years 2021 and 2020:

Fiscal Year 2021 Fiscal Year 2020

U.S.

Non-U.S.

Developed

Markets

Emerging

Markets

52%

32%

16%

U.S.

Non-U.S.

Developed

Markets

Emerging

Markets

52%

32%

16%

40 MEDTRONIC PLC 2021 Form 10-K

PART II

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

The table below includes net sales by market geography for each of our segments for fiscal years 2021 and 2020:

U.S.

(1)

Non-U.S. Developed Markets

(2)

Emerging Markets

(3)

(in millions)

Fiscal Year

2021

Fiscal Year

2020 % Change

Fiscal Year

2021

Fiscal Year

2020 % Change

Fiscal Year

2021

Fiscal Year

2020 % Change

Cardiovascular $ 5,248 $ 5,062 4% $ 3,752 $ 3,519 7% $ 1,773 $ 1,887 (6)%

Medical Surgical 3,650 3,532 3 3,320 3,169 5 1,766 1,651 7

Neuroscience 5,456 5,122 7 1,724 1,659 4 1,015 945 7

Diabetes 1,171 1,204 (3) 1,019 940 8 222 224 (1)

Total $ 15,526 $ 14,919 4% $ 9,815 $ 9,287 6% $ 4,777 $ 4,707 1%

(1) U.S. includes the United States and U.S. territories.

(2) Non-U.S. developed markets include Japan, Australia, New Zealand, Korea, Canada, and the countries within Western Europe.

(3) Emerging markets include the countries of the Middle East, Africa, Latin America, Eastern Europe, and the countries of Asia that are not included in

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

The increase in net sales for fiscal year 2021 as compared to

fiscal year 2020 was primarily related to the recovery of

procedure volumes as compared to the drastic decline

experienced in the fourth quarter of fiscal year 2020 as a result of

the pandemic. While the recovery of procedural volumes has

been uneven across geographies and our different product lines,

as of the end of fiscal year 2021, procedural volumes in the

majority of our end markets are returning to pre-pandemic

levels. Net sales for fiscal year 2021 were also impacted by an

additional selling week during the first fiscal month of fiscal year

2021 due to our 52/53 week fiscal year calendar. Although we

cannot precisely calculate the impact of the extra selling week,

we estimate that it benefited net sales for fiscal year 2021 by

approximately $360 million to $390 million. Additionally, currency

had a favorable impact on net sales in non-U.S. developed

markets of $427 million and an unfavorable impact on net sales in

emerging markets of $98 million for fiscal year 2021 as

compared to fiscal year 2020.

During the first and fourth quarters of fiscal year 2021, we

realigned our divisions with Neuroscience and Cardiovascular,

respectively. As a result, fiscal year 2020 results have been

recast to adjust for these realignments. Additionally, we

implemented our new operating model in fiscal year 2021, which

was fully operational beginning in the fourth quarter. Our new

operating model simplifies our organization in order to

accelerate decision making, improve commercial execution, and

more effectively leverage the scale of our company. The

“Restructuring Charges, Net” section of this Management’s

Discussion and Analysis has further information regarding our

new operating model.

Looking ahead, the uncertain and uneven global recovery from

COVID-19 and the resulting impact on future procedural

volumes and demand for our products and therapies could

negatively impact our business. Additionally, 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,

changes in timing of product registration approvals, replacement

cycle challenges, and fluctuations in currency exchange rates.

Cardiovascular

Cardiovascular products include pacemakers, insertable cardiac

monitors, cardiac resynchronization therapy devices (CRT-D &

CRT-P), 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

and related delivery systems, 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.

Cardiovascular also includes Care Management Services and

Cath Lab Managed Services (CLMS) within the Cardiac Rhythm &

Heart Failure division. Cardiovascular net sales for fiscal year

2021 were $10.8 billion, an increase of 3 percent as compared to

fiscal year 2020. Currency had a favorable impact on net sales for

fiscal year 2021 of $131 million. Cardiovascular net sales

increase for fiscal year 2021, as compared to fiscal year 2020,

was primarily due to the recovery of global procedural volumes

from the downturn experienced in the fourth quarter of fiscal

year 2020 resulting from the pandemic.

MEDTRONIC PLC 2021 Form 10-K 41

PART II

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

The charts below illustrate the percent of Cardiovascular net sales by division for fiscal years 2021 and 2020:

Fiscal Year 2021 Fiscal Year 2020

52%

22%

26%

CRHF

SHA

CPV

49%

24%

27%

CRHF

SHA

CPV

Cardiac Rhythm & Heart Failure (CRHF) net sales increased

9 percent in fiscal year 2021 as compared to fiscal year 2020.

The increase was led by Cardiac Rhythm Management and

Cardiac Ablation Solutions products, which included strong

growth from the Micra leadless pacing system, Cobalt and

Crome ICDs and CRT-Ds, TYRX antibacterial envelope, and Artic

Front Advance Cryoballons. Partially offsetting this growth were

declines in Mechanical Circulatory Support products driven by

slower recovery of procedure volumes and competitive

dynamics.

Structural Heart & Aortic (SHA) net sales were flat in fiscal year

2021 as compared to fiscal year 2020 as growth in transcatheter

aortic valve replacement (TAVR) nets sales were offset by net

sales declines within our Aortic and Cardiac Surgery businesses.

The growth experienced in TAVR was driven by continued

adoption of the Evolut Pro + valve. The declines experienced in

Aortic and Cardiac Surgery were a result of slower recovery of

procedure volumes as well our voluntary recall of the Valiant

Navion Thoracic Stent Graft System in the fourth quarter of

fiscal year 2021.

Coronary & Peripheral Vascular (CPV) net sales decreased

5 percent in fiscal year 2021 as compared to fiscal year 2020. The

decline was a result of the generally more deferrable nature of

peripheral and endovenous procedure categories as well as the

negative impact of the Chinese national tender on our drug-

eluting stent sales. The Chinese national tender went into effect

in January 2021 and resulted in significant price declines for drug-

eluting stents in China, which negatively impacted our Coronary

business. Partially offsetting these negative impacts was growth

in drug-coated balloons and peripheral embolization coils. Drug-

coated balloon growth was the result of strong adoption of the

IN.PACT AV drug-coated balloon driven by its pivotal data

published during the second quarter of fiscal year 2021.

In addition to the general impacts of COVID-19 on our Company

as described in the Executive Level Overview, looking ahead, we

expect Cardiovascular could be affected by the following:

䡲 Continued growth of our Micra transcatheter pacing system.

Micra AV received U.S. FDA approval and CE Mark approval in

January and April 2020, respectfully. Micra AV expands the

Micra target population from 15 percent to 45 percent of

pacemaker patients.

䡲 Continued acceptance and growth from the Azure XT and S

SureScan pacing systems. Azure pacemakers feature

Medtronic-exclusive BlueSync technology, which enables

automatic, secure wireless remote monitoring with increased

device longevity.

䡲 Acceptance and growth of the Cobalt and Crome portfolio of

ICDs and CRT-Ds. These devices received CE Mark approval

during the fourth quarter of fiscal year 2020 and U.S. FDA

approval during the first quarter of fiscal year 2021.

䡲 Continued acceptance and growth of the Claria MRI CRT-D

system with EffectivCRT Diagnostic and Effective CRT during

AF algorithm.

䡲 Acceptance and growth of the LINQ II cardiac monitor, which

received CE Mark in November 2019 and gained U.S. FDA

approval during the first quarter of fiscal year 2021. As of the

end of the fiscal year 2021, we are experiencing supply

constrains for the LINQ II cardiac monitor as we ramp our

wafer scale manufacturing.

䡲 Continued acceptance and growth of the CRT-P quadripolar

pacing system.

䡲 Continued growth, adoption, and utilization of the TYRX

Envelope for implantable devices driven by the favorable

results of the WRAP-IT clinical study. In the fourth quarter of

fiscal year 2020, we received 12-month shelf life extension for

our TYRX Envelope product.

䡲 Continued acceptance and market expansion of the Arctic

Front Advance Cryoballoon for treatment of atrial fibrillation.

We are pursuing a first line therapy designation from the U.S.

FDA for the Arctic Front Advance Cryoballoon’s treatment of

atrial fibrillation using the data of the STOP AF First clinical trial.

䡲 Continued acceptance and growth of the self-expanding

CoreValve Evolut transcatheter aortic valve replacement

platform into intermediate risk indication globally and for the

treatment of patients determined to be at low risk with

surgery. The Platform received both CE Mark for low risk and

bicuspid labeling indication in Europe during the first quarter of

fiscal year 2021. In August 2020, the U.S. FDA approved

revised commercial labeling for the platform that modified a

precaution for the treatment of patients at low risk.

䡲 Continued expansion and training of field support to increase

coverage in the U.S. centers performing transcatheter aortic

valve replacement procedures.

䡲 Continued acceptance and growth from Evolut PRO, which

provides industry-leading hemodynamics, reliable delivery,

and advanced sealing with an excellent safety profile, as well as

acceptance of our next generation Evolut Pro Plus TAVR

valve.

䡲 The negative impact of the Chinese national tender on drug-

eluting stent prices in China, that went into effect in January

2021, as well as provincial tenders in China on other Coronary

product categories.

MEDTRONIC PLC 2021 Form 10-K

PART II

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

䡲 Continued acceptance and growth from the VenaSeal Closure

System in the U.S. The VenaSeal Closure 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.

䡲 Our voluntary recall of the Valiant Navion Thoracic Stent Graft

System and our ability to ramp production of our previous

generation product, the Valiant Captivia Thoracic Stent Graft

System and resume selling this product in markets globally.

We currently have limited Valiant Captivia inventory available

and plan to reach full production capacity in October 2021.

䡲 Our recent decision to stop the distribution and sale of the

Medtronic HVAD System in June 2021 in light of a growing

body of observational clinical comparisons indicating a lower

frequency of neurological adverse events and mortality with

another circulatory support device available to patients

compared to the HVAD system. The HVAD system and

associated accessory revenue was $141 million in fiscal year

2021. Medtronic is committed to serving the needs of the

approximately 4,000 patients currently implanted with our

HVAD system. We expect to record a non-cash, pre-tax

impairment of long-lived assets of $400 million to $500 million

in the quarter ending July 30, 2021 primarily related to

intangible assets. Management also expects to record a

charge related to customer support obligations, restructuring,

and other associated costs in the quarter ending July 30,

2021.

䡲 Our ability to successfully develop and obtain regulatory

approval of products within our pipeline, which include the

Symplicity Spyral Multi-Electrode Renal Denervation Catheter

for the treatment of hypertension through a one-time,

minimally invasive, catheter procedure, Pulse Field Ablation, a

novel energy source that is non-thermal, for the treatment of

atrial fibrillation, and transcatheter mitral and tricuspid therapy

products lead by our Intrepid system.

Medical Surgical

Medical Surgical’s products span the entire continuum of patient

care from diagnosis to recovery, 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, surgical stapling

devices, vessel sealing instruments, wound closure,

electrosurgery products, hernia mechanical devices, mesh

implants, advanced ablation, interventional lung, ventilators,

airway products, renal care products, and sensors and monitors

for pulse oximetry, capnography, level of consciousness and

cerebral oximetry. Medical Surgical’s net sales for fiscal year

2021 were $8.7 billion, an increase of 5 percent as compared to

fiscal year 2020. Currency had a favorable impact on net sales of

$87 million for fiscal year 2021. Net sales growth was primarily

driven by the recovery in procedure volumes experienced from

the downturn experienced in the fourth quarter of fiscal year

2020 from the pandemic and increased demand for COVID-19

related diagnostics and therapies, particularly ventilator and

airway products, as compared to fiscal year 2020.

The charts below illustrate the percent of Medical Surgical net sales by division for fiscal years 2021 and 2020:

Fiscal Year 2021 Fiscal Year 2020

62%

38%

RGR

66%

34%

RGR

Surgical Innovations (SI) net sales for fiscal year 2021 decreased

1 percent as compared to fiscal year 2020, with declines

experienced across many product lines due to the deceleration

of surgical procedure recovery. The decline in surgical volumes,

particularly Bariatric, Colorectal, Hernia, and Thoracic

procedures, resulted in lower demand for Advanced Stapling

products and General Surgery products. This decline in demand

was partially offset by new product launches driving growth in

Advanced Energy.

Respiratory, Gastrointestinal, & Renal (RGR) net sales for fiscal

year 2021 increased 16 percent as compared to fiscal year 2020.

Net sales growth was primarily attributable to increased demand

for Respiratory Interventions products due to COVID-19, driven

by the Puritan Bennett high acuity ventilator portfolio.

In addition to the general impacts of COVID-19 on our Company

as described in the Executive Level Overview, looking ahead we

expect Medical Surgical could be affected by the following:

䡲 Continued acceptance and future growth of Open-to-MIS

techniques and tools supported by our efforts to transition

open surgery to MIS (minimally invasive surgery). The

Open-to-MIS initiative focuses on furthering 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.

䡲 Continued acceptance and future growth of powered stapling

and energy platform, along with our ability to execute ongoing

strategies to develop, gain regulatory approval, and

commercialize new products including our surgical soft tissue

robotics platform.

MEDTRONIC PLC 2021 Form 10-K 43

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

䡲 Our ability to execute ongoing strategies in order to address

the competitive pressure of reprocessing of our vessel sealing

disposables and growth of surgical soft tissue robotics

procedures in the U.S.

䡲 Our ability to create markets and drive products 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.

䡲 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.

䡲 Continued elevation of the standard of care for respiratory

compromise, a progressive condition impacting a patient’s

ability to breathe effectively, which leverages our market

leading MicroStream capnography technology.

䡲 Continued acceptance and growth in patient monitoring,

airway, and ventilation management. Key products in this area

include the Puritan Bennett 980 ventilator, Microstream

Capnography, Nellcor pulse oximetry system with OxiMax

technology, Shiley tracheostomy and endotracheal tubes, and

McGRATH MAC video laryngoscopes.

䡲 Continued and future acceptance of less invasive standards of

care in Gastrointestinal and Hepatology products, including

the areas of GI Diagnostic and Therapeutic product lines.

Recently launched products include the PillCam COLON

capsule endoscopy, the Barrx platform through ablation with

the Barrx 360 Express catheter, EndoFLIP imaging systems,

Bravo Calibration-free reflux testing, and the Emprint ablation

system with Thermosphere Technology, which maintains

predictable spherical ablation zones throughout procedures

reducing procedure time and cost.

䡲 Continued and future acceptance of Interventional Lung

Solutions. Products include our Illumisite navigation platform,

combined with our portfolio of biopsy tools including the

Arcpoint pulmonary needle, and to access lesions outside the

airway, the CrossCountry transbronchial access tool. This

comprehensive portfolio gives the power to display position

and access lung nodules in the periphery of the lungs, in a

minimally invasive approach to accessing difficult-to-reach

areas of the lung, which may aid in the diagnosis of lung

cancer.

䡲 Expanding the use of less invasive treatments and furthering

our commitment to improving options for women with

abnormal uterine bleeding. Our expanded and strengthened

surgical offerings are expected to complement our global

gynecology business.

䡲 Our ability to successfully develop and obtain regulatory

approval of products within our pipeline, which include our

PillCam Genius endoscopy module, a noninvasive process to

localize pre-cancerous lesions and our Hugo robotic assisted

surgery system, designed to help reduce unwanted variability,

improve patient outcomes, and, by extension, lower

per-procedure cost.

Neuroscience

Neuroscience’s products include various spinal implants, bone

graft substitutes, biologic products, image-guided surgery and

intra-operative imaging systems, robotic guidance systems used

in the robot-assisted spine procedures, and systems that

incorporate advanced energy surgical instruments.

Neuroscience’s products also focus on the treatment of

overactive bladder, urinary retention, fecal incontinence,

gastroparesis, as well as products to treat ear, nose, and throat

(ENT), and therapies to treat the diseases of the vasculature in

and around the brain, including coils, neurovascular stents and

flow diversion products. Neuroscience also manufactures

products related to implantable neurostimulation therapies and

drug delivery systems for the treatment of chronic pain,

movement disorders, and epilepsy. Neuroscience’s net sales for

fiscal year 2021 were $8.2 billion, an increase of 6 percent as

compared to fiscal year 2020. Currency had a favorable impact

on net sales for fiscal year 2021 of $75 million. Neuroscience’s

net sales growth was observed across all divisions and reflected

the recovery of global procedural volumes, particularly on

deferrable procedures, from the downturn experienced in the

fourth quarter of fiscal year 2020 as a result of the pandemic.

The graphs below illustrate the percent of Neuroscience net sales by division for fiscal years 2021 and 2020:

Fiscal Year 2021 Fiscal Year 2020

52%

20%

28%

CST

Specialty

53%

19%

28%

CST

Specialty

Cranial & Spinal Technologies (CST) net sales for fiscal year 2021

increased 5 percent as compared to fiscal year 2020. Growth

was experienced by both Enabling Technologies and Spine.

Enabling Technologies results, though still impacted by the

challenging environment for capital equipment due to

COVID-19, were driven by recovery on sales of the Midas Rex

MR8 high-speed drill system and the StealthStation S8

Navigation System. Spine net sales growth was driven by

recovery in procedural volumes in fiscal year 2021.

MEDTRONIC PLC 2021 Form 10-K

PART II

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

Specialty Therapies (Specialty) net sales for fiscal year 2021

increased 7 percent as compared to fiscal year 2020. Net sales

growth was primarily driven by strength in Pelvic Health and

Neurovascular. Pelvic Health saw continued recovery and growth

throughout the fiscal year, driven by the launch of the InterStim

Micro neurostimulator and SureScan MRI lead in the U.S.

Neurovascular’s growth continued to be driven by strength in

coils and aspiration catheters, as well as general strength in

emerging markets. This growth was partially offset by declines in

flow diversion products due to recent competitive entrants. ENT

experienced modest net sales growth due to the recovery of

deferrable procedure volumes.

Neuromodulation (NM) net sales for fiscal year 2021 increased

7 percent as compared to fiscal year 2020. Sales growth

occurred in both Pain Therapies and Brain Modulation and

reflected a recovery in procedural volumes. Net sales growth

was driven by strong adoption of the DTM (differential target

multiplexed) proprietary waveform in Pain Therapies, and the

Percept PC deep brain stimulation (DBS) device with BrainSense

technology in Brain Modulation.

In addition to the general impacts of COVID-19 on our Company

as described in the Executive Level Overview, looking ahead we

expect Neuroscience could be affected by the following:

䡲 Continued growth from Enabling Technologies StealthStation

and O-Arm Imaging Systems, Midas, and ENT Navigation and

Power Systems, as well as acceptance of the Stealth

Autoguide cranial robotic guidance platform.

䡲 Continued sales of Mazor robotic units and associated market

adoption of robot-assisted spine procedures, including the

Mazor X Stealth, our integrated robotics and navigation

platform.

䡲 Strengthening of our position in the spine titanium interbody

implant marketplace as a result of the June 2019 acquisition of

Titan Spine.

䡲 Continued adoption of our 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.

䡲 Market acceptance and continued global adoption of

innovative new spine products and procedural solutions within

our CST business such as our Infinity OCT System and

Prestige LP cervical disc system.

䡲 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.

䡲 Continued acceptance and growth of our ENT and Pelvic

Health therapies within our Specialty Therapies division,

including our InterStim therapy with InterStim II and InterStim

Micro neurostimulators, which received CE mark approval in

January 2020 and U.S. FDA approval in August 2020, for the

treatment of the symptoms of overactive bladder, urinary

retention, and bowel incontinence, and capital equipment

sales of the Stealth Station ENT surgical navigation system

and intraoperative NIM nerve monitoring system.

䡲 Continued acceptance and growth of the Solitaire FR

revascularization device for treatment of acute ischemic

stroke and the Pipeline Embolization Devices, endovascular

treatments for large or giant wide-necked brain aneurysms.

䡲 Continued acceptance of our React Catheter and Riptide

aspiration system, along with our next-generation Solitaire

revascularization device.

䡲 Market acceptance and continued global adoption of our

Intellis spinal cord stimulator, DTM proprietary waveform,

Evolve workflow algorithm, and Snapshot reporting to treat

chronic pain in major markets around the world.

䡲 Continued acceptance and growth of our Percept PC DBS

device with BrainSense technology, which received CE Mark

approval in January 2020 and U.S. FDA approval in June 2020,

including its treatment of Parkinson’s Disease, epilepsy, and

other movement disorders.

䡲 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 distribution requirements on our implantable

drug pump in October 2017 and its warning letter in November

2017.

䡲 Our ability to successfully develop and obtain regulatory

approval of the products within our pipeline, which include our

closed-loop Percept PC and RC devices with adaptive DBS

(aDBS) within Neuromodulation, as well as our hemorrhagic

stroke intrasaccular device within Specialty Therapies, and our

next-generation spine enabling technologies within CST.

Diabetes

Diabetes’ products include insulin pumps, continuous glucose

monitoring (CGM) systems, insulin pump consumables, and

smart insulin pen systems. Diabetes’ sales for fiscal year 2021

were $2.4 billion, an increase of 2 percent as compared to fiscal

year 2020. Currency had a favorable impact on net sales for fiscal

year 2021 of $37 million. Diabetes’ net sales increases for fiscal

year 2021 were primarily attributable to growth in the MiniMed

780G insulin pump system and integrated CGM in the

international markets. This growth was partially offset by

declines in the U.S. due to new patient start delays and continued

competitive pressures.

In addition to the general impacts of COVID-19 on our Company

as described in the Executive Level Overview, looking ahead we

expect Diabetes could be affected by the following:

䡲 Patient demand for the MiniMed 770G insulin pump system,

which received U.S. FDA approval in August 2020 and launched

in November 2020. The system is powered by SmartGuard

technology, as featured in the MiniMed 670G system, with the

added benefits of smartphone connectivity and an expanded

age indication to children as young as age two.

䡲 Continued future growth internationally for the MiniMed 780G

system. The MiniMed 780G system was approved in the E.U. in

June 2020 and launched in over 30 countries on four

continents outside the U.S., primarily in Europe, starting in

October 2020. The global adoption of sensor-augmented

insulin pump systems has resulted in strong sensor

attachment rates.

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

䡲 Continued acceptance and growth of the Guardian Connect

CGM system, which displays glucose information directly to a

smartphone. During the first quarter of fiscal year 2021, we

introduced the Guardian Connect system for Android devices

to ensure patients have access to their glucose levels

seamlessly and discretely. The Guardian Connect CGM

system is available on Apple iOS and Android devices.

䡲 Strengthening our position in the diabetes market as a result

of the September 10, 2020 acquisition of Companion Medical.

Companion Medical offers a U.S. FDA cleared InPen smart pen

system that combines the freedom of a reusable Bluetooth

pen with the intelligence of an intuitive mobile application that

helps users administer the appropriate insulin dose. During the

third quarter of fiscal year 2021, we integrated our CGM data

into the Companion Medical InPen Application, which allows

users to have their CGM readings in real-time alongside insulin

dose information, all in one view.

䡲 Continued pump and CGM competition in an expanding global

market.

䡲 Changes in medical reimbursement policies and programs,

along with additional payor coverage on insulin pumps.

䡲 Our ability to successfully develop and obtain regulatory

approval of the products within our pipeline, which include our

adult and pediatric MiniMed 780G and the Guardian 4 sensor,

which have been submitted to the U.S. FDA. These

technologies feature our next-generation algorithms by

further automating insulin delivery.

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:

Fiscal Year 2021 Fiscal Year 2020

Cost of products sold

Selling, general, & administrative

Research & development

34.8%

33.7%

8.3%

35.0%

8.1%

32.6%

Cost of Products Sold

Cost of products sold for fiscal years 2021 and 2020 was

$10.5 billion and $9.4 billion, respectively. The increase in cost of

products sold as a percentage of net sales in fiscal year 2021, as

compared to fiscal year 2020, was largely due to increased

expenses as a result of a full fiscal year impact of COVID-19,

primarily due to period expensing of some of our fixed overhead

costs due to idle capacity at certain manufacturing facilities and

increases in reserves for excess and obsolete inventory, as well

as charges associated with recent field corrective actions. Going

forward, we will continue to focus on reducing our costs of

production through supplier management, manufacturing

improvements, and optimizing our manufacturing network.

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.

In fiscal year 2021, we entered into arrangements with third

parties to fund the development of certain technologies in our

Diabetes segment. As there is a substantive and genuine

transfer of risk to the third parties, the development funding

provided is recognized as an obligation to perform contractual

services, and therefore is recorded as income in other operating

expense, net in the consolidated statements of income in the

period the corresponding research and development expenses

are incurred. If the technologies receive regulatory approval and

are successfully commercialized, we will pay royalties to the third

parties. During fiscal year 2021, no projects were significant,

either individually or in aggregate, to our consolidated results.

Selling, General, and Administrative Expense

Our goal is to continue to leverage selling, general, and

administrative expense initiatives. Selling, general, and

administrative expense primarily consists of salaries and wages,

other administrative costs, such as professional fees and

marketing expenses, and certain acquisition and restructuring

expenses.

MEDTRONIC PLC 2021 Form 10-K

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

Selling, general, and administrative expense for fiscal years 2021

and 2020 was $10.1 billion. The decrease in selling, general, and

administrative expense as a percentage of net sales in fiscal year

2021, as compared to 2020, was primarily due to net sales

growth, coupled with reduced travel and discretionary spending

due to the pandemic, offset by higher annual incentive accruals

and increased restructuring and associated costs. Selling,

general, and administrative expense in fiscal year 2021 includes

$196 million of restructuring and associated costs, as compared

to $168 million in fiscal year 2020. Additionally, for fiscal year

2020, selling, general, and administrative expense includes

$103 million of acquisition-related costs, as compared to

$3 million for fiscal year 2021.

The following is a summary of other costs and expenses:

Fiscal Year

(in millions) 2021 2020

Amortization of intangible assets $ 1,783 $ 1,756

Restructuring charges, net 293 118

Certain litigation charges 118 313

Other operating expense, net 315 71

Other non-operating income, net (336) (356)

Interest expense 925 1,092

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.

Restructuring Charges, Net

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:

䡲 Global Operations – integrating and enhancing global

manufacturing and supply processes, systems and site

presence to improve quality, delivery cost and cash flow

䡲 Functional Optimization – enhancing and leveraging global

operating models and systems across several enabling

functions to improve productivity and employee experience

䡲 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 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 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 40 percent of estimated charges are related to

employee termination benefits. The remaining charges are costs

associated with the restructuring program, such as salaries and

benefits for employees supporting the program, including

program management and transition teams, and strategic and

operational consulting services related to the three objectives of

the program discussed above. 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 2021, we recognized net charges of

$349 million, including $52 million recognized within

restructuring charges, net in the consolidated statements of

income which were primarily comprised of employee termination

benefits. For fiscal year 2021, 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 $128 million recognized within cost of

products sold and $169 million recognized within selling, general

and administrative expense in the consolidated statements of

income.

During fiscal year 2020, we recognized net charges of

$441 million, including $118 million recognized within

restructuring charges, net in the consolidated statements of

income primarily comprised of employee termination benefits.

For fiscal year 2020, 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 $149 million recognized within cost of products sold

and $165 million recognized within selling, general and

administrative expense in the consolidated statements of

income.

Simplification

In the first quarter of fiscal year 2021, we initiated our

Simplification restructuring program, designed to make the

Company a more nimble and competitive organization focused

on accelerating innovation, enhancing the customer experience,

MEDTRONIC PLC 2021 Form 10-K 47

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

driving revenue growth, and winning market share, while also

more efficiently and effectively leveraging our enterprise scale.

Under the oversight of the portfolio leaders, this new operating

model, which became fully operational the beginning of the

fourth quarter of fiscal year 2021, will simplify our organizational

structure and accelerate decision-making and execution.

Primary activities of the restructuring program will include

reorganizing our business into a portfolio-level structure,

including the creation of highly focused, accountable and

empowered Operating Units (OUs), consolidating operations at

the enterprise level, establishing Technology Development

Centers in areas where we have deep core technology

competencies to be leveraged by multiple OUs, and forming

dedicated sales organizations that leverage our scale but move

with the same agility as our smaller, local competitors.

The Simplification program designed to streamline our operating

model, improve competitiveness, and enhance the customer

and employee experience will result in substantial reduction in

selling, general, and administrative expenses, the majority of

which are expected to be achieved through the end of fiscal year

2022. Annual savings of approximately $450 million to

$475 million are expected to be realized by the various

components of the Simplification program.

We estimate that, in connection with the Simplification

restructuring program, we will recognize pre-tax exit and

disposal costs and other costs across all segments of

approximately $400 million to $450 million, the majority of which

are expected to be incurred by the end of fiscal year 2022.

Approximately three quarters of the estimated charges are

related to employee termination benefits. The remaining

charges are costs associated with the restructuring program,

such as salaries for employees supporting the program and

consulting expenses to execute the reorganization of our

business into a portfolio-like structure as discussed above.

These charges are recognized within restructuring charges, net

and selling, general, and administrative expense in the

consolidated statements of income.

During fiscal year 2021, we recognized net charges of $268 million,

including $241 million within restructuring charges, net in the

consolidated statements of income. For fiscal year 2021, charges

included $97 million of incremental defined benefit pension and

post-retirement related expenses for employees that accepted

voluntary early retirement packages within restructuring charges,

net in the consolidated statements of income. For fiscal year

2021, 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 $27 million

recognized within selling, general, and administrative expense in

the consolidated statements of income.

For additional information, see Note 4 to the consolidated

financial statements in “Item 8. Financial Statements and

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

Certain Litigation Charges

We classify litigation charges and gains related to significant legal

matters as certain litigation charges. For additional information,

refer to Note 18 of the consolidated financial statements in

“Item 8. Financial Statements and Supplementary Data” in this

Annual Report on Form 10-K.

Other Operating Expense, Net

Other operating expense, net primarily includes royalty income

and expense, currency remeasurement and derivative gains and

losses, Puerto Rico excise taxes, changes in fair value of

contingent consideration, changes in amounts accrued for

certain contingent liabilities for a recent acquisition, a

commitment to the Medtronic Foundation, charges associated

with business exits, impairment charges, in-process research

and development (IPR&D) charges, and income from funded

research and development arrangements.

The increase in other operating expense, net from fiscal year

2020 to 2021 was primarily driven by our remeasurement and

hedging programs, which, combined, resulted in a loss of

$47 million for fiscal year 2021 as compared to a gain of

$295 million for fiscal year 2020. Additionally, for fiscal year 2021,

other operating expense, net includes a $132 million gain related

to amounts accrued for certain contingent liabilities for a recent

acquisition and impairment charges of $76 million related to the

abandonment of certain intangible assets. Also contributing to

the increase were changes in fair value of contingent

consideration resulting in a loss of $36 million for fiscal year 2021

as compared to a gain of $33 million for fiscal year 2020. For

fiscal year 2020, other operating expense, net includes an

$80 million charge associated with a commitment to the

Medtronic Foundation and charges of $52 million associated

with the exit of businesses.

Other Non-Operating Income, Net

Other non-operating income, net includes the non-service

components of net periodic pension and postretirement benefit

cost, investment gains and losses, and interest income.

The decrease in other non-operating income, net from fiscal

year 2020 to 2021 was primarily attributable to the decrease in

interest income as a result of the lower interest rate

environment. Interest income was $192 million and $300 million

for fiscal years 2021 and 2020, respectively. This decrease was

partially offset by an increase in gains recognized on minority

investments. Gains on minority investments were $61 million for

fiscal year 2021 as compared to losses of $19 million for fiscal

year 2020.

Interest Expense

Interest expense includes 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, and charges recognized in connection with the

tender and early redemption of senior notes. The decrease in

interest expense from fiscal year 2020 to 2021 was primarily due

to a decrease in charges related to debt tender and redemption

transactions, which were $308 million for fiscal year 2021, as

compared to $413 million for fiscal year 2020. Also contributing

to the decrease was a decrease in the weighted-average

interest rate of outstanding debt obligations due to the

aforementioned debt issuance and tender transactions. Refer to

the “Debt and Capital” section of this Management’s Discussion

and Analysis for additional information on the debt issuances,

tenders, and early redemptions.

MEDTRONIC PLC 2021 Form 10-K

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

INCOME TAXES

Fiscal Year

(in millions) 2021 2020

Income tax provision (benefit) $ 265 $ (751)

Income before income taxes 3,895 4,055

Effective tax rate 6.8% (18.5)%

Non-GAAP income tax provision $ 809 $ 1,038

Non-GAAP income before income taxes 6,835 7,261

Non-GAAP Nominal Tax Rate 11.8% 14.3%

Difference between the effective tax rate and Non-GAAP Nominal Tax Rate 5.0% 32.8%

Many of the countries we operate in have statutory tax rates

lower than our U.S. statutory rate, thereby resulting in an overall

effective tax rate less than the U.S. statutory rate of 21.0 percent.

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

43.75 percent. Our earnings in Puerto Rico are subject to certain

tax incentive grants which provide for tax rates lower than the

country’s statutory tax rates. Unless our tax incentive grants are

extended, they will expire between fiscal years 2022 and 2030.

The tax incentive grants, which expired during fiscal year 2021, did

not have a material impact on our financial results. See Note 13 to

the consolidated financial statements in “Item 8. Financial

Statements and Supplementary Data” in this Annual Report on

Form 10-K for additional information.

Our effective tax rate for fiscal year 2021 was 6.8 percent, as

compared to (18.5) percent in fiscal year 2020. The increase in

the effective tax rate was primarily due to the impacts from

certain tax adjustments and year-over-year changes in

operational results by jurisdiction.

Our Non-GAAP Nominal Tax Rate for fiscal year 2021 was

11.8 percent, as compared to 14.3 percent in fiscal year 2020.

The decrease in our Non-GAAP Nominal Tax Rate for fiscal year

2021 as compared to fiscal year 2020 was primarily due to the

year-over-year changes in operational results by jurisdiction.

During fiscal year 2021, we recognized $51 million of operational tax

benefits. The operational tax benefits included a $46 million benefit

from excess tax benefits associated with stock-based compensation

and a $5 million net benefit associated with the resolution of certain

income tax audits, finalization of certain tax returns, changes to

uncertain tax position reserves, legal entity reorganizations, and

changes to certain deferred income tax balances.

During fiscal year 2020, we recognized $138 million of operational

tax benefits. The operational tax benefits included a $63 million

benefit from excess tax benefits associated with stock-based

compensation and a $75 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 one percent

would result in an additional income tax provision for fiscal years

2021 and 2020 of approximately $68 million and $73 million,

respectively.

Certain Tax Adjustments

During fiscal year 2021, the net benefit from certain tax

adjustments of $41 million, recognized in income tax provision

(benefit) in the consolidated statement of income, included the

following:

䡲 A net benefit of $106 million associated with the resolution of

an audit at the IRS Appellate level for fiscal years 2012, 2013,

and 2014. The issues resolved relate to the utilization of certain

net operating losses and the allocation of income between

Medtronic, Inc. and its wholly owned subsidiary operating in

Puerto Rico for businesses that are not the subject of the U.S.

Tax Court Case for fiscal years 2005 and 2006.

䡲 A net cost of $73 million related to a tax basis adjustment of

previously established deferred tax assets from intercompany

intellectual property transactions. The cumulative amount of

deferred tax benefit previously recognized from intercompany

intellectual property transactions and recorded as Certain Tax

Adjustments is $1.5 billion. The corresponding deferred tax

assets will be amortized over a period of approximately 20 years.

䡲 A cost of $50 million associated with the amortization of the

previously established deferred tax assets from intercompany

intellectual property transactions.

䡲 A net cost of $25 million associated with an internal

restructuring and intercompany sale of assets.

䡲 A benefit of $83 million related to the capitalization of certain

research and development costs for U.S. income tax purposes

and the establishment of a deferred tax asset at the U.S.

federal statutory tax rate.

During fiscal year 2020, the net benefit from certain tax

adjustments of $1.2 billion, recognized in income tax provision

(benefit) in the consolidated statement of income, included the

following:

䡲 A net benefit of $63 million related to the finalization of certain

state tax impacts from U.S. Tax Reform, and the issuance of

certain final U.S. Treasury Regulations associated with U.S. Tax

Reform. The primary impact of these regulations resulted in

the Company re-establishing its permanently reinvested

assertion on certain foreign earnings and reversing the

previously accrued tax liability. This benefit was partially offset

by additional tax associated with a previously executed internal

reorganization of certain foreign subsidiaries.

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

䡲 A benefit of $252 million related to tax legislative changes in

Switzerland, which abolished certain preferential tax regimes

the Company benefited from and replaced them with a new

set of internationally accepted measures. The legislation

provided for higher effective tax rates but allowed for a

transitional period whereby an amortizable asset was created

for Swiss federal income tax purposes that will be amortized

and deducted over a 10-year period.

䡲 A benefit of $658 million related to the release of a valuation

allowance previously recorded against certain net operating

losses. Luxembourg enacted tax legislation during the year

requiring the company to reassess the realizability of certain

net operating losses. The Company evaluated both the

positive and negative evidence and released valuation

allowance equal to the expected benefit from the utilization of

certain net operating losses in connection with a planned

intercompany sale of intellectual property.

䡲 A net benefit of $269 million associated with the intercompany

sale of intellectual property and the establishment of a

deferred tax asset.

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

We are currently in a strong financial position, despite the impact

COVID-19 had on our business and financial results during fiscal

years 2021 and 2020. We believe our balance sheet and liquidity

provide us with flexibility, and our cash, cash equivalents, and

current investments, along with our credit facility and related

commercial paper programs will satisfy our foreseeable

operating needs.

Our liquidity and capital structure are evaluated regularly within

the context of our annual operating and strategic planning

processes. 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.

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:

Fiscal Year

(in millions) 2021 2020

Cash provided by (used in):

Operating activities $ 6,240 $ 7,234

Investing activities (2,866) (3,203)

Financing activities (4,136) (4,198)

Effect of exchange rate changes on cash and cash equivalents 215 (86)

Net change in cash and cash equivalents $ (547) $ (253)

Operating Activities

The $994 million decrease in net cash provided was primarily

driven by a decrease in cash collected from customers and an

increase in cash paid for income taxes, partially offset by a

decrease in cash paid to employees, a decrease in payments

made for employer taxes, and a decrease in retirement benefit

plan contributions. The decrease in cash collected from

customers was primarily related to COVID-19 driving decreased

sales in the fourth quarter of fiscal year 2020 and first quarter of

fiscal year 2021, when compared to the prior fiscal year. The

increase in cash paid for income taxes was primarily due to

increased estimated federal tax payments and tax payments

associated with IRS audit settlements in fiscal year 2021. Cash

paid to employees decreased due to lower annual incentive plan

payouts compared the prior fiscal year. Payments made for

employer taxes decreased due to the deferral of payment on the

Company’s share of Social Security taxes allowed by the CARES

Act in the current fiscal year. For information on retirement

benefit plan contributions, refer to Note 15 to the consolidated

financial statements in “Item 8. Financial Statements and

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

Investing Activities

The $337 million decrease in net cash used was primarily

attributable to a decrease in net purchases of investments of

$1.0 billion, partially offset by a decrease in cash paid for

acquisitions of $506 million as compared to fiscal year 2020.

50 MEDTRONIC PLC 2021 Form 10-K

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

Financing Activities

The $62 million decrease in net cash used included a number of

largely offsetting items. Contributing to the decrease in cash

used was a decrease in share repurchases of $674 million.

Partially offsetting this decrease was a net decrease in short-

term borrowings of $294 million and an increase in dividends paid

to shareholders of $226 million. For fiscal year 2021, financing

cash flows were impacted by the Mizuho Bank term loan under

which we borrowed ¥300 billion in the first quarter of fiscal year

2021, which was subsequently repaid in the fourth quarter of

fiscal year 2021. Fiscal year 2021 financing cash flows were also

impacted by the issuance of $7.2 billion of Euro-denominated

senior notes offset by the early redemption of $6.0 billion of

senior notes for $6.3 billion of total consideration, and

repayment of an additional $911 million of Euro-denominated

senior notes. For comparison, financing cash flows for fiscal year

2020 reflect the issuance of $5.6 billion of Euro-denominated

senior notes, offset by the tender of $5.2 billion of senior notes

for $5.6 billion of total consideration. We also repaid $500 million

of senior notes at maturity during the fourth quarter of fiscal year

2020. For more information on the aforementioned Mizuho Bank

term loan, and issuances and redemptions of senior notes, refer

to the Debt and Capital section.

Debt and Capital

Our capital structure consists of equity and interest-bearing

debt. We primarily utilize unsecured senior debt obligations to

meet our financing needs and, to a lesser extent, bank

borrowings. From time to time, we may repurchase our

outstanding debt obligations in the open market or through

privately negotiated transactions.

Total debt at April 30, 2021 was $26.4 billion, as compared to

$24.8 billion at April 24, 2020. The increase in total debt was

primarily driven by fluctuations in exchange rates as it pertains to

our Euro-denominated senior notes and, to a lesser extent, the

net impact of the issuance and redemption of senior notes, both

of which are described below.

In September 2020, we issued six tranches of Euro-

denominated senior notes with an aggregate principal of

€6.3 billion, with maturities ranging from fiscal year 2023 to fiscal

year 2051, resulting in cash proceeds of approximately

$7.2 billion, net of discounts and issuance costs. The Euro-

denominated debt is designated as a net investment hedge of

certain of our European operations. We used the net proceeds

of the offering to fund the early redemption of $6.0 billion of

senior notes for $6.3 billion of total consideration in October

2020. Additionally, we used the proceeds to repay our

€750 million floating rate senior notes at maturity in March 2021.

We recognized a loss on debt extinguishment of $308 million in

fiscal year 2021, which primarily included cash premiums and

accelerated amortization of deferred financing costs and debt

discounts and premiums. The loss on debt extinguishment was

recognized in interest expense in the consolidated statements

of income.

In May 2020, we entered into an unsecured term loan agreement

with Mizuho Bank, Ltd. for an aggregate principal amount of up to

¥300 billion, or approximately $2.8 billion, with a term of six

months and the option to extend for an additional six months.

On May 13, 2020, Medtronic Luxco borrowed the entire amount

of the term loan under the Loan Agreement. The proceeds of

the loan were used for general corporate purposes. The

Japanese Yen denominated debt was designated as a net

investment hedge of certain of our Japanese operations. On

November 12, 2020, we exercised our option to extend the term

of the loan for an additional six months. During the fourth quarter

of fiscal year 2021, we de-designated the Yen denominated debt

as a net investment hedge and repaid the term loan in full,

including interest.

We repurchase our ordinary shares from time to time as part of

our focus on returning value to our shareholders. In March 2019,

the Company’s Board of Directors authorized the repurchase of

$6.0 billion of the Company’s ordinary shares. There is no

specific time period associated with these repurchase

authorizations. During fiscal years 2021 and 2020, we

repurchased a total of 4 million and 12 million shares,

respectively, under these programs at an average price of

$126.80 and $106.22, respectively. At April 30, 2021, we had

approximately $5.4 billion remaining under the share repurchase

programs authorized by our Board of Directors.

For more information on credit arrangements, see Note 6 of the

consolidated financial statements in “Item 8. Financial

Statements and Supplementary Data” in this Annual Report on

Form 10-K.

Liquidity

Our liquidity sources at April 30, 2021 include $3.6 billion of cash

and cash equivalents and $7.2 billion of current investments.

Additionally, we maintain commercial paper programs (no

commercial paper outstanding at April 30, 2021) and a Credit

Facility.

Our investments primarily include available-for-sale debt

securities, including U.S. and non-U.S. government and agency

securities, corporate debt securities, mortgage-backed

securities, and other asset-backed securities. See Note 5 to the

consolidated financial statements in “Item 8. Financial

Statements and Supplementary Data” in this Annual Report on

Form 10-K for additional information on our investments.

We maintain multicurrency commercial paper programs 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 both April 30, 2021 and April 24, 2020, we had no

commercial paper outstanding. The issuance of commercial

paper reduces the amount of credit available under our existing

line of credit, as explained below.

We also have a $3.5 billion five-year syndicated credit facility

(Credit Facility), which expires in December 2025. The Credit

Facility provides backup funding for the commercial paper

programs 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 $1.0 billion 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.

MEDTRONIC PLC 2021 Form 10-K 51

PART II

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

At April 30, 2021 and April 24, 2020, no amounts were

outstanding under the Credit Facility.

Interest rates on advances of our Credit Facility are determined

by a pricing matrix based on our long-term debt ratings assigned

by Standard & Poor’s Rating Services (S&P) and Moody’s Investor

Service (Moody’s). Facility fees are payable on the Credit Facility

and are determined in the same manner as the interest rates. We

are in compliance with all covenants related to the Credit Facility.

The following table is a summary of our S&P and Moody’s long-term debt ratings and short-term debt ratings:

Agency Rating

(1)

April 30, 2021 April 24, 2020

Standard & Poor’s Ratings Services

Long-term debt AA

Short-term debt A-1 A-1

Moody’s Investors Service

Long-term debt A3 A3

Short-term debt P-2 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 30, 2021 were unchanged as compared to the

ratings at April 24, 2020. 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,

Credit Facility, and related commercial paper programs.

Contractual Obligations and Cash

Requirements

We have future contractual obligations and other minimum

commercial commitments that are entered into in the normal

course of business, some of which are recorded in our

consolidated balance sheet. We believe our off-balance sheet

arrangements do not have a material current or anticipated

future effect on our consolidated earnings, financial position,

and/or cash flows.

Presented below is a summary of our off-balance sheet contractual obligations and other minimum commercial commitments at

April 30, 2021, as well as long-term contractual obligations reflected in the balance sheet at April 30, 2021.

Maturity by Fiscal Year

(in millions) Total 2022 2023 2024 2025 2026 Thereafter

Contractual obligations related to off-balance sheet

arrangements:

Commitments to fund minority investments, milestone

payments, and royalty obligations

(1)

$ 354 $ 157 $ 72 $ 47 $ 22 $ 19 $ 36

Interest payments

(2)

7,729 489 487 480 481 414 5,377

Other

(3)

1,038 550 232 103 42 29 82

Contractual obligations reflected in the balance sheet

(4)

Debt obligations

(5)

$ 26,588 $ 11 $ 4,237 $ 6 $ 1,895 $ 2,423 $ 18,016

Operating leases 1,090 223 166 147 119 97 338

Contingent consideration

(6)

270 78 120 33 34 4 —

Tax obligations

(7)

1,672 176 176 330 440 550 —

(1) Includes commitments related to the funding of minority 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.

(2) Includes the contractual interest payments on our outstanding debt and excludes the impacts of debt premium and discount amortization. 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 on our debt agreements.

(3) Includes inventory purchase commitments, research and development, and other arrangements that 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.

(4) 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 13, 15, and 18 to the consolidated

financial statements in “Item 8. Financial Statements and Supplementary Data” in this Annual Report on Form 10-K for further information.

52 MEDTRONIC PLC 2021 Form 10-K

PART II

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

(5) Includes the current and non-current portion of our Senior Notes and bank borrowings. Excludes debt premium and discount, unamortized gains

from terminated interest rate swap agreements, and commercial paper. See Notes 6 and 7 to the consolidated financial statements in “Item 8.

Financial Statements and Supplementary Data” in this Annual Report on Form 10-K for additional information on our debt agreements and interest

rate swap agreements, respectively.

(6) 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.

(7) 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 13 to the consolidated financial statements in “Item 8. Financial Statements and Supplementary

Data” in this Annual Report on Form 10-K for further information.

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 above. Historically, we

have not experienced significant losses on these types of

indemnification agreements.

Note 18 to the consolidated financial statements in “Item 8.

Financial Statements and Supplementary Data” in this Annual

Report on Form 10-K provides information regarding amounts

we have accrued related to 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.

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 we consider to be

permanently reinvested. 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.

Beyond the contractual obligations and other minimum

commercial commitments outlined above, we have recurring

cash requirements arising from the normal operation of our

business that include capital expenditures, research and

developments costs, and other operational costs.

We believe our balance sheet and liquidity provide us with

flexibility, and our cash, cash equivalents, current investments,

Credit Facility and related commercial paper programs as well as

our ability to generate operating cash flows will satisfy our

current and future contractual obligations and cash

requirements. We regularly review our capital needs and

consider various investing and financing alternatives to support

our requirements.

ACQUISITIONS

Information regarding acquisitions is included in Notes 3 to the

consolidated financial statements in “Item 8. Financial

Statements and Supplementary Data” in this Annual Report on

Form 10-K.

CRITICAL ACCOUNTING ESTIMATES

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, 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 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

MEDTRONIC PLC 2021 Form 10-K 53

PART II

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

damages; or could result in a change in business practice. Our

significant legal proceedings are discussed in Note 18 to the

consolidated financial statements in “Item 8. Financial

Statements and Supplementary Data” in this Annual Report on

Form 10-K.

Income Tax Reserves

We establish reserves when, despite our belief that our tax return

positions are fully supportable, we believe that certain positions

are likely to be challenged and that we may or may not prevail.

Under U.S. GAAP, if we determine that a tax position is more

likely than not of being sustained upon audit, based solely on the

technical merits of the position, we recognize the benefit. We

measure the benefit by determining the amount that is greater

than 50 percent likely of being realized upon settlement. We

presume that all tax positions will be examined by a taxing

authority with full knowledge of all relevant information. The

calculation of our tax liabilities involves dealing with uncertainties

in the application of complex tax regulations in a multitude of

jurisdictions across our global operations. We regularly monitor

our tax positions and tax liabilities. We reevaluate the technical

merits of our tax positions and recognize an uncertain tax

benefit, or derecognize a previously recorded tax benefit, when

there is (i) a completion of a tax audit, (ii) effective settlement of

an issue, (iii) a change in applicable tax law including a tax case or

legislative guidance, or (iv) 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.

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

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. We

assess the impairment of goodwill at the reporting unit level

annually as of the first day of 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 the highest and best use of the assets based on

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 intangible assets

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 intangible assets require us to make several estimates to

determine fair value, including projected future cash flows and

discount rates.

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.

SUPPLEMENTAL 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. Medtronic plc and Medtronic, Inc. each have

provided a full and unconditional guarantee of the obligations of

Medtronic Luxco under the Senior Notes (Medtronic Luxco

Senior Notes). The following is a summary of these guarantees:

MEDTRONIC PLC 2021 Form 10-K

PART II

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

Guarantees of Medtronic Senior Notes

䡲 Parent Company Guarantor - Medtronic plc

䡲 Subsidiary Issuer - Medtronic, Inc.

䡲 Subsidiary Guarantor - Medtronic Luxco

Guarantees of Medtronic Luxco Senior Notes

䡲 Parent Company Guarantor - Medtronic plc

䡲 Subsidiary Issuer - Medtronic Luxco

䡲 Subsidiary Guarantor -Medtronic, Inc.

Guarantees of CIFSA Senior Notes

䡲 Parent Company Guarantor -Medtronic plc

䡲 Subsidiary Issuer - CIFSA

䡲 Subsidiary Guarantors - Medtronic Luxco, Covidien Ltd., and

Covidien Group Holdings Ltd. (CIFSA Subsidiary Guarantors)

The following tables present summarized financial information

for the fiscal year ended April 30, 2021 for the obligor groups of

Medtronic and Medtronic Luxco Senior Notes, and CIFSA Senior

Notes. The obligor group consists of the parent company

guarantor, subsidiary issuer, and subsidiary guarantors for the

applicable senior notes. The summarized financial information is

presented after elimination of (i) intercompany transactions and

balances among the guarantors and issuers and (ii) equity in

earnings from and investments in any subsidiary that is a

non-guarantor or issuer.

The summarized results of operations information for the fiscal year ended April 30, 2021 was as follows:

(in millions)

Medtronic & Medtronic

Luxco Senior Notes

(1)

CIFSA Senior Notes

(2)

Net sales $ 1,925 $ —

Operating profit 11 80

Loss before income taxes (1,201) (741)

Net loss attributable to Medtronic (784) (725)

The summarized balance sheet information for the fiscal year ended April 30, 2021 was as follows:

(in millions)

Medtronic & Medtronic

Luxco Senior Notes

(1)

CIFSA Senior Notes

(2)

Total current assets

(3)

$21,901 $ 9,038

Total noncurrent assets

(4)

11,597 8,041

Total current liabilities

(5)

28,484 17,413

Total noncurrent liabilities

(6)

56,772 63,328

Noncontrolling interests 174 174

(1) The Medtronic Senior Notes and Medtronic Luxco Senior Notes obligor group consists of the following entities: Medtronic plc, Medtronic Luxco, and

Medtronic, Inc. Refer to the guarantee summary above for further details.

(2) The CIFSA Senior Notes obligor group consists of the following entities: Medtronic plc, Medtronic Luxco, CIFSA, and CIFSA Subsidiary Guarantors.

Please refer to the guarantee summary above for further details.

(3) Includes receivables due from non-guarantor subsidiaries of $21.4 billion and $9.0 billion for Medtronic & Medtronic Luxco Senior Notes, and CIFSA

Senior Notes, respectively.

(4) Includes loans receivable due from non-guarantor subsidiaries of $6.5 billion and $8.0 billion for Medtronic & Medtronic Luxco Senior Notes, and

CIFSA Senior Notes, respectively.

(5) Includes payables due to non-guarantor subsidiaries of $26.4 billion and $17.3 billion for Medtronic & Medtronic Luxco Senior Notes, and CIFSA

Senior Notes, respectively.

(6) Includes loans payable due to non-guarantor subsidiaries of $29.0 billion and $43.5 billion for Medtronic & Medtronic Luxco Senior Notes, and CIFSA

Senior Notes, respectively.

MEDTRONIC PLC 2021 Form 10-K 55

PART 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. Currencies of our

derivative instruments include the Euro, Japanese Yen, Chinese

Yuan, and others. Fluctuations in the exchange rates of currency

exposures that are unhedged, such as in certain emerging

markets, may result in future earnings and cash flow volatility. We

do not enter into currency exchange rate derivative instruments

for speculative purposes.

The gross notional amount of all currency exchange rate

derivative instruments outstanding at April 30, 2021 and April 24,

2020 was $14.7 billion and $11.9 billion, respectively. At April 30,

2021, these contracts were in a net unrealized loss position of

$211 million. A sensitivity analysis of changes in the fair value of

all currency exchange rate derivative contracts at April 30, 2021

and April 24, 2020 indicates that, if the U.S. dollar uniformly

strengthened/weakened by 10 percent against all currencies, it

would have the following impact on the fair value of these

contracts:

Increase (decrease)

(in millions) 2021 2020

10% appreciation in the U.S. dollar $ 995 $ 750

10% depreciation in the U.S. dollar (995) (750)

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.

In the second quarter of fiscal year 2019, we began accounting

for our operations in Argentina as highly inflationary, as the prior

three-year cumulative inflation rate exceeded 100 percent. The

change did not have a material impact on our results for fiscal

year ended 2021.

INTEREST RATE RISK

We are subject to interest rate risk on our 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 30, 2021 was comprised of debt

predominately denominated in U.S. dollars and the Euro, of which

substantially all is fixed rate debt. We are also exposed to interest

rate changes affecting our investments in interest rate sensitive

instruments, which include our marketable debt securities. We

enter into marketable debt security positions for cash

management purposes.

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 30, 2021

and April 24, 2020, would have the following impact on the fair

value of these instruments:

Increase (decrease)

(in millions) 2021 2020

10 basis point increase in interest rates $21$ 34

10 basis point decrease in interest rates (21) (34)

For a discussion of current market conditions and the impact on

our financial condition and results of operations, please see the

“Liquidity” 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 5

and 7 to the consolidated financial statements in “Item 8.

Financial Statements and Supplementary Data” in this Annual

Report on Form 10-K.

MEDTRONIC PLC 2021 Form 10-K

PART 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 (the “Company”) as of

April 30, 2021 and April 24, 2020, and the related consolidated

statements of income, of comprehensive income, of equity and

of cash flows for each of the three years in the period ended

April 30, 2021, including the related notes and financial

statement schedule listed in the index 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 30, 2021, 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 30, 2021 and April 24, 2020, and the

results of its operations and its cash flows for each of the three

years in the period ended April 30, 2021 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 30, 2021, based on criteria established in

Internal Control—Integrated Framework (2013) issued by the

COSO.

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements,

the Company changed the manner in which it accounts for

leases in fiscal year 2020.

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.

MEDTRONIC PLC 2021 Form 10-K 57

PART II

Item 8 Financial Statements and Supplementary Data

Critical Audit Matters

The critical audit matter communicated below is a matter arising

from the current period audit of the consolidated financial

statements that was communicated or required to be

communicated to the audit committee and that (i) relates to

accounts or disclosures that are material to the consolidated

financial statements and (ii) involved our especially challenging,

subjective, or complex judgments. The communication of critical

audit matters does not alter in any way our opinion on the

consolidated financial statements, taken as a whole, and we are

not, by communicating the critical audit matter below, providing

a separate opinion on the critical audit matter or on the accounts

or disclosures to which it relates.

Income Tax Reserve for the Uncertain Tax Position Related to

Puerto Rico Manufacturing

As described in Notes 13 and 18 to the consolidated financial

statements, management records reserves for uncertain tax

positions related to unresolved matters with the Internal

Revenue Service (IRS) and other taxing authorities. A remaining

unresolved issue with the IRS, 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

manufacturing sites. These reserves are subject to a high degree

of estimation and management judgment. Total reserves

relating to uncertain tax positions as of April 30, 2021 were

$1.668 billion, of which the Puerto Rico manufacturing reserve

makes up a significant portion.

The principal considerations for our determination that

performing procedures relating to the income tax reserve for the

uncertain tax position related to Puerto Rico manufacturing is a

critical audit matter are the significant judgment by management

when determining the reserves, including a high degree of

estimation uncertainty relative to the unresolved issue with the

IRS involving one of the Company’s manufacturing sites. This in

turn led to a high degree of auditor judgment, effort and

subjectivity in performing procedures and evaluating audit

evidence to support management’s accurate measurement of

the income tax reserve for the uncertain tax position related to

Puerto Rico manufacturing, as the nature of the evidence is

often highly subjective.

Addressing the matter involved performing procedures and

evaluating audit evidence in connection with forming our overall

opinion on the consolidated financial statements. These

procedures included testing the effectiveness of controls

relating to the recognition of the income tax reserves for

uncertain tax positions, as well as controls over measurement of

the reserves. These procedures also included, among others,

(i) testing management’s process for determining the reserve for

the uncertain tax position, (ii) evaluating the status and results of

the U. S. Tax Court case, and (iii) evaluating the consistency of

the reserve calculation with the relevant documents related to

the tax court case.

/s/ PricewaterhouseCoopers LLP

Minneapolis, Minnesota

June 25, 2021

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

MEDTRONIC PLC 2021 Form 10-K

PART II

Item 8 Financial Statements and Supplementary Data

Medtronic plc

Consolidated Statements of Income

Fiscal Year

(in millions, except per share data) 2021 2020 2019

Net sales $ 30,117 $ 28,913 $ 30,557

Costs and expenses:

Cost of products sold 10,483 9,424 9,155

Research and development expense 2,493 2,331 2,330

Selling, general, and administrative expense 10,148 10,109 10,418

Amortization of intangible assets 1,783 1,756 1,764

Restructuring charges, net 293 118 198

Certain litigation charges 118 313 166

Other operating expense, net 315 71 258

Operating profit 4,484 4,791 6,268

Other non-operating income, net (336) (356) (373)

Interest expense 925 1,092 1,444

Income before income taxes 3,895 4,055 5,197

Income tax provision (benefit) 265 (751) 547

Net income 3,630 4,806 4,650

Net income attributable to noncontrolling interests (24) (17) (19)

Net income attributable to Medtronic $ 3,606 $ 4,789 $ 4,631

Basic earnings per share $ 2.68 $ 3.57 $ 3.44

Diluted earnings per share $ 2.66 $ 3.54 $ 3.41

Basic weighted average shares outstanding 1,344.9 1,340.7 1,346.4

Diluted weighted average shares outstanding 1,354.0 1,351.1 1,357.5

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

MEDTRONIC PLC 2021 Form 10-K 59

PART II

Item 8 Financial Statements and Supplementary Data

Medtronic plc

Consolidated Statements of Comprehensive Income

Fiscal Year

(in millions) 2021 2020 2019

Net income $ 3,630 $ 4,806 $ 4,650

Other comprehensive income (loss), net of tax:

Unrealized gain on investment securities 92 45 102

Translation adjustment 1,699 (829) (1,375)

Net investment hedge (1,694) 405 88

Net change in retirement obligations 505 (544) (191)

Unrealized (loss) gain on cash flow hedges (519) 72 401

Other comprehensive income (loss) 83 (851) (975)

Comprehensive income including noncontrolling interests 3,713 3,955 3,675

Comprehensive income attributable to noncontrolling interests (32) (15) (16)

Comprehensive income attributable to Medtronic $ 3,681 $ 3,940 $ 3,659

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

60 MEDTRONIC PLC 2021 Form 10-K

PART II

Item 8 Financial Statements and Supplementary Data

Medtronic plc

Consolidated Balance Sheets

(in millions) April 30, 2021 April 24, 2020

ASSETS

Current assets:

Cash and cash equivalents $ 3,593 $ 4,140

Investments 7,224 6,808

Accounts receivable, less allowances and credit losses of $241 and $208, respectively 5,462 4,645

Inventories, net 4,313 4,229

Other current assets 1,955 2,209

Total current assets 22,548 22,031

Property, plant, and equipment, net 5,221 4,828

Goodwill 41,961 39,841

Other intangible assets, net 17,740 19,063

Tax assets 3,169 2,832

Other assets 2,443 2,094

Total assets $ 93,083 $ 90,689

LIABILITIES AND EQUITY

Current liabilities:

Current debt obligations $ 11 $ 2,776

Accounts payable 2,106 1,996

Accrued compensation 2,482 2,099

Accrued income taxes 435 502

Other accrued expenses 3,475 2,993

Total current liabilities 8,509 10,366

Long-term debt 26,378 22,021

Accrued compensation and retirement benefits 1,557 1,910

Accrued income taxes 2,251 2,682

Deferred tax liabilities 1,028 1,174

Other liabilities 1,756 1,664

Total liabilities 41,481 39,817

Commitments and contingencies (Notes 3, 16, and 18)

Shareholders’ equity:

Ordinary shares – par value $0.0001, 2.6 billion shares authorized, 1,345,400,671 and 1,341,074,724 shares issued

and outstanding, respectively ——

Additional paid-in capital 26,319 26,165

Retained earnings 28,594 28,132

Accumulated other comprehensive loss (3,485) (3,560)

Total shareholders’ equity 51,428 50,737

Noncontrolling interests 174 135

Total equity 51,602 50,872

Total liabilities and equity $ 93,083 $ 90,689

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

MEDTRONIC PLC 2021 Form 10-K 61

PART II

Item 8 Financial Statements and Supplementary Data

Medtronic plc

Consolidated Statements of Equity

Ordinary Shares

Additional

Paid-in Retained

Accumulated

Other

Comprehensive

Total

Shareholders’ Noncontrolling Total

(in millions) Number Par Value Capital Earnings Loss Equity Interests Equity

April 27, 2018 1,354 $ — $ 28,127 $ 24,379 $ (1,786) $ 50,720 $ 102 $50,822

Net income — — — 4,631 — 4,631 19 4,650

Other comprehensive loss — — — — (972) (972) (3) (975)

Dividends to shareholders ($2.00

per ordinary share) — — — (2,693) — (2,693) — (2,693)

Issuance of shares under stock

purchase and award plans 18 — 923 — — 923 — 923

Repurchase of ordinary shares (31) — (2,808) — — (2,808) — (2,808)

Stock-based compensation — — 290 — — 290 — 290

Changes to noncontrolling

ownership interests — — — — — — 3 3

Cumulative effect of change in

accounting principle

(1)

— — (47) 47 — — —

April 26, 2019 1,341 $ — $ 26,532 $ 26,270 $ (2,711) $ 50,091 $ 121 $50,212

Net income — — — 4,789 — 4,789 17 4,806

Other comprehensive loss — — — — (849) (849) (2) (851)

Dividends to shareholders ($2.16

per ordinary share) — — — (2,894) — (2,894) — (2,894)

Issuance of shares under stock

purchase and award plans 12 — 564 — — 564 — 564

Repurchase of ordinary shares (12) — (1,228) — — (1,228) — (1,228)

Stock-based compensation — — 297 — — 297 — 297

Changes to noncontrolling

ownership interests — — — — — — (1) (1)

Cumulative effect of change in

accounting principle

(2)

— — — (33) — (33) — (33)

April 24, 2020 1,341 $ — $ 26,165 $ 28,132 $ (3,560) $ 50,737 $ 135 $50,872

Net income — — — 3,606 — 3,606 24 3,630

Other comprehensive income — — — — 75 75 8 83

Dividends to shareholders ($2.32

per ordinary share) — — — (3,120) — (3,120) — (3,120)

Issuance of shares under stock

purchase and award plans 8 — 382 — — 382 — 382

Repurchase of ordinary shares (4) — (559) — — (559) — (559)

Stock-based compensation — — 344 — — 344 — 344

Changes to noncontrolling

ownership interests — — (13) — — (13) 7 (6)

Cumulative effect of change in

accounting principle

(3)

— — — (24) — (24) — (24)

April 30, 2021 1,345 $ — $ 26,319 $ 28,594 $ (3,485) $ 51,428 $ 174 $51,602

(1) The cumulative effect of change in accounting principle in fiscal year 2019 resulted from the adoption of accounting guidance that 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. As a result of the adoption, the Company reclassified $47 million from

accumulated other comprehensive loss to the opening balance of retained earnings as of April 28, 2018.

(2) The cumulative effect of change in accounting principle in fiscal year 2020 resulted from the adoption of accounting guidance that requires lessees to

recognize right-of-use assets and lease liabilities on the balance sheet. As a result of the adoption, the Company adjusted the opening balance of

retained earnings for $33 million as of April 27, 2019.

(3) See Note 1 to the consolidated financial statements for discussion regarding the adoption of accounting standards during fiscal year 2021.

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

62 MEDTRONIC PLC 2021 Form 10-K

PART II

Item 8 Financial Statements and Supplementary Data

Medtronic plc

Consolidated Statements of Cash Flows

Fiscal Year

(in millions) 2021 2020 2019

Operating Activities:

Net income $ 3,630 $ 4,806 $ 4,650

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

Depreciation and amortization 2,702 2,663 2,659

Provision for doubtful accounts 128 99 78

Deferred income taxes (422) (1,315) (304)

Stock-based compensation 344 297 290

Loss on debt extinguishment 308 406 457

Other, net 251 217 257

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

Accounts receivable, net (761) 1,291 (581)

Inventories, net 78 (577) (274)

Accounts payable and accrued liabilities 531 (44) 399

Other operating assets and liabilities (549) (609) (624)

Net cash provided by operating activities 6,240 7,234 7,007

Investing Activities:

Acquisitions, net of cash acquired (994) (488) (1,827)

Additions to property, plant, and equipment (1,355) (1,213) (1,134)

Purchases of investments (11,808) (11,039) (2,532)

Sales and maturities of investments 11,345 9,574 4,683

Other investing activities, net (54) (37) 36

Net cash used in investing activities (2,866) (3,203) (774)

Financing Activities:

Change in current debt obligations, net (311) (17) (713)

Proceeds from short-term borrowings (maturities greater than 90 days) 2,789 — —

Repayments from short-term borrowings (maturities greater than 90 days) (2,853) — —

Issuance of long-term debt 7,172 5,568 7,794

Payments on long-term debt (7,367) (6,110) (7,948)

Dividends to shareholders (3,120) (2,894) (2,693)

Issuance of ordinary shares 474 662 992

Repurchase of ordinary shares (652) (1,326) (2,877)

Other financing activities (268) (81) 14

Net cash used in financing activities (4,136) (4,198) (5,431)

Effect of exchange rate changes on cash and cash equivalents 215 (86) (78)

Net change in cash and cash equivalents (547) (253) 724

Cash and cash equivalents at beginning of period 4,140 4,393 3,669

Cash and cash equivalents at end of period $ 3,593 $ 4,140 $ 4,393

Supplemental Cash Flow Information

Cash paid for:

Income taxes $ 1,250 $ 878 $ 1,558

Interest 582 643 973

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

MEDTRONIC PLC 2021 Form 10-K 63

PART II

Item 8 Financial Statements and Supplementary Data

Medtronic plc

Notes to Consolidated Financial Statements

1. Summary of Significant Accounting Policies

Nature of Operations

Medtronic plc (Medtronic or the Company) 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. The Company provides innovative

products and therapies to serve healthcare systems, 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. Amounts reported in

millions within this annual report are computed based on the

amounts in thousands, and therefore, the sum of the

components may not equal the total amount reported in millions

due to rounding. Additionally, certain columns and rows within

tables may not sum due to rounding.

Use of Estimates

The preparation of the consolidated financial statements in

conformity with accounting principles generally accepted 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.

COVID-19 has had, and may continue to have, an adverse effect

on our business, results of operations, financial condition, and

cash flows, and its future impacts remain highly uncertain and

unpredictable. The Company has considered the disruptions

caused by COVID-19, including lower sales and customer

demand than the prior year in many businesses as well as

macroeconomic factors. As a result, the Company has also

assessed the potential impact on certain accounting estimates

including, but not limited to, the allowance for doubtful accounts,

inventory reserves, return reserves, the valuation of goodwill,

intangible assets, other long-lived assets, investments and

contingent consideration, as of April 30, 2021 and through the

date of this report. There was not a material impact to

accounting estimates associated with the Company’s

consolidated financial statements as of and for the fiscal years

ended April 30, 2021 and April 24, 2020.

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 30, 2021 and

April 24, 2020 and for each of the three fiscal years ended

April 30, 2021 (fiscal year 2021), April 24, 2020 (fiscal year 2020),

and April 26, 2019 (fiscal year 2019). Fiscal year 2021 was a

53-week year, with the extra week having occurred in the first

fiscal month of the first quarter. Fiscal years 2020 and 2019 were

52-week years.

Cash Equivalents

The Company considers highly liquid investments with maturities

of three months or less from the date of purchase to be cash

equivalents. These investments are carried at cost, which

approximates fair value.

Investments

The Company invests in marketable debt and equity securities,

investments that do not have readily determinable fair values,

and investments accounted for under the equity method.

Marketable debt 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. The Company determines the

appropriate classification of its investments in marketable debt

securities at the time of purchase and reevaluates such

determinations at each balance sheet date. The classification of

marketable debt 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 marketable equity

securities and other securities are long-term, strategic

investments in companies that are in various stages of

development and are included in other assets on the

consolidated balance sheets. Marketable equity securities are

recorded at fair value in the consolidated balance sheets. The

change in fair value of marketable equity securities is recognized

within other non-operating income, net in the consolidated

statements of income. At each reporting period, the Company

makes a qualitative assessment considering impairment

indicators to evaluate whether the investment is impaired. 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

MEDTRONIC PLC 2021 Form 10-K

PART II

Item 8 Financial Statements and Supplementary Data

income or loss and dividends paid. Securities accounted for

under the equity method are reviewed quarterly for changes in

circumstance or the occurrence of events that suggest other

than temporary impairment has occurred.

Accounts Receivable and Allowance for

Doubtful Accounts and Credit Losses

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

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 and depreciated

over the useful lives of the assets using the straight-line method.

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 cost of interest that is incurred in connection

with significant 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. 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.

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. 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

calculates the excess of each reporting unit’s fair value over its

carrying amount, including goodwill, utilizing a discounted cash

flow analysis. Internal operational budgets and long-range

strategic plans are used as a basis for the cash flow analysis. The

Company also utilizes assumptions for working capital, capital

expenditures, and terminal growth rates. The discount rate

applied to the cash flow analysis is based on the weighted

average cost of capital (“WACC”) for each reporting unit. 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 typically 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.

Acquired IPR&D represents the fair value assigned to those

research and development projects 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 project

and discounting the net cash flows back to their present values.

Upon achieving regulatory approval or commercial viability for

the related 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. If the project is

not completed or is terminated or abandoned, the Company

may have an impairment related to the IPR&D, which is charged

to expense. Indefinite-lived intangible assets are tested for

impairment annually in the third quarter of the fiscal year and

whenever events or changes in circumstances indicate that the

carrying amount may be impaired. Impairment is calculated as

the excess of the asset’s carrying value over its fair value. Fair

value is generally determined using a discounted future cash flow

analysis. IPR&D acquired outside of a business combination is

expensed immediately.

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,

MEDTRONIC PLC 2021 Form 10-K 65

PART II

Item 8 Financial Statements and Supplementary Data

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 other operating expense, net 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.

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 15 for assumptions

used in determining pension and post-retirement benefit costs

and liabilities.

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

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 as a fair value hedge or a cash flow hedge, based

upon the exposure being hedged. See Note 7 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:

䡲 Level 1 - Inputs are quoted prices in active markets for

identical assets or liabilities.

䡲 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.

䡲 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.

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 include certain investment securities for

which there is limited market activity such that the determination

MEDTRONIC PLC 2021 Form 10-K

PART II

Item 8 Financial Statements and Supplementary Data

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. For goodwill, other intangible assets, and IPR&D, 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.

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.

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. The Company

recognizes revenue when control is transferred to the 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, control is transferred

when the product is used or implanted. Payment terms vary

depending on the country of sale, type of customer, and type of

product.

If a contract contains more than one performance obligation, the

transaction price is allocated to each performance obligation

based on relative standalone selling price. Shipping and handling

is treated as a fulfillment activity rather than a promised service,

and therefore, is not considered a performance obligation. Taxes

assessed by a governmental authority that are both imposed on,

and concurrent with, a specific revenue producing transaction

and collected by the Company from customers (for example,

sales, use, value added, and some excise taxes) are not included

in revenue. For contracts that have an original duration of one

year or less, the Company uses the practical expedient

applicable to such contracts and does not adjust the transaction

price for the time value of money.

The amount of revenue recognized reflects 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, the stated rebate rates, and other relevant

information. The Company records adjustments to rebates and

returns reserves as increases or decreases of revenue.

The Company records a deferred revenue liability if a customer

pays consideration before the Company transfers a good or

service to the customer. Deferred revenue primarily represents

remote monitoring services and equipment maintenance, for

which consideration is received at the same time as

consideration for the device or equipment. Revenue related to

remote monitoring services and equipment maintenance is

recognized over the service period as time elapses.

Remaining performance obligations include deferred revenue

and amounts the Company expects to receive for goods and

services that have not yet been delivered or provided under

existing, noncancellable contracts with minimum purchase

commitments, primarily related to consumables for previously

sold equipment as well as remote monitoring services and

equipment maintenance. For contracts that have an original

duration of one year or less, the Company has elected the

practical expedient applicable to such contracts and does not

disclose the transaction price for remaining performance

obligations at the end of each reporting period and when the

Company expects to recognize this revenue.

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 $308 million,

$347 million, and $350 million in fiscal years 2021, 2020, and

2019, 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 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.

Income 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

MEDTRONIC PLC 2021 Form 10-K 67

PART II

Item 8 Financial Statements and Supplementary Data

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 Operating Expense, Net

Other operating expense, net primarily includes royalty income

and expense, currency remeasurement and derivative gains and

losses, Puerto Rico excise taxes, changes in fair value of

contingent consideration, changes in amounts accrued for

certain contingent liabilities for a recent acquisition, a

commitment to the Medtronic Foundation, charges associated

with business exits, impairment charges, IPR&D charges, and

income from funded research and development arrangements.

Other Non-Operating Income, Net

Other non-operating income, net includes the non-service

component of net periodic pension and post-retirement benefit

cost, investment gains and losses, and interest income.

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 operating 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.

Recently Adopted Accounting Standards

Current Expected Credit Losses

In June 2016, the Financial Accounting Standards Board (FASB)

issued guidance changing the methodology to be used to

measure credit losses for certain financial instruments and

financial assets, including trade receivables. The new

methodology requires the recognition of an allowance that

reflects the current estimate of credit losses expected to be

incurred over the life of the financial asset. The Company

adopted this guidance using the modified retrospective method

in the first quarter of fiscal year 2021. The adoption of this

guidance did not have a material impact to the Company’s

consolidated financial statements.

Leases

In February 2016, the FASB issued guidance which requires

lessees to recognize right-of-use assets and lease liabilities on

the balance sheet. This guidance also requires additional

qualitative and quantitative lease related disclosures in the notes

to the consolidated financial statements. The Company adopted

this guidance using the modified retrospective method in the

first quarter of fiscal year 2020.

During the implementation, the Company elected the package

of practical expedients available under the transition guidance

that allowed an entity not to reassess whether any expired or

existing contracts are or contain leases, the classification for any

expired or existing leases or any initial direct costs for existing

leases. Further, the Company made accounting policy elections

to not apply the recognition requirements to short-term leases

and to account for lease and nonlease components as a single

lease component.

The adoption of this guidance resulted in the recognition of

right-of-use assets and lease liabilities in an amount of

approximately $1.0 billion, an immaterial cumulative-effect

adjustment to retained earnings as of April 27, 2019, and

expansion of lease related disclosures. The adoption of this

guidance did not have a material impact on the Company’s

consolidated statements of income or consolidated statements

of cash flows.

2. Revenue

The Company’s revenues are principally derived from device-

based medical therapies and services related to cardiac rhythm

disorders, cardiovascular disease, renal disease, neurological

disorders and diseases, spinal conditions and musculoskeletal

trauma, chronic pain, urological and digestive disorders, ear,

nose, and throat conditions, and diabetes conditions as well as

advanced and general surgical care products, respiratory and

monitoring solutions, and neurological surgery technologies.

The Company’s primary customers include healthcare systems,

clinics, third-party healthcare providers, distributors, and other

institutions, including governmental healthcare programs and

group purchasing organizations.

MEDTRONIC PLC 2021 Form 10-K

PART II

Item 8 Financial Statements and Supplementary Data

During the first and fourth quarters of fiscal year 2021, the

Company realigned its divisions within Neuroscience and

Cardiovascular, respectively. As a result, fiscal year 2020 and

2019 revenue has been recast to adjust for these realignments

Additionally, the Company implemented a new operating model

in fiscal year 2021, which was fully operational beginning in the

fourth quarter.

The table below illustrates net sales by segment and division for fiscal years 2021, 2020, and 2019:

Net Sales by Fiscal Year

(in millions) 2021 2020 2019

Cardiac Rhythm & Heart Failure $ 5,584 $ 5,141 $ 5,849

Structural Heart & Aortic 2,834 2,842 2,882

Coronary & Peripheral Vascular 2,354 2,486 2,774

Cardiovascular 10,772 10,468 11,505

Surgical Innovations 5,438 5,513 5,753

Respiratory, Gastrointestinal, & Renal 3,298 2,839 2,725

Medical Surgical 8,737 8,352 8,478

Cranial & Spinal Technologies 4,288 4,082 4,252

Specialty Therapies 2,307 2,147 2,195

Neuromodulation 1,601 1,497 1,736

Neuroscience 8,195 7,725 8,183

Diabetes 2,413 2,368 2,391

Total $ 30,117 $ 28,913 $ 30,557

The table below includes net sales by market geography and segment for fiscal years 2021, 2020, and 2019:

U.S.

(1)

Non-U.S. Developed Markets

(2)

Emerging Markets

(3)

(in millions)

Fiscal Year

2021

Fiscal Year

2020

Fiscal Year

2019

Fiscal Year

2021

Fiscal Year

2020

Fiscal Year

2019

Fiscal Year

2021

Fiscal Year

2020

Fiscal Year

2019

Cardiovascular $ 5,248 $ 5,062 $ 5,750 $ 3,752 $ 3,519 $ 3,767 $ 1,773 $ 1,887 $ 1,988

Medical

Surgical 3,650 3,532 3,630 3,320 3,169 3,250 1,766 1,651 1,598

Neuroscience 5,456 5,122 5,478 1,724 1,659 1,759 1,015 945 946

Diabetes 1,171 1,204 1,336 1,019 940 855 222 224 200

Total $ 15,526 $ 14,919 $ 16,194 $ 9,815 $ 9,287 $ 9,631 $ 4,777 $ 4,707 $ 4,732

(1) U.S. includes the United States and U.S. territories.

(2) Non-U.S. developed markets include Japan, Australia, New Zealand, Korea, Canada, and the countries within Western Europe.

(3) Emerging markets include the countries of the Middle East, Africa, Latin America, Eastern Europe, and the countries of Asia that are not included in

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

At April 30, 2021, $906 million of rebates were classified as other

accrued expenses, and $485 million of rebates were classified as

a reduction of accounts receivable in the consolidated balance

sheet. At April 24, 2020, $706 million of rebates were classified as

other accrued expenses, and $321 million of rebates were

classified as a reduction of accounts receivable in the

consolidated balance sheet. During fiscal year 2021,

adjustments to rebate and return reserves recognized in

revenue that were included in the rebate and return reserves at

the beginning of the period were not material.

Deferred Revenue and Remaining Performance

Obligations

Deferred revenue at April 30, 2021 and April 24, 2020 was

$368 million and $303 million, respectively. At April 30, 2021 and

April 24, 2020, $276 million and $213 million was included in other

accrued expenses, respectively, and $93 million and $90 million

was included in other liabilities, respectively. During the fiscal

year ended April 30, 2021, the Company recognized $236

million of revenue that was included in deferred revenue as

of April 24, 2020.

At April 30, 2021, the estimated revenue expected to be

recognized in future periods related to performance obligations

that are unsatisfied for executed contracts with an original

duration of one year or more was approximately $1.3 billion. The

Company expects to recognize revenue on the majority of these

remaining performance obligations over the next four years.

MEDTRONIC PLC 2021 Form 10-K 69

PART II

Item 8 Financial Statements and Supplementary Data

3. Acquisitions

The Company had acquisitions during fiscal years 2021 and 2020

that were accounted for as business combinations. The assets

and liabilities of businesses acquired were recorded and

consolidated on the acquisition date at their respective fair

values. Goodwill resulting from business combinations is largely

attributable to future yet to be defined technologies, new

customer relationships, existing workforce of the acquired

businesses, and synergies expected to arise after the

Company’s acquisition of these businesses. The pro forma

impact of acquisitions during fiscal years 2021 and 2020 was not

significant, either individually or in the aggregate, to the

consolidated 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.

Fiscal Year 2021

The acquisition date fair value of net assets acquired during fiscal

year 2021 was $1.2 billion, consisting of $1.4 billion of assets

acquired and $161 million of liabilities assumed. Based upon

preliminary valuations, assets acquired were primarily comprised

of $417 million of technology-based intangible assets and

$13 million of customer-related intangible assets with estimated

useful lives ranging from 8 to 15 years, and $816 million of

goodwill. The goodwill is not deductible for tax purposes. The

Company recognized $253 million of contingent consideration

liabilities in connection with business combinations during fiscal

year 2021, which are comprised of revenue and regulatory

milestone-based payments. Additionally, the Company

recognized a gain of $132 million related to a change in amounts

accrued for certain contingent liabilities from a recent

acquisition. The benefit was recognized in other operating

expense, net in the consolidated statements of income as the

purchase accounting was finalized in fiscal year 2020. Purchase

price allocation adjustments for fiscal year 2021 business

combinations were not significant.

Fiscal Year 2020

The acquisition date fair value of net assets acquired during fiscal

year 2020 was $612 million, consisting of $679 million of assets

acquired and $67 million of liabilities assumed. Assets acquired

were primarily comprised of $236 million of technology-based

intangible assets and $26 million of customer-related intangible

assets with estimated useful lives ranging from 8 to 16 years,

$333 million of goodwill, and $40 million of inventory. The

goodwill is not deductible for tax purposes. The Company

recognized $80 million of contingent consideration liabilities in

connection with business combinations during fiscal year 2020,

which are comprised of revenue and regulatory milestone-based

payments. Purchase price allocation adjustments for fiscal year

2020 business combinations were not significant.

Contingent Consideration

The fair value of contingent consideration at April 30, 2021 and

April 24, 2020 was $270 million and $280 million, respectively. At

April 30, 2021, $78 million was recorded in other accrued

expenses, and $192 million was recorded in other liabilities on the

consolidated balance sheets. At April 24, 2020, $112 million was

reflected in other accrued expenses, and $168 million was

reflected in other liabilities on the consolidated balance sheets.

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

Fiscal Year

(in millions) 2021 2020

Beginning Balance $ 280 $ 222

Purchase price contingent consideration 253 125

Payments (299) (34)

Change in fair value 36 (33)

Ending Balance $ 270 $ 280

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

significant unobservable inputs:

(in millions)

Fair Value at

April 30, 2021 Unobservable Input Range

Weighted

Average

(1)

Discount rate 11.2%-31.6% 17.0%

Revenue and other performance-based payments $ 250 Probability of payment 30%-100% 99.1%

Projected fiscal year of payment 2022-2027 2025

Discount rate 5.5% 5.5%

Product development and other milestone-based payments $ 20 Probability of payment 100% 100%

Projected fiscal year of payment 2022-2027 2025

(1) Unobservable inputs were weighted by the relative fair value of the contingent consideration liability. For projected fiscal year of payment, the

amount represents the median of the inputs and is not a weighted average.

70 MEDTRONIC PLC 2021 Form 10-K

PART II

Item 8 Financial Statements and Supplementary Data

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.

The Company estimates that, in connection with its Enterprise

Excellence restructuring program, it will recognize pre-tax exit

and disposal costs and other costs 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 40 percent of the estimated charges are related

to employee termination benefits. The remaining charges are

costs associated with the restructuring program, such as salaries

and benefits for employees supporting the program, including

program management and transition teams, and strategic and

operational consulting services related to the three objectives of

the program discussed above. These charges are recognized

within restructuring charges, net, cost of products sold, and

selling, general, and administrative expense in the consolidated

statements of income.

For fiscal years 2021, 2020 and 2019, the Company recognized

net charges of $349 million, $441 million, and $424 million,

respectively. For fiscal years 2021, 2020 and 2019, charges

included $128 million, $155 million, and $91 million, respectively,

recognized within cost of products sold, and $169 million,

$168 million, and $118 million, respectively, recognized within

selling, general, and administrative expense in the consolidated

statements of income.

The following table summarizes the activity related to the Enterprise Excellence restructuring program for fiscal years 2021, 2020, and

2019:

(in millions)

Employee

Termination Benefits

Associated

Costs

(1)

Asset

Write-downs

Other

Costs Total

April 27, 2018 $ 27 $ 2 $ — $ — $ 29

Charges 192 193 17 22 424

Cash payments (118) (186) — (10) (314)

Settled non-cash — — (17) — (17)

April 26, 2019 101 9 — 12 122

Charges 129 300 24 9 462

Cash payments (128) (290) — (9) (427)

Settled non-cash — — (24) — (24)

Accrual adjustments

(2)

(13) — — (8) (21)

April 24, 2020 89 19 — 4 112

Charges 66 295 — 4 365

Cash payments (77) (296) — (5) (378)

Accrual adjustments

(2)

(14) — — (2) (16)

April 30, 2021 $ 64 $ 18 $ — $ 1 $ 83

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

consulting expenses.

(2) Accrual adjustments relate to certain employees identified for termination finding other positions within Medtronic and contract terminations being

settled for less than originally estimated.

Simplification

In the first quarter of fiscal year 2021, the Company initiated the Simplification restructuring program, designed to make the Company a

more nimble and competitive organization focused on accelerating innovation, enhancing the customer experience, driving revenue

growth, and winning market share, while also more efficiently and effectively leveraging the enterprise scale. Under the oversight of the

portfolio leaders, this new operating model, which became fully operational the beginning of the fourth quarter of fiscal year 2021, will

simplify the Company’s organizational structure and accelerate decision-making and execution. Primary activities of the restructuring

program will include reorganizing the Company into a portfolio-level structure, including the creation of highly focused, accountable, and

empowered Operating Units (OUs), consolidating Operations at the enterprise level, establishing Technology Development Centers in

areas where the Company has deep core technology competencies to be leveraged by multiple OUs, and forming dedicated sales

organizations that leverage the Company’s scale but move with the same agility as smaller, local competitors.

MEDTRONIC PLC 2021 Form 10-K 71

PART II

Item 8 Financial Statements and Supplementary Data

The Company estimates that, in connection with its

Simplification restructuring program, it will recognize pre-tax exit

and disposal costs and other costs across all segments of

approximately $400 million to $450 million, the majority of which

are expected to be incurred by the end of fiscal year 2022.

Approximately three quarters of the estimated charges are

related to employee termination benefits. The remaining

charges are costs associated with the restructuring program,

such as salaries for employees supporting the program and

consulting expenses to execute the reorganization of our

business into a portfolio-like structure as discussed above.

These charges are recognized within restructuring charges, net

and selling, general, and administrative expense in the

consolidated statements of income.

For fiscal year 2021, the Company recognized net charges of

$268 million, which included $97 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

restructuring charges below, as they are associated with costs

that are accounted for under the pension and post-retirement

rules. See Note 15 for further discussion on the incremental

defined benefit pension and post-retirement expenses. The

charges recognized for fiscal year 2021 included $27 million

recognized within selling, general, and administrative expense in

the consolidated statements of income.

The following table summarizes the activity related to the Simplification restructuring program for fiscal year 2021:

(in millions)

Employee

Termination Benefits

Associated

Costs

(1)

Total

April 24, 2020 $— $—$—

Charges 147 27 174

Cash payments (85) (23) (108)

Accrual adjustments

(2)

(3) — (3)

April 30, 2021 $59 $4$63

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

consulting expenses.

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

72 MEDTRONIC PLC 2021 Form 10-K

PART II

Item 8 Financial Statements and Supplementary Data

5. Financial Instruments

Debt Securities

The Company holds investments in marketable debt securities that are classified and accounted for as available-for-sale and are

remeasured on a recurring basis. The following tables summarize the Company’s investments in available-for-sale debt securities by

significant investment category and the related consolidated balance sheet classification at April 30, 2021 and April 24, 2020:

April 30, 2021

Valuation Balance Sheet Classification

(in millions) Cost

Unrealized

Gains

Unrealized

Losses Fair Value Investments Other Assets

Level 1:

U.S. government and agency securities $ 505 $ 26 $ (3) $ 528 $ 528 $ —

Level 2:

Corporate debt securities 4,557 103 (13) 4,647 4,647 —

U.S. government and agency securities 810 — (7) 804 804 —

Mortgage-backed securities 645 21 (16) 650 650 —

Non-U.S. government and agency securities 31 1 — 33 33 —

Certificates of deposit 19 — — 19 19

Other asset-backed securities 534 4 (1) 537 537 —

Debt funds 7 — — 7 7 —

Total Level 2 6,603 129 (36) 6,696 6,696 —

Level 3:

Auction rate securities 36 — (3) 33 — 33

Total available-for-sale debt securities $ 7,144 $ 155 $ (42) $ 7,257 $ 7,224 $ 33

April 24, 2020

Valuation Balance Sheet Classification

(in millions) Cost

Unrealized

Gains

Unrealized

Losses Fair Value Investments Other Assets

Level 1:

U.S. government and agency securities $ 542 $ 47 $ — $ 589 $ 589 $ —

Level 2:

Corporate debt securities 4,285 66 (90) 4,261 4,261 —

U.S. government and agency securities 746 1 — 747 747 —

Mortgage-backed securities 705 20 (28) 697 697 —

Non-U.S. government and agency securities 34 — — 34 34 —

Other asset-backed securities 499 1 (20) 480 480 —

Total Level 2 6,269 88 (138) 6,219 6,219 —

Level 3:

Auction rate securities 36 — (3) 33 — 33

Total available-for-sale debt securities $ 6,847 $ 135 $ (141) $ 6,841 $ 6,808 $ 33

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

sheets.

MEDTRONIC PLC 2021 Form 10-K 73

PART II

Item 8 Financial Statements and Supplementary Data

The following tables present the gross unrealized losses and fair values of the Company’s available-for-sale debt securities that have

been in a continuous unrealized loss position deemed to be temporary, aggregated by investment category at April 30, 2021 and

April 24, 2020:

April 30, 2021

Less than 12 months More than 12 months

(in millions) Fair Value

Unrealized

Losses Fair Value

Unrealized

Losses

U.S. government and agency securities $ 946 $ (10) $ — $ —

Corporate debt securities 1,437 — 3,209 (13)

Mortgage-backed securities 1 — 650 (16)

Other asset-backed securities 6 — 531 (1)

Auction rate securities — — 33 (3)

Total $ 2,389 $ (10) $ 4,423 $ (32)

April 24, 2020

Less than 12 months More than 12 months

(in millions) Fair Value

Unrealized

Losses Fair Value

Unrealized

Losses

Corporate debt securities $ 1,368 $ (2) $ 2,893 $ (88)

Mortgage-backed securities 35 (1) 663 (27)

Other asset-backed securities 17 — 463 (20)

Auction rate securities 33 (3) — —

Total $ 1,453 $ (6) $ 4,019 $ (135)

The Company reviews the fair value hierarchy classification on a

quarterly basis. Changes in the ability to observe valuation inputs

may result in a reclassification of levels for certain securities

within the fair value hierarchy. There were no transfers into or

out of Level 3 during the fiscal years ended April 30, 2021 and

April 24, 2020. When a determination is made to classify an asset

or liability within Level 3, the determination is based upon the

significance of the unobservable inputs to the overall fair value

measurement.

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

(in millions) April 30, 2021 April 24, 2020 April 26, 2019

Proceeds from sales and maturities $ 10,420 $ 9,559 $ 3,718

Gross realized gains 15 25 18

Gross realized losses (14) (22) (62)

During the fiscal year ended April 30, 2021, the Company had

proceeds from maturities of investments classified as held to

maturity of $911 million.

The April 30, 2021 balance of available-for-sale debt securities

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) April 30, 2021

Due in one year or less $ 1,891

Due after one year through five years 2,862

Due after five years through ten years 1,838

Due after ten years 666

Total debt securities $ 7,257

74 MEDTRONIC PLC 2021 Form 10-K

PART II

Item 8 Financial Statements and Supplementary Data

Equity Securities, Equity Method

Investments, and Other Investments

The Company commonly holds investments in equity securities

with readily determinable fair values, equity investments without

readily determinable fair values, investments accounted for

under the equity method, and other investments. Equity

securities with readily determinable fair values are included within

Level 1 of the fair value hierarchy, as they are measured using

quoted market prices. Equity method investments and

investments without readily determinable fair values 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.

The following table summarizes the Company’s equity and other investments at April 30, 2021 and April 24, 2020, which are classified as

other assets in the consolidated balance sheets:

(in millions) April 30, 2021 April 24, 2020

Investments with readily determinable fair values (marketable equity securities) $ 74 $ 18

Investments without readily determinable fair values 537 391

Equity method and other investments 76 71

Total equity and other investments $ 687 $ 480

The table below includes activity related to the Company’s portfolio of equity and other investments. Gains and losses on equity and

other investments are recognized in other non-operating income, net in the consolidated statements of income.

(in millions) April 30, 2021 April 24, 2020 April 26, 2019

Proceeds from sales $ 13 $ 15 $ 964

Gross gains 68 17 134

Gross losses (3) (30) (30)

Recognized impairment losses (4) (4) (45)

During the fiscal year ended April 30, 2021, there were

$63 million of net unrealized gains on equity securities and other

investments still held at April 30, 2021. During the fiscal year

ended April 24, 2020, there were $15 million of net unrealized

losses on equity securities and other investments still held at

April 24, 2020.

6. Financing Arrangements

Current debt obligations consisted of the following:

(in millions) April 30, 2021 April 24, 2020

Bank borrowings $ 2 $ 325

0.000 percent two-year 2019 senior notes — 1,631

Floating rate two-year 2019 senior notes — 815

Finance lease obligations 95

Current debt obligations $ 11 $ 2,776

MEDTRONIC PLC 2021 Form 10-K 75

PART II

Item 8 Financial Statements and Supplementary Data

Bank Borrowings

Outstanding bank borrowings at April 30, 2021 were not

significant. Outstanding bank borrowings at April 24, 2020 were

short-term advances primarily to non-U.S. subsidiaries under

credit agreements with various banks. These bank borrowings

consisted primarily of borrowings in Japanese Yen at an interest

rate of 0.21%, and were 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 United States Dollar-

denominated unsecured commercial paper notes (the 2015 CP

Program) on a private placement basis, and on January 31, 2020

Medtronic Luxco entered into various agreements pursuant to

which Medtronic Luxco may issue Euro-denominated unsecured

commercial paper notes (the 2020 CP Program) on a private

placement basis. The Maximum aggregate amount outstanding

at any time under the 2015 CP Program and the 2020 CP

Program together may not exceed the equivalent of $3.5 billion.

The Company and Medtronic, Inc. have guaranteed the

obligations of Medtronic Luxco under the 2015 CP Program and

the 2020 CP Program.

There was no commercial paper outstanding at April 30, 2021

and April 24, 2020 or during fiscal year 2021. During fiscal year

2020, the weighted average original maturity of the commercial

paper outstanding was approximately 7 days and the weighted

average interest rate was 2.31 percent. The issuance of

commercial paper reduces the amount of credit available under

the Company’s existing credit facility, defined below.

Line of Credit

On December 12, 2020, Medtronic Luxco, as borrower, entered

into an amendment to its amended and restated credit

agreement (Credit Facility), by and among Medtronic, Medtronic,

Inc., Medtronic Luxco, the lenders from time to time party

thereto, and Bank of America, N.A., as administrative agent and

issuing bank, extending the maturity date of the Credit Facility to

December 2025.

The Credit Facility provides for a $3.5 billion five-year unsecured

revolving credit facility (Credit Facility). 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 Credit Facility provides the

Company with the ability to increase its borrowing capacity by an

additional $1.0 billion at any time during the term of the

agreement. The Company and Medtronic, Inc. have guaranteed

the obligations of the borrowers under the Credit Facility, and

Medtronic Luxco will also guarantee the obligations of any

designated borrower. The Credit Facility includes a multi-

currency borrowing feature for certain specified foreign

currencies. At April 30, 2021 and April 24, 2020, no amounts

were outstanding under the Credit Facility.

Interest rates on advances on the Credit Facility are determined

by a pricing matrix based on the Company’s long-term debt

ratings, assigned by Standard & Poor’s Ratings Services and

Moody’s Investors Service. Facility fees are payable on the Credit

Facility and are determined in the same manner as the interest

rates. The Company is in compliance with all covenants related

to the Credit Facility.

MEDTRONIC PLC 2021 Form 10-K

PART II

Item 8 Financial Statements and Supplementary Data

Long-term debt consisted of the following:

April 30, 2021 April 24, 2020

(in millions, except interest rates)

Maturity by

Fiscal Year Amount

Effective

Interest Rate Amount

Effective

Interest Rate

3.150 percent seven-year 2015 senior notes 2022 $ — —% $ 1,534 3.29%

3.200 percent ten-year 2012 CIFSA senior notes 2023 — — 650 2.72

2.750 percent ten-year 2013 senior notes 2023 — — 530 3.25

0.000 percent three-year 2019 senior notes 2023 907 0.08 815 0.09

0.375 percent four-year 2019 senior notes 2023 1,813 0.55 1,631 0.56

0.000 percent two-year 2020 senior notes 2023 1,511 0.12 — —

2.950 percent ten-year 2013 CIFSA senior notes 2024 — — 310 2.71

3.625 percent ten-year 2014 senior notes 2024 — — 432 3.61

3.500 percent ten-year 2015 senior notes 2025 1,890 3.74 2,700 3.74

0.250 percent six-year 2019 senior notes 2026 1,209 0.43 1,087 0.44

0.000 percent five-year 2020 senior notes 2026 1,209 0.22 — —

1.125 percent eight-year 2019 senior notes 2027 1,813 1.24 1,631 1.25

3.350 percent ten-year 2017 senior notes 2027 368 3.53 368 3.53

0.375 percent eight-year 2020 senior notes 2029 1,209 0.51 — —

1.625 percent twelve-year 2019 senior notes 2031 1,209 1.74 1,087 1.75

1.000 percent twelve-year 2019 senior notes 2032 1,209 1.05 1,087 1.06

0.750 percent twelve-year 2020 senior notes 2033 1,209 0.81 — —

4.375 percent twenty-year 2015 senior notes 2035 1,932 4.47 1,932 4.47

6.550 percent thirty-year 2007 CIFSA senior notes 2038 253 4.67 253 4.68

2.250 percent twenty-year 2019 senior notes 2039 1,209 2.34 1,087 2.34

6.500 percent thirty-year 2009 senior notes 2039 158 6.56 158 6.56

1.500 percent twenty-year 2019 senior notes 2040 1,209 1.58 1,087 1.58

5.550 percent thirty-year 2010 senior notes 2040 224 5.58 224 5.58

1.375 percent twenty-year 2020 senior notes 2041 1,209 1.46 — —

4.500 percent thirty-year 2012 senior notes 2042 105 4.54 105 4.54

4.000 percent thirty-year 2013 senior notes 2043 305 4.09 305 4.10

4.625 percent thirty-year 2014 senior notes 2044 127 4.67 127 4.67

4.625 percent thirty-year 2015 senior notes 2045 1,813 4.69 1,813 4.67

1.750 percent thirty-year 2019 senior notes 2050 1,209 1.87 1,087 1.87

1.625 percent thirty-year 2020 senior notes 2051 1,209 1.75 — —

Bank borrowings N/A — — 55 2.11

Finance lease obligations 2022-2059 62 9.29 45 8.93

Debt discount, net 2022-2051 (75) — (15) —

Deferred financing costs 2022-2051 (125) — (104) —

Long-term debt $ 26,378 $ 22,021

Senior Notes

The Company has outstanding unsecured senior obligations,

described as senior notes in the tables above (collectively, the

Senior Notes). The Senior Notes rank equally with all other

unsecured and unsubordinated indebtedness of the Company.

The Company is in compliance with all covenants related to the

Seniors notes.

In June 2019, Medtronic Luxco issued six tranches of Euro-

denominated Senior Notes with an aggregate principal of

€5.0 billion, with maturities ranging from fiscal year 2021 to fiscal

year 2050, resulting in cash proceeds of approximately

$5.6 billion, net of discounts and issuance costs. The Company

used the net proceeds of the offering to fund the cash tender

offer and early redemption of $5.2 billion of Medtronic Inc.,

CIFSA, and Medtronic Luxco Senior Notes for $5.6 billion of total

consideration. The Company recognized a loss on debt

extinguishment of $413 million in fiscal year 2020, which primarily

included cash premiums and accelerated amortization of

deferred financing costs and debt discounts and premiums. The

loss was recognized in interest expense in the consolidated

statement of income.

MEDTRONIC PLC 2021 Form 10-K 77

PART II

Item 8 Financial Statements and Supplementary Data

In September 2020, Medtronic Luxco issued an additional six

tranches of Euro-denominated Senior Notes with an aggregate

principal of €6.3 billion, with maturities ranging from fiscal year

2023 to fiscal year 2051, resulting in cash proceeds of

approximately $7.2 billion, net of discounts and issuance costs.

The Company used the net proceeds of the offering to fund the

early redemption of $4.3 billion of Medtronic Inc. and CIFSA

Senior Notes and €1.5 billion of Medtronic Luxco Senior Notes

for $6.3 billion of total consideration in October 2020.

Additionally, the Company used the proceeds to repay its

€750 million floating rate senior notes at maturity in March 2021.

The Company recognized a loss on debt extinguishment of

$308 million in fiscal year 2021, which primarily included cash

premiums and accelerated amortization of deferred financing

costs and debt discounts and premiums. The loss was

recognized in interest expense in the consolidated statement of

income.

The Euro-denominated debt issued in June 2019 and

September 2020 is designated as a net investment hedge of

certain of the Company’s European operations. Refer to Note 7

for additional information regarding the net investment hedge.

Term Loan Agreements

On May 12, 2020, Medtronic Luxco entered into a term loan

agreement (Loan Agreement) by and among Medtronic Luxco,

Medtronic plc, Medtronic, Inc., and Mizuho Bank, Ltd. as

administrative agent and as lender. The Loan Agreement

provided an unsecured term loan in an aggregate principal

amount of up to ¥300 billion, with a term of six months and the

option to extend for an additional six months at Medtronic

Luxco’s option. On May 13, 2020, Medtronic Luxco borrowed the

entire amount of the term loan under the Loan Agreement. The

Japanese Yen-denominated debt was designated as a net

investment hedge of certain of our Japanese operations.

Borrowings under the Loan Agreement carried interest at the

TIBOR Rate (as defined in the Loan Agreement) plus a margin of

0.50% per annum. Medtronic plc and Medtronic, Inc. guaranteed

the obligations of Medtronic Luxco under the Loan Agreement.

On November 12, 2020, the Company exercised its option to

extend the term loan for an additional six months. During the

fourth quarter of fiscal year 2021, the Company de-designated

the Yen-denominated debt as a net investment hedge and

repaid the term loan in full, including interest.

Contractual maturities of debt for the next five fiscal years and thereafter, excluding deferred financing costs and debt discount, net, are

as follows:

(in millions)

2022 $11

2023 4,237

2024 6

2025 1,895

2026 2,423

Thereafter 18,016

Total $ 26,588

Financial Instruments Not Measured at Fair

Value

At April 30, 2021, the estimated fair value of the Company’s

Senior Notes was $28.6 billion compared to a principal value of

$26.5 billion. At April 24, 2020 the estimated fair value was

$27.1 billion compared to a principal value of $24.5 billion. There

was no commercial paper outstanding during fiscal year 2021.

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.

7. Derivatives and Currency Exchange Risk Management

The Company uses operational and economic hedges, including

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. Currencies of our derivative

instruments include the Euro, Japanese Yen, Chinese Yuan, and

others. 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 $14.7 billion and $11.9 billion at

April 30, 2021 and April 24, 2020, respectively.

The Company also uses derivative and non-derivative

instruments to manage the impact of currency exchange rate

changes on net investments in foreign currency-denominated

operations. The information that follows explains the various

types of derivatives and financial instruments used by the

Company, reasons the Company uses such instruments, and the

impact such instruments have on the Company’s consolidated

balance sheets and statements of income.

MEDTRONIC PLC 2021 Form 10-K

PART II

Item 8 Financial Statements and Supplementary Data

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 freestanding currency exchange rate

contracts outstanding at April 30, 2021 and April 24, 2020 was

$5.7 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 uses total return swaps 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 30, 2021 and April 24, 2020 was $243 million

and $181 million, respectively. The Company’s total return swaps

are not designated as hedges, and therefore, changes in the

value of these instruments are recognized in earnings. The cash

flows related to the Company’s freestanding derivative

contracts are reported as operating activities or financing

activities, depending on the nature of the underlying hedged

item, in the consolidated statements of cash flows.

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 2021, 2020, and 2019 were as follows:

Fiscal Year

(in millions) Classification 2021 2020 2019

Currency exchange rate contracts Other operating expense, net $ 247 $ (133) $ (218)

Total return swaps Other operating expense, net (81) 7 (18)

Total $ 166 $ (126) $ (236)

Cash Flow Hedges

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. The gross notional amount of these

contracts, designated as cash flow hedges, outstanding at

April 30, 2021 and April 24, 2020 was $9.0 billion and $7.0 billion,

respectively, and will mature within the subsequent three-year

period. For derivative instruments that are designated and qualify

as a cash flow hedge, the gain or loss on the derivative

instrument is reported as a component of accumulated other

comprehensive loss. The gain or loss on the derivative

instrument is reclassified into earnings and is included in other

operating 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.

Amounts excluded from the measurement of hedge

effectiveness are recognized in earnings in the current period.

The cash flows related to all of the Company’s derivative

instruments designated as cash flow hedges are reported as

operating activities in the consolidated statements of cash flows.

No components of the hedge contracts were excluded in the

measurement of hedge effectiveness, and no forward contracts

designated as cash flow hedges were derecognized or

discontinued during fiscal years 2021, 2020, or 2019.

The amount of the (gains) losses recognized in accumulated other comprehensive loss (AOCI) related to currency exchange rate

contract derivative instruments designated as cash flow hedges for fiscal years 2021, 2020, and 2019 were as follows:

Fiscal Year

(in millions) 2021 2020 2019

Currency exchange rate contracts $ 627 $ (397) $ (615)

MEDTRONIC PLC 2021 Form 10-K 79

PART II

Item 8 Financial Statements and Supplementary Data

The amount of the (gains) losses recognized in the consolidated statements of income related to derivative instruments designated as

cash flow hedges for fiscal years 2021, 2020, and 2019 were as follows:

Fiscal Year

2021 2020 2019

(in millions)

Other

operating

expense, net

Cost of

products

sold

Other

operating

expense, net

Cost of

products sold

Other

operating

expense, net

Cost of

products

sold

Total amounts of income and expense line

items presented in the consolidated

statements of income in which the effects

of cash flow hedges are recorded $ 315 $ 10,483 $ 71 $ 9,424 $ 258 $ 9,155

Currency exchange rate contracts

designated as cash flow hedges:

Amount of (gain) loss reclassified from

AOCI into income (17) 15 (335) — (108) —

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 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 gains or losses are then reclassified into interest

expense over the term of the related debt. For fiscal years 2021,

2020, and 2019, the reclassifications of net (gains) losses on

forward starting interest rate derivative instruments from

accumulated other comprehensive loss to interest expense

were not significant.

At April 30, 2021 and April 24, 2020, the Company had

$253 million in after-tax unrealized losses and $266 million in

after-tax net unrealized gains, respectively, associated with cash

flow hedging instruments recorded in accumulated other

comprehensive loss. The Company expects that $146 million of

after-tax net unrealized losses at April 30, 2021 will be

recognized in the consolidated statements of income over the

next 12 months.

Net Investment Hedges

The Company has designated Euro-denominated debt as a net

investment hedge of certain of its European operations to

manage the exposure to currency and exchange rate

movements for foreign currency-denominated net investments

in foreign operations. At April 30, 2021, the Company had

€16.0 billion, or $19.3 billion, of outstanding Euro-denominated

debt designated as a hedge of its net investment in certain of its

European operations, which will mature in fiscal years 2023

through fiscal year 2051.

In February 2021, the Company de-designated ¥300 billion of

outstanding Yen-denominated debt previously designated as a

net investment hedge and concurrently entered into

freestanding forward derivative contracts with a total notional

value of ¥300 billion, or approximately $2.9 billion. These forward

contracts were not designated as hedges. The Company used

the proceeds from these forward derivative contracts to repay

the ¥300 billion of Yen-denominated debt in conjunction with the

maturity of these forward contracts in March and April of 2021.

Additionally, during the first quarter of fiscal year 2020, the

Company entered into and settled forward currency exchange

rate contracts to manage the exposure to exchange rate

movements in anticipation of the issuance of Euro-denominated

senior notes. Certain of these forward currency exchange rate

contracts were designated as a net investment hedge of certain

of the Company’s European operations. These contracts

matured in conjunction with the issuance of the Euro-

denominated debt in the first quarter of fiscal year 2020.

For instruments that are designated and qualify as net

investment hedges, the gains or losses are reported as a

component of accumulated other comprehensive loss. The gains

or losses are reclassified into earnings upon a liquidation event or

deconsolidation of the foreign subsidiary. Amounts excluded

from the assessment of effectiveness are recognized in other

operating expense, net. The cash flows related to the Company’s

derivative instruments designated as net investment hedges are

reported as investing activities in the consolidated statements of

cash flows.

At April 30, 2021 and April 24, 2020, the Company had $1.5 billion

in after-tax unrealized losses, and $236 million in after-tax

unrealized gains associated with net investment hedges

recorded in accumulated other comprehensive loss, respectively.

The Company does not expect any of the after-tax unrealized

losses at April 30, 2021 to be recognized in the consolidated

statements of income over the next 12 months.

The Company did not recognize any gains or losses during fiscal

years 2021, 2020, or 2019 on instruments that no longer qualify

as net investment hedges.

MEDTRONIC PLC 2021 Form 10-K

PART II

Item 8 Financial Statements and Supplementary Data

The amount and classifications of the (gains) losses recognized in the consolidated statements of income for the portion of the net

investment hedges excluded from the measurement of hedge effectiveness were as follows:

Fiscal Year

(in millions) Classification 2021 2020 2019

Net investment hedges Other operating expense, net $ — $ (9) $ (12)

The amount of the (gains) losses recognized in AOCI related to instruments designated as net investment hedges for fiscal year 2021,

2020, or 2019 were as follows:

Fiscal Year

(in millions) 2021 2020 2019

Net investment hedges $ (1,694) $ (405) $ (88)

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 30, 2021 and April 24, 2020. 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.

April 30, 2021

Derivative Assets Derivative Liabilities

(in millions) Balance Sheet Classification Fair Value Balance Sheet Classification Fair Value

Derivatives designated as hedging instruments

Currency exchange rate contracts Other current assets $ 49 Other accrued expenses $ 190

Currency exchange rate contracts Other assets 22 Other liabilities 94

Total derivatives designated as hedging

instruments 70 285

Derivatives not designated as hedging instruments

Currency exchange rate contracts Other current assets 14 Other accrued expenses 11

Total return swaps Other current assets 18 Other accrued expenses —

Total derivatives not designated as hedging

instruments 32 11

Total derivatives $ 102 $ 296

April 24, 2020

Derivative Assets Derivative Liabilities

(in millions) Balance Sheet Classification Fair Value Balance Sheet Classification Fair Value

Derivatives designated as hedging instruments

Currency exchange rate contracts Other current assets $ 271 Other accrued expenses $ 2

Currency exchange rate contracts Other assets 103 Other liabilities 2

Total derivatives designated as hedging

instruments 374 4

Derivatives not designated as hedging instruments

Currency exchange rate contracts Other current assets 25 Other accrued expenses 13

Total return swaps Other current assets — Other accrued expenses 25

Cross-currency interest rate contracts Other current assets 3 Other accrued expenses —

Total derivatives not designated as hedging

instruments 28 38

Total derivatives $ 402 $ 42

MEDTRONIC PLC 2021 Form 10-K 81

PART II

Item 8 Financial Statements and Supplementary Data

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

basis:

April 30, 2021 April 24, 2020

(in millions) Level 1 Level 2 Level 1 Level 2

Derivative assets $ 85 $ 18 $ 399 $ 3

Derivative liabilities 296 — 17 25

The Company has elected to present the fair value of derivative

assets and liabilities within the consolidated balance sheets on a

gross basis, even when derivative transactions are subject to

master netting arrangements and may otherwise qualify for net

presentation. The cash flows related to collateral posted and

received are reported gross as investing and financing activities,

respectively, in the consolidated statements of cash flows.

The following tables provide information as if the Company had

elected to offset the asset and liability balances of derivative

instruments, netted in accordance with various criteria as

stipulated by the terms of the master netting arrangements with

each of the counterparties. Derivatives not subject to master

netting arrangements are not eligible for net presentation.

April 30, 2021

Gross Amount Not Offset on the

Balance Sheet

(in millions)

Gross Amount of

Recognized Assets

(Liabilities)

Financial

Instruments

Cash Collateral

(Received)

Posted

Net

Amount

Derivative assets:

Currency exchange rate contracts $ 85 $ (83) $ — $ 1

Total return swaps 18 — — 18

102 (83) — 19

Derivative liabilities:

Currency exchange rate contracts (296) 83 46 (167)

Total $ 193 $ — $ 46 $ (148)

April 24, 2020

Gross Amount Not Offset on the

Balance Sheet

(in millions)

Gross Amount of

Recognized Assets

(Liabilities)

Financial

Instruments

Cash Collateral

(Received)

Posted

Net

Amount

Derivative assets:

Currency exchange rate contracts $ 399 $ (17) $ (48) $ 334

Cross-currency interest rate contracts 3 — — 3

402 (17) (48) 337

Derivative liabilities:

Currency exchange rate contracts (17) 17 — —

Total return swaps (25) — — (25)

(42) 17 — (25)

Total $ 360 $ — $ (48) $ 312

82 MEDTRONIC PLC 2021 Form 10-K

PART II

Item 8 Financial Statements and Supplementary Data

Concentrations of Credit Risk

Financial instruments, which potentially subject the Company to

significant concentrations of credit risk, consist principally of

interest-bearing investments, forward exchange derivative

contracts, and trade accounts receivable. Global concentrations

of credit risk with respect to trade accounts receivable are

limited due to the large number of customers and their

dispersion across many geographic areas. The Company

monitors the creditworthiness of its customers to which it grants

credit terms in the normal course of business.

The Company maintains cash and cash equivalents,

investments, and certain other financial instruments (including

currency exchange rate and interest rate derivative contracts)

with various major financial institutions. The Company performs

periodic evaluations of the relative credit standings of these

financial institutions and limits the amount of credit exposure

with any one institution. In addition, the Company has collateral

credit agreements with its primary derivatives counterparties.

Under these agreements, either party is required to post eligible

collateral when the market value of transactions covered by the

agreement exceeds specific thresholds, thus limiting credit

exposure for both parties. As of April 30, 2021, the Company

posted net cash collateral of $46 million to its counterparties. As

of April 24, 2020, the Company received net cash collateral of

$48 million from its counterparties. Cash collateral posted is

recorded as a reduction in cash and cash equivalents, with the

offset recorded as an increase in other current assets in the

consolidated balance sheets. Cash collateral received is

recorded as an increase in cash and cash equivalents with the

offset recorded in other accrued expenses in the consolidated

balance sheets.

8. Inventories

Inventory balances, net of reserves, were as follows:

(in millions) April 30, 2021 April 24, 2020

Finished goods $ 2,906 $ 2,874

Work-in-process 611 608

Raw materials 796 747

Total $ 4,313 $ 4,229

9. Goodwill and Other Intangible Assets

Goodwill

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

(in millions) Cardiovascular Medical Surgical Neuroscience Diabetes Total

April 26, 2019 $ 6,854 $ 20,381 $ 10,821 $ 1,903 $ 39,959

Goodwill as a result of acquisitions 19 227 71 16 333

Purchase accounting adjustments 7 2 120 (5) 124

Currency translation and other (49) (434) (92) — (575)

April 24, 2020 6,831 20,176 10,920 1,914 39,841

Goodwill as a result of acquisitions 248 12 210 346 816

Purchase accounting adjustments (2) (5) 3 (4) (8)

Currency translation and other 132 1,012 167 1 1,312

April 30, 2021 $ 7,209 $ 21,195 $ 11,300 $ 2,257 $ 41,961

The Company did not recognize any goodwill impairments during fiscal years 2021, 2020, or 2019.

MEDTRONIC PLC 2021 Form 10-K 83

PART II

Item 8 Financial Statements and Supplementary Data

Intangible Assets

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

April 30, 2021 April 24, 2020

(in millions)

Gross Carrying

Amount

Accumulated

Amortization

Gross Carrying

Amount

Accumulated

Amortization

Definite-lived:

Customer-related $ 17,036 $ (6,058) $ 16,963 $ (5,065)

Purchased technology and patents 11,286 (5,156) 10,742 (4,354)

Trademarks and tradenames 475 (251) 464 (232)

Other 82 (68) 75 (53)

Total $ 28,879 $ (11,533) $ 28,244 $ (9,704)

Indefinite-lived:

IPR&D $ 394 $ — $ 523 $ —

During fiscal year 2021, the Company recognized $30 million of

definite-lived intangible asset charges in connection with the

abandonment of certain intangible assets within the

Neuroscience segment. During fiscal year 2020, the Company

recognized $37 million of definite-lived intangible asset charges,

including $33 million and $4 million recognized in connection with

business exits in the Neuroscience and Cardiovascular

segments, respectively. During fiscal year 2019, the Company

recognized $87 million of definite-lived intangible asset charges,

including $61 million and $26 million recognized in connection

with business exits in the Cardiovascular and Neuroscience

segments, respectively. Definite-lived intangible asset charges

are recognized in other operating expense, net in the

consolidated statements of income.

During fiscal year 2021, the Company recognized $45 million of

indefinite-lived intangible asset charges related to the

abandonment of certain IPR&D projects in the Neuroscience

segment. During fiscal year 2020, the Company recognized

$35 million of indefinite-lived intangible asset charges, including

$25 million relating to a partial impairment of an IPR&D project

within the Neuroscience segment and $10 million in connection

with the discontinuation of an IPR&D project within the

Cardiovascular segment. During fiscal year 2019, the Company

recognized $30 million of indefinite-lived intangible asset

charges, including $11 million in connection with a business exit

in the Neuroscience segment, and $10 million and $9 million in

connection with the discontinuation of certain IPR&D projects

within the Medical Surgical and Cardiovascular segments,

respectively. Indefinite-lived intangible asset charges are

recognized in other operating expense, net in the consolidated

statements of income. Due to the nature of IPR&D projects, the

Company may experience future delays or failures to obtain

regulatory approvals to conduct clinical trials, failures of such

clinical trials, delays or failures to obtain required market

clearances, 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 was $1.8 billion for fiscal

years 2021, 2020 and 2019. 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 30, 2021, excluding any possible future

amortization associated with acquired IPR&D which has not met

technological feasibility, is as follows:

(in millions)

Amortization

Expense

2022 $ 1,758

2023 1,693

2024 1,662

2025 1,635

2026 1,623

84 MEDTRONIC PLC 2021 Form 10-K

PART II

Item 8 Financial Statements and Supplementary Data

10. Property, Plant, and Equipment

Property, plant, and equipment balances and corresponding estimated useful lives were as follows:

(in millions) April 30, 2021 April 24, 2020

Estimated Useful Lives

(in years)

Equipment $ 6,308 $ 5,859 Generally 2-7, up to 15

Computer software 2,346 2,131 Up to 5

Land and land improvements 178 175 Up to 20

Buildings and leasehold improvements 2,370 2,277 Up to 40

Construction in progress 1,498 1,202 —

Property, plant, and equipment 12,700 11,644

Less: Accumulated depreciation (7,479) (6,816)

Property, plant, and equipment, net $ 5,221 $ 4,828

Depreciation expense of $919 million, $907 million, and $895 million was recognized in fiscal years 2021, 2020, and 2019, respectively.

11. Shareholders’ Equity

Share Capital

Medtronic plc is authorized to issue 2.6 billion Ordinary Shares,

$0.0001 par value; 40 thousand Euro Deferred Shares, €1.00 par

value; 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 30, 2021, 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 30, 2021, 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 30, 2021, 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.

Dividends

The timing, declaration, and payment of future dividends to

holders of the Company’s 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 the Company’s

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 2021 and 2020, the

Company repurchased approximately 4 million and 12 million

shares, respectively, at an average price of $126.80 and $106.22,

respectively.

In March 2019, the Company’s Board of Directors authorized

$6.0 billion for repurchase of the Company’s ordinary shares.

There is no specific time-period associated with these

repurchase authorizations. At April 30, 2021, the Company had

used $608 million of the $6.0 billion authorized under the

repurchase program, leaving approximately $5.4 billion available

for future repurchases. The Company accounts for repurchases

of ordinary shares using the par value method and shares

repurchased are cancelled.

MEDTRONIC PLC 2021 Form 10-K 85

PART II

Item 8 Financial Statements and Supplementary Data

12. Stock Purchase and Award Plans

In fiscal year 2021, the Company granted stock awards under the

Medtronic plc 2013 Plan (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 30, 2021, there were approximately 26 million shares

available for future grants under the 2013 Plan.

Stock-Based Compensation Expense

The following table presents the components and classification of stock-based compensation expense recognized for stock options,

restricted stock, performance share units, and employee stock purchase plan (ESPP) in fiscal years 2021, 2020, and 2019:

Fiscal Year

(in millions) 2021 2020 2019

Stock options $72$61$72

Restricted stock 185 205 189

Performance share units 49 — —

Employee stock purchase plan 38 31 29

Total stock-based compensation expense $ 344 $ 297 $ 290

Cost of products sold $ 35 $ 28 $ 30

Research and development expense 38 36 36

Selling, general, and administrative expense 272 233 224

Total stock-based compensation expense 344 297 290

Income tax benefits (59) (51) (54)

Total stock-based compensation expense, net of tax $ 285 $ 246 $ 236

Stock Options

Options are granted at the exercise price, which is equal to the

closing price of the Company’s ordinary shares 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. 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.

The following table provides the weighted average fair value of options granted to employees and the related assumptions used in the

Black-Scholes model:

Fiscal Year

2021 2020 2019

Weighted average fair value of options granted $ 16.15 $ 15.49 $ 14.77

Assumptions used:

Expected life (years) 6.0 6.1 6.1

Risk-free interest rate 0.33% 1.88% 2.90%

Volatility 24.17% 17.97% 17.77%

Dividend yield 2.36% 2.09% 2.25%

86 MEDTRONIC PLC 2021 Form 10-K

PART II

Item 8 Financial Statements and Supplementary Data

The following table summarizes stock option activity during fiscal year 2021:

Options

(in thousands)

Wtd. Avg.

Exercise

Price

Wtd. Avg.

Remaining

Contractual

Term

(in years)

Aggregate

Intrinsic Value

(in millions)

Outstanding at April 24, 2020 27,068 $ 78.70

Granted 6,182 98.16

Exercised (4,370) 66.91

Expired/Forfeited (908) 95.54

Outstanding at April 30, 2021 27,972 84.38 5.7 $ 1,302

Expected to vest at April 30, 2021 9,184 97.01 8.5 311

Exercisable at April 30, 2021 18,149 77.48 4.2 970

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 2021, 2020, and 2019:

Fiscal Year

(in millions) 2021 2020 2019

Cash proceeds from options exercised $ 277 $ 484 $ 825

Intrinsic value of options exercised 205 349 383

Tax benefit related to options exercised 47 75 78

Unrecognized compensation expense related to outstanding stock options at April 30, 2021 was $76 million and is expected to be

recognized over a weighted average period of 2.6 years.

Restricted Stock

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 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. 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 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.

The following table summarizes restricted stock activity during fiscal year 2021:

Units

(in thousands)

Wtd. Avg.

Grant

Price

Nonvested at April 24, 2020 7,625 $ 92.52

Granted 2,193 99.48

Vested (3,228) 86.89

Forfeited (610) 95.79

Nonvested at April 30, 2021 5,980 97.66

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 2021, 2020, and 2019:

Fiscal Year

(in millions, except per share data) 2021 2020 2019

Weighted-average grant-date fair value per restricted stock $ 99.48 $ 103.52 $ 88.78

Fair value of restricted stock vested 280 242 174

Tax benefit related to restricted stock vested 65 62 45

Unrecognized compensation expense related to restricted stock as of April 30, 2021 was $316 million and is expected to be recognized

over a weighted average period of 2.4 years.

MEDTRONIC PLC 2021 Form 10-K 87

PART II

Item 8 Financial Statements and Supplementary Data

Performance Share Units

Beginning in fiscal year 2021, the Company granted performance

share units to officers and key employees. Performance share

units typically cliff vest after three years. The awards include

three metrics: relative total shareholder return (rTSR), revenue

growth, and return on investor capital (ROIC). rTSR is considered

a market condition metric, and the expense is determined at the

grant date and will not be adjusted even if the market condition is

not met. Revenue growth and ROIC are considered performance

metrics, and the expense is recorded over the performance

period, which will be reassessed each reporting period based on

the probability of achieving the various performance conditions.

The number of shares earned at the end of the three-year

period will vary, based on only actual performance, from 0% to

200% of the target number of performance share units granted.

Performance share units are subject to forfeiture if employment

terminates prior to the lapse of the restrictions. Performance

share units are not considered issued or outstanding ordinary

shares of the Company. Dividend equivalent units are

accumulated on performance share units for each component

of the award during the vesting period.

The Company calculates the fair value of the performance share

units for each component individually. The fair value of the rTSR

metric will be determined using the Monte Carlo valuation model.

The fair value of the revenue growth and ROIC metrics are equal

to the closing stock price on the grant date.

The following table summarizes performance share unit activity during fiscal year 2021:

Units

(in thousands)

Wtd. Avg.

Grant

Price

Nonvested at April 24, 2020 —$ —

Granted 854 129.04

Forfeited (25) 128.51

Nonvested at April 30, 2021 828 129.05

The following table summarizes the weighted-average grant date fair value of performance share units granted, total fair value of

performance share units vested and related tax benefit during fiscal year 2021:

Fiscal Year

(in millions, except per share data) 2021

Weighted-average grant-date fair value per performance share units $ 129.04

Fair value of performance share units vested —

Tax benefit related to performance share units vested —

Unrecognized compensation expense related to performance

share units as of April 30, 2021 was $57 million and is expected to

be recognized over a weighted average period of 2.2 years.

Employees Stock Purchase Plan

The Medtronic plc Amended and Restated 2014 Employees

Stock Purchase Plan 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. Employees purchased 2 million shares at

an average price of $90.16 per share in fiscal year 2021. At

April 30, 2021, approximately 9 million ordinary shares were

available for future purchase under the ESPP.

13. Income Taxes

The income tax provision (benefit) 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:

Fiscal Year

(in millions) 2021 2020 2019

U.S. $ (358) $ 466 $ 877

International 4,253 3,589 4,320

Income before income taxes $ 3,895 $ 4,055 $ 5,197

88 MEDTRONIC PLC 2021 Form 10-K

PART II

Item 8 Financial Statements and Supplementary Data

The income tax provision (benefit) consists of the following:

Fiscal Year

(in millions) 2021 2020 2019

Current tax expense:

U.S. $ 287 $ 151 $ 579

International 439 375 406

Total current tax expense 726 526 985

Deferred tax (benefit) expense:

U.S. (625) (138) (310)

International 165 (1,139) (128)

Net deferred tax benefit (461) (1,277) (438)

Income tax provision (benefit) $ 265 $ (751) $ 547

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

(in millions) April 30, 2021 April 24, 2020

Deferred tax assets:

Net operating loss, capital loss, and credit carryforwards $ 6,114 $ 6,432

Capitalization of research and development 408 —

Other accrued liabilities 442 390

Accrued compensation 411 285

Pension and post-retirement benefits 234 350

Stock-based compensation 132 136

Inventory 164 191

Lease obligations 106 101

Federal and state benefit on uncertain tax positions 55 96

Interest limitation 352 266

Other 336 308

Gross deferred tax assets 8,754 8,555

Valuation allowance (5,822) (5,482)

Total deferred tax assets 2,932 3,073

Deferred tax liabilities:

Intangible assets (320) (1,017)

Realized loss on derivative financial instruments (75) (65)

Right of use leases (102) (97)

Unrealized gain on available-for-sale securities and derivative financial instruments (16) (12)

Accumulated depreciation (151) (87)

Outside basis difference of subsidiaries (101) (77)

Other (81) (110)

Total deferred tax liabilities (846) (1,465)

Prepaid income taxes 458 449

Income tax receivables 353 381

Tax assets, net $ 2,897 $ 2,438

Reported as (after valuation allowance and jurisdictional netting):

Other current assets $ 756 $ 780

Tax assets 3,169 2,832

Deferred tax liabilities (1,028) (1,174)

Tax assets, net $ 2,897 $ 2,438

MEDTRONIC PLC 2021 Form 10-K 89

PART II

Item 8 Financial Statements and Supplementary Data

No deferred taxes have been provided on the approximately

$74.2 billion and $69.9 billion of undistributed earnings of the

Company’s subsidiaries at April 30, 2021 and April 24, 2020,

respectively, since these earnings have been, and under current

plans will continue to be, permanently reinvested in these

subsidiaries. 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 30, 2021, the Company had approximately $25.2 billion

of net operating loss carryforwards in certain non-U.S.

jurisdictions, of which $20.2 billion have no expiration, and the

remaining $5.0 billion will expire during fiscal years 2022 through

2041. Included in these net operating loss carryforwards are

$18.5 billion of net operating losses related to a subsidiary of the

Company, substantially all of which were recorded in fiscal year

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

$6.7 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 30, 2021, the Company had $361 million of U.S. federal

net operating loss carryforwards, of which $81 million have no

expiration. The remaining loss carryforwards will expire during

fiscal years 2022 through 2038. For U.S. state purposes, the

Company had $1.4 billion of net operating loss carryforwards at

April 30, 2021, $57 million of which have no expiration. The

remaining U.S. state loss carryforwards will expire during fiscal

years 2022 through 2041.

At April 30, 2021, the Company also had $270 million of tax

credits available to reduce future income taxes payable, of which

$107 million have no expiration. The remaining credits will expire

during fiscal years 2022 through 2041.

The Company has established valuation allowances of $5.8 billion

and $5.5 billion at April 30, 2021 and April 24, 2020, 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 2021 is primarily related to

the generation of certain net operating losses and 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.

The Company’s effective income tax rate varied from the U.S. federal statutory tax rate as follows:

Fiscal Year

2021 2020 2019

U.S. federal statutory tax rate 21.0% 21.0% 21.0%

Increase (decrease) in tax rate resulting from:

U.S. state taxes, net of federal tax benefit (1.1) 0.5 0.9

Research and development credit (2.3) (2.1) (1.2)

Puerto Rico Excise Tax (2.0) (1.5) (1.6)

International (12.6) (10.0) (10.7)

U.S. Tax Reform ——0.2

Stock based compensation (0.8) (1.5) (1.0)

Other, net 0.9 0.4 (0.5)

Interest on uncertain tax positions 0.9 1.3 0.9

Base Erosion Anti-Abuse Tax 0.5 2.6 0.1

Foreign Derived Intangible Income Benefit (1.9) (1.2) (0.6)

Divestiture-related — — (0.4)

Certain tax adjustments (1.0) (30.8) (0.6)

Legal entity restructuring 1.8 — —

U.S. tax on foreign earnings 3.4 2.8 4.0

Effective tax rate 6.8% (18.5)% 10.5%

During fiscal year 2021, the net benefit from certain tax

adjustments of $41 million, recognized in income tax provision

(benefit) in the consolidated statements of income, included the

following:

䡲 A net benefit of $106 million associated with the resolution of

an audit at the IRS Appellate level for fiscal years 2012, 2013,

and 2014. The issues resolved relate to the utilization of

certain net operating losses and the allocation of income

between Medtronic, Inc. and its wholly owned subsidiary

operating in Puerto Rico for businesses that are not the

subject of the U.S. Tax Court Case for fiscal years 2005 and

2006.

MEDTRONIC PLC 2021 Form 10-K

PART II

Item 8 Financial Statements and Supplementary Data

䡲 A net cost of $73 million related to a tax basis adjustment of

previously established deferred tax assets from intercompany

intellectual property transactions. The cumulative amount of

deferred tax benefit previously recognized from intercompany

intellectual property transactions and recorded as Certain Tax

Adjustments is $1.5 billion. The corresponding deferred tax

assets will be amortized over a period of approximately 20

years.

䡲 A cost of $50 million associated with the amortization of the

previously established deferred tax assets from intercompany

intellectual property transactions.

䡲 A net cost of $25 million associated with an internal

restructuring and intercompany sale of assets.

䡲 A benefit of $83 million related to the capitalization of certain

research and development costs for U.S. income tax purposes

and the establishment of a deferred tax asset at the U.S.

federal statutory tax rate.

During fiscal year 2020, the net benefit from certain tax

adjustments of $1.2 billion, recognized in income tax provision

(benefit) in the consolidated statements of income, included the

following:

䡲 A net benefit of $63 million related to the finalization of certain

state tax impacts from U.S. Tax Reform, and the issuance of

certain final U.S. Treasury Regulations associated with U.S. Tax

Reform. The primary impact of these regulations resulted in

the Company re-establishing its permanently reinvested

assertion on certain foreign earnings and reversing the

previously accrued tax liability. This benefit was partially offset

by additional tax associated with a previously executed internal

reorganization of certain foreign subsidiaries.

䡲 A benefit of $252 million related to tax legislative changes in

Switzerland, which abolished certain preferential tax regimes

the Company benefited from and replaced them with a new

set of internationally accepted measures. The legislation

provided for higher effective tax rates but allowed for a

transitional period whereby an amortizable asset was created

for Swiss federal income tax purposes that will be amortized

and deducted over a 10-year period.

䡲 A benefit of $658 million related to the release of a valuation

allowance previously recorded against certain net operating

losses. Luxembourg enacted tax legislation during the year

requiring the Company to reassess the realizability of certain

net operating losses. The Company evaluated both the

positive and negative evidence and released valuation

allowance equal to the expected benefit from the utilization of

certain net operating losses in connection with a planned

intercompany sale of intellectual property.

䡲 A benefit of $269 million associated with the intercompany

sale of intellectual property and the establishment of a

deferred tax asset.

During fiscal year 2019, the net benefit from certain tax

adjustments of $40 million, recognized in income tax provision

(benefit) in the consolidated statements of income, included the

following:

䡲 A net benefit of $30 million associated with the finalization of

the transition tax liability and the Tax Act impact to deferred

tax assets, liabilities, and valuation allowances.

䡲 A charge of $42 million related to the recognition of a prepaid

tax expense resulting from the reduction in the U.S. statutory

tax rate under the Tax Act and the current year sale of U.S.

manufactured inventory held as of April 27, 2018.

䡲 A benefit of $32 million related to intercompany legal entity

restructuring.

䡲 A net benefit of $20 million with the finalization of certain

income tax aspects of the divestiture of the Patient Care,

Deep Vein Thrombosis, and Nutritional Insufficiency

businesses.

Currently, the Company’s operations in Puerto Rico, Singapore,

Dominican Republic, Costa Rica, and China have various tax

holidays and tax incentive grants. The tax reductions as

compared to the local statutory rate favorably impacted

earnings by $301 million, $231 million, and $437 million in fiscal

years 2021, 2020, and 2019, respectively, and diluted earnings

per share by $0.22, $0.17, and $0.32 in fiscal years 2021, 2020,

and 2019, respectively. The tax holidays are conditional upon the

Company meeting certain thresholds required under statutory

law. The tax incentive grants, unless extended, will expire

between fiscal years 2022 and 2030. 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 2021 did not have a material impact on the Company’s

consolidated financial statements.

MEDTRONIC PLC 2021 Form 10-K 91

PART II

Item 8 Financial Statements and Supplementary Data

The Company had $1.7 billion, $1.9 billion, and $1.8 billion of gross unrecognized tax benefits at April 30, 2021, April 24, 2020, and

April 26, 2019, respectively. A reconciliation of the beginning and ending amount of unrecognized tax benefits for fiscal years 2021, 2020,

and 2019 is as follows:

Fiscal Year

(in millions) 2021 2020 2019

Gross unrecognized tax benefits at beginning of fiscal year $ 1,862 $ 1,836 $ 1,727

Gross increases:

Prior year tax positions 88 12 34

Current year tax positions 62 55 109

Gross decreases:

Prior year tax positions (106) (9) (14)

Settlements (216) (5) —

Statute of limitation lapses (21) (27) (20)

Gross unrecognized tax benefits at end of fiscal year 1,668 1,862 1,836

Cash advance paid to taxing authorities (859) (859) (859)

Gross unrecognized tax benefits at end of fiscal year,

net of cash advance $ 809 $ 1,003 $ 977

If all of the Company’s unrecognized tax benefits at April 30,

2021, April 24, 2020, and April 26, 2019 were recognized,

$1.6 billion, $1.8 billion, and $1.8 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 $809 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 $14 million, net as a result of statute of

limitation lapses.

The Company recognizes interest and penalties related to

income tax matters in income tax provision (benefit) 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

$99 million, $225 million, and $172 million of accrued gross

interest and penalties at April 30, 2021, April 24, 2020, and

April 26, 2019, respectively. During fiscal years 2021, 2020, and

2019, the Company recognized gross interest income of

$44 million, expense of $53 million, and expense of $48 million,

respectively, in income tax provision (benefit) in the consolidated

statements of income.

The Company reserves for uncertain tax positions related 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 2021 Form 10-K

PART II

Item 8 Financial Statements and Supplementary Data

The major tax jurisdictions where the Company conducts business which remain subject to examination are as follows:

Jurisdiction Earliest Year Open

United States - federal and state 2005

Australia 2016

Brazil 2016

Canada 2013

China 2015

Costa Rica 2017

Dominican Republic 2018

France 2016

Germany 2014

India 2002

Ireland 2012

Israel 2010

Italy 2005

Japan 2017

Korea 2017

Luxembourg 2015

Mexico 2007

Puerto Rico 2011

Singapore 2016

Switzerland 2010

United Kingdom 2017

See Note 18 for additional information regarding the status of current tax audits and proceedings.

14. 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 with the

proceeds from issuance of the potentially dilutive shares.

Potentially dilutive ordinary shares include stock-based awards

granted under stock-based compensation plans and shares

committed to be purchased under the employee stock purchase

plan.

MEDTRONIC PLC 2021 Form 10-K 93

PART II

Item 8 Financial Statements and Supplementary Data

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

Fiscal Year

(in millions, except per share data) 2021 2020 2019

Numerator:

Net income attributable to ordinary shareholders $ 3,606 $ 4,789 $ 4,631

Denominator:

Basic – weighted average shares outstanding 1,344.9 1,340.7 1,346.4

Effect of dilutive securities:

Employee stock options 6.6 7.2 7.6

Employee restricted stock units 2.1 2.8 3.2

Other 0.5 0.4 0.3

Diluted – weighted average shares outstanding 1,354.0 1,351.1 1,357.5

Basic earnings per share $ 2.68 $ 3.57 $ 3.44

Diluted earnings per share $ 2.66 $ 3.54 $ 3.41

The calculation of weighted average diluted shares outstanding excludes options to purchase approximately 4 million, 4 million, and

7 million ordinary shares in fiscal years 2021, 2020, and 2019, respectively, because their effect would have been anti-dilutive on the

Company’s earnings per share.

15. Retirement Benefit Plans

The Company sponsors various retirement benefit plans,

including defined benefit pension plans, post-retirement medical

plans, defined contribution savings plans, and termination

indemnity plans, covering substantially all U.S. employees and

many employees outside the U.S. The net expense related to

these plans was $668 million, $467 million, and $539 million in

fiscal years 2021, 2020, and 2019, respectively.

In the U.S., the Company maintain qualified pension plans

designed to provide guaranteed minimum retirement benefits to

all eligible U.S. participants. 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 30, 2021 and April 24, 2020, the net underfunded status

of the Company’s benefit plans was $705 million and $1.4 billion,

respectively.

During fiscal year 2021, as part of the Simplification restructuring

program, the Company offered certain eligible U.S. employees

voluntary early retirement packages, resulting in incremental

expense of $97 million recognized. Of this amount, $73 million

related to U.S. pension benefits, $11 million related to defined

contribution plans, $11 million related to U.S. post-retirement

benefits, and $2 million related to cash payments and

administrative fees. See Note 4 for additional information on the

Simplification restructuring program.

As of April 24, 2020, the Company announced the freezing of

U.S. pension benefits beginning in 2027. Employees will continue

to earn benefits as required by the plan until April 30, 2027, after

which date benefits will no longer be earned and employees will

earn benefits under a new defined contribution structure. The

Company recognized curtailment benefits of $94 million in fiscal

year 2020 as a result of this change.

MEDTRONIC PLC 2021 Form 10-K

PART II

Item 8 Financial Statements and Supplementary Data

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 Fiscal Year

(in millions) 2021 2020 2021 2020

Accumulated benefit obligation at end of year: $ 3,786 $ 3,440 $ 2,035 $ 1,785

Change in projected benefit obligation:

Projected benefit obligation at beginning of year $ 3,723 $ 3,404 $ 2,024 $ 1,832

Service cost 106 106 70 59

Interest cost 109 126 28 28

Employee contributions — — 12 11

Plan curtailments and settlements — (94) (4) (2)

Actuarial loss

(1)

99 300 6 180

Benefits paid (129) (111) (41) (55)

Special termination benefits 73 — — —

Currency exchange rate changes and other — (8) 200 (29)

Projected benefit obligation at end of year $ 3,979 $ 3,723 $ 2,294 $ 2,024

Change in plan assets:

Fair value of plan assets at beginning of year $ 2,982 $ 2,728 $ 1,404 $ 1,409

Actual return on plan assets 715 (72) 232 2

Employer contributions 95 444 149 54

Employee contributions — — 12 11

Plan settlements — — (4) (2)

Benefits paid (129) (111) (41) (55)

Currency exchange rate changes and other — (7) 149 (15)

Fair value of plan assets at end of year $ 3,660 $ 2,982 $ 1,900 $ 1,404

Funded status at end of year:

Fair value of plan assets $ 3,660 $ 2,982 $ 1,900 $ 1,404

Benefit obligations 3,979 3,723 2,294 2,024

Underfunded status of the plans (319) (741) (394) (620)

Recognized liability $ (319) $ (741) $ (394) $ (620)

Amounts recognized on the consolidated

balance sheets consist of:

Non-current assets $ 110 $ — $ 48 $ 7

Current liabilities (20) (17) (6) (6)

Non-current liabilities (408) (724) (436) (621)

Recognized liability $ (319) $ (741) $ (394) $ (620)

Amounts recognized in accumulated other

comprehensive loss:

Prior service cost $ — $ 1 $ (6) $ 7

Net actuarial loss 1,220 1,662 530 663

Ending balance $ 1,220 $ 1,663 $ 524 $ 670

(1) Actuarial gains and losses result from changes in actuarial assumptions (such as changes in the discount rate and revised mortality rates). The

actuarial losses in fiscal years 2021 and 2020 were primarily related to decreases in discount rates.

MEDTRONIC PLC 2021 Form 10-K 95

PART II

Item 8 Financial Statements and Supplementary Data

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 30, 2021 and April 24, 2020. U.S. and non-U.S. pension plans with

accumulated benefit obligations in excess of plan assets consist of the following:

Fiscal Year

(in millions) 2021 2020

Accumulated benefit obligation $ 5,089 $ 5,105

Projected benefit obligation 5,198 5,252

Plan assets at fair value 4,561 4,074

U.S. and non-U.S. pension plans with projected benefit obligations in excess of plan assets consist of the following:

Fiscal Year

(in millions) 2021 2020

Projected benefit obligation $ 5,921 $ 5,700

Plan assets at fair value 5,159 4,331

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

U.S. Pension Benefits Non-U.S. Pension Benefits

Fiscal Year Fiscal Year

(in millions) 2021 2020 2019 2021 2020 2019

Service cost $ 106 $ 106 $ 109 $ 70 $ 59 $ 59

Interest cost 109 126 129 28 28 30

Expected return on plan assets (242) (225) (215) (59) (58) (57)

Amortization of prior service cost 1 1 1 (1) (1) (1)

Amortization of net actuarial loss 69 56 76 25 14 12

Settlement loss (gain) — — — 1 — (2)

Special termination benefits 73 — — — — —

Net periodic benefit cost $ 115 $ 64 $ 100 $ 64 $ 42 $ 41

The other changes in plan assets and projected benefit obligations recognized in accumulated other comprehensive loss for fiscal year

2021 are as follows:

(in millions)

U.S. Pension

Benefits

Non-U.S.

Pension

Benefits

Net actuarial gain $ (373) $ (168)

Amortization of prior service cost (1) 1

Amortization and settlement recognition of actuarial loss (69) (26)

Effect of exchange rates —61

Total recognized in accumulated other comprehensive loss $ (443) $ (132)

Total recognized in net periodic benefit cost and accumulated other comprehensive loss $ (328) $ (67)

96 MEDTRONIC PLC 2021 Form 10-K

PART II

Item 8 Financial Statements and Supplementary Data

The actuarial assumptions are as follows:

U.S. Pension Benefits Non-U.S. Pension Benefits

Fiscal Year Fiscal Year

2021 2020 2019 2021 2020 2019

Critical assumptions – projected benefit

obligation:

Discount rate 2.80%-3.50% 3.10%-3.70% 3.90%-4.20% 0.30%-13.30% 0.30%-13.30% 0.40%-13.90%

Rate of compensation increase 4.83% 3.90% 3.90% 2.90% 2.91% 2.87%

Critical assumptions – net periodic benefit cost:

Discount rate – benefit obligation 3.10%-3.70% 3.90%-4.30% 4.20%-4.30% 0.30%-13.90% 0.40%-13.90% 0.50%-11.00%

Discount rate – service cost 2.60%-3.90% 3.70%-4.00% 4.10%-4.40% 0.30%-13.90% 0.40%-13.90% 0.50%-11.00%

Discount rate – interest cost 2.80%-3.20% 3.50%-4.30% 4.00%-4.10% 0.30%-13.90% 0.40%-13.90% 0.50%-11.00%

Expected return on plan assets 7.50% 7.90% 7.90% 3.78% 4.19% 4.23%

Rate of compensation increase 3.90% 3.90% 3.90% 2.91% 2.87% 2.88%

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. The current yield curves

represent high quality, long-term fixed income instruments.

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

Medtronic U.S. pension and other U.S. post-retirement benefit

plans employ similar investment strategies with different asset

allocation targets.

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, and active and passive management.

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 30, 2021 for the plans are 40% equity securities, 31% debt

securities, and 29% other.

The plans did not hold any investments in the Company’s

ordinary shares at April 30, 2021 or April 24, 2020.

The Company’s U.S. plans target asset allocations at April 30, 2021, compared to the U.S. plans actual asset allocations at April 30, 2021

and April 24, 2020 by asset category, are as follows:

U.S. Plans

Target Allocation Actual Allocation

April 30, 2021 April 30, 2021 April 24, 2020

Asset Category:

Equity securities 34% 39% 39%

Debt securities 51 32 27

Other 15 29 34

Total 100% 100% 100%

MEDTRONIC PLC 2021 Form 10-K 97

PART II

Item 8 Financial Statements and Supplementary Data

Strong performance on equity securities during the fiscal year

resulted in asset allocations different than targets. Management

expects to move the allocations closer to target over the

intermediate term.

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.

Mutual funds: Comprised of investments in equity and fixed

income securities held in pooled investment vehicles. The

valuations of mutual funds 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 publicly reported.

Equity commingled trusts: Comprised of investments in equity

securities held in pooled investment vehicles. The valuations of

equity commingled trusts are based on the respective net asset

values which are determined by the fund daily at market close.

The net asset values are calculated based on the valuation of the

underlying assets which are determined using observable

inputs. The net asset values are not publicly reported, and funds

are valued at the net asset value practical expedient.

Fixed income commingled trusts: Comprised of investments in

fixed income securities held in pooled investment vehicles. The

valuations of fixed income commingled trusts are based on the

respective net asset values which are determined by the fund

daily at market close. The net asset values are calculated based

on the valuation of the underlying assets which are determined

using observable inputs. The net asset values are not publicly

reported, and funds are valued at the net asset value practical

expedient.

Partnership units: Valued based on the year-end net asset

values of the underlying partnerships. The net asset values of the

partnerships are based on the fair values of the underlying

investments of the partnerships. Quoted market prices are used

to value the underlying investments of the partnerships, where

the partnerships consist of the investment pools which invest

primarily in common stocks. Partnership units include

partnerships, private equity investments, and real asset

investments. Partnerships primarily include long/short equity

and absolute return strategies. These investments may be

redeemed monthly with notice periods ranging from 45 to 95

days. At April 30, 2021, 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 30, 2021

is $171 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 30, 2021, there are no real estate investments in

the process of liquidation. 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.

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. 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 30, 2021 and April 24, 2020.

MEDTRONIC PLC 2021 Form 10-K

PART II

Item 8 Financial Statements and Supplementary Data

U.S. Pension Benefits

Fair Value at

April 30, 2021

Fair Value Measurements

Using Inputs Considered as

Investments

Measured at Net

Asset Value(in millions) Level 1 Level 2 Level 3

Short-term investments $ 232 $ 232 $ — $ — $ —

Mutual funds 99 99 — — —

Equity commingled trusts 1,420 — — — 1,420

Fixed income commingled trusts 1,050 — — — 1,050

Partnership units 860 — — 860 —

$ 3,660 $ 331 $ — $ 860 $ 2,470

Fair Value at

April 24, 2020

Fair Value Measurements

Using Inputs Considered as

Investments

Measured at Net

Asset Value(in millions) Level 1 Level 2 Level 3

Short-term investments $ 548 $ 548 $ — $ — $ —

Equity commingled trusts 1,204 — — — 1,204

Fixed income commingled trusts 605 — — — 605

Partnership units 625 — — 625 —

$ 2,982 $ 548 $ — $ 625 $ 1,809

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)

Partnership

Units

April 26, 2019 $ 629

Total unrealized losses, net (45)

Purchases and sales, net 41

April 24, 2020 625

Total realized gains, net 8

Total unrealized gains, net 89

Purchases and sales, net 139

April 30, 2021 $ 860

Non-U.S. Pension Benefits

Fair Value at

April 30, 2021

Fair Value Measurements

Using Inputs Considered as

Investments

Measured at Net

Asset Value(in millions) Level 1 Level 2 Level 3

Registered investment companies $ 1,850 $ — $ — $ — $ 1,850

Insurance contracts 49 — — 49 —

$ 1,900 $ — $ — $ 49 $ 1,850

Fair Value at

April 24, 2020

Fair Value Measurements

Using Inputs Considered as

Investments

Measured at Net

Asset Value

(in millions) Level 1 Level 2 Level 3

Registered investment companies $ 1,361 $ — $ — $ — $ 1,361

Insurance contracts 43 — — 43 —

$ 1,404 $ — $ — $ 43 $ 1,361

MEDTRONIC PLC 2021 Form 10-K 99

PART II

Item 8 Financial Statements and Supplementary Data

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)

Insurance

Contracts

April 26, 2019 $41

Total unrealized gains, net 2

Purchases and sales, net 1

Currency exchange rate changes (1)

April 24, 2020 43

Total unrealized gains, net 2

Purchases and sales, net 1

Currency exchange rate changes 4

April 30, 2021 $49

There were no transfers into or out of Level 3 for both the U.S.

and non-US pension plans during the fiscal years ended April 30,

2021 and April 24, 2020.

Retirement Benefit Plan Funding

It is the Company’s policy to fund retirement costs within the

limits of allowable tax deductions. During fiscal year 2021, the

Company made discretionary contributions of approximately

$95 million to the U.S. pension plan. Internationally, the Company

contributed approximately $149 million for pension benefits

during fiscal year 2021. The Company anticipates that it will make

contributions of $20 million and $78 million to its U.S. pension

benefit plans and non-U.S. pension benefit plans, respectively, in

fiscal year 2022. 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 2022 contributions will be

discretionary. The Company believes that pension assets,

returns on invested pension assets, and Company contributions

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) Gross Payments

Fiscal Year U.S. Pension Benefits Non-U.S. Pension Benefits

2022 $ 135 $ 62

2023 145 63

2024 157 62

2025 170 67

2026 182 67

2027 – 2031 1,068 395

Total $ 1,856 $ 717

Post-retirement Benefit Plans

The net periodic benefit cost associated with the Company’s

post-retirement benefit plans was income of $6 million,

$15 million, and $17 million in fiscal years 2021, 2020, and 2019,

respectively. The Company’s projected benefit obligation for all

post-retirement benefit plans was $337 million and $339 million

at April 30, 2021 and April 24, 2020, respectively. The Company’s

fair value of plan assets for all post-retirement benefit plans was

$345 million and $296 million at April 30, 2021 and April 24, 2020,

respectively. The post-retirement benefit plan assets at both

April 30, 2021 and April 24, 2020 primarily comprised of equity

and fixed commingled trusts, consistent with the U.S. retirement

benefit plan assets outlined in the fair value leveling tables above.

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

$495 million, $376 million, and $415 million in fiscal years 2021,

2020, and 2019, respectively.

100

MEDTRONIC PLC 2021 Form 10-K

PART II

Item 8 Financial Statements and Supplementary Data

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 $50 million,

$52 million, and $54 million in fiscal years 2021, 2020, and 2019,

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 or rehired after July 1, 2020. 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 $73 million, $66 million, and $58 million and in

fiscal years 2021, 2020, and 2019, respectively.

16. Leases

The Company leases office, manufacturing, and research

facilities and warehouses, as well as transportation, data

processing, and other equipment. The Company determines

whether a contract is a lease or contains a lease at inception

date. Upon commencement, the Company recognizes a

right-of-use asset and lease liability. Right-of-use assets

represent the Company’s right to use the underlying asset for

the lease term. Lease liabilities are the Company’s obligation to

make the lease payments arising from a lease. As the Company’s

leases typically do not provide an implicit rate, the Company’s

lease liabilities are measured on a discounted basis using the

Company’s incremental borrowing rate. Lease terms used in the

recognition of right-of-use assets and lease liabilities include

only options to extend the lease that are reasonably certain to be

exercised. Additionally, lease terms underlying the right-of-use

assets and lease liabilities consider terminations that are

reasonably certain to be executed.

The Company’s lease agreements include leases that have both

lease and associated nonlease components. The Company has

elected to account for lease components and the associated

nonlease components as a single lease component. The

consolidated balance sheets do not include recognized assets or

liabilities for leases that, at the commencement date, have a

term of twelve months or less and do not include an option to

purchase the underlying asset that is reasonably certain to be

exercised. The Company recognizes such leases in the

consolidated statements of income on a straight-line basis over

the lease term. Additionally, the Company recognizes variable

lease payments not included in its lease liabilities in the period in

which the obligation for those payments is incurred. Variable

lease payments for fiscal year 2021 and 2020 were not material.

The Company’s lease agreements include leases accounted for

as operating leases and those accounted for as finance leases.

The right-of-use assets, lease liabilities, lease costs, cash flows,

and lease maturities associated with the Company’s finance

leases were not material to the consolidated financial

statements at April 30, 2021 or April 24, 2020 or for fiscal year

2021 or 2020. Finance lease right-of-use assets are included in

property, plant, and equipment, net, and finance lease liabilities

are included in current debt obligations and long-term debt on

the consolidated balance sheets.

The following table summarizes the balance sheet classification of the Company’s operating leases and amounts of the right-of-use

assets and lease liabilities at April 30, 2021 and April 24, 2020:

(in millions)

Balance Sheet

Classification April 30, 2021 April 24, 2020

Right-of-use assets Other assets $ 998 $ 927

Current liability Other accrued expenses 186 171

Non-current liability Other liabilities 829 774

The following table summarizes the weighted-average remaining lease term and weighted-average discount rate for the Company’s

operating leases at April 30, 2021 and April 24, 2020:

April 30, 2021 April 24, 2020

Weighted-average remaining lease term 7.5 years 7.2 years

Weighted-average discount rate 2.3% 3.0%

MEDTRONIC PLC 2021 Form 10-K 101

PART II

Item 8 Financial Statements and Supplementary Data

The following table summarizes the components of total operating lease cost for fiscal year 2021 and 2020:

(in millions) Fiscal Year 2021 Fiscal Year 2020

Operating lease cost $ 216 $ 223

Short-term lease cost 35 46

Total operating lease cost $ 251 $ 269

Rent expense for all operating leases was $305 million in fiscal year 2019.

The following table summarizes the cash paid for amounts included in the measurement of operating lease liabilities and right-of-use

assets obtained in exchange for operating lease liabilities for fiscal year 2021 and 2020:

(in millions) Fiscal Year 2021 Fiscal Year 2020

Cash paid for amounts included in the measurement of operating lease liabilities $ 216 $ 221

Right-of-use assets obtained in exchange for operating lease liabilities 230 174

The following table summarizes the maturities of the Company’s operating leases at April 30, 2021:

(in millions)

Fiscal Year

Operating

Leases

2022 $ 223

2023 166

2024 147

2025 119

2026 97

Thereafter 338

Total expected lease payments 1,090

Less: Imputed interest (75)

Total lease liability $ 1,015

The Company makes certain products available to customers

under lease arrangements, including arrangements whereby

equipment is placed with customers who then purchase

consumable products to accompany the use of the equipment.

Income arising from arrangements where the Company is the

lessor is recognized within net sales in the consolidated

statements of income and the Company’s net investments in

sales-type leases are included in other current assets and other

assets in the consolidated balance sheets. Lessor income and

the related assets and lease maturities were not material to the

consolidated financial statements at or for the fiscal year ended

April 30, 2021 and April 30, 2021.

102

MEDTRONIC PLC 2021 Form 10-K

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Item 8 Financial Statements and Supplementary Data

17. Accumulated Other Comprehensive Loss

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

(in millions)

Unrealized

(Loss) Gain on

Investment

Securities

Cumulative

Translation

Adjustments

Net

Investment

Hedges

Net Change

in Retirement

Obligations

Unrealized

(Loss) Gain

on Cash Flow

Hedges

Total

Accumulated

Other

Comprehensive

(Loss) Income

April 27, 2018 $ (194) $ (11) $ (257) $ (1,117) $ (207) $ (1,786)

Other comprehensive income

(loss) before reclassifications 67 (1,372) 88 (266) 457 (1,026)

Reclassifications 35 — — 75 (56) 54

Other comprehensive income (loss) 102 (1,372) 88 (191) 401 (972)

Cumulative effect of change in

accounting principle

(1)

47 — — — — 47

April 26, 2019 (45) (1,383) (169) (1,308) 194 (2,711)

Other comprehensive income

(loss) before reclassifications 43 (827) 405 (596) 309 (666)

Reclassifications 2 — — 52 (237) (183)

Other comprehensive income (loss) 45 (827) 405 (544) 72 (849)

April 24, 2020 — (2,210) 236 (1,852) 266 (3,560)

Other comprehensive income

(loss) before reclassifications 92 1,691 (1,694) 432 (541) (20)

Reclassifications — — — 73 22 95

Other comprehensive income (loss) 92 1,691 (1,694) 505 (519) 75

April 30, 2021 $ 92 $ (519) $ (1,458) $ (1,347) $ (253) $ (3,485)

(1) The cumulative effect of change in accounting principle in fiscal year 2019 resulted from the adoption of accounting guidance that 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 income tax on gains and losses on investment securities in

other comprehensive income before reclassifications during

fiscal years 2021, 2020, and 2019 was an expense of $31 million,

a benefit of $13 million and a benefit of $5 million, respectively.

Realized gains and losses on investment securities reclassified

from AOCI were reduced by income taxes of $2 million for fiscal

year 2021 and $3 million for fiscal years 2020 and 2019. When

realized, gains and losses on investment securities reclassified

from AOCI are recognized within other non-operating income,

net. Refer to Note 5 for additional information.

During fiscal years 2021, 2020, and 2019, the income tax on

cumulative translation adjustment was an expense of $7 million,

a benefit of $9 million, and a benefit of $7 million, respectively.

During fiscal years 2021, 2020, and 2019, there were no tax

impacts on net investment hedges. Refer to Note 7 for

additional information.

The net change in retirement obligations in other

comprehensive income includes amortization of net 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 2021, 2020,

and 2019 resulted in an expense of $115 million and a benefit of

$159 million, and $63 million, respectively. During fiscal years

2021, 2020, and 2019, the gains and losses on defined benefit

and pension items reclassified from AOCI were reduced by

income taxes of $16 million, $12 million, and $19 million,

respectively. When realized, net gains and losses on defined

benefit and pension items reclassified from AOCI are recognized

within other non-operating income, net. Refer to Note 15 for

additional information.

The income tax on unrealized gains and losses on cash flow

hedges in other comprehensive income before reclassifications

during fiscal years 2021, 2020, and 2019 was a benefit of

$87 million and an expense of $88 million and $158 million,

respectively. Amounts reclassified from AOCI related to cash

flow hedges included income taxes of $14 million, $80 million,

and $24 million for fiscal years 2021, 2020, and 2019,

respectively. When realized, gains and losses on currency

exchange rate contracts reclassified from AOCI are recognized

within other operating expense, net and gains and losses on

forward starting interest rate derivatives reclassified from AOCI

are recognized within interest expense. Refer to Note 7 for

additional information.

MEDTRONIC PLC 2021 Form 10-K 103

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Item 8 Financial Statements and Supplementary Data

18. 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, tax disputes, and governmental

proceedings and investigations, including those described below.

With respect to governmental proceedings and investigations,

like other companies in our industry, the Company is subject to

extensive regulation by national, state, and local governmental

agencies in the United States and in other jurisdictions in which

the Company and its affiliates operate. As a result, interaction

with governmental agencies is ongoing. The Company’s

standard practice is to cooperate with regulators and

investigators in responding to inquiries. The outcomes of legal

actions are not within the Company’s complete control and may

not be known for prolonged periods of time. In some actions, the

enforcement agencies or private claimants seek damages, as

well as other civil or criminal remedies (including injunctions

barring the sale of products that are the subject of the

proceeding), that could require significant expenditures, result in

lost revenues, or limit the Company’s ability to conduct business

in the applicable jurisdictions.

The Company records a liability in the consolidated financial

statements on an undiscounted basis for loss contingencies

related to legal actions when a loss is known or considered

probable and the amount may be reasonably estimated. If the

reasonable estimate of a known or probable loss is a range, and

no amount within the range is a better estimate than any other,

the minimum amount of the range is accrued. If a loss is

reasonably possible but not known or probable, and may be

reasonably estimated, the estimated loss or range of loss is

disclosed. When determining the estimated loss or range of loss,

significant judgment is required. Estimates of probable losses

resulting from litigation and governmental proceedings involving

the Company are inherently difficult to predict, particularly when

the matters are in early procedural stages with incomplete

scientific facts or legal discovery, involve unsubstantiated or

indeterminate claims for damages, potentially involve penalties,

fines or punitive damages, or could result in a change in business

practice. The Company classifies litigation charges and gains

related to significant legal matters as certain litigation charges.

During fiscal years 2021, 2020, and 2019, the Company

recognized $118 million, $313 million, and $166 million,

respectively, of certain litigation charges. At April 30, 2021 and

April 24, 2020, accrued litigation was approximately $0.4 billion

and $0.5 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

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 16,200 claimants have asserted or may assert

claims involving products manufactured by Covidien’s

subsidiaries. As of June 2, 2021, the Company had reached

agreements to settle approximately 15,900 of these claims. The

Company’s accrued expenses for this matter are included within

accrued litigation as discussed above.

Hernia Mesh Litigation

Starting in fiscal year 2020, plaintiffs filed lawsuits against certain

subsidiaries of the Company in U.S. state and federal courts

alleging personal injury from hernia mesh products sold by those

subsidiaries. The majority of the pending cases are in

Massachusetts state court, where they have been consolidated

before a single judge. Certain plaintiffs’ law firms have advised

the Company that they may file a large volume of additional

cases in the future. The pending lawsuits relate almost entirely to

hernia mesh products that have not been subject to recalls,

withdrawals or other adverse regulatory action. The Company

has not recorded an expense related to damages in connection

with these matters because any potential loss is not currently

probable 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.

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Item 8 Financial Statements and Supplementary Data

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 March 2021, the consolidated action was

dismissed with prejudice, pursuant to a settlement agreement.

Sasso

The Company is involved in litigation in Indiana relating to certain

patent and royalty disputes with Dr. Sasso under agreements

originally entered into in 1999 and 2001. On November 28, 2018,

a jury in Indiana state court returned a verdict against the

Company for approximately $112 million. On June 15, 2021,

pursuant to an order from the state court, the Company paid the

judgment plus accrued interest to Dr. Sasso, subject to

repayment if the Company’s ongoing appeal is successful.

Shareholder Related Matters

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. In April 2021, the parties reach an

agreement to resolve this matter, bringing it to a conclusion.

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.

Since the early 2000s, the Company or its predecessors have

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 the Company’s predecessor 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.

Following a trial in March 2002, the Court held that conditions in

the Penobscot River and Bay may pose an imminent and

substantial endangerment and that the Company’s predecessor

was liable for the cost of performing a study of the River and Bay.

Following a second trial in June 2014, the Court ordered that

further engineering study and engineering design work was

needed to determine the nature and extent of remediation in the

Penobscot River and Bay. The Court also appointed an

engineering firm to conduct such studies and issue a report on

potential remediation alternatives. In connection with these

proceedings, reports have been produced including a variety of

cost estimates for a variety of potential remedial options. In

March 2021, the parties notified the Court that they had agreed

on a settlement in principle of all issues in this matter. Finalization

of the proposed settlement remains subject to a fairness hearing

and Court approval.

The Company’s accrued expenses for environmental

proceedings are included within accrued litigation as discussed

above.

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

MEDTRONIC PLC 2021 Form 10-K 105

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Item 8 Financial Statements and Supplementary Data

sites. The U.S. Tax 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 for the 8th Circuit regarding the Tax Court

Opinion. Oral argument for the Appeal occurred on March 14,

2018. The 8th Circuit Court of Appeals issued their opinion on

August 16, 2018 and remanded the case back to the U.S. Tax

Court for additional factual findings. The U.S. Tax Court trial was

held in June 2021.

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. The remaining unresolved issue for fiscal years

2007 and 2008 relates to 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. The remaining unresolved issue for fiscal years

2009, 2010, and 2011 relates to 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. During January 2021, Medtronic, Inc. and the

IRS resolved the outstanding matters related to the allocation of

income between Medtronic, Inc. and its wholly-owned subsidiary

operating in Puerto Rico for the businesses that are not the

subject of the U.S. Tax Court Case and the utilization of certain

net operating losses. The remaining unresolved issue for fiscal

years 2012, 2013 and 2014 relates to 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 November 2020, the IRS issued its audit report on Medtronic,

Inc. for fiscal years 2015 and 2016. Medtronic, Inc. reached

agreement with the IRS on some but not all matters related to

these fiscal years. The significant issue that remains unresolved

relates to 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.

Medtronic, Inc.’s fiscal years 2017, 2018, and 2019 U.S. federal

income tax returns are currently being audited by the IRS.

In January 2021, the IRS issued its audit report for Covidien’s

fiscal year 2015 U.S. federal income tax returns. Covidien

reached agreement with the IRS on all matters related to fiscal

year 2015. The statute of limitations for Covidien’s 2016 and

2017 U.S. federal income tax returns lapsed during the third

quarter of fiscal year 2020 and 2021, respectively.

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 13 for additional discussion of income taxes.

Guarantees

As part of the Company’s 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, and/or cash

flows.

19. Segment and Geographic Information

Effective February 1, 2021, the Company implemented a new

operating model, moving from a Group structure to a Portfolio

structure: Cardiovascular Portfolio (formerly Cardiac and

Vascular Group), Neuroscience Portfolio (formerly Restorative

Therapies Group), and Medical Surgical Portfolio (formerly

Minimally Invasive Therapies Group). The Diabetes Operating

Unit (formerly Diabetes Group) remains a separate operating and

reportable segment in the new structure. There were no

changes to the reportable segments during the fiscal year ended

April 30, 2021, such that the four principal operating and

reportable segments are as follows: Cardiovascular Portfolio,

Neuroscience Portfolio, Medical Surgical Portfolio, and Diabetes

Operating Unit.

The Company’s management has chosen to organize the entity

based upon therapy solutions provided by each segment. 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.

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MEDTRONIC PLC 2021 Form 10-K

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Item 8 Financial Statements and Supplementary Data

The primary products and services from which the

Cardiovascular Portfolio 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 Medical

Surgical Portfolio 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 Neuroscience

Portfolio 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 Operating Unit

segment derives its revenues include those focused on diabetes

management, including insulin pumps, continuous glucose

monitoring systems, smart insulin pens, and insulin pump

consumables.

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 operating profit.

Segment operating profit represents income before income

taxes, excluding interest expense, amortization of intangible

assets, centralized distribution costs, non-operating income or

expense items, 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.

Segment Operating Profit

Fiscal Year

(in millions) 2021 2020 2019

Cardiovascular $ 3,850 $ 3,719 $ 4,532

Medical Surgical 3,021 3,044 3,262

Neuroscience 3,162 2,915 3,319

Diabetes 598 546 739

Segment operating profit 10,632 10,224 11,852

Interest expense (925) (1,092) (1,444)

Other non-operating income, net 336 356 373

Amortization of intangible assets (1,783) (1,756) (1,764)

Corporate (1,577) (1,239) (1,291)

Centralized distribution costs (1,877) (1,420) (1,689)

Restructuring and associated costs (617) (441) (407)

Acquisition-related items 15 (66) (88)

Certain litigation charges (118) (313) (166)

Impairment charges (76) — —

IPR&D charges (31) (25) (58)

Exit of businesses — (52) (149)

Debt tender premium and other charges — 7 28

Medical device regulations (83) (48) —

Contribution to Medtronic Foundation — (80) —

Income before income taxes $ 3,895 $ 4,055 $ 5,197

MEDTRONIC PLC 2021 Form 10-K 107

PART II

Item 8 Financial Statements and Supplementary Data

Total Assets and Depreciation Expense

Total Assets Depreciation Expense

(in millions) April 30, 2021 April 24, 2020 2021 2020 2019

Cardiovascular $ 15,027 $ 14,844 $ 212 $ 210 $ 194

Medical Surgical 39,319 39,666 195 194 206

Neuroscience 17,151 16,850 236 233 217

Diabetes 3,671 3,165 53 38 34

Segments 75,168 74,525 696 675 651

Corporate 17,915 16,164 223 232 244

Total $ 93,083 $ 90,689 $ 919 $ 907 $ 895

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 2021, 2020, and 2019, and property, plant, and equipment, net at April 30, 2021 and

April 24, 2020 for the Company’s country of domicile, countries with significant concentrations, and all other countries:

Net sales Property, plant, and equipment, net

(in millions) 2021 2020 2019 April 30, 2021 April 24, 2020

Ireland $ 100 $ 85 $ 91 $ 170 $ 164

United States 15,526 14,919 16,194 3,688 3,459

Rest of world 14,491 13,909 14,272 1,363 1,205

Total other countries, excluding Ireland 30,017 28,828 30,466 5,051 4,664

Total $ 30,117 $ 28,913 $ 30,557 $ 5,221 $ 4,828

No single customer represented over 10 percent of the Company’s consolidated net sales in fiscal years 2021, 2020, or 2019.

20. Subsequent Events

On June 3, 2021, the Company announced the decision to stop

the distribution and sale of the Medtronic HVAD System in light

of a growing body of observational clinical comparisons

indicating a lower frequency of neurological adverse events and

mortality with another circulatory support device available to

patients compared to the HVAD system. Fiscal year 2021 HVAD

system and associated accessory revenue was $141 million and

is included in our Cardiovascular segment. The Company

expects to record a non-cash pre-tax impairment of long-lived

assets of $400 million to $500 million in the quarter ending

July 30, 2021 primarily related to intangible assets. The Company

remains committed to serving the needs of the 4,000 patients

currently implanted with this device.

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PART 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 30, 2021. The effectiveness of

the Company’s internal control over financial reporting as of

April 30, 2021 has been audited by PricewaterhouseCoopers

LLP, an independent registered public accounting firm, as stated

in its report 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

During the quarter ended April 30, 2021, there were no changes

in our internal control over financial reporting (as defined in Rules

13a-15(f) under the Exchange Act) that have materially affected,

or are reasonably likely to materially affect, the Company’s

internal control over financial reporting. The Company has not

experienced any material impacts to its internal controls over

financial reporting despite the fact that most of its employees

are working remotely due to the COVID-19 pandemic.

Item 9B. Other Information

Medtronic has engaged in certain activities that it is required to

disclose pursuant to Section 13(r)(1)(D)(ii) of the Securities

Exchange Act of 1934, as amended. The activities described

herein are expressly authorized by the U.S. Government under

applicable economic sanctions regulations.

Specifically, Medtronic’s affiliate in Russia, Medtronic Russia LLC

(“Medtronic Russia”), is required under Russian law to complete

certain notification and filing requirements to Russia’s Federal

Security Service (“FSB”) regarding certain Medtronic medical

devices that make use of encryption functionality that are

imported into Russia. While the FSB has been included on the

Specially Designated Nationals (“SDN”) List administered by the

Office of Foreign Assets Control (“OFAC”), these activities are

and remain authorized. In particular, Cyber General License No.

1B (“Cyber GL 1B”), issued by OFAC, authorizes all transactions

ordinarily incident to obtaining such permits from the FSB,

provided that certain conditions are met.

Historically, Medtronic has not been required to disclose these

lawful dealings with the FSB. However, on March 2, 2021, OFAC

designated the FSB pursuant to an additional sanctions

authority. While OFAC amended the applicable general license to

confirm that all previously authorized dealings with the FSB

remain authorized (notwithstanding the additional designation),

the designation of the FSB with a [NPWMD] tag pursuant to

Executive Order 13382 means that Medtronic is required under

Section 13(r)(1)(D)(ii) of the Securities Exchange Act to disclose

MEDTRONIC PLC 2021 Form 10-K 109

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Item 9B Other Information

certain information as a result of this additional designation, as

Section 13(r)(1)(D)(ii) does not contain an exception from its

reporting requirements for activities that are authorized by the

U.S. Government.

Since March 2, 2021, in the normal course of business and

consistent with the authorization of Cyber GL 1B, Medtronic

Russia filed five notifications with the FSB, as required under local

Russian law for the import of medical devices that make use of

encryption functionality. These activities did not directly result in

any revenues or profits for Medtronic. Medtronic intends to

continue engaging in activities for which it is authorized by Cyber

GL 1B (or any successor GL), to the extent necessary to comply

with local law requirements in Russia.

110

MEDTRONIC PLC 2021 Form 10-K

PART III

Part III of this Annual Report on Form 10-K incorporates information by reference from the Company’s 2021 definitive proxy statement,

which will be filed no later than 120 days after April 30, 2021.

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 — Delinquent Section 16(a) Report” in the

Company’s Proxy Statement for our 2021 Annual General

Meeting of Shareholders, which will be filed no later than 120

days after April 30, 2021, 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.

The following table shows the name, age, and position as of April 30, 2021 of each of our executive officers:

Name Age Position with the Company

Geoffrey S. Martha 51 Chairman and Chief Executive Officer

Richard Kuntz, M.D. 64 Senior Vice President and Chief Medical and Scientific Officer

Bradley E. Lerman 64 Senior Vice President, General Counsel and Corporate Secretary of the Company

Karen L. Parkhill 55 Executive Vice President and Chief Financial Officer

Carol A. Surface 55 Senior Vice President and Chief Human Resources Officer

Robert ten Hoedt 60 Executive Vice President and President, EMEA Region

Robert J. White 58 Executive Vice President and President, Medical Surgical Portfolio

John Liddicoat, M.D. 57 Executive Vice President and President, Americas Region

Sean Salmon 56 Executive Vice President and President, Diabetes Operating Unit, President,

Cardiovascular Portfolio

Brett Wall 56 Executive Vice President and President, Neuroscience Portfolio

Geoffrey S. Martha, age 51, is Chairman of the Board of

Directors and Chief Executive Officer of Medtronic. Geoff

assumed the role of CEO on April 27, 2020 and became

Chairman of the Board on December 11, 2020. Prior to his role as

Chairman and CEO, he served as President of Medtronic from

November 2019 through April 2020 and joined the Board of

Directors in November 2019. Previously, Mr. Martha served as

Executive Vice President and President, Restorative Therapies

Group, a role he held since August 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.

Richard Kuntz, M.D., age 64, has been Senior Vice President and

Chief Medical and Scientific 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 64, 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

MEDTRONIC PLC 2021 Form 10-K 111

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Item 11 Executive Compensation

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.

Karen L. Parkhill, age 55, joined the Company as Executive Vice

President and Chief Financial Officer in June 2016. From 2011 to

2016, Ms. Parkhill served as Vice Chairman and Chief Financial

Officer of Comerica Incorporated. Ms. Parkhill was a member of

Comerica’s Management Executive Committee and the

Comerica Bank Board of Directors. Prior to joining Comerica,

Ms. Parkhill worked for J.P. Morgan Chase & Co. in various

capacities from 1992 to 2011, including serving as Chief Financial

Officer of the Commercial Banking business from 2007 to 2011.

Ms. Parkhill is also a current member of the Board of Directors for

American Express.

Carol A. Surface, age 55, 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 60, has been Executive Vice President

and President, EMEA of the Company since January 2015 and of

Medtronic, Inc. since May 2014. Prior to that, he was Senior Vice

President and President, EMEA and Canada from 2009 to 2014;

Vice President CardioVascular Europe and Central Asia from

2006 to 2009; Vice President and General Manager, Vitatron

from 1999 to 2006; Gastro-Uro leader from 1994 to 1999; and

Marketing Manager, Neurological from 1991 to 1994.

Robert J. White, age 58, is Executive Vice President and

President, Medical Surgical Portfolio. Since 2017, Mr. White has

served as Executive Vice President and Group President of the

Minimally Invasive Therapies Group of Medtronic. Prior to that,

he was Senior Vice President and President, Asia Pacific from

January 2015 to December 2017. He had served as President,

Emerging Markets, President, Respiratory and Monitoring

Solutions and Vice President and General Manager of Patient

Monitoring at Covidien. He also held various leadership positions

at GE Healthcare and IBM. Mr. White is also a current member of

the Board of Directors of Smith & Nephew plc.

John Liddicoat, M.D., age 57, was named Executive Vice

President and President, Americas Region in September 2018.

Dr. Liddicoat joined Medtronic in 2006 as Vice President of Atrial

Fibrillation Technologies. In December of 2006, Dr. Liddicoat was

named Vice President and General Manager of the Structural

Heart Disease Business. Beginning in August 2014, Dr. Liddicoat

served as Senior Vice President and President, Cardiac Rhythm

and Heart Failure.

Sean Salmon, age 56, has been Executive Vice President and

Group President, Diabetes Group of the company since October

2019, and also assumed the role of Executive Vice President and

President, Cardiovascular Portfolio in January 2021. Mr. Salmon

previously served as Senior Vice President and President of

Coronary and Structural Heart Business within the Cardiac and

Vascular Group of the Company beginning in July 2014.

Mr. Salmon is a seasoned leader who has been with Medtronic

since 2004 and spent the past 16 years in increasingly senior

levels of management. Prior to joining Medtronic, Mr. Salmon

worked at CR Bard and Johnson & Johnson.

Brett Wall, age 56, is Executive Vice President and President of

Medtronic’s Neuroscience Portfolio. Mr. Wall previously served

as Senior Vice President and President of the Brain Therapies

division of Medtronic within the Restorative Therapies Group of

the Company from March 2016 to November 2019. Prior to that,

Mr. Wall served as SVP and President of Medtronic’s

Neurovascular business. Prior to joining Medtronic, he served as

Covidien’s SVP and President of Neurovascular as well as Senior

Vice President and President of the International Vascular

Therapies business for Covidien. Mr. Wall also served as Senior

Vice President and President, International at ev3, Inc. From

2000 to 2008, Brett held various marketing and sales positions

with ev3, Inc. and Micro Therapeutics, Inc. Mr. Wall has also

worked at Boston Scientific as Director of Marketing,

Cardiovascular, Asia Pacifica and Marketing Manager, Japan,

from September 1995 to September 2000.

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 2021 Annual General Meeting of

Shareholders, which will be filed no later than 120 days after

April 30, 2021, are incorporated herein by reference. The section

entitled “Compensation Committee Report” in Medtronic’s

Proxy Statement for the Company’s 2021 Annual General

Meeting of Shareholders, which will be filed no later than 120

days after April 30, 2021, is furnished herein by reference.

112

MEDTRONIC PLC 2021 Form 10-K

PART III

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters

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 2021 Annual General Meeting of Shareholders, which will be filed no later than 120 days after April 30, 2021, 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 2021 Annual General Meeting of Shareholders, which will be filed

no later than 120 days after April 30, 2021, 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 2021 Annual General Meeting of Shareholders, which will be filed no later than 120 days

after April 30, 2021, are incorporated herein by reference.

MEDTRONIC PLC 2021 Form 10-K 113

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a) 1. Financial Statement Schedules

Schedule II. Valuation and Qualifying Accounts — years ended April 30, 2021, April 24, 2020, and April 26, 2019.

MEDTRONIC PLC AND SUBSIDIARIES

SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS

Balance at

Beginning of

Fiscal Year

Additions Deductions

Balance at End of

Fiscal Year(in millions)

Charges to

Income

Charges to

Other Accounts

Other Changes

(Debit) Credit

Allowance for doubtful accounts:

Fiscal year ended April 30, 2021 $ 208 $ 128 $ — $ (95)

(a)

$ 241

Fiscal year ended April 24, 2020 190 99 — (81)

(a)

208

Fiscal year ended April 26, 2019 193 78 — (81)

(a)

190

Inventory reserve:

Fiscal year ended April 30, 2021 $ 544 $ 483 $ — $ (398)

(b)

$ 629

Fiscal year ended April 24, 2020 521 282 — (259)

(b)

544

Fiscal year ended April 26, 2019 452 224 — (155)

(b)

521

Deferred tax valuation allowance:

Fiscal year ended April 30, 2021 $ 5,482 $ 342 $ 170

(e)

$ (172)

(d)

$ 5,822

Fiscal year ended April 24, 2020 6,300 119 (6)

(c)

(744)

(d)

5,482

(187)

(e)

Fiscal year ended April 26, 2019 7,166 378 (11)

(c)

(770)

(d)

6,300

(463)

(e)

(a) Primarily consists of uncollectible accounts written off, less recoveries.

(b) Primarily reflects utilization of the inventory reserve.

(d) Primarily reflects carryover attribute utilization and expiration.

(e) Primarily reflects the effects of currency fluctuations.

All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes

thereto.

114

MEDTRONIC PLC 2021 Form 10-K

PART IV

Item 15 Exhibits and Financial Statement Schedules

2. Exhibits

Exhibit No. Description

3.1 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).

3.2 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).

4.1 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).

4.2 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).

4.3 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).

4.4 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).

4.5 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).

4.6 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).

4.7 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).

4.8 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).

4.9 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).

4.10 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).

4.11 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).

4.12 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).

4.13 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).

4.14 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).

4.15 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).

4.16 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).

4.17 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).

4.18 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).

MEDTRONIC PLC 2021 Form 10-K 115

PART IV

Item 15 Exhibits and Financial Statement Schedules

Exhibit No. Description

4.19 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).

4.20 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).

4.21 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).

4.22 Second Supplemental Indenture, dated as of March 7, 2019, by and among Medtronic plc, Medtronic Global Holdings S.C.A., Medtronic,

Inc., Wells Fargo Bank, N.A., and Elavon Financial Services DAC, UK Branch (incorporated by reference to Exhibit 4.1 to Medtronic plc’s

Current Report on Form 8-K, filed on March 7, 2019, File No. 001-36820).

4.23 Third Supplemental Indenture, dated as of July 2, 2019, among Medtronic Global Holdings S.C.A., Medtronic, Inc. and Medtronic plc,

Wells Fargo Bank, N.A., as trustee, and Elavon Financial Services DAC (incorporated by reference to Exhibit 4.1 to Medtronic plc’ Current

Report on Form 8-K, filed July 2, 2019, File No. 001-36820).

4.24 Fourth Supplemental Indenture, dated as of September 29, 2020, among Medtronic Global Holdings S.C.A., Medtronic, Inc. and

Medtronic plc, Wells Fargo Bank, N.A., as trustee, and Elavon Financial Services DAC, as paying agent (including the forms of the 2023

Notes, the 2025 Notes, the 2028 Notes, the 2032 Notes, the 2040 Notes and the 2050 Notes) (incorporated by reference to Exhibit 4.1

to Medtronic plc’ Current Report on Form 8-K, filed September 29, 2020, File No. 001-36820).

#4.25 Description of Registrant’s Securities.

10.1 Amended and Restated Credit Agreement, dated as of December 12, 2018, by and among Medtronic Global Holdings, SCA, certain

subsidiaries named therein, Medtronic, Inc., Medtronic PLC, the lenders from time to time party thereto, and Bank of America, N.A. as

Administration Agent (incorporated by reference to Exhibit 10.1 to Medtronic plc’s Current Report on Form 8-K, filed on December 13,

2018, File No. 001-36820).

10.2 Amendment No. 1 and Extension Agreement to the Amended and Restated Credit Agreement, dated as of December 12, 2019,

among Medtronic Global Holdings S.C.A., Medtronic, Inc., Medtronic PLC, the Lenders party thereto and Bank of America, N.A., as

Administrative Agent (incorporated by reference to Exhibit 10.1 to Medtronic plc’s Current Report on Form 10-Q, filed on February 28,

2020, File No. 001-36820).

10.3 Term Loan Agreement, dated as of May 12, 2020, among Medtronic Global Holdings S.C.A., Medtronic, Inc., Medtronic PLC, the

Lenders party thereto and Mizuho Bank, LTD., as Administrative Agent (incorporated by reference to Exhibit 10.1 to Medtronic plc’s

Current Report on Form 8-K, filed on May 12, 2020, File No. 001-36820).

10.4 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).

10.5 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).

*10.6 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).

*10.7 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).

*10.8 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).

*10.9 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).

*10.10 Office of Chairman and Chief Executive Officer Letter Agreement (incorporated by reference to Exhibit 10.1 to Medtronic plc’s

Quarterly Report on Form 10-Q, filed on December 3, 2019, File No. 001-36820).

*10.11 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).

*10.12 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).

*10.13 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).

*10.14 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).

*10.15 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).

*10.16 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).

*10.17 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).

116 MEDTRONIC PLC 2021 Form 10-K

PART IV

Item 15 Exhibits and Financial Statement Schedules

Exhibit No. Description

*10.18 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).

*10.19 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).

*10.20 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).

*10.21 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).

*10.22 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).

*10.23 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).

*10.24 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).

*10.25 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).

*10.26 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).

*10.27 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).

*10.28 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).

*10.29 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).

*10.30 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).

*10.31 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).

*10.32 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).

*10.33 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).

*10.34 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).

*10.35 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).

*10.36 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).

*10.37 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).

*10.38 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).

*10.39 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).

*10.40 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).

MEDTRONIC PLC 2021 Form 10-K 117

PART IV

Item 15 Exhibits and Financial Statement Schedules

Exhibit No. Description

*10.41 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).

*10.42 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).

*10.43 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).

*10.44 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).

*10.45 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).

*10.46 Form of Non-qualified Stock Option Agreement Amended and Restated 2013 Stock Award and Incentive Plan (incorporated by

reference to Exhibit 10.50 to Medtronic plc’s Annual Report on Form 10-K, filed June 22, 2018, File No. 001-36820).

*10.47 Form of Restricted Stock Unit Award Agreement Amended and Restated 2013 Stock Award and Incentive Plan (incorporated by

reference to Exhibit 10.51 to Medtronic plc’s Annual Report on Form 10-K, filed June 22, 2018, File No. 001-36820).

*10.48 Form of Restricted Stock Award Agreement Amended and Restated 2013 Stock Award and Incentive Plan (incorporated by reference

to Exhibit 10.52 to Medtronic plc’s Annual Report on Form 10-K, filed June 22, 2018, File No. 001-36820)

*10.49 Form of Long Term Performance Award Agreement under Amended and Restated 2013 Stock Award and Incentive Plan (incorporated

by reference to Exhibit 10.53 to Medtronic plc’s Annual Report on Form 10-K, filed June 22, 2018, File No. 001-36820).

*10.50 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).

*10.51 Form of Performance Share Unit 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-Q for the quarter ended October 30, 2020, filed on

December 3, 2020, File No. 001-36820).

*10.52 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).

*10.53 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).

*10.54 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).

*10.55 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).

*10.56 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).

*10.57 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).

*10.58 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).

*10.59 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).

*10.60 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).

*10.61 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).

*10.62 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).

*10.63 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).

118 MEDTRONIC PLC 2021 Form 10-K

PART IV

Item 16 Form 10-K Summary

Exhibit No. Description

*10.64 Form of Restricted Stock Award Agreement under Amended and Restated 2013 Stock Award and Incentive Plan (incorporated by

reference to Exhibit 10.69 to Medtronic plc’s Annual Report on Form 10-K for the year ended April 24, 2020, filed on June 19, 2020, File

No. 001-36820).

*10.65 Form of Non-Qualified Stock Option Agreement under Amended and Restated 2013 Stock Award and Incentive Plan (incorporated by

reference to Exhibit 10.70 to Medtronic plc’s Annual Report on Form 10-K for the year ended April 24, 2020, filed on June 19, 2020, File

No. 001-36820).

*10.66 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).

*10.67 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).

*10.68 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).

*10.69 Medtronic Non-Qualified Retirement Plan Supplemental (restated November 6, 2020, and formerly known as the Supplemental

Executive Retirement Plan) (incorporated by reference to Exhibit 10.3 to Medtronic plc’s Quarterly Report on Form 10-Q for the quarter

ended October 30, 2020, filed on December 3, 2020, File No. 001-36820).

*10.70 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).

*10.71 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).

*10.72 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).

*10.73 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).

*10.74 Amended and Restated Covidien Supplemental Savings and Retirement Plan (restated November 6, 2020) (incorporated by reference

to Exhibit 10.2 to Medtronic plc’s Quarterly Report on Form 10-Q for the quarter ended October 30, 2020, filed on December 3, 2020,

File No. 001-36820).

*10.75 Medtronic Capital Accumulation Plan Deferral Program (restated November 6, 2020) (incorporated by reference to Exhibit 10.4 to

Medtronic plc’s Quarterly Report on Form 10-Q for the quarter ended October 30, 2020, filed on December 3, 2020, File

No. 001-36820).

#21 List of Subsidiaries of Medtronic plc.

#22 List of Senior Notes, Issuers and Guarantors.

#23 Consent of Independent Registered Public Accounting Firm.

#24 Power of Attorney.

#31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

#31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

#32.1 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

#32.2 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

#101.SCH XBRL Taxonomy Extension Schema Document

#101.CAL XBRL Taxonomy Extension Calculation Linkbase Document

#101.DEF XBRL Taxonomy Extension Definition Linkbase Document

#101.LAB XBRL Taxonomy Extension Label Linkbase Document

#101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

#104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Exhibits that are management contracts or compensatory plans or arrangements.

# Filed herewith

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.

MEDTRONIC PLC 2021 Form 10-K 119

PART IV

Item 16 Form 10-K Summary

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.

Medtronic plc

Dated: June 25, 2021 By:

/s/ Geoffrey S. Martha

Geoffrey S. Martha

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 plc

Dated: June 25, 2021 By:

/s/ Geoffrey S. Martha

Geoffrey S. Martha

Chairman and Chief Executive Officer

(Principal Executive Officer)

Dated: June 25, 2021 By:

/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*

Andrea J. Goldsmith, PH.D.*

Randall J. Hogan,*

Michael O. Leavitt*

James T. Lenehan*

Kevin E. Lofton*

Geoffrey S. Martha

Elizabeth G. Nabel, M.D.*

Denise M. O’Leary*

Kendall J. Powell*

*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 25, 2021 By:

/s/ Bradley E. Lerman

Bradley E. Lerman

120 MEDTRONIC PLC 2021 Form 10-K

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