10-QPeriod: Q2 FY2017

Medtronic plc Quarterly Report for Q2 Ended Oct 28, 2016

Filed December 5, 2016For Securities:MDT

Summary

Medtronic plc reported strong financial performance for the six months and three months ended October 28, 2016. Net income attributable to Medtronic saw substantial increases, with diluted earnings per share rising to $1.46 for the six-month period and $0.80 for the three-month period. Net sales also grew, driven by performance across its key segments: Cardiac and Vascular, Minimally Invasive Therapies, Restorative Therapies, and Diabetes. The company completed several strategic acquisitions during the period, including HeartWare International, Inc. and Smith & Nephew's gynecology business, which are expected to contribute to future growth. Medtronic also continued its focus on cost synergies, restructuring initiatives, and managing its debt and capital structure, maintaining a solid liquidity position. The company reiterated its commitment to innovation and strategic growth through both organic development and acquisitions.

Financial Highlights

52 data points
Beta

Revenue

$7.34B

68.3% Gross Margin

Net Income

$1.11B

15.2% Net Margin

EPS (Diluted)

$0.80

Total Assets

$98.41B

Cash & Equivalents

$2.95B

Free Cash Flow

$1.20B

Financial Statements
Beta
Revenue$7.34B
Cost of Revenue$2.33B
Gross Profit$5.02B
SG&A Expenses$2.42B
Operating Income$1.39B
Interest Expense$264.00M
Net Income$1.11B
EPS (Basic)$0.81
EPS (Diluted)$0.80
Shares Outstanding (Basic)1.38B
Shares Outstanding (Diluted)1.39B

Key Highlights

  • 1Net income attributable to Medtronic increased significantly, up 114% year-over-year for the three months and 53% for the six months.
  • 2Diluted earnings per share grew to $0.80 for the three-month period and $1.46 for the six-month period.
  • 3Total net sales increased by 4% for the three months ($7.345 billion) and 1% for the six months ($14.511 billion) compared to the prior year periods.
  • 4The company completed the acquisition of HeartWare International, Inc. for approximately $1.1 billion and Smith & Nephew's gynecology business for approximately $350 million, enhancing its product portfolio.
  • 5Operating profit increased to $1.385 billion for the quarter and $2.552 billion for the six-month period.
  • 6Free cash flow generation remained strong, with $2.424 billion for the six-month period, an increase from $1.649 billion in the prior year.
  • 7Medtronic maintained a healthy liquidity position with $11.257 billion in cash, cash equivalents, and current investments at the end of the period.

Frequently Asked Questions

Medtronic reported total net sales of $7.345 billion for the three months ended October 28, 2016, a 4% increase compared to $7.058 billion in the prior year period. For the six months ended October 28, 2016, net sales were $14.511 billion, a 1% increase from $14.332 billion in the prior year period. Growth was driven by solid performance across its key segments.

Medtronic completed two significant acquisitions: HeartWare International, Inc. on August 23, 2016, for approximately $1.1 billion, which develops implantable heart pumps, and Smith & Nephew's gynecology business on August 5, 2016, for approximately $350 million, expanding its minimally invasive surgical offerings.

Net income attributable to Medtronic saw substantial growth, increasing by 114% to $1.115 billion for the three months ended October 28, 2016, compared to $520 million in the prior year. Diluted earnings per share rose to $0.80 from $0.36. For the six-month period, net income increased by 53% to $2.044 billion, with diluted earnings per share rising to $1.46 from $0.94.

Medtronic maintained a strong liquidity position, with $11.257 billion in cash, cash equivalents, and current investments at October 28, 2016. The company's total debt was $32.377 billion, resulting in a net debt position of $21.120 billion. The debt-to-total capital ratio was 39%. Medtronic continues to utilize its $3.5 billion revolving credit facility and commercial paper program to manage its short-term financing needs.