10-QPeriod: Q1 FY2019

Medtronic plc Quarterly Report for Q1 Ended Jul 27, 2018

Filed August 31, 2018For Securities:MDT

Summary

Medtronic plc reported net sales of $7.384 billion for the three months ended July 27, 2018, largely flat compared to the prior year period. Net income attributable to Medtronic increased by 6% to $1.075 billion, and diluted earnings per share rose by 7% to $0.79. This improvement was driven by a decrease in cost of products sold, gains on minority investments, and a lower income tax provision, partially offset by increased litigation and restructuring charges. The company saw varied performance across its segments. The Cardiac and Vascular Group and Restorative Therapies Group demonstrated solid growth, while the Minimally Invasive Therapies Group experienced a significant decline, largely due to a prior year divestiture. The Diabetes Group showed strong growth, driven by demand for its advanced systems. Cash flow from operations remained robust, and the company managed its debt effectively. Investors should note the ongoing restructuring program (Enterprise Excellence) and the significant impact of U.S. Tax Reform on the effective tax rate.

Financial Highlights

54 data points
Beta

Revenue

$7.38B

70.2% Gross Margin

Net Income

$1.08B

14.6% Net Margin

EPS (Diluted)

$0.79

Total Assets

$89.72B

Cash & Equivalents

$4.38B

Free Cash Flow

$1.41B

Financial Statements
Beta
Revenue$7.38B
Cost of Revenue$2.20B
Gross Profit$5.18B
SG&A Expenses$2.60B
Operating Income$1.24B
Interest Expense$242.00M
Net Income$1.08B
EPS (Basic)$0.79
EPS (Diluted)$0.79
Shares Outstanding (Basic)1.35B
Shares Outstanding (Diluted)1.37B

Key Highlights

  • 1Net sales were $7.384 billion, flat year-over-year.
  • 2Net income attributable to Medtronic increased by 6% to $1.075 billion.
  • 3Diluted earnings per share (EPS) grew by 7% to $0.79.
  • 4Operating profit decreased by 11% to $1.236 billion, impacted by increased litigation and restructuring charges.
  • 5The Cardiac and Vascular Group and Restorative Therapies Group showed segment sales growth of 6% and 8% respectively.
  • 6The Minimally Invasive Therapies Group saw a 17% decrease in net sales, primarily due to prior year divestitures.
  • 7Cash flow from operating activities significantly increased to $1.702 billion from $737 million in the prior year period.

Frequently Asked Questions

Medtronic reported net sales of $7.384 billion for the three months ended July 27, 2018, which was essentially flat compared to $7.390 billion in the same period last year. While overall sales were flat, there were differing performances across segments, with Cardiac and Vascular Group and Restorative Therapies Group showing growth, offset by declines in the Minimally Invasive Therapies Group due to divestitures.

Net income attributable to Medtronic increased by 6% to $1.075 billion, and diluted earnings per share (EPS) rose by 7% to $0.79. This improvement was driven by a lower cost of products sold (partially due to prior divestitures), gains on minority investments, and a reduction in income tax provision. However, operating profit saw a decline due to higher litigation and restructuring charges.

Cost of products sold decreased as a percentage of sales, primarily due to the divestiture of lower-margin products. Research and development expenses increased, reflecting the company's commitment to innovation. Selling, general, and administrative expenses remained relatively flat as a percentage of sales. Significant charges were noted for restructuring ($120 million for the Enterprise Excellence program), and litigation ($103 million). Amortization of intangible assets remained substantial.

Medtronic demonstrated strong operational cash flow, which increased significantly to $1.702 billion. The company also repurchased shares and paid dividends, reflecting a focus on returning value to shareholders. Total debt remained relatively stable, with a reduction in commercial paper borrowings. The company has a significant cash position and access to a revolving credit facility, indicating solid liquidity.