10-QPeriod: Q1 FY2020

Medtronic plc Quarterly Report for Q1 Ended Jul 26, 2019

Filed August 30, 2019For Securities:MDT

Summary

Medtronic plc (MDT) reported its first-quarter fiscal year 2020 results, ending July 26, 2019. The company generated net sales of $7.49 billion, a modest 1% increase year-over-year. While overall revenue saw slight growth, net income attributable to Medtronic declined by 20% to $864 million, translating to a diluted EPS of $0.64, down from $0.79 in the prior year period. This decline in profitability was largely attributed to a significant increase in interest expense driven by debt extinguishment activities, specifically the tender and early redemption of senior notes. Despite the net income dip, Medtronic demonstrated solid operational cash flow generation, with $1.51 billion in cash from operations and $1.21 billion in free cash flow, underscoring the underlying strength of its business operations.

Financial Highlights

54 data points
Beta

Revenue

$7.49B

68.4% Gross Margin

Net Income

$877.00M

11.7% Net Margin

EPS (Diluted)

$0.64

Total Assets

$91.27B

Cash & Equivalents

$5.08B

Free Cash Flow

$1.21B

Financial Statements
Beta
Revenue$7.49B
Cost of Revenue$2.37B
Gross Profit$5.13B
SG&A Expenses$2.54B
Operating Income$1.49B
Interest Expense$609.00M
Net Income$877.00M
EPS (Basic)$0.64
EPS (Diluted)$0.64
Shares Outstanding (Basic)1.34B
Shares Outstanding (Diluted)1.35B

Key Highlights

  • 1Net sales increased by 1% to $7.49 billion, driven by growth in Minimally Invasive Therapies and Restorative Therapies groups, alongside emerging market strength.
  • 2Net income attributable to Medtronic decreased by 20% to $864 million, and diluted EPS fell to $0.64 from $0.79.
  • 3A significant increase in interest expense, primarily due to $413 million in charges from the tender and early redemption of senior notes, impacted profitability.
  • 4Operating cash flow remained strong at $1.51 billion, with free cash flow at $1.21 billion.
  • 5The company repurchased approximately 3.3 million shares for $328 million during the quarter, with $6.9 billion remaining under its authorized share repurchase program.
  • 6Restructuring charges related to the Enterprise Excellence Program were $136 million for the quarter.
  • 7Emerging market sales grew 8%, indicating continued success in Medtronic's globalization strategy.

Frequently Asked Questions

The primary driver for the decrease in net income attributable to Medtronic was a significant increase in interest expense. This was largely due to $413 million in charges recognized in connection with the tender and early redemption of approximately $5.2 billion of senior notes during the quarter.

Net sales in the U.S. increased by 1%. Non-U.S. developed markets saw a 1% decrease, while emerging markets showed strong growth of 8%. This growth in emerging markets reflects the company's successful globalization strategy.

Medtronic repurchased approximately 3.3 million shares for $328 million during the quarter. As of July 26, 2019, there was approximately $6.9 billion remaining under the company's authorized share repurchase program.

Medtronic is executing a multi-year global 'Enterprise Excellence Program' aimed at driving long-term business growth and efficiency through global operations integration, functional optimization, and commercial optimization. This program is expected to generate significant annual savings and incurred $136 million in charges during this quarter.