10-QPeriod: Q3 FY2021

Medtronic plc Quarterly Report for Q3 Ended Jan 29, 2021

Filed March 5, 2021For Securities:MDT

Summary

Medtronic plc's (MDT) third quarter of fiscal year 2021 (ended January 29, 2021) showed a slight increase in net sales of 1% to $7.775 billion compared to the prior year period, demonstrating resilience amidst the ongoing COVID-19 pandemic. While revenue saw modest growth, net income attributable to Medtronic declined significantly to $1.270 billion from $1.915 billion in the prior year, primarily impacted by increased cost of products sold and various charges. The company continued to navigate supply chain disruptions and demand fluctuations caused by the pandemic. Despite these challenges, Medtronic highlighted growth in its Minimally Invasive Therapies Group, driven by COVID-19 related diagnostics and therapies, and positive contributions from new product launches in its Restorative Therapies and Diabetes Groups. However, the Cardiac and Vascular Group experienced a decline due to reduced procedural volumes. The company also initiated a significant restructuring program, "Simplification," aimed at improving agility and efficiency, which incurred associated charges during the quarter.

Financial Highlights

54 data points
Beta

Revenue

$7.78B

66.3% Gross Margin

Net Income

$1.28B

16.5% Net Margin

EPS (Diluted)

$0.94

Total Assets

$97.27B

Cash & Equivalents

$5.08B

Free Cash Flow

$1.99B

Financial Statements
Beta
Revenue$7.78B
Cost of Revenue$2.62B
Gross Profit$5.15B
SG&A Expenses$2.54B
Operating Income$1.28B
Interest Expense$143.00M
Net Income$1.28B
EPS (Basic)$0.94
EPS (Diluted)$0.94
Shares Outstanding (Basic)1.35B
Shares Outstanding (Diluted)1.36B

Key Highlights

  • 1Net sales for the third quarter of fiscal year 2021 increased by 1% year-over-year to $7.775 billion.
  • 2Net income attributable to Medtronic decreased to $1.270 billion for the quarter, compared to $1.915 billion in the prior year period, impacted by higher costs and charges.
  • 3The Minimally Invasive Therapies Group showed growth, driven by COVID-19 related products, while the Cardiac & Vascular Group saw a decline due to reduced procedure volumes.
  • 4The company initiated a 'Simplification' restructuring program, estimating pre-tax costs of $400-$450 million.
  • 5Cash provided by operating activities for the first nine months of fiscal year 2021 was $4.495 billion, a decrease from $5.784 billion in the prior year period.
  • 6Medtronic ended the quarter with $5.077 billion in cash and cash equivalents and $9.562 billion in investments.

Frequently Asked Questions

The decrease in net income was primarily driven by an increase in the cost of products sold, which rose significantly as a percentage of net sales. Additionally, various charges including restructuring costs, litigation charges, and other operating expenses, contributed to the decline in profitability compared to the prior year period.

Medtronic is experiencing varied impacts from COVID-19 across its segments. While demand for certain products, particularly ventilators and diagnostics, increased, the pandemic led to reduced procedural volumes in other areas, impacting sales in groups like Cardiac & Vascular. The company is also implementing a 'Simplification' restructuring program to enhance agility and efficiency in response to the ongoing challenges and evolving market dynamics.

Medtronic maintains a strong liquidity position, with $5.077 billion in cash and cash equivalents and $9.562 billion in investments as of January 29, 2021. The company also has an undrawn $3.5 billion credit facility. Total debt increased to $30.3 billion ($3.8 billion current, $26.5 billion long-term) from $24.8 billion in the prior year, primarily due to new borrowings and debt issuances.

Net sales performance varied by segment. The Minimally Invasive Therapies Group saw growth, boosted by COVID-19 related products. The Restorative Therapies and Diabetes Groups showed some positive signs from new product launches. However, the Cardiac & Vascular Group experienced a sales decline, largely due to the reduction in global procedural volumes caused by the pandemic. The company also realigned its Restorative Therapies Group divisions during the quarter.