8-KRegulation FD

Medtronic plc 8-K Report, Regulation FD Disclosure (Feb 17, 2021)

Filed February 17, 2021For Securities:MDT

Summary

Medtronic plc (MDT) has announced a voluntary global recall of its Valiant Navion™ Thoracic Stent Graft System. While the company has booked a $19 million reserve for scrapped inventory, it does not anticipate a material impact on its overall financials. The revenue generated by the Valiant Navion™ system represented less than 0.5% of total company revenue prior to the recall. To mitigate the disruption, Medtronic is increasing production of its previous generation product, the Valiant Captivia™ Thoracic Stent Graft System, with global availability expected in late March or early April and full production capacity anticipated by September. The company has provided revenue impact estimates, projecting a negative effect of approximately $40 million on its Aortic, Peripheral and Venous (APV) division revenue in the fourth quarter of fiscal year 2021, and an estimated $25 to $35 million per quarter in fiscal year 2022, decreasing over the year.

Key Highlights

  • 1Voluntary global recall of the Valiant Navion™ Thoracic Stent Graft System initiated.
  • 2Recall is not expected to have a material impact on total company financials.
  • 3Valiant Navion™ revenue was less than 0.5% of total company revenue.
  • 4Medtronic is ramping up production of the Valiant Captivia™ Thoracic Stent Graft System as a replacement.
  • 5Valiant Captivia™ expected to be available globally in late March/early April, with full production by September.
  • 6A $19 million reserve has been set aside for inventory write-offs.
  • 7Estimated Q4 FY21 APV division revenue impact of approximately $40 million, with FY22 impact of $25-$35 million per quarter.

Frequently Asked Questions

Medtronic plc filed this 8-K to disclose its voluntary global recall of the Valiant Navion™ Thoracic Stent Graft System and to provide details regarding the financial and operational implications of this recall.

Medtronic has booked a $19 million reserve for scrapped inventory and estimates a negative impact of approximately $40 million on its APV division revenue in Q4 FY21. For FY22, the estimated quarterly APV revenue impact is projected to be between $25 million and $35 million, decreasing throughout the fiscal year. The company does not expect the recall to materially impact its total company financials.

Medtronic is increasing the production of its prior generation product, the Valiant Captivia™ Thoracic Stent Graft System, to serve as a substitute. The company expects to have inventory available in most markets by late March or early April and reach full production capacity by September.

The $19 million charge for scrapped inventory will be recognized in Medtronic's cost of products sold for the third quarter of fiscal year 2021, which was scheduled to be reported on February 23, 2021. The company does not expect to adjust its third-quarter earnings for this charge.