|Medtronic Updates Capital Allocation Plans and Fiscal 2016 EPS Guidance|
DUBLIN - Jan 11, 2016 - Medtronic plc (NYSE:MDT), a global leader in medical technology, services, and solutions, today updated its capital allocation plans for the approximately $9.3 billion resulting from the previously announced September 2015 internal reorganization as part of the company's integration of Covidien legal entities. Separately, the company today reiterated its revenue outlook and updated its diluted non-GAAP EPS guidance.
Capital Allocation Plans
Today, the company announced that it intends to return $5 billion of the $9.3 billion to its shareholders through share repurchases to be executed before the end of fiscal year 2018. The company expects to opportunistically utilize its existing board authorization under Medtronic's Share Repurchase Plan to repurchase shares based on market conditions, with a bias toward repurchasing shares earlier within the time period. This $5 billion return to shareholders is in addition to the company's current commitment of returning 50 percent of its free cash flow each year to shareholders in the form of dividends and share repurchases.
In addition, Medtronic intends to use a majority of the remaining proceeds to either prepay existing debt or pay debt as it comes due by the end of fiscal year 2018 in order to meet its commitments to its debt investors. Medtronic continues to target an A credit profile.
With this increased financial flexibility and within its ongoing commitment to return a minimum of 50 percent of free cash flow to shareholders in the form of dividends and share repurchases, the company has the ability to meet its targeted dividend payout ratio of 40 percent faster than previously communicated. Decisions on annual dividend payments are typically announced by the company in June. Medtronic is a constituent of the S&P 500 Dividend Aristocrats index and has increased its dividend payment for 38 consecutive years.
The net result of these capital allocation actions are not expected to materially affect the company's fiscal year 2016 income statement, including expectations for net interest expense, net earnings, diluted weighted shares outstanding, or diluted earnings per share. However, the company does expect these actions to be accretive to earnings per share starting in fiscal year 2017.
Revenue Outlook and EPS Guidance
FORWARD LOOKING STATEMENTS
NON-GAAP FINANCIAL MEASURES
Medtronic management believes that these non-GAAP measures are useful because they may allow investors to consider the impact of aligning historical Covidien revenues to Medtronic's fiscal calendar and to exclude the effect of certain charges or gains that contribute to or reduce earnings but that result from transactions or events that management believes may or may not recur with similar materiality or impact to operations in future periods (Non-GAAP Adjustments). Medtronic generally uses non-GAAP financial measures to facilitate management's review of the operational performance of the company and as a basis for strategic planning. Non-GAAP financial measures should be considered supplemental to and not a substitute for financial information prepared in accordance with GAAP, and investors are cautioned that Medtronic may calculate non-GAAP financial measures in a way that is different from other companies. Management strongly encourages investors to review the company's consolidated financial statements and publicly filed reports in their entirety.