SEC Filings

10-Q
MEDTRONIC PLC filed this Form 10-Q on 09/01/2017
Entire Document
 
Medtronic plc
Notes to Consolidated Financial Statements
(Unaudited)


19. Subsequent Events
On July 29, 2017, the Company's Minimally Invasive Therapies Group sold the Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency businesses within the Patient Monitoring and Recovery division to Cardinal Health, Inc. (Cardinal) for total consideration of $6.1 billion. Among the product lines included in the divestiture are the dental/animal health, chart paper, wound care, incontinence, electrodes, SharpSafety, thermometry, perinatal protection, blood collection, compression, and enteral feeding offerings. The divestiture also included 17 dedicated manufacturing sites. The after-tax proceeds are estimated to be approximately $5.6 billion to $5.8 billion. In connection with the transaction, the Company has entered into Transition Service Agreements (TSAs) and Transition Manufacturing Agreements (TMAs) with Cardinal designed to ensure and facilitate an orderly transfer of business operations. The TSAs are primarily related to administrative services for terms generally between 6 and 12 months, with an ability to extend upon mutual agreement of both parties. Under the TMAs, both the Company and Cardinal will manufacture and supply certain products to each other for a transition period of up to 5 years. On August 3, 2017, the Company used a portion of the proceeds received from Cardinal to repay its senior unsecured term loan, including accrued interest, for $3.0 billion.
On August 10, 2017 the Company received a tax ruling confirming the treatment of various intercompany transactions which have the effect of utilizing the $12 billion of non-U.S. special deductions previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended April 28, 2017. The ruling will allow the Company to offset some of the gain on the sale of the Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency businesses as well as recognize an income tax benefit associated with an intercompany sale of intellectual property. The Company is still assessing the financial statement impact of these events.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
UNDERSTANDING OUR FINANCIAL INFORMATION
The following discussion and analysis provides information management believes to be relevant to understanding the financial condition and results of operations of Medtronic plc and its subsidiaries (Medtronic plc, Medtronic, or the Company, or we, us, or our). For a full understanding of financial condition and results of operations, you should read this discussion along with management’s discussion and analysis of financial condition and results of operations in our Annual Report on Form 10-K for the fiscal year ended April 28, 2017. In addition, you should read this discussion along with our consolidated financial statements and related notes thereto at and for the three months ended July 28, 2017.
Early in the week of June 19, 2017, we experienced an information technology system disruption that affected our customer ordering, distribution, and manufacturing processes globally. Our system has been fully restored. While the system disruption had some impact on our overall performance for the three months ended July 28, 2017, we have concluded that the impact was not material to our revenue or earnings per share for the three months ended July 28, 2017 or full fiscal year 2018.
Financial Trends
Throughout this Management’s Discussion and Analysis, we present certain financial measures that management uses to evaluate the operational performance of the Company and as a basis for strategic planning; however, such financial measures are not presented in our financial statements prepared in accordance with generally accepted accounting principles in the United States (U.S.) (U.S. GAAP). These financial measures are considered "non-GAAP financial measures."
Management uses non-GAAP financial measures to facilitate management’s review of the operational performance of the Company and as a basis for strategic planning. Management believes that non-GAAP financial measures provide useful information to investors regarding the underlying business trends and performance of the Company’s ongoing operations and are useful for period over period comparisons of such operations. The non-GAAP financial measures reflect an additional way of viewing aspects of the Company’s operations. Investors should not consider results reflecting non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with U.S. GAAP and are cautioned that Medtronic may calculate results reflecting non-GAAP financial measures in a way that is different from other companies.
The GAAP to Non-GAAP Reconciliation presents non-GAAP financial measures that exclude the impact of charges or gains that contribute to or reduce earnings and that may affect financial trends, but which include charges or benefits that result from transactions or events that management believes may or may not recur with similar materiality or impact to our operations in future periods (Non-GAAP Adjustments).
In the event there is a Non-GAAP Adjustment recognized in our operating results, the tax cost or benefit attributable to that item is separately calculated and recorded. Because the effective rate can be significantly impacted by the Non-GAAP Adjustments that take place during the period, we often refer to our tax rate using both the effective rate and the non-GAAP nominal tax rate

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