SEC Filings

10-Q
MEDTRONIC PLC filed this Form 10-Q on 12/04/2017
Entire Document
 


conditions and investor demand. Our auction rate security holdings continue to experience reduced liquidity due to low investor demand. Although our auction rate securities are currently illiquid and other securities could become illiquid, we believe we could liquidate a substantial amount of our portfolio without incurring a material impairment loss.
For the three and six months ended October 27, 2017, the total other-than-temporary impairment losses on available-for-sale debt securities were not significant. Based on our assessment of the credit quality of the underlying collateral and credit support available to each of the remaining securities in which we are invested, we believe we have recognized all necessary other-than-temporary impairments as we do not have the intent to sell, nor is it more likely than not that we will be required to sell, before recovery of the amortized cost. At October 27, 2017, we have $227 million of gross unrealized losses on our aggregate available-for-sale debt securities of $7.6 billion. If market conditions deteriorate, some of these holdings may experience other-than-temporary impairment in the future, which could adversely impact our financial results. We are required to use estimates and assumptions in our valuation of investments, which requires a high degree of judgment, and therefore, actual results could differ materially from estimates. See Note 7 to the current period's consolidated financial statements for additional information regarding fair value measurements.
Summary of Cash Flows
 
Six months ended
(in millions)
October 27, 2017
 
October 28, 2016
Cash provided by (used in):
 

 
 

Operating activities
$
1,644

 
$
3,022

Investing activities
6,125

 
(357
)
Financing activities
(7,277
)
 
(2,651
)
Effect of exchange rate changes on cash and cash equivalents
70

 
64

Net change in cash and cash equivalents
$
562

 
$
78

Operating Activities The $1.4 billion decrease in net cash provided was primarily driven by an increase in cash paid for income taxes of $416 million, funding of our retirement benefit plans of $170 million, cash paid for for divestiture-related expenses of approximately $100 million, an increase in certain litigation payments of $96 million, net cash outflows for collateral related to our currency exchange rate derivative instruments, a decrease in cash collected from customers, and an increase in cash paid for inventory. The increase in cash paid for income taxes was primarily a result of tax payments related to the intercompany sale of intellectual property and sale of the Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency businesses as well as settlement payments for U.S federal income taxes for fiscal years 2012 to 2014 and audit settlements outside of the U.S. during the six months ended October 27, 2017. The decrease in net cash provided by operating activities related to the funding of our retirement benefit plans is due to timing of contributions; we made a contribution of $170 million in the second quarter of fiscal year 2018 whereas the prior year contribution was made in the second half of fiscal year 2017. The decrease in cash collected from customers is partially attributable to reduced sales due to the July 29, 2017 sale of the Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency businesses. The increase in cash paid for inventory is partially attributable to higher inventory in the Cardiac and Vascular Group and Minimally Invasive Therapies Group related to new product launches and in Diabetes due to sensor supply constraints. For more information on collateral received/posted see Note 9 to the current period's consolidated financial statements.
Investing Activities The $6.5 billion increase in net cash provided was primarily attributable to sale of the Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency businesses on July 29, 2017 resulting in net proceeds of $6.1 billion.
Financing Activities The $4.6 billion increase in net cash used was primarily attributable to the repayment of our senior unsecured term loan, including accrued interest, for $3.0 billion in August 2017, the repayment of our 6.000 percent ten-year 2008 CIFSA senior notes, including accrued interest, for $1.2 billion in October 2017, and a reduction of commercial paper borrowings of $1.1 billion, partially offset by a decrease in share repurchases of $906 million.

70

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