MEDTRONIC PLC 
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 ofMedtronic 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 endedApril 30, 2021 . In addition, you should read this discussion along with our consolidated financial statements and related notes thereto at and for the three and six months endedOctober 29, 2021 . Amounts reported in millions within this quarterly report are computed based on the amounts in thousands, and therefore, the sum of the components may not equal the total amount reported in millions due to rounding. Additionally, certain columns and rows within tables may not sum due to rounding. Financial Trends Throughout this Management's Discussion and Analysis, we present certain financial measures that we use 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 accounting principles generally accepted inthe United States (U.S. ) (U.S. GAAP). These financial measures are considered "non-GAAP financial measures" and are intended to supplement, and should not be considered as superior to, financial measures presented in accordance withU.S. GAAP. We generally use non-GAAP financial measures to facilitate management's review of the operational performance of the Company and as a basis for strategic planning. We believe that non-GAAP financial measures provide information useful to investors in understanding the Company's underlying operational performance and trends and may facilitate comparisons with the performance of other companies in the medical technologies industry. As presented in the GAAP to Non-GAAP Reconciliations section below, our non-GAAP financial measures exclude the impact of certain charges or benefits that contribute to or reduce earnings and that may affect financial trends and include certain charges or benefits that result from transactions or events that we believe 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 reported. 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 (Non-GAAP Nominal Tax Rate). The Non-GAAP Nominal Tax Rate is calculated as the income tax provision, adjusted for the impact of Non-GAAP Adjustments, as a percentage of income before income taxes, excluding Non-GAAP Adjustments. Free cash flow is a non-GAAP financial measure calculated by subtracting property, plant, and equipment additions from operating cash flows. Refer to the "GAAP to Non-GAAP Reconciliations," "Income Taxes," and "Free Cash Flow" sections for reconciliations of the non-GAAP financial measures to their most directly comparable financial measures prepared in accordance withU.S. GAAP. EXECUTIVE LEVEL OVERVIEW Medtronic is the leading global healthcare technology company - alleviating pain, restoring health, and extending life for millions of people around the world. Our primary products include those for cardiac rhythm disorders, cardiovascular disease, advanced and general surgical care, respiratory and monitoring solutions, renal care, neurological disorders, spinal conditions and musculoskeletal trauma, urological and digestive disorders, and ear, nose, and throat, and diabetes conditions. The global healthcare system is continuing to respond to the unprecedented challenge posed by the Covid-19 pandemic ("COVID-19" or the "pandemic"). Most of our businesses were affected by a decline in global procedural volumes during fiscal year 2021, particularly in the first and second quarters. During the first quarter of fiscal year 2022, most of our businesses performed at or above pre-COVID-19 levels, while also experiencing a slowdown in elective procedures in certain businesses and geographies in the final weeks of the quarter as a result of the Delta variant of COVID-19. In the second quarter of fiscal year 2022, certain international markets saw procedural recovery from the resurgence experienced in prior quarters. However, particularly in theU.S. , the COVID-19 resurgence as well as healthcare system staffing shortages impacted our revenue results for the three months endedOctober 29, 2021 . While we expect the impact of the Delta variant may be less severe than prior waves of COVID-19 as vaccination rates continue to rise, we cannot predict with confidence the duration and severity of the pandemic and its impact on global procedure volumes. We expect medical procedure rates to continue to vary by therapy and country and to be impacted by regional COVID-19 case volumes, vaccine immunization rates, and new COVID-19 variants, including the Omicron variant. Also, we cannot predict the impact healthcare system staffing shortages may have on procedural volumes. 29 -------------------------------------------------------------------------------- The following is a summary of revenue and diluted earnings per share for the three months endedOctober 29, 2021 andOctober 30, 2020 , and operating cash flow for the six months endedOctober 29, 2021 andOctober 30, 2020 :
[[Image Removed: mdt-20211029_g2.jpg]]
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GAAP to Non-GAAP Reconciliations The tables below present our GAAP to Non-GAAP
reconciliations for the three months ended October 29, 2021 and October 30,
2020 :
Three months ended October 29, 2021
Income Income Net Income
Before Tax Provision Attributable to Effective
(in millions, except per share data) Income Taxes (Benefit) Medtronic Diluted EPS Tax Rate GAAP$ 1,493 $ 176 $ 1,311$ 0.97 11.8 % Non-GAAP Adjustments: Restructuring and associated costs (1) 77 15 62 0.05 19.5 Acquisition-related items (2) (13) 2 (15) (0.01) (15.4) Certain litigation charges 34 4 30 0.02 11.8 (Gain)/loss on minority investments (3) 6 - 6 -
-
Medical device regulations (4) 24 4 20 0.01
16.7
Amortization of intangible assets 431 69 361 0.27
16.0
Certain tax adjustments, net (5) - (16) 16 0.01 - Non-GAAP$ 2,052 $ 254 $ 1,792$ 1.32 12.4 % Three months ended October 30, 2020 Income Income Net Income Before Tax Provision Attributable to Effective (in millions, except per share data) Income Taxes (Benefit) Medtronic Diluted EPS Tax Rate GAAP$ 525 $ 31 $ 489$ 0.36 5.9 % Non-GAAP Adjustments: Restructuring and associated costs (1) 179 44 135 0.10 24.6 Acquisition-related items (2) 47 8 39 0.03 17.0 Certain litigation charges 84 21 63 0.05 25.0 (Gain)/loss on minority investments (3) 1 - 1 -
-
Medical device regulations (4) 19 3 16 0.01
15.8
Amortization of intangible assets 443 70 373 0.28 15.8 Debt tender premium (6) 308 60 248 0.18 19.5 Certain tax adjustments, net (5) - (16) 16 0.01 - Non-GAAP$ 1,606 $ 221 $ 1,380$ 1.02 13.8 % (1)Associated costs include costs incurred as a direct result of the restructuring program, such as salaries for employees supporting the program and consulting expenses. (2)The charges primarily include business combination costs, changes in fair value of contingent consideration, and for the three months endedOctober 30, 2020 , certain license payments for unapproved technology. (3)We exclude unrealized and realized gains and losses on our minority investments as we do not believe that these components of income or expense have a direct correlation to our ongoing or future business operations. (4)The charges represent incremental costs of complying with the newEuropean Union (E.U.) medical device regulations for previously registered products and primarily include charges for contractors supporting the project and other direct third-party expenses. (5)The charges include the amortization on previously established deferred tax assets from intercompany intellectual property transactions. (6)The charges relate to the early redemption of approximately$6.0 billion of debt. 31
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The tables below present our GAAP to Non-GAAP reconciliations for the six months
ended
Six months ended October 29, 2021
Income Net Income
Income Before Tax Provision Attributable to Effective
(in millions, except per share data) Income Taxes (Benefit) Medtronic Diluted EPS Tax Rate
GAAP $ 2,326 $ 240 $ 2,074 $ 1.53 10.3 %
Non-GAAP Adjustments:
Restructuring and associated costs (1) 159 31 128 0.09 19.5
Acquisition-related items (2) 96 24 72 0.05 25.0
Certain litigation charges 60 9 51 0.04 15.0
(Gain)/loss on minority investments (3) (25) - (22) (0.02) -
Medical device regulations (4) 45 9 36 0.03
20.0
Amortization of intangible assets 866 139 728 0.54 16.1 MCS impairments / costs (5) 726 162 564 0.42 22.3 Certain tax adjustments, net (6) - (69) 69 0.05 - Non-GAAP$ 4,253 $ 545 $ 3,699$ 2.73 12.8 % Six months ended October 30, 2020 Income Net Income Income Before Tax Provision Attributable to Effective (in millions, except per share data) Income Taxes (Benefit) Medtronic Diluted EPS Tax Rate GAAP$ 1,109 $ 124 $ 976$ 0.72 11.2 % Non-GAAP Adjustments: Restructuring and associated costs (1) 307 66 241 0.18 21.5 Acquisition-related items (2) (49) (21) (28) (0.02) 42.9 Certain litigation charges (4) 2 (6) - (50.0) (Gain)/loss on minority investments (3) (9) 1 (10) (0.01)
(11.1)
Medical device regulations (4) 37 5 32 0.02
13.5
Amortization of intangible assets 884 141 743 0.55 16.0 Debt tender premium (7) 308 60 248 0.18 19.5 Certain tax adjustments, net (6) - (20) 20 0.01 - Non-GAAP$ 2,583 $ 358 $ 2,216$ 1.64 13.9 % (1)Associated costs include costs incurred as a direct result of the restructuring program, such as salaries for employees supporting the program and consulting expenses. (2)The charges primarily include business combination costs, changes in fair value of contingent consideration, acquisitions of, and certain license payments for, unapproved technology, and specifically for the six months endedOctober 30, 2020 , change in amounts accrued for certain contingent liabilities for recent acquisitions. (3)We exclude unrealized and realized gains and losses on our minority investments as we do not believe that these components of income or expense have a direct correlation to our ongoing or future business operations. (4)The charges represent incremental costs of complying with the new E.U. medical device regulations for previously registered products and primarily include charges for contractors supporting the project and other direct third-party expenses. (5)The charges relate to the Company'sJune 2021 decision to stop the distribution and sale of the Medtronic HVAD System within the Mechanical Circulatory Support Operating Unit (MCS). The charges included$515 million of non-cash impairments, primarily related to$409 million of intangible asset impairments, as well as$211 million for commitments and obligations in connection with the decision, including customer support obligations, restructuring, and other associated costs. Medtronic is committed to serving the needs of the approximately 4,000 patients currently implanted with the HVAD System. (6)The charges include the amortization on previously established deferred tax assets from intercompany intellectual property transactions, and specifically for the six months endedOctober 29, 2021 , charges associated with a change in the company's permanent reinvestment assertion on certain historical earnings. (7)The charges relate to the early redemption of approximately$6.0 billion of debt. 32 -------------------------------------------------------------------------------- Free Cash Flow Free cash flow, a non-GAAP financial measure, is calculated by subtracting additions to property, plant, and equipment from net cash provided by operating activities. Management uses this non-GAAP financial measure, in addition toU.S. GAAP financial measures, to evaluate our operating results. Free cash flow should be considered supplemental to, and not a substitute for, our reported financial results prepared in accordance withU.S. GAAP. Reconciliations between net cash provided by operating activities (the most comparableU.S. GAAP measure) and free cash flow are as follows: Six months ended (in millions) October 29, 2021 October 30, 2020 Net cash provided by operating activities $ 3,061 $ 2,139 Additions to property, plant, and equipment (649) (615) Free cash flow $ 2,412 $ 1,524 Refer to the Summary of Cash Flows section for drivers of the change in cash provided by operating activities. NET SALES Segment and Division The charts below illustrate the percent of net sales by segment for the three months endedOctober 29, 2021 andOctober 30, 2020 : [[Image Removed: mdt-20211029_g3.jpg]] [[Image Removed: mdt-20211029_g4.jpg]] 33 --------------------------------------------------------------------------------
The table below illustrates net sales by segment and division for the three and
six months ended
Three months ended Six months ended
October 30, October 29, October 30,
(in millions) October 29, 2021 2020 % Change 2021 2020 % Change
Cardiac Rhythm & Heart Failure $ 1,471 $ 1,426 3 % $ 2,954 $ 2,673 11 %
Structural Heart & Aortic 750 733 2 1,537 1,360 13
Coronary & Peripheral Vascular 606 567 7 1,226 1,125 9
Cardiovascular 2,827 2,725 4 5,717 5,158 11
Surgical Innovations 1,497 1,393 7 3,051 2,473 23
Respiratory, Gastrointestinal, & Renal 802 893 (10) 1,570 1,613 (3)
Medical Surgical 2,299 2,285 1 4,621 4,086 13
Cranial & Spinal Technologies 1,067 1,071 - 2,189 2,015 9
Specialty Therapies 634 581 9 1,275 1,035 23
Neuromodulation 435 411 6 875 725 21
Neuroscience 2,136 2,063 4 4,340 3,774 15
Diabetes 585 574 2 1,157 1,136 2
Total $ 7,847 $ 7,647 3 % $ 15,835 $ 14,154 12 %
Segment and Market Geography
The charts below illustrate the percent of net sales by market geography for the
three months ended October 29, 2021 and October 30, 2020 :
[[Image Removed: mdt-20211029_g5.jpg]][[Image Removed: mdt-20211029_g6.jpg]]
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The table below includes net sales by market geography for each of our segments
for the three and six months ended
U.S.(1) Non-U.S. Developed Markets(2) Emerging Markets(3)
Three months ended Three months ended Three months ended
October 29, October 30, October 29, October 30, October 30,
(in millions) 2021 2020 % Change 2021 2020 % Change October 29, 2021 2020 % Change
Cardiovascular $ 1,373 $ 1,377 - % $ 948 $ 945 - % $ 506 $ 404 25 %
Medical Surgical 970 996 (3) 841 837 - 488 452 8
Neuroscience 1,394 1,397 - 433 426 2 309 240 29
Diabetes 261 284 (8) 256 238 8 69 51 35
Total $ 3,997 $ 4,054 (1) % $ 2,478 $ 2,446 1 % $ 1,372 $ 1,147 20 %
U.S.(1) Non-U.S. Developed Markets(2) Emerging Markets(3)
Six months ended Six months ended Six months ended
October 29, October 30, October 29, October 30, October 30,
(in millions) 2021 2020 % Change 2021 2020 % Change October 29, 2021 2020 % Change
Cardiovascular $ 2,793 $ 2,582 8 % $ 1,952 $ 1,798 9 % $ 972 $ 778 25 %
Medical Surgical 1,959 1,718 14 1,710 1,556 10 951 811 17
Neuroscience 2,840 2,533 12 898 802 12 602 439 37
Diabetes 506 572 (12) 519 465 12 132 100 32
Total $ 8,098 $ 7,405 9 % $ 5,079 $ 4,621 10 % $ 2,658 $ 2,128 25 %
(1)U.S. includes the United States and U.S. territories.
(2)Non-U.S. developed markets include Japan , Australia , New Zealand , Korea ,
Canada , and the countries within Western Europe .
(3)Emerging markets include the countries of the Middle East , Africa , Latin
America , Eastern Europe , and the countries of Asia that are not included in the
non-U.S. developed markets, as defined above.
The increase in net sales for the three months ended October 29, 2021 , as
compared to the corresponding period in the prior fiscal year, was driven by
strength in the international markets partially offset by declines in the U.S.
largely due to the COVID-19 resurgence and healthcare system staffing shortages.
For the six months ended October 29, 2021 , most of our businesses and
geographies continue to achieve revenue levels at or above pre-pandemic levels.
Currency had a favorable impact on net sales of $32 million and $277 million ,
respectively, for the three and six months ended October 29, 2021 . For the three
months ended, currency had a favorable impact on emerging markets of $37 million
partially offset by an unfavorable impact for non-U.S. developed markets of
$5 million . For the six months ended October 29, 2021 , currency had a favorable
impact for emerging markets and non-U.S. developed markets of $100 million and
$177 million , respectively.
During the fourth quarter of fiscal year 2021, we realigned our divisions within
the Cardiovascular Portfolio. As a result, fiscal year 2021 results have been
recast to adjust for this realignment. Additionally, in fiscal year 2021 we
implemented our new operating model, which was fully operational the beginning
of the fourth quarter. Our new operating model simplifies our organization in
order to accelerate decision making, improve commercial execution, and more
effectively leverage the scale of our company.
Looking ahead, the uncertain and uneven impact of COVID-19 on future procedural
volumes, supply constraints, healthcare staffing, and resulting demand for our
products and therapies could negatively impact our business. Additionally, our
segments may face competitive product launches and pricing pressure, geographic
macro-economic risks, reimbursement challenges and national tender pricing for
certain products, impacts from changes in the mix of our product offerings,
delays in product registration approvals, replacement cycle challenges, and
fluctuations in currency exchange rates.
Cardiovascular
Cardiovascular products include pacemakers, insertable cardiac monitors, cardiac
resynchronization therapy devices, implantable cardioverter defibrillators
(ICD), leads and delivery systems, ablation products, electrophysiology
catheters, products for the treatment of atrial fibrillation, information
systems for the management of patients with Cardiac Rhythm & Heart Failure
devices, products designed to reduce surgical site infections, coronary and
peripheral stents and related delivery systems, balloons and related delivery
systems, endovascular stent graft systems, heart valve replacement technologies,
cardiac tissue ablation systems, and open heart and coronary bypass grafting
surgical products. Cardiovascular also includes Care Management Services and
Cath Lab Managed Services (CLMS) within the Cardiac Rhythm & Heart Failure
division. Cardiovascular's net sales for the three and six months ended
October 29, 2021 were $2.8 billion and $5.7 billion , respectively, which
represents an increase of 4 percent and 11 percent, respectively, compared to
the corresponding periods
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in the prior fiscal year. Currency had a favorable impact of $11 million and
$106 million , respectively, on net sales for the three and six months ended
October 29, 2021 . Cardiovascular's net sales increase for the three months ended
October 29, 2021 was primarily driven by the recovery of procedural volumes in
the international markets, with partially offsetting declines experienced in
certain businesses in the U.S. due to the COVID-19 resurgence. The increase for
the six months ended October 29, 2021 was primarily due to the recovery of
global procedure volumes from the downturn experienced in the first and second
quarter of fiscal year 2021 resulting from the pandemic along with growth from
recent product launches.
The graphs below illustrate the percent of Cardiovascular net sales by division
for the three months ended October 29, 2021 and October 30, 2020 :
[[Image Removed: mdt-20211029_g7.jpg]][[Image Removed: mdt-20211029_g8.jpg]]
Cardiac Rhythm & Heart Failure (CRHF) net sales for the three and six months
ended October 29, 2021 increased 3 percent and 11 percent, respectively, as
compared to the corresponding periods in the prior fiscal year. The increase for
the three and six months ended was led by Cardiac Rhythm Management with growth
in TYRX antibacterial envelopes, CRT-Ds, and cardiac pacing therapies due to
Micra and transvenous pacemakers. Cardiac Ablation Solutions also led growth for
both periods with strong sales of Arctic Front cryoablation systems. For the
three months ended October 29, 2021 , these increases were partially offset by
lower growth of Cardiovascular Diagnostics caused by COVID-19 and competitive
pressure. For both periods, the net sales growth was partially offset by a
decline of Medtronic HVAD System net sales as a result of our June 2021 decision
to stop the distribution and sale of the system.
Structural Heart & Aortic (SHA) net sales for the three and six months ended
October 29, 2021 increased 2 percent and 13 percent, respectively, as compared
to the corresponding periods in the prior fiscal year. The increase in both
periods was led by growth in transcatheter aortic valve replacement (TAVR) net
sales as a result of continued adoption of the CoreValve Evolut. Cardiac Surgery
also contributed to the net increase in sales for both periods as a result of
broad-based growth across the business. Partially offsetting these increases was
a decline in net sales of the Valiant Navion Thoracic Stent Graft System as a
result of our voluntary recall of the system in the fourth quarter of fiscal
year 2021.
Coronary & Peripheral Vascular (CPV) net sales for the three and six months
ended October 29, 2021 increased 7 percent and 9 percent, respectively, as
compared to the corresponding periods in the prior fiscal year. The increase in
both periods was led by growth in Peripheral Vascular Health driven by our
superficial venous product portfolio, including the VenaSeal and ClosureFast
systems, as well as strong performance of the recently launched Abre venous
self-expanding stent system for Deep Venous disease. Coronary & Renal
Denervation also experienced growth driven by drug-eluting stents and guide
catheters.
In addition to the general impacts of COVID-19 on our Company as described in
the Executive Level Overview, looking ahead, we expect Cardiovascular could be
affected by the following:
•Continued growth of our Micra transcatheter pacing system. Micra AV received
U.S. FDA approval and CE Mark approval in January and April 2020 , respectfully.
Subsequent to the quarter, the Micra AV launched in Japan in November. Micra AV
expands the Micra target population from 15 percent to 45 percent of pacemaker
patients.
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•Continued acceptance and growth from the Azure XT and S SureScan pacing
systems. Azure pacemakers feature Medtronic-exclusive BlueSync technology, which
enables automatic, secure wireless remote monitoring with increased device
longevity.
•Growth of the Cobalt and Crome portfolio of ICDs and CRT-Ds. These devices
received CE Mark approval during the fourth quarter of fiscal year 2020 and U.S.
FDA approval during the first quarter of fiscal year 2021.
•Continued acceptance and expansion of the Claria MRI CRT-D system with
EffectivCRT Diagnostic and EffectivCRT During AF Algorithm.
•Advancement of the LINQ II cardiac monitor, which received CE Mark in November
2019 and gained U.S. FDA approval during the first quarter of fiscal year 2021.
We are currently experiencing supply constrains for the LINQ II cardiac monitor
as we ramp our wafer scale manufacturing.
•Growth of the CRT-P quadripolar pacing system.
•Continued growth, adoption, and utilization of the TYRX Envelope for
implantable devices driven by the favorable results of the WRAP-IT clinical
study.
•Continued acceptance and market expansion of Arctic Front cryoablation for
treatment of atrial fibrillation. In June 2021 , the Arctic Front cryoablation
system received a first line therapy designation from the U.S. FDA for the
treatment of atrial fibrillation.
•Continued acceptance and growth of the self-expanding CoreValve Evolut
transcatheter aortic valve replacement platform into intermediate risk
indication globally and for the treatment of patients determined to be at low
risk with surgery. The Platform received both CE Mark for low risk and bicuspid
labeling indication in Europe during the first quarter of fiscal year 2021. In
August 2020 , the U.S. FDA approved revised commercial labeling for the platform
that modified a precaution for the treatment of patients at low risk.
•Continued expansion and training of field support to increase coverage in the
U.S. centers performing TAVR procedures.
•Continued acceptance and growth from Evolut PRO, which provides
industry-leading hemodynamics, reliable delivery, and advanced sealing with an
excellent safety profile. In August 2021 , the U.S. FDA approved the Evolut FX
TAVR, a system enhancement designed to improve the overall procedural experience
through enhancements in deliverability, implant visibility and deployment
stability.
•The Chinese national and provincial tenders that have negatively impacted
drug-eluting stent and coronary balloon prices in China could impact other
products within the division.
•Continued acceptance and growth from the VenaSeal Closure System in the U.S.
The VenaSeal Closure System is a unique non-thermal solution to address
superficial venous disease that provides improved patient comfort, reduces the
recovery time, and eliminates the risk of thermal nerve injury.
•Our voluntary recall of the Valiant Navion Thoracic Stent Graft System and our
ability to ramp production of our previous generation product, the Valiant
Captivia Thoracic Stent Graft System. We are currently ramping production of the
Valiant Captivia Thoracic Stent Graft System and plan to reach full production
capacity in the fourth quarter of fiscal year 2022.
•Our June 2021 decision to stop the distribution and sale of the Medtronic HVAD
System in light of a growing body of observational clinical comparisons
indicating a lower frequency of neurological adverse events and mortality with
another circulatory support device available to patients compared to the HVAD
System.
•Our ability to successfully develop, obtain regulatory approval of and
commercialize the products within our pipeline, which include the Symplicity
Spyral Multi-Electrode Renal Denervation Catheter for the treatment of
hypertension through a one-time, minimally invasive catheter procedure; Pulse
Field Ablation, a novel energy source that is non-thermal, for the treatment of
atrial fibrillation; and transcatheter mitral and tricuspid therapy products led
by our Intrepid system.
Medical Surgical
Medical Surgical's products span the entire continuum of patient care from
diagnosis to recovery, with a focus on diseases of the gastrointestinal tract,
lungs, pelvic region, kidneys, obesity, and preventable complications. The
products include those for advanced and general surgical products, surgical
stapling devices, vessel sealing instruments, wound closure, electrosurgery
products, hernia mechanical devices, mesh implants, advanced ablation,
interventional lung, ventilators, airway products, renal care products, and
sensors and monitors
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for pulse oximetry, capnography, level of consciousness and cerebral oximetry.
Medical Surgical's net sales for the three and six months ended October 29, 2021
were $2.3 billion and $4.6 billion , respectively, an increase of 1 percent and
13 percent, respectively, as compared to the corresponding periods in the prior
fiscal year. Currency had a favorable impact of $8 million and $85 million on
net sales for the three and six months ended October 29, 2021 , respectively.
Medical Surgical's net sales increase for the three months ended October 29,
2021 was driven by the recovery of procedural volumes in the international
markets, with partially offsetting declines experienced in the U.S. due to the
COVID-19 resurgence. The net sales increase for the six months ended October 29,
2021 was primarily due to the recovery of global procedure volumes from the
declines experienced in the corresponding period in the prior year.
The graphs below illustrate the percent of Medical Surgical net sales by
division for the three months ended October 29, 2021 and October 30, 2020 :
[[Image Removed: mdt-20211029_g9.jpg]][[Image Removed: mdt-20211029_g10.jpg]]
Surgical Innovations (SI) net sales for the three and six months ended
October 29, 2021 increased 7 percent and 23 percent, respectively, as compared
to the corresponding periods in the prior fiscal year. Net sales growth for the
three months ended October 29, 2021 was led by the international markets due to
strong procedure recovery in certain regions, with growth in advanced stapling
and wound closure. This growth was offset by declines in the U.S. largely due to
Advanced Energy. The growth for the six months ended October 29, 2021 was
experienced worldwide led by Advanced Stapling, Advanced Energy, and Hernia and
Wound Management.
Respiratory, Gastrointestinal, & Renal (RGR) net sales for the three and six
months ended October 29, 2021 decreased 10 percent and 3 percent, respectively,
as compared to the corresponding periods in the prior fiscal year. RGR net sales
declines for both periods were largely due to declines in ventilator demands
when compared to the corresponding periods in the prior year as demand continues
to trend towards pre-pandemic levels. These declines were partially offset by
growth in Renal Care Solutions, Patient Monitoring, particularly the Nellcor
pulse oximetry system, as well as in Gastrointestinal, driven by the esophageal
product portfolio and PillCam capsule endoscopy.
In addition to the general impacts of COVID-19 on our Company as described in
the Executive Level Overview, looking ahead we expect Medical Surgical could be
affected by the following:
•Continued acceptance and future growth of Open-to-MIS techniques and tools
supported by our efforts to transition open surgery to MIS (minimally invasive
surgery). The Open-to-MIS initiative focuses on furthering our presence in and
working to optimize open surgery globally, while capturing the market
opportunity that exists in transitioning open procedures to MIS, whether through
traditional MIS, or advanced technologies, including robotics.
•Continued acceptance and future growth of powered stapling and energy platform.
•Our ability to execute ongoing strategies in order to address the competitive
pressure of reprocessing of our vessel sealing disposables and growth of
surgical soft tissue robotics procedures in the U.S.
•Our ability to create markets and drive products and procedures into emerging
markets. We have high quality and cost-effective surgical products designed for
customers in emerging markets such as the ValleyLab LS10 single channel
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vessel sealing generator, which is compatible with our line of LigaSure
instruments and designed for simplified use and affordability.
•Continued acceptance and growth within the end stage renal disease market. The
population of patients treated for end stage renal disease globally is expected
to double over the next decade.
•Continued elevation of the standard of care for respiratory compromise, a
progressive condition impacting a patient's ability to breathe effectively,
which leverages our market leading MicroStream capnography technology.
•Continued acceptance and growth in patient monitoring, airway, and ventilation
management. Key products in this area include the Puritan Bennett 980
ventilator, Microstream Capnography, Nellcor pulse oximetry system with OxiMax
technology, Shiley tracheostomy and endotracheal tubes, McGRATH MAC video
laryngoscopes, as well as the SonarMed Airway Monitoring System for the NICU
that was launched in the U.S during the first quarter of fiscal year 2022.
•Continued and future acceptance of less invasive standards of care in
Gastrointestinal and Hepatology products, including the areas of GI Diagnostic
and Therapeutic product lines. Recently launched products include the PillCam
COLON capsule endoscopy, the Barrx platform through ablation with the Barrx 360
Express catheter, Endoflip imaging systems, Bravo Calibration-free reflux
testing, and the Emprint ablation system with Thermosphere Technology, which
maintains predictable spherical ablation zones throughout procedures reducing
procedure time and cost.
•Continued and future acceptance of Interventional Lung Solutions. Products
include our Illumisite navigation platform, combined with our portfolio of
biopsy tools including the Arcpoint pulmonary needle, and to access lesions
outside the airway, the CrossCountry transbronchial access tool. This
comprehensive portfolio gives the power to display position and access lung
nodules in the periphery of the lungs, in a minimally invasive approach to
accessing difficult-to-reach areas of the lung, which may aid in the diagnosis
of lung cancer.
•Expanding the use of less invasive treatments and furthering our commitment to
improving options for women with abnormal uterine bleeding. Our expanded and
strengthened surgical offerings are expected to complement our global gynecology
business.
•Continued future growth internationally for the Hugo robotic assisted surgery
(RAS) system for urologic and gynecologic procedures, which received CE Mark in
October 2021 . The Hugo RAS system is designed to help reduce unwanted
variability, improve patient outcomes, and by extension, lower per procedure
cost.
•Our ability to successfully develop, obtain regulatory approval of and
commercialize the products within our pipeline, which include our Hugo RAS
system in the U.S. , our NextGen McGrath MAC video laryngoscopes, Signia power
stapling devices, and our Ligasure and Sonicion vessel sealing devices.
Neuroscience
Neuroscience's products include various spinal implants, bone graft substitutes,
biologic products, image-guided surgery and intra-operative imaging systems,
robotic guidance systems used in the robot-assisted spine procedures, and
systems that incorporate advanced energy surgical instruments. Neuroscience's
products also focus on the treatment of overactive bladder, urinary retention,
fecal incontinence, gastroparesis, as well as products to treat ear, nose, and
throat (ENT), and therapies to treat the diseases of the vasculature in and
around the brain, including coils, neurovascular stents and flow diversion
products. Neuroscience also manufactures products related to implantable
neurostimulation therapies and drug delivery systems for the treatment of
chronic pain, movement disorders, and epilepsy. Neuroscience's net sales for the
three and six months ended October 29, 2021 were $2.1 billion and $4.3 billion ,
respectively, which represents an increase of 4 percent and 15 percent,
respectively, as compared to the corresponding periods in the prior fiscal year.
Currency had a favorable impact of $10 million and $57 million , respectively, on
net sales for the three and six months ended October 29, 2021 . Neuroscience's
net sales increase for the three months ended October 29, 2021 was driven by the
recovery of procedural volumes in the international markets, with partially
offsetting declines in certain businesses in the U.S. due to the COVID-19
resurgence. The net sales growth for the six months ended October 29, 2021 was
primarily due to the recovery of global procedure volumes from the declines
experienced in the corresponding period in the prior year.
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The graphs below illustrate the percent of Neuroscience net sales by division
for the three months ended
[[Image Removed: mdt-20211029_g11.jpg]][[Image Removed: mdt-20211029_g12.jpg]] Cranial and Spinal Technologies (CST) net sales growth for the three and six months endedOctober 29, 2021 was flat and increased 9 percent, respectively, as compared to the corresponding periods in the prior fiscal year. For both periods, Neurosurgery experienced growth from strong sales of Midas Rex powered surgical instruments, StealthStation Navigation, and O-arm imaging surgery. For the six months endedOctober 29, 2021 , the increase was also driven by Spine and Biologics due to the recovery of global procedural volumes when compared to the corresponding period in the prior year. For the three months ended, the international markets of Spine and Biologics recovered, resulting in sales growth, partially offset by declines in theU.S. Specialty Therapies (Specialty) net sales for the three and six months endedOctober 29, 2021 increased 9 percent and 23 percent, respectively, as compared to the corresponding periods in the prior fiscal year. The increase for both periods was driven by growth in Neurovascular led by flow diversion and liquid embolic products. ENT experienced worldwide growth for both periods, including strong performance outside theU.S. in power, navigation, and monitoring. For the three months endedOctober 29, 2021 ,Pelvic Health sales growth was due to the international markets offset by declines in theU.S. For the six months endedOctober 29, 2021 ,Pelvic Health saw continued growth led by sales of the recently launched InterStim Micro neurostimulator and SureScan MRI leads. Neuromodulation (NM) net sales for the three and six months endedOctober 29, 2021 increased 6 percent and 21 percent, respectively, as compared to the corresponding periods in the prior fiscal year. Sales growth in both periods was driven by Brain Modulation and Interventional businesses. Brain Modulation and Interventional saw net sales growth driven by strong performance in the Percept PC deep brain stimulation (DBS) device with BrainSense technology. For the six months endedOctober 29, 2021 , the increase was also driven by Pain Stim and Pain Therapies, largely due to strong performance of recent product launches. For the three months endedOctober 29, 2021 , Pain Stim and Pain Therapies partially offset the sales growth with declines in theU.S. In addition to the general impacts of COVID-19 on our Company as described in the Executive Level Overview, looking ahead we expect Neuroscience could be affected by the following: •Continued growth from Enabling Technologies, including StealthStation and O-Arm Imaging Systems, Midas, and ENT Navigation and Power Systems, as well as acceptance of the Stealth Autoguide cranial robotic guidance platform. •Continued sales of Mazor robotic units and associated market adoption of robot-assisted spine procedures, including the Mazor X Stealth, our integrated robotics and navigation platform. •Continued growth from spine titanium interbody implants. •Continued adoption of our integrated solutions through theSurgical Synergy strategy which integrates our spinal implants with enabling technologies such as imaging, navigation, power instruments, nerve monitoring, and Mazor 40 -------------------------------------------------------------------------------- robotics, as well as AI-driven surgical planning, personalized spinal implants, and robot-assisted surgery due to the newly acquiredMedicrea technologies. •Market acceptance and continued global adoption of innovative new spine products and procedural solutions within our CST division, such as ourInfinity OCT System and Prestige LP cervical disc system. •Growth in the broader vertebral compression fracture (VCF) and adjacent markets as we continue to pursue the development of other therapies to treat more patients with VCF, including continued success of both the Kyphon V vertebroplasty system and the Osteocool RF Spinal Tumor ablation system. •Continued acceptance and growth of ourENT and Pelvic Health therapies within our Specialty Therapies division, including our InterStim therapy with InterStim II and InterStim Micro neurostimulators for the treatment of the symptoms of overactive bladder, urinary retention, and bowel incontinence, and capital equipment sales of the Stealth Station ENT surgical navigation system and intraoperative NIM nerve monitoring system. •Continued acceptance and growth of the Solitaire FR revascularization device for treatment of acute ischemic stroke and the Pipeline Embolization Devices, endovascular treatments for large or giant wide-necked brain aneurysms. •Continued acceptance of our React Catheter and Riptide aspiration system, along with our next-generation Solitaire revascularization device. •Market acceptance and continued global adoption of our Intellis spinal cord stimulator, DTM proprietary waveform, Evolve workflow algorithm, and Snapshot reporting to treat chronic pain in major markets around the world. •Continued acceptance and growth of our Percept PC DBS device with BrainSense technology, including its treatment of Parkinson's Disease, epilepsy, and other movement disorders. •Ongoing obligations under theU.S. FDA consent decree entered inApril 2015 relating to the SynchroMed drug infusion system and the Neuromodulation quality system. TheU.S. FDA lifted its distribution requirements on our implantable drug pump inOctober 2017 and its warning letter inNovember 2017 . •Our ability to successfully develop, obtain regulatory approval of and commercialize the products within our pipeline, which include our closed-loop Percept PC and RC devices with adaptive DBS (aDBS) within Neuromodulation, as well as our hemorrhagic stroke intravascular device within Specialty Therapies, and our next-generation spine enabling technologies within CST. Diabetes Diabetes' products include insulin pumps, continuous glucose monitoring (CGM) systems, consumables, and smart insulin pen systems. Diabetes' net sales for the three and six months endedOctober 29, 2021 were$585 million and$1.2 billion , respectively, an increase of 2 percent as compared to the corresponding periods in the prior fiscal year. Currency had a favorable impact of$3 million and$29 million on net sales for the three and six months endedOctober 29, 2021 , respectively. Diabetes' net sales growth for both periods was primarily attributable to growth in the international markets in durable pumps and integrated CGM. The growth was also driven by durable pumps in theU.S. while CGM experienced declines in theU.S. for both periods. In addition to the general impacts of COVID-19 on our Company as described in the Executive Level Overview, looking ahead we expect Diabetes could be affected by the following: •Patient demand for the MiniMed 770G insulin pump system, which receivedU.S. FDA approval inAugust 2020 and launched inNovember 2020 . The system is powered by SmartGuard technology and features the added benefits of smartphone connectivity and an expanded age indication to children as young as age two. •Continued future growth internationally for the MiniMed 780G insulin pump system. The MiniMed 780G system was approved in the E.U. inJune 2020 and has launched in over 40 countries on four continents outside theU.S. starting inOctober 2020 . The global adoption of sensor-augmented insulin pump systems has resulted in strong sensor attachment rates. •Continued acceptance and growth of the Guardian Connect CGM system which displays glucose information directly to a smartphone to help ensure patients have access to their glucose levels seamlessly and discretely. The Guardian Connect CGM system is available on both Apple iOS and Android devices. •Strengthening our position in the diabetes market as a result of theSeptember 2020 acquisition of Companion Medical. Companion Medical offered aU.S. FDA cleared InPen smart pen system that combines the freedom of a reusable Bluetooth pen with the intelligence of an intuitive mobile application that helps users administer the appropriate insulin 41 -------------------------------------------------------------------------------- dose. During the third quarter of fiscal year 2021, we integrated our CGM data into the InPen Application, which allows users to have their CGM readings in real-time alongside insulin dose information, all in one view. •Continued pump and CGM competition in an expanding global market. •Changes in medical reimbursement policies and programs, along with additional payor coverage on insulin pumps. •Our ability to successfully develop, obtain regulatory approval of and commercialize the products within our pipeline, which include our MiniMed 780G insulin pump and the Guardian 4 sensor, which have been submitted to theU.S. FDA. These technologies feature our next-generation algorithms by further automating insulin delivery. COSTS AND EXPENSES The following is a summary of cost of products sold, research and development, and selling, general, and administrative expenses as a percent of net sales for the three and six months endedOctober 29, 2021 andOctober 30, 2020 : [[Image Removed: mdt-20211029_g13.jpg]] Cost of Products Sold We continue to focus on reducing our costs of production through supplier management, manufacturing improvements, and optimizing our manufacturing network. Cost of products sold for the three and six months endedOctober 29, 2021 was$2.5 billion and$5.1 billion , respectively, as compared to$2.7 billion and$5.2 billion for the corresponding periods in the prior fiscal year. The decrease in cost of products sold as a percentage of net sales for both periods was largely due to increased expenses in the prior year comparable periods as a result of COVID-19. During the three and six months endedOctober 30, 2020 , the conditions of the pandemic resulted in period expensing some of our fixed overhead costs due to idle capacity at certain manufacturing facilities, and increases in our reserves in our excess and obsolete inventory, as well as negative impact from mix, as products in higher demand had lower gross margins. The six months endedOctober 29, 2021 included$58 million of inventory write-downs associated with ourJune 2021 decision to stop the distribution and sale of Medtronic's HVAD System (MCS charges). Research and Development Expense We remain committed to deliver the best possible experiences for every patient, physician, and caregiver we serve; to create technologies that expand what's possible across the entire human body to transform lives; to turn data and insights into real action to serve real patient needs, dramatically improving care; and to expand healthcare access and deliver positive outcomes that go far beyond our products. Research and development expense for the three and six months endedOctober 29, 2021 was$676 million and$1.4 billion , respectively, as compared to$639 million and$1.3 billion , respectively, for the corresponding periods in the prior fiscal year. The six months endedOctober 29, 2021 included$90 million of asset acquisitions and certain license payments for unapproved technology primarily in our Diabetes segment. Selling, General, and Administrative Expense Our goal is to continue to leverage selling, general, and administrative expense initiatives. Selling, general, and administrative expense primarily consists of salaries and wages, other administrative costs, such as professional fees and marketing expenses, and certain acquisition and restructuring expenses. Selling, general, and administrative expense for the three and six months endedOctober 29, 2021 was$2.6 billion and$5.2 billion , as compared to$2.6 billion and$5.0 billion for the corresponding periods in the prior fiscal year. The decrease in selling, general, and administrative expense as a percentage of net sales for both periods was primarily driven by net sales growth as a result of the recovery of procedural volumes as well as cost containment measures implemented in the current year. 42 --------------------------------------------------------------------------------
The following is a summary of other costs and expenses (income):
Three months ended Six months ended
October 29, October 30, October 30,
(in millions) 2021 2020 October 29, 2021 2020
Amortization of intangible assets $ 431 $ 443 $ 866 $ 884
Restructuring charges, net 10 97 21 150
Certain litigation charges, net 34 84 60 (4)
Other operating expense, net 21 149 781 35
Other non-operating income, net (66) (65) (177) (147)
Interest expense 136 470 273 641
Amortization of Intangible Assets Amortization of intangible assets includes the
amortization expense of our definite-lived intangible assets, consisting of
purchased patents, trademarks, tradenames, customer relationships, purchased
technology, and other intangible assets.
Restructuring Charges, Net
Enterprise Excellence
In the third quarter of fiscal year 2018, we announced a multi-year global
Enterprise Excellence Program designed to drive long-term business growth and
sustainable efficiency. Further program details are described in Note 4 to the
consolidated financial statements included in the Company's Annual Report on
Form 10-K for the fiscal year ended April 30, 2021 .
Since inception, the Company has incurred pre-tax exit and disposal costs and
other costs, across all segments, of $1.4 billion in connection with the
Enterprise Excellence program. In total, the Company estimates it will recognize
approximately $1.6 billion to $1.8 billion of exit and disposal costs and other
costs related to the Enterprise Excellence program, the majority of which are
expected to be incurred by the end of this fiscal year.
For the three and six months ended October 29, 2021 , we recognized net charges
of $62 million and $136 million , respectively, associated with our Enterprise
Excellence Program, including $4 million and $15 million , respectively,
recognized within restructuring charges, net in the consolidated statements of
income primarily comprised of employee termination benefits. Net charges for the
three and six months ended October 29, 2021 also included costs incurred as a
direct result of the restructuring program, such as salaries for employees
supporting the program and consulting expenses, including $31 million and $64
million , respectively, recognized within cost of products sold and $27 million
and $57 million , respectively, recognized within selling, general, and
administrative expense in the consolidated statements of income.
For the three and six months ended October 30, 2020 , we recognized net charges
of $87 million and $164 million , respectively, associated with our Enterprise
Excellence Program, including $7 million and $10 million , respectively,
recognized within restructuring charges, net in the consolidated statements of
income primarily comprised of employee termination benefits. Net charges for the
three and six months ended October 29, 2021 also included costs incurred as a
direct result of the restructuring program, such as salaries for employees
supporting the program and consulting expenses, including $32 million and $59
million , respectively, recognized within cost of products sold, and $48 million
and $95 million , respectively, recognized within selling, general and
administrative expense in the consolidated statements of income.
Simplification
In the first quarter of fiscal year 2021, we initiated our Simplification restructuring program, designed to make the Company a more nimble and competitive organization. Further program details are described in Note 4 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year endedApril 30, 2021 . Since inception, the Company has incurred pre-tax exit and disposal costs and other costs, across all segments, of$293 million in connection with the Simplification program. In total, the Company estimates it will recognize approximately$400 million to$450 million of exit and disposal costs and other costs related to the Simplification program, the majority of which are expected to be incurred by the end of this fiscal year. For the three and six months endedOctober 29, 2021 , we recognized net charges of$18 million and$25 million , respectively, including$9 million recognized within restructuring charges, net in the consolidated statements of income for both periods primarily comprised of employee termination benefits. Net charges for the three and six months endedOctober 29, 2021 also included costs incurred as a direct result of the restructuring program, such as salaries for employees supporting the program and consulting expenses, including$9 million and$16 million , respectively, recognized within selling, general and administrative expense in the consolidated statements of income. 43 -------------------------------------------------------------------------------- For the three and six months endedOctober 30, 2020 , we recognized net charges of$94 million and$145 million , respectively, including$92 million and$142 million , respectively, recognized within restructuring charges, net in the consolidated statements of income primarily comprised of employee termination benefits, including$97 million of incremental defined benefit pension and post-retirement related expenses for employees that accepted voluntary early retirement packages. Net charges for the three and six months endedOctober 30, 2020 also included costs incurred as a direct result of the restructuring program, such as salaries for employees supporting the program and consulting expenses, including$2 million and$3 million , respectively, recognized within selling, general and administrative expense in the consolidated statements of income. For additional information about our restructuring programs, refer to Note 5 to the current period's consolidated financial statements. Certain Litigation Charges, Net We classify litigation charges and gains related to significant legal matters as certain litigation charges. Information regarding certain litigation charges, net is included in Note 16 to the current period's consolidated financial statements. Other Operating Expense, Net Other operating expense, net primarily includes royalty income and expense, currency remeasurement and derivative gains and losses,Puerto Rico excise taxes, changes in the fair value of contingent consideration, changes in amounts accrued for certain contingent liabilities for a past acquisition, MCS charges, and income from funded research and development arrangements. For the three months endedOctober 29, 2021 , the change in other operating expense, net is primarily attributable to changes in fair value of contingent consideration, which resulted in a$26 million gain for the three months endedOctober 29, 2021 as compared to a$7 million loss in the corresponding period in the prior year. Additionally, the change is driven by a$27 million charge for certain personal protective equipment in the three months endedOctober 30, 2020 . For the six months endedOctober 29, 2021 , the change in other operating expense, net was primarily driven by MCS charges recorded during the three months endedJuly 30, 2021 . The charges of$668 million primarily included$409 million of intangible asset impairments and$211 million for commitments and obligations, including customer support obligations, restructuring, and other associated costs. The change was also driven by a change in amounts accrued for certain contingent liabilities for a past acquisition resulting in a$132 million gain for the six months endedOctober 30, 2020 . Additionally, the net currency impact of remeasurement expense and our hedging programs resulted in a net loss of$36 million for the six months endedOctober 29, 2021 , as compared to a net gain of$16 million for the six months endedOctober 30, 2020 . Additional information regarding the MCS charges is included in Note 5 Restructuring and Other Costs. Other Non-Operating Income, Net Other non-operating income, net includes the non-service component of net periodic pension and postretirement benefit cost, investment gains and losses, and interest income. The increase in other non-operating income, net for the six months endedOctober 29, 2021 when compared to the corresponding in the prior year, is primarily attributable to gains on our equity method and minority investment portfolios partially offset by a decrease in interest income. Gains on equity method and minority investments were$38 million and$4 million for the six months endedOctober 29, 2021 andOctober 30, 2020 , respectively. Interest income was$89 million and$98 million for the six months endedOctober 29, 2021 andOctober 30, 2020 , respectively. Interest Expense Interest expense includes interest incurred on our outstanding borrowings, amortization of debt issuance costs and debt premiums or discounts, amortization of gains or losses on terminated or de-designated interest rate derivative instruments, and charges recognized in connection with the tender and early redemption of senior notes. The decrease in interest expense for both periods was primarily due to the$308 million charge incurred as a result of the early redemption of approximately$6.0 billion of debt during the three months endedOctober 30, 2020 . 44 --------------------------------------------------------------------------------
INCOME TAXES
Three months ended Six months ended
(in millions) October 29, 2021 October 30, 2020 October 29, 2021 October 30, 2020
Income tax provision $ 176 $ 31 $ 240 $ 124
Income before income taxes 1,493 525 2,326 1,109
Effective tax rate 11.8 % 5.9 % 10.3 % 11.2 %
Non-GAAP income tax provision $ 254 $ 221 $ 545 $ 358
Non-GAAP income before income taxes 2,052 1,606 4,253 2,583
Non-GAAP Nominal Tax Rate 12.4 % 13.8 % 12.8 % 13.9 %
Difference between the effective tax rate
and Non-GAAP Nominal Tax Rate 0.6 % 7.9 % 2.5 % 2.7 %
Our effective tax rate for the three and six months ended October 29, 2021 was
11.8 percent and 10.3 percent, respectively, as compared to 5.9 percent and 11.2
percent for the three and six months ended October 30, 2020 , respectively. The
change in our effective tax rate for the three and six months ended October 29,
2021 , as compared to the corresponding periods in the prior fiscal year, was
primarily due to the tax impact of the debt tender premium, stock-based
compensation benefits, and year over-year-changes in operational results by
jurisdiction; and specifically impacting the six months ended comparison are the
tax impact of the MCS charges and the tax cost associated with a change in the
company's permanent reinvestment assertion on certain historical earnings.
Our Non-GAAP Nominal Tax Rate for the three and six months ended October 29,
2021 was 12.4 percent and 12.8 percent, respectively, as compared to 13.8
percent and 13.9 percent for the three and six months ended October 30, 2020 ,
respectively. The decrease in our Non-GAAP Nominal Tax Rate was primarily due to
the impact of year-over-year changes in stock-based compensation benefits and
operational results by jurisdiction. An increase in our Non-GAAP Nominal Tax
Rate of 1 percent would result in an additional income tax provision for the
three and six months ended October 29, 2021 of approximately $21 million and
$43 million , respectively.
LIQUIDITY AND CAPITAL RESOURCES
We are currently in a strong financial position, and we believe our balance
sheet and liquidity as of October 29, 2021 provide us with flexibility, and our
cash, cash equivalents, and current investments, along with our credit facility
and related commercial paper programs will satisfy our foreseeable operating
needs.
Our liquidity and capital structure are evaluated regularly within the context
of our annual operating and strategic planning processes. We consider the
liquidity necessary to fund our operations, which includes working capital
needs, investments in research and development, property, plant, and equipment,
and other operating costs. We also consider capital allocation alternatives that
balance returning value to shareholders through dividends and share repurchases,
satisfying maturing debt, and acquiring businesses and technology.
Summary of Cash Flows
The following is a summary of cash provided by (used in) operating, investing,
and financing activities, the effect of exchange rate changes on cash and cash
equivalents, and the net change in cash and cash equivalents:
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