BARCLAYS

GLOBAL
HEALTHCARE
CONFERENCE
MARCH 17, 2016
MIAMI, FL

GARY ELLIS

EVP & CHIEF FINANCIAL OFFICER

FORWARD LOOKING STATEMENT

This presentation contains forward-looking statements which provide current expectations or forecasts,
including those relating to market and sales growth, growth strategies, financial results, use of free cash
flow, product development and introduction, partnerships, regulatory matters, restructuring initiatives,
mergers/acquisitions/divestitures and related effects, accounting estimates, financing activities, working
capital adequacy, competitive strengths and sales efforts. They are based on current assumptions and
expectations that involve uncertainties or risks. These uncertainties and risks include, but are not limited to,
those described in our periodic reports on file with the U.S. Securities and Exchange Commission (SEC).
Actual results may differ materially from anticipated results. Forward-looking statements are made as of
today's date, and we undertake no duty to update them or any of the information contained in this
presentation.
Financial Data
Certain information in this presentation includes calculations or figures that have been prepared internally
and have not been reviewed or audited by our independent registered public accounting firm. Use of different
methods for preparing, calculating or presenting information may lead to differences and such differences
may be material. This presentation also contains non-GAAP financial measures such as free cash flow and
historical revenue on a comparable constant currency basis, which sums historical data of Medtronic and
Covidien, aligns Covidiens prior year monthly revenue to Medtronics fiscal quarters and adjusts for the
impact of foreign currency translation. We believe these measures provide a useful way to evaluate our
underlying performance. Detail concerning how all non-GAAP measures are calculated, including all nonGAAP to GAAP reconciliations, are attached.

Barclays Global Healthcare Conference | March, 2016

NEW THERAPIES: KEY TO SUSTAINABLE MID-SINGLE DIGIT GROWTH

Additional Pipeline to be Discussed at June Investor Day
Robotics
Platform

Beyond
Valiant Evo
(US / EU)
TAVR Intermediate Risk

FY18 Resolute OnyxTM (US)

Endurant Evo (CE)

FY17

Micra TPS
(US / Japan)

CoreValve Japan
CoreValve
Evolut R
Evera MRI ICD

Cardiac & Vascular

Group

PipelineTM Flex
with Shield

SigniaTM
Powered
Stapler
>20 new products to
be launched through
the end of FY17
expected to
generate ~$500M in
cumulative revenue
over the next 3 years

Visia AFTM MRI

New Therapies
150-350bps

Sapiens

BarrxTM 360 Express

MRI Safe CRT-D

FY16

IntellisTM RC

GastriSailTM

Atlantis EssentialsTM
Anterior Cervical Plate

iPro 3 (EU)

MiniMed 670G (US)

Prestige LP
Solera Voyager
O-arm O2
SolitaireTM FR

Minimally Invasive
Therapies Group

Globalization
150-200bps

Medina
Embolization

Guardian
Connect with
EnliteTM 3 (US)

Restorative
Therapies Group

Services & Solutions

40-60bps
Barclays Global Healthcare Conference | March, 2016

MiniMed
640G (EU)

Diabetes
Group
Consistent MSD
Revenue Growth

EPS WALK: FY15 FY16E

FX PARTIALLY OFFSETTING
STRONG OPERATING LEVERAGE

NON-GAAP EPS1

5
5

$4.81
to
$4.90

650 to 900 bps

Leverage
~12% - 15%
Y/Y growth

FY17 Commentary
$0.45
to
$0.50

5
5
4
4

$4.20

$4.36
to
$4.40

~$0.08 - $0.10

Double-Digit to Low-Teens EPS Constant

Currency Growth After Adjusting for the Extra
Week
Extra Week Will Negatively Affect FY17 Revenue
Growth by ~150 bps, with Commensurate EPS
Impact
2

FX :

Revenue: ~$250M-$300M negative impact

4
FY15

Extra Week
Impact CC

EPS Growth
CC

FY16E
EPS CC

FX 2
Impact

FY16E
EPS

EPS: ($0.20) to ($0.25) negative impact

Delivering 650 to 900 bps of CC EPS Leverage (Excl. Benefit of the Extra Week)
COV Synergies: Expect to Exceed Goal of $300-$350M
Significant FX Impact Partially Mitigated by Hedging Strategy

1
2

Non-GAAP EPS on a comparable basis

FX impact calculated using rates as of 2/29/2016

Barclays Global Healthcare Conference | March, 2016

CAPITAL ALLOCATION: IMPROVED CASH ACCESSIBILITY

PRE-COVIDIEN1

FY16E FY18E
Accessible
FCF

Trapped
FCF

~$5.5B
Trapped
FCF

~$11B
Accessible
FCF

Dividends
Financial
Flexibility

Trapped
Cash to B/S

~$6B
Trapped
B/S Cash

Share
Repurchase
M&A

Debt
Issuance
Only ~35% of Free Cash Flow Accessible
Issued Debt to Cover Additional Accessible
Cash Needs
Trapped Cash Accumulated
Returned ~50% of Free Cash Flow to
Shareholders

Debt
Paydown

~$9.3B
Untrapped
B/S Cash

Dividends
Share
Repurchase
Incremental
Share
Repurchase

$4B
Accessible
B/S Cash

~65% of Free Cash Flow Accessible

Untrapping Cash; Already $9.3B in FY16
Return Minimum of ~50% of Free Cash Flow to
Shareholders; Target 40% Dividend Payout Ratio
Target A Credit Profile
Maintaining Healthy Financial Flexibility

Free cash flow (FCF) defined as Operating Cash Flow less Capital Expenditures
Outer rings are sources of cash. Inner rings are uses of cash.
Barclays Global Healthcare Conference | March, 2016
1. FY12-FY15, not including impact of Covidien acquisition.

DETAILS OF $9.3B CAPITAL DEPLOYMENT

INCREASED FLEXIBILITY IN CAPITAL ALLOCATION
1

SHARE REPURCHASES

Incremental $5 billion by the end of FY18

In addition to MDTs current commitment to
return a minimum of 50% of FCF each year
Opportunistically utilize existing Board
authorization
Bias towards repurchasing shares earlier

18.0

~$15B
15.0

9.0

~$6.2B

3.0

Continue to target A-credit rating profile

0.0

MAINTAIN FINANCIAL FLEXIBILITY

Potential to accelerate payout ratio faster

than previously communicated

~$7.0B

6.0

Targeted commitments to debt investors by

the end of FY18

Incremental
$5B Share
Repurchase

12.0

ADDITIONAL DELEVERAGING

Repay existing debt or debt coming due

STRONG RECORD OF RETURNING

CASH TO SHAREHOLDERS

$ Billions

FY10-FY12 1
Dividends

FY13-FY15

FY16-FY18E

Net Share Repurchases

Commitment: Return A Minimum of 50% of

Free Cash Flow to Shareholders

1
FY12 includes $213M of proceeds related to the sale of Physio-Control used for share repurchases.
Note: Free cash flow (FCF) defined as Operating Cash Flow less Capital Expenditures
Barclays Global Healthcare Conference | March, 2016
6

STRONG, CONSISTENT TRACK RECORD OF DIVIDEND GROWTH

TARGETING 40% PAYOUT RATIO
45%

$2.75
$2.50

35%

$1.75

Dividend per Share CAGR

5-year
11%
10-year
15%
20-year
17%
38-year
18%

$1.50
$1.25
$1.00

30%
25%

$0.75
$0.50

Payout Ratio1

$0.25

Dividend per Share

20%

$0.00

Member of S&P 500 Dividend Aristocrats

38 Years of Increasing Dividend per Share

1
7

On a non-GAAP basis. Calculated as annual dividend per share divided by prior year non-GAAP earnings per share.
Barclays Global Healthcare Conference | March, 2016

FY20E

FY18E

FY16E

FY14

FY12

FY10

FY08

FY06

FY04

FY02

FY00

FY98

FY96

FY94

FY92

FY90

FY88

FY86

FY84

FY82

FY80

FY78

15%

Payout Ratio

Dividend per Share

$2.00

40%

Dividend Payout Ratio now ~35%1

Dividend up +25% in FY16E

$2.25

NON-GAAP RECONCILIATION TABLES

NON-GAAP RECONCILIATION TABLE

UNAUDITED CONDENSED COMBINED STATEMENT OF EARNINGS FOR THE THREE MONTHS ENDED JULY 25, 2014

Q1 FY15: MEDTRONIC PLC COMBINED HISTORICAL STATEMENT OF EARNINGS

(1) For the three months ended July 25, 2014

(2) For the three months ended June 27, 2014
(3) Combined weighted average shares outstanding have been calculated as if the shares to be issued in the transaction had been issued and
outstanding as of April 26, 2014, the beginning of fiscal year 2015.
(4) See accompanying footnotes for additional information on reclassification adjustments.
(5) Represents increase (decrease) in Covidien results for the three months ended July 25, 2014 as compared to Covidien results for the three months ended
June 27, 2014.
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FOR THE THREE MONTHS ENDED JULY 25, 2014 (IN MILLIONS, EXCEPT PER SHARE DATA)

Q1 FY15: MEDTRONIC PLC NON-GAAP RECONCILIATION (UNAUDITED)

(1) Combined Cash EPS is calculated as diluted EPS excluding Medtronic and Covidien reported non-GAAP adjustments and combined amortization of
intangible assets.
(a) To exclude the impact of Medtronic's restructuring charges, net.
(b) To exclude the impact of Medtronic's acquisition-related items, primarily costs incurred in connection with the Covidien acquisition.
(c) To exclude the impact of Covidien's restructuring charges, net, including $2 million of restructuring-related accelerated depreciation included in cost of
products sold.
(d) To exclude Covidien acquisition-related costs, primarily $12 million of charges recorded in cost of products sold related to the sale of acquired inventory
that had been written up to fair value upon acquisition and an adjustment to contingent consideration.
(e) To exclude a legal charge resulting from an increase to Covidien's estimated indemnification obligation for certain pelvic mesh products liability cases.
(f) To exclude transaction costs incurred by Covidien resulting from Medtronic's acquisition of Covidien.
(g) To exclude an adjustment to the gain on the sale of Covidien's Confluent biosurgery product line.
(h) To exclude the non-interest portion of the impact of Covidien's tax sharing agreement with Tyco International plc and TE Connectivity Ltd.
(i) Primarily to exclude Covidien's favorable audit settlement reached with certain non-U.S. taxing authorities.
(j) To exclude combined amortization of intangible assets.
Investors should consider these non-GAAP measures in addition to, and not as a substitute for, financial performance measures prepared in accordance with
U.S. GAAP.

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UNAUDITED CONDENSED COMBINED STATEMENT OF EARNINGS FOR THE THREE MONTHS ENDED OCTOBER 24, 2014

Q2 FY15: MEDTRONIC PLC COMBINED HISTORICAL STATEMENT OF EARNINGS

(1) For the three months ended October 24, 2014

(2) For the three months ended September 26, 2014
(3) Combined weighted average shares outstanding have been calculated as if the shares to be issued in the transaction had been issued and
outstanding as of April 26, 2014, the beginning of fiscal year 2015.
(4) See accompanying footnotes for additional information on reclassification adjustments.
(5) Represents increase (decrease) in Covidien results for the three months ended October 24, 2014 as compared to Covidien results for the three months
ended September 26, 2014.
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FOR THE THREE MONTHS ENDED OCTOBER 24, 2014 (IN MILLIONS, EXCEPT PER SHARE DATA)

Q2 FY15: MEDTRONIC PLC NON-GAAP RECONCILIATION (UNAUDITED)

(1) Combined Cash EPS is calculated as diluted EPS excluding Medtronic and Covidien reported non-GAAP adjustments and combined amortization of
intangible assets.
(2) The data in the table has been intentionally rounded to the nearest $0.01 and, therefore, may not sum.
(a) To exclude the impact of a charitable cash donation made to the Medtronic Foundation.
(b) To exclude the impact of Medtronic's acquisition-related items, primarily costs incurred in connection with the Covidien acquisition.
(c) To exclude the impact of Covidien's restructuring charges, net.
(d) To exclude Covidien acquisition-related costs, primarily adjustments to contingent consideration.
(e) To exclude the impairment of in-process research and development related to Covidien's drug coated balloon platform, which was sold in connection with
Medtronic's acquisition of Covidien.
(f) To exclude transaction costs incurred by Covidien resulting from Medtronic's acquisition of Covidien.
(g) To exclude the non-interest portion of the impact of Covidien's tax sharing agreement with Tyco International plc and TE Connectivity Ltd.
(h) Primarily to exclude the effective settlement of all Covidien tax matters relating to the 2005 through 2007 U.S. audit cycle.
(i)
To exclude combined amortization of intangible assets.
Investors should consider these non-GAAP measures in addition to, and not as a substitute for, financial performance measures prepared in accordance with
U.S. GAAP.

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UNAUDITED CONDENSED COMBINED STATEMENT OF EARNINGS FOR THE THREE MONTHS ENDED JANUARY 23, 2015

Q3 FY15: MEDTRONIC PLC COMBINED HISTORICAL STATEMENT OF EARNINGS

(1) For the three months ended January 23, 2015

(2) For the three months ended December 26, 2014
(3) Combined weighted average shares outstanding have been calculated as if the shares issued in the transaction had been issued and outstanding
as of April 26, 2014, the beginning of fiscal year 2015.
(4) See accompanying footnotes for additional information on reclassification adjustments.
(5) Represents increase (decrease) in Covidien results for the three months ended January 23, 2015 as compared to Covidien results for the three months
ended December 26, 2014.

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FOR THE THREE MONTHS ENDED JANUARY 23, 2015 (IN MILLIONS, EXCEPT PER SHARE DATA)

Q3 FY15: MEDTRONIC PLC NON-GAAP RECONCILIATION (UNAUDITED)

(1) Combined Cash EPS is calculated as diluted EPS excluding Medtronic and Covidien reported non-GAAP adjustments and combined amortization of
intangible assets.
(2) Combined diluted EPS does not include an adjustment to exclude the incremental interest expense incurred to hold $17 billion of debt from December 10,
2014 through the end of the third quarter of fiscal year 2015 of $77 million.
(a) To exclude the impact of a charitable cash donation made to the Medtronic Foundation, a gain on divestiture recognized in connection with the sale of a
product line in the Surgical Technologies division and a net gain recognized in connection with the sale of a certain equity method investment.
(b) To exclude the impact of Medtronic's acquisition-related items, primarily costs incurred in connection with the Covidien acquisition.
(c) To exclude the impact of Covidien's restructuring credits, net.
(d) To exclude transaction costs incurred by Covidien resulting from Medtronic's acquisition of Covidien.
(e) To exclude the non-interest portion of the impact of Covidien's tax sharing agreement with Tyco International plc and TE Connectivity Ltd.
(f) To exclude $20 million from the effective settlement of all Covidien tax matters related to a 2004 U.S. audit and $8 million from the retroactive re-enactment
of the U.S. research and development tax credit.
(g) To exclude combined amortization of intangible assets.
Investors should consider these non-GAAP measures in addition to, and not as a substitute for, financial performance measures prepared in accordance with
U.S. GAAP.

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UNAUDITED CONDENSED STATEMENT OF EARNINGS FOR THE THREE MONTHS ENDED APRIL 24, 2015

Q4 FY15: MEDTRONIC PLC HISTORICAL STATEMENT OF EARNINGS

16

FOR THE THREE MONTHS ENDED APRIL 24, 2015 (IN MILLIONS, EXCEPT PER SHARE DATA)

Q4 FY15: MEDTRONIC PLC NON-GAAP RECONCILIATION (UNAUDITED)

(a) To exclude the step-up in preliminary fair value of inventory acquired in connection with the Covidien acquisition.
(b) To exclude the probable and reasonably estimable commitment related to a CRHF global comprehensive program for home based monitors due to industry
conversion from analog to digital technology.
(c) To exclude the impact of restructuring charges, net, including $15 million of charges recorded in cost of products sold related to inventory write-offs of
discontinued product lines and production-related asset impairments.
(d) To exclude the impact of certain litigation charges, net, primarily related to probable and reasonably estimable INFUSE product liability litigation and other
matters litigation.
(e) To exclude the impact of acquisition-related items.
(f) To exclude amortization of intangible assets.
(g) To exclude tax expense primarily related to the anticipated resolution of the Kyphon acquisition-related issues with the IRS.

17

UNAUDITED CONDENSED COMBINED STATEMENT OF EARNINGS FOR THE FISCAL YEAR ENDED APRIL 24, 2015

FY15: MEDTRONIC PLC COMBINED HISTORICAL STATEMENT OF EARNINGS

(1) Combined results for the nine months ended January 23, 2015
(2) Medtronic plc results for the three months ended April 24, 2015
(3) Combined weighted average shares outstanding have been calculated as if the shares issued in the transaction had been issued and outstanding as of April
26, 2014, the beginning of fiscal year 2015.

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FOR THE FISCAL YEAR ENDED APRIL 24, 2015 (IN MILLIONS, EXCEPT PER SHARE DATA)

FY15: MEDTRONIC PLC COMBINED NON-GAAP RECONCILIATION (UNAUDITED)

(1) For the fiscal year ended April 24, 2015

(2) For the nine months ended December 26, 2014
(3) Combined Cash EPS is calculated as diluted EPS excluding Medtronic and Covidien reported non-GAAP adjustments and combined amortization of
intangible assets.
(4) Combined diluted EPS does not include an adjustment to exclude the incremental interest expense incurred to hold $17 billion of debt from December 10,
2014 through the end of the third quarter of fiscal year 2015 of $77 million.
(a) To exclude combined amortization of intangible assets.
For details on Medtronic and Covidien reported non-GAAP adjustments for the fiscal year ended April 24, 2015, see Non-GAAP Reconciliations for the three
months ended April 24, 2015, January 23, 2015, October 24, 2014, and July 25, 2014.
Investors should consider these non-GAAP measures in addition to, and not as a substitute for, financial performance measures prepared in accordance with
U.S. GAAP.

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FOOTNOTES
Footnotes to the Unaudited Condensed Combined Statements of Earnings
Certain reclassifications have been made to Covidiens historical financial statements to conform to Medtronics presentation, as follows:
A. To reclassify Covidiens medical device excise tax from selling, general, and administrative expense to other expense (income), net.
B. To reclassify Covidiens amortization of definite-lived intangible assets from cost of products sold and selling, general, and administrative
expense to amortization of intangible assets.
C. To reclassify Covidiens net gains and losses on foreign exchange transactions and related gains and losses on associated hedge
transactions from cost of products sold and selling, general, and administrative expense to other expense (income), net.
D. To reclassify certain of Covidiens stock-based compensation expense from selling, general, and administrative expense to cost of products
sold and research and development expense.
E. To reclassify certain of Covidiens shipping and handling costs from cost of products sold to selling, general, and administrative expense.
F. To reclassify Covidiens royalty expense from cost of products sold to other expense (income), net.
G. To reclassify Covidiens litigation and environmental charges from selling, general, and administrative expense to certain litigation charges,
net. The litigation charge resulted from an increase to Covidien's estimated indemnification obligation for certain pelvic mesh product liability
cases. The environmental charge related to probable and reasonably estimated incremental costs to remediate a site in Orrington, Maine
following a court decision affirming a compliance order issued by the Maine Board of Environmental Protection.
H. To reclassify Covidien's gain on a previously-held investment associated with Covidien's acquisition of CV Ingenuity from other expense
(income), net to acquisition-related items, which is included in selling, general, and administrative expense in these Condensed Combined
Statements of Earnings.
I. To record pro forma incremental interest expense, net (including incremental interest expense and incremental debt issuance amortization
expense from debt financing obtained by Medtronic, Inc.). Prior to the Transaction closing, Medtronic, Inc. obtained $17 billion of debt financing
across a range of maturities and a weighted average contractual interest rate of 3.60 percent.
J. To recognize accretion of the pro forma debt premium from Medtronics assumption of Covidiens existing long-term debt. The premium to
adjust assumed Covidien debt to fair market value is amortized over the remaining maturity of the debt as a credit to pro forma interest
expense, net.
K. The statutory tax rate was applied, as appropriate, to Footnotes I and J based on the jurisdiction in which the adjustment was expected to
occur. Although not reflected, the effective tax rate of the combined company could be significantly different depending on post-acquisition
activities, such as the geographical mix of taxable income affecting state and foreign taxes, among other factors.

20