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Microsoft Excel LibreOffice Calc

Medtronic PLC (MDT)

Analysis of Income Taxes

Advanced level

Accounting Policy on Income Taxes

Medtronic has deferred taxes that arise as a result of the different treatment of transactions for U.S. GAAP and income tax accounting, known as temporary differences. Medtronic records the tax effect of these temporary differences as deferred tax assets and deferred tax liabilities. Deferred tax assets generally represent items that may be used as a tax deduction or credit in a tax return in future years for which Medtronic has already recognized the tax benefit in the consolidated statements of income. Medtronic establishes valuation allowances for deferred tax assets when the amount of expected future taxable income is not likely to support the use of the deduction or credit. Deferred tax liabilities generally represent tax expense for which payment has been deferred or expense has already been taken as a deduction on Medtronic’s tax return but has not yet been recognized as an expense in the consolidated statements of income.

Source: 10-K (filing date: 2019-06-21).

Income Tax Expense (Benefit)

Medtronic PLC, income tax expense (benefit), continuing operations

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended Apr 26, 2019 Apr 27, 2018 Apr 28, 2017 Apr 29, 2016 Apr 24, 2015 Apr 25, 2014
U.S.
International
Current tax expense
U.S.
International
Deferred tax expense (benefit)
Income tax provision

Based on: 10-K (filing date: 2019-06-21), 10-K (filing date: 2018-06-22), 10-K (filing date: 2017-06-27), 10-K (filing date: 2016-06-28), 10-K (filing date: 2015-06-23), 10-K (filing date: 2014-06-20).

Item Description The company
Current tax expense Amount of current income tax expense (benefit) pertaining to taxable income (loss) from continuing operations. Medtronic PLC’s current tax expense increased from 2017 to 2018 but then decreased significantly from 2018 to 2019.
Deferred tax expense (benefit) Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations. Medtronic PLC’s deferred tax expense (benefit) decreased from 2017 to 2018 but then increased from 2018 to 2019 exceeding 2017 level.
Income tax provision Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. Medtronic PLC’s income tax provision increased from 2017 to 2018 but then decreased significantly from 2018 to 2019.

Effective Income Tax Rate (EITR)

Medtronic PLC, effective income tax rate (EITR) reconciliation

Microsoft Excel LibreOffice Calc
Apr 26, 2019 Apr 27, 2018 Apr 28, 2017 Apr 29, 2016 Apr 24, 2015 Apr 25, 2014
U.S. federal statutory tax rate
U.S. state taxes, net of federal tax benefit
Research and development credit
Puerto Rico Excise Tax
International
Stock based compensation
Other, net
Divestiture related
Certain tax adjustments
U.S. tax on foreign earnings
Increase (decrease) in tax rate
Effective tax rate, before U.S. Tax Reform
U.S. Tax Reform
Effective tax rate

Based on: 10-K (filing date: 2019-06-21), 10-K (filing date: 2018-06-22), 10-K (filing date: 2017-06-27), 10-K (filing date: 2016-06-28), 10-K (filing date: 2015-06-23), 10-K (filing date: 2014-06-20).

Item Description The company
Effective tax rate, before U.S. Tax Reform Percentage of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. Medtronic PLC’s effective tax rate, before U.S. Tax Reform decreased from 2017 to 2018 but then increased from 2018 to 2019 not reaching 2017 level.

Components of Deferred Tax Assets and Liabilities

Medtronic PLC, components of deferred tax assets and liabilities

US$ in millions

Microsoft Excel LibreOffice Calc
Apr 26, 2019 Apr 27, 2018 Apr 28, 2017 Apr 29, 2016 Apr 24, 2015 Apr 25, 2014
Net operating loss, capital loss, and credit carryforwards
Other accrued liabilities
Accrued compensation
Pension and post-retirement benefits
Stock-based compensation
Other
Inventory
Federal and state benefit on uncertain tax positions
Interest limitation
Unrealized loss on available-for-sale securities and derivative financial instruments
Gross deferred tax assets
Valuation allowance
Deferred tax assets
Intangible assets
Basis impairment
Realized loss on derivative financial instruments
Other
Accumulated depreciation
Unrealized gain on available-for-sale securities and derivative financial instruments
Outside basis difference of subsidiaries
Deferred tax liabilities
Prepaid income taxes
Income tax receivables
Tax assets (liabilities), net

Based on: 10-K (filing date: 2019-06-21), 10-K (filing date: 2018-06-22), 10-K (filing date: 2017-06-27), 10-K (filing date: 2016-06-28), 10-K (filing date: 2015-06-23), 10-K (filing date: 2014-06-20).

Item Description The company
Gross deferred tax assets Amount before allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. Medtronic PLC’s gross deferred tax assets decreased from 2017 to 2018 and from 2018 to 2019.
Deferred tax assets Amount after allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. Medtronic PLC’s deferred tax assets decreased from 2017 to 2018 but then slightly increased from 2018 to 2019.
Tax assets (liabilities), net Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, without jurisdictional netting. Medtronic PLC’s tax assets (liabilities), net increased from 2017 to 2018 and from 2018 to 2019.

Deferred Tax Assets and Liabilities, Classification

Medtronic PLC, deferred tax assets and liabilities, classification

US$ in millions

Microsoft Excel LibreOffice Calc
Apr 26, 2019 Apr 27, 2018 Apr 28, 2017 Apr 29, 2016 Apr 24, 2015 Apr 25, 2014
Tax assets (included in Other current assets)
Tax assets
Current deferred tax liabilities
Noncurrent deferred tax liabilities
Deferred tax liabilities (included in Noncurrent liabilities held for sale)

Based on: 10-K (filing date: 2019-06-21), 10-K (filing date: 2018-06-22), 10-K (filing date: 2017-06-27), 10-K (filing date: 2016-06-28), 10-K (filing date: 2015-06-23), 10-K (filing date: 2014-06-20).

Item Description The company
Tax assets Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, with jurisdictional netting and classified as noncurrent. Medtronic PLC’s tax assets decreased from 2017 to 2018 but then increased from 2018 to 2019 exceeding 2017 level.
Noncurrent deferred tax liabilities Amount, after deferred tax asset, of deferred tax liability attributable to taxable differences, with jurisdictional netting and classified as noncurrent. Medtronic PLC’s noncurrent deferred tax liabilities decreased from 2017 to 2018 and from 2018 to 2019.

Adjustments to Financial Statements: Removal of Deferred Taxes

Medtronic PLC, adjustments to financial statements

US$ in millions

Microsoft Excel LibreOffice Calc
Apr 26, 2019 Apr 27, 2018 Apr 28, 2017 Apr 29, 2016 Apr 24, 2015 Apr 25, 2014
Adjustment to Current Assets
Current assets (as reported)
Less: Current deferred tax assets, net
Current assets (adjusted)
Adjustment to Total Assets
Total assets (as reported)
Less: Current deferred tax assets, net
Less: Noncurrent deferred tax assets, net
Total assets (adjusted)
Adjustment to Current Liabilities
Current liabilities (as reported)
Less: Current deferred tax liabilities, net
Current liabilities (adjusted)
Adjustment to Total Liabilities
Total liabilities (as reported)
Less: Current deferred tax liabilities, net
Less: Noncurrent deferred tax liabilities, net
Total liabilities (adjusted)
Adjustment to Shareholders’ Equity
Shareholders’ equity (as reported)
Less: Net deferred tax assets (liabilities)
Shareholders’ equity (adjusted)
Adjustment to Net Income Attributable To Medtronic
Net income attributable to Medtronic (as reported)
Add: Deferred income tax expense (benefit)
Net income attributable to Medtronic (adjusted)

Based on: 10-K (filing date: 2019-06-21), 10-K (filing date: 2018-06-22), 10-K (filing date: 2017-06-27), 10-K (filing date: 2016-06-28), 10-K (filing date: 2015-06-23), 10-K (filing date: 2014-06-20).

Medtronic PLC, Financial Data: Reported vs. Adjusted

Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)

Medtronic PLC, adjusted financial ratios

Microsoft Excel LibreOffice Calc
Apr 26, 2019 Apr 27, 2018 Apr 28, 2017 Apr 29, 2016 Apr 24, 2015 Apr 25, 2014
Current Ratio
Reported current ratio
Adjusted current ratio
Net Profit Margin
Reported net profit margin
Adjusted net profit margin
Total Asset Turnover
Reported total asset turnover
Adjusted total asset turnover
Financial Leverage
Reported financial leverage
Adjusted financial leverage
Return on Equity (ROE)
Reported ROE
Adjusted ROE
Return on Assets (ROA)
Reported ROA
Adjusted ROA

Based on: 10-K (filing date: 2019-06-21), 10-K (filing date: 2018-06-22), 10-K (filing date: 2017-06-27), 10-K (filing date: 2016-06-28), 10-K (filing date: 2015-06-23), 10-K (filing date: 2014-06-20).

Financial ratio Description The company
Adjusted current ratio A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities. Medtronic PLC’s adjusted current ratio improved from 2017 to 2018 and from 2018 to 2019.
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. Medtronic PLC’s adjusted net profit margin ratio deteriorated from 2017 to 2018 but then improved from 2018 to 2019 exceeding 2017 level.
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Medtronic PLC’s adjusted total asset turnover ratio improved from 2017 to 2018 and from 2018 to 2019.
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.		 Medtronic PLC’s adjusted financial leverage ratio decreased from 2017 to 2018 and from 2018 to 2019.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. Medtronic PLC’s adjusted ROE deteriorated from 2017 to 2018 but then improved from 2018 to 2019 exceeding 2017 level.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Medtronic PLC’s adjusted ROA deteriorated from 2017 to 2018 but then improved from 2018 to 2019 exceeding 2017 level.

Medtronic PLC, Financial Ratios: Reported vs. Adjusted

Adjusted Current Ratio

Microsoft Excel LibreOffice Calc
Apr 26, 2019 Apr 27, 2018 Apr 28, 2017 Apr 29, 2016 Apr 24, 2015 Apr 25, 2014
As Reported
Selected Financial Data (US$ in millions)
Current assets
Current liabilities
Liquidity Ratio
Current ratio1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted current assets
Adjusted current liabilities
Liquidity Ratio
Adjusted current ratio2

Based on: 10-K (filing date: 2019-06-21), 10-K (filing date: 2018-06-22), 10-K (filing date: 2017-06-27), 10-K (filing date: 2016-06-28), 10-K (filing date: 2015-06-23), 10-K (filing date: 2014-06-20).

2019 Calculations

1 Current ratio = Current assets ÷ Current liabilities
= ÷ =

2 Adjusted current ratio = Adjusted current assets ÷ Adjusted current liabilities
= ÷ =

Liquidity ratio Description The company
Adjusted current ratio A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities. Medtronic PLC’s adjusted current ratio improved from 2017 to 2018 and from 2018 to 2019.

Adjusted Net Profit Margin

Microsoft Excel LibreOffice Calc
Apr 26, 2019 Apr 27, 2018 Apr 28, 2017 Apr 29, 2016 Apr 24, 2015 Apr 25, 2014
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to Medtronic
Net sales
Profitability Ratio
Net profit margin1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income attributable to Medtronic
Net sales
Profitability Ratio
Adjusted net profit margin2

Based on: 10-K (filing date: 2019-06-21), 10-K (filing date: 2018-06-22), 10-K (filing date: 2017-06-27), 10-K (filing date: 2016-06-28), 10-K (filing date: 2015-06-23), 10-K (filing date: 2014-06-20).

2019 Calculations

1 Net profit margin = 100 × Net income attributable to Medtronic ÷ Net sales
= 100 × ÷ =

2 Adjusted net profit margin = 100 × Adjusted net income attributable to Medtronic ÷ Net sales
= 100 × ÷ =

Profitability ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. Medtronic PLC’s adjusted net profit margin ratio deteriorated from 2017 to 2018 but then improved from 2018 to 2019 exceeding 2017 level.

Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Apr 26, 2019 Apr 27, 2018 Apr 28, 2017 Apr 29, 2016 Apr 24, 2015 Apr 25, 2014
As Reported
Selected Financial Data (US$ in millions)
Net sales
Total assets
Activity Ratio
Total asset turnover1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Net sales
Adjusted total assets
Activity Ratio
Adjusted total asset turnover2

Based on: 10-K (filing date: 2019-06-21), 10-K (filing date: 2018-06-22), 10-K (filing date: 2017-06-27), 10-K (filing date: 2016-06-28), 10-K (filing date: 2015-06-23), 10-K (filing date: 2014-06-20).

2019 Calculations

1 Total asset turnover = Net sales ÷ Total assets
= ÷ =

2 Adjusted total asset turnover = Net sales ÷ Adjusted total assets
= ÷ =

Activity ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Medtronic PLC’s adjusted total asset turnover ratio improved from 2017 to 2018 and from 2018 to 2019.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Apr 26, 2019 Apr 27, 2018 Apr 28, 2017 Apr 29, 2016 Apr 24, 2015 Apr 25, 2014
As Reported
Selected Financial Data (US$ in millions)
Total assets
Shareholders’ equity
Solvency Ratio
Financial leverage1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted total assets
Adjusted shareholders’ equity
Solvency Ratio
Adjusted financial leverage2

Based on: 10-K (filing date: 2019-06-21), 10-K (filing date: 2018-06-22), 10-K (filing date: 2017-06-27), 10-K (filing date: 2016-06-28), 10-K (filing date: 2015-06-23), 10-K (filing date: 2014-06-20).

2019 Calculations

1 Financial leverage = Total assets ÷ Shareholders’ equity
= ÷ =

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted shareholders’ equity
= ÷ =

Solvency ratio Description The company
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.		 Medtronic PLC’s adjusted financial leverage ratio decreased from 2017 to 2018 and from 2018 to 2019.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Apr 26, 2019 Apr 27, 2018 Apr 28, 2017 Apr 29, 2016 Apr 24, 2015 Apr 25, 2014
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to Medtronic
Shareholders’ equity
Profitability Ratio
ROE1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income attributable to Medtronic
Adjusted shareholders’ equity
Profitability Ratio
Adjusted ROE2

Based on: 10-K (filing date: 2019-06-21), 10-K (filing date: 2018-06-22), 10-K (filing date: 2017-06-27), 10-K (filing date: 2016-06-28), 10-K (filing date: 2015-06-23), 10-K (filing date: 2014-06-20).

2019 Calculations

1 ROE = 100 × Net income attributable to Medtronic ÷ Shareholders’ equity
= 100 × ÷ =

2 Adjusted ROE = 100 × Adjusted net income attributable to Medtronic ÷ Adjusted shareholders’ equity
= 100 × ÷ =

Profitability ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. Medtronic PLC’s adjusted ROE deteriorated from 2017 to 2018 but then improved from 2018 to 2019 exceeding 2017 level.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Apr 26, 2019 Apr 27, 2018 Apr 28, 2017 Apr 29, 2016 Apr 24, 2015 Apr 25, 2014
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to Medtronic
Total assets
Profitability Ratio
ROA1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income attributable to Medtronic
Adjusted total assets
Profitability Ratio
Adjusted ROA2

Based on: 10-K (filing date: 2019-06-21), 10-K (filing date: 2018-06-22), 10-K (filing date: 2017-06-27), 10-K (filing date: 2016-06-28), 10-K (filing date: 2015-06-23), 10-K (filing date: 2014-06-20).

2019 Calculations

1 ROA = 100 × Net income attributable to Medtronic ÷ Total assets
= 100 × ÷ =

2 Adjusted ROA = 100 × Adjusted net income attributable to Medtronic ÷ Adjusted total assets
= 100 × ÷ =

Profitability ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Medtronic PLC’s adjusted ROA deteriorated from 2017 to 2018 but then improved from 2018 to 2019 exceeding 2017 level.