Free cash flow is a non-GAAP financial measure calculated by subtracting property, plant, and equipment additions from operating cash flows.
The following is a summary of revenue, diluted earnings per share, and cash flow for fiscal years 2022 and 2021:
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(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.
(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.
(7)The charges relate to the abandonment of certain intangible assets in our Neuroscience segment.
(8)The charges relate to the early redemption of approximately $6.0 billion of debt.
Net cash provided by operating activities $ 7,346 $ 6,240 Additions to property, plant, and equipment (1,368) (1,355) Free cash flow
Refer to the Summary of Cash Flows section for drivers of the change in cash provided by operating activities.
The charts below illustrate the percent of net sales by segment for fiscal years 2022 and 2021:
[[Image Removed: mdt-20220429_g25.jpg]][[Image Removed: mdt-20220429_g26.jpg]]
The charts below illustrate the percent of net sales by market geography for fiscal years 2022 and 2021:
[[Image Removed: mdt-20220429_g27.jpg]][[Image Removed: mdt-20220429_g28.jpg]]
The table below includes net sales by market geography for each of our segments for fiscal years 2022 and 2021:
Looking ahead, a number of macro-economic and geopolitical factors could negatively impact our business, including without limitation:
•National and provincial tender pricing for certain products, particularly in China.
The charts below illustrate the percent of Cardiovascular net sales by division for fiscal years 2022 and 2021:
[[Image Removed: mdt-20220429_g29.jpg]][[Image Removed: mdt-20220429_g30.jpg]]
distribution and sale of the system. The net sales for the Medtronic HVAD system for fiscal year 2021 was $141 million.
In addition to the macro-economic and geopolitical factors described in the Executive Level Overview, looking ahead, we expect Cardiovascular could be affected by the following:
•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.
•Continued acceptance and expansion of the Claria MRI CRT-D system with AdaptivCRT and compatibility with TriageHF technology.
•Growth of the CRT-P quadripolar pacing system.
•Continued growth, adoption, and utilization of the TYRX Envelope for implantable devices.
•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.
•Continued expansion and training of field support to increase coverage in the U.S. centers performing TAVR procedures.
•Our June 2021 decision to stop the distribution and sale of the Medtronic HVAD System.
The charts below illustrate the percent of Medical Surgical net sales by division for fiscal years 2022 and 2021:
[[Image Removed: mdt-20220429_g31.jpg]][[Image Removed: mdt-20220429_g32.jpg]]
In addition to the macro-economic and geopolitical factors described in the Executive Level Overview, looking ahead we expect Medical Surgical could be affected by the following:
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.
•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.
•Our ability to successfully develop, obtain regulatory approval of and commercialize the products within our pipeline, which include, but are not limited to, our Hugo RAS system in the U.S., our NextGen McGrath MAC video laryngoscopes, Signia power stapling devices, and our Ligasure and Sonicision vessel sealing devices.
The graphs below illustrate the percent of Neuroscience net sales by division for fiscal years 2022 and 2021:
[[Image Removed: mdt-20220429_g33.jpg]][[Image Removed: mdt-20220429_g34.jpg]]
In addition to the macro-economic and geopolitical factors described in the Executive Level Overview, looking ahead we expect Neuroscience could be affected by the following:
•Continued growth from Enabling Technologies, including StealthStation Navigation and O-arm Imaging Systems, Midas Rex Powered Surgical Instruments, 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.
•Market acceptance and continued global adoption of innovative new spine products and procedural solutions within our CST division such as our Infinity 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 of our React Catheter and Riptide aspiration system, along with our next-generation Solitaire revascularization device.
•Market acceptance and growth from SCS therapy for treating Diabetic Peripheral Neuropathy (DPN) on Intellis rechargeable neurostimulator and Vanta recharge-free neurostimulator which received U.S. FDA approval in January 2022.
•Our ability to successfully develop, obtain regulatory approval of and commercialize the products within our pipeline, which include, but are not limited to, our closed-loop Percept PC and RC devices with adaptive DBS (aDBS), our hemorrhagic stroke intravascular device, and our next-generation spine enabling technologies.
In addition to the macro-economic and geopolitical factors described in the Executive Level Overview, looking ahead we expect Diabetes could be affected by the following:
•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.
•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, but are not limited to, our MiniMed 780G insulin pump and the Guardian 4 sensor, which have been submitted to the U.S. FDA.
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:
The following is a summary of other costs and expenses (income):
Amortization of intangible assets $ 1,733 $ 1,783 Restructuring charges, net
Other non-operating income, net (318) (336) Interest expense
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 of the consolidated financial statements in "Item 8. Financial Statements and Supplementary Data" in this Annual Report on Form 10-K.
Difference between the effective tax rate and Non-GAAP Nominal Tax Rate
During fiscal year 2022, the net benefit from certain tax adjustments of $50 million, recognized in income tax provision (benefit) in the consolidated statement of income, included the following:
•A benefit of $82 million associated with a step up in tax basis for Swiss Cantonal purposes.
•A benefit of $82 million related to a change in tax rates on intangible assets.
•A cost of $47 million associated with the amortization of the previously established deferred tax assets from intercompany intellectual property transactions.
•A cost of $41 million associated with a change in the Company's permanent reinvestment assertion on certain historical earnings.
•A net cost of $26 million primarily associated with an intercompany sale of assets.
During fiscal year 2021, the net benefit from certain tax adjustments of $41 million, recognized in income tax provision (benefit) in the consolidated statement of income, included the following:
•A cost of $50 million associated with the amortization of the previously established deferred tax assets from intercompany intellectual property transactions.
•A net cost of $25 million associated with an internal restructuring and intercompany sale of assets.
•A benefit of $83 million related to the capitalization of certain research and development costs for U.S. income tax purposes and the establishment of a deferred tax asset at the U.S. federal statutory tax rate.
Effect of exchange rate changes on cash and cash equivalents (231)
Total debt at April 29, 2022 was $24.1 billion, as compared to $26.4 billion at April 30, 2021. The decrease in total debt was driven by fluctuations in exchange rates as it pertains to our Euro-denominated senior notes.
For more information on credit arrangements, see Note 6 of the consolidated financial statements in "Item 8. Financial Statements and Supplementary Data" in this Annual Report on Form 10-K.
Beyond the contractual obligations and other minimum commercial commitments outlined above, we have recurring cash requirements arising from the normal operation of our business that include capital expenditures, research and developments costs, and other operational costs.
We believe our balance sheet and liquidity provide us with flexibility, and our cash, cash equivalents, current investments, Credit Facility and related commercial paper programs as well as our ability to generate operating cash flows will satisfy our current and future contractual obligations and cash requirements. We regularly review our capital needs and consider various investing and financing alternatives to support our requirements.
Additional information regarding acquisitions is included in Note 3 of the consolidated financial statements in "Item 8. Financial Statements and Supplementary Data" within this Annual Report on Form 10-K.
Our critical accounting estimates include the following:
Information regarding new accounting pronouncements is included in Note 1 to the consolidated financial statements in "Item 8. Financial Statements and Supplementary Data" in this Annual Report on Form 10-K.
The summarized results of operations information for the fiscal year ended April 29, 2022 was as follows:
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