Medtronic 2016 Annual Report Download - page 25

Table of Contents
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We may experience higher costs to produce our products as a result of changes in prices for oil, gas and other commodities.
We use resins, other petroleum-based materials and pulp as raw materials in some of our products. Prices of oil and gas also
significantly affect our costs for freight and utilities. Oil, gas and pulp prices are volatile and may increase, resulting in higher
costs to produce and distribute our products. New laws or regulations adopted in response to climate change could also increase
energy costs and the costs of certain raw materials and components. Due to the highly competitive nature of the healthcare industry
and the cost-containment efforts of our customers and third-party payers, we may be unable to pass along cost increases through
higher prices. If we are unable to fully recover these costs through price increases or offset these increases through cost reductions,
we could experience lower margins and profitability and our business, results of operations, financial condition and cash flows
could be materially and adversely affected.
Economic and political instability around the world could adversely affect our revenues, financial condition or results of
operations.
There can be no assurance that economic and political instability around the world will not adversely affect our revenues, financial
condition or results of operations. Our customers and vendors may experience financial difficulties or be unable to borrow money
to fund their operations which may adversely impact their ability to purchase our products or to pay for our products on a timely
basis, if at all. As with our customers and vendors, these economic conditions make it more difficult for us to accurately forecast
and plan our future business activities. In addition, a significant amount of our trade receivables are with national health care
systems in many countries. Repayment of these receivables is dependent upon the political and financial stability of those countries.
In light of these global economic fluctuations, we continue to monitor the creditworthiness of customers located outside the U.S.
Failure to receive payment of all or a significant portion of these receivables could adversely affect our results of operations.
We are subject to a variety of market and financial risks due to our international operations that could adversely affect those
operations or our profitability and operating results.
Although our stock is traded on the New York Stock Exchange, we are a global company. Operations in countries outside of the
U.S., which account for approximately 43 percent of our net sales for the fiscal year ended April 29, 2016, are accompanied by
certain financial and other risks that would not be faced by a company operating purely within the U.S. We intend to continue to
pursue growth opportunities in sales outside the U.S., especially in emerging markets, which could expose us to greater risks
associated with international sales and operations. Our profitability and international operations are, and will continue to be, subject
to a number of risks and potential costs, including:
• fluctuations in currency exchange rates,
• healthcare reform legislation,
• multiple non-U.S. regulatory requirements that are subject to change and that could restrict our ability to
manufacture and sell our products,
• local product preferences and product requirements,
• longer-term receivables than are typical in the U.S.,
• trade protection measures and import or export licensing requirements,
• less intellectual property protection in some countries outside the U.S. than exists in the U.S.,
• different labor regulations and workforce instability,
• political instability,
• the potential payment of U.S. income taxes on earnings of certain controlled foreign subsidiaries subject
to U.S. taxation upon repatriation,
• the expiration and non-renewal of foreign tax rulings and/or grants,
• potentially negative consequences from changes in or interpretations of tax laws, and
• economic instability and inflation, recession or interest rate fluctuations.
There are recent legislative proposals to tax profits of U.S. affiliates which are earned abroad. While it is impossible for us to
predict whether these and other proposals will be implemented, or how they will ultimately impact us, they may materially impact
our results of operations if, for example, our profits earned abroad are subject to U.S. income tax, or we are otherwise disallowed
deductions as a result of these profits.
On June 23, 2016, the United Kingdom (U.K.) held a referendum in which voters approved an exit from the E.U., commonly
referred to as “Brexit”. As a result of the referendum, it is expected that the British government will begin negotiating the terms
of the U.K.’s future relationship with the E.U. Although it is unknown what those terms will be, it is possible that there will be
greater restrictions on imports and exports between the U.K. and E.U. countries and increased regulatory complexities. These
changes may adversely affect our operations and financial results.