SEC Filings

10-Q
MEDTRONIC PLC filed this Form 10-Q on 12/04/2017
Entire Document
 


Other Costs and Expenses
 
Three months ended
 
Six months ended
(in millions)
October 27, 2017
 
October 28, 2016
 
October 27, 2017
 
October 28, 2016
Amortization of intangible assets
$
460

 
$
500

 
$
914

 
$
987

Restructuring charges, net
8

 
47

 
16

 
141

Acquisition-related items
7

 
28

 
51

 
80

Certain litigation charges

 

 

 
82

Divestiture-related items
67

 

 
114

 

Gain on sale of businesses
(697
)
 

 
(697
)
 

Special charge
80

 

 
80

 

Other expense, net
111

 
89

 
177

 
128

Interest expense, net
173

 
173

 
367

 
352

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. Amortization expense was $460 million and $914 million for the three and six months ended October 27, 2017, respectively, as compared to $500 million and $987 million for the three and six months ended October 28, 2016, respectively. The decrease in amortization expense was primarily attributable to the discontinuation of amortization on the definite-lived intangible assets classified as assets held for sale at April 28, 2017 and through the first quarter of fiscal year 2018 related to the divestiture of our Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency businesses. This divestiture was completed during the second quarter of fiscal year 2018.
Restructuring Charges We incur restructuring charges in connection with our cost-reduction and productivity initiatives or with acquisitions when we implement plans to restructure and integrate the acquired operations.
We began our restructuring program related to the acquisition of Covidien, the cost synergies initiative, in the fourth quarter of fiscal year 2015. We anticipate approximately $850 million in cost synergies to be achieved as a result of the Covidien acquisition through fiscal year 2018, including administrative office optimization, manufacturing and supply chain infrastructure, and certain general and administrative savings. Restructuring charges are primarily related to employee termination costs and costs related to manufacturing and facility closures. Although costs associated with the cost synergies initiative restructuring program are expected be finalized in fiscal year 2018, this initiative has created a catalyst for potential additional operating margin expansion programs. We are committed to areas of improvement that will deliver sustained productivity, including manufacturing consolidation, supply chain and sourcing, customer-facing operations, and enabling functions, such as human resources, finance, and legal operations.
Our restructuring reserve balances at October 27, 2017 and April 28, 2017 were $212 million and $291 million, respectively. During the three and six months ended October 27, 2017, we recognized restructuring charges of $26 million, and $45 million, respectively, which were partially offset by accrual adjustments of $8 million and $13 million, respectively. Accrual adjustments relate to certain employees identified for termination finding other positions within the Company and cancellations of employee terminations. For the three and six months ended October 27, 2017, restructuring charges included $7 million and $12 million, respectively, recognized within cost of products sold, and $3 million and $4 million, respectively, recognized within selling, general and administrative expense.
For the three and six months ended October 28, 2016, the Company recognized $47 million and $158 million in charges, respectively. The Company recognized no reversals of excess restructuring reserves for the three months ended October 28, 2016. As a result of certain employees identified for termination finding other positions within the Company, the Company recognized a $7 million reversal of excess restructuring reserves for the six months ended October 28, 2016. For the three months and six months ended October 28, 2016, charges included asset write-downs included $3 million and $7 million, respectively, related to property, plant, and equipment impairments, and $10 million for the six months ended October 28, 2016 related to inventory write-offs recognized within cost of products sold in the consolidated statements of income. 
For additional information about our restructuring program, see Note 6 to the current period's consolidated financial statements.

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