SEC Filings

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


Acquisition-Related Items Acquisition-related items includes expenses incurred in connection with the integration of Covidien, our $50.0 billion acquisition completed in the fourth quarter of fiscal year 2015, expenses incurred in connection with business acquisitions, and changes in fair value of contingent consideration. During the three and six months ended October 27, 2017, we recognized acquisition-related items expense of $18 million and $71 million, respectively, including $11 million and $20 million, respectively, recognized within cost of products sold in the consolidated statements of income. For the three and six months ended October 27, 2017, acquisition-related items expense includes $44 million and $90 million, respectively, of costs associated with the integration of Covidien manufacturing, distribution, and administrative facilities as well as IT system implementation, partially offset by changes in fair value of contingent consideration as a result of revised revenue forecasts and the timing of anticipated regulatory payments.
During the three and six months ended October 28, 2016, we recognized acquisition-related items expense of $28 million and $80 million, respectively. For the three and six months ended October 28, 2016, acquisition-related items expense includes $59 million and $102 million, respectively, of costs associated with the integration of Covidien manufacturing, distribution, and administrative facilities as well as IT system implementation and benefits harmonization, and $9 million and $16 million, respectively, of accelerated and incremental stock compensation expense, partially offset by changes in fair value of contingent consideration as a result of revised revenue forecasts and the timing of anticipated regulatory payments.
Certain Litigation Charges We classify litigation charges and gains related to significant legal proceedings as certain litigation charges. During the three and six months ended October 27, 2017, there were no certain litigation charges. During the three months ended October 28, 2016, there were no certain litigation charges. During the six months ended October 28, 2016, we recognized $82 million of litigation charges related to probable and estimable damages.
Divestiture-Related Items Divestiture-related items includes expenses incurred in connection with the divestiture of the Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency businesses. During the three months ended October 27, 2017, we recognized divestiture-related items expense of $67 million primarily comprised of expenses incurred for professional services, including banker fees and legal, tax, and advisory fees. During the six months ended October 27, 2017, we recognized divestiture-related items expense of $114 million, primarily comprised of expenses incurred for professional services, including banker fees and legal, tax, and advisory fees, as well as $16 million of accelerated stock compensation expense related to the acceleration of the vesting period for employees that transferred with the divestiture. There were no divestiture-related items expenses for the three or six months ended October 28, 2016.
Gain on Sale of Businesses We recognized a pre-tax gain of $697 million on the sale of the Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency businesses during the three and six months ended October 27, 2017. There were no sales of businesses during the three or six months ended October 28, 2016.
Special Charge During the three and six months ended October 27, 2017, continuing our commitment to improve the health of people and communities throughout the world, we made an $80 million commitment to fund the Medtronic Foundation. During the three and six months ended October 28, 2016, we did not recognize a special charge. 
Other Expense, Net Other expense, net includes royalty income and expense, realized equity security gains and losses, currency transaction and derivative gains and losses, impairment charges on equity securities, and Puerto Rico excise tax. For the three and six months ended October 27, 2017, other expense, net was $111 million and $177 million, respectively as compared to $89 million and $128 million for the three and six months ended October 28, 2016, respectively. The increase was partially attributable to $15 million of humanitarian aid provided to our employees impacted by Hurricane Maria during the current quarter. The increase was also driven by our remeasurement and hedging programs, which, combined, were a $32 million and $37 million loss for the three and six months ended October 27, 2017, respectively, as compared to a $20 million and $16 million loss for the three and six months ended October 28, 2016, respectively.
Interest Expense, Net Interest expense, net includes interest earned on our cash, cash equivalents and investments, interest incurred on our outstanding borrowings, amortization of debt issuance costs and debt premiums or discounts, amortization of gains or losses on terminated or de-designated interest rate derivative instruments, and ineffectiveness on interest rate derivative instruments. For the three and six months ended October 27, 2017, interest expense, net was $173 million and $367 million, respectively, as compared to $173 million and $352 million for the three and six months ended October 28, 2016, respectively. The increase in interest expense, net during the six months ended October 27, 2017 was primarily driven by modestly higher average interest rates on total debt obligations outstanding as compared to the corresponding period in the prior fiscal year.

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