Medtronic 2016 Annual Report Download - page 124

Table of Contents
Medtronic plc
Notes to Consolidated Financial Statements (Continued)
121
Environmental Proceedings
The Company, through the acquisition of Covidien, is involved in various stages of investigation and cleanup related to
environmental remediation matters at a number of sites. These projects relate to a variety of activities, including removal of solvents,
metals and other hazardous substances from soil and groundwater. The ultimate cost of site cleanup and timing of future cash flows
is difficult to predict given uncertainties regarding the extent of the required cleanup, the interpretation of applicable laws and
regulations, and alternative cleanup methods.
The Company is a successor to a company which owned and operated a chemical manufacturing facility in Orrington, Maine from
1967 until 1982, and is responsible for the costs of completing an environmental site investigation as required by the Maine
Department of Environmental Protection (MDEP). MDEP served a compliance order on Mallinckrodt LLC and U.S. Surgical
Corporation in December 2008. The compliance order included a directive to remove a significant volume of soils at the site. On
December 19, 2008, Covidien filed an appeal with the Maine Board of Environmental Protection (Maine Board) to challenge the
terms of the compliance order. A hearing before the Maine Board began on January 25, 2010 and concluded on February 4, 2010.
On August 19, 2010, the Maine Board modified the MDEP order and issued a final order requiring removal of two landfills, capping
of the remaining three landfills, installation of a groundwater extraction system and long-term monitoring of the site and the three
remaining landfills.
On April 3, 2014, the Maine Supreme Judicial Court affirmed the Maine Board’s compliance order. The Company has proceeded
with implementation of the investigation and remediation at the site in accordance with the MDEP order as modified by the Maine
Board order.
The Company has also been involved in a lawsuit filed in the U.S. District Court for the District of Maine by the Natural Resources
Defense Council and the Maine People’s Alliance. Plaintiffs sought an injunction requiring Covidien to conduct extensive studies
of mercury contamination of the Penobscot River and Bay and options for remediating such contamination, and to perform
appropriate remedial activities, if necessary.
On July 29, 2002, following a March 2002 trial, the District Court entered an opinion and order which held that conditions in the
Penobscot River and Bay may pose an imminent and substantial endangerment and that Covidien was liable for the cost of
performing a study of the river and bay. The District Court subsequently appointed an independent study panel to oversee the study
and ordered Covidien to pay costs associated with the study. A report issued by the study panel contains recommendations for a
variety of potential remedial options which could be implemented individually or in a variety of combinations, and included
preliminary cost estimates for a variety of potential remedial options, which the report describes as “very rough estimates of cost,”
ranging from $25 million to $235 million. The report indicates that these costs are subject to uncertainties, and that before any
remedial option is implemented, further engineering studies and engineering design work are necessary to determine the feasibility
of the proposed remedial options. In June of 2014, a trial was held to determine if remediation was necessary and feasible, and on
September 2, 2015, the District Court issued an order concluding that further engineering study and engineering design work is
appropriate to determine the nature and extent of remediation in the Penobscot River and Bay. In January of 2016, the Court
appointed an engineering firm to conduct the next phase of the study. The study is targeted for completion late 2017.
The Company's accrued expenses for environmental proceedings are included within accrued certain litigation charges in other
accrued expenses and other long-term liabilities on the consolidated balance sheets as discussed above.
Government Matters
Medtronic has received subpoenas or document requests from the Attorneys General in Massachusetts, California, Oregon, Illinois,
and Washington seeking information regarding sales, marketing, clinical, and other information relating to the INFUSE bone graft
product. The Company has not recorded an expense related to damages in connection with these matters, because any potential
loss is not currently probable or reasonably estimable under U.S. GAAP. Additionally, the Company cannot reasonably estimate
the range of loss, if any, that may result from these matters.
On May 2, 2011, the U.S. Attorney’s Office for the District of Massachusetts issued a subpoena to ev3, a subsidiary of the Company,
requesting production of documents relating to sales and marketing and other issues in connection with several neurovascular
products. The matters under investigation relate to activities prior to Covidien's acquisition of ev3 in 2010. ev3 complied as required
with the subpoena and cooperated with the investigation. In the third quarter of fiscal year 2016, the Company accrued expenses
in connection with this matter, which are included within accrued certain litigation charges in other accrued expenses and other
long-term liabilities on the consolidated balance sheets as discussed above.