Other assets impairments, restructuring and other items

3 Months Ended

Mar. 31, 2019

Other assets impairments, restructuring and other items

NOTE 14 – Other assets impairments, restructuring and other items:

	Three months ended March 31,
	2019			2018
	(U.S. $ in millions)
Impairments of long-lived tangible assets (1)	$	20		$	226
Contingent consideration		(71	)		8
Restructuring		32			247
Other		20			20
Total	$	1		$	501

(1)	Including impairments related to exit and disposal activities

Impairments

Impairments of property, plant and equipment for the first three months of 2019 were $20 million, consisting mainly of impairment of lease-related assets in North America.

As a result of Teva’s plant rationalization acceleration in connection with the two year restructuring plan announced in December, 2017, to the extent the Company changes its plans on any given asset and/or the assumptions underlying such plans, there may be additional impairments in the future.

Contingent consideration

In the three months ended March 31, 2019, Teva recorded $71 million of contingent consideration income, compared to $8 million expense in the three months ended March 31, 2018. The income in the first quarter of 2019 mainly related to the decrease in the expected royalty payments in connection with lenalidomide (generic equivalent of Revlimid

) which was part of the Actavis acquisition.

Restructuring

In the three months ended

March 31, 2019,

Teva recorded $32 million of restructuring expenses, compared to $247 million in the three months ended

March 31, 2018.

Since the announcement of its restructuring plan, Teva reduced its global headcount by approximately 10,400 full-time-equivalent employees.

The following tables provide the components of costs associated with Teva’s restructuring plan, including other costs associated with Teva’s restructuring plan and recorded under different items:

	Three months ended March 31,
	2019		2018
	(U.S. $ in millions)
Restructuring
Employee termination	$	20	$	228
Other		12		19
Total	$	32	$	247

The following table provides the components of and changes in the Company’s restructuring accruals:

	Employee termination costs			Other			Total
	(U.S. $ in millions )
Balance as of January 1, 2019	$	(204	)	$	(29	)	$	(233	)
Provision		(20	)		(12	)		(32	)
Utilization and other*		32			34			66
Balance as of March 31, 2019	$	(192	)	$	(7	)	$	(199	)

*	Includes adjustments for foreign currency translation.

Significant regulatory events

In July 2018, the FDA completed an inspection of Teva’s manufacturing plant in Davie, Florida in the United States, and issued a Form FDA-483 to the site. In October 2018, the FDA notified Teva that the inspection of the site is classified as “official action indicated” (OAI). On February 5, 2019, Teva received a warning letter from the FDA that contains four enumerated concerns related to production, quality control, and investigations at this site.

Teva is working diligently to remediate the FDA’s concerns

in a manner consistent with current good manufacturing practice (CGMP) requirements, and to address those concerns as quickly and as thoroughly as possible. If Teva is unable to remediate the warning letter findings to the FDA’s satisfaction, it may face additional consequences, including delays in FDA approval for future products from the site, financial implications due to loss of revenues, impairments, inventory write offs, customer penalties, idle capacity charges, costs of additional remediation and possible FDA enforcement action. Teva expects to generate approximately $240 million in revenues from this site

for the remainder of

2019, assuming remediation or enforcement does not cause any unscheduled slowdown or stoppage at the facility.

In July 2018, Teva announced the voluntary recall of valsartan and certain combination valsartan medicines in various countries due to the detection of trace amounts of a previously unknown impurity called NDMA found in valsartan API supplied to Teva by Zhejiang Huahai Pharmaceutical. Since July 2018, Teva has been actively engaged with regulatory agencies around the world in reviewing its valsartan and other sartan products for NDMA and other related impurities and, where necessary, has initiated additional voluntary recalls. The impact of this recall on Teva’s 2018 financial statements was $51 million, primarily related to inventory reserves.

Teva expects to continue to experience loss of revenues and profits in connection with this matter. In addition, multiple lawsuits have been filed in connection with this matter, for which litigation costs are currently being incurred. Teva may also incur additional customer penalties, impairments and litigation costs going forward.