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59
Medtronic, Inc.
while continuing to invest in geographies, businesses, and
products where faster growth is anticipated, such as emerging
markets and new technologies. This initiative impacted most
businesses and certain corporate functions. Included in the $177
million of employee termination costs were severance and the
associated costs of continued medical benefits and outplacement
services, as well as $15 million of incremental defined benefit
pension and post-retirement related expenses for employees that
accepted voluntary early retirement packages. These costs are not
included in the table summarizing the restructuring costs below
because they are associated with costs that are accounted for
under the pension and post-retirement rules. For further
discussion on the incremental defined benefit pension and post-
retirement related expenses, see Note 14. Of the $24 million of
asset write-downs, $11 million related to inventory write-offs
of discontinued product lines and production-related asset
impairments and therefore was recorded within cost of products
sold in the consolidated statement of earnings. Additionally,
included in the other related costs is a $19 million intangible asset
impairment related to the discontinuance of a product line within
the CardioVascular business.
In connection with the fiscal year 2011 initiative, as of the end
of the fourth quarter of fiscal year 2011, the Company had
identified approximately 2,100 positions for elimination to be
achieved through voluntary early retirement packages offered to
employees, voluntary separation, and involuntary separation. Of
the 2,100 positions identified, approximately 120 positions have
been eliminated as of April 29, 2011. The fiscal year 2011 initiative
is scheduled to be substantially complete by the end of the fourth
quarter of fiscal year 2012.
A summary of the activity related to the fiscal year 2011
initiative is presented below:
Fiscal Year 2011 Initiative
(in millions)
Employee
Termination
Costs
Asset
Write-
downs
Other
Costs Total
Balance as of April 30, 2010 $ — $ — $ — $ —
Restructuring charges 162 24 71 257
Payments/write-downs (5) (24) (24) (53)
Balance as of April 29, 2011 $157 $ — $ 47 $204
Fiscal Year 2009 Initiative
In the fourth quarter of fiscal year 2009, the Company recorded a
$34 million restructuring charge, which consisted of employee
termination costs of $29 million and asset write-downs of $5
million. The fiscal year 2009 initiative focused on streamlining the
organization and standardizing or centralizing certain functional
activities which were not unique to individual businesses. This
initiative was designed to streamline operations, by further
consolidating manufacturing and eliminating certain non-core
product lines, and to further align resources around the
Company’s higher growth opportunities. This initiative impacted
most businesses and certain corporate functions. Of the $5 million
of asset write-downs, $3 million related to inventory write-offs
and production-related asset impairments and therefore was
recorded within cost of products sold in the c
onsolidated
statement of earnings. The employee termination costs of $29
million consisted of severance and the associated costs of
continued medical benefits and outplacement services.
As a continuation of the fiscal year 2009 initiative, in the first
quarter of fiscal year 2010, the Company incurred $72 million of
incremental restructuring charges, which consisted of employee
termination costs of $62 million and asset write-downs of $10
million. Included in the $62 million of employee termination costs
was $9 million of incremental defined benefit pension and post-
retirement related expenses for those employees who accepted
early retirement packages. These costs are not included in the
table summarizing restructuring costs below because they are
associated with costs that are accounted for under the pension
and post-retirement rules. For further discussion on the
incremental defined benefit pension and post-retirement related
expenses, see Note 14. Of the $10 million of asset write-downs,
$7 million related to inventory write-offs and production-related
asset impairments and therefore was recorded within cost of
products sold in the consolidated statement of earnings.
In the fourth quarter of fiscal year 2010, the Company recorded
a $12 million reversal of excess restructuring reserves related to
the fiscal year 2009 initiative. This reversal was primarily a result
of a higher than expected percentage of employees identified for
elimination finding positions elsewhere within the Company.
In connection with the fiscal year 2009 initiative, as of the end
of the first quarter of fiscal year 2010, the Company had identified
approximately 1,500 positions for elimination which were achieved
through early retirement packages offered to employees,
voluntary separation, and involuntary separation. As of July 30,
2010, the fiscal year 2009 initiative was substantially complete.