Medtronic 2012 Annual Report Download - page 91

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Fiscal Year 2011 Initiative
In the fourth quarter of fiscal year 2011, the Company recorded a $272 million restructuring charge
(including $2 million of restructuring charges related to the Physio-Control business presented as divestiture-
related costs within discontinued operations), which consisted of employee termination costs of $177 million,
asset write-downs of $24 million, contract termination fees of $45 million, and other related costs of
$26 million. The fiscal year 2011 initiative was designed to restructure the business to align its cost structure
to current market conditions and to continue to position the Company for long-term sustainable growth in
emerging markets and new technologies. 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 15. 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 was a $19 million intangible asset impairment related to the discontinuance of a
product line within the CardioVascular business.
In the fourth quarter of fiscal year 2012, the Company recorded a $31 million reversal of excess
restructuring reserves related to the fiscal year 2011 initiative. This reversal was primarily a result of certain
employees identified for elimination finding positions elsewhere within the Company, favorable severance
negotiations outside the U.S., and more favorable than expected outcomes in the sub-leasing of previously
vacated properties.
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 net positions (including 55 net positions at Physio-Control)
for elimination which were achieved through voluntary early retirement packages, voluntary separation,
and involuntary separation. As of April 27, 2012, the fiscal year 2011 initiative was substantially complete.
A summary of the activity (including Physio-Control) related to the fiscal year 2011 initiative is
presented below:
Fiscal Year 2011 Initiative
____________________________________________________________
Employee
Termination Asset Other
(in millions) Costs Write-downs 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
Payments/write-downs . . . . . . . . . . . . . . . . . . . . . (134) – (35) (169)
Reversal of excess accrual . . . . . . . . . . . . . . . . . . (23) – (8) (31)
____________ ____________ ____________ ____________
Balance as of April 27, 2012 . . . . . . . . . . . . . . . . $ –$ –$ 4$ 4
____________ ____________ ____________ ____________
____________ ____________ ____________ ____________
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.
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
74
Medtronic, Inc.
Notes to Consolidated Financial Statements (Continued)