Medtronic 2011 Annual Report Download - page 35

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Medtronic, Inc.
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, we 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. For further discussion on the incremental
defined benefit pension and post-retirement related expenses,
see Note 14 to the consolidated financial statements. 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, we 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, we 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
and is expected to produce annualized operating savings of
approximately $125 million, mostly from reduced compensation
expense.
Global Realignment Initiative In the fourth quarter of fiscal year
2008, we began a global realignment initiative which focused on
shifting resources to those areas where we had the greatest
opportunities for growth and streamlining operations to drive
operating leverage. The global realignment initiative impacted
most businesses and certain corporate functions. Within our
CRDM business, we reduced research and development
infrastructure by closing a facility outside the U.S., reprioritizing
research and development projects to focus on the core business
and consolidating manufacturing operations to drive operating
leverage. Within our Spinal business, we reorganized and
consolidated certain activities where Medtronic’s existing
infrastructure, resources, and systems could be leveraged to
obtain greater operational synergies. The global realignment
initiative was also designed to further consolidate manufacturing
of CardioVascular products, streamline distribution of products in
select businesses, and reduce general and administrative costs in
our corporate functions.
In the first quarter of fiscal year 2009, as a continuation of
the global realignment initiative, we incurred $96 million of
incremental restructuring charges, which consisted of employee
termination costs of $91 million and asset write-downs of
$5 million. The majority of the expense recognized in the first
quarter of fiscal year 2009 related to the execution of our global
realignment initiative outside the U.S. This included the
realignment and elimination of certain personnel throughout
Europe and the emerging markets and the closure of an existing
facility in the Netherlands that was integrated into the U.S.
operations. The remainder of the expense was associated with
enhanced severance benefits provided to employees identified in
the fourth quarter of fiscal year 2008. These incremental costs
were not accrued in fiscal year 2008 because the enhanced
benefits had not yet been communicated to the impacted
employees.
In the fourth quarter of fiscal year 2009, we recorded a $7
million reversal of excess restructuring reserves related to the
global realignment initiative. This reversal was primarily a result
of favorable severance negotiations with certain employee
populations outside the U.S. as well as a higher than expected
percentage of employees identified for elimination finding
positions elsewhere within the Company.
In the first quarter of fiscal year 2010, we recorded an $8 million
reversal of excess restructuring reserves primarily as a result of
favorable severance negotiations as well as a higher than expected
percentage of employees identified for elimination finding
positions elsewhere in the Company. This $8 million reversal of
excess reserves was partially offset by a $5 million charge we
recorded in the first quarter of fiscal year 2010 related to the
further write-down of a non-inventory related asset resulting
from the continued decline in the international real estate market.
In connection with the global realignment initiative, as of t he
end of the first quarter of fiscal year 2009, we had identified
approximately 900 positions for elimination which were achieved
through both voluntary and involuntary separation. As of October
30, 2009, the global realignment initiative was substantially
complete and is expected to produce annualized operating
savings of approximately $96 million. These savings will arise
mostly from reduced compensation expense.
F
financial statements.