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75732me_10K.indd 43 6/25/13 6:39 PM
Table of Contents
and geographies. For fiscal year 2012, the impact of these initiatives was partially offset by incremental bad debt expense in our
Diabetes business and in Italy.
Restructuring Charges, Net, Certain Litigation Charges, Net, and Acquisition-Related Items We believe that in order to
properly understand our short-term and long-term financial trends, investors may find it useful to consider the impact of restructuring
charges, net, certain litigation charges, net, and acquisition-related items. Restructuring charges, net, certain litigation charges,
net, and acquisition-related items recorded during fiscal years 2013, 2012, and 2011 were as follows:
Fiscal Year
(in millions) 2013 2012 2011
Restructuring charges, net(1) $ 182 $ 87 $ 270
Certain litigation charges, net 245 90 245
Acquisition-related items (49) 12 14
Total restructuring charges, net, certain litigation charges, net,
and acquisition-related items 378 189 529
Net tax impact of restructuring charges, net, certain litigation
charges, net, and acquisition-related items(1) (47) (56) (99)
Total restructuring charges, net, certain litigation charges, net,
and acquisition-related items, net of tax(1) $ 331 $ 133 $ 430
(1) For fiscal years 2013 and 2011, restructuring charges, net and the related tax impact within this table include the impact
of amounts recorded within cost of products sold in the consolidated statements of earnings related to the fiscal year 2013
initiative and fiscal year 2011 initiative, respectively.
Restructuring Charges, Net
Fiscal Year 2013 Initiative
In the fourth quarter of fiscal year 2013, we recorded a $192 million restructuring charge, which consisted of employee termination
costs of $150 million, asset write-downs of $13 million, contract termination costs of $18 million, and other related costs of $11
million. Of the $13 million of asset write-downs, $10 million related to inventory write-offs of discontinued product lines and
production-related asset impairments, and therefore, was recorded within costs of products sold in the consolidated statements of
earnings. The fiscal year 2013 initiative was designed to scale back our infrastructure in slower growing areas of our business,
while continuing to invest in geographies, businesses, and products where we anticipate faster growth. A number of factors have
contributed to ongoing challenging market dynamics, including increased pricing pressure, various governmental austerity
measures, and the U.S. medical device excise tax.
As of the end of the fourth quarter of fiscal year 2013, we identified approximately 2,000 positions for elimination to be achieved
through involuntary and voluntary separation. The fiscal year 2013 initiative is scheduled to be substantially complete by the end
of the fourth quarter of fiscal year 2014 and is expected to produce annualized operating savings of approximately $200 to $225
million. These savings will arise mostly from reduced compensation expense. In the first quarter of fiscal year 2014, we expect
to incur an additional restructuring charge of $25 to $35 million, primarily related to contract termination fees.
Fiscal Year 2012 Initiative
In the fourth quarter of fiscal year 2012, we recorded a $118 million restructuring charge, which consisted of employee termination
costs of $66 million, asset write-downs of $9 million, contract termination costs of $30 million, and other related costs of $13
million. The fiscal year 2012 initiative was designed to reduce general, administrative, and indirect distribution costs in certain
organizations within the Company while prioritizing investment in research and development, and sales and marketing in those
organizations within the Company where faster growth is anticipated, such as emerging markets and new technologies.
As of the end of the fourth quarter of fiscal year 2012, we identified approximately 1,000 positions for elimination to be achieved
through involuntary and voluntary separation. As of April 26, 2013, the fiscal year 2012 initiative was substantially complete and
is expected to produce annualized operating savings of approximately $100 to $125 million. These savings will arise mostly from
reduced compensation expense.
In the fourth quarter of fiscal year 2013, the Company recorded a $10 million reversal of excess restructuring reserves related to
the fiscal year 2012 initiative. This reversal was primarily a result of revisions to particular strategies and certain employees
identified for elimination finding other positions within the Company.
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