Medtronic 2010 Annual Report Download - page 35

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Medtronic, Inc.
charges, certain litigation charges, net, IPR&D and certain
acquisition-related costs and certain tax adjustments. Special
charges (such as asset impairments or contributions to The
Medtronic Foundation), restructuring charges, certain litigation
charges, net, IPR&D and certain acquisition-related costs and
certain tax adjustments recorded during the previous three fiscal
years were as follows:
Fiscal Year
(in millions) 2010 2009 2008
Special charges:
Asset impairment charges $ — $ — $ 78
Medtronic Foundation contribution —100 —
Total special charges —100 78
Restructuring charges 57 123 45
Certain litigation charges, net 374 714 366
IPR&D and certain
acquisition-related costs 23 621 390
Total special charges, restructuring
charges, certain litigation charges,
net and IPR&D and certain
acquisition-related costs 454 1,558 879
Net tax impact of special charges,
restructuring charges, certain litigation
charges, net, IPR&D and certain
acquisition-related costs and certain
tax adjustments (80) (444) (137)
Total special charges, restructuring
charges, certain litigation charges, net,
IPR&D and certain acquisition-related
costs and certain tax adjustments,
net of tax $ 374 $ 1,114 $ 742
Special Charges In fiscal year 2010, there were no special charges.
In fiscal year 2009, consistent with our ongoing commitment to
improving the health of people and communities throughout the
world, we recorded a $100 million contribution to The Medtronic
Foundation, which is a related party non-profit organization. The
contribution to The Medtronic Foundation was paid in the fourth
quarter of fiscal year 2009.
In fiscal year 2008, we recorded a special charge related to the
impairment of intangible assets associated with our benign
prostatic hyperplasia, or enlarged prostate, product line purchased
in fiscal year 2002. The development of the market, relative to our
original assumptions, has changed as a result of the broad
acceptance of a new line of drugs to treat the symptoms of an
enlarged prostate. After analyzing the estimated future cash flows
utilizing this technology, based on the market development, we
determined that the carrying value of these intangible assets was
impaired and a write-down of $78 million was necessary.
Restructuring Charges
Fiscal Year 2009 Initiative In the fourth quarter of fiscal year 2009,
as part of our “One Medtronic” strategy, we recorded a $34 million
restructuring charge, which consisted of employee termination
costs of $29 million and asset write-downs of $5 million. The “One
Medtronic” strategy focused on streamlining the organization and
standardizing or centralizing certain functional activities which
were not unique to individual businesses. In connection with
these efforts to create “One Medtronic,” this initiative was
designed to streamline operations, by further consolidating
manufacturing and eliminating certain non-core product lines,
and to further align resources around our 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 consolidated 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 we incurred $72 million of incremental
restructuring charges, which consisted of employee termination
costs of $62 million and asset write-downs of $10 million. 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. Included in the $62 million restructuring
charge 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
expense, see Note 15 to the consolidated financial statements.
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 to be achieved
through early retirement packages offered to employees, voluntary
separation and involuntary separation. Of these 1,500 positions,
approximately 1,400 positions had been eliminated as of April 30,
2010. The fiscal year 2009 initiative is scheduled to be substantially