Restructuring Charges

3 Months Ended

Jul. 31, 2015

Cost Synergies Initiative

The cost synergies initiative, initially referred to as the fiscal year 2015 initiative, was the beginning of the Company's restructuring program primarily related to the acquisition of Covidien. This initiative is expected to contribute to the approximately $850 million in cost synergies expected to be achieved as a result of the Covidien acquisition through fiscal year 2018, including administrative office optimization, manufacturing and supply chain infrastructure, certain program cancellations, and certain general and administrative savings. Restructuring charges are expected to be incurred on a quarterly basis throughout fiscal year 2016 and in future fiscal years as cost synergy initiatives are finalized.

In the fourth quarter of fiscal year 2015, the Company recorded a $248 million restructuring charge, which consisted of employee termination costs of $213 million, asset write-downs of $28 million, contract termination costs of $6 million, and other related costs of $1 million. Of the $28 million of asset write-downs, $15 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 statements of income. In the first quarter of fiscal year 2016, the Company recorded a $67 million restructuring charge in connection with the cost synergies initiative, which consisted primarily of employee termination costs of $52 million and other related costs of $15 million. Restructuring accruals resulting from quarterly restructuring charges incurred within the cost synergies initiative are scheduled to be substantially complete within one year from the quarter the restructuring charge was initially incurred.

A summary of the activity related to the cost synergies initiative is presented below:



(in millions)	Employee Termination Costs			Other Costs			Total
Balance as of April 24, 2015	$	136		$	7		$	143
Restructuring charges	52			15			67
Payments/write-downs	(76		)	(7		)	(83		)
Balance as of July 31, 2015	$	112		$	15		$	127

Covidien Initiative

Covidien's pre-acquisition restructuring program is designed to improve legacy Covidien's cost structure. The program consists of reducing corporate expenses, expanding shared services, consolidating manufacturing locations, and optimizing distribution centers. The Covidien restructuring initiative is scheduled to be substantially complete by the end of fiscal year 2018.

At the Acquisition Date, the Company reserved $103 million in connection with the Covidien initiative, which consisted of employee termination costs of $76 million and other costs of $27 million. In the fourth quarter of fiscal year 2015, the Company recorded a reversal of excess restructuring reserves related to the Covidien initiative of $5 million. The reversal was primarily the result of certain employees identified for elimination finding other positions within the Company and revisions to particular strategies.

A summary of the activity related to the Covidien initiative is presented below:



(in millions)	Employee Termination Costs			Other Costs			Total
Balance as of April 24, 2015	$	61		$	17		$	78
Payments	(13		)	(5		)	(18		)
Balance as of July 31, 2015	$	48		$	12		$	60