Restructuring

Enterprise Excellence

In the third quarter of fiscal year 2018, the Company announced its Enterprise Excellence restructuring program, which is expected to leverage the Company's global size and scale, as well as enhance the customer and employee experience, with a focus on three objectives: global operations, functional optimization, and commercial optimization. Primary activities of the restructuring program include integrating and enhancing global manufacturing and supply processes, systems and site presence, enhancing and leveraging global operating models across several enabling functions, and optimizing certain commercial processes, systems, and models.

The Company estimates that, in connection with its Enterprise Excellence restructuring program, it will recognize pre-tax exit and disposal costs and other costs associated with the restructuring program across all segments of approximately $1.6 billion to $1.8 billion, the majority of which are expected to be incurred by the end of fiscal year 2022. Approximately half of the estimated charges are related to employee termination benefits. The remaining restructuring charges are costs associated with the restructuring program, such as salaries for employees supporting the program and consulting expenses. These charges are recognized within restructuring charges, net, cost of products sold, and selling, general, and administrative expense in the consolidated statements of income. For the three and six months ended October 26, 2018, the Company recognized $75 million and $195 million in charges, respectively. Additionally, the Company incurred accrual adjustments of $4 million and $2 million for the three and six months ended October 26, 2018, respectively, related to employee termination benefits being more than initially estimated.

The following table summarizes the activity related to the Enterprise Excellence restructuring program for the six months ended October 26, 2018:



(in millions)	Employee Termination Benefits			Associated Costs⁽¹⁾			Asset Write-Downs⁽²⁾			Other Costs			Total
April 27, 2018	$	27		$	2		$	—		$	—		$	29
Charges	78			91			13			13			195
Cash payments	(69		)	(88		)	—			(4		)	(161		)
Settled non-cash	—			—			(13		)	—			(13		)
Accrual adjustments	2			—			—			—			2
October 26, 2018	$	38		$	5		$	—		$	9		$	52

(1)

Associated costs include costs incurred as a direct result of the restructuring program, such as salaries for employees supporting the program and consulting expenses. For the three and six months ended October 26, 2018, charges included $22 million and $37 million, respectively, recognized within cost of products sold and $31 million and $54 million, respectively, recognized within selling, general, and administrative expense in the consolidated statements of income.


(2)	Recognized within selling, general, and administrative expense in the consolidated statements of income.

Cost Synergies

The cost synergies program related to administrative office optimization, manufacturing and supply chain infrastructure, and certain general and administrative savings was achieved as part of the Covidien plc (Covidien) integration and completed in the third quarter of fiscal year 2018. Restructuring charges incurred throughout the life of the initiative affecting all segments were primarily related to employee termination costs and costs related to manufacturing and facility closures.

A summary of the restructuring accrual and related activity is presented below:



(in millions)	Employee Termination Benefits			Other Costs			Total
April 27, 2018	$	116		$	22		$	138
Cash payments	(28		)	(14		)	(42		)
Accrual adjustments	(7		)	—			(7		)
October 26, 2018	$	81		$	8		$	89

For the three and six months ended October 26, 2018, the Company recognized no charges and accrual adjustments of $2 million and $7 million, respectively. Accrual adjustments relate to certain employees identified for termination finding other positions within the Company, cancellations of employee terminations, and employee termination benefits being less than initially estimated.

For the three and six months ended October 27, 2017, the Company recognized $26 million and $45 million in charges, respectively, which were partially offset by accrual adjustments of $8 million and $13 million, respectively. Accrual adjustments relate to certain employees identified for termination finding other positions within the Company, cancellations of employee terminations, and employee termination benefits being less than initially estimated. For the three and six months ended October 27, 2017, charges included $7 million and $12 million, respectively, recognized within cost of products sold and $3 million and $4 million, respectively, recognized within selling, general and administrative expense.