Restructuring

3 Months Ended

Jul. 31, 2020

Restructuring and Related Activities [Abstract]

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 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 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 months ended July 31, 2020, the Company recognized charges of $79 million, and incurred accrual adjustments of $2 million related to contract terminations being settled for less than originally estimated. For the three months ended July 31, 2020, charges included $27 million recognized within cost of products sold and $47 million recognized within selling, general, and administrative expense in the consolidated statements of income.

For the three months ended July 26, 2019, the Company recognized charges of $136 million. Additionally, the Company incurred accrual adjustments of $12 million for the three months ended July 26, 2019 related to certain employees identified for termination finding other positions within Medtronic. For the three months ended July 26, 2019, charges included $35 million recognized within cost of products sold and $42 million recognized within selling, general, and administrative expense in the consolidated statements of income.

The following table summarizes the activity related to the Enterprise Excellence restructuring program for the three months ended July 31, 2020:


(in millions)	Employee Termination Benefits		Associated Costs⁽¹⁾		Other Costs		Total
April 24, 2020	$	89	$	19	$	4	$	112
Charges	6		73		—		79
Cash payments	(26)		(72)		(2)		(100)

Accrual adjustments	—		—		(2)		(2)
July 31, 2020	$	69	$	20	$	—	$	89

(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.

Simplification

In the first quarter of fiscal year 2021, the Company initiated the Simplification restructuring program, designed to make the Company a more nimble and competitive organization focused on accelerating innovation, enhancing the customer experience, driving revenue growth, and winning market share, while at the same time more efficiently and effectively leveraging the Enterprise scale. This new operating model will simplify the Company's organizational structure and accelerate decision-making and execution. Primary activities of the restructuring program will include reorganizing the Group structure to create highly focused, accountable, and empowered Operating Units (OUs), consolidating Operations at the Enterprise level, establishing Technology Development Centers in areas where the Company has deep core technology competencies to be leveraged by multiple OUs, and forming dedicated sales organizations that leverage the Company's scale but move with the same agility as smaller, local competitors.

The Company estimates that, in connection with its Simplification restructuring program, it will recognize pre-tax exit and disposal costs and other costs across all segments of approximately $400 million to $450 million, the majority of which are expected to be incurred by the end of fiscal year 2022. Approximately three quarters of the estimated charges are related to employee termination benefits. The remaining 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 months ended July 31, 2020, the Company recognized charges of $51 million, which included $1 million recognized within selling, general, and administrative expense in the consolidated statements of income.

The following table summarizes the activity related to the Simplification restructuring program for the three months ended July 31, 2020:


(in millions)	Employee Termination Benefits		Associated Costs⁽¹⁾		Total
April 24, 2020	$	—	$	—	$	—
Charges	50		1		51
Cash payments	—		(1)		(1)
July 31, 2020	$	50	$	—	$	50

(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.