Restructuring and Other Costs

6 Months Ended

Oct. 28, 2022

Restructuring and Related Activities [Abstract]

Enterprise Excellence

In the third quarter of fiscal year 2018, the Company announced its Enterprise Excellence restructuring program. Further program details are described in Note 4 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended April 29, 2022.

Since inception, the Company has incurred pre-tax exit and disposal costs and other costs, across all segments, of $1.7 billion in connection with the Enterprise Excellence program. In total, the Company estimates it will recognize approximately $1.8 billion of exit and disposal costs and other costs related to the program by the end of fiscal year 2023. The remaining charges are costs associated with the restructuring program, such as salaries and benefits for employees supporting the program, including program management and transition teams, and strategic and operational consulting services related to the three objectives of the program. 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 28, 2022, the Company recognized net charges of $53 million and $93 million, respectively, of which $19 million and $38 million, respectively, were recognized within cost of products sold and $27 million and $55 million, respectively, were recognized within selling, general, and administrative expense in the consolidated statements of income. For the three months and six months ended October 29, 2021, the Company recognized net charges of $62 million and $136 million, of which $31 million and $64 million, respectively, were recognized within cost of products sold and $27 million and $57 million, respectively, were recognized within selling, general, and administrative expense in the consolidated statements of income.

Simplification

In the first quarter of fiscal year 2021, the Company initiated the Simplification restructuring program. Further program details are described in Note 4 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended April 29, 2022.

Since inception, the Company has incurred pre-tax exit and disposal costs and other costs, across all segments, of $427 million in connection with the Simplification program. In total, the Company estimates it will recognize approximately $450 million of exit and disposal costs and other costs related to the Simplification program by the end of fiscal year 2023. 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 and six months ended October 28, 2022, the Company recognized net charges of $43 million and $78 million, respectively, of which $18 million and $31 million, respectively, were recognized within selling, general, and administrative expense in the consolidated statements of income. For the three and six months ended October 29, 2021, the Company recognized net charges of $18 million and $25

million, respectively, of which $9 million and $16 million, respectively, were recognized within selling, general, and administrative expense in the consolidated statements of income.

The following table summarizes the activity related to the restructuring programs above for the six months ended October 28, 2022:


(in millions)	Employee Termination Benefits		Associated Costs(1)		Other Costs		Total
April 29, 2022	$	81	$	27	$	1	$	110
Charges	50		126		4		180
Cash payments	(76)		(138)		(4)		(220)
Accrual adjustments(2)	(9)		—		—		(9)
October 28, 2022	$	45	$	15	$	1	$	61

(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.

(2) Accrual adjustments relate to certain employees identified for termination finding other positions within the Company.

Mechanical Circulatory Support (MCS)

In June 2021, the Company announced the decision to stop the distribution and sale of the Medtronic HVAD System in light of a growing body of observational clinical comparisons indicating a lower frequency of neurological adverse events and mortality with another circulatory support device available to patients compared to the HVAD system. In connection with this decision, the Company recorded charges of $726 million (MCS charges) within the Cardiovascular segment during the three months ended July 30, 2021, including $58 million recognized in costs of products sold and $668 million recognized within other operating (income) expense, net in the consolidated statement of income. The charges included $515 million of non-cash impairments and write-downs primarily related to $409 million of intangible asset impairments and $58 million of inventory write-downs. The Company also recorded charges of $211 million for commitments and obligations associated with the decision, which included charges for patient support obligations, restructuring, and other associated costs. During the fourth quarter of fiscal year 2022, the Company recorded additional charges of $155 million within other operating (income) expense, net primarily related to incremental commitments and obligations associated with the exit of the business. As of October 28, 2022, accruals were recorded in the consolidated balance sheet for these obligations, with $83 million reflected in other accrued expenses and $120 million recorded in other liabilities. Medtronic remains committed to serving the needs of the patients currently implanted with the HVAD system.