Restructuring, Impairment and Related Charges

3 Months Ended

Jun. 30, 2020

Restructuring and Related Activities [Abstract]

Restructuring, Impairment and Related Charges

The Company recorded restructuring, impairment, and related charges of $56 million and $23 million during the three months ended June 30, 2020 and 2019, respectively. These charges are included under the caption, “Restructuring, impairment and related charges” in Operating expenses in the Condensed Consolidated Statements of Operations. In addition, charges related to restructuring initiatives are included under the caption “Cost of sales” in its Condensed Consolidated Statements of Operations and were not material for the three months ended June 30, 2020 and 2019.

Restructuring Initiatives

As previously announced on November 30, 2018, the Company relocated its corporate headquarters, effective April 1, 2019, from San Francisco, California to Irving, Texas to improve efficiency, collaboration, and cost competitiveness. The Company expects to record total charges of approximately $90 million to $125 million, of which $83 million of charges were recorded to date. Charges recorded in the three months ended June 30, 2020 and 2019 were not material. The estimated remaining charges primarily consist of lease and other exit-related costs, and employee-related expenses. The Company anticipates that the relocation will be complete by January 2021.

During the fourth quarter of 2019, the Company committed to certain programs to continue its operating model and cost optimization efforts. The Company continues to implement centralization of certain functions and outsourcing through an expanded arrangement with a third-party vendor to achieve operational efficiency. The programs also include reorganization and consolidation of business operations, related headcount reductions, the further closures of retail pharmacy stores in Europe, and closures of other facilities. The Company expects to incur total charges of approximately $290 million to $320 million for these programs, of which $245 million of charges were recorded to date. Charges recorded in the three months ended June 30, 2020 and 2019 were not material and primarily represented employee severance, accelerated depreciation expense, and project consulting fees. The Company anticipates these additional programs will be substantially completed by the end of 2021. The estimated remaining charges primarily consist of facility and other exit costs and employee-related costs.

During the first quarter of 2021, the Company committed to an initiative within the United Kingdom, which forms part of the Company’s European Pharmaceutical Solutions segment, to further drive transformational changes in technologies and business processes, operational efficiencies, and cost savings. The initiative includes reducing the number of retail pharmacy stores, decommissioning obsolete technologies and processes, reorganizing and consolidating certain business operations, and related headcount reductions. The Company expects to incur total charges of approximately $90 million to $110 million for this initiative, of which charges of $14 million, primarily related to employee severance and other employee-related costs, have been recorded in the three months ended June 30, 2020. The initiative is expected to be substantially complete by the end of 2021 and estimated remaining charges primarily consist of facility and other exit costs and employee-related costs.

Fiscal 2021

Restructuring, impairment and related charges during the three months ended June 30, 2020 consisted of the following:


	Three Months Ended June 30, 2020
(In millions)	U.S. Pharmaceutical and Specialty Solutions		European Pharmaceutical Solutions ⁽¹⁾		Medical-Surgical Solutions		Other		Corporate ⁽¹⁾		Total
Severance and employee-related costs, net	$	1	$	13	$	—	$	4	$	20	$	38
Exit and other-related costs ⁽²⁾	1		1		3		1		7		13
Asset impairments and accelerated depreciation	—		4		—		—		1		5
Total	$	2	$	18	$	3	$	5	$	28	$	56

(1)Primarily represents costs associated with the operating model and cost optimization efforts described above.

(2)Exit and other-related costs primarily consist of project consulting fees.

Fiscal 2020

Restructuring, impairment and related charges during the three months ended June 30, 2019 consisted of the following:


	Three Months Ended June 30, 2019
(In millions)	U.S. Pharmaceutical and Specialty Solutions ⁽¹⁾		European Pharmaceutical Solutions⁽¹⁾		Medical-Surgical Solutions ⁽²⁾		Other⁽²⁾		Corporate⁽³⁾		Total
Severance and employee-related costs, net	$	(1)	$	(1)	$	—	$	—	$	6	$	4
Exit and other-related costs ⁽⁴⁾	—		1		2		1		10		14
Asset impairments and accelerated depreciation	—		3		1		—		1		5
Total	$	(1)	$	3	$	3	$	1	$	17	$	23

(1)Represents costs associated with the operating model and cost optimization efforts described above.

(2)Represents costs associated with a growth initiative which included a reduction in workforce, facility consolidation, and store closures. These initiatives were substantially completed in the year ended March 31, 2020.

(3)Represents costs associated with the operating model cost optimization efforts and with the relocation of the Company’s corporate headquarters described above.

(4)Exit and other-related costs primarily include project consulting fees.

The following table summarizes the activity related to the restructuring liabilities associated with the Company’s restructuring initiatives for the three months ended June 30, 2020:


(In millions)	U.S. Pharmaceutical and Specialty Solutions		European Pharmaceutical Solutions		Medical-Surgical Solutions		Other		Corporate		Total
Balance, March 31, 2020 ⁽¹⁾	$	24	$	56	$	20	$	18	$	39	$	157
Restructuring, impairment and related charges	2		18		3		5		28		56
Non-cash charges	—		(4)		—		—		(1)		(5)
Cash payments	(7)		(3)		—		(5)		(16)		(31)
Other	—		(2)		(4)		—		(3)		(9)
Balance, June 30, 2020 ⁽²⁾	$	19	$	65	$	19	$	18	$	47	$	168

(1)As of March 31, 2020, the total reserve balance was $157 million, of which $118 million was recorded in Other accrued liabilities and $39 million was recorded in Other non-current liabilities.

(2)As of June 30, 2020, the total reserve balance was $168 million, of which $141 million was recorded in Other accrued liabilities and $27 million was recorded in Other non-current liabilities.