SPECIAL CHARGES

The Company recognizes certain transactions and events as special charges in its consolidated financial statements. These charges (such as restructuring charges, impairment charges and certain settlement or litigation charges) result from facts and circumstances that vary in frequency and impact on the Company's results of operations. In order to enhance segment comparability and reflect management's focus on the ongoing operations of the Company, special charges are not reflected in the individual reportable segments operating results.

2012 Business Realignment Plan

During 2012, the Company incurred charges of $185 million resulting from the realignment of its product divisions into two new operating divisions: the Implantable Electronic Systems Division (combining its legacy Cardiac Rhythm Management and Neuromodulation product divisions) and the Cardiovascular and Ablation Technologies Division (combining its legacy Cardiovascular and Atrial Fibrillation product divisions). In addition, the Company centralized certain support functions, including information technology, human resources, legal, business development and certain marketing functions. The organizational changes are part of a comprehensive plan to accelerate the Company's growth, reduce costs, leverage economies of scale and increase investment in product development. In connection with the realignment, the Company recognized $109 million of severance costs and other termination benefits after management determined that such severance and benefit costs were probable and estimable, in accordance with ASC Topic 712, Nonretirement Postemployment Benefits. The 2012 business realignment plan reduced the Company's workforce by approximately 5%. The Company also recognized $17 million of inventory write-offs associated with discontinued CATD product lines and $41 million of accelerated depreciation charges and fixed asset write-offs, primarily associated with information technology assets no longer expected to be utilized or with a limited remaining useful life. Additionally, the Company recognized $18 million of other restructuring costs, which included $7 million of contract termination costs and $11 million of other costs.

During the first quarter of 2013, the Company incurred $34 million of additional special charges associated with the 2012 business realignment plan. Of the $34 million in additional special charges, the Company recognized $10 million of severance and other termination benefits after management determined that such costs were probable and estimable. The Company also recognized $18 million of inventory write-offs associated with discontinued CATD product lines, $2 million of fixed asset write-offs and $4 million of other restructuring costs, all as part of the Company's continued integration efforts.

A summary of the activity related to the 2012 business realignment plan accrual is as follows (in millions):



	Employee Termination Costs			Inventory Charges			Fixed Asset Charges			Other Restructuring Costs			Total
Balance at December 31, 2011	$	—		$	—		$	—		$	—		$	—
Cost of sales special charges	5			17			—			2			24
Special charges	104			—			41			16			161
Non-cash charges used	—			(17		)	(41		)	(3		)	(61		)
Cash payments	(52		)	—			—			(7		)	(59		)
Foreign exchange rate impact	1			—			—			—			1
Balance at December 29, 2012	58			—			—			8			66
Cost of sales special charges	—			18			—			—			18
Special charges	10			—			2			4			16
Non-cash charges used	—			(18		)	(2		)	—			(20		)
Cash payments	(32		)	—			—			(3		)	(35		)
Foreign exchange rate impact	(1		)	—			—			—			(1		)
Balance at March 30, 2013	$	35		$	—		$	—		$	9		$	44

2011 Restructuring Plan

During 2011, the Company announced a restructuring plan to streamline certain activities in the Company's legacy cardiac rhythm management business and sales and selling support organizations. Specifically, the restructuring actions included phasing out cardiac rhythm management manufacturing and research and development (R&D) operations in Sweden, reductions in the Company's workforce and rationalizing product lines. During 2011, the Company incurred charges totaling $162 million related to the 2011 restructuring plan. During 2012, the Company incurred additional charges totaling $102 million related to the 2011 restructuring plan. The Company recognized severance costs and other termination benefits of $38 million for an additional 100 employees after management determined that such severance and benefit costs were probable and estimable, in accordance with ASC Topic 712, Nonretirement Postemployment Benefits. The Company also recognized $13 million of inventory obsolescence charges primarily related with the rationalization of product lines in its IESD segment. Additionally, the Company recognized $51 million of other restructuring charges, which included $37 million of restructuring related charges associated with the Company's legacy cardiac rhythm management business and sales and selling support organizations (of which $13 million primarily related to idle facility costs in Sweden). The remaining charges included $8 million of contract termination costs and $6 million of other costs.

During the first quarter of 2013, the Company recognized an additional $9 million of restructuring charges associated with the 2011 restructuring plan. Of the $9 million incurred, $2 million related to severance costs and other termination benefits, and $7 million related to other restructuring costs, primarily associated with idle facility costs.

A summary of the activity related to the 2011 restructuring plan accrual is as follows (in millions):



	Employee Termination Costs			Inventory Charges			Other Restructuring Costs			Total
Balance at December 31, 2011	$	54		$	—		$	18		$	72
Cost of sales special charges	11			13			20			44
Special charges	27			—			31			58
Non-cash charges used	—			(13		)	(4		)	(17		)
Cash payments	(68		)	—			(47		)	(115		)
Foreign exchange rate impact	1			—			(1		)	—
Balance at December 29, 2012	25			—			17			42
Special charges	2			—			7			9
Cash payments	(13		)	—			(6		)	(19		)
Balance March 30, 2013	$	14		$	—		$	18		$	32

Other Special Charges

During the first quarter of 2012, the Company agreed to settle a dispute on licensed technology for the Company's Angio-Seal™ vascular closure devices. In connection with this settlement, which resolved all disputed claims and included a fully-paid perpetual license, the Company recognized a $28 million settlement expense which it classified as a special charge and also recognized a $12 million licensed technology intangible asset to be amortized over the technology's remaining patent life.