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.

During 2013, the Company incurred additional charges totaling $220 million related to the realignment plan initiated during 2012. Of the $220 million incurred, the Company recognized 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 (ASC Topic 712), inventory write-offs primarily associated with discontinued CATD product lines, fixed asset write-offs related to information technology assets no longer expected to be utilized as well as other restructuring costs. The other restructuring costs included a distributor and other contract termination costs, office consolidation costs, termination of a research agreement and other costs, all as part of the Company's continued integration efforts.

During the first quarter of 2014, the Company announced additional organizational changes including the combination of its IESD and CATD operating divisions, resulting in an integrated research and development organization and a consolidation of manufacturing and supply chain operations worldwide. The integration is being conducted in a phased approach throughout 2014. In connection with these actions, the Company incurred $34 million of special charges associated with the 2012 business realignment plan. These charges primarily included severance and other termination benefits as well as other restructuring costs primarily associated with distributor and other contract termination costs, and international sales office consolidation costs.

During the second quarter of 2014, the Company incurred $60 million of additional charges associated with the continued organizational changes announced in the first quarter of 2014. These charges primarily related to the termination of a clinical trial, costs associated with the planned exit of a facility in Europe and distributor and other contract termination costs. The 2012 Business Realignment Plan is expected to be completed in 2015.

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 29, 2012	$	58		$	—		$	—		$	8		$	66
Cost of sales special charges	—			30			—			5			35
Special charges	75			—			13			97			185
Non-cash charges used	—			(30		)	(13		)	(4		)	(47		)
Cash payments	(79		)	—			—			(73		)	(152		)
Balance at December 28, 2013	54			—			—			33			87
Cost of sales special charges	—			1			—			—			1
Special charges	12			—			1			20			33
Non-cash charges used	—			(1		)	(1		)	—			(2		)
Cash payments	(22		)	—			—			(29		)	(51		)
Balance at March 29, 2014	44			—			—			24			68
Cost of sales special charges	7			7			12			—			26
Special charges	23			—			2			9			34
Non-cash charges used	—			(7		)	(14		)	—			(21		)
Cash payments	(14		)	—			—			(12		)	(26		)
Balance at June 28, 2014	$	60		$	—		$	—		$	21		$	81

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. As of December 28, 2013, the Company had a remaining accrual balance consisting of employee termination and other restructuring costs associated with its 2011 restructuring plan of $15 million. During the first six months of 2014, $9 million was paid resulting in a remaining accrual balance of $6 million as of June 28, 2014 that is expected to be paid during 2014. Going forward, no additional charges are expected as the 2011 restructuring plan is now complete.

Other Special Charges

During the second quarter of 2014, the Company recognized a $27 million gain related to a favorable judgment and resolution in a patent infringement case. Additionally, the Company recognized $18 million of litigation charges for expected future probable and estimable legal costs associated with outstanding legal matters related to the Company's IESD field actions.

During the second quarter of 2013, the Company agreed to settle a dispute on licensed technology associated with certain CATD product lines. In connection with the settlement, which resolved all disputed claims, the Company recognized a $22 million settlement expense. Additionally, the Company recognized $13 million of impairments primarily associated with customer relationship intangible assets recognized in connection with legacy acquisitions involved in the distribution of the Company's products. Due to the changing dynamics of the U.S. healthcare market, specifically as it relates to hospital purchasing practices, the Company determined that these intangible assets had no future discrete cash flows and were fully impaired.