SPECIAL CHARGES

The Company recognizes certain transactions and events as special charges in its Condensed Consolidated Financial Statements. These charges (such as restructuring charges, impairment charges, certain legal settlements or product field action costs and litigation costs) result from facts and circumstances that vary in frequency and impact on the Company's results of operations.

Manufacturing and Supply Chain Optimization Plan

During 2014, the Company initiated the Manufacturing and Supply Chain Optimization Plan to leverage economies of scale, streamline distribution methods, drive process improvements through global synergies, balance plant utilization levels, centralize certain vendor relationships and reduce overall costs. During 2014, the Company incurred charges of $32 million related to severance and other termination benefits, fixed assets associated with information technology assets no longer expected to be utilized and distributor and other contract termination costs.

During the first quarter of 2015, the Company incurred additional charges of $8 million primarily related to severance and other termination benefits as well as other contract termination costs associated with the elimination of certain operational, quality and hardware development activities at a research and development facility and continued exit costs related to a facility closure in the United States. The Company currently expects to incur approximately $40 million during the remainder of 2015 to complete the plan, but may incur additional charges in future periods.

A summary of the activity related to the Manufacturing and Supply Chain Optimization Plan accrual is as follows (in millions):



	Employee Termination Costs			Inventory Charges			Fixed Asset Charges			Other Restructuring Costs			Total
Balance at December 28, 2013	$	—		$	—		$	—		$	—		$	—
Cost of sales special charges	7			—			—			—			7
Special charges	12			—			5			8			25
Non-cash charges used	—			—			(5		)	—			(5		)
Cash payments	(5		)	—			—			(2		)	(7		)
Balance at January 3, 2015	14			—			—			6			20
Cost of sales special charges	1			1			—			—			2
Special charges	3			—			—			3			6
Non-cash charges used	—			(1		)	—			—			(1		)
Cash payments	(5		)	—			—			(5		)	(10		)
Foreign exchange rate impact	—			—			—			(1		)	(1		)
Balance at April 4, 2015	$	13		$	—		$	—		$	3		$	16

2012 Business Realignment Plan

During 2012, the Company realigned 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 have been part of a comprehensive plan to accelerate the Company's growth, reduce costs, leverage economies of scale and increase investment in product development.

During 2014, the Company announced additional organizational changes including the combination of its Implantable Electronic Systems Division and Cardiovascular and Ablation Technologies Division, resulting in an integrated research and development (R&D) organization and a consolidation of manufacturing and supply chain operations worldwide. The integration was conducted in a phased approach during 2014. In connection with these actions, the Company incurred $108 million of special charges associated with the 2012 Business Realignment Plan. These charges primarily included severance and other termination benefits and other restructuring costs, including distributor and other contract termination costs, costs associated with the discontinuation of a clinical trial and planned exit costs related to a facility in Europe. Additionally, the Company recognized inventory and fixed asset write-offs related to a discontinued clinical trial and fixed asset write-offs associated with projects abandoned under the new realigned structure.

During the first quarter of 2015, the Company incurred additional charges of $5 million primarily related to severance and other termination benefits and other restructuring costs, including contract termination costs, moving expenses and other exit costs predominately associated with the facility closure in Europe. The Company currently expects to incur approximately $4 million during the remainder of 2015 to complete the plan.

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 28, 2013	$	54		$	—		$	—		$	33		$	87
Cost of sales special charges	8			8			13			1			30
Special charges	36			—			7			35			78
Non-cash charges used	—			(8		)	(20		)	—			(28		)
Cash payments	(69		)	—			—			(56		)	(125		)
Balance at January 3, 2015	26			—			—			12			38
Cost of sales special charges	1			1			—			—			2
Special charges	—			—			1			2			3
Non-cash charges used	—			(1		)	(1		)	—			(2		)
Cash payments	(6		)	—			—			—			(6		)
Foreign exchange rate impact	(2		)	—			—			—			(2		)
Balance at April 4, 2015	$	19		$	—		$	—		$	14		$	33

2011 Restructuring Plan

During 2011, the Company incurred special charges to realign certain activities in the Company's legacy Cardiac Rhythm Management business and sales and selling support organizations. The restructuring actions included phasing out Cardiac Rhythm Management manufacturing and R&D operations in a country in Europe, reductions in the Company's workforce and rationalizing product lines. The 2011 Restructuring Plan was completed in 2013 and the remaining accrual balance is not material.

Other Special Charges

Legal settlements: In connection with the March 2010 Securities Class Action Litigation, the Company recognized $10 million in insurance recoveries as a special benefit during the first quarter of 2015 (see Note 4).

Product field action costs and litigation costs: During the first quarter of 2015, the Company recognized $5 million of litigation charges for expected future probable and estimable legal costs associated with outstanding legal matters related to the Company's product field actions. Charges in excess of the amounts accrued are reasonably possible and depend on a number of factors, such as the type of claims received and the cost to defend. Partially offsetting this special charge, the Company recognized a $2 million benefit in cost of sales special charges for salvaged inventory related to certain ICDs that were identified during 2014 as having a potential battery anomaly.