Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives (Tables)

9 Months Ended

Sep. 27, 2020

Restructuring and Related Activities [Abstract]

Schedule of Components of Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives

The following summarizes acquisitions and cost-reduction/productivity initiatives costs and credits:
	Three Months Ended				Nine Months Ended
(MILLIONS OF DOLLARS)	September 27, 2020		September 29, 2019		September 27, 2020		September 29, 2019
Restructuring charges/(credits):
Employee terminations	$	(15)	$	82	$	357	$	(86)
Asset impairments	22		3		45		3
Exit costs/(credits)	(11)		(1)		(9)		33
Restructuring charges/(credits)(a)	(4)		83		392		(50)
Transaction costs(b)	—		65		14		65
Integration costs and other(c)	7		217		29		281
Restructuring charges and certain acquisition-related costs	4		365		435		295
Net periodic benefit costs recorded in Other (income)/deductions––net	—		9		29		19
Additional depreciation––asset restructuring recorded in our condensed consolidated statements of income as follows(d):
Cost of sales	4		6		14		21
Selling, informational and administrative expenses	—		—		—		2
Research and development expenses	—		—		(3)		6
Total additional depreciation––asset restructuring	4		6		10		29
Implementation costs recorded in our condensed consolidated statements of income as follows(e):
Cost of sales	11		14		32		45
Selling, informational and administrative expenses	36		23		114		48
Research and development expenses	1		3		2		16
Total implementation costs	48		40		148		109
Total costs associated with acquisitions and cost-reduction/productivity initiatives	$	56	$	420	$	621	$	452

(a)In the first nine months of 2020, restructuring charges mainly represent employee termination costs associated with our Transforming to a More Focused Company cost-reduction program. In the third quarter of 2019, restructuring charges mainly represented employee termination costs associated with cost-reduction and productivity initiatives as well as our acquisition of Array. In the first nine months of 2019, restructuring credits mostly represented the reversal of certain accruals related to our acquisition of Wyeth upon the effective favorable settlement of an IRS audit for multiple tax years, partially offset by employee termination costs associated with cost-reduction and productivity initiatives, as well as our acquisition of Array. See Notes to Consolidated Financial Statements––Note 5D. Tax Matters: Tax Contingencies in our 2019 Financial Report.

The restructuring activities for 2020 are associated with the following:

•For the third quarter of 2020, Biopharma ($6 million charge); Upjohn ($3 million credit); and Other ($7 million credit).

•For the first nine months of 2020, Biopharma ($3 million credit); Upjohn ($10 million charge); and Other ($386 million charge).

The restructuring activities for 2019 are associated with the following:

•For the third quarter of 2019, Biopharma ($10 million charge); Upjohn ($6 million credit); and Other ($79 million charge).

•For the first nine months of 2019, Biopharma ($38 million credit); Upjohn ($27 million credit); and Other ($15 million charge). Restructuring costs identified as Other are for restructuring activities associated with corporate enabling functions, WRDM, GPD and other manufacturing and commercial operations, as applicable. For the first nine months of 2020, restructuring costs identified as Other primarily relate to corporate enabling functions.

(b)Transaction costs represent external costs for banking, legal, accounting and other similar services.

(c)Integration costs and other represent external, incremental costs directly related to integrating acquired businesses, such as expenditures for consulting and the integration of systems and processes, and certain other qualifying costs. In the third quarter and first nine months of 2020, integration costs and other were mostly related to our acquisition of Array. In the third quarter and first nine months of 2019, integration costs and other primarily included $157 million in payments to Array employees for the fair value of previously unvested stock options that was recognized as post-closing compensation expense. See Notes to Consolidated Financial Statements––Note 2A. Acquisitions, Divestitures, Equity-Method Investments and Assets and Liabilities Held for Sale, Licensing Arrangements and Research and Development and Collaborative Arrangements: Acquisitions in our 2019 Financial Report.

(d)Additional depreciation––asset restructuring represents the impact of changes in the estimated useful lives of assets involved in restructuring actions.

(e)Implementation costs represent external, incremental costs directly related to implementing our non-acquisition-related cost-reduction/productivity initiatives.

Schedule of Components of and Changes in Restructuring Accruals

The following summarizes the components and changes in restructuring accruals:
(MILLIONS OF DOLLARS)	Employee Termination Costs		Asset Impairment Charges		Exit Costs		Accrual
Balance, December 31, 2019(a)	$	887	$	—	$	46	$	933
Provision	357		45		(9)		392
Utilization and other(b)	(411)		(45)		(23)		(479)
Balance, September 27, 2020(c)	$	832	$	—	$	14	$	847

(a)Included in Other current liabilities ($714 million) and Other noncurrent liabilities ($219 million).

(b)Includes adjustments for foreign currency translation.

(c)Included in Other current liabilities ($607 million) and Other noncurrent liabilities ($240 million).