RESTRUCTURING-RELATED ACTIVITIES

On an on-going basis, we monitor the dynamics of the economy, the healthcare industry, and the markets in which we compete; and we continue to assess opportunities for improved operational effectiveness and efficiency, and better alignment of expenses with revenues, while preserving our ability to make the investments in research and development projects, capital, our people and other programs that we believe are important to drive our growth. As a result of these assessments, we have undertaken various restructuring initiatives in order to enhance our growth potential and position us for long-term success. These initiatives are described below.

2014 Restructuring Plan

On October 22, 2013, our Board of Directors approved, and we committed to, a restructuring initiative (the 2014 Restructuring plan). The 2014 Restructuring plan is intended to build on the progress we have made to address financial pressures in a changing global marketplace, further strengthen our operational effectiveness and efficiency and support new growth investments. Key activities under the plan include continued implementation of our ongoing Plant Network Optimization (PNO) strategy, continued focus on driving operational efficiencies and ongoing business and commercial model changes. The PNO strategy is intended to simplify our manufacturing plant structure by transferring certain production lines among facilities. Other activities involve rationalizing organizational reporting structures to streamline various functions, eliminate bureaucracy, increase productivity and better align resources to business strategies and marketplace dynamics. These activities were initiated in the fourth quarter of 2013 and are expected to be substantially completed by the end of 2015.

We estimate that the implementation of the 2014 Restructuring plan will result in total pre-tax charges of approximately $250 million to $300 million, and approximately $235 million to $285 million of these charges are expected to result in future cash outlays, of which we have made payments of $93 million to date. We have recorded related costs of $142 million since the inception of the plan, and are recording a portion of these expenses as restructuring charges and the remaining portion through other lines within our consolidated statement of operations. The following table provides a summary of our estimates of costs associated with the 2014 Restructuring plan by major type of cost:



Type of cost	Total estimated amount expected to be incurred
Restructuring charges:
Termination benefits	$115 million to $135 million
Other (1)	$25 million to $35 million
Restructuring-related expenses:
Other (2)	$110 million to $130 million
	$250 million to $300 million

(1) Consists primarily of consultant fees and costs associated with contractual cancellations.

(2) Comprised of other costs directly related to the 2014 Restructuring plan, including program management, accelerated depreciation, and costs to transfer product lines among facilities.

2011 Restructuring Plan

On July 26, 2011, our Board of Directors approved, and we committed to, a restructuring initiative (the 2011 Restructuring plan) designed to strengthen operational effectiveness and efficiencies, increase competitiveness and support new investments, thereby increasing shareholder value. Key activities under the 2011 Restructuring plan included standardizing and automating certain processes and activities; relocating select administrative and functional activities; rationalizing organizational reporting structures; leveraging preferred vendors; and other efforts to eliminate inefficiency. Among these efforts, we expanded our ability to deliver best-in-class global shared services for certain functions and divisions at several locations in emerging markets. This action was intended to enable us to grow our global commercial presence in key geographies and take advantage of many cost-reducing and productivity-enhancing opportunities. In addition, we undertook efforts to streamline various corporate functions, eliminate bureaucracy, increase productivity and better align corporate resources to our key business strategies. On January 25, 2013, our Board of Directors approved, and we committed to, an expansion of the 2011 Restructuring plan (the Expansion). The Expansion was intended to further strengthen our operational effectiveness and efficiencies and support new investments. Activities under the 2011 Restructuring plan were initiated in the third quarter of 2011 and all activities, including those related to the Expansion, were substantially completed by the end of 2013.

The 2011 Restructuring plan, including the Expansion, is estimated to result in total pre-tax charges of approximately $289 million to $292 million, and approximately $287 million to $291 million of these charges are expected to result in cash outlays, of which we have made payments of $287 million to date. We have recorded related costs of $289 million since the inception of the plan, and recorded a portion of these expenses as restructuring charges and the remaining portion through other lines within our consolidated statements of operations.

The following provides a summary of our expected total costs associated with the 2011 Restructuring plan, including the Expansion, by major type of cost:



Type of cost	Total estimated amount expected to be incurred
Restructuring charges:
Termination benefits	$138 million to $141 million
Other (1)	$112 million
Restructuring-related expenses:
Other (2)	$39 million
	$289 million to $292 million


(1)	Includes primarily consulting fees, net fixed asset write-offs and costs associated with contractual cancellations.


(2)	Comprised of other costs directly related to the 2011 Restructuring plan, including the Expansion, such as program management, accelerated depreciation, retention and infrastructure-related costs.

2010 Restructuring Plan

On February 6, 2010, our Board of Directors approved, and we committed to, a series of management changes and restructuring initiatives (the 2010 Restructuring plan) designed to focus our business, drive innovation, accelerate profitable revenue growth and increase both accountability and shareholder value. Key activities under the plan included the restructuring of certain of our businesses and corporate functions; the re-alignment of our international structure to reduce our administrative costs and invest in expansion opportunities including significant investments in emerging markets; and the re-prioritization and diversification of our product portfolio. Activities under the 2010 Restructuring plan were initiated in the first quarter of 2010 and were complete by the end of 2012.

The execution of the 2010 Restructuring plan resulted in total pre-tax charges of $160 million, and required cash outlays of $145 million. We have recorded a portion of these expenses as restructuring charges and the remaining portion through other lines within our consolidated statements of operations.

The following provides a summary of our costs associated with the 2010 Restructuring plan by major type of cost:



Type of Cost	Total amount incurred
Restructuring charges:
Termination benefits	$90 million
Fixed asset write-offs	$11 million
Other (1)	$51 million
Restructuring-related expenses:
Other (2)	$8 million
	$160 million


(1)	Includes primarily consulting fees and costs associated with contractual cancellations.


(2)	Comprised of other costs directly related to the 2010 Restructuring plan, including accelerated depreciation and infrastructure-related costs.

Plant Network Optimization (PNO) Program

In January 2009, our Board of Directors approved, and we committed to, a PNO program, intended to simplify our manufacturing plant structure by transferring certain production lines among facilities and by closing certain other facilities. The program was intended to improve our overall gross profit margins. Activities under the PNO program were initiated in the first quarter of 2009 and were substantially completed during 2012.

The Plant Network Optimization program resulted in total pre-tax charges of $126 million, and resulted in cash outlays of $103 million. We have recorded a portion of these expenses as restructuring charges and the remaining portion through cost of products sold within our consolidated statements of operations.

The following provides a summary of our costs associated with the Plant Network Optimization program by major type of cost:



Type of cost	Total amount incurred
Restructuring charges:
Termination benefits	$30 million

Restructuring-related expenses:
Accelerated depreciation	$22 million
Transfer costs (1)	$74 million
	$126 million


(1)	Consists primarily of costs to transfer product lines among facilities, including costs of transfer teams, freight, idle facility and product line validations.

In aggregate, we recorded restructuring charges pursuant to our restructuring plans of $69 million during 2014, $101 million during 2013, and $136 million during 2012. In addition, we recorded expenses within other lines of our accompanying consolidated statements of operations related to our restructuring initiatives of $48 million during 2014, $23 million during 2013, and $24 million during 2012.

The following presents these costs by major type and line item within our accompanying consolidated statements of operations, as well as by program:



Year Ended December 31, 2014
(in millions)	Termination Benefits		Accelerated Depreciation		Transfer Costs		Other		Total
Restructuring charges	$	42	$	—	$	—	$	27	$	69
Restructuring-related expenses:
Cost of products sold	—		—		24		—		24
Selling, general and administrative expenses	—		5		—		19		24
	—		5		24		19		48
	$	42	$	5	$	24	$	46	$	117

(in millions)	Termination Benefits		Accelerated Depreciation		Transfer Costs		Other		Total
2014 Restructuring plan	$	41	$	5	24		$	43	$	113
2011 Restructuring plan	1		—		—		3		4
2010 Restructuring plan	—		—		—		—		—
Plant Network Optimization program	—		—		—		—		—
	$	42	$	5	$	24	$	46	$	117



Year Ended December 31, 2013
(in millions)	Termination Benefits			Accelerated Depreciation		Transfer Costs		Net Gain on Fixed Asset Disposal			Other		Total
Restructuring charges	$	60		$	—	$	—	$	(15	)	$	56	$	101
Restructuring-related expenses:
Selling, general and administrative expenses	—			3		—		—			20		23
	—			3		—		—			20		23
	$	60		$	3	$	—	$	(15	)	$	76	$	124

(in millions)	Termination Benefits			Accelerated Depreciation		Transfer Costs		Net Gain on Fixed Asset Disposal			Other		Total
2014 Restructuring plan	$	29		$	—	$	—	$	—		$	1	$	30
2011 Restructuring plan	37			3		—		(15		)	75		100
2010 Restructuring plan	—			—		—		—			—		—
Plant Network Optimization program	(6		)	—		—		—			—		(6		)
	$	60		$	3	$	—	$	(15	)	$	76	$	124



Year Ended December 31, 2012
(in millions)	Termination Benefits		Accelerated Depreciation		Transfer Costs		Fixed Asset Write-offs		Other		Total
Restructuring charges	$	79	$	—	$	—	$	14	$	43	$	136
Restructuring-related expenses:
Cost of products sold	—		—		8		—		—		8
Selling, general and administrative expenses	—		2		—		—		14		16
	—		2		8		—		14		24
	$	79	$	2	$	8	$	14	$	57	$	160

(in millions)	Termination Benefits		Accelerated Depreciation		Transfer Costs		Fixed Asset Write-offs		Other		Total
2011 Restructuring plan	$	78	$	2	$	—	$	14	$	55	$	149
2010 Restructuring plan	1		—		—		—		2		3
Plant Network Optimization program	—		—		8		—		—		8
	$	79	$	2	$	8	$	14	$	57	$	160

Termination benefits represent amounts incurred pursuant to our on-going benefit arrangements and amounts for “one-time” involuntary termination benefits, and have been recorded in accordance with ASC Topic 712, Compensation – Non-retirement Postemployment Benefits and ASC Topic 420, Exit or Disposal Cost Obligations (Topic 420). We expect to record additional termination benefits related to our restructuring initiatives in 2015 when we identify with more specificity the job classifications, functions and locations of the remaining headcount to be eliminated. Other restructuring costs, which represent primarily consulting fees, are being recorded as incurred in accordance with Topic 420. Accelerated depreciation is being recorded over the adjusted remaining useful life of the related assets, and production line transfer costs are being recorded as incurred.

We have incurred cumulative restructuring charges related to our 2014 Restructuring plan, 2011 Restructuring plan, 2010 Restructuring plan and Plant Network Optimization program of $526 million and restructuring-related costs of $191 million since we committed to each plan. The following presents these costs by major type and by plan:



(in millions)	2014 Restructuring plan		2011 Restructuring plan			2010 Restructuring plan		Plant Network Optimization		Total
Termination benefits	$	69	$	138		$	90	$	30	$	327
Fixed asset write-offs	—		(1		)	11		—		10
Other	25		113			51		—		189
Total restructuring charges	94		250			152		30		526
Accelerated depreciation	5		5			—		22		32
Transfer costs	24		—			—		74		98
Other	19		34			8		—		61
Restructuring-related expenses	48		39			8		96		191
	$	142	$	289		$	160	$	126	$	717

We made cash payments of $112 million in 2014 associated with restructuring initiatives pursuant to these plans, and have made total cash payments of $628 million related to our 2014 Restructuring plan, 2011 Restructuring plan, 2010 Restructuring plan and Plant Network Optimization program since committing to each plan. Each of these payments was made using cash generated from operations, and are comprised of the following:



(in millions)	2014 Restructuring plan		2011 Restructuring plan		2010 Restructuring plan		Plant Network Optimization		Total
Year Ended December 31, 2014
Termination benefits	$	31	$	9	$	—	$	—	$	40
Transfer costs	24		—		—		—		24
Other	38		10		—		—		48
	$	93	$	19	$	—	$	—	$	112

Program to Date
Termination benefits	31		$	133	$	90	$	30	$	284
Transfer costs	24		—		—		73		97
Other	38		154		55		—		247
	$	93	$	287	$	145	$	103	$	628

Our restructuring liability is primarily comprised of accruals for termination benefits. The following is a rollforward of the termination benefit liability associated with our 2014 Restructuring plan, 2011 Restructuring plan, 2010 Restructuring plan and Plant Network Optimization program, since the inception of the respective plan, which is reported as a component of accrued expenses included in our accompanying consolidated balance sheets:



	Restructuring Plan Termination Benefits
										Plant Network
(in millions)	2014			2011			2010			Optimization			Total
Accrued as of December 31, 2011	$	—		$	18		$	6		$	33		$	57
Charges	—			78			1			—			79
Cash payments	—			(60		)	(4		)	(24		)	(88		)
Accrued as of December 31, 2012	—			36			3			9			48
Charges	29			37			—			(6		)	60
Cash payments	—			(61		)	—			(1		)	(62		)
Other	—			—			(3		)	(2		)	(5		)
Accrued as of December 31, 2013	29			12			—			—			41
Charges	41			1			—			—			42
Cash payments	(31		)	(9		)	—			—			(40		)
Accrued as of December 31, 2014	$	39		$	4		$	—		$	—		$	43

In addition to our accrual for termination benefits, we had a $6 million liability as of December 31, 2014 and a $8 million liability as of December 31, 2013 for other restructuring-related items.