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 were substantially completed by the end of 2015; except for certain activities associated with our plant network optimization strategy, which we expect to substantially complete by the end of 2016.

We estimate that the implementation of the 2014 Restructuring plan will result in total pre-tax charges of approximately $255 million to $270 million and approximately $240 million to $255 million of these charges are expected to result in cash outlays, of which we have made payments of $189 million to date. We have recorded related costs of $229 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 statements 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	$95 million to $100 million
Other (1)	$30 million to $35 million
Restructuring-related expenses:
Other (2)	$130 million to $135 million
	$255 million to $270 million

(1) Consists primarily of consulting 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. 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. 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, resulted in total pre-tax charges of approximately $286 million and $287 million of cash outlays. In addition, we received $53 million of cash proceeds on facility and fixed asset sales. We 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 total costs associated with the 2011 Restructuring plan, including the Expansion, by major type of cost:



Type of cost	Total amount incurred
Restructuring charges:
Termination benefits	$135 million
Other (1)	$112 million
Restructuring-related expenses:
Other (2)	$39 million
	$286 million


(1)	Includes primarily consulting fees, gains and losses on fixed asset disposals 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.

In aggregate, we recorded restructuring charges pursuant to our restructuring plans of $26 million during 2015, $69 million during 2014, and $101 million during 2013. In addition, we recorded expenses within other lines of our accompanying consolidated statements of operations related to our restructuring initiatives of $57 million during 2015, $48 million during 2014, and $23 million during 2013.

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, 2015
(in millions)	Termination Benefits			Accelerated Depreciation		Transfer Costs		Other		Total
Restructuring charges	$	23		$	—	$	—	$	3	$	26
Restructuring-related expenses:
Cost of products sold	—			—		31		—		31
Selling, general and administrative expenses	—			3		—		23		26
	—			3		31		23		57
	$	23		$	3	$	31	$	26	$	83

(in millions)	Termination Benefits			Accelerated Depreciation		Transfer Costs		Other		Total
2014 Restructuring plan	$	27		$	3	31		$	26	$	87
2011 Restructuring plan	(4		)	—		—		—		(4		)
	$	23		$	3	$	31	$	26	$	83



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
	$	42	$	5	$	24	$	46	$	117



Year Ended December 31, 2013
(in millions)	Termination Benefits			Accelerated Depreciation		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		Net Gain on Fixed Asset Disposal			Other		Total
2014 Restructuring plan	$	29		$	—	$	—		$	1	$	30
2011 Restructuring plan	37			3		(15		)	75		100
Substantially completed restructuring programs	(6		)	—		—			—		(6		)
	$	60		$	3	$	(15	)	$	76	$	124

In 2013 we recorded a $6 million credit for the release of certain termination benefit accruals related to restructuring programs that were substantially complete by the end of 2012.

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 2016 as we complete our 2014 Restructuring plan. 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 and 2011 Restructuring plan (including the Expansion) of $372 million and restructuring-related costs of $143 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 (including the Expansion)			Total
Termination benefits	$	96	$	135		$	231
Fixed asset write-offs	—		(1		)	(1		)
Other	29		113			142
Total restructuring charges	125		247			372
Accelerated depreciation	8		5			13
Transfer costs	55		—			55
Other	41		34			75
Restructuring-related expenses	104		39			143
	$	229	$	286		$	515

We made cash payments of $95 million in 2015 associated with restructuring initiatives pursuant to these plans, and have made total cash payments of $476 million related to our 2014 Restructuring plan and 2011 Restructuring plan (including the Expansion) 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 (including the Expansion)		Total
Year Ended December 31, 2015
Termination benefits	$	37	$	—	$	37
Transfer costs	31		—		31
Other	27		—		27
	$	95	$	—	$	95

Program to Date
Termination benefits	69		$	133	$	202
Transfer costs	55		—		55
Other	65		154		219
	$	189	$	287	$	476

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 and 2011 Restructuring plan (including the Expansion) 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

(in millions)	2014			2011			Total
Accrued as of December 31, 2012	$	—		$	36		$	36
Charges	29			37			66
Cash payments	—			(61		)	(61		)
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
Charges	27			(4		)	23
Cash payments	(37		)	—			(37		)
Accrued as of December 31, 2015	$	29		$	—		$	29

In addition to our accrual for termination benefits, we had a $3 million liability as of December 31, 2015 and a $6 million liability as of December 31, 2014 for other restructuring-related items.