RESTRUCTURING-RELATED ACTIVITIES

We monitor the dynamics of the economy, the healthcare industry, and the markets in which we compete and 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 that we believe are essential to our long-term success. 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.

2016 Restructuring Plan

On June 6, 2016, our Board of Directors approved, and we committed to, a restructuring initiative (the 2016 Restructuring Plan). The 2016 Restructuring Plan is intended to develop global commercialization, technology and manufacturing capabilities in key growth markets, build on our Plant Network Optimization (PNO) strategy which is intended to simplify our manufacturing plant structure by transferring certain production lines among facilities, and expand operational efficiencies in support of our operating income margin goals. Key activities under the 2016 Restructuring Plan include strengthening global infrastructure through evolving global real estate and workplaces, developing global commercial and technical competencies, enhancing manufacturing and distribution expertise in certain regions, and continuing implementation of our PNO strategy. These activities initiated in the second quarter of 2016 and are expected to be substantially completed by the end of 2018.

The implementation of the 2016 Restructuring Plan is expected to result in total pre-tax charges of approximately $175 million to $225 million, and approximately $160 million to $210 million of these charges are estimated to result in cash outlays, of which we have made payments of $27 million in 2016. We have recorded related costs of $47 million in 2016, 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 table provides a summary of our estimates of costs associated with the 2016 Restructuring Plan through the end of 2018 by major type of cost:



Type of cost	Total estimated amount expected to be incurred
Restructuring charges:
Termination benefits	$65 million to $80 million
Other (1)	$15 million to $25 million
Restructuring-related expenses:
Other (2)	$95 million to $120 million
	$175 million to $225 million

(1) Consists primarily of consulting fees and costs associated with contract cancellations.

(2) Comprised of other costs directly related to the 2016 Restructuring Plan, including program management, accelerated depreciation, and costs to transfer product lines among facilities.

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 built on the progress we made to address financial pressures in a changing global marketplace, further strengthened our operational effectiveness and efficiency and supported new growth investments. Key activities under the plan included continued implementation of our PNO strategy, continued focus on driving operational effectiveness and efficiencies and business and commercial model changes. The PNO strategy simplified our manufacturing plant structure by transferring certain production lines among facilities. Other activities involved 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 actions associated with our PNO strategy, which were completed by the end of 2016.

The implementation of the 2014 Restructuring Plan resulted in total pre-tax charges of $261 million and $244 million of cash outlays. 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 table provides a summary of our total costs associated with the 2014 Restructuring plan through December 31, 2016 by major type of cost:



Type of cost	Total amount incurred
Restructuring charges:
Termination benefits	$91 million
Other (1)	$34 million
Restructuring-related expenses:
Other (2)	$136 million
	$261 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.

We recorded restructuring charges pursuant to our restructuring plans of $28 million during 2016, $26 million during 2015, and $69 million during 2014. In addition, we recorded expenses within other lines of our accompanying consolidated statements of operations related to our restructuring initiatives of $50 million during 2016, $57 million during 2015, and $48 million during 2014.

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



Year Ended December 31, 2016
(in millions)	Termination Benefits			Accelerated Depreciation		Transfer Costs		Fixed Asset Write-Offs		Other		Total
Restructuring charges	$	19		$	—	$	—	$	2	$	7	$	28
Restructuring-related expenses:
Cost of products sold	—			—		34		—		—		34
Selling, general and administrative expenses	—			5		—		—		11		16
	—			5		34		—		11		50
	$	19		$	5	$	34	$	2	$	18	$	78

(in millions)	Termination Benefits			Accelerated Depreciation		Transfer Costs		Fixed Asset Write-Offs		Other		Total
2016 Restructuring plan	$	24		$	1	$	15	$	—	$	7	$	47
2014 Restructuring plan	$	(5	)	$	4	19		$	2	$	11	$	31
	$	19		$	5	$	34	$	2	$	18	$	78



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
Substantially complete 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
Substantially complete restructuring plan	1		—		—		3		4
	$	42	$	5	$	24	$	46	$	117

Termination benefits represent amounts incurred pursuant to our benefit arrangements and amounts for “one-time” involuntary termination benefits, and have been recorded in accordance with FASB ASC Topic 712 and FASB ASC Topic 420. Other restructuring costs, which represent primarily consulting fees and costs related to contract cancellations, are being recorded as incurred in accordance with FASB ASC 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.

As of December 31, 2016, we have incurred cumulative restructuring charges related to our 2016 Restructuring Plan and our 2014 Restructuring Plan of $153 million and restructuring-related costs of $155 million since we committed to the plans. The following presents these costs by major type and by plan:



(in millions)	2016 Restructuring Plan		2014 Restructuring Plan		Total
Termination benefits	24		$	91	$	115
Fixed asset write-offs	—		2		2
Other	4		32		36
Total restructuring charges	28		125		153
Accelerated depreciation	1		12		13
Transfer costs	15		75		90
Other	3		49		52
Restructuring-related expenses	19		136		155
	$	47	$	261	$	308

We made cash payments of $82 million in 2016 associated with restructuring initiatives, and as of December 31, 2016 we had made total cash payments of $271 million related to our 2016 Restructuring Plan and 2014 Restructuring Plan since committing to the plans. These payments were made using cash generated from operations, and are comprised of the following:



(in millions)	2016 Restructuring Plan		2014 Restructuring Plan		Total
Year Ended December 31, 2016
Termination benefits	8		$	24	$	32
Transfer costs	15		19		34
Other	4		12		16
	$	27	$	55	$	82

Program to Date
Termination benefits	8		93		$	101
Transfer costs	15		74		89
Other	4		77		81
	$	27	$	244	$	271

Our restructuring liability is primarily comprised of accruals for termination benefits. The following is a rollforward of the termination benefit liability associated with our 2016 Restructuring Plan, our 2014 Restructuring Plan and our substantially complete restructuring plan, which is reported as a component of accrued expenses included in our accompanying consolidated balance sheets:



	Restructuring Plan Termination Benefits
(in millions)	2016 Restructuring Plan			2014 Restructuring Plan			Substantially complete restructuring plan			Total
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
Charges	24			(5		)	—			19
Cash payments	(8		)	(24		)	—			(32		)
Accrued as of December 31, 2016	$	16		$	—		$	—		$	16

In addition to our accrual for termination benefits, we had a $6 million liability as of December 31, 2016 and a $3 million liability as of December 31, 2015 for other restructuring-related items.