Restructuring (Notes)

6 Months Ended

Jul. 03, 2016

Restructuring and Related Activities [Abstract]

Restructuring

RESTRUCTURING

The Company announced restructuring actions in its Medical Devices segment to better serve the needs of patients and customers in today’s evolving healthcare marketplace. The Company is undertaking actions to strengthen its go-to-market model, accelerate the pace of innovation, further prioritize key platforms and geographies, and streamline operations while maintaining high quality standards.

The Company estimates that, in connection with its plans, it will record pre-tax restructuring charges of approximately $2.0 billion to $2.4 billion, most of which are expected to be incurred by 2017. In the fiscal six months of 2016, the Company recorded a pre-tax charge of $278 million, of which $24 million was included in cost of products sold and $20 million was included in other (income) expense. See table below for additional details. Total restructuring charges of $868 million have been recorded since the restructuring has been announced.

Additionally, as part of the plan, the Company expects that the restructuring actions will result in position eliminations of approximately 4 to 6 percent of the Medical Devices segment’s global workforce over the next two years, subject to any consultation procedures in countries, where required. Approximately 900 positions have been eliminated since the restructuring has been announced.

The Company estimates that approximately one half of the cumulative pre-tax costs will result in cash outlays, including

approximately $500 million of employee severance. Approximately one half of the cumulative pre-tax costs are non-cash,

relating primarily to facility rationalization, inventory write-offs and intangible asset write-offs.

The following table summarizes the severance related reserves and the associated spending under this initiative through the first fiscal six months of 2016:

(Dollars in Millions)	Severance			Asset Write-offs		Other		Total
Reserve balance, January 3, 2016	$	484		—		17		501
Current year activity:
Charges	—			150		128		278
Cash payments	(56		)	—		(142	)	(198	)
Settled without cash	—			(150	)	—		(150	)
Reserve balance, July 3, 2016*	$	428		—		3		431

*Cash outlays for severance are expected to be substantially paid out over the next 24 months in accordance with the Company's plans and local laws.