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

3 Months Ended

Mar. 31, 2013

Restructuring and Related Activities [Abstract]

Schedule of Costs Associated with Cost-Reduction/Productivity Initiatives and Acquisition Activity

The following table provides the components of costs associated with acquisitions and cost-reduction/productivity initiatives:



	Three Months Ended
(MILLIONS OF DOLLARS)	March 31, 2013			April 1, 2012
Integration costs^(a)	$	39		$	100
Restructuring charges:^(b)
Employee terminations	(20		)	267
Asset impairments	105			218
Exit costs	14			12
Restructuring charges and certain acquisition-related costs	138			597
Additional depreciation––asset restructuringrecorded in our condensed consolidated statements of income as follows:^(c)
Cost of sales	33			79
Selling, informational and administrative expenses	12			2
Research and development expenses	90			259
Total additional depreciation––asset restructuring	135			340
Implementation costs recorded in our condensed consolidated statements of income as follows:^(d)
Cost of sales	6			—
Selling, informational and administrative expenses	30			15
Research and development expenses	3			48
Total implementation costs	39			63
Total costs associated with acquisitions and cost-reduction/productivity initiatives	$	312		$	1,000


^(a)	Integration costs represent external, incremental costs directly related to integrating acquired businesses, and primarily include expenditures for consulting and the integration of systems and processes.

^(b)

From the beginning of our cost-reduction/productivity initiatives in 2005 through March 31, 2013, Employee termination costs represent the expected reduction of the workforce by approximately 62,000 employees, mainly in manufacturing and sales and research, of which approximately 54,000 employees have been terminated as of March 31, 2013. For the three months ended March 31, 2013, the credit to employee terminations reflects a change in estimate related to the number of employees to be terminated and the expected total cost of planned terminations.

The restructuring charges for the three months ended March 31, 2013 are associated with the following:


•	Primary Care operating segment ($5 million income), Specialty Care and Oncology operating segment ($6 million), Established Products and Emerging Markets operating segment ($11 million), other operating segments ($2 million), research and development operations ($2 million), manufacturing operations ($4 million) and Corporate ($79 million).

The restructuring charges for the three months ended April 1, 2012 are associated with the following:


•	Primary Care operating segment ($3 million), Specialty Care and Oncology operating segment ($3 million), Established Products and Emerging Markets operating segment ($3 million), other operating segments ($6 million), research and development operations ($12 million), manufacturing operations ($152 million) and Corporate ($318 million).


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


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

Schedule of Restructuring Accruals

The following table provides the components of and changes in our restructuring accruals:



(MILLIONS OF DOLLARS)	Employee Termination Costs/(Credits)			Asset Impairment Charges			Exit Costs			Accrual
Balance, December 31, 2012^(a)	$	1,793		$	—		$	157		$	1,950
Provision	(20		)	105			14			99
Utilization and other^(b)	(340		)	(105		)	(33		)	(478		)
Balance, March 31, 2013^(c)	$	1,433		$	—		$	138		$	1,571


^(a)	Included in Other current liabilities ($1.2 billion) and Other noncurrent liabilities ($731 million).


^(b)	Includes adjustments for foreign currency translation.


^(c)	Included in Other current liabilities ($919 million) and Other noncurrent liabilities ($652 million).

Schedule of Asset Impairment Charges Included In Restructuring Charges

The following table provides additional information about the long-lived assets that were impaired during the first quarter of 2013 in Restructuring charges and certain acquisition-related costs:



									Three Months Ended March 31,
	Fair Value^(a)								2013
(MILLIONS OF DOLLARS)	Amount		Level 1		Level 2		Level 3		Impairment
Assets held for sale^(b)	$	84	$	—	$	84	$	—	$	64
Assets abandoned/demolished	—		—		—		—		41
Long-lived assets	$	84	$	—	$	84	$	—	$	105


^(a)	The fair value amount is presented as of the date of impairment, as these assets are not measured at fair value on a recurring basis. See also Note 1C. Basis of Presentation and Significant Accounting Policies: Fair Value.


^(b)	Reflects property, plant and equipment and other long-lived held-for-sale assets written down to their fair value of $84 million, less costs to sell of $2 million (a net of $82 million), in the first three months of 2013. Fair value was determined primarily using a market approach, with various inputs, such as recent sales transactions.

- Definition

Tabular disclosure for impairment of long-lived assets held and used by an entity which includes a description of the impaired long-lived asset and facts and circumstances leading to the impairment, aggregate amount of the impairment loss and where the loss is located in the income statement, method(s) for determining fair value, and the segment in which the impaired long-lived asset is reported.

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- Definition

Tabular disclosure of restructuring and related costs by type of restructuring including the description of the restructuring costs, such as the expected cost; the costs incurred during the period; the cumulative costs incurred as of the balance sheet date; the income statement caption within which the restructuring charges recognized for the period are included; and changes to an entity's restructuring reserve that occurred during the period associated with the exit from or disposal of business activities or restructurings for each major type of cost.

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