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

6 Months Ended

Jun. 29, 2014

Restructuring and Related Activities [Abstract]

Schedule of Restructuring and Related Costs

The following table provides the components of costs associated with acquisitions and cost-reduction/productivity initiatives:
	Three Months Ended				Six Months Ended
(MILLIONS OF DOLLARS)	June 29, 2014		June 30, 2013		June 29, 2014		June 30, 2013
Restructuring charges(a):
Employee terminations	$	17	$	136	$	47	$	115
Asset impairments	13		12		19		115
Exit costs	36		2		40		15
Total restructuring charges	66		150		106		245
Integration costs(b)	15		33		33		69
Restructuring charges and certain acquisition-related costs	81		183		139		314
Additional depreciation––asset restructuringrecorded in our condensed consolidated statements of income as follows(c):
Cost of sales	72		58		146		91
Selling, informational and administrative expenses	1		8		1		19
Research and development expenses	29		3		29		94
Total additional depreciation––asset restructuring	102		69		176		204
Implementation costs recorded in our condensed consolidated statements of income as follows(d):
Cost of sales	22		5		28		11
Selling, informational and administrative expenses	38		34		53		65
Research and development expenses	16		7		27		9
Total implementation costs	76		46		108		85
Total costs associated with acquisitions and cost-reduction/productivity initiatives	$	259	$	298	$	423	$	603

^(a)  In the six months ended June 29, 2014, Employee terminations represent the expected reduction of the workforce by approximately 300 employees, mainly in manufacturing and sales.

The restructuring charges in 2014 are associated with the following:

• For the three months ended June 29, 2014, the Global Innovative Pharmaceutical segment (GIP) ($9 million), the Global Established Pharmaceutical segment (GEP) ($24 million), the Global Vaccines, Oncology and Consumer Healthcare segment (VOC) ($6 million), Worldwide Research and Development and Medical ($8 million), manufacturing operations ($12 million) and Corporate ($7 million).

• For the six months ended June 29, 2014, the Global Innovative Pharmaceutical segment (GIP) ($11 million), the Global Established Pharmaceutical segment (GEP) ($31 million), the Global Vaccines, Oncology and Consumer Healthcare segment (VOC) ($6 million), Worldwide Research and Development and Medical ($9 million), manufacturing operations ($38 million) and Corporate ($11 million).

The restructuring charges in 2013 are associated with the following:

• For the three months ended June 30, 2013, total operating segments ($54 million), Worldwide Research and Development and Medical ($12 million), manufacturing operations ($80 million) and Corporate ($4 million).

• For the six months ended June 30, 2013, total operating segments ($67 million), Worldwide Research and Development and Medical ($15 million), manufacturing operations ($82 million) and Corporate ($81 million).

At the beginning of fiscal 2014, we revised our operating segments and are unable to identify these prior-period restructuring charges to the new individual segments.

^(b) 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.

^(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 Reserve by Type of Cost

The following table provides the components of and changes in our restructuring accruals:
(MILLIONS OF DOLLARS)	Employee Termination Costs			Asset Impairment Charges			Exit Costs			Accrual
Balance, December 31, 2013(a)	$	1,685		$	—		$	94		$	1,779
Provision	47			19			40			106
Utilization and other(b)	(239		)	(19		)	(69		)	(327		)
Balance, June 29, 2014(c)	$	1,493		$	—		$	65		$	1,558

^(a)  Included in Other current liabilities ($1.0 billion) and Other noncurrent liabilities ($767 million).

^(b)  Includes adjustments for foreign currency translation.

^(c)  Included in Other current liabilities ($1.0 billion) and Other noncurrent liabilities ($550 million).