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

3 Months Ended

Apr. 03, 2016

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
(MILLIONS OF DOLLARS)	April 3, 2016		March 29, 2015
Restructuring charges(a):
Employee terminations	$	24	$	31
Asset impairments	1		6
Exit costs	4		6
Total restructuring charges	30		42
Transaction costs(b)	24		5
Integration costs(c)	87		13
Restructuring charges and certain acquisition-related costs	141		60
Additional depreciation––asset restructuringrecorded in our condensed consolidated statements of income as follows(d):
Cost of sales	45		17
Research and development expenses	4		1
Total additional depreciation––asset restructuring	49		18
Implementation costs recorded in our condensed consolidated statements of income as follows(e):
Cost of sales	43		13
Selling, informational and administrative expenses	12		26
Research and development expenses	6		8
Total implementation costs	62		48
Total costs associated with acquisitions and cost-reduction/productivity initiatives	$	252	$	127

^(a)  In the three months ended April 3, 2016, Employee terminations represent the expected reduction of the workforce by approximately 100employees, mainly in manufacturing. Employee termination costs are generally recorded when the actions are probable and estimable and include accrued severance benefits, pension and postretirement benefits, many of which may be paid out during periods after termination.

The restructuring charges for the three months ended April 3, 2016 are associated with the following:

• the Global Innovative Pharmaceutical segment (GIP) ($8 million); the Global Vaccines, Oncology and Consumer Healthcare segment (VOC) ($1 million); the Global Established Pharmaceutical segment (GEP) ($3 million); Worldwide Research and Development and Medical (WRD/M) ($3 million); manufacturing operations ($14 million); and Corporate ($1 million).

The restructuring charges for the three months ended March 29, 2015 are associated with the following:

• GIP ($12 million); VOC ($13 million); GEP ($10 million); WRD/M ($12 million); manufacturing operations ($22 million income); and Corporate ($18 million).

^(b)  Transaction costs represent external costs for banking, legal, accounting and other similar services, most of which are directly related to the terminated transaction with Allergan.

^(c)  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, primarily related to the acquisition of Hospira.

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

^(e)  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, 2015(a)	$	1,109		$	—		$	48		$	1,157
Provision	24			1			4			30
Utilization and other(b)	(165		)	(1		)	(9		)	(175		)
Balance, April 3, 2016(c)	$	968		$	—		$	43		$	1,011

^(a)  Included in Other current liabilities ($776 million) and Other noncurrent liabilities ($381 million).

^(b)  Includes adjustments for foreign currency translation.

^(c)  Included in Other current liabilities ($638 million) and Other noncurrent liabilities ($373 million).