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

3 Months Ended

Apr. 02, 2017

Restructuring and Related Activities [Abstract]

Schedule of Components of Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives

The following table provides the components of costs associated with acquisitions and cost-reduction/productivity initiatives:
	Three Months Ended
(MILLIONS OF DOLLARS)	April 2, 2017		April 3, 2016
Restructuring charges(a):
Employee terminations	$	19	$	24
Asset impairments	24		1
Exit costs	2		4
Total restructuring charges	45		30
Transaction costs(b)	12		24
Integration costs(c)	101		87
Restructuring charges and certain acquisition-related costs	157		141
Additional depreciation––asset restructuring recorded in our condensed consolidated statements of income as follows(d):
Cost of sales	14		45
Research and development expenses	—		4
Total additional depreciation––asset restructuring	14		49
Implementation costs recorded in our condensed consolidated statements of income as follows(e):
Cost of sales	15		43
Selling, informational and administrative expenses	9		12
Research and development expenses	7		6
Total implementation costs	31		62
Total costs associated with acquisitions and cost-reduction/productivity initiatives	$	202	$	252

^(a)  In the three months ended April 2, 2017, restructuring charges are largely associated with cost-reduction and productivity initiatives not associated with acquisitions, as well as our acquisitions of Medivation and Anacor. In the three months ended April 3, 2016, restructuring charges are largely associated with cost-reduction and productivity initiatives not associated with acquisitions. In the three months ended April 2, 2017, Employee terminations represent the expected reduction of the workforce by approximately 150 employees, mainly in manufacturing, sales, research and corporate. 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 2, 2017 are associated with the following:

• IH ($9 million); EH ($18 million income); WRD/GPD ($10 million); manufacturing operations ($24 million); and Corporate ($19 million).

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

• IH ($9 million); EH ($3 million); WRD/GPD ($3 million); manufacturing operations ($14 million); and Corporate ($1 million).

^(b)  Transaction costs represent external costs for banking, legal, accounting and other similar services, virtually all of which in the first quarter of 2017 are directly related to our acquisition of Medivation. Transaction costs in the first quarter of 2016 were primarily 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. In the first quarter of 2017 and 2016, integration costs were primarily related to our 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 Components of and Changes in Restructuring Accruals

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, 2016(a)	$	1,547		$	—		$	36	$	1,583
Provision	19			24			2		45
Utilization and other(b)	(159		)	(24		)	4		(179		)
Balance, April 2, 2017(c)	$	1,406		$	—		$	42	$	1,449

^(a)  Included in Other current liabilities ($863 million) and Other noncurrent liabilities ($720 million).

^(b)  Includes adjustments for foreign currency translation.

^(c) 

Included in Other current liabilities ($718 million) and Other noncurrent liabilities ($731 million).