RESTRUCTURING-RELATED ACTIVITIES

On an ongoing basis, we monitor the dynamics of the economy, the healthcare industry, and the markets in which we compete. We continue to assess opportunities for improved operational effectiveness and efficiency, and better alignment of expenses with revenues, while preserving our ability to make the investments in research and development projects, capital and our people that we believe are essential to our long-term success. As a result of these assessments, we have undertaken various restructuring initiatives in order to enhance our growth potential and position us for long-term success. These initiatives are described below.

2014 Restructuring Plan

On October 22, 2013, our Board of Directors approved, and we committed to, a restructuring initiative (the 2014 Restructuring plan). The 2014 Restructuring plan is intended to build on the progress we have made to address financial pressures in a changing global marketplace, further strengthen our operational effectiveness and efficiency and support new growth investments. Key activities under the plan include continued implementation of our ongoing Plant Network Optimization (PNO) strategy, continued focus on driving operational efficiencies and ongoing business and commercial model changes. The PNO strategy is intended to simplify our manufacturing plant structure by transferring certain production lines among facilities. Other activities involve rationalizing organizational reporting structures to streamline various functions, eliminate bureaucracy, increase productivity and better align resources to business strategies and marketplace dynamics. These activities were initiated in the fourth quarter of 2013 and are expected to be substantially completed by the end of 2015.

We estimate that the implementation of the 2014 Restructuring plan will result in total pre-tax charges of approximately $250 million to $300 million, and approximately $235 million to $285 million of these charges is estimated to result in cash outlays, of which we have made payments of $119 million through March 31, 2015. We have recorded related costs of $168 million since the inception of the plan, and recorded a portion of these expenses as restructuring charges and the remaining portion through other lines within our consolidated statements of operations.

The following table provides a summary of our estimates of costs associated with the 2014 Restructuring plan by major type of cost:



Type of cost	Total estimated amount expected to be incurred
Restructuring charges:
Termination benefits	$115 million to $135 million
Other (1)	$25 million to $35 million
Restructuring-related expenses:
Other (2)	$110 million to $130 million
	$250 million to $300 million

(1) Consists primarily of consulting fees and costs associated with contract cancellations.

(2) Comprised of other costs directly related to the 2014 Restructuring plan, including program management, accelerated depreciation, and costs to transfer product lines among facilities.

2011 Restructuring Plan

On July 26, 2011, our Board of Directors approved, and we committed to, a restructuring initiative (the 2011 Restructuring plan) designed to strengthen operational effectiveness and efficiencies, increase competitiveness and support new investments. Key activities under the 2011 Restructuring plan included standardizing and automating certain processes and activities; relocating select administrative and functional activities; rationalizing organizational reporting structures; leveraging preferred vendors; and other efforts to eliminate inefficiency. Among these efforts, we expanded our ability to deliver best-in-class global shared services for certain functions and divisions at several locations in emerging markets. On January 25, 2013, our Board of Directors approved, and we committed to, an expansion of the 2011 Restructuring plan (the Expansion). The Expansion was intended to further strengthen our operational effectiveness and efficiencies and support new investments. Activities under the 2011 Restructuring plan were initiated in the third quarter of 2011 and all activities, including those related to the Expansion, were substantially completed by the end of 2013.

The 2011 Restructuring plan, including the Expansion, resulted in net pre-tax charges of $286 million, and $287 million of cash outlays. In addition, we received $53 million of cash proceeds on facility and fixed asset sales. We recorded a portion of these expenses as restructuring charges and the remaining portion through other lines within our consolidated statements of operations.

The following provides a summary of our total costs associated with the 2011 Restructuring plan, including the Expansion, by major type of cost:



Type of cost	Total amounts incurred
Restructuring charges:
Termination benefits	$135 million
Other (1)	$112 million
Restructuring-related expenses:
Other (2)	$39 million
	$286 million


(1)	Includes primarily consulting fees, gains and losses on disposals of fixed assets and costs associated with contract cancellations.


(2)	Comprised of other costs directly related to the 2011 Restructuring plan, including the Expansion, such as program management, accelerated depreciation, retention and infrastructure-related costs.

We recorded net restructuring charges pursuant to our restructuring plans of $6 million in the first quarter of 2015 and $20 million in the first quarter of 2014. In addition, we recorded expenses within other lines of our accompanying unaudited condensed consolidated statements of operations related to our restructuring initiatives of $16 million in the first quarter of 2015, and $8 million in the first quarter of 2014.

The following presents these costs (credits) by major type and line item within our accompanying unaudited condensed consolidated statements of operations, as well as by program:



Three Months Ended March 31, 2015
(in millions)	Termination Benefits			Accelerated Depreciation		Transfer Costs		Fixed Asset Write-offs		Other		Total
Restructuring charges	$	5		$	—	$	—	$	—	$	1	$	6
Restructuring-related expenses:
Cost of products sold	—			—		8		—		—		8
Selling, general and administrative expenses	—			1		—		—		7		8
	—			1		8		—		7		16
	$	5		$	1	$	8	$	—	$	8	$	22

(in millions)	Termination Benefits			Accelerated Depreciation		Transfer Costs		Fixed Asset Write-offs		Other		Total
2014 Restructuring plan	$	8		$	1	$	8	$	—	$	8	$	25
2011 Restructuring plan (including the Expansion)	(3		)	—		—		—		—		(3		)
	$	5		$	1	$	8	$	—	$	8	$	22

Three Months Ended March 31, 2014
(in millions)	Termination Benefits			Accelerated Depreciation		Transfer Costs		Fixed Asset Write-offs		Other		Total
Restructuring charges	$	11		$	—	$	—	$	—	$	9	$	20
Restructuring-related expenses:
Cost of products sold	—			—		2		—		—		2
Selling, general and administrative expenses	—			1		—		—		5		6
	—			1		2		—		5		8
	$	11		$	1	$	2	$	—	$	14	$	28

(in millions)	Termination Benefits			Accelerated Depreciation		Transfer Costs		Fixed Asset Write-offs		Other		Total
2014 Restructuring plan	$	9		$	1	$	2	$	—	$	11	$	23
2011 Restructuring plan (including the Expansion)	2			—		—		—		3		5
	$	11		$	1	$	2	$	—	$	14	$	28

Termination benefits represent amounts incurred pursuant to our on-going benefit arrangements and amounts for “one-time” involuntary termination benefits, and have been recorded in accordance with ASC Topic 712, Compensation – Non-retirement Postemployment Benefits and ASC Topic 420, Exit or Disposal Cost Obligations (Topic 420). We expect to record additional termination benefits related to our restructuring initiatives throughout 2015 when we identify with more specificity the job classifications, functions and locations of the remaining head count to be eliminated. Other restructuring costs, which represent primarily consulting fees and costs related to contract cancellations, are being recorded as incurred in accordance with Topic 420. Accelerated depreciation is being recorded over the adjusted remaining useful life of the related assets, and production line transfer costs are being recorded as incurred.

As of March 31, 2015, we incurred cumulative restructuring charges related to our 2014 Restructuring plan and 2011 Restructuring plan (including the Expansion) of $351 million and restructuring-related costs of $103 million since we committed to each plan. The following presents these costs by major type and by plan:



(in millions)	2014 Restructuring plan		2011 Restructuring plan (including the Expansion)			Total
Termination benefits	$	78	$	135		$	213
Net loss (gain) on fixed asset disposals	—		(1		)	(1		)
Other	26		113			139
Total restructuring charges	104		247			351
Accelerated depreciation	6		5			11
Transfer costs	32		—			32
Other	26		34			60
Restructuring-related expenses	64		39			103
	$	168	$	286		$	454

We made cash payments of $26 million in the first quarter of 2015 associated with restructuring initiatives pursuant to these plans, and, as of March 31, 2015, we had made total cash payments of $406 million related to our 2014 Restructuring plan and 2011 Restructuring plan (including the Expansion) since committing to each plan. These payments were made using cash generated from operations, and are comprised of the following:



(in millions)	2014 Restructuring plan		2011 Restructuring plan (including the Expansion)		Total
Three Months Ended March 31, 2015
Termination benefits	$	9	$	—	$	9
Transfer costs	8		—		8
Other	9		—		9
	$	26	$	—	$	26

Program to Date
Termination benefits	$	40	$	133	$	173
Transfer costs	32		—		32
Other	47		154		201
	$	119	$	287	$	406

Our restructuring liability is primarily comprised of accruals for termination benefits. The following is a rollforward of the termination benefit liability associated with our 2014 Restructuring plan and 2011 Restructuring plan (including the Expansion), which is reported as a component of accrued expenses included in our accompanying unaudited condensed balance sheets:



(in millions)	2014 Restructuring plan			2011 Restructuring plan (including the Expansion)			Total
Accrued as of December 31, 2014	$	39		$	4		$	43
Charges (credits)	8			(3		)	5
Cash payments	(9		)	—			(9		)
Other	—			(1		)	(1		)
Accrued as of March 31, 2015	$	38		$	—		$	38

In addition to our accrual for termination benefits, we had a $6 million liability as of March 31, 2015 and an $6 million liability as of December 31, 2014 for other restructuring-related items.