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 were substantially completed by the end of 2015, except for certain ongoing actions associated with our PNO strategy, which we expect to be substantially completed by the end of 2016.

The implementation of the 2014 Restructuring Plan will result in total pre-tax charges of approximately $255 million to $270 million, and approximately $240 million to $255 million of these charges are estimated to result in cash outlays, of which we have made payments of $212 million through March 31, 2016. We have recorded related costs of $242 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	$95 million to $100 million
Other (1)	$30 million to $35 million
Restructuring-related expenses:
Other (2)	$130 million to $135 million
	$255 million to $270 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.

We recorded net restructuring charges pursuant to our restructuring plans of $3 million in the first quarter of 2016 and $6 million in the first quarter of 2015. In addition, we recorded expenses within other lines of our accompanying unaudited condensed consolidated statements of operations related to our restructuring initiatives of $10 million in the first quarter of 2016 and $16 million in the first quarter of 2015.

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, 2016
(in millions)	Termination Benefits		Accelerated Depreciation		Transfer Costs		Other		Total
Restructuring charges	$	1	$	—	$	—	$	2	$	3
Restructuring-related expenses:
Cost of products sold	—		—		5		—		5
Selling, general and administrative expenses	—		1		—		4		5
	—		1		5		4		10
	$	1	$	1	$	5	$	6	$	13

All charges incurred in the first quarter of 2016 are related to the 2014 Restructuring Plan.



Three Months Ended March 31, 2015
(in millions)	Termination Benefits			Accelerated Depreciation		Transfer Costs		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		Other		Total
2014 Restructuring Plan	$	8		$	1	$	8	$	8	$	25
Substantially completed restructuring programs	(3		)	—		—		—		(3		)
	$	5		$	1	$	8	$	8	$	22

Termination benefits represent amounts incurred pursuant to our ongoing benefit arrangements and amounts for “one-time” involuntary termination benefits, and have been recorded in accordance with FASB ASC Topic 712, Compensation – Non-retirement Postemployment Benefits and FASB ASC Topic 420, Exit or Disposal Cost Obligations (Topic 420). We expect to record additional termination benefits related to our restructuring initiatives throughout 2016 as we complete our 2014 Restructuring Plan. 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, 2016, we incurred cumulative restructuring charges related to our 2014 Restructuring Plan of $128 million and restructuring-related costs of $114 million since we committed to the plan. The following presents these costs by major type (in millions):



Termination benefits	$	97
Fixed asset write-offs	—
Other	31
Total restructuring charges	128
Accelerated depreciation	9
Transfer costs	60
Other	45
Restructuring-related expenses	114
	$	242

We made cash payments of $23 million in the first quarter of 2016 associated with our restructuring initiatives and as of March 31, 2016, we had made total cash payments of $212 million related to our 2014 Restructuring Plan since committing to the plan. These payments were made using cash generated from operations, and are comprised of the following:



(in millions)	2014 Restructuring Plan
Three Months Ended March 31, 2016
Termination benefits	$	14
Transfer costs	5
Other	4
	$	23

Program to Date
Termination benefits	$	83
Transfer costs	60
Other	69
	$	212

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, which is reported as a component of accrued expenses included in our accompanying unaudited condensed balance sheets (in millions):



Accrued as of December 31, 2015	$	29
Charges (credits)	1
Cash payments	(14		)
Accrued as of March 31, 2016	$	16

In addition to our accrual for termination benefits, we had a $4 million liability as of March 31, 2016 and a $3 million liability as of December 31, 2015 for other restructuring-related items.