NOTE F – RESTRUCTURING-RELATED ACTIVITIES

2016 Restructuring Plan

On June 6, 2016, our Board of Directors approved and we committed to, a restructuring initiative (the 2016 Restructuring Plan). The 2016 Restructuring Plan is intended to develop global commercialization, technology and manufacturing capabilities in key growth markets, build on our Plant Network Optimization (PNO) strategy which is intended to simplify our manufacturing plant structure by transferring certain production lines among facilities and expand operational efficiencies in support of our operating income margin goals. Key activities under the 2016 Restructuring Plan include strengthening global infrastructure through evolving global real estate and workplaces, developing global commercial and technical competencies, enhancing manufacturing and distribution expertise in certain regions and continuing implementation of our ongoing PNO strategy. These activities were initiated in the second quarter of 2016 and are expected to be substantially completed by the end of 2018.

The implementation of the 2016 Restructuring Plan is expected to result in total pre-tax charges of approximately $175 million to $225 million and approximately $160 million to $210 million of these charges are estimated to result in cash outlays. We have recorded related costs of $66 million since the inception of the plan through March 31, 2017 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 2016 Restructuring Plan through the end of 2018 by major type of cost:



Type of cost	Total estimated amount expected to be incurred
Restructuring charges:
Termination benefits	$65 million to $80 million
Other (1)	$10 million to $20 million
Restructuring-related expenses:
Other (2)	$100 million to $125 million
	$175 million to $225 million

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

(2) Comprised of other costs directly related to the 2016 Restructuring Plan, including program management, accelerated depreciation and costs to transfer product lines among facilities.

We recorded restructuring charges pursuant to our restructuring plans of $4 million in the first quarter of 2017 and $3 million in the first quarter of 2016. In addition, we recorded expenses within other lines of our accompanying unaudited condensed consolidated statements of operations related to our restructuring initiatives of $15 million in the first quarter of 2017 and $10 million in the first quarter of 2016.

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



Three Months Ended March 31, 2017
(in millions)	Termination Benefits		Accelerated Depreciation		Transfer Costs		Other		Total
Restructuring charges	$	3	$	—	$	—	$	1	$	4
Restructuring-related expenses:
Cost of products sold	—		—		12		—		12
Selling, general and administrative expenses	—		2		—		1		3
	—		2		12		1		15
	$	3	$	2	$	12	$	2	$	19

All charges incurred in the first quarter of 2017 were related to the 2016 Restructuring Plan.



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 were related to a previous restructuring plan that was substantially completed in 2015.

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 - Nonretirement and Postemployment Benefits (Topic 712) and FASB ASC Topic 420, Exit or Disposal Cost Obligations (Topic 420). Other restructuring costs, which represent primarily consulting fees and costs related to contract cancellations, are being recorded as incurred in accordance with FASB ASC Topic 420. Accelerated depreciation is being recorded over the adjusted remaining useful life of the related assets and program management and production line transfer costs are being recorded as incurred.

As of March 31, 2017, we incurred cumulative restructuring charges related to our 2016 Restructuring Plan of $32 million and restructuring-related charges of $34 million since we committed to the plan. The following presents these costs by major type:



(in millions)	2016 Restructuring Plan
Termination benefits	$	27
Other	5
Total restructuring charges	32
Accelerated depreciation	3
Transfer costs	27
Other	4
Restructuring-related expenses	34
	$	66

We made cash payments of $16 million in the first quarter of 2017 associated with our 2016 Restructuring Plan and as of March 31, 2017, we had made total cash payments of $43 million related to our 2016 Restructuring Plan since committing to the plan. These payments were made using cash generated from operations and are comprised of the following:



(in millions)	2016 Restructuring Plan
Three Months Ended March 31, 2017
Termination benefits	$	4
Transfer costs	11
Other	1
	$	16

Program to Date
Termination benefits	$	12
Transfer costs	26
Other	5
	$	43

Our restructuring liability is primarily comprised of accruals for termination benefits. The following is a rollforward of the termination benefit liability associated with our 2016 Restructuring Plan, which is reported as a component of accrued expenses included in our accompanying unaudited condensed balance sheets:



(in millions)	2016 Restructuring Plan
Accrued as of December 31, 2016	$	16
Charges (credits)	3
Cash payments	(4		)
Accrued as of March 31, 2017	$	15

In addition to our accrual for termination benefits, we had a $6 million liability as of March 31, 2017 and December 31, 2016 for other restructuring-related items.