Restructuring

The Company announced restructuring actions in its Medical Devices segment to better serve the needs of patients and customers in today’s evolving healthcare marketplace. The Company is undertaking actions to strengthen its go-to-market model, accelerate the pace of innovation, further prioritize key platforms and geographies, and streamline operations while maintaining high quality standards.

The Company estimates that, in connection with its plans, it will record pre-tax restructuring charges of approximately $2.0 billion to $2.4 billion, most of which are expected to be incurred by 2017. In the fiscal fourth quarter of 2015, the Company recorded a pre-tax charge of $590 million, of which $81 million is included in cost of products sold. The $590 million restructuring charge consists of severance costs of $484 million, asset write-offs of $86 million and $20 million in other costs, primarily related to supply contracts.

Additionally, as part of the plan, the Company expects that the restructuring actions will result in position eliminations of approximately 4 to 6 percent of the Medical Devices segment’s global workforce over the next two years, subject to any consultation procedures in countries, where required.

The Company estimates that approximately one half of the cumulative pre-tax costs will result in cash outlays, including

approximately $500 million of employee severance. Approximately one half of the cumulative pre-tax costs are non-cash,

relating primarily to facility rationalization, inventory write-offs and intangible asset write-offs.

The following table summarizes the severance charges and the associated spending for the fiscal year ended 2015:



(Dollars in Millions)	Severance		Asset Write-offs	Other	Total
2015 restructuring charge	$	484	86	20	590

Current year activity	—		86	3	89

Reserve balance, January 3, 2016*	$	484	—	17	501

*Cash outlays for severance are expected to be substantially paid out over the next 24 months in accordance with the Company's plans and local laws.