BUSINESS OPTIMIZATION CHARGES

6 Months Ended

Jun. 30, 2023

Restructuring and Related Activities [Abstract]

In recent years, we have undertaken actions to transform our cost structure and enhance operational efficiency. These efforts include restructuring the organization, optimizing the manufacturing footprint, R&D operations and supply chain network, employing disciplined cost management, and centralizing and streamlining certain support functions. From the commencement of our business optimization activities in the second half of 2015 through June 30, 2023, we have incurred cumulative pre-tax costs of $1.86 billion related to these actions. The costs consisted primarily of employee termination costs, implementation costs, contract termination costs, asset impairments and accelerated depreciation. We currently expect to incur additional pre-tax costs, primarily related to implementation of business optimization programs, of approximately $20 million through the completion of initiatives that are currently underway. We continue to pursue cost savings initiatives, including those related the ongoing implementation of our previously announced new operating model intended to simplify and streamline our operations, and, to the extent further cost savings opportunities are identified, we would incur additional restructuring charges and costs to implement business optimization programs in future periods.

During the three and six months ended June 30, 2023 and 2022, we recorded the following charges related to business optimization programs.


	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2023		2022		2023		2022
Restructuring charges	$	287	$	26	$	397	$	93
Costs to implement business optimization programs	6		16		30		30

Total business optimization charges	$	293	$	42	$	427	$	123

For segment reporting purposes, business optimization charges are unallocated expenses.

Costs to implement business optimization programs for the three and six months ended June 30, 2023 and 2022, respectively, consisted primarily of external consulting and transition costs, including employee compensation and related costs. These costs were primarily included within cost of sales and SG&A expense.

During the three and six months ended June 30, 2023 and 2022, we recorded the following restructuring charges.


	Three months ended June 30, 2023
(in millions)	COGS		SG&A		R&D		Total
Employee termination costs	$	9	$	19	$	—	$	28
Contract termination and other costs	—		2		—		2
Asset impairments	257		—		—		257
Total restructuring charges	$	266	$	21	$	—	$	287


	Three months ended June 30, 2022
(in millions)	COGS		SG&A		R&D		Total
Employee termination costs	$	4	$	16	$	—	$	20
Contract termination and other costs	—		5		—		5
Asset impairments	—		1		—		1
Total restructuring charges	$	4	$	22	$	—	$	26



	Six months ended June 30, 2023
(in millions)	COGS		SG&A		R&D		Total
Employee termination costs	$	26	$	82	$	7	$	115
Contract termination and other costs	3		2		—		5
Asset impairments	269		8		—		277
Total restructuring charges	$	298	$	92	$	7	$	397



	Six months ended June 30, 2022
(in millions)	COGS		SG&A		R&D		Total
Employee termination costs	$	6	$	63	$	—	$	69
Contract termination and other costs	—		17		—		17
Asset impairments	—		7		—		7
Total restructuring charges	$	6	$	87	$	—	$	93

For the three months and six months ended June 30, 2023, $19 million and $97 million, respectively, of the restructuring charges reflected in the table above, consisting of employee termination costs, were related to the ongoing implementation of our previously announced new operating model intended to simplify and streamline our operations. For the three and six months ended June 30, 2023, $253 million of the restructuring charges reflected in the table above, consisting of $243 million of asset impairment charges and $10 million of employee termination costs, were related to our decision to cease production of dialyzers at one of our manufacturing facilities in connection with our initiatives to streamline our manufacturing footprint and improve our profitability. See Note 3 for additional information.

For the three months ended June 30, 2022, $27 million of the restructuring charges reflected in the table above were related to integration activities for the Hillrom acquisition, consisting of $21 million of employee termination costs, $5 million of contract termination and other costs and $1 million of asset impairments. For the six months ended June 30, 2022, $83 million of the restructuring charges reflected in the table above were related to integration activities for the Hillrom acquisition, consisting of $59 million of employee termination costs, $17 million of contract termination and other costs and $7 million of asset impairments.

The following table summarizes activity in the liability related to our restructuring initiatives.


(in millions)
Liability balance as of December 31, 2022	$	107
Charges	132
Payments	(63)
Reserve adjustments	(12)
Currency translation	(1)
Liability balance as of June 30, 2023	$	163

Substantially all of our restructuring liabilities as of June 30, 2023 relate to employee termination costs, with the remaining liabilities attributable to contract termination costs. Substantially all of the cash payments for those liabilities are expected to be disbursed by the end of 2024.