BUSINESS OPTIMIZATION CHARGES

6 Months Ended

Jun. 30, 2024

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. The related costs of those actions consisted primarily of employee termination costs, implementation costs, contract termination costs, and asset impairments. We currently expect to incur additional pre-tax costs, primarily related to the implementation of business optimization programs, of approximately $7 million through the completion of initiatives that are currently underway. We continue to pursue cost savings initiatives, including those related to our newly implemented operating model, intended to simplify and streamline our operations, and to the extent further cost savings opportunities are identified (including after completion of the proposed Kidney Care separation), 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, 2024 and 2023, we recorded the following charges related to business optimization programs.


	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2024		2023		2024		2023
Restructuring charges	$	9	$	287	$	56	$	397
Costs to implement business optimization programs	11		6		21		30

Total business optimization charges	$	20	$	293	$	77	$	427

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, 2024 and 2023, 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, 2024 and 2023, we recorded the following restructuring charges.


	Three months ended June 30, 2024
(in millions)	COGS		SG&A		R&D		Total
Employee termination costs	$	(2)	$	3	$	(3)	$	(2)
Contract termination and other costs	3		—		—		3
Asset impairments	8		—		—		8
Total restructuring charges	$	9	$	3	$	(3)	$	9


	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


	Six months ended June 30, 2024
(in millions)	COGS		SG&A		R&D		Total
Employee termination costs	$	3	$	18	$	13	$	34
Contract termination and other costs	4		5		—		9
Asset impairments	13		—		—		13
Total restructuring charges	$	20	$	23	$	13	$	56


	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

For the three months ended June 30, 2024, $6 million of the restructuring charges reflected in the table above, consisting of asset impairments, related to a transfer of a manufacturing production line as part of our initiatives to optimize our global manufacturing and supply chain organization. For the six months ended June 30, 2024, $27 million of the restructuring charges reflected in the table above were related to a program to centralize certain of our R&D activities into a new location, and to our recent implementation of a new operating model intended to simplify and streamline our operations.

For the three 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 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 long-lived asset impairment charges and $10 million of employee termination costs, were related to our decision to cease production at one of our dialyzer manufacturing facilities in connection with our initiatives to streamline our manufacturing footprint and improve our profitability. See Note 3 for additional information.

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


(in millions)
Liability balance as of December 31, 2023	$	128
Charges	60
Payments	(64)
Reserve adjustments	(17)
Currency translation	7
Liability balance as of June 30, 2024	$	114

Substantially all of our restructuring liabilities as of June 30, 2024 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 2025.