BUSINESS OPTIMIZATION CHARGES

6 Months Ended

Jun. 30, 2022

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. In the current period, restructuring charges include actions taken in connection with our integration of Hillrom. From the commencement of our business optimization activities in the second half of 2015 through June 30, 2022, we have incurred cumulative pre-tax costs of $1.3 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 $29 million through the completion of initiatives that are currently underway. We continue to pursue cost savings initiatives, including those related to our integration of Hillrom, 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, 2022 and 2021, we recorded the following charges related to business optimization programs.


	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2022		2021		2022		2021
Restructuring charges	$	26	$	10	$	93	$	35
Costs to implement business optimization programs	16		8		30		10

Total business optimization charges	$	42	$	18	$	123	$	45

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, 2022 and 2021, 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, 2022 and 2021, we recorded the following restructuring charges.


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


	Three months ended June 30, 2021
(in millions)	COGS		SG&A		Total
Employee termination costs	$	8	$	1	$	9

Asset impairments	1		—		1
Total restructuring charges	$	9	$	1	$	10


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


	Six months ended June 30, 2021
(in millions)	COGS		SG&A		Total
Employee termination costs	$	24	$	6	$	30

Asset impairments	5		—		5
Total restructuring charges	$	29	$	6	$	35

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


(in millions)
Liability balance as of December 31, 2021	$	109
Charges	92
Payments	(70)
Reserve adjustments	(6)
Currency translation	(9)
Liability balance as of June 30, 2022	$	116

Substantially all of our restructuring liabilities as of June 30, 2022 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 2023.