BUSINESS OPTIMIZATION CHARGES

12 Months Ended

Dec. 31, 2023

Restructuring and Related Activities [Abstract]


BUSINESS OPTIMIZATION CHARGES

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. We currently expect to incur additional pre-tax cash costs, primarily related to the implementation of business optimization programs, of approximately $50 million through the completion of initiatives that are currently underway. We continue to pursue cost savings initiatives, including those intended to mitigate a portion of the dis-synergies expected to arise as a result of the proposed spinoff of our Kidney Care business, 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. For segment reporting, business optimization charges are unallocated expenses.

We recorded the following charges related to business optimization programs in 2023, 2022, and 2021:


years ended December 31 (in millions)	2023		2022		2021
Restructuring charges	$	478	$	163	$	91
Costs to implement business optimization programs1	56		62		23

Total business optimization charges	$	534	$	225	$	114

1 Costs to implement business optimization programs for the years ended December 31, 2023, 2022 and 2021, respectively, consisted primarily of external consulting and transition costs, including employee compensation and related costs. The costs were primarily included within cost of sales and SG&A expenses.

The costs of restructuring actions consisted primarily of employee termination costs, contract termination costs and asset impairments. During the years ended December 31, 2023, 2022 and 2021, we recorded the following restructuring charges:


	2023
(in millions)	COGS		SG&A		R&D		Total
Employee termination costs	$	47	$	115	$	12	$	174
Contract termination and other costs	6		2		—		8
Asset impairments	289		7		—		296
Total restructuring charges	$	342	$	124	$	12	$	478
	2022
(in millions)	COGS		SG&A		R&D		Total
Employee termination costs	$	24	$	102	$	3	$	129
Contract termination and other costs	—		22		—		22
Asset impairments	2		10		—		12
Total restructuring charges	$	26	$	134	$	3	$	163
	2021
(in millions)	COGS		SG&A		R&D		Total
Employee termination costs	$	37	$	35	$	1	$	73
Contract termination and other costs	—		2		—		2
Asset impairments	16		—		—		16
Total restructuring charges	$	53	$	37	$	1	$	91

For the year ended December 31, 2023, $111 million of the restructuring charges reflected 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 year ended December 31, 2023, $267 million of the restructuring charges reflected in the table above, consisting of $243 million of long-lived asset impairment charges, $14 million of other asset write-downs related to inventory and spare parts 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 4 for additional information.

For the year ended December 31, 2022, $85 million of the restructuring charges reflected in the table above were related to integration activities for the Hillrom acquisition, consisting of $55 million of employee termination costs, $22 million of contract terminations and other costs and $8 million of asset impairments.

For the year ended December 31, 2021, $37 million and $12 million, respectively, of restructuring charges reflected in the table above, consisting of employee termination costs, were related to global programs to simplify and streamline our supply chain and finance functions.

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


(in millions)
Liability balance as of December 31, 2020	$	113
Assumed in acquisition	6
Charges	94
Payments	(78)
Reserve adjustments	(19)
Currency translation	(7)
Liability balance as of December 31, 2021	109

Charges	172
Payments	(145)
Reserve adjustments	(21)
Currency translation	(8)
Liability balance as of December 31, 2022	107

Charges	212
Payments	(151)
Reserve adjustments	(30)
Currency translation	(10)
Liability balance as of December 31, 2023	$	128

Reserve adjustments primarily relate to employee termination cost reserves established in prior periods.

Substantially all of our restructuring liabilities as of December 31, 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.