BUSINESS OPTIMIZATION CHARGES

12 Months Ended

Dec. 31, 2021

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. From the commencement of our business optimization activities in the second half of 2015 through December 31, 2021, we have incurred cumulative pre-tax costs of approximately $1.2 billion related to these actions. These 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 cash costs of

approximately $30 million through the completion of the initiatives that are currently underway, primarily related to implementation costs. We continue to pursue cost savings initiatives and, to the extent further cost savings opportunities are identified, we may incur additional restructuring charges and costs to implement business optimization programs in future periods.

We recorded the following charges related to business optimization programs in 2021, 2020, and 2019:


years ended December 31 (in millions)	2021		2020		2019
Restructuring charges	$	91	$	111	$	134
Costs to implement business optimization programs	23		23		45
Accelerated depreciation	—		—		5
Total business optimization charges	$	114	$	134	$	184

For segment reporting, business optimization charges are unallocated expenses.

Costs to implement business optimization programs for the years ended December 31, 2021, 2020 and 2019, respectively, consisted primarily of external consulting and transition costs, including employee compensation and related costs. The costs were generally included within cost of sales, SG&A expense and R&D expense.

For the year ended December 31, 2019, we recognized accelerated depreciation, primarily associated with facilities to be closed. The costs were recorded within cost of sales and SG&A expense.

During the years ended December 31, 2021, 2020 and 2019, we recorded the following restructuring charges:


	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
	2020
(in millions)	COGS		SG&A		R&D		Total
Employee termination costs	$	36	$	54	$	2	$	92
Contract termination and other costs	4		4		—		8
Asset impairments	8		3		—		11
Total restructuring charges	$	48	$	61	$	2	$	111
	2019
(in millions)	COGS		SG&A		R&D		Total
Employee termination costs	$	13	$	37	$	25	$	75
Contract termination and other costs	10		1		—		11
Asset impairments	37		2		9		48
Total restructuring charges	$	60	$	40	$	34	$	134

In conjunction with our business optimization initiatives, we sold property that resulted in a gain of $17 million in 2020. This benefit is reflected within other operating income, net in our consolidated statement of income for the year ended December 31, 2020.

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


(in millions)
Liability balance as of December 31, 2018	$	101
Charges	113
Payments	(93)
Reserve adjustments	(27)
Currency translation	(2)
Liability balance as of December 31, 2019	92
Charges	116
Payments	(86)
Reserve adjustments	(16)
Currency translation	7
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

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

Substantially all of our restructuring liabilities as of December 31, 2021 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.