BUSINESS OPTIMIZATION CHARGES

9 Months Ended

Sep. 30, 2023

Restructuring and Related Activities [Abstract]

BUSINESS OPTIMIZATION CHARGESIn 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 implementation of business optimization programs, of approximately $25 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, we would incur additional restructuring charges and costs to implement business optimization programs in future periods.

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


	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	2023		2022		2023		2022
Restructuring charges	$	64	$	57	$	461	$	150
Costs to implement business optimization programs	17		16		47		46

Total business optimization charges	$	81	$	73	$	508	$	196

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

Costs to implement business optimization programs for the three and nine months ended September 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 nine months ended September 30, 2023 and 2022, we recorded the following restructuring charges.


	Three months ended September 30, 2023
(in millions)	COGS		SG&A		R&D		Total
Employee termination costs	$	17	$	33	$	5	$	55
Contract termination and other costs	—		2		—		2
Asset impairments	7		—		—		7
Total restructuring charges	$	24	$	35	$	5	$	64


	Three months ended September 30, 2022
(in millions)	COGS		SG&A		R&D		Total
Employee termination costs	$	13	$	36	$	4	$	53
Contract termination and other costs	—		2		—		2
Asset impairments	1		1		—		2
Total restructuring charges	$	14	$	39	$	4	$	57



	Nine months ended September 30, 2023
(in millions)	COGS		SG&A		R&D		Total
Employee termination costs	$	43	$	115	$	12	$	170
Contract termination and other costs	3		4		—		7
Asset impairments	276		8		—		284
Total restructuring charges	$	322	$	127	$	12	$	461



	Nine months ended September 30, 2022
(in millions)	COGS		SG&A		R&D		Total
Employee termination costs	$	19	$	99	$	4	$	122
Contract termination and other costs	—		19		—		19
Asset impairments	1		8		—		9
Total restructuring charges	$	20	$	126	$	4	$	150

For the three and nine months ended September 30, 2023, $14 million and $111 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 nine months ended September 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 September 30, 2022, $14 million of the restructuring charges reflected in the table above were related to integration activities for the Hillrom acquisition, consisting of $12 million of employee termination costs and $2 million of contract termination. For the nine months ended September 30, 2022, $97 million of the restructuring charges reflected in the table above were related to integration activities for the Hillrom acquisition, consisting of $71 million of employee termination costs, $19 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	189
Payments	(108)
Reserve adjustments	(12)
Currency translation	(5)
Liability balance as of September 30, 2023	$	171

Substantially all of our restructuring liabilities as of September 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.