James Saccaro: Sure. So overall, with respect to operating margins, we do now anticipate a reduction, as you pointed out. And I would say that there are a few drivers of that. First, the lower sales outlook. When you think about things like absorption, some of the higher-margin areas, the lower sales outlook does have an impact of $0.40 to $0.50 in earnings with an attending operating margin impact. Secondly, I’d point to supply chain headwinds that impact the first half of the year, most prominently. And these are incremental to what we previously said. As we went through the fourth quarter, we were still purchasing electronic components at much higher levels than we anticipated. The spot market was very challenging. So things like that led to incremental costs that roll out into the first half of the year.
And then, we do have some benefits related to the incremental savings program and FX is a modest headwind overall. As we look at operating margin, it’s basically flat, maybe a little bit of a — maybe — it’s basically flat as we look at the bottom line. And so, those are the factors that impact the operating margin. But Vijay, I do want to make a really important point. As we think about the cadence of the story that occurs over the course of the year, first half of the year will be a challenging operating margin story, as I’ve discussed. But as we start to benefit from indices that currently sit at today’s levels in the product that we sell in the second half of the year, as we start to benefit from more electronic component availability and only reflected modest, very cautious improvements in this area in the second half and as we add incremental sales to the second half as we always do, the second half margin starts to look a lot nicer and a lot more consistent with the trajectory that we expect to see.
As far as the synergies and incremental costs and so on, from a cash flow standpoint, we’ve included roughly $100 million in our cash flow statement. There is maybe $0.03 or so of non-adjusted impact in the P&L for things that are suboptimized as it relates to the spin. So a modest impact in that regard. We’ve reflected that. It’s a bigger impact from a free cash flow standpoint. I’ve discussed this with a number of you already. So I think we’ve got that correctly modeled. And like I said, I think the operating margin story really does start to look a lot better as we approach Q3.
Operator: We’ll go next to Mike — I apologize. Matthew Mishan with KeyBanc.
Matthew Mishan: How are you guys looking at R&D into 2023? Do you have the flexibility to kind of speed up some projects, especially in the transition like this that sets you up for better growth in 2024 and 2025?
James Saccaro: We have earmarked some R&D dollars, in particular, for some of the Hillrom portfolio and some of the connected areas there in Front Line Care, in particular. I will say that as we look at the opportunities presented by the Hillrom acquisition, it’s a really tremendous one long term. And we’re talking — once we’ve resolved the supply constraints, last year growth was essentially flat. We’re seeing — we’re expecting mid-single growth — mid-single-digit growth in the Hillrom portfolio this year in the face of continued supply constraints. And part of that comes from new products. We’ll launch a new ICU bed, as I referenced in my prepared remarks. But to your point, Matt, there are some really interesting opportunities that will protect investment for as we go forward. And I think that should start to accrue to the benefit of frankly, both companies in 2024 and beyond.
