What changed in this filing

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Item 1. Financial Statements

2022-04-28 compared with 2021-10-28 · 271 added, 411 removed, 555 unchanged (55% of the section changed)

3 unchanged sentences

(in millions, except share information)

September 30,

2022 December 31,

17 unchanged sentences

Total current liabilities 3,890 4,236

Long-term debt and finance lease obligations 5,446 5,786

Long-term debt and finance lease obligations, less current portion 16,765 17,149

Operating lease liabilities 508 522

17 unchanged sentences

Three months ended

September 30, Nine months ended

September 30,

2021 2020 2021 2020

Net sales $ 3,707 $ 2,946

3 unchanged sentences

Research and development expenses 150 128

Other operating expense (income), net ( 1 ) 1 ( 6 ) ( 19 )

Other operating income, net ( 17 ) —

Operating income 163 390

Interest expense, net 85 34

Other expense, net 12 16 15 32

Other (income) expense, net ( 16 ) 5

Income before income taxes 94 351

Income tax (benefit) expense ( 1 ) 56 141 143

Income tax expense 21 51

Net income 73 300

12 unchanged sentences

Three months ended

September 30, Nine months ended

September 30,

2021 2020 2021 2020

Net income $ 73 $ 300

Other comprehensive income (loss), net of tax:

Currency translation adjustments, net of tax expense (benefit) of $ 3 and $ 18 for the three months ended September 30, 2021 and 2020, respectively, and $ 16 and $ 12 for the nine months ended September 30, 2021 and 2020, respectively

( 137 ) 127 ( 257 ) ( 43 )

Pension and other postretirement benefits, net of tax expense of $ 8 and $ 0 for the three months ended September 30, 2021 and 2020, respectively, and $ 19 and $ 7 for the nine months ended September 30, 2021 and 2020, respectively

Hedging activities, net of tax expense (benefit) of $ 3 and $ 5 for the three months ended September 30, 2021 and 2020, respectively, and $ 8 and ($ 33 ) for the nine months ended September 30, 2021 and 2020, respectively

Currency translation adjustments, net of tax expense (benefit) of ($ 11 ) and $ 17 for the three months ended March 31, 2022 and 2021, respectively.

( 15 ) ( 208 )

Total other comprehensive income (loss), net of tax ( 106 ) 149 ( 168 ) ( 129 )

Pension and other postretirement benefits, net of tax expense of $ 3 and $ 8 for the three months ended March 31, 2022 and 2021, respectively.

Hedging activities, net of tax expense (benefit) of ($ 1 ) and $ 3 for the three months ended March 31, 2022 and 2021, respectively.

Debt securities, net of tax expense of $ 1 and zero for the three months ended March 31, 2022 and 2021, respectively

Total other comprehensive loss, net of tax ( 7 ) ( 166 )

Comprehensive income 66 134

5 unchanged sentences

(in millions)

For the three months ended September 30, 2021

For the three months ended March 31, 2022

Baxter International Inc.

4 unchanged sentences

income (loss) Total Baxter stockholders' equity Noncontrolling interests Total equity

Balance as of July 1, 2021 683 $ 683 184 $ ( 11,561 ) $ 6,090 $ 16,658 $ ( 3,376 ) $ 8,494 $ 41 $ 8,535

Balance as of January 1, 2022 683 $ 683 182 $ ( 11,488 ) $ 6,197 $ 17,065 $ ( 3,380 ) $ 9,077 $ 44 $ 9,121

Net income — — — — — 71 — 71 2 73

3 unchanged sentences

Change in noncontrolling interests — — — — — — — — ( 2 ) ( 2 )

Balance as of September 30, 2021

Balance as of March 31, 2022

683 $ 683 180 $ ( 11,422 ) $ 6,207 $ 16,994 $ ( 3,387 ) $ 9,075 $ 44 $ 9,119

For the nine months ended September 30, 2021

For the three months ended March 31, 2021

Baxter International Inc.

8 unchanged sentences

Change in noncontrolling interests — — — — — — — — ( 1 ) ( 1 )

Balance as of September 30, 2021

683 $ 683 183 $ ( 11,529 ) $ 6,131 $ 16,967 $ ( 3,482 ) $ 8,770 $ 45 $ 8,815

For the three months ended September 30, 2020

Baxter International Inc.

stockholders' equity

Common stock shares Common stock Common stock shares in treasury Common stock in treasury Additional contributed capital Retained earnings Accumulated other comprehensive income (loss) Total Baxter stockholders' equity Noncontrolling interests Total equity

Balance as of July 1, 2020 683 $ 683 173 $ ( 10,597 ) $ 5,975 $ 16,055 $ ( 3,988 ) $ 8,128 $ 32 $ 8,160

Net income — — — — — 356 — 356 3 359

Other comprehensive income (loss) — — — — — — 149 149 — 149

Stock issued under employee benefit plans and other — — — 26 34 — — 60 — 60

Dividends declared on common stock — — — — — ( 126 ) — ( 126 ) — ( 126 )

Balance as of September 30, 2020 683 $ 683 173 $ ( 10,571 ) $ 6,009 $ 16,285 $ ( 3,839 ) $ 8,567 $ 35 $ 8,602

For the nine months ended September 30, 2020

Baxter International Inc.

stockholders' equity

Balance as of January 1, 2020 683 $ 683 177 $ ( 10,764 ) $ 5,955 $ 15,718 $ ( 3,710 ) $ 7,882 $ 30 $ 7,912

Adoption of new accounting standards — — — — — ( 4 ) — ( 4 ) — ( 4 )

Net income — — — — — 934 — 934 5 939

Other comprehensive income (loss) — — — — — — ( 129 ) ( 129 ) — ( 129 )

Stock issued under employee benefit plans and other — — ( 4 ) 193 54 — — 247 — 247

Dividends declared on common stock — — — — — ( 363 ) — ( 363 ) — ( 363 )

Balance as of September 30, 2020

683 $ 683 173 $ ( 10,571 ) $ 6,009 $ 16,285 $ ( 3,839 ) $ 8,567 $ 35 $ 8,602

Balance as of March 31, 2021 683 $ 683 181 $ ( 11,296 ) $ 6,043 $ 16,502 $ ( 3,480 ) $ 8,452 $ 38 $ 8,490

The accompanying notes are an integral part of these condensed consolidated financial statements.

2 unchanged sentences

(in millions)

Nine months ended

September 30,

Three months ended

Cash flows from operations

5 unchanged sentences

Net periodic pension and other postretirement costs 14 26

Intangible asset impairment — 17

Other ( 12 ) 14

Changes in balance sheet items:

5 unchanged sentences

Other ( 43 ) 1

Cash flows from operations – continuing operations 1,529 1,158

Cash flows from operations – discontinued operations — ( 2 )

Cash flows from operations 208 377

6 unchanged sentences

Repayments of debt ( 404 ) —

Issuances of debt 50 1,240

Net increase (decrease) in debt with original maturities of three months or less 251 ( 226 )

Net decreases in debt with original maturities of three months or less ( 45 ) —

Cash dividends on common stock ( 140 ) ( 125 )

1 unchanged sentence

Purchases of treasury stock — ( 253 )

Debt issuance costs ( 37 ) ( 3 )

Other financing activities, net ( 25 ) ( 28 )

1 unchanged sentence

Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash ( 13 ) ( 31 )

Increase (decrease) in cash, cash equivalents and restricted cash ( 475 ) 1,031

Decrease in cash, cash equivalents and restricted cash ( 657 ) ( 550 )

Cash, cash equivalents and restricted cash at beginning of period (1)

1 unchanged sentence

$ 2,299 $ 3,186

(1) We did not have any restricted cash balances as of December 31, 2019.

The following table provides a reconciliation of cash, cash equivalents and restricted cash shown above to the amounts reported within the condensed consolidated balance sheet as of September 30, 2021,

December 31, 2020, and September 30, 2020 (in millions):

September 30, 2021 December 31, 2020 September 30, 2020

(1) The following table provides a reconciliation of cash, cash equivalents and restricted cash shown above to the amounts reported within the condensed consolidated balance sheet as of March 31, 2022, December 31, 2021, and March 31, 2021 (in millions):

March 31, 2022 December 31, 2021 March 31, 2021

Cash and cash equivalents $ 2,294 $ 2,951 $ 3,182

6 unchanged sentences

The unaudited interim condensed consolidated financial statements of Baxter International Inc.

and its subsidiaries (we or our) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC).

and its subsidiaries (we or our) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) for interim financial reporting.

Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S.

1 unchanged sentence

GAAP) in the United States have been condensed or omitted.

These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in our Current Report on Form 8-K filed with the SEC on April 29, 2021 (2020 Annual Report), which revised and superseded the corresponding sections of the Annual Report on Form 10-K for the year ended December 31, 2020.

These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2021 (2021 Annual Report).

In the opinion of management, the unaudited interim condensed consolidated financial statements reflect all adjustments necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented.

1 unchanged sentence

The results of operations for the current interim period are not necessarily indicative of the results of operations to be expected for the full year.

Certain reclassifications have been made to conform the prior period condensed consolidated statements to the current period presentation.

Risks and Uncertainties Related to COVID-19

Our global operations expose us to risks associated with public health crises and epidemics/pandemics, such as the COVID-19 pandemic.

Risks and Uncertainties Related to COVID-19 and Global Economic Conditions

Our global operations expose us to risks associated with public health crises and epidemics/pandemics, such as the novel strain of coronavirus (COVID-19).

COVID-19 has had, and we expect will continue to have, an adverse impact on our operations, supply chains and distribution systems and has increased and we expect will continue to increase our expenses, including as a result of impacts associated with preventive and precautionary measures that we, other businesses and governments have taken and continue to take.

1 unchanged sentence

The pandemic has created significant volatility in the demand for our products.

For further information about our revenues by product category, refer to Note 9 - Revenues.

For further information about our revenues by product category, refer to Note 9.

Significant uncertainty remains regarding the duration and overall impact of the COVID-19 pandemic.

For example, concerns remain regarding the pace of economic recovery due to virus resurgence across the globe from the Delta variant and other virus mutations as well as vaccine distribution and hesitancy.

and other governments may continue existing measures or implement new restrictions and other requirements in light of the continuing spread of the pandemic (including with respect to mandatory vaccinations for certain of our employees).

For example, concerns remain regarding the pace of economic recovery due to virus resurgence across the globe from the Omicron variants, subvariants and other virus mutations as well as vaccine distribution and hesitancy.

Due to the uncertainty caused by the pandemic, our operating performance and financial results, particularly in the short term, may be subject to volatility.

We have experienced significant challenges, including lengthy delays, shortages and interruptions, posed by the pandemic and other exogenous factors (including significant weather events and disruptions to certain ports of call around the world) to our global supply chain, including the cost and availability of raw materials and component parts (including resins and electromechanical devices) and higher transportation costs, and may experience these and other challenges in future periods.

We have experienced significant challenges, including lengthy delays, shortages and interruptions, posed by the pandemic and other exogenous factors (including significant weather events, disruptions to certain ports of call around the world and certain geopolitical events) to our global supply chain, including the cost and availability of raw materials and component parts (including resins and electromechanical devices) and higher transportation costs, and may experience these and other challenges in future periods.

Many of our manufacturing plant and distribution center personnel are currently unvaccinated, and we may also experience employee resistance in complying with current and future government vaccine and testing mandates, which may cause labor shortages significantly impacting manufacturing production and distribution center productivity.

We expect that these challenges as well as evolving governmental restrictions and requirements, among other factors, may continue to have an adverse effect on our business.

New Accounting Standards

Recently adopted accounting pronouncements

As of January 1, 2022, we adopted Accounting Standards Update (ASU) 2021-05, Leases (Topic 842), which requires a lessor to classify a lease with variable lease payments (that do not depend on an index or rate) as an operating lease if (1) the lease would have been classified as a sales-type or direct financing lease, and (2) the lessor would have recognized a selling loss at lease commencement.

These changes are intended to avoid recognizing a day-one loss for a lease with variable payments even though the lessor expects the arrangement will be profitable overall.

The adoption of this ASU did not have a material impact on our condensed consolidated financial statements.

ACQUISITIONS AND OTHER ARRANGEMENTS

Proposed Acquisition of Hillrom

On September 2, 2021, we announced that we have entered into a definitive agreement to acquire all of the outstanding equity interests of Hill-Rom Holdings, Inc.

(Hillrom) for total cash consideration of approximately $ 10.5 billion.

Including the assumption of Hillrom's outstanding debt obligations, the enterprise value of the transaction will be approximately $ 12.4 billion.

Under the terms of the transaction agreement, Hillrom shareholders will receive

$ 156.00 in cash for each Hillrom share.

The transaction is expected to close in early 2022, subject to the approval of Hillrom shareholders a nd the satisfaction of customary closing conditions, including regulatory approvals.

Hillrom is a global medical technology leader whose products and services help enable earlier diagnosis and treatment, optimize surgical efficiency, and accelerate patient recovery while simplifying clinical communication and shifting care closer to home.

Hillrom makes those outcomes possible through digital and connected care solutions and collaboration tools, including smart bed systems, patient monitoring and diagnostic technologies, respiratory health devices, advanced equipment for the surgical space and more, delivering actionable, real-time insights at the point of care.

In connection with the proposed acquisition of Hillrom, on September 1, 2021, we entered into a bridge facility commitment letter with JPMorgan Chase Bank, N.A.

(JP Morgan) and Citigroup Global Markets Inc.

(Citi) pursuant to which JP Morgan and Citi have committed to provide a 364 -day senior unsecured bridge term loan facility in an aggregate principal amount of $ 11.4 billion (the Bridge Facility) for the purpose of funding the consideration for the Hillrom acquisition, refinancing certain indebtedness of Hillrom, and paying fees and expenses related to the foregoing.

Loans under the Bridge Facility will bear interest at variable rates, will be due 364 days after the loan is issued and contain various covenants, including a maximum net leverage ratio.

The Bridge Facility included upfront fees of $ 40 million that will increase to $ 53 million if the Bridge Facility is not terminated within 120 days of the date the Bridge Facility was executed.

The commitments in respect of the Bridge Facility were syndicated to additional financial institutions on September 30, 2021.

Undrawn commitments in respect of the Bridge Facility will be subject to a ticking fee commencing on the later of (x) the date that definitive documentation with respect to the Bridge Facility is executed and (y) November 30, 2021 at a rate per annum equal to 0.125 %.

Loans under the Bridge Facility, if funded, will bear interest at variable rates, will be due 364 days after the initial funding of such loans and contain various covenants, including a maximum net leverage ratio.

In addition, loans drawn under the Bridge Facility will be subject to a duration fee equal to (i) 0.5 % of the outstanding loans on the 90 th day after the initial funding of such loans, (ii) 0.75 % of the outstanding loans on the 180 th day after the initial funding of such loans and (iii) 1 % of the outstanding loans on the 270 th day after the initial funding of such loans.

On September 30, 2021, we entered into a term loan credit agreement (the Term Loan Credit Agreement), pursuant to which a syndicate of financial institutions has committed to provide us with a senior unsecured term loan facility in an aggregate principal amount of $ 4.0 billion (the Term Loan Facility), consisting of a $ 2.0 billion three-year term loan and a $ 2.0 billion five-year term loan.

Loans under the Term Loan Facility will be available on the closing date of the Hillrom acquisition to fund the consideration for the Hillrom acquisition, refinance certain indebtedness of Hillrom, and pay fees and expenses related to the foregoing.

Loans under the Term Loan Facility will bear interest at variable rates, will be subject to amortization at an annual rate of 0.625 % for the first year and 1.25 % thereafter (with loans outstanding under the five -year tranche subject to amortization at an annual rate of 1.875 % after the second anniversary of the commencement of amortization and 2.500 % after the third anniversary of the commencement of amortization).

The Term Loan Credit Agreement contains various covenants, including a maximum net leverage ratio.

Undrawn commitments under the Term Loan Facility are subject to a ticking fee commencing on November 30, 2021 at a rate per annum equal to 0.125 %.

The aggregate principal amount of the commitments under the Term Loan Facility have replaced a corresponding amount under the commitment letter in respect of the Bridge Facility, in accordance with the terms of the commitment letter.

As a result, there are now $ 7.4 billion in bridge facility commitments remaining.

We expect to replace these remaining commitments with cash on the balance sheet and/or permanent financing in the form of the issuance of debt securities prior to the closing of the proposed acquisition of Hillrom.

Transderm Scop

In March 2021, we acquired the rights to Transderm Scop (TDS) for the U.S.

and specified territories outside of the U.S.

from subsidiaries of GlaxoSmithKline for an upfront purchase price of $ 60 million including the cost of acquired inventory and the potential for additional cash consideration of $ 30 million, which had an acquisition-date fair value of $ 24 million, based upon regulatory approval of a new contract manufacturer by a specified date.

We previously sold this product under a distribution license to the U.S.

institutional market.

TDS is indicated for post-operative nausea and vomiting in the U.S.

and motion sickness in European markets.

W e concluded that the acquired assets met the definition of a business and accounted for the transaction as a business combination using the acquisition method of accounting.

The fair value of the potential contingent consideration payment was estimated by applying a probability-

weighted expected payment model and is a Level 3 fair value measurement due to the significant estimates and assumptions used by management in establishing the estimated fair value.

The following table summarizes the fair value of the consideration transferred:

(in millions)

Contingent Consideration 24

Total Consideration $ 84

The following table summarizes the fair value of the assets acquired as of the acquisition date:

(in millions)

Assets acquired

Inventory $ 16

Other intangible assets 67

Total assets acquired $ 84

The results of operations of the acquired business have been included in our consolidated statement of income since the date the business was acquired and were not material for the three and nine months ended September 30, 2021.

We allocated $ 64 million of the total consideration to the TDS developed product rights with an estimated useful life of 9 years and $ 3 million to customer relationships with an estimated useful life of 7 years.

The fair values of the intangible assets were determined using the income approach.

The discount rates used to measure the intangible assets were 22.5 % for developed product rights and 15.5 % for customer relationships.

We consider the fair values of the intangible assets to be Level 3 measurements due to the significant estimates and assumptions used by management in establishing the estimated fair values.

The goodwill, which is deductible for tax purposes, includes the value of overall strategic benefits provided to our pharmaceutical portfolio and is included in the Americas segment.

In July 2021, we acquired certain assets related to PerClot Polysaccharide Hemostatic System (PerClot), including distribution rights for the U.S.

and specified territories outside of the U.S., from CryoLife, Inc.

for an upfront purchase price of $ 25 million and the potential for additional cash consideration of up to $ 36 million, which had an acquisition-date fair value of $ 28 million, based upon regulatory and commercial milestones.

PerClot is an absorbable powder hemostat indicated for use in surgical procedures, including cardiac, vascular, orthopedic, spinal, neurological, gynecological, ENT and trauma surgery as an adjunct hemostat when control of bleeding from capillary, venous, or arteriolar vessels by pressure, ligature, and other conventional means is either ineffective or impractical.

PerClot is approved for distribution in the European Union and other markets and is expected to be submitted for Pre-Market Approval (PMA) for distribution in the U.S.

in the fourth quarter of 2021.

We concluded that the acquired assets met the definition of a business and accounted for the transaction as a business combination using the acquisition method of accounting.

The fair values of the potential contingent consideration payments were estimated by applying probability-weighted expected payment models and are Level 3 fair value measurements due to the significant estimates and assumptions used by management in establishing the estimated fair values.

The following table summarizes the fair value of the consideration transferred:

On December 13, 2021, we completed our acquisition of all outstanding equity interests of Hill-Rom Holdings, Inc.

(Hillrom) for a purchase price of $ 10.5 billion.

Including the assumption of Hillrom's outstanding debt, the enterprise value of the transaction was approximately $ 12.8 billion.

Under the terms of the transaction agreement, Hillrom shareholders received $ 156.00 in cash per outstanding Hillrom common share.

The following table summarizes the fair value of the total consideration paid:

(in millions)

Contingent Consideration 28

Cash consideration paid to Hillrom shareholders (a)

Fair value of equity awards issued to Hillrom equity award holders (b)

Total Consideration $ 10,476

The following table summarizes the fair value of the assets acquired as of the acquisition date:

(a) Represents cash consideration transferred of $ 156.00 per outstanding Hillrom common share to existing shareholders and holders of equity awards that vested at closing pursuant to their original terms.

(b) Represents the pre-acquisition service portion of the fair value of 668 thousand replacement restricted stock units issued to Hillrom equity award holders at closing.

The valuation of assets acquired and liabilities assumed has not yet been finalized as of March 31, 2022.

Finalization of the valuation during the measurement period could result in a change in the amounts recorded for acquired intangible assets, goodwill and income taxes among other items.

The completion of the valuation will occur no later than one year from the acquisition date.

The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed as of the acquisition date:

(in millions)

Assets acquired

Assets acquired and liabilities assumed

Cash and cash equivalents $ 399

Accounts receivable 590

Inventories 557

Prepaid expenses and other current assets 49

Property, plant and equipment 502

Goodwill 6,795

Other intangible assets 6,029

Total assets acquired $ 53

The valuation of the assets acquired are preliminary and measurement period adjustments may be recorded in the future as we finalize our fair value estimates.

We allocated $ 39 million of the total consideration to an in-process research and development (IPR&D) asset with an indefinite useful life, $ 9 million to the approved PerClot developed product rights with an estimated useful life of 10 years and $ 1 million to customer relationships with an estimated useful life of 10 years.

The fair values of the intangible assets were determined using the income approach.

The discount rates used to measure the intangible assets were 18.7 % for IPR&D, 16.0 % for developed product rights and 15.0 % for customer relationships.

We consider the fair values of the intangible assets to be Level 3 measurements due to the significant estimates and assumptions used by management in establishing the estimated fair values.

The goodwill, which is deductible for tax purposes, includes the value of overall strategic benefits provided to our surgical portfolio of hemostats and sealants and is included in the Americas and EMEA segments.

We have not presented pro forma financial information for either of the 2021 business combinations because their results are not material to our consolidated financial statements.

Caelyx and Doxil

In February 2021, we acquired the rights to Caelyx and Doxil, the branded versions of liposomal doxorubicin, from a subsidiary of Johnson & Johnson for specified territories outside of the U.S.

We previously acquired the U.S.

rights to this product in 2019.

Liposomal doxorubicin is a chemotherapy medicine used to treat various types of cancer.

The transaction was accounted for as an asset acquisition, as substantially all of the fair value of the gross assets acquired was concentrated in the developed technology intangible asset.

The purchase price of $ 325 million was allocated to the assets acquired, which included a $ 314 million developed-technology intangible asset with an estimated useful life of 9 years and an $ 11 million customer relationship intangible asset with an estimated useful life of 8 years.

Net sales related to this acquisition were $ 32 million and $ 73 million, respectively, for the three and nine months ended September 30, 2021.

Operating lease right-of-use assets 74

Other non-current assets 125

Short-term debt ( 250 )

Accounts payable ( 140 )

Accrued expenses and other current liabilities ( 552 )

Long-term debt and finance lease obligations ( 2,118 )

Operating lease liabilities ( 57 )

Other non-current liabilities ( 1,527 )

Total assets acquired and liabilities assumed $ 10,476

In the first quarter of 2022, we recorded measurement period adjustments to increase other intangible assets of $ 7 million, increase deferred income tax liabilities of $ 11 million, other individually insignificant adjustments for a net

decrease to assets acquired and liabilities assumed of $ 6 million and a corresponding increase to goodwill of $ 10 million.

The measurement period adjustments did not have a significant impact our results of operations.

The goodwill, which is not deductible for tax purposes, includes the value of an assembled workforce as well as the overall strategic benefits provided to our product portfolio and is included in the Hillrom segment.

For the three months ended March 31, 2022, we recognized $ 159 million of incremental costs of sales from the fair value step-ups on acquired Hillrom inventory that was sold in the current period.

Other Business Development Activities

In March 2022, we entered into an agreement with a subsidiary of Pfizer Inc.

to acquire the rights to Zosyn, a premixed frozen piperacillin-tazobactam product, in the U.S.

Zosyn is used for the treatment of intra-abdominal infections, nosocomial pneumonia, skin and skin structure infections, female pelvic infections and community-acquired pneumonia.

Under the terms of the acquisition, we paid the acquisition price of $ 122 million currently, received specified intellectual property, including patent rights, in the current period and will receive additional intellectual property, including the product rights to Zosyn, in one year.

Under the arrangement, we are entitled to receive profit sharing payments from sales of Zosyn until the product rights transfer to us in March 2023.

The transaction has been accounted for as an asset acquisition, as substantially all of the fair value of the assets being acquired under the arrangement was concentrated in the product rights that we will receive, which we classify as a developed technology intangible asset.

Accordingly, the $ 122 million purchase price was primarily allocated to the developed technology intangible asset class and will be amortized over an estimated useful life of 9 years.

SUPPLEMENTAL FINANCIAL INFORMATION

Interest Expense, Net

Three months ended

September 30, Nine months ended

September 30,

(in millions) 2021 2020 2021 2020

Interest expense, net of capitalized interest $ 54 $ 42 $ 128 $ 112

Interest income ( 4 ) ( 3 ) ( 10 ) ( 16 )

Interest expense, net $ 50 $ 39 $ 118 $ 96

Other Expense, Net

Three months ended

September 30, Nine months ended

September 30,

(in millions) 2021 2020 2021 2020

Foreign exchange (gains) losses, net $ — $ 23 $ 5 $ 44

Pension and other postretirement benefit plans 4 — 11 ( 2 )

Change in fair value of marketable equity securities 9 ( 9 ) 2 ( 9 )

Other, net ( 1 ) 2 ( 3 ) ( 1 )

Other expense, net $ 12 $ 16 $ 15 $ 32

Allowance for Doubtful Accounts

The following table is a summary of the changes in our allowance for doubtful accounts for the three and nine months ended September 30, 2021 and 2020.

The following table is a summary of the changes in our allowance for doubtful accounts for the three months ended March 31, 2022 and 2021.

Three months ended

September 30, Nine months ended

September 30,

(in millions) 2022 2021

Balance at beginning of period $ 122 $ 125

Adoption of new accounting standard — — — 4

Charged to costs and expenses 6 1

2 unchanged sentences

Balance at end of period $ 129 $ 120

(in millions) September 30,

(in millions) March 31,

2022 December 31,

4 unchanged sentences

Property, Plant and Equipment, Net

(in millions) September 30,

(in millions) March 31,

2022 December 31,

2 unchanged sentences

Property, plant and equipment, net $ 5,114 $ 5,178

Interest Expense, Net

Three months ended

(in millions) 2022 2021

Interest expense, net of capitalized interest $ 88 $ 37

Interest income ( 3 ) ( 3 )

Interest expense, net $ 85 $ 34

Other (Income) Expense, Net

Three months ended

(in millions) 2022 2021

Foreign exchange (gains) losses, net $ ( 11 ) $ ( 3 )

Pension and other postretirement benefit plans ( 5 ) 4

Other, net — 4

Other (income) expense, net $ ( 16 ) $ 5

Non-Cash Operating and Investing Activities

Right-of-use operating lease assets obtained in exchange for lease obligations for the nine months ended September 30, 2021 and 2020 were $ 69 million and $ 42 million, respectively.

Right-of-use finance lease assets obtained in exchange for lease obligations for the nine months ended September 30, 2020 were $ 7 million.

Purchases of property, plant and equipment included in accounts payable as of September 30, 2021 and 2020 were $ 49 million and $ 48 million, respectively.

Right-of-use operating lease assets obtained in exchange for lease obligations for the three months ended March 31, 2022 and 2021 were $ 14 million and $ 5 million, respectively.

Purchases of property, plant and equipment included in accounts payable as of March 31, 2022 and 2021 were $ 53 million and $ 63 million, respectively.

There were no unsettled share repurchases as of March 31, 2022.

Unsettled share repurchases included in accrued expenses and other current liabilities were $ 47 million as of March 31, 2021.

GOODWILL AND OTHER INTANGIBLE ASSETS, NET

The following is a reconciliation of goodwill by business segment.

(in millions) Americas EMEA APAC Total

(in millions) Americas EMEA APAC Hillrom Total

Balance as of December 31, 2021 $ 2,517 $ 309 $ 224 $ 6,786 $ 9,836

Reallocation of goodwill 81 ( 81 ) — —

Acquisitions 4 1 — 5

Acquisition accounting adjustments — — — 10 10

Currency translation ( 29 ) ( 3 ) ( 3 ) 5 ( 30 )

Balance as of September 30, 2021 $ 2,556 $ 314 $ 228 $ 3,098

As of September 30, 2021, there were no reductions in goodwill relating to impairment losses.

As discussed in Note 16 - Segment Information, we made a change to our reportable segments in the first quarter of 2021.

As a result of this change, we reallocated goodwill from our EMEA segment to the Americas segment using a relative fair value approach.

In addition, we completed an assessment of any potential goodwill impairment for all reporting units immediately prior to the reallocation and determined that no impairment existed.

Balance as of March 31, 2022 $ 2,488 $ 306 $ 221 $ 6,801 $ 9,816

As of March 31, 2022, there were no reductions in goodwill relating to impairment losses.

Other intangible assets, net

The following is a summary of our other intangible assets.

(in millions) Developed technology, including patents Other amortized intangible assets Indefinite-lived intangible assets

September 30, 2021

(in millions) Customer relationships Developed technology, including patents Other amortized intangible assets Indefinite-lived intangible assets

March 31, 2022

Gross other intangible assets $ 3,457 $ 3,883 $ 340 $ 2,140 $ 9,820

5 unchanged sentences

Other intangible assets, net $ 3,275 $ 2,245 $ 132 $ 2,140 $ 7,792

Intangible asset amortization expense was $ 68 million and $ 57 million for the three months ended September 30, 2021 and 2020, respectively, and $ 199 million and $ 165 million for the nine months ended September 30, 2021 and 2020, respectively.

In the second quarter of 2020, we recognized an impairment charge of $ 17 million related to a developed-technology intangible asset due to a decline in market expectations for the related product.

The fair value of the intangible asset was measured using a discounted cash flow approach and the charge is classified within cost of sales in the accompanying condensed consolidated statement of income.

We consider the fair value of the asset to be a Level 3 measurement due to the significant estimates and assumptions we used in establishing the estimated fair value.

Intangible asset amortization expense was $ 217 million and $ 64 million for the three months ended March 31, 2022 and 2021, respectively.

FINANCING ARRANGEMENTS

Significant Debt Activity

In connection with the proposed acquisition of Hillrom, we entered into the Bridge Facility and the Term Loan Agreement that would provide for total debt commitments of $ 11.4 billion for the purpose of funding the consideration for the Hillrom acquisition, refinancing certain indebtedness of Hillrom, and paying fees and expenses related to the foregoing.

Refer to Note 2 for additional information.

In 2020, we issued $ 500 million of 3.95 % senior notes due in 2030 and $ 650 million of 1.73 % senior notes due in 2031 (the Notes).

In conjunction with the issuances of the Notes, we entered into registration rights agreements in which we agreed to file a registration statement with the SEC with respect to an offer to exchange the Notes for new issues of Notes with the same terms registered under the Securities Act of 1933.

Those exchange offers with respect to the Notes were completed in May 2021.

In July 2021, Baxter redeemed $ 400 million in 1.7 % Senior Notes due August 2021, which was partially funded by the issuance of commercial paper.

In March 2022, we repaid $ 170 million of our $ 2.0 billion three-year term loan facility and $ 175 million of our $ 2.0 billion five-year term loan facility.

The loss from the early extinguishment of this debt was not significant.

Credit Facilities

On September 30, 2021, we entered into a new U.S.

dollar-denominated revolving credit facility (the USD Revolver), and on October 1, 2021, we amended our existing Euro-denominated revolving credit facility (as amended, the Euro Revolver).

Our USD Revolver has a capacity of $ 2.5 billion and our Euro Revolver has a capacity of € 200 million.

dollar-denominated revolving credit facility has a capacity of $ 2.5 billion and our Euro-denominated revolving credit facility has a capacity of € 200 million.

Each of the facilities matures in 2026.

The facilities enable us to borrow funds on an unsecured basis at variable interest rates, and contain various covenants, including a maximum net leverage ratio.

Fees under the credit facilities are 0.09 % annually as of September 30, 2021 and are based on our credit ratings and the total capacity of the facility.

Prior to entering into the USD Revolver and the Euro Revolver, our previous U.S.

dollar-denominated revolving credit facility and Euro-denominated revolving credit facility had a maximum capacity of $ 2.0 billion and € 200 million, respectively.

Fees under these credit facilities were 0.09 % annually as of December 31, 2020 and were based on our credit ratings and the total capacity of the facility.

There were no borrowings outstanding under these credit facilities as of September 30, 2021 or December 31, 2020.

There were no borrowings outstanding under these credit facilities as of March 31, 2022 or December 31, 2021.

Commercial Paper

As of September 30, 2021, we had $ 300 million of commercial paper outstanding with a weighted-average interest rate of 0.23 % and an original weighted-average term of 90 days.

There was no commercial paper outstanding as of December 31, 2020.

As of March 31, 2022, we had $ 200 million of commercial paper outstanding with a weighted-average interest rate of 0.5 % and an original weighted-average term of 89 days.

As of December 31, 2021, we had $ 300 million of commercial paper outstanding with a weighted-average interest rate of 0.27 % and an original weighted-average term of 88 days.

COMMITMENTS AND CONTINGENCIES

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If a loss is not probable or a probable loss cannot be reasonably estimated, no liability is recorded.

As of September 30, 2021 and December 31, 2020, our total recorded reserves with respect to legal and environmental matters were $ 73 million and $ 40 million, respectively, and we had a $ 7 million insurance receivable as of September 30, 2021.

As of March 31, 2022 and December 31, 2021, our total recorded reserves with respect to legal and environmental matters were $ 57 million and $ 72 million, respectively.

We have established reserves for certain of the matters discussed below.

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With respect to governmental and regulatory matters, these actions may lead to product recalls, injunctions, and other restrictions on our operations and monetary sanctions, including significant civil or criminal penalties.

With respect to intellectual property, we may be exposed to significant litigation concerning the scope of our and others’ rights.

litigation could result in a loss of patent protection or the ability to market products, which could lead to a significant loss of sales, or otherwise materially affect future results of operations.

With respect to

intellectual property, we may be exposed to significant litigation concerning the scope of our and others’ rights.

Such litigation could result in a loss of patent protection or the ability to market products, which could lead to a significant loss of sales, or otherwise materially affect future results of operations.

Environmental

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The laws generally provide that a PRP may be held jointly and severally liable for the costs of investigating and remediating the site.

Separate from these Superfund cases, we are involved in an ongoing voluntary environmental remediation associated with historic operations at our Irvine, California, United States facility.

As of September 30, 2021 and December 31, 2020, our environmental reserves, which are measured on an undiscounted basis, were $ 18 million and $ 20 million, respectively.

Separate from these Superfund cases noted above, we are involved in an ongoing environmental remediations associated with historic operations at certain of our facilities.

As of March 31, 2022 and December 31, 2021, our environmental reserves, which are measured on an undiscounted basis, were $ 18 million, respectively.

After considering these reserves, the outcome of these matters is not expected to have a material adverse effect on our financial position or results of operations.

General Litigation

In November 2016, a putative antitrust class action complaint seeking monetary and injunctive relief was filed in the United States District Court for the Northern District of Illinois.

The complaint alleges a conspiracy among manufacturers of IV solutions to restrict output and affect pricing in connection with a shortage of such solutions.

Similar parallel actions subsequently were filed.

In January 2017, a single consolidated complaint covering these matters was filed in the Northern District of Illinois.

We filed a motion to dismiss the consolidated complaint in February 2017.

The court granted our motion to dismiss the consolidated complaint without prejudice in July 2018.

The plaintiffs filed an amended complaint, which we moved to dismiss on November 9, 2018.

The court granted our motion to dismiss the amended complaint with prejudice on April 3, 2020.

The plaintiffs did not file an appeal.

In April 2017, we became aware of a criminal investigation by the U.S.

Department of Justice (DOJ), Antitrust Division and a federal grand jury in the United States District Court for the Eastern District of Pennsylvania.

We and an employee received subpoenas seeking production of documents and testimony regarding the manufacturing, selling, pricing and shortages of IV solutions and containers (including saline solutions and certain other injectable medicines sold by us) and communications with competitors regarding the same.

On November 30, 2018, the DOJ notified us that it had closed the investigation.

The New York Attorney General had also requested that we provide information regarding business practices in the IV saline industry.

We cooperated with that request and have been advised that the matter has now been closed.

In August 2019, we were named in an amended complaint filed by Fayette County, Georgia in the MDL In re:

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The plaintiff, who allegedly purchased shares of our common stock during the specified class period, filed this putative class action on behalf of himself and shareholders who acquired Baxter common stock between February 21, 2019 and October 23, 2019.

The plaintiff alleges that we and certain officers violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by making allegedly false and misleading statements and failing to disclose material facts relating to certain intra-company transactions undertaken for the purpose of generating foreign exchange gains or avoiding foreign exchange losses, as well as our internal controls over financial reporting.

The plaintiff alleged that we and certain officers violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by making allegedly false and misleading statements and failing to disclose material facts relating to certain intra-company transactions undertaken for the purpose of generating foreign exchange gains or avoiding foreign exchange losses, as well as our internal controls over financial reporting.

On January 29, 2020, the Court appointed Varma Mutual Pension Insurance Company and Louisiana Municipal Police Employees Retirement System as lead plaintiffs in the case.

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The parties reached an agreement to settle the case for $ 16 million, subject to the completion of confirmatory discovery and final approval by the Court.

The Court granted final approval of the settlement on August 11, 2021.

We were fully reserved for the settlement amount as of September 30, 2021.

In addition, we have received a stockholder request for inspection of our books and records in connection with the announcement made in our Form 8-K on October 24, 2019 that we had commenced an internal investigation into

certain intra-company transactions that impacted our previously reported non-operating foreign exchange gains and losses.

As initially disclosed on October 24, 2019, we also voluntarily advised the staff of the SEC of our internal investigation and we are continuing to cooperate with the staff of the SEC.

The Court granted final approval of the settlement on August 11, 2021 and the settlement became effective on September 13, 2021.

As initially disclosed in our Form 8-K on October 24, 2019, we voluntarily advised the staff of the SEC of an internal investigation into certain intra-company transactions that impacted our previously reported non-operating foreign exchanges gains and losses.

We also received a stockholder request for inspection of our books and records in connection with the October 24, 2019 announcement.

The Company has cooperated with the staff of the SEC in its investigation into related matters, and on February 18, 2022, we reached a settlement with the SEC.

Without admitting or denying the findings in the administrative order issued by the SEC, we agreed to pay a civil penalty of $ 18 million and to cease and desist from violations of specified provisions of the federal securities laws and related rules.

In the order, the SEC acknowledged the Company’s cooperation.

We paid the penalty in the first quarter of 2022.

In March 2020, two lawsuits were filed against us in the Northern District of Illinois by plaintiffs alleging injuries as a result of exposure to ethylene oxide used in our manufacturing facility in Mountain Home, Arkansas to sterilize certain of our products.

The plaintiffs sought damages, including compensatory and punitive damages in an unspecified amount, and unspecified injunctive and declaratory relief.

The parties reached agreement to settle these lawsuits in the third quarter of 2021 for amounts that are not material to our financial results.

The settlement of these claims does not preclude potential future lawsuits on behalf of other plaintiffs.

The parties reached agreement to settle these lawsuits in the third quarter of 2021 for amounts that are not material to our financial results, which were paid in the fourth quarter of 2021.

The settlement of these claims does not preclude potential future lawsuits.

In July 2021, Hill-Rom, Inc.

received a subpoena (from the United States Office of Inspector General for the Department of Health and Human Services (the DHHS) requesting documents and information related to compliance

with the False Claims Act and the Anti-Kickback Statute.

Hillrom has been working with the DHHS and the DOJ to provide information responsive to the subpoena.

Hillrom also voluntarily began a related internal review and Hillrom and now Baxter have been cooperating fully with the DHHS and the DOJ with respect to these matters.

The DHHS often issues this type of subpoena when investigating alleged violations of the False Claims Act.

On December 28, 2021, Linet Americas, Inc.

(Linet) filed a complaint against Hill-Rom Holdings, Inc., Hill-Rom Company, Inc., and Hill-Rom Services, Inc.

in the United States District Court for the Northern District of Illinois, captioned Linet Americas, Inc.

Hill-Rom Holdings, Inc.;

Hill-Rom Company, Inc.;

Hill-Rom Services, Inc.

Linet alleges that Hillrom violated Sections 1, 2 and 3 of The Sherman Antitrust Act of 1890 and the Illinois Antitrust Act by allegedly engaging in anti-competitive conduct in alleged markets for standard, ICU and birthing beds.

Hillrom filed an answer to the complaint on January 28, 2022.

STOCKHOLDERS’ EQUITY

Stock Options Award Modification

In the first quarter of 2020, we modified the terms of stock option awards granted to 123 employees.

Specifically, we extended the term for certain stock options that were scheduled to expire in the first quarter of 2020 as applicable employees were not permitted to exercise these awards due to our announcement in February 2020 that our previously issued financial statements should no longer be relied upon.

The stock options were extended in order to allow impacted employees to exercise their stock option awards for a brief period once we became current with our SEC reporting obligations, which occurred in March 2020.

As a result of the modifications, we recognized an additional $ 8 million of stock compensation expense during the quarter ended March 31, 2020.

Stock-Based Compensation

Stock compensation expense totaled $ 32 million and $ 22 million in the first quarter of 2022 and 2021, respectively.

Approximately 75 % of stock compensation expense is classified within selling, general and administrative (SG&A) expense with the remainder classified in cost of sales and research and development (R&D) expense.

We awarded stock compensation grants which consisted of 1.8 million stock options, 1.2 million restricted stock units (RSUs) and 0.4 million performance stock units (PSUs) during the first quarter of 2022.

The grant date fair values of stock options, RSUs and PSUs awarded in the first quarter of 2022 were $ 33 million, $ 102 million and $ 34 million, respectively.

Stock options and RSUs generally vest in one-third increments over a three-year period.

The vesting conditions for PSUs granted are equally divided based on our compound annual sales growth rate performance, our adjusted return on invested capital performance and on our stock performance relative to a specified peer group.

All of the PSUs vest at the end of the applicable three-year service period.

Stock Options

The weighted-average Black-Scholes assumptions used in establishing the fair value of stock options granted during the period, along with weighted-average grant date fair values, were as follows:

Three months ended

Expected volatility 24 % 25 %

Expected life (in years) 5.5 5.5

Risk-free interest rate 1.8 % 0.8 %

Dividend yield 1.3 % 1.3 %

Fair value per stock option $ 18 $ 16

The total intrinsic value of stock options exercised was $ 27 million and $ 21 million during the first quarters of 2022 and 2021, respectively.

As of March 31, 2022, the unrecognized compensation cost related to all unvested stock options of $ 80 million is expected to be recognized as expense over a weighted-average period of 1.9 years.

As of March 31, 2022, the unrecognized compensation cost related to all unvested RSUs of $ 163 million is expected to be recognized as expense over a weighted-average period of 2.2 years.

As of March 31, 2022, the unrecognized compensation cost related to all unvested PSUs of $ 50 million is expected to be recognized as expense over a weighted-average period of 1.9 years.

Cash Dividends

Cash dividends declared per share for the three and nine months ended September 30, 2021 were $ 0.280 and $ 0.805 , respectively.

Cash dividends declared per share for the three and nine months ended September 30, 2020 were $ 0.245 and $ 0.710 , respectively.

Cash dividends declared per share for the three months ended March 31, 2022 and 2021 were $ 0.28 and $ 0.245 , respectively.

Stock Repurchase Programs

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The Board of Directors increased this authority by an additional $ 1.5 billion in each of November 2016 and February 2018, by an additional $ 2.0 billion in November 2018 and by an additional $ 1.5 billion in October 2020.

During the first nine months of 2021, we repurchased 7.3 million shares under this authority pursuant to Rule 10b5-1 plans.

During the first nine months of 2020, we did not repurchase any shares under this authority.

We had $ 1.3 billion remaining available under the authorization as of September 30, 2021.

During the first quarter of 2022, we did not repurchase any shares under this authority.

During the first quarter of 2021, we repurchased 3.6 million shares under this authority pursuant to a Rule 10b5-1 plan.

We had $ 1.3 billion remaining available under the authorization as of March 31, 2022.

ACCUMULATED OTHER COMPREHENSIVE INCOME

Comprehensive income includes all changes in stockholders’ equity that do not arise from transactions with stockholders, and consists of net income, currency translation adjustments (CTA), certain gains and losses from pension and other postretirement employee benefit (OPEB) plans and gains and losses on cash flow hedges.

The following table is a net-of-tax summary of the changes in accumulated other comprehensive (loss) income (AOCI) by component for the nine months ended September 30, 2021 and 2020.

(in millions) CTA Pension and OPEB plans Hedging activities Total

The following table is a net-of-tax summary of the changes in accumulated other comprehensive (loss) income (AOCI) by component for the three months ended March 31, 2022 and 2021.

(in millions) CTA Pension and OPEB plans Hedging activities Debt securities Total

Gains (losses)

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Net other comprehensive income (loss) ( 15 ) 9 ( 2 ) 1 ( 7 )

Balance as of September 30, 2021 $ ( 2,844 ) $ ( 511 ) $ ( 127 ) $ ( 3,482 )

Balance as of March 31, 2022 $ ( 2,922 ) $ ( 338 ) $ ( 128 ) $ 1 $ ( 3,387 )

(in millions) CTA Pension and OPEB plans Hedging activities Total

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Net other comprehensive income (loss) ( 208 ) 30 12 ( 166 )

Balance as of September 30, 2020 $ ( 2,997 ) $ ( 689 ) $ ( 153 ) $ ( 3,839 )

Balance as of March 31, 2021 $ ( 2,795 ) $ ( 544 ) $ ( 141 ) $ ( 3,480 )

(a) See table below for details about these reclassifications.

The following is a summary of the amounts reclassified from AOCI to net income during the three and nine months ended September 30, 2021 and 2020.

The following is a summary of the amounts reclassified from AOCI to net income during the three months ended March 31, 2022 and 2021.

Amounts reclassified from AOCI (a)

(in millions) Three months ended September 30, 2021 Nine months ended

September 30, 2021 Location of impact in income statement

Amortization of pension and OPEB items

Amortization of net losses and prior service costs or credits $ ( 21 ) $ ( 62 ) Other expense, net

(in millions) Three months ended March 31, 2022 Three months ended March 31, 2021 Location of impact in income statement

Pension and OPEB items

Amortization of net losses and prior service costs or credits $ ( 9 ) $ ( 21 ) Other (income) expense, net

Tax effect 2 4 Income tax expense

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(a) Amounts in parentheses indicate reductions to net income

Amounts reclassified from AOCI (a)

(in millions) Three months ended September 30, 2020 Nine months ended September 30, 2020 Location of impact in income statement

Amortization of pension and OPEB items

Amortization of net losses and prior service costs or credits $ ( 14 ) $ ( 44 ) Other expense, net

Tax effect 3 9 Income tax expense

$ ( 11 ) $ ( 35 ) Net of tax

Gains on hedging activities

Foreign exchange contracts $ ( 2 ) $ 2 Cost of sales

Tax effect 1 — Income tax expense

$ ( 1 ) $ 2 Net of tax

Total reclassifications for the period $ ( 12 ) $ ( 33 ) Total net of tax

(a) Amounts in parentheses indicate reductions to net income

Refer to Note 11 for additional information regarding the amortization of pension and OPEB items and Note 14 for additional information regarding hedging activity.

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Our global payment terms are typically between 30 - 90 days.

The majority of our performance obligations are satisfied at a point in time.

Most of our performance obligations are satisfied at a point in time.

This includes sales of our broad portfolio of essential healthcare products across our geographic segments including acute and chronic dialysis therapies;

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generic injectable pharmaceuticals;

and surgical hemostat and sealant products.

For a majority of these sales, our performance obligation is satisfied upon delivery to the customer.

surgical hemostat and sealant products;

hospital beds and services;

surgical tables, lights and pendants;

and patient monitoring and diagnostic technologies.

For most of those sales, our performance obligation is satisfied upon delivery to the customer.

Shipping and handling activities are considered to be fulfillment activities and are not considered to be a separate performance obligation.

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Revenue is recognized over time when we are creating or enhancing an asset that the customer controls as the asset is created or enhanced or our performance does not create an asset with an alternative use and we have an enforceable right to payment for performance completed.

As of September 30, 2021, we had $ 8.3 billion of transaction price allocated to remaining performance obligations related to executed contracts with an original duration of one year or more, which are primarily included in the Americas segment.

As of March 31, 2022, we had $ 8.2 billion of transaction price allocated to remaining performance obligations related to executed contracts with an original duration of one year or more, which are primarily included in the Americas segment.

Some contracts in the United States included in this amount contain index-dependent price increases, which are not known at this time.

We expect to recognize approximately 10 % of this amount as revenue over the remainder of 2021, 30 % in each of 2022 and 2023 and 15 % in each of 2024 and 2025.

We expect to recognize approximately 30 % of this amount as revenue over the remainder of 2022, 30 % in 2023, 20 % in 2024, 15 % in 2025 and 5 % thereafter.

Significant Judgments

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Management's estimates take into consideration historical experience, current contractual and statutory requirements, specific known market events and trends, industry data, and forecasted customer buying and payment patterns.

Overall, these

reserves reflect our best estimates of the amount of consideration to which we are entitled based on the terms of the contract using the expected value method.

Overall, these reserves reflect our best estimates of the amount of consideration to which we are entitled based on the terms of the contract using the expected value method.

The amount of variable consideration included in the net sales price is limited to the amount for which it is probable that a significant reversal in revenue will not occur when the related uncertainty is resolved.

Revenue recognized during the three and nine months ended September 30, 2021 and 2020 related to performance obligations satisfied in prior periods was not material.

Revenue recognized during the three months ended March 31, 2022 and 2021 related to performance obligations satisfied in prior periods was not material.

Additionally, our contracts with customers often include promises to transfer multiple products and services to a customer.

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The timing of revenue recognition, billings and cash collections results in the recognition of trade accounts receivable, unbilled receivables, contract assets and customer advances and deposits (contract liabilities) on our condensed consolidated balance sheets.

Net trade accounts receivable was $ 1.8 billion and $ 1.7 billion as of September 30, 2021 and December 31, 2020, respectively.

Net trade accounts receivable was $ 2.3 billion and $ 2.4 billion as of March 31, 2022 and December 31, 2021, respectively.

For contract manufacturing arrangements, revenue is primarily recognized throughout the production cycle, which typically lasts up to 90 days, resulting in the recognition of contract assets until the related services are completed and the customers are billed.

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The following table summarizes our contract assets:

(in millions) September 30,

(in millions) March 31,

2022 December 31,

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The following table summarizes the classification of contract assets and contract liabilities as reported in the condensed consolidated balance sheets:

(in millions) September 30,

(in millions) March 31,

2022 December 31,

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Contract liabilities $ 240 $ 246

Contract liabilities are recognized when a customer pays consideration before we transfer goods or provide services.

During the nine months ended September 30, 2021 and 2020, the amount of revenue recognized that was included in contract liabilities as of December 31, 2020 and 2019 was not significant.

Contract liabilities represent deferred revenues that arise as a result of cash received from customers or where the timing of billing for services precedes satisfaction of our performance obligations.

Such remaining performance obligations represent the portion of the contract price for which work has not been performed and are primarily related to our installation and service contracts.

We expect to satisfy the majority of the remaining performance obligations and recognize revenue related to installation and service contracts within the next 12 months with most of the non-current performance obligations satisfied within 24 months.

The following table summarizes contract liability activity for the three months ended March 31, 2022.

The contract liability balance represents the transaction price allocated to the remaining performance obligations.

Three Months Ended March 31, 2022

Balance at beginning of period $ 246

New revenue deferrals 116

Revenue recognized upon satisfaction of performance obligations ( 122 )

Balance at end of period $ 240

During the three months ended March 31, 2021, the amount of revenue recognized that was included in contract liabilities as of December 31, 2020 was not significant.

Disaggregation of Net Sales

Beginning in the first quarter of 2021, our product category net sales disclosures (previously referred to as global business units (GBUs)) separately present net sales from our BioPharma Solutions business, which was previously included within Other.

Concurrent with that disaggregation of net sales from our BioPharma Solutions business, we have also allocated certain previously unallocated sales deductions from Other to various categories, primarily based on their respective net sales.

Net sales for the three and nine months ended September 30, 2020 have been recast to conform to the current period presentation.

In connection with our acquisition of Hillrom in December 2021, we have added three new product categories:

Patient Support Systems, Front Line Care and Surgical Solutions.

The following tables disaggregate our net sales from contracts with customers by product category between the U.S.

and international:

Three Months Ended September 30,

Three Months Ended March 31,

(in millions) U.S.

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52 104 156 44 91 135

18 7 25 19 7 26

Total Baxter $ 1,319 $ 1,907 $ 3,226 $ 1,244 $ 1,728 $ 2,972

Nine Months Ended September 30,

(in millions) U.S.

International Total U.S.

International Total

$ 655 $ 2,212 $ 2,867 $ 629 $ 2,115 $ 2,744

Medication Delivery 2

1,345 751 2,096 1,262 686 1,948

Pharmaceuticals 3

550 1,137 1,687 637 899 1,536

Clinical Nutrition 4

255 460 715 241 426 667

Advanced Surgery 5

Patient Support Systems 8

295 88 383 — — —

Acute Therapies 6

Front Line Care 9

207 87 294 — — —

BioPharma Solutions 7

Surgical Solutions 10

37 41 78 — — —

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7 BioPharma Solutions includes sales of contracted services we provide to various pharmaceutical and biopharmaceutical companies.

8 Patient Support Systems includes sales of our connected care solutions:

devices, software, communications and integration technologies.

9 Front Line Care includes sales of our integrated patient monitoring and diagnostic technologies to help diagnose, treat and manage a wide variety of illness and diseases, including respiratory therapy, cardiology vision screening and physical assessment.

10 Surgical Solutions includes sales of our surgical video technologies, tables, lights, pendants, precision positioning devices and other accessories.

11 Other includes sales of miscellaneous product and service offerings.

Lease Revenue

We lease medical equipment, such as renal dialysis equipment and infusion pumps, to customers, primarily in conjunction with arrangements to provide consumable medical products such as dialysis therapies, IV fluids and inhaled anesthetics.

We lease smart beds, such as bariatric, critical care, maternal, and home care beds, as well as other surfaces, to customers during periods of peak demand or for specialty purposes.

We also lease medical equipment, such as renal dialysis equipment and infusion pumps, to customers, primarily in conjunction with arrangements to provide consumable medical products such as dialysis therapies, IV fluids and inhaled anesthetics.

Certain of our equipment leases are classified as sales-type leases and the remainder are operating leases.

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We allocate revenue between equipment leases and medical products based on their standalone selling prices.

The components of lease revenue for the three and nine months ended September 30, 2021 were:

(in millions) Three months ended September 30, 2021 Nine months ended September 30, 2021

Sales-type lease revenue $ 3 $ 19

Operating lease revenue 21 90

Variable lease revenue 27 59

Total lease revenue $ 51 $ 168

The components of lease revenue for the three and nine months ended September 30, 2020 were:

(in millions) Three months ended September 30, 2020 Nine months ended September 30, 2020

The components of lease revenue for the three months ended March 31, 2022 and 2021 were:

(in millions) Three months ended March 31, 2022 Three months ended March 31, 2021

Sales-type lease revenue $ 3 $ 6

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Total lease revenue $ 145 $ 57

Our net investment in sales-type leases was $ 119 million as of September 30, 2021, of which $ 16 million originated in 2017 and prior, $ 29 million in 2018, $ 26 million in 2019, $ 33 million in 2020 and $ 15 million in 2021.

Our net investment in sales-type leases was $ 109 million as of March 31, 2022, of which $ 38 million originated in 2018 and prior, $ 16 million in 2019, $ 28 million in 2020, $ 25 million in 2021, and $ 2 million in 2022.

BUSINESS OPTIMIZATION CHARGES

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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 September 30, 2021, we have incurred cumulative pre-tax costs of $ 1.2 billion related to these actions.

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 March 31, 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.

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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.

During the three and nine months ended September 30, 2021 and 2020, we recorded the following charges related to business optimization programs.

Three Months Ended September 30, Nine Months Ended September 30,

During the three months ended March 31, 2022 and 2021, we recorded the following charges related to business optimization programs.

Three Months Ended March 31,

(in millions) 2022 2021

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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, 2021 and 2020, respectively, consisted primarily of external consulting and transition costs, including employee compensation and related costs.

Costs to implement business optimization programs for the three months ended March 31, 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 nine months ended September 30, 2021 and 2020, we recorded the following restructuring charges.

Three months ended September 30, 2021

(in millions) COGS SG&A R&D Total

Employee termination costs $ 11 $ 8 $ — $ 19

Contract termination and other costs — 2 — 2

Asset impairments 11 — — 11

Total restructuring charges $ 22 $ 10 $ — $ 32

Three months ended September 30, 2020

(in millions) COGS SG&A R&D Total

Employee termination costs $ 4 $ 15 $ 1 $ 20

Contract termination and other costs 1 3 — 4

Asset impairments — 2 — 2

Total restructuring charges $ 5 $ 20 $ 1 $ 26

Nine months ended September 30, 2021

During the three months ended March 31, 2022 and 2021, we recorded the following restructuring charges.

Three months ended March 31, 2022

(in millions) COGS SG&A R&D Total

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Total restructuring charges $ 2 $ 65 $ — $ 67

Nine months ended September 30, 2020

Three months ended March 31, 2021

(in millions) COGS SG&A R&D Total

Employee termination costs $ 16 $ 5 $ — $ 21

Contract termination and other costs 3 3 — 6

Asset impairments 4 — — 4

Total restructuring charges $ 20 $ 5 $ — $ 25

In conjunction with our business optimization initiatives in the first quarter of 2020, we sold property that resulted in a gain of $ 17 million.

This gain is reflected within other operating expense (income), net in our condensed consolidated statement of income for the nine months ended September 30, 2020.

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

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Payments ( 31 )

Reserve adjustments ( 3 )

Currency translation ( 2 )

Liability balance as of September 30, 2021 $ 96

Substantially all of our restructuring liabilities as of September 30, 2021 relate to employee termination costs, with the remaining liabilities attributable to contract termination costs.

Liability balance as of March 31, 2022 $ 137

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

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Three months ended

September 30, Nine months ended

September 30,

(in millions) 2022 2021

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Net periodic OPEB cost (income) $ ( 2 ) $ ( 1 )

Our effective income tax rate was ( 0.2 )% and 13.5 % for the three months ended September 30, 2021 and 2020, respectively, and 11.8 % and 13.2 % for the nine months ended September 30, 2021 and 2020, respectively.

Our effective income tax rate was 22.3 % and 14.5 % for the three months ended March 31, 2022 and 2021, respectively.

Our effective income tax rate can differ from the 21 % U.S.

federal statutory rate due to a number of factors, including foreign rate differences, tax incentives, increases or decreases in valuation allowances and liabilities for uncertain tax positions and excess tax benefits on stock compensation awards.

For the three months ended September 30, 2021, the difference between our effective income tax rate and the U.S.

federal statutory rate was primarily attributable to a $ 58 million tax benefit related to a tax-deductible foreign statutory loss on an investment in a foreign subsidiary, as well as changes related to our ability to realize tax credit carryforwards based on a favorable tax ruling in a foreign jurisdiction.

For the nine months ended September 30, 2021, the difference between our effective income tax rate and the U.S.

federal statutory rate was primarily attributable to a $ 58 million tax benefit related to a tax-deductible foreign statutory loss on an investment in a foreign subsidiary, as well as a favorable geographic earnings mix and changes related to our ability to realize tax credit carryforwards based on a favorable tax ruling in a foreign jurisdiction.

For the three months ended September 30, 2020, the difference between our effective income tax rate and the U.S.

federal statutory rate was primarily attributable to a favorable geographic earnings mix and changes related to our ability to realize foreign tax credits.

For the nine months ended September 30, 2020, the difference between our effective income tax rate and the U.S.

federal statutory rate was primarily attributable to a favorable geographic earnings mix and excess tax benefits on stock compensation awards .

For the three months ended March 31, 2022, the difference between our effective income tax rate and the U.S.

federal statutory rate was primarily attributable to discrete tax matters in various foreign jurisdictions, of which none are individually material, and an increase in our liabilities for uncertain tax positions, partially offset by excess tax benefits on stock compensation awards and a favorable geographic earnings mix.

For the three months ended March 31, 2021, the difference between our effective income tax rate and the U.S.

federal statutory rate was primarily attributable to decreases in accrued withholding taxes in several foreign jurisdictions and a favorable geographic earnings mix.

EARNINGS PER SHARE

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Three months ended

September 30, Nine months ended

September 30,

(in millions) 2022 2021

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The effect of dilutive securities includes unexercised stock options, unvested RSUs and contingently issuable shares related to granted PSUs.

The computation of diluted EPS excludes 7 million equity awards for the three and nine months ended September 30, 2021, respectively, and 4 million and 3 million equity awards for the three and nine months ended September 30, 2020, respectively, because their inclusion would have had an anti-dilutive effect on diluted EPS.

The computation of diluted EPS excludes 4 million and 7 million equity awards for the three months ended March 31, 2022 and 2021, respectively, because their inclusion would have had an anti-dilutive effect on diluted EPS.

Refer to Note 7 for additional information regarding items impacting basic and diluted shares.

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Our hedging policy attempts to manage these risks to an acceptable level based on our judgment of the appropriate trade-off between risk, opportunity and costs.

We are primarily exposed to foreign exchange risk with respect to recognized assets and liabilities, forecasted transactions and net assets denominated in the Euro, British Pound, Chinese Renminbi, Korean Won, Australian Dollar, Canadian Dollar, Japanese Yen, Colombian Peso, Brazilian Real, Mexican Peso, Indian Rupee and Swedish Krona.

We manage our foreign currency exposures on a consolidated basis, which allows us to net exposures and take advantage of any natural offsets.

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We do not hold any instruments for trading purposes and none of our outstanding derivative instruments contain credit-risk-related contingent features.

All derivative instruments are recognized as either assets or liabilities at fair value in the condensed consolidated balance sheets and are classified as short-term or long-term based on the scheduled maturity of the instrument.

All derivative instruments are generally recognized as either assets or liabilities at fair value in the condensed consolidated balance sheets and are classified as short-term or long-term based on the scheduled maturity of the instrument.

We designate certain of our derivatives and foreign-currency denominated debt as hedging instruments in cash flow, fair value, or net investment hedges.

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Option premiums or net premiums paid are initially recorded as assets and reclassified to other comprehensive income (OCI) over the life of the option, and then recognized in earnings consistent with the underlying hedged item.

Cash flow hedges are classified in cost of sales and interest expense, net, and are primarily related to forecasted third-party sales denominated in foreign currencies, forecasted intra-company sales denominated in foreign currencies, and forecasted interest payments on anticipated issuances of debt, respectively.

The notional amounts of foreign exchange contracts designated as cash flow hedges were $ 365 million and $ 345 million as of September 30, 2021 and December 31, 2020, respectively.

The maximum term over which we have cash flow hedge contracts in place related to forecasted transactions at September 30, 2021 is 12 months for foreign exchange contracts.

There were no outstanding interest rate contracts designated as cash flow hedges as of September 30, 2021 and December 31, 2020.

Cash flow hedges are classified in cost of sales and interest expense, net, and are primarily related to forecasted intra-company sales denominated in foreign currencies and forecasted interest payments on anticipated issuances of debt, respectively.

The notional amounts of foreign exchange contracts designated as cash flow hedges were $ 402 million and $ 377 million as of March 31, 2022 and December 31, 2021, respectively.

The maximum term over which we have cash flow

hedge contracts in place related to forecasted transactions at March 31, 2022 is 12 months for foreign exchange contracts.

There were no outstanding interest rate contracts designated as cash flow hedges as of March 31, 2022 and December 31, 2021.

Fair Value Hed g es

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Changes in the fair value of hedge instruments designated as fair value hedges are classified in interest expense, net, as they hedge the interest rate risk associated with certain of our fixed-rate debt.

There were no outstanding interest rate contracts designated as fair value hedges as of September 30, 2021 and December 31, 2020.

There were no outstanding interest rate contracts designated as fair value hedges as of March 31, 2022 and December 31, 2021.

Net Investment Hed g es

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We have designated these debt obligations as hedges of our net investment in our European operations and, as a result, mark to spot rate adjustments on the outstanding debt balances are recorded as a component of AOCI.

As of September 30, 2021, we had an accumulated pre-tax unrealized translation loss in AOCI of $ 102 million related to the Euro-denominated senior notes.

As of March 31, 2022, we had an accumulated pre-tax unrealized translation loss in AOCI of $ 4 million related to the Euro-denominated senior notes.

Dedesignations

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However, if it is probable that the hedged forecasted transactions will not occur, any gains or losses would be immediately reclassified from AOCI to earnings.

There were no hedge dedesignations in the first nine months of 2021 or 2020 resulting from changes in our assessment of the probability that the hedged forecasted transactions would occur.

There were no hedge dedesignations in the first three months of 2022 or 2021 resulting from changes in our assessment of the probability that the hedged forecasted transactions would occur.

If we terminate a fair value hedge, an amount equal to the cumulative fair value adjustment to the hedged item at the date of termination is amortized to earnings over the remaining term of the hedged item.

There were no fair value hedges terminated during the first nine months of 2021 or 2020.

If we remove a net investment hedge designation, any gain or loss recognized in AOCI is not reclassified to earnings until we sell, liquidate, or deconsolidate the foreign investments that were being hedged.

There were no net investment hedges terminated during the first nine months of 2021 or 2020.

There were no fair value hedges terminated during the first three months of 2022 or 2021.

If we remove a net investment hedge designation, any gains or losses recognized in AOCI are not reclassified to earnings until we sell, liquidate, or deconsolidate the foreign investments that were being hedged.

There were no net investment hedges terminated during the first three months of 2022 or 2021.

Undesignated Derivative Instruments

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These derivative instruments are generally not formally designated as hedges and the terms of these instruments generally do not exceed one month.

The total notional amount of undesignated derivative instruments was $ 1.0 billion as of September 30, 2021 and December 31, 2020.

The total notional amount of undesignated derivative instruments was $ 940 million as of March 31, 2022 and $ 851 million as of December 31, 2021.

Gains and Losses on Hedging Instruments and Undesignated Derivative Instruments

The following tables summarize the gains and losses on our hedging instruments and the classification of those gains and losses within our condensed consolidated financial statements for the three months ended September 30, 2021

Gain (loss) recognized in OCI Location of gain (loss)

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Foreign exchange contracts ( 3 ) 4 Cost of sales 2 ( 10 )

Net investment hedges 60 ( 103 ) Other expense, net — —

Net investment hedges 42 114 Other (income) expense, net — —

Total $ 39 $ 118 $ 1 $ ( 11 )

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Undesignated derivative instruments

Foreign exchange contracts Other expense, net $ ( 7 ) $ 7

Gain (loss) recognized in OCI Location of gain (loss)

in income statement Gain (loss) reclassified from AOCI

(in millions) 2021 2020 2021 2020

Cash flow hedges

Interest rate contracts $ — $ ( 144 ) Interest expense, net $ ( 4 ) $ —

Foreign exchange contracts 7 1 Cost of sales ( 23 ) 2

Net investment hedges 143 ( 104 ) Other expense, net — —

Total $ 150 $ ( 247 ) $ ( 27 ) $ 2

Location of gain (loss)

in income statement Gain (loss) recognized in income

(in millions) 2021 2020

Undesignated derivative instruments

Foreign exchange contracts Other expense, net $ ( 26 ) $ 22

As of September 30, 2021, $ 1 million of deferred, net after-tax losses on derivative instruments included in AOCI are expected to be recognized in earnings during the next 12 months, coinciding with when the hedged items are expected to impact earnings.

Foreign exchange contracts Other (income) expense, net $ 3 $ ( 22 )

As of March 31, 2022, $ 5 million of deferred, net after-tax losses on derivative instruments included in AOCI are expected to be recognized in earnings during the next 12 months, coinciding with when the hedged items are expected to impact earnings.

Derivative Assets and Liabilities

The following table summarizes the classification and fair values of derivative instruments reported in the condensed consolidated balance sheet as of September 30, 2021.

The following table summarizes the classification and fair values of derivative instruments reported in the condensed consolidated balance sheet as of March 31, 2022.

Derivatives in asset positions Derivatives in liability positions

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The following table provides information on our derivative positions as if they were presented on a net basis, allowing for the right of offset by counterparty.

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

(in millions) Asset Liability Asset Liability

Gross amounts recognized in the consolidated balance sheet $ 9 $ 8 $ 11 $ 19

Gross amount subject to offset in master netting arrangements not offset in the consolidated balance sheet ( 2 ) ( 2 ) ( 6 ) ( 6 )

Gross amounts recognized in the condensed consolidated balance sheets $ 16 $ 7 $ 8 $ 5

Gross amount subject to offset in master netting arrangements not offset in the condensed consolidated balance sheet ( 3 ) ( 3 ) ( 2 ) ( 2 )

Total $ 13 $ 4 $ 6 $ 3

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in the carrying amount of the hedged item (a)

(in millions) Balance as of September 30, 2021 Balance as of December 31, 2020 Balance as of September 30, 2021 Balance as of December 31, 2020

(in millions) Balance as of March 31, 2022 Balance as of December 31, 2021 Balance as of March 31, 2022 Balance as of December 31, 2021

Long-term debt $ 101 $ 101 $ 4 $ 4

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Basis of fair value measurement

(in millions) Balance as of September 30, 2021 Quoted prices in active markets for identical assets

(in millions) Balance as of March 31, 2022 Quoted prices in active markets for identical assets

(Level 1) Significant other

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Total $ 148 $ — $ 5 $ 143

As of September 30, 2021 and December 31, 2020, cash and cash equivalents of $ 3.3 billion and $ 3.7 billion, respectively, included money market and other short-term funds of approximately $ 1.5 billion and $ 1.8 billion, respectively, which are considered Level 2 in the fair value hierarchy.

As of March 31, 2022 and December 31, 2021, cash and cash equivalents of $ 2.3 billion and $ 3.0 billion, respectively, included money market and other short-term funds of approximately $ 426 million and $ 816 million, respectively, which are considered Level 2 in the fair value hierarchy.

For assets that are measured using quoted prices in active markets, the fair value is the published market price per unit multiplied by the number of units held, without consideration of transaction costs.

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The key inputs, which are considered observable and vary depending on the type of derivative, include contractual terms, interest rate yield curves, foreign exchange rates and volatility.

Debt securities, which consist of convertible debt and convertible redeemable preferred shares issued by nonpublic entities, are measured using discounted cash flow and option pricing models.

Those debt securities are classified as Level 3 fair value measurements when there are no observable transactions near the balance sheet date due to the lack of observable data over certain fair value inputs such as equity volatility.

The fair values of debt securities increase when interest rates decrease, equity volatility increases, or the fair values of the equity shares underlying the conversion options increase.

Contingent payments related to acquisitions, which consist of milestone payments and sales-based payments, are valued using discounted cash flow techniques.

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The fair value of sales-based payments is based upon probability-weighted future revenue estimates, and increases as revenue estimates increase, probability weighting of higher revenue scenarios increases or the expected timing of payment is accelerated.

The following table is a reconciliation of recurring fair value measurements that use significant unobservable inputs (Level 3), which consist of contingent payments related to acquisitions.

Three months ended

September 30, Nine months ended

September 30,

(in millions) 2021 2020 2021 2020

The following table is a reconciliation of recurring fair value measurements that use significant unobservable inputs (Level 3), which consist of contingent payments related to acquisitions and debt securities.

Three months ended March 31,

(in millions) Contingent payments related to acquisitions Debt securities Contingent payments related to acquisitions

Fair value at beginning of period $ 143 $ 30 $ 30

1 unchanged sentence

Change in fair value recognized in earnings ( 17 ) — —

Change in fair value recognized in AOCI — 2 —

Payments ( 2 ) — ( 16 )

Currency translation — — 1 —

Fair value at end of period $ 124 $ 53 $ 38

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In addition to the financial instruments that we are required to recognize at fair value in the condensed consolidated balance sheets, we have certain financial instruments that are recognized at amortized cost or some basis other than fair value.

For these financial instruments, the following table provides the values recognized in the condensed consolidated balance sheets and the estimated fair values as of September 30, 2021 and December 31, 2020.

For these financial instruments, the following table provides the values recognized in the condensed consolidated balance sheets and the estimated fair values as of March 31, 2022 and December 31, 2021.

Book values Fair values(a)

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The carrying value of short-term debt approximates its fair value due to the short-term maturities of the obligations.

The estimated fair values of long-term debt were computed by multiplying price by the notional amount of the respective debt instruments.

The estimated fair values of current and long-term debt were computed by multiplying price by the notional amount of the respective debt instruments.

Price is calculated using the stated terms of the respective debt instrument and yield curves commensurate with our credit risk.

The carrying values of other financial instruments, such as accounts receivable and accounts payable, approximate their fair values due to the short-term maturities of most of those assets and liabilities.

Equity investments not measured at fair value are comprised of other equity investments without readily determinable fair values and were $ 108 million at September 30, 2021 and $ 105 million at December 31, 2020.

Equity investments not measured at fair value are comprised of other equity investments without readily determinable fair values and were $ 110 million at March 31, 2022 and $ 114 million at December 31, 2021.

Those investments are included in Other non-current assets on our condensed consolidated balance sheets.

SEGMENT INFORMATION

We manage our business based on three geographical segments:

Americas (North and South America), EMEA (Europe, Middle East and Africa) and APAC (Asia Pacific).

Our segments provide a broad portfolio of essential healthcare products, including acute and chronic dialysis therapies;

We manage our business based on four segments, consisting of the following geographic segments related to our legacy Baxter business:

Americas (North and South America), EMEA (Europe, Middle East and Africa) and APAC (Asia Pacific), and a new global segment for the acquired Hillrom business.

The Americas, EMEA and APAC segments provide a broad portfolio of essential healthcare products, including acute and chronic dialysis therapies;

sterile IV solutions;

4 unchanged sentences

and surgical hemostat and sealant products.

In the first quarter of 2021, the information provided to our Chief Executive Officer for purposes of allocating resources and assessing performance was updated to reallocate contracted services activities performed at a German manufacturing facility from our EMEA segment to our Americas segment.

The contracted services performed at that facility are part of our BioPharma Solutions business, which is managed as part of the Americas segment.

Accordingly, the reported financial results of the Americas segment now include the contracted services activities performed at that facility.

Segment results for the three and nine months ended September 30, 2020 have been recast to conform to the current period presentation.

The Hillrom segment provides digital and connected care solutions and collaboration tools, including smart bed systems, patient monitoring and diagnostic technologies, respiratory health devices, and advanced equipment for the surgical space.

We use operating income on a segment basis to make resource allocation decisions and assess the ongoing performance of our business segments.

1 unchanged sentence

Certain items are maintained at Corporate and are not allocated to a segment.

They primarily include corporate headquarters costs, certain R&D costs, certain product category support costs, stock compensation expense, certain employee benefit plan costs, certain foreign currency hedging activities, and certain gains, losses, and other charges (such as business optimization, acquisition and integration costs, intangible asset amortization and asset impairments).

They primarily include corporate headquarters costs, certain R&D costs, certain product category support costs, stock compensation expense, certain employee benefit plan costs, and certain gains, losses, and other charges (such as business optimization, acquisition and integration costs, intangible asset amortization and asset impairments).

For the period from our acquisition of Hillrom on December 13, 2021 through December 31, 2021, we previously included all costs incurred by the Hillrom business within that segment, including the types of costs described in the preceding sentence that are maintained at Corporate for our legacy Baxter segments.

In connection with our ongoing integration activities, beginning in the first quarter 2022, we have updated the measure of profitability for our Hillrom segment by excluding such unallocated costs, consistent with our legacy Baxter segments.

Those unallocated costs related to Hillrom, which totaled $ 219 million for the three months ended March 31, 2022, are now presented within Corporate as well.

Our chief operating decision maker does not receive any asset information by operating segment and, accordingly, we do not report asset information by operating segment.

1 unchanged sentence

Three months ended

September 30, Nine months ended

September 30,

(in millions) 2022 2021

Americas $ 1,626 $ 1,560

EMEA 779 720 2,300 2,077

APAC 720 646 2,059 1,775

Hillrom 755 —

Total net sales $ 3,707 $ 2,946

1 unchanged sentence

Americas $ 610 $ 599

EMEA 167 126 461 364

APAC 166 161 456 432

Hillrom 200 —

Total segment operating income $ 1,080 $ 872

1 unchanged sentence

Three months ended

September 30, Nine months ended

September 30,

(in millions) 2022 2021

3 unchanged sentences

Interest expense, net 85 34

Other expense, net 12 16 15 32

Other (income) expense, net ( 16 ) 5

Income before income taxes $ 94 $ 351

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements