What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-05-02 compared with 2023-11-02 · 199 added, 483 removed, 603 unchanged (53% of the section changed)

3 unchanged sentences

(in millions, except share information)

September 30,

2024 December 31,

4 unchanged sentences

Prepaid expenses and other current assets 865 892

Current assets of discontinued operations — 186

Total current assets 9,400 9,600

4 unchanged sentences

Other non-current assets 1,152 1,126

Non-current assets of discontinued operations — 686

Total assets $ 27,788 $ 28,276

Current liabilities:

Short-term debt $ 514 $ 299

Current maturities of long-term debt and finance lease obligations $ 2,634 $ 2,668

1 unchanged sentence

Accrued expenses and other current liabilities 2,402 2,594

Current liabilities of discontinued operations — 61

Total current liabilities 6,365 6,503

2 unchanged sentences

Other non-current liabilities 1,652 1,737

Non-current liabilities of discontinued operations — 120

Total liabilities 19,553 19,808

5 unchanged sentences

Retained earnings 16,003 16,114

Accumulated other comprehensive income (loss) ( 3,716 ) ( 3,833 )

Accumulated other comprehensive loss ( 3,722 ) ( 3,554 )

Total Baxter stockholders’ equity 8,173 8,402

4 unchanged sentences

Baxter International Inc.

Condensed Consolidated Statements of Income (Loss) (unaudited)

Condensed Consolidated Statements of Income (unaudited)

(in millions, except per share data)

Three months ended

September 30, Nine months ended

September 30,

2023 2022 2023 2022

Net sales $ 3,592 $ 3,513

3 unchanged sentences

Research and development expenses 176 164

Goodwill impairments — 2,785 — 2,785

Other operating expense (income), net — 48 ( 14 ) 20

Operating income (loss) ( 51 ) ( 2,880 ) 61 ( 2,533 )

Other operating income, net ( 3 ) ( 13 )

Operating income 187 129

Interest expense, net 78 117

Other (income) expense, net ( 7 ) 61 33 1

Loss from continuing operations before income taxes ( 172 ) ( 3,045 ) ( 341 ) ( 2,812 )

Income tax benefit ( 223 ) ( 54 ) ( 199 ) ( 14 )

Income (loss) from continuing operations 51 ( 2,991 ) ( 142 ) ( 2,798 )

Other income, net ( 7 ) ( 2 )

Income from continuing operations before income taxes 116 14

Income tax expense 77 14

Income from continuing operations 39 —

Income from discontinued operations, net of tax — 45

Net income (loss) 2,511 ( 2,934 ) 2,417 ( 2,606 )

Net income 39 45

Net income attributable to noncontrolling interests 2 1

Net income (loss) attributable to Baxter stockholders $ 2,508 $ ( 2,937 ) $ 2,411 $ ( 2,614 )

Income (loss) from continuing operations per common share

Net income attributable to Baxter stockholders $ 37 $ 44

Income from continuing operations per common share

Basic $ 0.07 $ 0.00

3 unchanged sentences

Diluted $ 0.00 $ 0.09

Net income (loss) per common share

Net income per common share

Basic $ 0.07 $ 0.09

8 unchanged sentences

Three months ended

September 30, Nine months ended

September 30,

2023 2022 2023 2022

Income (loss) from continuing operations $ 51 $ ( 2,991 ) $ ( 142 ) $ ( 2,798 )

Income from continuing operations $ 39 $ —

Other comprehensive income (loss) from continuing operations, net of tax:

Currency translation adjustments, net of tax expense (benefit) of $ 10 and $( 16 ) for the three months ended September 30, 2023 and 2022, respectively, and $ 1 and ($ 25 ) for the nine months ended September 30, 2023 and 2022, respectively.

( 67 ) ( 274 ) ( 62 ) ( 650 )

Pension and other postretirement benefits, net of tax expense (benefit) of zero and $ 5 for the three months ended September 30, 2023 and 2022, respectively, and ($ 3 ) and $ 13 the nine months ended September 30, 2023 and 2022, respectively.

( 1 ) 15 ( 12 ) 47

Hedging activities, net of tax expense (benefit) of $ 2 and $ 5 for the three months ended September 30, 2023 and 2022, respectively, and $ 3 and $ 8 for the nine months ended September 30, 2023 and 2022, respectively.

Available-for-sale debt securities, net of tax expense of zero for the three months ended September 30, 2023 and 2022 and zero and $ 1 for the nine months ended September 30, 2023 and 2022, respectively.

Total other comprehensive loss from continuing operations, net of tax ( 63 ) ( 243 ) ( 64 ) ( 574 )

Comprehensive loss from continuing operations ( 12 ) ( 3,234 ) ( 206 ) ( 3,372 )

Currency translation adjustments, net of tax expense (benefit) of $ 11 and $( 13 ) for the three months ended March 31, 2024 and 2023, respectively.

Pension and other postretirement benefits, net of tax expense (benefit) of $ 3 and ($ 1 ) for the three months ended March 31, 2024 and 2023, respectively.

Hedging activities, net of tax expense (benefit) of $ 2 and ($ 1 ) for the three months ended March 31, 2024 and 2023, respectively.

Total other comprehensive income (loss) from continuing operations, net of tax ( 172 ) 73

Comprehensive income (loss) from continuing operations ( 133 ) 73

Income from discontinued operations, net of tax — 45

Other comprehensive income (loss) from discontinued operations

Currency translation adjustments, net of tax expense (benefit) of zero for the three and nine months ended September 30, 2023 and 2022

165 ( 45 ) 185 ( 101 )

Pension and other postretirement benefits, net of tax expense (benefit) of zero for the three and nine months ended September 30, 2023 and 2022

( 4 ) 1 ( 4 ) 1

Total other comprehensive income (loss) from discontinued operations 161 ( 44 ) 181 ( 100 )

Other comprehensive income from discontinued operations, net of tax - currency translation adjustments — 21

Comprehensive income from discontinued operations — 66

1 unchanged sentence

Comprehensive income attributable to noncontrolling interests 2 1

Other comprehensive income (loss) attributable to noncontrolling interests ( 4 ) —

Comprehensive income (loss) attributable to Baxter stockholders $ ( 131 ) $ 138

3 unchanged sentences

(in millions)

For the three months ended September 30, 2023

For the three months ended March 31, 2024

Baxter International Inc.

4 unchanged sentences

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

Balance as of July 1, 2023 683 $ 683 177 $ ( 11,296 ) $ 6,341 $ 13,655 $ ( 3,814 ) $ 5,569 $ 62 $ 5,631

Net income — — — — — 2,508 — 2,508 3 2,511

Other comprehensive income (loss) — — — — — — 98 98 — 98

Stock issued under employee benefit plans and other — — ( 1 ) 47 27 — — 74 — 74

Dividends declared on common stock — — — — — ( 148 ) — ( 148 ) — ( 148 )

Change in noncontrolling interests — — — — — — — — — —

Balance as of September 30, 2023

683 $ 683 176 $ ( 11,249 ) $ 6,368 $ 16,015 $ ( 3,716 ) $ 8,101 $ 65 $ 8,166

For the nine months ended September 30, 2023

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 January 1, 2024 683 $ 683 176 $ ( 11,230 ) $ 6,389 $ 16,114 $ ( 3,554 ) $ 8,402 $ 66 $ 8,468

4 unchanged sentences

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

Balance as of September 30, 2023

Balance as of March 31, 2024

683 $ 683 174 $ ( 11,130 ) $ 6,339 $ 16,003 $ ( 3,722 ) $ 8,173 $ 62 $ 8,235

For the three months ended September 30, 2022

Baxter International Inc.

stockholders' equity

Balance as of July 1, 2022 683 $ 683 180 $ ( 11,409 ) $ 6,253 $ 17,099 $ ( 3,767 ) $ 8,859 $ 44 $ 8,903

Net loss — — — — — ( 2,937 ) — ( 2,937 ) 3 ( 2,934 )

Other comprehensive income (loss) — — — — — — ( 287 ) ( 287 ) — ( 287 )

Purchases of treasury stock — — — ( 24 ) — — — ( 24 ) — ( 24 )

Stock issued under employee benefit plans and other — — ( 1 ) 27 44 — — 71 — 71

Dividends declared on common stock — — — — — ( 147 ) — ( 147 ) — ( 147 )

Change in noncontrolling interests — — — — — — — — ( 3 ) ( 3 )

Balance as of September 30, 2022 683 $ 683 179 $ ( 11,406 ) $ 6,297 $ 14,015 $ ( 4,054 ) $ 5,535 $ 44 $ 5,579

For the nine months ended September 30, 2022

For the three months ended March 31, 2023

Baxter International Inc.

2 unchanged sentences

Balance as of January 1, 2023 683 $ 683 179 $ ( 11,389 ) $ 6,322 $ 14,050 $ ( 3,833 ) $ 5,833 $ 62 $ 5,895

Net loss — — — — — ( 2,614 ) — ( 2,614 ) 8 ( 2,606 )

Net income — — — — — 44 — 44 1 45

Other comprehensive income (loss) — — — — — — 94 94 — 94

Purchases of treasury stock — — — ( 32 ) — — — ( 32 ) — ( 32 )

Stock issued under employee benefit plans and other — — ( 1 ) 65 ( 10 ) — — 55 — 55

1 unchanged sentence

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

Balance as of September 30, 2022

683 $ 683 179 $ ( 11,406 ) $ 6,297 $ 14,015 $ ( 4,054 ) $ 5,535 $ 44 $ 5,579

Balance as of March 31, 2023 683 $ 683 178 $ ( 11,324 ) $ 6,312 $ 13,947 $ ( 3,739 ) $ 5,879 $ 62 $ 5,941

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 March 31,

Cash flows from operations

Net income (loss) $ 2,417 $ ( 2,606 )

Net income $ 39 $ 45

Income from discontinued operations, net of tax — 45

Loss from continuing operations ( 142 ) ( 2,798 )

Income from continuing operations 39 —

Adjustments to reconcile net income to cash flows from operations:

3 unchanged sentences

Net periodic pension and other postretirement costs ( 5 ) ( 4 )

Goodwill impairments — 2,785

Intangible asset impairments 77 332

Other long-lived asset impairments 461 —

Loss on product divestiture arrangement — 54

Reclassification of cumulative translation loss to earnings — 65

Other 45 ( 34 )

Changes in balance sheet items:

10 unchanged sentences

Capital expenditures ( 176 ) ( 165 )

Acquisitions, net of cash acquired, and investments ( 6 ) ( 206 )

Acquisitions of developed technology and investments ( 6 ) ( 3 )

Proceeds from sale of marketable equity securities 16 —

Other investing activities, net — 5

4 unchanged sentences

Repayments of debt ( 15 ) ( 3 )

Net increases in debt with original maturities of three months or less 214 30

Net (decreases) increases in debt with original maturities of three months or less — ( 249 )

Cash dividends on common stock ( 147 ) ( 146 )

Proceeds from stock issued under employee benefit plans 40 36

Purchases of treasury stock — ( 32 )

Other financing activities, net ( 18 ) ( 10 )

1 unchanged sentence

Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash ( 25 ) 18

Increase (decrease) in cash, cash equivalents and restricted cash 4,070 ( 1,352 )

Decrease in cash, cash equivalents and restricted cash ( 168 ) ( 45 )

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

1 unchanged sentence

$ 3,030 $ 1,677

(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 September 30, 2023, December 31, 2022, and September 30, 2022 (in millions):

September 30, 2023 December 31, 2022 September 30, 2022

(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, 2024, December 31, 2023, and March 31, 2023 (in millions):

March 31, 2024 December 31, 2023 March 31, 2023

Cash and cash equivalents $ 3,026 $ 3,194 $ 1,673

Restricted cash included in prepaid expenses and other current assets 4 4 3

Restricted cash included in other non-current assets 4 4 4

Cash, cash equivalents and restricted cash $ 3,030 $ 3,198 $ 1,677

9 unchanged sentences

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, 2023 (2023 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.

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

All such adjustments, unless otherwise noted herein, are of a normal, recurring nature.

1 unchanged sentence

In January 2023, we announced our intention to separate our Kidney Care business into a new, publicly traded company.

While the completion of the proposed spinoff is subject to satisfaction of customary conditions, we are targeting completion of the planned separation by July 2024 or earlier.

On September 29, 2023, we completed the sale of our BioPharma Solutions (BPS) business and received net pre-tax cash proceeds of $ 3.96 billion from that transaction.

The financial position, results of operations and cash flows of our BPS business, including our gain from the sale of that business and the related cash proceeds received, are reported as discontinued operations in the accompanying condensed consolidated financial statements.

See Note 2 for additional information.

In March 2024, we announced that we have been in recent discussions with select private equity investors to explore a potential sale of our Kidney Care business in lieu of the proposed spinoff.

Regardless of the separation structure ultimately selected, the separation of our Kidney Care business is currently expected to be completed during the second half of 2024, subject to the satisfaction of customary conditions.

Risks and Uncertainties

Supply Constraints and Global Economic Conditions

We have experienced significant challenges to our global supply chain in recent periods, including production delays and interruptions, increased costs and shortages of raw materials and component parts (including resins and electromechanical devices) and higher transportation costs, resulting from the pandemic and other exogenous factors including significant weather events, elevated inflation levels, increased interest rates, disruptions to certain ports of call around the world, the wars in Ukraine, Israel and Gaza and other geopolitical events.

We expect to experience some of these and other challenges related to our supply chain in future periods.

We have experienced significant challenges to our global supply chain in recent periods, including production delays and interruptions, increased costs and shortages of raw materials and component parts (including resins and electromechanical devices), and higher transportation costs, resulting from the pandemic and other exogenous factors including significant weather events, elevated inflation levels, disruptions to certain ports of call and access to shipping lanes around the world, the war in Ukraine, the conflict in the Middle East (including attacks on merchant ships in the Red Sea), tensions amongst China, Taiwan, and the U.S., and other geopolitical events.

These challenges, including the unavailability of certain raw materials and component parts, have also had a negative impact on our sales for certain product categories due to our inability to fully satisfy demand.

While we have seen improvements in the availability of certain component parts and improved pricing in certain raw materials, these challenges have not completely subsided and may continue to have a negative impact on our sales in the future.

While we have seen meaningful improvements in the availability of certain component parts and improved pricing of certain raw materials and on certain transportation costs, these challenges may have a negative impact on our sales in the future.

We expect that the challenges caused by global economic conditions, among other factors, may continue to have an adverse effect on our business.

DISCONTINUED OPERATIONS

On September 29, 2023, we sold our BPS business to Advent International and Warburg Pincus (collectively, the "buyers").

Under the terms of the related Equity Purchase agreement entered into with the buyers in May 2023, we were entitled to aggregate consideration of $ 4.25 billion, subject to adjustment for specified items.

After giving effect to those adjustments, we received cash proceeds of $ 3.96 billion.

We recognized a pre-tax gain on the sale of $ 2.89 billion ($ 2.60 billion net of tax), which represents the excess of (a) the $ 3.91 billion in net consideration received, consisting of (i) $ 3.96 billion in cash proceeds from the buyers, less (ii) $ 47 million in transaction costs, over (b) the sum of (i) the $ 840 million net book value of the BPS business upon the closing of the transaction and (ii) BPS's $ 181 million other comprehensive loss, which was reclassified to earnings.

The BPS business, which was historically reported within our Americas segment, provides contract manufacturing and development services, which include sterile fill-finish manufacturing and support services across clinical and

commercial applications, primarily serving customers in the pharmaceutical industry.

On September 29, 2023, we sold our BioPharma Solutions (BPS) business to Advent International and Warburg Pincus (collectively, the "buyers").

The BPS business, which was historically reported within our former Americas segment, provided contract manufacturing and development services, which include sterile fill-finish manufacturing and support services across clinical and commercial applications, primarily serving customers in the pharmaceutical industry.

BPS was historically operated through our former, wholly-owned subsidiaries Baxter Pharmaceutical Solutions LLC, a Delaware limited liability company, and Baxter Oncology GmbH, a German limited liability company (collectively, the divested entities).

We intend to use the net after-tax proceeds from this transaction to repay certain of our debt obligations.

We concluded that our BPS business met the criteria to be classified as held-for-sale in May 2023.

A component of an entity is reported in discontinued operations after meeting the criteria for held-for-sale classification if the disposition represents a strategic shift that has (or will have) a major effect on the entity's operations and financial results.

We analyzed the quantitative and qualitative factors relevant to the divestiture of our BPS business, including its significance to our overall net income (loss) and earnings (loss) per share, and determined that those conditions for discontinued operations presentation had been met.

As such, the financial position, results of operations and cash flows of that business, including our gain from the sale of that business and the related cash proceeds received, are reported as discontinued operations in the accompanying condensed consolidated financial statements.

We analyzed the quantitative and qualitative factors relevant to the divestiture of our BPS business, including its significance to our overall net income and earnings per share, and determined that those conditions for discontinued operations presentation had been met.

As such, the financial position, results of operations and cash flows of that

business are reported as discontinued operations in the accompanying consolidated financial statements.

Prior period amounts have been adjusted to reflect discontinued operations presentation.

At closing of the transaction, Baxter Pharmaceutical Solutions LLC included a BPS manufacturing facility in Bloomington Indiana and Baxter Oncology GmbH included a manufacturing facility in Halle Germany.

Previously, Baxter Oncology GmbH included an additional manufacturing site in Bielefeld Germany that was not part of the BPS business and was transferred to another Baxter entity prior to closing of the divestiture.

Accordingly, amounts related to the Bielefeld site continue to be presented as continuing operations in the accompanying condensed consolidated financial statements.

At closing of the transaction, Baxter entered into a Transition Services Agreement (TSA) and a Master Commercial Manufacturing and Supply Agreement (MSA) with the divested entities.

2 unchanged sentences

Pursuant to the MSA, the divested entities will provide development, manufacturing, regulatory, and other related services for certain Baxter pharmaceutical products for up to 5 years post-closing (with certain extension rights as provided therein).

Results of Discontinued Operations and Assets and Liabilities of Discontinued Operations

The following table summarizes the major classes of line items included in income from discontinued operations, net of tax, for the three and nine months ended September 30, 2023 and 2022:

Results of Discontinued Operations

The following table summarizes the major classes of line items included in income from discontinued operations, net of tax, for the three months ended March 31, 2023:

Three months ended

September 30, Nine months ended

September 30,

(in millions) 2023

3 unchanged sentences

Selling, general and administrative expenses 15

Research and development expenses 1 1 2 2

Other (income) expense, net 2 2 2 2

Income from discontinued operations before gain on disposition and income taxes 92 79 205 235

Gain on disposition 2,890 — 2,890 —

Other income, net 1

Income from discontinued operations before income taxes 56

Income tax expense 11

Income from discontinued operations, net of tax 45

For the three and nine months ended September 30, 2023, selling, general and administrative expenses include $ 4 million and $ 19 million, respectively, of separation-related costs incurred in connection with the sale of BPS.

The following table summarizes the carrying amounts of the major classes of assets and liabilities classified as discontinued operations in the condensed consolidated balance sheets as of December 31, 2022:

(in millions) December 31,

Accounts receivable, net of allowances $ 88

Inventories 39

Prepaid expenses and other current assets 59

Property, plant and equipment, net 284

Operating lease right-of-use assets 9

Other non-current assets 2

Assets of discontinued operations $ 872

Accounts payable $ 29

Accrued expenses and other current liabilities 32

Operating lease liabilities 9

Other non-current liabilities 111

Liabilities of discontinued operations $ 181

For the three months ended March 31, 2023, selling, general and administrative expenses (SG&A) include $ 7 million of separation-related costs incurred in connection with the sale of BPS.

SUPPLEMENTAL FINANCIAL INFORMATION

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, 2023 and 2022.

The following table is a summary of the changes in our allowance for doubtful accounts for the three months ended March 31, 2024 and 2023.

Three months ended

September 30, Nine months ended

September 30,

(in millions) 2024 2023

4 unchanged sentences

Balance at end of period $ 121 $ 122

(in millions) September 30,

(in millions) March 31,

2024 December 31,

4 unchanged sentences

Property, Plant and Equipment, Net

(in millions) September 30,

(in millions) March 31,

2024 December 31,

2 unchanged sentences

Property, plant and equipment, net $ 4,370 $ 4,433

Impairments of Property, Plant and Equipment and Certain Other Long-Lived Assets

We review the carrying amounts of long-lived assets used in operations for potential impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

In evaluating recoverability of long-lived assets other than goodwill and intangible assets not subject to amortization, we group assets and liabilities at the lowest level such that the identified cash flows relating to the group are largely independent of the cash flows of other assets and liabilities.

If the carrying amount of an asset group is greater than the related estimated undiscounted future cash flows, the carrying value is not considered recoverable.

In that case, an impairment charge is recorded if, and to the extent that, the amount by which the asset group's carrying amount exceeds its fair value.

However, the portion of an impairment loss allocated to an individual long-lived asset within an asset group cannot reduce the carrying amount of that asset below its fair value is determinable without undue cost and effort.

Impairment of Opelika, Alabama Manufacturing Facility

Our manufacturing facility in Opelika, Alabama is one of three Baxter manufacturing facilities that currently produce dialyzers used in hemodialysis (HD) treatments.

The current competitive environment has increased the global supply of those products and, in connection with our initiatives to streamline our manufacturing footprint and improve our profitability, we have made the decision to cease production of dialyzers at the Opelika facility near the end of 2023.

We believe that there is more than adequate availability of dialyzers in the United States and globally, and we intend to continue to manufacture those products at volumes aligned with the related market demand at our other manufacturing facilities that currently produce them.

As a result of our decision to cease dialyzer production at this manufacturing facility, we performed a trigger-based recoverability assessment of its long-lived assets, which consist of a building and manufacturing equipment, including specialized equipment used in the production of dialyzers.

The carrying amount of that asset group exceeded the estimated undiscounted cash flows expected to be generated, and we recognized an impairment charge of $ 243 million, classified within cost of sales in the accompanying condensed consolidated statements of income (loss), during the second quarter of 2023 to reduce the carrying amounts to their estimated fair values.

The fair values of the building and manufacturing equipment tested for impairment during the second quarter of 2023 were determined based on transaction prices of comparable assets (a market approach).

Significant assumptions used in the determination of the fair values included the identification of representative comparable assets.

Our long-lived asset fair value measurements are classified as Level 3 in the fair value hierarchy because they involve significant unobservable inputs.

Other Impairments of Long-Lived Assets Related to HD Business

In the third quarter of 2023, we completed the implementation of a new operating model intended to simplify and streamline our operations and better align our manufacturing and supply chain to our commercial activities.

Our segments were changed during the third quarter of 2023 to align with our new operating model.

See further discussion in Note 16, Segment Information.

In connection with that segment change, we identified new reporting units for impairment testing purposes and performed fair value measurements of our reporting units to reallocate goodwill to the new reporting units based on their relative fair values and to assess those reporting units for impairment.

We identified our HD business within our Kidney Care segment as one of the new reporting units.

Based on the estimated fair value of that reporting unit, we allocated no goodwill to it.

Additionally, we determined that a triggering event was present to review the carrying amounts of long-lived assets within the HD reporting unit, which include four manufacturing facilities that primarily manufacture HD products, HD equipment leased to customers under operating leases and developed technology intangible assets, for potential impairment.

In connection with that evaluation, we determined that the carrying amount of the asset group represented by our HD reporting unit, which is the lowest level for which identifiable cash flows are largely independent of other assets and liabilities, exceeded its forecasted undiscounted cash flows.

We then measured the excess of the carrying amount of that asset group over its fair value and allocated the resulting impairment to its long-lived assets, limiting the impairments of individual assets within the group to amounts that would not result in their carrying amounts being written down below their fair values.

As a result, we recognized $ 267 million of long-lived asset impairment charges, comprised of (i) a $ 190 million impairment charge related to certain manufacturing equipment, operating lease right-of-use assets and HD equipment leased to customers and (ii) a $ 77 million impairment charge related to developed technology intangible assets.

The impairments are classified within cost of sales in the accompanying consolidated statements of income (loss) for the three and nine months ended September 30, 2023.

The fair value of the HD asset group was based on a discounted cash flow model (an income approach).

Significant assumptions used in the determination of its fair value include forecasted cash flows, discount rates and terminal growth rates.

The discounted cash flow model used to determine the fair value of the HD asset group during the third quarter 2023 reflected our most recent cash flow projections, a discount rate of 8 % and a terminal growth rate of 1.5 %.

We also measured the fair values of individual assets within that asset group to ensure that the allocation of the asset group’s impairment to the long-lived assets within that group would not reduce the carrying amount of any individual asset below its fair value.

The fair values of the buildings, manufacturing equipment and HD equipment leased to customers within that asset group were determined based on transaction prices of comparable assets (a market approach).

Significant assumptions used in the determination of those fair values included the identification of representative comparable assets.

The fair value of the right-of-use asset within that group was determined based on market rents and discount rates.

Our long-lived asset fair value measurements are classified as Level 3 in the fair value hierarchy because they involve significant unobservable inputs.

Interest Expense, Net

Three months ended

September 30, Nine months ended

September 30,

(in millions) 2024 2023

2 unchanged sentences

Interest expense, net $ 78 $ 117

Other (Income) Expense, Net

Other Income, Net

Three months ended

September 30, Nine months ended

September 30,

(in millions) 2024 2023

Foreign exchange (gains) losses, net $ 13 $ — $ 49 ( 26 )

Foreign exchange losses, net $ 14 $ 14

Pension and other postretirement benefit plans ( 12 ) ( 10 )

Pension curtailment — — — ( 11 )

Change in fair value of marketable equity securities ( 4 ) ( 5 )

Reclassification of cumulative translation loss to earnings — 65 — 65

Non-marketable investment impairments — — 23 —

Other, net ( 5 ) ( 1 )

Other (income) expense, net $ ( 7 ) $ 61 $ 33 $ 1

Other income, net $ ( 7 ) $ ( 2 )

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, 2023 and 2022 were $ 73 million and $ 59 million, respectively.

Purchases of property, plant and equipment included in accounts payable as of September 30, 2023 and 2022 were $ 43 million and $ 65 million, respectively.

Right-of-use operating lease assets obtained in exchange for lease obligations for the three months ended March 31, 2024 and 2023 were $ 20 million and $ 26 million, respectively.

Purchases of property, plant and equipment included in accounts payable as of March 31, 2024 and 2023 were $ 52 million and $ 70 million, respectively.

GOODWILL AND OTHER INTANGIBLE ASSETS, NET

The following is a reconciliation of goodwill by segment.

(in millions) Americas EMEA APAC Medical Products and Therapies Healthcare Systems and Technologies 1

Pharmaceuticals Kidney Care Total

(in millions) Medical Products and Therapies Healthcare Systems and Technologies Pharmaceuticals Kidney Care Total

Balance as of December 31, 2023 $ 1,241 $ 3,989 $ 563 $ 721 $ 6,514

Currency translation and other ( 27 ) ( 4 ) ( 3 ) ( 2 ) ( 7 ) ( 1 ) ( 1 ) ( 45 )

Reallocation of goodwill ( 1,938 ) ( 285 ) ( 207 ) 1,195 — 542 693 —

Balance as of September 30, 2023 $ — $ — $ — $ 1,193 $ 3,981 $ 541 $ 692 $ 6,407

1 Prior to the third quarter of 2023, our Healthcare Systems and Technologies segment was referred to as our Hillrom segment.

We assess goodwill and indefinite-lived intangible assets for impairment annually during the fourth quarter or whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.

We recognize a goodwill impairment charge for the amount by which a reporting unit's carrying amount exceeds its fair value.

Change in Reportable Segments

As discussed in Note 16, Segment Information, our reportable segments were previously comprised 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 global segment for our Hillrom business.

Our segments were changed during the third quarter of 2023 to align with our new operating model.

Our business is comprised of four segments under this new operating model:

Medical Products and Therapies, Healthcare Systems and Technologies (formerly referred to as our Hillrom segment), Pharmaceuticals and Kidney Care.

As a result of this segment change, we reallocated the goodwill from our previous Americas, EMEA and APAC segments to the reporting units within our new Medical Products and Therapies, Pharmaceuticals and Kidney Care segments based on the relative fair values of those reporting units.

We also performed goodwill impairment assessments of all of our reporting units during the third quarter of 2023, including both our legacy reporting units and the reporting units of our new segments, and we did not identify any goodwill impairments.

Goodwill Impairments

We acquired Hill-Rom Holdings, Inc.

in December 2021 and recognized $ 6.83 billion of goodwill and $ 6.03 billion of other intangible assets, including $ 1.91 billion of indefinite-lived intangible assets, in connection with that acquisition.

During the third quarter of 2022, we performed trigger-based impairment tests for each of the reporting units within our Hillrom segment (currently referred to as our Healthcare Systems and Technologies segment), as well as the indefinite-lived intangible assets, consisting primarily of trade names, that we acquired in connection with the Hillrom acquisition.

We performed those tests as of September 30, 2022 due to (a) current macroeconomic conditions, including the rising interest rate environment and broad declines in equity valuations, and (b) reduced earnings forecasts for our Hillrom reporting units, driven primarily by shortages of certain component parts used in our products, raw materials inflation and increased supply chain costs.

Those impairment tests resulted in total pre-tax goodwill impairment charges of $ 2.79 billion in the third quarter of 2022.

The fair values of the reporting units for which impairments were recognized during the third quarter of 2022 were determined based on a discounted cash flow model (an income approach) and earnings multiples (a market approach) based on the guideline public company method.

Significant assumptions used in the determination of the fair values of our reporting units generally include forecasted cash flows, discount rates, terminal growth rates and earnings multiples.

The discounted cash flow models used to determine the fair values of our reporting units during 2022 reflected our most recent cash flow projections, discount rates ranging from 9 % to 10 % and terminal growth rates ranging from 2 % to 3 %.

Our reporting unit fair value measurements are classified as Level 3 in the fair value hierarchy because they involve significant unobservable inputs.

See further discussion below for information regarding Hillrom indefinite-lived intangible asset impairment charges recognized during the third quarter of 2022.

Currency translation ( 38 ) ( 7 ) ( 17 ) ( 22 ) ( 84 )

Balance as of March 31, 2024 $ 1,203 $ 3,982 $ 546 $ 699 $ 6,430

For the periods ended March 31, 2024 and 2023, there were no reductions in goodwill relating to impairment losses.

Other intangible assets, net

1 unchanged sentence

Indefinite-lived intangible assets

(in millions) Customer relationships Developed technology, including patents Other amortized intangible assets Trade names In process Research and Development

September 30, 2023

(in millions) Customer relationships Developed technology, including patents Trade names Other amortized intangible assets Trade names In process Research and Development

March 31, 2024

Gross other intangible assets $ 3,444 $ 3,807 $ 1,097 $ 118 $ 680 $ 157 $ 9,303

5 unchanged sentences

Other intangible assets, net $ 2,757 $ 1,538 $ 926 $ 21 $ 680 $ 157 $ 6,079

Intangible asset amortization expense was $ 162 million and $ 168 million for the three months ended September 30, 2023 and 2022, respectively, and $ 481 million and $ 578 million for the nine months ended September 30, 2023 and 2022, respectively.

Intangible Asset Impairments

Impairment of Developed Technology Intangible Asset Related to HD Business

In the third quarter of 2023, we reviewed the long-lived assets of our HD reporting unit for potential impairment and recognized a $ 77 million impairment of developed technology intangible assets, in addition to other impairments of property, plant and equipment and operating lease right-of-use assets.

See Note 3, Supplemental Financial Information, for information about the impairment of this intangible asset, impairments of other long-lived assets related to our HD business and related fair value measurements.

Impairment of Indefinite-Lived Intangible Assets from Our Hillrom Acquisition

In the third quarter of 2022, we recognized pre-tax impairment charges of $ 332 million to reduce the carrying amounts of certain indefinite-lived intangible assets, which primarily related to the Hillrom and Welch Allyn trade names acquired in the Hillrom acquisition, to their estimated fair values.

Those intangible asset impairment charges are classified within cost of sales in the accompanying consolidated statements of income (loss) for the three and nine months ended September 30, 2022.

The fair values of the trade name intangible assets were determined using the relief from royalty method.

Significant assumptions used in the determination of the fair values of the trade name intangible assets included revenue growth rates, terminal growth rates, discount rates and royalty rates.

The relief from royalty models used in the determination of the fair values of our trade name intangible assets during 2022 reflected our most recent revenue projections, a discount rate of 9.5 %, royalty rates ranging from 3 % to 5 % and terminal growth rates ranging from 2 % to 3 %.

Our trade name intangible asset fair value measurements are classified as Level 3 in the fair value hierarchy because they involve significant unobservable inputs.

Intangible asset amortization expense was $ 166 million and $ 162 million for the three months ended March 31, 2024 and 2023, respectively.

FINANCING ARRANGEMENTS

1 unchanged sentence

In the first quarter of 2024, we amended the credit agreements governing our U.S.

dollar-denominated term loan credit facility and revolving credit facility and the guaranty agreement with respect to our Euro-denominated revolving credit facility, in each case to amend the net leverage ratio covenant to increase the maximum net leverage ratio for the four fiscal quarters ending March 31, 2023, June 30, 2023, September 30, 2023 and December 31, 2023.

dollar-denominated revolving credit facility has a capacity of $ 2.50 billion and our Euro-denominated revolving credit facility has a capacity of € 200 million .

dollar-denominated term loan credit facility and revolving credit facility and the guaranty agreement with respect to our Euro-denominated revolving credit facility, in each case to amend the net leverage ratio covenant to increase the maximum net leverage ratio for the six fiscal quarters ending June 30, 2024, September 30, 2024, December 31, 2024, March 31, 2025, June 30, 2025, and September 30, 2025.

The amendment further provides for the reduction of the capacity under our U.S dollar-denominated revolving credit facility from $ 2.50 billion to $ 2.00 billion on the earlier of September 30, 2024 or the date of the sale or spinoff of our Kidney Care business.

Costs incurred in connection with the amendment were not material.

dollar-denominated revolving credit facility currently has a capacity of $ 2.50 billion and our Euro-denominated revolving credit facility has a capacity of € 200 million .

Each of the facilities matures in 2026.

There were no borrowings outstanding under these credit facilities as of September 30, 2023 or December 31, 2022.

There were no borrowings outstanding under these credit facilities as of March 31, 2024 or December 31, 2023.

Our commercial paper borrowing arrangements require us to maintain undrawn borrowing capacity under our credit facilities for an amount at least equal to our outstanding commercial paper borrowings.

Based on our covenant calculations as of September 30, 2023 we have capacity to draw on the full amounts under our credit facilities, less commercial paper borrowings which were $ 514 million as of September 30, 2023.

In the first nine months of 2023, we repaid $ 350 million of our $ 2.00 billion three-year term loan facility.

In October 2023, we repaid an additional $ 950 million under that term loan facility and our entire $ 514 million of outstanding commercial paper borrowings, both using proceeds from the sale of our BPS business.

The losses from our early extinguishments of debt were not significant.

Commercial Paper

As of September 30, 2023, we had $ 514 million of commercial paper outstanding with a weighted-average interest rate of 5.53 % and an original weighted-average term of 13 days.

As of December 31, 2022, we had $ 299 million of commercial paper outstanding with a weighted-average interest rate of 4.75 % and an original weighted-average term of 32 days.

Based on our covenant calculations as of March 31, 2024 we have capacity to draw on the full amounts under our credit facilities.

In the first three months of 2024, we repaid $ 13 million of senior notes at maturity.

COMMITMENTS AND CONTINGENCIES

3 unchanged sentences

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

As of September 30, 2023 and December 31, 2022, our total recorded reserves with respect to legal and environmental matters were $ 33 million and $ 28 million, respectively.

As of March 31, 2024 and December 31, 2023, our total recorded reserves with respect to legal and environmental matters were $ 30 million and $ 31 million, respectively.

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

12 unchanged sentences

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

As of September 30, 2023 and December 31, 2022, our environmental reserves, which are measured on an undiscounted basis, were $ 16 million and $ 19 million, respectively.

As of March 31, 2024 and December 31, 2023, our environmental reserves, which are measured on an undiscounted basis, were $ 14 million and $ 15 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 August 2019, we were named in an amended complaint filed by Fayette County, Georgia in the MDL In re:

National Prescription Opiate Litigation pending in the U.S.

District Court, Northern District of Ohio.

The complaint alleges that

multiple manufacturers and distributors of opiate products improperly marketed and diverted these products, which caused harm to Fayette County.

The complaint is limited in its allegations as to Baxter and does not distinguish between injectable opiate products and orally administered opiates.

We manufactured generic injectable opiate products in our facility in Cherry Hill, NJ, which we divested in 2011.

On July 17, 2023, we were voluntarily dismissed from the litigation without prejudice.

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 were not material to our financial results, which were paid in the fourth quarter of 2021.

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

We have since resolved, without litigation, additional claims of injuries from exposure to ethylene oxide at Mountain Home for amounts within accruals previously established as of December 31, 2021.

3 unchanged sentences

We answered the First Amended Complaint on January 27, 2023.

The parties reached agreement to settle this lawsuit in the third quarter of 2023 for an amount that was not material to our financial results, which was paid in the fourth quarter of 2023.

The parties reached an agreement to settle this lawsuit in the third quarter of 2023 for an amount that was not material to our financial results, which was paid in the fourth quarter of 2023.

The case was dismissed on October 17, 2023.

Starting in December 2023, a number of lawsuits have been filed against us in the Circuit Court of Cook County, Illinois by plaintiffs alleging injuries as a result of exposure to ethylene oxide used by several companies, including historic use by us for sterilization at our manufacturing facility in Round Lake, Illinois.

The plaintiffs seek damages in an unspecified amount.

We acquired Hill-Rom Holdings, Inc.

1 unchanged sentence

In July 2021, Hill-Rom, Inc., a wholly-owned subsidiary of Hillrom, 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 Department of Justice (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 subpoena was related to a lawsuit brought under the qui tam provisions

of False Claims Act.

The allegations included in the unsealed complaint relate to conduct prior to our acquisition of Hillrom, and the division involved is no longer operational.

Hillrom voluntarily began a related internal review, and Hillrom and Baxter cooperated fully with the DHHS and the Department of Justice (DOJ) with respect to this matter.

In January 2024, the parties reached an agreement to settle the allegations.

We paid the settlement amounts, which were not material to our financial results, in January 2024 and the matter was dismissed in February 2024.

In October 2022, the DOJ issued a separate Civil Investigative Demand (CID) addressed to Hillrom, requesting documents and information related to compliance with the False Claims Act and the Anti-Kickback Statute.

8 unchanged sentences

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 and filed a motion challenging certain aspects of plaintiff's case on May 27, 2022.

In July 2023, we and certain of our officers were named in a class action complaint captioned Grover J.

Kelley et al.

Baxter International Inc.

that was filed in the United States District Court for the Northern District of Illinois.

The plaintiff, who allegedly purchased securities during the specified class period, filed this putative class action on behalf of himself and shareholders who acquired Baxter securities on the public market between May 25, 2022, and February 8, 2023.

The plaintiff alleges that we and certain officers violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder by making allegedly false and misleading statements and failing to disclose material facts relating to supply chain and financial guidance.

The Court appointed Kelley as lead plaintiff on September 20, 2023.

Hillrom filed an answer to the complaint on January 28, 2022 and filed a motion challenging certain aspects of plaintiff's case on May 27, 2022, which was denied on January 17, 2024, subject to further discovery.

STOCKHOLDERS’ EQUITY

Cash Dividends

Cash dividends declared per share for the three and nine months ended September 30, 2023 were $ 0.29 and $ 0.87 , respectively.

Cash dividends declared per share for the three and nine months ended September 30, 2022 were $ 0.29 and $ 0.86 , respectively.

Cash dividends declared per share for the three months ended March 31, 2024 and 2023 were $ 0.29 .

Stock Repurchase Programs

In July 2012, our Board of Directors authorized a share repurchase program and the related authorization amount was subsequently increased a number of times.

During the first nine months of 2023 we did not repurchase any shares

under this authority.

During the first nine months of 2022 we repurchased 0.5 million shares under this authority pursuant to Rule 10b5-1 plans.

We had $ 1.30 billion remaining available under the authorization as of September 30, 2023.

During the first three months of 2024 and 2023 we did not repurchase any shares under this authority.

We had $ 1.30 billion remaining available under the authorization as of March 31, 2024.

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

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

The following table is a net-of-tax summary of the changes in accumulated other comprehensive income (loss) (AOCI) by component for the nine months ended September 30, 2023 and 2022.

The following table is a net-of-tax summary of the changes in accumulated other comprehensive income (loss) (AOCI) by component for the three months ended March 31, 2024 and 2023.

Gains (losses)

5 unchanged sentences

Net other comprehensive income (loss) ( 180 ) 4 8 — ( 168 )

Balance as of September 30, 2023 $ ( 3,263 ) $ ( 347 ) $ ( 109 ) $ 3 $ ( 3,716 )

Balance as of March 31, 2024 $ ( 3,165 ) $ ( 448 ) $ ( 112 ) $ 3 $ ( 3,722 )

Gains (losses)

5 unchanged sentences

Net other comprehensive income (loss) 102 ( 6 ) ( 2 ) — 94

Balance as of September 30, 2022 $ ( 3,658 ) $ ( 299 ) $ ( 99 ) $ 2 $ ( 4,054 )

Balance as of March 31, 2023 $ ( 3,284 ) $ ( 337 ) $ ( 121 ) $ 3 $ ( 3,739 )

(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, 2023 and 2022.

The following is a summary of the amounts reclassified from AOCI to net income during the three months ended March 31, 2024 and 2023.

Amounts reclassified from AOCI (a)

(in millions) Three months ended September 30, 2023 Nine months ended September 30, 2023 Location of impact in income statement

Reclassification of cumulative translation loss to earnings from BPS divestiture $ ( 185 ) $ ( 185 ) Income from discontinued operations, net of tax

Tax effect — — Income from discontinued operations, net of tax

$ ( 185 ) $ ( 185 ) Net of tax

(in millions) Three months ended March 31, 2024 Three months ended March 31, 2023 Location of impact in income statement

Pension and OPEB items

Amortization of net losses and prior service costs or credits $ 5 $ 15 Other (income) expense, net

Pension settlement from BPS divestiture 4 4 Income from discontinued operations, net of tax

Amortization of net losses and prior service costs or credits $ 2 $ 5 Other income, net

Tax effect ( 1 ) ( 2 ) Income tax expense

3 unchanged sentences

Interest rate contracts ( 1 ) ( 1 ) Interest expense, net

Fair value hedges ( 3 ) — Other income, net

( 2 ) 3 Total before tax

3 unchanged sentences

(a) Amounts in parentheses indicate reductions to net income

Amounts reclassified from AOCI (a)

(in millions) Three months ended September 30, 2022 Nine months ended September 30, 2022 Location of impact in income statement

Reclassification of cumulative translation loss to earnings $ ( 65 ) $ ( 65 ) Other (income) expense, net

Tax effect — — Income tax expense

$ ( 65 ) $ ( 65 ) Net of tax

Amortization of pension and OPEB items

Amortization of net losses and prior service costs or credits $ ( 8 ) $ ( 25 ) Other (income) expense, net

Tax effect 2 6 Income tax expense

$ ( 6 ) $ ( 19 ) Net of tax

Gains on hedging activities

Foreign exchange contracts $ 6 $ 11 Cost of sales

Interest rate contracts ( 1 ) ( 4 ) Interest expense, net

5 7 Total before tax

Tax effect ( 1 ) ( 1 ) Income tax expense

$ 4 $ 6 Net of tax

Total reclassifications for the period $ ( 67 ) $ ( 78 ) Total net of tax

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

5 unchanged sentences

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

Our primary customers are hospitals, healthcare distribution companies, dialysis providers, and government agencies that purchase healthcare products on behalf of providers.

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

11 unchanged sentences

and advanced equipment for the surgical space.

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

For most of those offerings, 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.

To a lesser extent, we enter into arrangements for which revenue may be recognized over time.

For example, our recently divested BPS business, which is reported within discontinued operations and included contract manufacturing arrangements, our Healthcare Systems and Technologies segment includes digital and connected care solutions and collaboration tools that are implemented over time and all of our segments include equipment leases and certain subscription software and licensing arrangements.

For example, we lease medical equipment to customers under operating lease arrangements and recognize the related revenues on a monthly basis over the lease term.

Our Healthcare Systems and Technologies segment includes connected care solutions and collaboration tools that are implemented over time.

We recognize revenue for these arrangements over time or at a point in time depending on our evaluation of when the customer obtains control of the promised goods or services.

We also earn revenue from contract manufacturing activities, which is recognized over time as the services are performed.

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, 2023, we had $ 7.35 billion of transaction price allocated to remaining performance obligations related to executed contracts with an original duration of more than one year, which are primarily included in the Medical Product and Therapies and Kidney Care segments.

As of March 31, 2024, we had $ 5.78 billion of transaction price allocated to remaining performance obligations related to executed contracts with an original duration of more than one year, which are primarily included in the Medical Product and Therapies and Kidney Care segments.

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 2023, 45 % in 2024, 25 % in 2025, 10 % in 2026 and 10 % thereafter.

We expect to recognize approximately 45 % of this amount as revenue over the remainder of 2024, 30 % in 2025, 15 % in 2026, and 10 % in 2027.

Significant Judgments

Revenues from product sales are recorded at the net sales price, which includes estimates of variable consideration primarily related to rebates and wholesaler chargebacks.

These reserves are based on estimates of the amounts earned or to be claimed on the related sales and are included in accrued expenses and other current liabilities and accounts receivable, net on the condensed consolidated balance sheets.

These reserves are based on estimates of the amounts earned or to be claimed on the related sales and are included in accrued expenses and other current liabilities and as reductions of accounts receivable, net on the condensed consolidated balance sheets.

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.

1 unchanged sentence

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, 2023 and 2022 related to performance obligations satisfied in prior periods was not material.

Revenue recognized during the three months ended March 31, 2024 and 2023 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.

1 unchanged sentence

Contract Balances

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 $ 2.28 billion and $ 2.34 billion as of September 30, 2023 and December 31, 2022, respectively.

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 $ 2.26 billion and $ 2.43 billion as of March 31, 2024 and December 31, 2023, 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.

4 unchanged sentences

The following table summarizes our contract assets:

(in millions) September 30,

(in millions) March 31,

2024 December 31,

6 unchanged sentences

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 nine months ended September 30, 2023 and 2022.

The following table summarizes contract liability activity for the three months ended March 31, 2024 and 2023.

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

Nine Months Ended September 30,

Three Months Ended March 31,

(in millions) 2024

4 unchanged sentences

Balance at end of period $ 197 $ 190

For the nine months ended September 30, 2023 and 2022, $ 119 million and $ 99 million of revenue was recognized that was included in contract liabilities as of December 31, 2022 and 2021, respectively.

For the three months ended March 31, 2024 and 2023, $ 48 million and $ 65 million of revenue was recognized that was included in contract liabilities as of December 31, 2023 and 2022, respectively.

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,

2024 December 31,

12 unchanged sentences

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, 2023 and 2022 were:

(in millions) Three months ended September 30, 2023 Nine Months Ended September 30, 2023

Sales-type lease revenue $ 2 $ 9

Operating lease revenue 124 380

Variable lease revenue 12 41

Total lease revenue $ 138 $ 430

(in millions) Three months ended September 30, 2022 Nine months ended September 30, 2022

The components of lease revenue for the three months ended March 31, 2024 and 2023 were:

Three Months Ended March 31,

(in millions) 2024 2023

Sales-type lease revenue $ 3 $ 4

2 unchanged sentences

Total lease revenue $ 163 $ 143

Our net investment in sales-type leases was $ 68 million as of September 30, 2023, of which $ 10 million originated in 2019 and prior, $ 19 million in 2020, $ 19 million in 2021, $ 13 million in 2022, and $ 7 million in 2023.

Our net investment in sales-type leases was $ 69 million as of March 31, 2024, of which $ 29 million originated in 2020 and prior, $ 16 million in 2021, $ 12 million in 2022, $ 10 million in 2023, and $ 2 million in 2024.

BUSINESS OPTIMIZATION CHARGES

3 unchanged sentences

We currently expect to incur additional pre-tax costs, primarily related to implementation of business optimization programs, of approximately $ 15 million through the completion of initiatives that are currently underway.

We continue to pursue cost savings initiatives, including those related to our newly implemented operating model, intended to simplify and streamline our operations, and to the extent further cost

savings opportunities are identified, we would incur additional restructuring charges and costs to implement business optimization programs in future periods.

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

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

We continue to pursue cost savings initiatives, including those related to our newly implemented operating model, intended to simplify and streamline our operations, and to the extent further cost savings opportunities are identified, we would incur additional restructuring charges and costs to implement business optimization programs in future periods.

During the three months ended March 31, 2024 and 2023, we recorded the following charges related to business optimization programs.

Three Months Ended March 31,

(in millions) 2024 2023

3 unchanged sentences

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

Costs to implement business optimization programs for the three and nine months ended September 30, 2023 and 2022, respectively, consisted primarily of external consulting and transition costs, including employee compensation and related costs.

Costs to implement business optimization programs for the three months ended March 31, 2024 and 2023, respectively, consisted primarily of external consulting and transition costs, including employee compensation and related costs.

These costs were primarily included within cost of sales and SG&A expense.

During the three and nine months ended September 30, 2023 and 2022, we recorded the following restructuring charges.

Three months ended September 30, 2023

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

Employee termination costs $ 17 $ 33 $ 5 $ 55

Contract termination and other costs — 2 — 2

Asset impairments 7 — — 7

Total restructuring charges $ 24 $ 35 $ 5 $ 64

Three months ended September 30, 2022

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

Employee termination costs $ 13 $ 36 $ 4 $ 53

Contract termination and other costs — 2 — 2

Asset impairments 1 1 — 2

Total restructuring charges $ 14 $ 39 $ 4 $ 57

Nine months ended September 30, 2023

During the three months ended March 31, 2024 and 2023, we recorded the following restructuring charges.

Three months ended March 31, 2024

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

3 unchanged sentences

Total restructuring charges $ 11 $ 20 $ 16 $ 47

Nine months ended September 30, 2022

Three months ended March 31, 2023

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

3 unchanged sentences

Total restructuring charges $ 32 $ 71 $ 7 $ 110

For the three and nine months ended September 30, 2023, $ 14 million and $ 111 million, respectively, of the restructuring charges reflected in the table above, consisting of employee termination costs, were related to the implementation of our previously announced new operating model intended to simplify and streamline our operations.

For the nine months ended September 30, 2023, $ 253 million of the restructuring charges reflected in the table above, consisting of $ 243 million of asset impairment charges and $ 10 million of employee termination costs, were related to

our decision to cease production of dialyzers at one of our manufacturing facilities in connection with our initiatives to streamline our manufacturing footprint and improve our profitability.

See Note 3 for additional information.

For the three months ended September 30, 2022, $ 14 million of the restructuring charges reflected in the table above were related to integration activities for the Hillrom acquisition, consisting of $ 12 million of employee termination costs and $ 2 million of contract termination.

For the nine months ended September 30, 2022, $ 97 million of the restructuring charges reflected in the table above were related to integration activities for the Hillrom acquisition, consisting of $ 71 million of employee termination costs, $ 19 million of contract termination and other costs and $ 7 million of asset impairments.

For the three months ended March 31, 2024, our most significant restructuring actions, reflecting $ 24 million of the restructuring charges in the table above, were related to a program to centralize certain of our R&D activities into a new location and to our recent implementation of a new operating model intended to simplify and streamline our operations.

For the three months ended March 31, 2023, our most significant restructuring action, reflecting $ 78 million of the restructuring charges in the table above, was related to the implementation of our new operating model.

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

2 unchanged sentences

Payments ( 35 )

Reserve adjustments ( 12 )

Currency translation 1

Liability balance as of September 30, 2023 $ 171

Substantially all of our restructuring liabilities as of September 30, 2023 relate to employee termination costs, with the remaining liabilities attributable to contract termination costs.

Liability balance as of March 31, 2024 $ 136

Substantially all of our restructuring liabilities as of March 31, 2024 relate to employee termination costs, with the remaining liabilities attributable to contract termination costs.

Substantially all of the cash payments for those liabilities are expected to be disbursed by the end of 2024.

2 unchanged sentences

Three months ended

September 30, Nine months ended

September 30,

(in millions) 2024 2023

8 unchanged sentences

Net periodic OPEB cost (income) $ ( 3 ) $ ( 4 )

Our effective income tax rate was 129.7 % and 1.8 % for the three months ended September 30, 2023 and 2022, respectively, and 58.4 % and 0.5 % for the nine months ended September 30, 2023 and 2022, respectively.

Our effective income tax rate was 66.4 % and 100.0 % for the three months ended March 31, 2024 and 2023, 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, non-deductible expenses, non-taxable income, increases or decreases in valuation allowances, increases or decreases in liabilities for uncertain tax positions, and excess tax benefits or shortfalls on stock compensation awards.

Our effective income tax rate during interim periods reflects our estimated annual effective tax rate excluding discrete items.

For the three and nine months ended September 30, 2023, the difference between our effective income tax rate and the U.S.

federal statutory rate was primarily driven by the jurisdictional mix of global earnings, which was impacted by the long-lived asset impairments we recognized during the second and third quarters of 2023, and by the significance of non-deductible items to our anticipated pre-tax income for the full year.

For the three months ended September 30, 2023, our effective tax rate was also impacted by $ 13 million of separation-related income tax costs.

For the nine months ended September 30, 2023, our effective tax rate was also impacted by a $ 30 million valuation allowance recorded to reduce the carrying amount of a deferred tax asset for a tax basis step-up related to previously enacted Swiss tax legislation and by $ 17 million of separation-related income tax costs.

For the three and nine months ended September 30, 2022, the difference between our effective income tax rate and the U.S.

federal statutory rate was primarily attributable to non-deductible goodwill impairments .

For the three months ended March 31, 2024, the difference between our effective income tax rate and the U.S.

federal statutory rate was primarily driven by $ 37 million of income tax expense resulting from internal reorganization transactions related to the proposed separation of our Kidney Care segment, an increase in a valuation allowance in a foreign jurisdiction resulting from changes in future projected income, and an increase in our liabilities for various uncertain tax positions.

For the three months ended March 31, 2023, the difference between our effective income tax rate and the U.S.

federal statutory rate was primarily attributable to tax shortfalls on stock compensation awards and an increase in our liabilities for uncertain tax positions.

EARNINGS PER SHARE

The numerator for both basic and diluted earnings per share (EPS) is net income (loss) attributable to Baxter stockholders.

The numerator for both basic and diluted earnings per share (EPS) is net income attributable to Baxter stockholders.

The denominator for basic EPS is the weighted-average number of shares outstanding during the period.

The dilutive effect of outstanding stock options, RSUs and PSUs is reflected in the denominator for diluted EPS using the treasury stock method.

The following table is a reconciliation of net income (loss) attributable to Baxter stockholders.

The following table is a reconciliation of income from continuing operations to net income attributable to Baxter stockholders.

Three months ended

September 30, Nine months ended

September 30,

(in millions) 2024 2023

Income (loss) from continuing operations $ 51 $ ( 2,991 ) $ ( 142 ) $ ( 2,798 )

Income from continuing operations $ 39 $ —

Net income attributable to noncontrolling interests 2 1

1 unchanged sentence

Income from discontinued operations — 45

Net income (loss) attributable to Baxter stockholders $ 2,508 $ ( 2,937 ) $ 2,411 $ ( 2,614 )

Net income attributable to Baxter stockholders $ 37 $ 44

The following table is a reconciliation of basic shares and diluted shares.

Three months ended

September 30, Nine months ended

September 30,

(in millions) 2024 2023

2 unchanged sentences

Diluted shares 510 505

The effect of dilutive securities for the three months ended September 30, 2023 includes unexercised stock options, unvested RSUs and contingently issuable shares related to granted PSUs.

Basic and diluted shares are the same for the three months ended September 30, 2022 and the nine months ended September 30, 2023 and 2022 due to our net losses from continuing operations for those periods.

Diluted EPS excludes 18 million and 25 million shares issuable under equity awards for the three and nine months ended September 30, 2023, respectively, and 23 million shares issuable under equity awards for the three and nine months ended September 30, 2022, respectively, because their inclusion would have had an anti-dilutive effect on diluted EPS.

Basic and diluted shares are the same for the three months ended March 31, 2023 due to our loss from continuing operations attributable to Baxter stockholders.

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 16 million and 24 million shares issuable under equity awards for the three months ended March 31, 2024, and 2023, respectively, because their inclusion would have had an anti-dilutive effect on diluted EPS.

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

1 unchanged sentence

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, Chinese Renminbi, Japanese Yen, Swedish Krona, British Pound, Polish Zloty, Mexican Peso, Australian Dollar, Canadian Dollar, Korean Won, Colombian Peso, Brazilian Real, Russian Ruble, Turkish Lira and Indian Rupee.

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, Japanese Yen, Swedish Krona, Polish Zloty, Mexican Peso, Australian Dollar, Canadian Dollar, Korean Won, Colombian Peso, Brazilian Real, Turkish Lira, and Indian Rupee.

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

In addition, we use derivative and nonderivative instruments to further reduce our net exposure to foreign exchange risk.

Gains and losses on the hedging instruments are intended to offset losses and gains on the hedged transactions and reduce the earnings and equity volatility resulting from changes in foreign exchange rates.

In addition, we use derivative and nonderivative instruments to further reduce the net exposure to foreign exchange risk.

Gains and losses on the hedging instruments offset losses and gains on the hedged transactions and reduce the earnings and equity volatility resulting from changes in foreign exchange rates.

Financial market and currency volatility may limit our ability to cost-effectively hedge these exposures.

11 unchanged sentences

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 $ 437 million and $ 398 million as of September 30, 2023 and December 31, 2022, respectively.

The maximum term over which we have cash flow hedge contracts in place related to forecasted transactions at September 30, 2023 is 12 months for foreign exchange contracts.

There were no outstanding interest rate contracts designated as cash flow hedges as of September 30, 2023 and December 31, 2022.

The notional amounts of foreign exchange contracts designated as cash flow hedges were $ 261 million and $ 340 million as of March 31, 2024 and December 31, 2023, respectively.

The maximum term over which we have cash flow hedge contracts in place related to forecasted transactions at March 31, 2024 is 12 months for foreign exchange contracts.

There were no outstanding interest rate contracts designated as cash flow hedges as of March 31, 2024 and December 31, 2023.

Fair Value Hed g es

3 unchanged sentences

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, 2023 and December 31, 2022.

There were no outstanding interest rate contracts designated as fair value hedges as of March 31, 2024 and December 31, 2023.

In October 2023, we entered into a foreign currency forward contract with a notional amount of $ 798 million maturing in May 2024 and designated that derivative as a fair value hedge of our € 750 million of 0.40 % senior notes due May 2024.

Net Investment Hed g es

In May 2017, we issued € 600 million of 1.3 % senior notes due May 2025.

In May 2019, we issued € 750 million of senior notes due May 2024 and € 750 million of senior notes due May 2029.

In May 2019, we issued € 750 million of 1.3 % senior notes due May 2029.

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, 2023, we had an accumulated pre-tax unrealized translation gain in AOCI of $ 105 million related to the Euro-denominated senior notes.

In May 2019, we issued € 750 million of 0.40 % senior notes due May 2024.

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

In October 2023, we dedesignated this previously designated net investment hedge and concurrently entered into a fair value hedging relationship as discussed in the "Fair Value Hedges" section above.

As of March 31, 2024, we had an accumulated pre-tax unrealized translation gain in AOCI of $ 75 million related to the Euro-denominated senior notes.

Dedesignations

If it is determined that a derivative or nonderivative hedging instrument is no longer highly effective as a hedge, we discontinue hedge accounting prospectively.

Gains or losses relating to terminations of effective cash flow hedges generally continue to be deferred and are recognized consistent with the loss or income recognition of the underlying

hedged items.

Gains or losses relating to terminations of effective cash flow hedges generally continue to be deferred and are recognized consistent with the loss or income recognition of the underlying hedged items.

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 cash flow hedge dedesignations in the first nine months of 2023 or 2022 resulting from changes in our assessment of the probability that the hedged forecasted transactions would occur.

There were no cash flow hedge dedesignations in the first three months of 2024 or 2023 resulting from changes in our assessment of the probability that the hedged forecasted transactions would occur.

The losses relating to these terminations continue to be deferred and are being recognized consistent with the underlying hedged item, interest expense on the issuance of debt.

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 2023 or 2022.

There were no fair value hedges terminated during the first three months of 2024 or 2023.

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 2023 or 2022.

There were no net investment hedges terminated during the first three months of 2024 or 2023.

Undesignated Derivative Instruments

1 unchanged sentence

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 $ 626 million as of September 30, 2023 and $ 753 million as of December 31, 2022.

The total notional amount of undesignated derivative instruments was $ 707 million as of March 31, 2024 and $ 709 million as of December 31, 2023.

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, 2023 and 2022.

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

4 unchanged sentences

Foreign exchange contracts 10 — Cost of sales 2 4

Net investment hedges 48 126 Other (income) expense, net — —

Fair value hedges

Foreign exchange contracts ( 2 ) — Other income, net ( 3 ) —

Net investment hedges 38 ( 48 ) Other income, net — —

Total $ 46 $ ( 48 ) $ ( 2 ) $ 3

1 unchanged sentence

(in millions) 2024 2023

Fair value hedges

Foreign exchange contracts Other income, net $ ( 23 ) $ —

Undesignated derivative instruments

Foreign exchange contracts Other (income) expense, net $ 2 $ ( 11 )

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

in income statement Gain (loss) reclassified from AOCI

(in millions) 2023 2022 2023 2022

Cash flow hedges

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

Foreign exchange contracts 19 42 Cost of sales 10 11

Net investment hedges 10 311 Other (income) expense, net — —

Foreign exchange contracts Other income, net ( 17 ) ( 3 )

Total $ ( 40 ) $ ( 3 )

Location of gain (loss)

in income statement Gain (loss) recognized in income

(in millions) 2023 2022

Undesignated derivative instruments

Foreign exchange contracts Other (income) expense, net $ ( 16 ) $ ( 34 )

As of September 30, 2023, $ 7 million of deferred, net after-tax gains 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.

As of March 31, 2024, less than $ 1 million of deferred, net after-tax gains 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, 2023.

The following table summarizes the classification and fair values of derivative instruments reported in the condensed consolidated balance sheet as of March 31, 2024.

Derivatives in asset positions Derivatives in liability positions

(in millions) Balance sheet location Fair value Balance sheet location Fair value

Derivative instruments designated as hedges

Foreign exchange contracts Prepaid expenses and other current assets $ 13 Accrued expenses and other current liabilities $ 1

Total derivative instruments designated as hedges 13 1

Undesignated derivative instruments

Foreign exchange contracts Prepaid expenses and other current assets $ 13 Accrued expenses and other current liabilities $ 7

Derivative instruments designated as hedges

Foreign exchange contracts Prepaid expenses and other current assets 6 Accrued expenses and other current liabilities 1

Total derivative instruments $ 19 $ 8

2 unchanged sentences

(in millions) Balance sheet location Fair value Balance sheet location Fair value

Derivative instruments designated as hedges

Foreign exchange contracts Prepaid expenses and other current assets $ 8 Accrued expenses and other current liabilities $ 5

Total derivative instruments designated as hedges 8 5

Undesignated derivative instruments

Foreign exchange contracts Prepaid expenses and other current assets $ 47 Accrued expenses and other current liabilities $ —

Derivative instruments designated as hedges

Foreign exchange contracts Prepaid expenses and other current assets 4 Accrued expenses and other current liabilities 5

Total derivative instruments $ 51 $ 5

2 unchanged sentences

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, 2023 December 31, 2022

March 31, 2024 December 31, 2023

(in millions) Asset Liability Asset Liability

5 unchanged sentences

in the carrying amount of the hedged item (a)

(in millions) Balance as of September 30, 2023 Balance as of December 31, 2022 Balance as of September 30, 2023 Balance as of December 31, 2022

(in millions) Balance as of March 31, 2024 Balance as of December 31, 2023 Balance as of March 31, 2024 Balance as of December 31, 2023

Long-term debt $ 100 $ 100 $ 3 $ 3

3 unchanged sentences

Basis of fair value measurement

(in millions) Balance as of September 30, 2023 Quoted prices in active markets for identical assets

(in millions) Balance as of March 31, 2024 Quoted prices in active markets for identical assets

(Level 1) Significant other

22 unchanged sentences

Total $ 19 $ — $ 5 $ 14

As of September 30, 2023 and December 31, 2022, cash and cash equivalents of $ 5.79 billion and $ 1.72 billion, respectively, included money market and other short-term funds of approximately $ 4.34 billion and $ 341 million, respectively, which are considered Level 2 in the fair value hierarchy.

As of March 31, 2024 and December 31, 2023, cash and cash equivalents of $ 3.03 billion and $ 3.19 billion, respectively, included money market funds of approximately $ 1.47 billion and $ 1.63 billion, 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.

5 unchanged sentences

The fair values of available-for-sale 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.

The fair value of milestone payments reflects management’s expectations of probability of payment, and increases as the probability of payment increases or the expected timing of payments is accelerated.

Contingent payments related to acquisitions, which consist of milestone payments and sales-based payments, are valued using discounted cash flow techniques incorporating management's expectations of future outcomes.

The fair value of milestone payments increases as the estimated probability of payment increases or the expected timing of payments is accelerated.

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 and available-for-sale debt securities.

Three months ended September 30,

(in millions) Contingent payments related to acquisitions Available-for-sale debt securities Contingent payments related to acquisitions Available-for-sale debt securities

Fair value at beginning of period $ 21 $ 37 $ 113 $ 44

Additions — 2 — —

Change in fair value recognized in earnings — — ( 6 ) —

Payments ( 2 ) — ( 17 ) —

Fair value at end of period $ 19 $ 39 $ 90 $ 44

Nine months ended September 30,

Three months ended March 31,

(in millions) Contingent payments related to acquisitions Available-for-sale debt securities Contingent payments related to acquisitions Available-for-sale debt securities

Fair value at beginning of period $ 14 $ 22 $ 84 $ 47

Additions — 2 — 21

Change in fair value recognized in earnings — — ( 13 ) —

Change in fair value recognized in AOCI — — — 3

Transfers out of Level 3 — — — ( 5 )

1 unchanged sentence

Fair value at end of period $ 14 $ 22 $ 70 $ 42

During the second quarter of 2022, $ 8 million of available-for-sale debt securities that were previously classified as Level 3 converted to marketable equity securities, upon the initial public offering of the investee and were reclassified to Level 1 in the fair value hierarchy at that time.

During the three months ended March 31, 2023, available-for-sale debt securities were reclassified from Level 3, upon conversion to marketable equity securities, which are classified as Level 1 in the fair value hierarchy, upon initial public offerings of the investees.

Financial Instruments Not Measured at Fair Value

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, 2023 and December 31, 2022.

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, 2024 and December 31, 2023.

Book values Fair values(a)

3 unchanged sentences

(a) These fair value amounts are classified as Level 2 within the fair value hierarchy as they are estimated based on observable inputs.

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 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 not presented in the above table, such as accounts receivable, short-term debt and accounts payable, approximate their fair values due to the short-term maturities of most of those assets and liabilities.

The carrying values of other financial instruments not presented in the above table, such as accounts receivable, and accounts payable, approximate their fair values due to the short-term maturities of most of those assets and liabilities.

Investments Without Readily Determinable Fair Values

The carrying values of equity investments without readily determinable fair values that we measure at cost, less impairment were $ 74 million as of September 30, 2023 and $ 104 million as of December 31, 2022.

The carrying values of equity investments without readily determinable fair values that we measure at cost, less impairment were $ 67 million as of March 31, 2024 and $ 66 million as of December 31, 2023.

When applicable, we also adjust the measurement of such equity investments for observable prices in orderly transactions for an identical or similar investment of the same issuer.

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

During the first nine months of 2023, several of our investees either completed or were in the process of undertaking new financing rounds at lower enterprise valuations as compared to their valuations at the time of our investments.

As a result, we recognized $ 18 million of impairments of equity investments without readily determinable fair values in the second quarter.

In addition, we recognized a $ 5 million impairment of a convertible debt investment, which is accounted for as an available-for-sale security, during the first nine months of 2023.

The fair value measurements of investments in non-marketable equity and convertible debt securities are classified as Level 3 in the fair value hierarchy because they involve significant unobservable inputs.

SEGMENT INFORMATION

Our reportable segments were previously comprised 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 global segment for our Hillrom business.

Our business is comprised of four segments under this new operating model:

Medical Products and Therapies, Healthcare Systems and Technologies (formerly referred to as our Hillrom segment), Pharmaceuticals and Kidney Care.

Under this new operating model, our business is comprised of four segments:

Medical Products and Therapies, Healthcare Systems and Technologies, Pharmaceuticals, and Kidney Care (which we are planning to divest during the second half of 2024 through either a sale or spinoff, as discussed above).

Our segments were changed during the third quarter of 2023 to align with our new operating model and prior period segment disclosures have been revised to reflect the new segment presentation.

2 unchanged sentences

The Pharmaceuticals segment includes sales of specialty injectable pharmaceuticals, inhaled anesthesia, and drug compounding.

The Kidney Care segment includes sales of chronic and acute dialysis therapies and services, including peritoneal dialysis, hemodialysis, continuous renal replacement therapies (CRRT) and other organ support therapies.

Other sales not allocated to a segment primarily include sales of products and services provided directly through certain of our manufacturing facilities and royalty income under a business development arrangement that ended in early 2023 when we acquired the related product rights.

3 unchanged sentences

Intersegment sales are eliminated in consolidation.

Three Months Ended September 30,

(in millions) U.S.

International Total U.S.

International Total

Infusion Therapies and Technologies

$ 570 $ 433 $ 1,003 $ 567 $ 389 $ 956

Advanced Surgery

139 116 255 141 106 247

Medical Products and Therapies 709 549 1,258 708 495 1,203

Care and Connectivity Solutions

317 126 443 339 117 456

Front Line Care

234 67 301 209 70 279

Healthcare Systems and Technologies

551 193 744 548 187 735

Injectables and Anesthesia

195 156 351 173 152 325

Drug Compounding — 229 229 — 200 200

Pharmaceuticals 195 385 580 173 352 525

Chronic Therapies 1

233 688 921 236 698 934

Acute Therapies 1

66 122 188 57 109 166

Kidney Care 299 810 1,109 293 807 1,100

12 5 17 36 10 46

Total Baxter $ 1,766 $ 1,942 $ 3,708 $ 1,758 $ 1,851 $ 3,609

Nine Months Ended September 30,

Three months ended March 31,

(in millions) U.S.

23 unchanged sentences

Total Baxter $ 1,659 $ 1,933 $ 3,592 $ 1,667 $ 1,846 $ 3,513

1 In connection with our segment change in the third quarter of 2023, we made the following reclassifications of prior period sales amounts to conform to the current period presentation.

We reclassified $ 16 million of sales from the first half of 2023 and $ 8 million and $ 23 million for the three and nine months ended September 30, 2022, respectively, from Chronic Therapies to Acute Therapies.

Additionally, in connection with the reclassification of our BPS business to discontinued operations during the second quarter of 2023, we reclassified $ 2 million of contract manufacturing revenues from the first quarter of 2023 and $ 8 million and $ 26 million for the three and nine months ended September 30, 2022, respectively, from BPS to Other (within continuing operations), as the related manufacturing facility was not part of that divestiture transaction.

1 In connection with our segment change in the third quarter of 2023, we reclassified $ 8 million of sales from the first quarter of 2023 from Chronic Therapies to Acute Therapies to conform to the current period presentation.

Additionally, in connection with the reclassification of our BPS business to discontinued operations during the second quarter of 2023, we reclassified $ 2 million of contract manufacturing revenues from the first quarter of 2023 from BPS to Other (within continuing operations), as the related manufacturing facility was not part of that divestiture transaction.

Geographic Sales Information

Our net sales are attributed to the following geographic regions based on the location of the customer.

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Three months ended March 31,

United States $ 1,659 $ 1,667

Emerging markets 1

852 820 2,447 2,355

Rest of world 2

1,090 1,031 3,298 3,236

Total Baxter $ 3,592 $ 3,513

1 Emerging markets include sales from our operations in Eastern Europe, the Middle East, Africa, Latin America and Asia (except for Japan).

1 Emerging markets includes sales from our operations in Eastern Europe, the Middle East, Africa, Latin America, and Asia (except for Japan).

2 Rest of world includes sales from our operations in Western Europe, Canada, Japan, Australia, and New Zealand.

2 unchanged sentences

Segment operating income represents income before income taxes, interest and other non-operating income or expense, unallocated corporate costs, intangible asset amortization, and other special items.

Special items, which are presented below in our reconciliations of segment operating income to income (loss) from continuing operations before income taxes, are excluded from segment operating income because they are highly variable, difficult to predict and of a size that may substantially impact our reported results of operations for the period.

Under our new operating model, most global functional support costs, overhead costs and other shared costs that benefit our segments are allocated to those segments.

Corporate costs that are not allocated to our segments, as well as any differences between actual corporate costs and the amounts allocated to our segments, are presented as

unallocated corporate costs.

The following table presents our segment operating income and reconciliations of segment operating income to income (loss) from continuing operations before income taxes.

Three months ended

September 30, Nine months ended

September 30,

Special items, which are presented below in our reconciliations of segment operating income to income from continuing operations before income taxes, are excluded from segment operating income because they are highly variable, difficult to predict and of a size that may substantially impact our reported results of operations for the period.

Most global functional support costs, overhead costs and other shared costs that benefit our segments are allocated to those segments.

Corporate costs that are not allocated to our segments, as well as any differences between actual

corporate costs and the amounts allocated to our segments, are presented as unallocated corporate costs.

The following table presents our segment operating income and reconciliations of segment operating income to income from continuing operations before income taxes.

Three months ended March 31,

(in millions) 2024 2023

3 unchanged sentences

Kidney Care 159 57

Other 6 17 19 52

Total 535 460

1 unchanged sentence

Intangible asset amortization expense ( 166 ) ( 162 )

Long-lived asset impairments ( 267 ) ( 332 ) ( 267 ) ( 332 )

Legal matters ( 13 ) — ( 13 ) —

Goodwill impairments — ( 2,785 ) — ( 2,785 )

Business optimization items ( 57 ) ( 134 )

Acquisition and integration items ( 5 ) 7

Loss on product divestiture arrangement — ( 54 ) — ( 54 )

Separation-related costs ( 92 ) ( 9 )

European Medical Devices Regulation ( 8 ) ( 12 )

Product-related items — ( 20 ) — ( 43 )

Total operating income (loss) ( 51 ) ( 2,880 ) 61 ( 2,533 )

Total operating income 187 129

Interest expense, net 78 117

Other (income) expense, net ( 7 ) 61 33 1

Loss from continuing operations before income taxes $ ( 172 ) $ ( 3,045 ) $ ( 341 ) $ ( 2,812 )

Other income, net ( 7 ) ( 2 )

Income from continuing operations before income taxes $ 116 $ 14

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.

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