What changed in this filing

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Item 1. Financial Statements

2024-11-12 compared with 2024-08-06 · 321 added, 245 removed, 716 unchanged (44% 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 720 706

Current assets of discontinued operations 2,892 2,179

Total current assets 8,864 9,600

4 unchanged sentences

Other non-current assets 886 809

Non-current assets of discontinued operations 2,534 2,949

Total assets $ 26,676 $ 28,276

3 unchanged sentences

Accrued expenses and other current liabilities 1,772 1,915

Current liabilities of discontinued operations 1,089 1,040

Total current liabilities 6,200 6,503

2 unchanged sentences

Other non-current liabilities 1,263 1,400

Non-current liabilities of discontinued operations 575 551

Total liabilities 18,734 19,808

12 unchanged sentences

Baxter International Inc.

Condensed Consolidated Statements of Loss (unaudited)

Condensed Consolidated Statements of Income (Loss) (unaudited)

(in millions, except per share data)

Three months ended

June 30, Six months ended

September 30, Nine months ended

September 30,

2024 2023 2024 2023

4 unchanged sentences

Research and development expenses 129 133 379 391

Goodwill impairment 430 — 430 —

Other operating income, net ( 5 ) — ( 9 ) ( 14 )

Operating income (loss) ( 192 ) ( 17 ) ( 5 ) 112

Operating income 155 179 449 403

Interest expense, net 87 127 251 367

Other (income) expense, net ( 1 ) ( 12 ) ( 34 ) 15

Loss from continuing operations before income taxes ( 257 ) ( 183 ) ( 141 ) ( 169 )

Income from continuing operations before income taxes 69 64 232 21

Income tax expense 8 27 70 59

Loss from continuing operations ( 311 ) ( 193 ) ( 272 ) ( 193 )

Income from discontinued operations, net of tax — 54 — 99

Net loss ( 311 ) ( 139 ) ( 272 ) ( 94 )

Income (loss) from continuing operations 61 37 162 ( 38 )

Income (loss) from discontinued operations, net of tax 83 2,474 ( 290 ) 2,455

Net income (loss) 144 2,511 ( 128 ) 2,417

Net income attributable to noncontrolling interests included in continuing operations — — — —

Net income attributable to noncontrolling interests included in discontinued operations 4 3 9 6

Net income attributable to noncontrolling interests 4 3 9 6

Net loss attributable to Baxter stockholders $ ( 314 ) $ ( 141 ) $ ( 277 ) $ ( 97 )

Loss from continuing operations per common share

Net income (loss) attributable to Baxter stockholders $ 140 $ 2,508 $ ( 137 ) $ 2,411

Income (loss) from continuing operations per common share

Basic $ 0.12 $ 0.07 $ 0.32 $ ( 0.08 )

Diluted $ 0.12 $ 0.07 $ 0.32 $ ( 0.08 )

Income from discontinued operations per common share

Income (loss) from discontinued operations per common share

Basic $ 0.15 $ 4.88 $ ( 0.59 ) $ 4.84

Diluted $ 0.15 $ 4.86 $ ( 0.59 ) $ 4.84

Loss per common share

Income (loss) per common share

Basic $ 0.27 $ 4.95 $ ( 0.27 ) $ 4.76

5 unchanged sentences

Baxter International Inc.

Condensed Consolidated Statements of Comprehensive Loss (unaudited)

Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited)

(in millions)

Three months ended

June 30, Six months ended

September 30, Nine months ended

September 30,

2024 2023 2024 2023

Loss from continuing operations $ ( 311 ) $ ( 193 ) $ ( 272 ) $ ( 193 )

Income (loss) from continuing operations $ 61 $ 37 $ 162 $ ( 38 )

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

Currency translation adjustments, net of tax expense (benefit) of $ 2 and $ 4 for the three months ended June 30, 2024 and 2023, respectively, and $ 13 and ($ 9 ) for the six months ended June 30, 2024 and 2023, respectively.

Currency translation adjustments, net of tax expense (benefit) of ($ 19 ) and $ 12 for the three months ended September 30, 2024 and 2023, respectively, and ($ 3 ) and $ 2 for the nine months ended September 30, 2024 and 2023, respectively.

106 ( 36 ) ( 61 ) ( 39 )

Pension and other postretirement benefits, net of tax expense (benefit) of ($ 1 ) and ($ 2 ) for the three months ended June 30, 2024 and 2023, respectively, and $ 2 and ($ 3 ) for the six months ended June 30, 2024 and 2023, respectively.

Pension and other postretirement benefits, net of tax expense (benefit) of ($ 2 ) and zero for the three months ended September 30, 2024 and 2023, respectively, and zero and ($ 3 ) for the nine months ended September 30, 2024 and 2023, respectively.

( 6 ) ( 1 ) ( 2 ) ( 11 )

Hedging activities, net of tax expense (benefit) of $ 1 and $ 2 for the three months ended June 30, 2024 and 2023, respectively and $ 3 and $ 1 for the six months ended June 30, 2024 and 2023, respectively.

Total other comprehensive loss from continuing operations, net of tax ( 106 ) ( 74 ) ( 278 ) ( 1 )

Hedging activities, net of tax expense (benefit) of ($ 3 ) and $ 2 for the three months ended September 30, 2024 and 2023, respectively and zero and $ 3 for the nine months ended September 30, 2024 and 2023, respectively.

Total other comprehensive income (loss) from continuing operations, net of tax 91 ( 32 ) ( 61 ) ( 40 )

Comprehensive loss from continuing operations 152 5 101 ( 78 )

Income from discontinued operations, net of tax — 54 — 99

Other comprehensive income (loss) from discontinued operations, net of tax - currency translation adjustments — ( 1 ) — 20

Comprehensive income from discontinued operations — 53 — 119

Comprehensive loss ( 417 ) ( 214 ) ( 550 ) ( 75 )

Income (loss) from discontinued operations, net of tax 83 2,474 ( 290 ) 2,455

Other comprehensive income (loss) from discontinued operations

Currency translation adjustments, net of tax expense (benefit) of $( 11 ) and $( 1 ) for the three months ended September 30, 2024 and 2023, respectively, and $( 15 ) and $( 1 ) for the nine months ended September 30, 2024 and 2023, respectively.

90 134 ( 35 ) 162

Pension and other postretirement benefits, net of tax expense (benefit) of zero for the three and nine months ended September 30, 2024 and 2023

— ( 4 ) ( 1 ) ( 5 )

Total other comprehensive income (loss) from discontinued operations 90 130 ( 36 ) 157

Comprehensive income (loss) from discontinued operations 173 2,604 ( 326 ) 2,612

Comprehensive income (loss) 325 2,609 ( 225 ) 2,534

Comprehensive income attributable to noncontrolling interests 4 3 9 6

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

Comprehensive loss attributable to Baxter stockholders $ ( 420 ) $ ( 216 ) $ ( 551 ) $ ( 78 )

Comprehensive income (loss) attributable to Baxter stockholders $ 321 $ 2,606 $ ( 230 ) $ 2,528

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

2 unchanged sentences

(in millions)

For the three months ended June 30, 2024

For the three months ended September 30, 2024

Baxter International Inc.

4 unchanged sentences

loss Total Baxter stockholders' equity Noncontrolling interests Total equity

Balance as of April 1, 2024 683 $ 683 174 $ ( 11,130 ) $ 6,339 $ 16,003 $ ( 3,722 ) $ 8,173 $ 62 $ 8,235

Net loss — — — — — ( 314 ) — ( 314 ) 3 ( 311 )

Balance as of July 1, 2024 683 $ 683 173 $ ( 11,104 ) $ 6,353 $ 15,539 $ ( 3,828 ) $ 7,643 $ 65 $ 7,708

Net income — — — — — 140 — 140 4 144

Other comprehensive income (loss) — — — — — — 181 181 — 181

1 unchanged sentence

Dividends declared on common stock — — — — — ( 150 ) — ( 150 ) — ( 150 )

Balance as of June 30, 2024

Change in noncontrolling interests — — — — — — — — 1 1

Balance as of September 30, 2024

683 $ 683 173 $ ( 11,084 ) $ 6,391 $ 15,529 $ ( 3,647 ) $ 7,872 $ 70 $ 7,942

For the six months ended June 30, 2024

For the nine months ended September 30, 2024

Baxter International Inc.

7 unchanged sentences

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

Balance as of June 30, 2024

Balance as of September 30, 2024

683 $ 683 173 $ ( 11,084 ) $ 6,391 $ 15,529 $ ( 3,647 ) $ 7,872 $ 70 $ 7,942

For the three months ended June 30, 2023

For the three months ended September 30, 2023

Baxter International Inc.

1 unchanged sentence

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

Balance as of April 1, 2023 683 $ 683 178 $ ( 11,324 ) $ 6,312 $ 13,947 $ ( 3,739 ) $ 5,879 $ 62 $ 5,941

Net loss — — — — — ( 141 ) — ( 141 ) 2 ( 139 )

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

1 unchanged sentence

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

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

Balance as of June 30, 2023 683 $ 683 177 $ ( 11,296 ) $ 6,341 $ 13,655 $ ( 3,814 ) $ 5,569 $ 62 $ 5,631

For the six months ended June 30, 2023

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.

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 — — — — — ( 97 ) — ( 97 ) 3 ( 94 )

Net income — — — — — 2,411 — 2,411 6 2,417

Other comprehensive income (loss) — — — — — — 117 117 — 117

2 unchanged sentences

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

Balance as of June 30, 2023

Balance as of September 30, 2023

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

3 unchanged sentences

(in millions)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operations

Net loss $ ( 272 ) $ ( 94 )

Income from discontinued operations, net of tax — 99

Loss from continuing operations ( 272 ) ( 193 )

Net income (loss) $ ( 128 ) $ 2,417

Income (loss) from discontinued operations, net of tax ( 290 ) 2,455

Income (loss) from continuing operations 162 ( 38 )

Adjustments to reconcile net loss to cash flows from operations:

3 unchanged sentences

Net periodic pension and other postretirement costs ( 21 ) ( 19 )

Goodwill impairment 430 —

Other long-lived asset impairments 42 3

19 unchanged sentences

Repayments of debt ( 827 ) ( 353 )

Net (decreases) increases in debt with original maturities of three months or less — ( 51 )

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

Cash dividends on common stock ( 443 ) ( 439 )

2 unchanged sentences

Cash flows from financing activities ( 1,222 ) ( 554 )

Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash ( 47 ) 9

Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash - continuing operations ( 45 ) ( 37 )

Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash - discontinued operations 39 23

Increase (decrease) in cash, cash equivalents and restricted cash ( 1,118 ) 4,070

1 unchanged sentence

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

$ 2,096 $ 1,726

(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 June 30, 2024, December 31, 2023, and June 30, 2023 (in millions):

June 30, 2024 December 31, 2023 June 30, 2023

Less cash and cash equivalents of discontinued operations 658 72

Cash, cash equivalents and restricted cash of continuing operations $ 1,422 $ 5,720

(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, 2024, December 31, 2023, and September 30, 2023 (in millions):

September 30, 2024 December 31, 2023 September 30, 2023

Cash and cash equivalents $ 1,420 $ 3,078 $ 5,716

13 unchanged sentences

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

The disclosures presented in our notes to the consolidated financial statements are presented on a continuing operations basis.

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

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

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 in late 2024 or early 2025, subject to the satisfaction of customary conditions.

On August 12, 2024, we entered into an Equity Purchase Agreement (EPA) with certain affiliates of Carlyle Group Inc.

(Carlyle) to sell our Kidney Care business, which will be known as Vantive, for an aggregate purchase price of $ 3.80 billion.

After giving effect to certain closing adjustments, we currently expect to receive approximately $ 3.50 billion in cash with net after-tax proceeds currently estimated to be in the range of $ 3.15 billion to $ 3.25 billion.

The transaction is currently expected to close in late 2024 or early 2025, subject to the receipt of customary regulatory approvals and satisfaction of other closing conditions.

We determined that our Kidney Care business met the criteria to be classified as held-for-sale in August 2024, and we also concluded that it met the conditions to be reported as a discontinued operation at that time.

Accordingly, our Kidney Care business is reported in discontinued operations in the accompanying condensed consolidated financial statements, and our prior period results have been adjusted to reflect discontinued operations presentation.

See Note 2 for additional information.

Hurricane Helene

In September 2024, Hurricane Helene, which brought significant rain and extensive flooding to Western North Carolina, caused damage to certain of our assets at our North Cove facility in Marion, N.C.

and disrupted operations at that facility.

We are actively working with customers, regulators and other stakeholders to manage inventory and minimize disruption to patient care as we work to fully restore our North Cove manufacturing operations.

Our insurance policies generally cover the repair or replacement of our assets that suffer loss or damage, less applicable deductibles and subject to any coverage limits and exclusions, and we are working closely with our insurance carriers and claims adjusters to ascertain the full amount of insurance proceeds due to us as a result of the damages and the loss we suffered as a result of Hurricane Helene (which proceeds are likely to be less than the applicable losses).

Our insurance policies also provide coverage for interruption to our business, including lost profits, and reimbursement for other expenses and costs that have been incurred relating to the damages and losses suffered.

In the third quarter of 2024, we recorded $ 25 million of pre-tax net charges related to damages caused by Hurricane Helene.

This consisted of $ 44 million related to the write-off of damaged inventory and fixed assets offset by a receivable of $ 19 million, which is the amount of the loss, net of our insurance deductible, related to insurance recoveries expected as a result of those asset write-offs.

These amounts were recorded as a component of cost of sales in the condensed consolidated statements of income for the three and nine month periods ended September 30, 2024.

At this time, the full amount of combined property damage and business interruption costs cannot be estimated and any additional insurance recoveries are not realizable, and accordingly, no additional amounts have been recorded as of September 30, 2024.

On November 1, 2024, we received $ 101 million of cash related to insurance proceeds which included recoveries for expenses incurred after the balance sheet date.

We expect to receive additional related insurance proceeds in the future.

Risks and Uncertainties

Supply Constraints and Global Economic Conditions

We have experienced significant challenges to our global supply chain (which we experienced most acutely in 2022), 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 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 results of operations in the future.

In recent years, we have experienced significant challenges to our global supply chain, including production delays and interruptions, increased costs and shortages of raw materials and component parts (including resins and

electromechanical devices), higher transportation costs, adverse impacts from significant weather events (including Hurricane Helene and the flooding of our North Cove facility), elevated inflation levels and interest rates, disruptions to certain ports of call and access to shipping lanes around the world, the war in Ukraine, the conflict in the Middle East, tensions amongst China, Taiwan, and the U.S., and other geopolitical events.

While we have seen improvements in the availability of component parts and improved pricing of raw materials and on transportation costs, some of these challenges (such as additional transportation costs resulting from Hurricane Helene as we transfer product across our global network in the interest of increasing the availability of intravenous and peritoneal dialysis solutions for our customers while we work to fully remediate our North Cove facility) are expected to have a negative impact on our results of operations in the future.

DISCONTINUED OPERATIONS

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

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.

The condensed consolidated financial statements reflect discontinued operations presentation for two strategic actions, as described below.

Discontinued Operations - Kidney Care

On August 12, 2024, we entered into an EPA to sell our Kidney Care business, subject to receipt of customary regulatory approvals and satisfaction of other closing conditions.

That business, which is comprised of our Kidney Care segment, provides chronic and acute dialysis therapies and services, including peritoneal dialysis, hemodialysis, continuous renal replacement therapies, and other organ support therapies.

Pursuant to the EPA, we expect to sell the Kidney Care business to Carlyle for an aggregate purchase price of $ 3.80 billion.

After giving effect to certain adjustments, we currently expect to receive approximately $ 3.50 billion of net pre-tax cash proceeds (approximately $ 3.15 billion to $ 3.25 billion after tax).

The transaction is currently expected to close in late 2024 or early 2025, subject to receipt of customary regulatory approvals and satisfaction of other closing conditions.

We intend to use the net after-tax proceeds from this transaction to repay certain of our debt obligations, consistent with our stated capital allocation priorities.

We concluded that our Kidney Care business met the criteria to be classified as held-for-sale in August 2024.

We analyzed the quantitative and qualitative factors relevant to the pending sale of our Kidney Care business, including its significance to our overall net income (loss), earnings (loss) per share, and net assets, 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 condensed consolidated financial statements.

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

Upon closing of the pending sale of the Kidney Care business, Baxter and Vantive will enter into several agreements, including a Manufacturing and Supply Agreement (Kidney Care MSA), a long-term Master Services Agreement, a Distribution Agreement, a Transition Services Agreement (Kidney Care TSA), and an Intellectual Property Agreement.

Pursuant to the Kidney Care MSA, Baxter and the Kidney Care divested entities will provide each other with certain dialysis-related products, other products, product components and fulfillment services for a period up to 10 years post-closing (with certain extension rights as provided therein).

Pursuant to the Kidney Care TSA, Baxter and the entities that will be divested in connection with the pending Kidney Care sale (the Kidney Care divested entities) will provide each other, on an interim basis, certain transitional services for up to 30 months post-closing (with certain extension rights as provided therein) to help ensure business continuity and help minimize disruptions to the entities' operations post-closing.

Services to be provided under the TSA include IT, supply chain and certain other corporate and administrative services.

Pursuant to the EPA, Baxter will retain (i) the manufacture and sale of saline solutions and (ii) the plastics operations of Baxter and its subsidiaries at its Mountain Home, Arkansas facility, which is not part of the Kidney Care segment.

Discontinued Operations - BioPharma Solutions

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

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 BPS divested entities).

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

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.

1 unchanged sentence

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

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.

Pursuant to the TSA, Baxter and the divested entities provide to each other, on an interim basis, specific transition services for up to 24 months post-closing to help ensure business continuity and minimize disruptions.

Services provided under the TSA include finance, information technology, human resources, integrated supply chain, and certain other administrative services.

Pursuant to the MSA, the divested entities 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

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

Three Months Ended June 30, Six Months Ended June 30,

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

Pursuant to the BPS TSA, Baxter and the BPS divested entities provide to each other, on an interim basis, specific transition services for up to 24 months post-closing to help ensure business continuity and minimize disruptions.

Services provided under the BPS TSA include finance, information technology, human resources, integrated supply chain, and certain other administrative services.

Pursuant to the BPS MSA, the BPS divested entities 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 tables summarize the major classes of line items included in income (loss) from discontinued operations, net of tax, for the three and nine months ended September 30, 2024 and 2023:

Kidney Care BioPharma Solutions Total

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

(in millions) 2024 2023 2024 2023 2024 2023

4 unchanged sentences

Research and development expenses 41 33 — 1 41 34

Other operating income, net ( 1 ) — — — ( 1 ) —

Operating income (loss) 106 ( 230 ) — 94 106 ( 136 )

Interest expense, net 1 1 — — 1 1

Other (income) expense, net ( 8 ) 5 — 2 ( 8 ) 7

Income from discontinued operations before income taxes 57 113

Income tax expense 3 14

Income (loss) from discontinued operations before gain on disposition and income taxes 113 ( 236 ) — 92 113 ( 144 )

Gain on disposition — — — 2,890 — 2,890

Income tax expense (benefit) 30 ( 250 ) — 522 30 272

Income from discontinued operations, net of tax 83 14 — 2,460 83 2,474

For the three and six months ended June 30, 2023, selling, general and administrative expenses (SG&A) include $ 8 million and $ 15 million, respectively, of separation-related costs incurred in connection with the sale of BPS.

Net income attributable to noncontrolling interest included in discontinued operations 4 3 — — 4 3

Net income attributable to Baxter stockholders included in discontinued operations $ 79 $ 11 $ — $ 2,460 $ 79 $ 2,471

Kidney Care BioPharma Solutions Total

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

2024 2023 2024 2023 2024 2023

Net sales $ 3,375 $ 3,294 $ — $ 469 $ 3,375 $ 3,763

Cost of sales 2,125 2,841 — 216 2,125 3,057

Gross margin 1,250 453 — 253 1,250 706

Selling, general and administrative expenses 874 691 — 44 874 735

Research and development expenses 140 104 — 2 140 106

Goodwill impairment 430 — — — 430 —

Other operating income, net ( 1 ) — — — ( 1 ) —

Operating income (loss) ( 193 ) ( 342 ) — 207 ( 193 ) ( 135 )

Interest expense, net — 2 — — — 2

Other (income) expense, net ( 2 ) 18 — 2 ( 2 ) 20

Income (loss) from discontinued operations before income taxes ( 191 ) ( 362 ) — 205 ( 191 ) ( 157 )

Gain on disposition — — — 2,890 — 2,890

Income tax expense (benefit) 99 ( 258 ) — 536 99 278

Income (loss) from discontinued operations, net of tax ( 290 ) ( 104 ) — 2,559 ( 290 ) 2,455

Net income attributable to noncontrolling interests included in discontinued operations 9 6 — — 9 6

Net income (loss) attributable to Baxter stockholders included in discontinued operations $ ( 299 ) $ ( 110 ) $ — $ 2,559 $ ( 299 ) $ 2,449

For the three and nine months ended September 30, 2024, selling, general and administrative expenses (SG&A) includes $ 69 million and $ 236 million, respectively, of separation-related costs incurred in connection with the pending sale of our Kidney Care business.

For the three months ended September 30, 2023, SG&A includes separation-related costs of $ 67 million and $ 8 million, incurred in connection with the pending sale of our Kidney Care business and the sale of BPS, respectively.

For the nine months ended September 30, 2023, SG&A includes separation-related costs of $ 108 million and $ 15 million, incurred in connection with the pending sale of our Kidney Care business and the sale of BPS, respectively.

The following table summarizes the carrying amounts of the major classes of assets and liabilities classified as discontinued operations, related to our Kidney Care business, in the condensed consolidated balance sheets as of September 30, 2024 and December 31, 2023:

(in millions) September 30, 2024 December 31, 2023

Cash and cash equivalents $ 658 $ 116

Accounts receivable, net of allowances 1,045 971

Inventories 960 906

Prepaid expenses and other current assets 229 186

Current assets of discontinued operations 2,892 2,179

Property, plant and equipment, net 1,542 1,562

Goodwill 276 721

Other intangible assets, net 147 161

Operating lease right-of-use assets 209 188

Other non-current assets 360 317

Non-current assets of discontinued operations 2,534 2,949

Assets of discontinued operations $ 5,426 $ 5,128

Current maturities of finance lease obligations $ — $ 1

Accounts payable 396 360

Accrued expenses and other current liabilities 693 679

Current liabilities of discontinued operations 1,089 1,040

Long-term finance lease obligations, less current portion 40 41

Operating lease liabilities 186 173

Other non-current liabilities 349 337

Non-current liabilities of discontinued operations 575 551

Liabilities of discontinued operations $ 1,664 $ 1,591

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 six months ended June 30, 2024 and 2023.

Three Months Ended June 30, Six Months Ended June 30,

The following table is a summary of the changes in our allowance for doubtful accounts for the three and nine months ended September 30, 2024 and 2023.

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

(in millions) 2024 2023 2024 2023

4 unchanged sentences

Balance at end of period $ 65 $ 66 $ 65 $ 66

(in millions) June 30,

(in millions) September 30,

2024 December 31,

4 unchanged sentences

Property, Plant and Equipment, Net

(in millions) June 30,

(in millions) September 30,

2024 December 31,

2 unchanged sentences

Property, plant and equipment, net $ 2,833 $ 2,871

Impairment of Manufacturing Facility

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

The 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 made the decision in the second quarter of 2023 to cease production of dialyzers at the Opelika facility near the end of 2023.

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 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.

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.

Interest Expense, Net

Three Months Ended June 30, Six Months Ended June 30,

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

(in millions) 2024 2023 2024 2023

3 unchanged sentences

Other (Income) Expense, Net

Three Months Ended June 30, Six Months Ended June 30,

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

(in millions) 2024 2023 2024 2023

6 unchanged sentences

Non-Cash Operating and Investing Activities

Right-of-use operating lease assets obtained in exchange for lease obligations for the six months ended June 30, 2024 and 2023 were $ 47 million and $ 45 million, respectively.

Purchases of property, plant and equipment included in accounts payable as of June 30, 2024 and 2023 were $ 52 million and $ 57 million, respectively.

Right-of-use operating lease assets obtained in exchange for lease obligations for the nine months ended September 30, 2024 and 2023 were $ 54 million and $ 55 million, respectively.

Purchases of property, plant and equipment included in accounts payable as of September 30, 2024 and 2023 were $ 34 million and $ 30 million, respectively.

GOODWILL AND OTHER INTANGIBLE ASSETS, NET

The following is a reconciliation of goodwill by segment.

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

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

Balance as of December 31, 2023 $ 1,241 $ 3,989 $ 563 $ 5,793

Impairment — — — ( 430 ) ( 430 )

Currency translation ( 7 ) — ( 3 ) ( 10 )

Balance as of June 30, 2024 $ 1,204 $ 3,981 $ 547 $ 269 $ 6,001

Goodwill Impairment

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

While we have not finalized our decision with respect to the ultimate structure of the proposed Kidney Care separation at the time of this filing, we received bids from prospective buyers in June 2024 following the completion of a related due diligence process in connection with a potential sale transaction.

If we were to sell our overall Kidney Care business at a price consistent with the bid we received that we believe to be most representative of fair value, we would recognize a significant gain, although the expected net pre-tax proceeds would be less than the sum of the individual fair values that we previously estimated for the two reporting units within our Kidney Care segment in connection with our most recent goodwill impairment assessments.

Additionally, the fair value of our Chronic Therapies reporting unit within our Kidney Care segment exceeded its carrying value by only 6 % as of November 1, 2023, the date of our most recent goodwill impairment test for that reporting unit.

As a result of those factors, we performed an interim goodwill impairment assessment of our Chronic Therapies reporting unit in the second quarter of 2024, which resulted in a pre-tax goodwill impairment charge of $ 430 million, representing all of the goodwill of that reporting unit.

The fair value of our Chronic Therapies reporting unit was 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 value of the reporting unit included forecasted cash flows, discount rates, terminal growth rates, and earnings multiples.

The discounted cash flow model used to determine the fair value of our Chronic Therapies reporting unit included our most recent cash flow projections, a 12.5 % discount rate, and a 2.5 % terminal growth rate, and multiples of forward-looking EBITDA ranged from 4.75 to 5.00 .

Our Chronic Therapies reporting unit fair value measurement is classified as Level 3 in the fair value hierarchy because it involves significant unobservable inputs.

The fair value of the remaining reporting unit within our Kidney Care segment, Acute Therapies, significantly exceeded its carrying value as of its most recent goodwill impairment test and we determined that an interim goodwill impairment test of that reporting unit was not required.

However, in connection with the interim goodwill impairment test of our Chronic Therapies reporting unit during the second quarter of 2024, we also performed a fair value measurement of our Acute Therapies reporting unit and we calibrated the sum of the fair values of those two Kidney Care reporting units to the bid we received for the overall Kidney Care business that we believe to be most representative of fair value.

Balance as of September 30, 2024 $ 1,234 $ 3,989 $ 560 $ 5,783

Other intangible assets, net

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

June 30, 2024

September 30, 2024

Gross other intangible assets $ 3,390 $ 3,182 $ 963 $ 87 $ 680 $ 157 $ 8,459

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Other intangible assets, net $ 2,736 1,399 926 20 680 157 5,918

Intangible asset amortization expense was $ 167 million and $ 157 million for the three months ended June 30, 2024 and 2023, respectively, and $ 333 million and $ 319 million for the six months ended June 30, 2024 and 2023, respectively.

Intangible asset amortization expense was $ 159 million and $ 147 million for the three months ended September 30, 2024 and 2023, respectively, and $ 471 million and $ 434 million for the nine months ended September 30, 2024 and 2023, respectively.

FINANCING ARRANGEMENTS

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Borrowings under the bridge facility will be available in up to three drawings to fund (a) the refinancing of our 1.322 % Senior Notes due November 29, 2024, our Floating Rate Notes due November 29, 2024, and certain borrowings under our existing term loan facility and (b) payment of certain U.S.

tax liabilities arising from internal reorganization transactions related to the proposed separation of our Kidney Care business.

tax liabilities arising from internal reorganization transactions related to the pending sale of our Kidney Care business.

Borrowings under the bridge facility will bear interest at a rate based on our long-term debt ratings in effect from time to time and the interest rate on any borrowings outstanding beyond December 31, 2024 would increase by 0.25 %.

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The banks’ funding commitments under the bridge facility will terminate upon the earliest to occur of:

(i) our consummation of the debt repayments and tax payments described above without us having borrowed under the bridge facility, (ii) our election to terminate the commitments under the bridge facility, (iii) our receipt of net cash proceeds from certain transactions (including from the separation of our Kidney Care business), (iv) the occurrence of three drawings under the bridge facility, and (v) December 31, 2024.

(i) our consummation of the debt repayments and tax payments described above without us having borrowed under the bridge facility, (ii) our election to terminate the commitments under the bridge facility, (iii) our receipt of net cash proceeds from certain transactions (including from the pending sale of our Kidney Care business), (iv) the occurrence of three drawings under the bridge facility, and (v) December 31, 2024.

Outstanding borrowings under the bridge facility will mature on the earlier of 364 days from the first funding date and November 24, 2025.

Additionally, we are required to use the net cash proceeds from certain transactions (including from the separation of our Kidney Care business) to repay any outstanding borrowings under the bridge facility.

Additionally, we are required to use the net cash proceeds from certain transactions (including from the pending sale of our Kidney Care business) to repay any outstanding borrowings under the bridge facility.

The bridge facility contains financial and other covenants, including a net leverage covenant, and provides for customary events of default.

There were no borrowings outstanding under this bridge facility as of September 30, 2024.

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 to increase the maximum net leverage ratio covenant 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.

The amendment further provided 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 of our Kidney Care business.

Costs incurred in connection with the amendment were not material.

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Each of the facilities matures in 2026.

There were no borrowings outstanding under these credit facilities as of June 30, 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 June 30, 2024 we have capacity to draw on the full amounts under our credit facilities.

I n the first six months of 2024, we repaid $ 822 million of senior notes at maturity.

There were no borrowings outstanding under these credit facilities as of September 30, 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, 2024 we have capacity to draw on the full amounts under our credit facilities.

I n the first nine months of 2024, we repaid $ 822 million of senior notes at maturity.

COMMITMENTS AND CONTINGENCIES

We are involved in product liability, patent, commercial, and other legal matters that arise in the normal course of our business.

We are involved in product liability, patent, commercial, employment and other legal matters that arise in the normal course of our business.

We record a liability when a loss is considered probable and the amount can be reasonably estimated.

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

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

As of September 30, 2024 and December 31, 2023, our total recorded reserves with respect to legal and environmental matters were $ 41 million and $ 25 million, respectively.

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

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We are involved as a potentially responsible party (PRP) for environmental clean-up costs at six Superfund sites.

Additionally, we are a defendant in a separate matter regarding a seventh Superfund site.

Under the U.S.

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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 June 30, 2024 and December 31, 2023, our environmental reserves, which are measured on an undiscounted basis, were $ 14 million and $ 15 million, respectively.

As of September 30, 2024 and December 31, 2023, our environmental reserves, which are measured on an undiscounted basis, were $ 30 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.

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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 plaintiffs sought damages, including compensatory and punitive damages in an unspecified

amount, and unspecified injunctive and declaratory relief.

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.

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The case was dismissed on October 17, 2023.

Since December 2023, 24 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 facility in Round Lake, Illinois.

Since December 2023, 25 lawsuits (after giving effect to the amendment referenced below) 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 facility in Round Lake, Illinois.

The plaintiffs seek damages in an unspecified amount.

On July 16, 2024, Plaintiffs' counsel filed an omnibus motion seeking leave to add

certain defendants to hundreds of previously-filed lawsuits, including Baxter with respect to 40 cases.

On July 16, 2024, Plaintiffs' counsel filed an omnibus motion seeking leave to add certain defendants to hundreds of previously-filed lawsuits, including Baxter with respect to 40 cases.

The motion was denied on July 25, 2024, without prejudice to refiling multiple motions each addressing smaller groupings of cases and defendants.

On September 11, 2024, the court granted leave to amend one previously-filed complaint to add Baxter as a defendant.

We acquired Hill-Rom Holdings, Inc.

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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.

Baxter is cooperating fully with the DOJ in responding to the CID.

The DHHS and DOJ often issue these types of requests when investigating alleged violations of the False Claims Act.

In October 2024, the DOJ issued a subpoena (2024 Subpoena), pursuant to 18 U.S.C.

3846, to Hillrom.

The 2024 Subpoena substantially overlaps with the CID and requests additional documents relating to Hillrom's respiratory health business.

Baxter is cooperating fully with the DOJ in responding to the CID and the 2024 Subpoena.

The DHHS and DOJ often issue these types of requests when investigating alleged violations of the federal health care laws.

On December 28, 2021, Linet Americas, Inc.

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The plaintiff filed the action on behalf of itself and all "direct purchasers of Standard Hospital Beds, ICU Beds, and/or Birthing Beds from Hill-Rom during a period beginning at least as early as June 20, 2020” and continuing past the date of filing.

On September 30, 2024, the plaintiff filed a First Amended Complaint.

STOCKHOLDERS’ EQUITY

Cash Dividends

Cash dividends declared per share for the three months ended June 30, 2024 and 2023 were $ 0.29 and for the six months ended June 30, 2024 and 2023 were $ 0.58 .

Cash dividends declared per share for the three months ended September 30, 2024 and 2023 were $ 0.29 and for the nine months ended September 30, 2024 and 2023 were $ 0.87 .

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 six 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 June 30, 2024.

During the first nine 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 September 30, 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 six months ended June 30, 2024 and 2023.

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, 2024 and 2023.

Gains (losses)

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Net other comprehensive income (loss) ( 92 ) ( 3 ) 2 — ( 93 )

Balance as of June 30, 2024 $ ( 3,273 ) $ ( 449 ) $ ( 109 ) $ 3 $ ( 3,828 )

Balance as of September 30, 2024 $ ( 3,077 ) $ ( 455 ) $ ( 118 ) $ 3 $ ( 3,647 )

Gains (losses)

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Net other comprehensive income (loss) 123 ( 16 ) 10 — 117

Balance as of June 30, 2023 $ ( 3,361 ) $ ( 342 ) $ ( 114 ) $ 3 $ ( 3,814 )

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

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

The following is a summary of the amounts reclassified from AOCI to net income (loss) during the three and six months ended June 30, 2024 and 2023.

The following is a summary of the amounts reclassified from AOCI to net income (loss) during the three and nine months ended September 30, 2024 and 2023.

Amounts reclassified from AOCI (a)

(in millions) Three Months Ended June 30, 2024 Six Months Ended June 30, 2024 Location of impact in income statement

(in millions) Three Months Ended September 30, 2024 Nine Months Ended September 30, 2024 Location of impact in income statement

Pension and OPEB items

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Amounts reclassified from AOCI (a)

(in millions) Three Months Ended June 30, 2023 Six Months Ended June 30, 2023 Location of impact in income statement

(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

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

9 19 Total before tax

Tax effect — ( 3 ) Income tax expense

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Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in the contract.

A performance obligation is a promise in a contract to transfer a distinct good or service to the

customer and is the unit of account in the contract.

A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.

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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.

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

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

This includes sales of our broad portfolio of essential healthcare products across our business segments.

We earn revenues from acute and chronic dialysis therapies;

sterile IV solutions;

We earn revenues from sterile IV solutions;

infusion systems and devices;

nutrition therapies;

parenteral nutrition therapies;

inhaled anesthetics;

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

As of June 30, 2024, we had $ 4.16 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 Products and Therapies and Kidney Care segments.

As of September 30, 2024, we had $ 2.75 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 Products and Therapies segment.

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

We expect to recognize approximately 35 % of this amount as revenue over the remainder of 2024, 30 % in 2025, 25 % in 2026, and 10 % in 2027.

We expect to recognize approximately 25 % of this amount as revenue over the remainder of 2024, 25 % in 2025, 20 % in each of 2026 and 2027 and 10 % thereafter.

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.

Revenues from product sales are recorded at the net sales price, which include 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 as reductions of accounts receivable, net on the condensed consolidated balance sheets.

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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 six months ended June 30, 2024 and 2023 related to performance obligations satisfied in prior periods was no t material.

Revenue recognized during the three and nine months ended September 30, 2024 and 2023 related to performance obligations satisfied in prior periods was no t material.

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

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

Net trade accounts receivable was $ 2.37 billion and $ 2.43 billion as of June 30, 2024 and December 31, 2023, respectively.

Net trade accounts receivable was $ 1.54 billion as of September 30, 2024 and December 31, 2023.

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.

Additionally, for certain arrangements containing a performance obligation to deliver software that can be used with medical devices, we recognize revenue upon delivery of the software, which results in the recognition of contract assets when customers are billed over time, generally over one to five years .

For bundled contracts involving equipment delivered up-front and consumable medical products to be delivered over time, total contract revenue is allocated between the equipment and consumable medical products.

contracts involving equipment delivered up-front and consumable medical products to be delivered over time, total contract revenue is allocated between the equipment and consumable medical products.

In certain of those arrangements, a contract asset is created for the difference between the amount of equipment revenue recognized upon delivery and the amount of consideration initially receivable from the customer.

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The following table summarizes our contract assets:

(in millions) June 30,

(in millions) September 30,

2024 December 31,

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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 six months ended June 30, 2024 and 2023.

The following table summarizes contract liability activity for the nine months ended September 30, 2024 and 2023.

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

Six Months Ended June 30,

Nine Months Ended September 30,

(in millions) 2024

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Balance at end of period $ 160 $ 169

For the six months ended June 30, 2024 and 2023, $ 80 million and $ 64 million of revenue was recognized that was included in contract liabilities as of December 31, 2023 and 2022, respectively.

For the nine months ended September 30, 2024 and 2023, $ 94 million and $ 111 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) June 30,

(in millions) September 30,

2024 December 31,

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Lease Revenue

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

We lease medical equipment, such as smart beds and infusion pumps, to customers, often in conjunction with arrangements to provide consumable medical products such as IV fluids and inhaled anesthetics.

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

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

The components of lease revenue for the three and six months ended June 30, 2024 and 2023 were:

Three Months Ended June 30, Six Months Ended June 30,

The components of lease revenue for the three and nine months ended September 30, 2024 and 2023 were:

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

(in millions) 2024 2023 2024 2023

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Total lease revenue $ 115 $ 103 $ 318 $ 323

Our net investment in sales-type leases was $ 70 million as of June 30, 2024, of which $ 29 million originated in 2020 and prior, $ 15 million in 2021, $ 11 million in 2022, $ 10 million in 2023, and $ 5 million in 2024.

Our net investment in sales-type leases was $ 36 million as of September 30, 2024, of which $ 5 million originated in 2020 and prior, $ 10 million in 2021, $ 5 million in 2022, $ 7 million in 2023, and $ 9 million in 2024.

BUSINESS OPTIMIZATION CHARGES

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We currently expect to incur additional pre-tax costs, primarily related to the implementation of business optimization programs, of approximately $ 5 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 (including after completion of the proposed Kidney Care separation), we would incur additional restructuring charges and costs to implement business optimization programs in future periods.

During the three and six months ended June 30, 2024 and 2023, we recorded the following charges related to business optimization programs.

Three Months Ended June 30, Six Months Ended June 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 (including after completion of the pending Kidney Care sale), 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, 2024 and 2023, we recorded the following charges related to business optimization programs.

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

(in millions) 2024 2023 2024 2023

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

Costs to implement business optimization programs for the three and six months ended June 30, 2024 and 2023, respectively, consisted primarily of external consulting and transition costs, including employee compensation and related costs.

Costs to implement business optimization programs for the three and nine months ended September 30, 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 six months ended June 30, 2024 and 2023, we recorded the following restructuring charges.

Three months ended June 30, 2024

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

During the three and nine months ended September 30, 2024 and 2023, we recorded the following restructuring charges.

Three months ended September 30, 2024

(in millions) COGS SG&A Total

Employee termination costs $ 2 $ 10 $ 12

Contract termination and other costs — 3 3

Asset impairments 8 — — 8

Total restructuring charges $ 2 $ 13 $ 15

Three months ended June 30, 2023

Three months ended September 30, 2023

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

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Contract termination and other costs — 2 — 2

Asset impairments 257 — — 257

Total restructuring charges $ 6 $ 31 $ 4 $ 41

Six months ended June 30, 2024

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

Nine months ended September 30, 2024

(in millions) COGS SG&A Total

Employee termination costs $ 4 $ 25 $ 29

Contract termination and other costs 1 6 7

Asset impairments 13 — — 13

Total restructuring charges $ 5 $ 31 $ 36

Six months ended June 30, 2023

Nine months ended September 30, 2023

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

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Total restructuring charges $ 28 $ 102 $ 10 $ 140

For the three months ended June 30, 2024, $ 6 million of the restructuring charges reflected in the table above, consisting of asset impairments, related to a transfer of a manufacturing production line as part of our initiatives to optimize our global manufacturing and supply chain organization.

For the six months ended June 30, 2024, $ 27 million of the restructuring charges reflected 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 and six months ended June 30, 2023, $ 19 million and $ 97 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 three and six months ended June 30, 2023, $ 253 million of the restructuring charges reflected in the table above, consisting of $ 243 million of long-lived asset impairment charges and $ 10 million of employee termination costs, were related to our decision to cease production at one of our dialyzer 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 and nine months ended September 30, 2024, $ 7 million and $ 14 million of the restructuring charges reflected in the table above, consisting of employee termination costs, were related to business optimization initiatives within our Healthcare Systems and Technologies segment.

Additionally, for the nine months ended September 30, 2024, $ 7 million of the restructuring charges reflected in the table above, consisting of employee termination costs, were related to our recent implementation of a new operating model intended to simplify and streamline our operations.

For the three and nine months ended September 30, 2023, $ 11 million and $ 79 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.

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

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Currency translation 4

Liability balance as of June 30, 2024 $ 114

Substantially all of our restructuring liabilities as of June 30, 2024 relate to employee termination costs, with the remaining liabilities attributable to contract termination costs.

Liability balance as of September 30, 2024 $ 74

Substantially all of our restructuring liabilities as of September 30, 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 2025.

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The following is a summary of net periodic benefit cost relating to our pension and OPEB plans.

Three Months Ended June 30, Six Months Ended June 30,

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

(in millions) 2024 2023 2024 2023

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Net periodic OPEB cost (income) $ ( 3 ) $ ( 4 ) $ ( 8 ) $ ( 12 )

Our effective income tax rate was ( 21.0 )% and ( 5.5 )% for the three months ended June 30, 2024 and 2023, respectively, and ( 92.9 )% and ( 14.2 )% for the six months ended June 30, 2024 and 2023, respectively.

Our effective income tax rate was 11.6 % and 42.2 % for the three months ended September 30, 2024 and 2023, respectively, and 30.2 % and 281.0 % for the nine months ended September 30, 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.

For the three months ended June 30, 2024, the difference between our effective income tax rate and the U.S.

For the six months ended June 30, 2024, the difference between our effective income tax rate and the U.S.

federal statutory rate was primarily driven by a non-deductible goodwill impairment, an increase in 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, an increase in our liabilities for various uncertain tax positions, an unfavorable geographic earnings mix, and separation costs that are partially non-deductible.

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

For the three months ended September 30, 2024, the difference between our effective income tax rate and the U.S.

federal statutory rate was primarily attributable to a favorable geographic earnings mix, the tax impacts of the write-off of damaged inventory and fixed assets at our North Cove facility caused by Hurricane Helene, and a change in our assertion on the reinvested foreign earnings related to the pending sale of our Kidney Care segment allocated to continuing operations, partially offset by a $ 26 million valuation allowance recorded to reduce the carrying amount of a tax attribute carryforward in the U.S.

related to the pending sale of our Kidney Care segment.

For the nine months ended September 30, 2024, the difference between our effective income tax rate and the U.S.

federal statutory rate was primarily attributable to a $ 26 million valuation allowance recorded to reduce the carrying amount of a tax attribute carryforward in the U.S.

related to the pending sale of our Kidney Care segment, an increase in a valuation allowance in a foreign jurisdiction resulting from changes in future projected income, an increase in income tax expense resulting from internal reorganization transactions related to the pending sale of our Kidney Care segment, and an increase in our liabilities for various uncertain tax positions, partially offset by a favorable geographic earnings mix.

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

federal statutory rate was primarily attributable to an increase in the valuation allowance in a foreign jurisdiction resulting from changes in future projected income, partially offset by a favorable geographic earnings mix.

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

federal statutory rate was primarily attributable to a $ 30 million increase in the valuation allowance related to a deferred tax asset from a tax basis step-up that arose from previously enacted Swiss tax reform legislation, an increase in the valuation allowance in a foreign jurisdiction resulting from changes in future projected income, and excess tax shortfalls on stock compensation awards.

EARNINGS PER SHARE

3 unchanged sentences

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

Three Months Ended June 30, Six Months Ended June 30,

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

(in millions) 2024 2023 2024 2023

Loss from continuing operations $ ( 311 ) $ ( 193 ) $ ( 272 ) $ ( 193 )

Net income attributable to noncontrolling interests 3 2 5 3

Loss from continuing operations attributable to Baxter stockholders ( 314 ) ( 195 ) ( 277 ) ( 196 )

Income from discontinued operations — 54 — 99

Net loss attributable to Baxter stockholders $ ( 314 ) $ ( 141 ) $ ( 277 ) $ ( 97 )

Income (loss) from continuing operations $ 61 $ 37 $ 162 $ ( 38 )

Net income attributable to noncontrolling interests included in continuing operations — — — —

Income (loss) from continuing operations attributable to Baxter stockholders 61 37 162 ( 38 )

Income (loss) from discontinued operations 83 2,474 ( 290 ) 2,455

Net income attributable to noncontrolling interests included in discontinued operations 4 3 9 6

Income (loss) from discontinued operations attributable to Baxter stockholders 79 2,471 ( 299 ) 2,449

Net income (loss) attributable to Baxter stockholders $ 140 $ 2,508 $ ( 137 ) $ 2,411

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

Three Months Ended June 30, Six Months Ended June 30,

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

(in millions) 2024 2023 2024 2023

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Diluted shares 512 509 511 506

Basic and diluted shares are the same for the three and six months ended June 30, 2024 and 2023 due to our loss from continuing operations attributable to Baxter stockholders.

Basic and diluted shares are the same for nine months ended September 30, 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 25 million shares issuable under equity awards for the three and six months ended June 30, 2024, and 27 million and 25 million shares issuable under equity awards for the three and six months ended June 30, 2023, respectively, because their inclusion would have had an anti-dilutive effect on diluted EPS.

The computation of diluted EPS excludes 18 million and 19 million shares issuable under equity awards for the three and nine months ended September 30, 2024, and 18 million and 25 million shares issuable under equity awards for the three and nine months ended September 30, 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, 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 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, Mexican Peso, Australian Dollar, Canadian Dollar, 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.

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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 $ 252 million and $ 340 million as of June 30, 2024 and December 31, 2023, respectively.

The maximum term over which we have cash flow hedge contracts in place related to forecasted transactions at June 30, 2024 is 12 months for foreign exchange contracts.

There were no outstanding interest rate contracts designated as cash flow hedges as of June 30, 2024 and December 31, 2023.

The notional amounts of foreign exchange contracts designated as cash flow hedges were $ 225 million and $ 340 million as of September 30, 2024 and December 31, 2023, respectively.

The maximum term over which we have cash flow hedge contracts in place related to forecasted transactions at September 30, 2024 is 12 months for foreign exchange contracts.

There were no outstanding interest rate contracts designated as cash flow hedges as of September 30, 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 June 30, 2024 and December 31, 2023.

There were no outstanding interest rate contracts designated as fair value hedges as of September 30, 2024 and December 31, 2023.

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

7 unchanged sentences

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 June 30, 2024, we had an accumulated pre-tax unrealized translation gain in AOCI of $ 86 million related to the Euro-denominated senior notes.

As of September 30, 2024, we had an accumulated pre-tax unrealized translation gain in AOCI of $ 18 million related to the Euro-denominated senior notes.

Dedesignations

2 unchanged sentences

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 six months of 2024 or 2023 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 nine months of 2024 or 2023 resulting from changes in our assessment of the probability that the hedged forecasted transactions would occur.

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

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

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

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

Undesignated Derivative Instruments

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

The total notional amount of undesignated derivative instruments was $ 741 million as of June 30, 2024 and $ 709 million as of December 31, 2023.

The total notional amount of undesignated derivative instruments was $ 527 million as of September 30, 2024 and $ 305 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 June 30, 2024 and 2023.

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

4 unchanged sentences

Foreign exchange contracts ( 9 ) 9 Cost of sales 4 3

Fair value hedges

Foreign exchange contracts ( 1 ) — Other (income) expense, net ( 2 ) —

Net investment hedges ( 68 ) 48 Other (income) expense, net — —

2 unchanged sentences

(in millions) 2024 2023

Fair value hedges

Foreign exchange contracts Other (income) expense, net $ ( 1 ) $ —

Undesignated derivative instruments

1 unchanged sentence

Total $ 6 $ ( 1 )

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

15 unchanged sentences

Total $ ( 24 ) $ ( 9 )

As of June 30, 2024, $ 2 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 September 30, 2024, $ 8 million of deferred, net after-tax losses on derivative instruments included in AOCI are expected to be recognized in earnings during the next 12 months, coinciding with when the hedged items are expected to impact earnings.

Derivative Assets and Liabilities

The following table summarizes the classification and fair values of derivative instruments reported in the condensed consolidated balance sheet as of June 30, 2024.

The following table summarizes the classification and fair values of derivative instruments reported in the condensed consolidated balance sheet as of September 30, 2024.

Derivatives in asset positions Derivatives in liability positions

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

June 30, 2024 December 31, 2023

September 30, 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 June 30, 2024 Balance as of December 31, 2023 Balance as of June 30, 2024 Balance as of December 31, 2023

(in millions) Balance as of September 30, 2024 Balance as of December 31, 2023 Balance as of September 30, 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 June 30, 2024 Quoted prices in active markets for identical assets

(in millions) Balance as of September 30, 2024 Quoted prices in active markets for identical assets

(Level 1) Significant other

22 unchanged sentences

Total $ 19 $ — $ 5 $ 14

As of June 30, 2024 and December 31, 2023, cash and cash equivalents of $ 2.10 billion and $ 3.19 billion, respectively, included money market funds of approximately $ 628 million and $ 1.63 billion, respectively, which are considered Level 2 in the fair value hierarchy.

As of September 30, 2024 and December 31, 2023, cash and cash equivalents of $ 1.42 billion and $ 3.08 billion, respectively, included money market funds of approximately $ 427 million 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.

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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 June 30,

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 $ 14 $ 1 $ 21 $ 17

Change in fair value recognized in earnings — — ( 1 ) ( 5 )

Payments ( 2 ) — ( 2 ) —

Fair value at end of period $ 12 $ 1 $ 19 $ 17

Six Months Ended June 30,

Nine 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

4 unchanged sentences

Fair value at end of period $ 12 $ 1 $ 19 $ 17

During the six months ended June 30, 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.

During the nine months ended September 30, 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 June 30, 2024 and December 31, 2023.

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, 2024 and December 31, 2023.

Book values Fair values(a)

7 unchanged sentences

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 $ 67 million as of June 30, 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 quarter ended June 30, 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.

The carrying values of equity investments without readily determinable fair values that we measure at cost, less impairment were $ 33 million as of September 30, 2024 and 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 $ 8 million of impairments of equity investments without readily determinable fair values in the prior year period.

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 second quarter of 2023.

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.

1 unchanged sentence

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.

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 through either a sale or spinoff, as discussed in Note 1).

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.

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

Medical Products and Therapies, Healthcare Systems and Technologies, Pharmaceuticals, and Kidney Care (which we are planning to divest through the pending sale and accordingly, the results are reported in discontinued operations as discussed in Note 1).

The Medical Products and Therapies segment includes sales of our sterile IV solutions, infusion systems, administration sets, parenteral nutrition therapies and surgical hemostat, sealant, and adhesion prevention products.

1 unchanged sentence

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, 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, which are eliminated in consolidation, are not presented in the table below.

Three Months Ended June 30,

Three Months Ended September 30,

(in millions) U.S.

16 unchanged sentences

Pharmaceuticals 178 410 588 195 385 580

Chronic Therapies 1

228 689 917 230 698 928

Acute Therapies 1

77 124 201 64 124 188

Kidney Care 305 813 1,118 294 822 1,116

16 6 22 16 6 22

Other 3 14 17 12 5 17

Total Baxter $ 1,500 $ 1,199 $ 2,699 $ 1,467 $ 1,132 $ 2,599

Six Months Ended June 30,

Nine Months Ended September 30,

(in millions) U.S.

16 unchanged sentences

Pharmaceuticals 566 1,202 1,768 550 1,102 1,652

Chronic Therapies 1

454 1,351 1,805 459 1,353 1,812

Acute Therapies 1

162 253 415 128 248 376

Kidney Care 616 1,604 2,220 587 1,601 2,188

27 11 38 40 12 52

Other 30 25 55 56 17 73

Total Baxter $ 4,340 $ 3,543 $ 7,883 $ 4,300 $ 3,334 $ 7,634

1 In connection with our segment change in the third quarter of 2023, we reclassified $ 8 million and $ 16 million of sales for the three and six months ended June 30, 2023, respectively, from Chronic Therapies to Acute Therapies to conform to the current period presentation.

Geographic Sales Information

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

Three Months Ended June 30, Six Months Ended June 30,

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

2024 2023 2024 2023

13 unchanged sentences

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.

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 June 30, Six Months Ended June 30,

With the results of our Kidney Care segment reported in discontinued operations, corporate costs that had previously been allocated to the Kidney Care segment which will not convey with the Kidney Care segment in the pending sale, are

now 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 September 30, Nine Months Ended September 30,

(in millions) 2024 2023 2024 2023

2 unchanged sentences

Pharmaceuticals 58 108 211 284

Kidney Care 83 55 242 112

Other 2 6 15 19

2 unchanged sentences

Intangible asset amortization expense ( 159 ) ( 147 ) ( 471 ) ( 434 )

Goodwill impairment ( 430 ) — ( 430 ) —

Legal matters ( 17 ) ( 13 ) ( 17 ) ( 13 )

Business optimization items ( 18 ) ( 48 ) ( 49 ) ( 167 )

Acquisition and integration items ( 5 ) ( 2 ) ( 16 ) ( 2 )

Separation-related costs ( 81 ) ( 37 ) ( 173 ) ( 46 )

European Medical Devices Regulation ( 9 ) ( 12 ) ( 25 ) ( 32 )

Total operating income (loss) ( 192 ) ( 17 ) ( 5 ) 112

Hurricane Helene costs ( 25 ) — ( 25 ) —

Product-related items ( 3 ) — ( 3 ) —

Total operating income 155 179 449 403

Interest expense, net 87 127 251 367

Other (income) expense, net ( 1 ) ( 12 ) ( 34 ) 15

Loss from continuing operations before income taxes $ ( 257 ) $ ( 183 ) $ ( 141 ) $ ( 169 )

Income from continuing operations before income taxes $ 69 $ 64 $ 232 $ 21

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