What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-02-21 compared with 2024-02-08 · 396 added, 491 removed, 1601 unchanged (36% of the section changed)

55 unchanged sentences

Income (loss) from continuing operations ( 326 ) 181 ( 3,113 )

Income from discontinued operations, net of tax 2,732 233 262

Income (loss) from discontinued operations, net of tax ( 312 ) 2,482 692

Net income (loss) ( 638 ) 2,663 ( 2,421 )

Net income attributable to noncontrolling interests 7 12 11

Net income attributable to noncontrolling interests included in continuing operations — — 1

Net income attributable to noncontrolling interests included in discontinued operations 11 7 11

Net income (loss) attributable to Baxter stockholders $ ( 649 ) $ 2,656 $ ( 2,433 )

2 unchanged sentences

Diluted $ ( 0.64 ) $ 0.36 $ ( 6.18 )

Income from discontinued operations per common share

Income (loss) from discontinued operations per common share

Basic $ ( 0.63 ) $ 4.89 $ 1.35

15 unchanged sentences

( 19 ) ( 92 ) ( 39 )

Hedging activities, net of tax expense (benefit) of zero in 2023, $ 2 in 2022 and $ 7 in 2021

Available-for-sale debt securities, net of tax expense of zero in 2023, $ 1 in 2022 and zero in 2021

Hedging activities, net of tax expense (benefit) of $ 3 in 2024, zero in 2023 and $ 2 in 2022

Available-for-sale debt securities, net of tax expense of zero in 2024 and 2023 and $ 1 in $ 2 in 2022

Total other comprehensive income (loss) from continuing operations, net of tax ( 655 ) 208 ( 676 )

Comprehensive income (loss) from continuing operations ( 981 ) 389 ( 3,789 )

Income from discontinued operations, net of tax 2,732 233 262

Income (loss) from discontinued operations, net of tax ( 312 ) 2,482 692

Other comprehensive income (loss) from discontinued operations

Currency translation adjustments, net of tax expense (benefit) of zero in 2023, 2022 and 2021

Currency translation adjustments, net of tax expense (benefit) of $( 7 ) in 2024, $ 8 in 2023 and $ 6 in 2022

Pension and other postretirement benefit plans, net of tax expense of $ 3 in 2024, $( 2 ) in 2023 and $ 2 in 2022

( 4 ) ( 29 ) 55

Pension and other postretirement benefit plans, net of tax expense of zero in 2023, 2022 and 2021

Total other comprehensive income from discontinued operations 183 68 223

Comprehensive income from discontinued operations 2,913 217 215

Comprehensive income (loss) from discontinued operations ( 129 ) 2,550 915

Comprehensive income (loss) ( 1,110 ) 2,939 ( 2,874 )

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Other comprehensive income (loss) — — — — — — 279 279 ( 3 ) 276

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

Stock issued under employee benefit plans and other — — ( 3 ) 159 67 — — 226 — 226

Dividends declared on common stock — — — — — ( 592 ) — ( 592 ) — ( 592 )

Change in noncontrolling interests — — — — — — — — 11 11

Balance as of December 31, 2023 683 $ 683 176 $ ( 11,230 ) $ 6,389 $ 16,114 $ ( 3,554 ) $ 8,402 $ 66 $ 8,468

3 unchanged sentences

Dividends declared on common stock — — — — — ( 536 ) — ( 536 ) — ( 536 )

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

Balance as of December 31, 2024 683 $ 683 173 $ ( 11,059 ) $ 6,421 $ 14,929 $ ( 4,010 ) $ 6,964 $ 60 $ 7,024

4 unchanged sentences

Net income (loss) $ ( 638 ) $ 2,663 $ ( 2,421 )

Income from discontinued operations, net of tax 2,732 233 262

Loss from continuing operations ( 69 ) ( 2,654 ) 1,033

Adjustments to reconcile net income (loss) to cash flows operations:

Income (loss) from discontinued operations, net of tax ( 312 ) 2,482 692

Income (loss) from continuing operations ( 326 ) 181 ( 3,113 )

Adjustments to reconcile net income (loss) to cash flows from operations:

Depreciation and amortization 997 984 1,072

3 unchanged sentences

Stock compensation 114 115 140

Losses on debt extinguishments — — 5

Goodwill impairments 425 — 2,812

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Capital expenditures ( 446 ) ( 432 ) ( 377 )

Acquisitions, net of cash acquired, and investments ( 6 ) ( 263 ) ( 10,502 )

Acquisitions of developed technology and investments ( 14 ) ( 4 ) ( 258 )

Proceeds from sale of marketable equity securities 34 — —

Other investing activities, net 16 26 11

3 unchanged sentences

Cash flows from financing activities

Issuances of debt — — 11,903

Increase in short term debt 1,830 — —

Repayments of debt ( 2,657 ) ( 2,634 ) ( 954 )

3 unchanged sentences

Purchases of treasury stock — — ( 32 )

Debt issuance costs — — ( 98 )

Other financing activities, net ( 31 ) ( 63 ) ( 61 )

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2,414 3,198 1,722

Less cash and cash equivalents of discontinued operations 648 116 97

Cash, cash equivalents and restricted cash of continuing operations $ 1,766 $ 3,082 $ 1,625

(1) The following table provides a reconciliation of cash, cash equivalents and restricted cash amounts as shown in the consolidated statement of cash flows to the amount reported in the consolidated balance sheet as of December 31, 2024, 2023, and 2022:

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respiratory health devices;

advanced equipment for the surgical space, including surgical video technologies, precision positioning devices and other accessories;

advanced equipment for the surgical space, including operating room integration technologies, precision positioning devices and other accessories;

injectable pharmaceuticals;

inhaled anesthesia;

drug compounding;

chronic and acute dialysis therapies and services, including peritoneal dialysis (PD), hemodialysis (HD), continuous renal replacement therapies (CRRT) and other organ support therapies.

These products are used by hospitals, kidney dialysis centers, nursing homes, rehabilitation centers, ambulatory surgery centers, doctors’ offices and patients at home under physician supervision.

inhaled anesthetics and drug compounding services.

These products are used by hospitals, nursing homes, rehabilitation centers, ambulatory surgery centers, doctors’ offices, kidney dialysis centers and patients at home under physician supervision.

Our global footprint and the critical nature of our products and services play a key role in expanding access to healthcare in emerging and developed countries.

Our reportable segments were previously comprised of the following geographic segments related to our legacy Baxter business:

Americas (North and South), EMEA (Europe, Middle East and Africa) and APAC (Asia Pacific), and a global segment for our Hillrom Business.

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

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

Medical Products and Therapies, Healthcare Systems and Technologies (formerly referred to as our Hillrom segment), Pharmaceuticals and Kidney Care which are described in Note 18.

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.

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

While we continue to evaluate all strategic options in the interest of maximizing stockholder value, we continue to progress towards our current target of July 2024 for completion of the proposed spinoff of this business.

Our business is comprised of three reportable segments:

Medical Products & Therapies, Healthcare Systems & Technologies, and Pharmaceuticals which are described in Note 18.

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.

That business, which is now known as Vantive Health LLC (Vantive) is comprised of our former Kidney Care segment and provides chronic and acute dialysis therapies and services, including peritoneal dialysis, hemodialysis, continuous renal replacement therapies, and other organ support therapies.

On January 31, 2025, we completed the sale of our Kidney Care business to Carlyle for an aggregate purchase price of $ 3.80 billion in cash, subject to certain closing cash, working capital and debt adjustments.

After giving effect to certain adjustments, we received approximately $ 3.71 billion pre-tax cash proceeds at closing of the transaction with the net after tax proceeds currently estimated to be approximately $ 3.4 billion, subject to certain post-closing adjustments.

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 consolidated financial systems, 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.

Since then, we have actively worked with our customers, regulators and other stakeholders to manage inventory and minimize disruption to patient care as we worked towards resuming 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.

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 2024, we recorded $ 110 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 as well as $ 317 million of remediation, idle facility, air freight and other costs offset by $ 251 million of insurance recoveries.

These amounts were recorded as a component of cost of sales in the consolidated statement of income (loss) for the year ended December 31, 2024.

Risks and Uncertainties

Supply Constraints and Global Economic Conditions

We have experienced significant challenges to our global supply chain in recent periods, including production delays and interruptions, increased costs and shortages of raw materials and component parts (including resins and electromechanical devices) and higher transportation costs, resulting from the pandemic and other exogenous factors including significant weather events, elevated inflation levels, 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 recent attacks on merchant ships in the Red Sea), tensions between China and Taiwan and other geopolitical events.

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

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

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

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

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The consolidated financial statements include the accounts of Baxter and our majority-owned subsidiaries that we control, after elimination of intra-company balances and transactions.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation.

Revenue Recognition

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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;

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

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

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

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

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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 December 31, 2023, we had $ 6.51 billion of transaction price allocated to remaining performance obligations related to executed contracts with an original duration of more than one year, which are primarily included in the Medical Product and Therapies and Kidney Care segments.

As of December 31, 2024, we had $ 5.47 billion of transaction price allocated to remaining performance obligations related to executed contracts with an original duration of more than one year, which are primarily included in the Medical Product and Therapies segments.

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

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

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

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

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

51 unchanged sentences

GAAP) of acquired assets and liabilities in a business combination.

Goodwill is not amortized but is subject to an impairment review annually and whenever indicators of impairment exist.

Management performs an impairment test in the fourth quarter of each year, or whenever events or changes in circumstances indicate that the fair value of the reporting unit is more likely than not below its carrying amount.

We have the option to assess goodwill for impairment by initially performing a qualitative assessment to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount.

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In a quantitative goodwill impairment test, the fair values of our reporting units are generally determined based on a discounted cash flow model (an income approach) and earnings multiples (a market approach).

Significant assumptions in reporting unit fair value measurements generally include forecasted cash flows, discount rates, terminal growth rates and earnings multiples.

Significant assumptions in reporting unit fair value measurements generally include revenue growth rates, forecasted earnings before interest, taxes, depreciation and amortization (EBITDA) margins, discount rates, terminal growth rates and earnings multiples.

Each of those assumptions can significantly affect the fair values of our reporting units.

Indefinite-lived intangible assets, such as IPR&D acquired in business combinations and certain trade names with indefinite lives, are subject to an impairment review annually and whenever indicators of impairment exist.

We have the option to assess indefinite-lived intangible assets for impairment by first performing qualitative assessments to determine whether it is more-likely-than-not that the fair values of the indefinite-lived intangible assets are less than the carrying amounts.

We have the option to assess indefinite-lived intangible assets for impairment by first performing

qualitative assessments to determine whether it is more-likely-than-not that the fair values of the indefinite-lived intangible assets are less than the carrying amounts.

If we determine that it is more-likely-than-not that an indefinite-lived intangible asset is impaired, or if we elect not to perform an initial qualitative assessment, we then perform the quantitative impairment test by comparing the fair value of the indefinite-lived intangible asset with its carrying amount.

1 unchanged sentence

We review the carrying amounts of long-lived assets used in operations, other than goodwill and intangible assets not subject to amortization, for potential impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

In evaluating recoverability, we group assets and liabilities at the lowest level such that the identifiable cash flows relating to the group are largely independent of the cash flows

of other assets and liabilities.

In evaluating recoverability, we group assets and liabilities at the lowest level such that the identifiable cash flows relating to the group are largely independent of the cash flows of other assets and liabilities.

We then compare the carrying amounts of the assets or asset groups with the related estimated undiscounted future cash flows.

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Assets held for sale are no longer depreciated or amortized and they are reported at the lower of their carrying amount or fair value less cost to sell.

See Notes 4 and 5 for further information about impairments of goodwill and other long-lived assets recognized in the accompanying consolidated financial statements.

See Notes 3 and 5 for further information about impairments of goodwill and intangible assets recognized in the accompanying consolidated financial statements.

Investments in Debt and Equity Securities

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

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

For each derivative instrument that is designated and effective as a cash flow hedge, the gain or loss on the derivative is recorded in OCI and then recognized in earnings consistent with the underlying hedged item.

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

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

For each derivative instrument that is designated and effective as a cash flow hedge, the gain or loss on the derivative is recorded in AOCI and then recognized in earnings consistent with the underlying hedged item.

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

For each derivative instrument that is designated and effective as a fair value hedge, the gain or loss on the derivative is recognized immediately to earnings, and offsets changes in fair value attributable to a particular risk, such as changes in interest rates, of the hedged item, which are also recognized in earnings.

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.

We have designated certain of our Euro-denominated senior notes as hedges of our net investment in our European operations and, as a result, mark to spot rate adjustments on the outstanding debt balances are recorded as a component of AOCI.

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

However, if it is probable that the hedged forecasted transactions will not occur, any gains or losses would be immediately reclassified from accumulated other comprehensive income (loss) (AOCI) to earnings.

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.

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.

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

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

Cash flows related to the settlement of derivative instruments designated as net investment hedges of foreign operations are classified in the consolidated statements of cash flows within investing activities.

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Recently issued accounting standards not yet adopted

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, which requires enhanced disclosures about segment expenses on an annual and interim basis.

This standard is effective for our annual consolidated financial statements for the year ending December 31, 2024 and for interim periods beginning in 2025.

We are currently evaluating the impact of this standard on our consolidated financial statements.

In November 2024, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses, which requires disaggregated disclosure of certain expenses on an interim and annual basis in the notes to the financial statements.

This standard is effective for annual consolidated financial statements for the year ending December 31, 2027 and for interim periods beginning in 2028.

We are currently evaluating the impact of this new standard on our consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

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Additionally, the amendment requires disclosure of certain disaggregated information about income taxes paid, income from continuing operations before income tax expense (benefit) and income tax expense (benefit).

The standard is effective for our annual consolidated financial statements for the year ending December 31, 2025.

The standard is effective for our annual consolidated financial

statements for the year ending December 31, 2025.

We are currently evaluating the impact of this standard on our consolidated financial statements.

In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820):

Fair Value Measurement of Equity Securities Subject to Contractual Sales Restrictions, which (1) clarifies the guidance in Topic 820 on the fair value measurement of an equity security that is subject to contractual restrictions that prohibit the sale of an equity security and (2) requires specific disclosures related to such an equity security.

The standard is effective for our annual consolidated financial statements for the year ending December 31, 2024 and for interim periods beginning in 2025.

The impact of the adoption of this ASU is not expected to have a material effect on our consolidated financial statements.

Recently adopted accounting pronouncements

As of January 1, 2024, we adopted ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, which requires enhanced disclosures about segment expenses on an annual and interim basis.

This standard became effective for our annual consolidated financial statements for the year ended December 31, 2024 and for interim periods beginning in 2025.

See Note 18 for further information on our segment disclosures.

As of January 2024, we adopted ASU 2022-03, Fair Value Measurement (Topic 820):

The standard became effective for our annual consolidated financial statements for the year ended December 31, 2024 and for interim periods beginning in 2025.

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

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

These changes are intended to avoid recognizing a day-one loss for a lease with

variable payments even though the lessor expects the arrangement will be profitable overall.

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

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

In the fourth quarter of 2021, we adopted ASU 2021-08, Business Combinations - Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.

This ASU requires an entity to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606 (Revenue from Contracts with Customers).

This ASU is expected to reduce diversity in practice and increase comparability for both the recognition and measurement of acquired revenue contracts with customers at the date of and after a business combination.

In accordance with this ASU we recognized contract liabilities of $ 142 million as part of the Hillrom acquisition in December 2021.

We did not acquire contract assets or liabilities in connection with other acquisitions completed since the adoption of this ASU.

DISCONTINUED OPERATIONS

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 consolidated financial statements reflect discontinued operations 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 former Kidney Care segment, provides chronic and acute dialysis therapies and services, including peritoneal dialysis, hemodialysis, continuous renal replacement therapies, and other organ support therapies.

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 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 consolidated financial statements.

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

The fair value and carrying value of assets held for sale are evaluated each period and a loss on sale is recognized when the fair value less costs to sell are below the carrying value.

There has been no loss on sale recognized for the period ending December 31, 2024.

We will recognize a gain or loss upon disposition of the business depending on the carrying value at that date, including any tax impacts of the sale, which may be material.

Upon closing of the sale of the Kidney Care business, Baxter and Vantive entered 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 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 Kidney Care TSA include information technology applications and support, 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 BPS business to Advent International and Warburg Pincus (collectively, the buyers).

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

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

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

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

Results of Discontinued Operations and Assets and Liabilities of Discontinued Operations

The following table summarizes the major classes of line items included in income from discontinued operations, net of tax, for the years ended December 31, 2023, 2022 and 2021:

The following table summarizes the major classes of line items included in income (loss) from discontinued operations, net of tax, for the years ended December 31, 2024, 2023 and 2022:

Kidney Care BioPharma Solutions Total

Year Ended December 31, Year Ended December 31, Year Ended December 31,

(in millions) 2024 2023 2022 2024 2023 2022 2024 2023 2022

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Research and development expenses 181 149 152 — 1 3 181 150 155

Goodwill impairments 430 — — — — — 430 — —

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

Operating income (loss) ( 112 ) ( 317 ) 602 — 207 300 ( 112 ) ( 110 ) 902

Interest expense, net 13 3 1 — ( 1 ) — 13 2 1

Other (income) expense, net 10 25 3 — 1 3 10 26 6

Income from discontinued operations before gain on disposition and income taxes 207 297 361

Income (loss) from discontinued operations before gain on disposition and income taxes ( 135 ) ( 345 ) 598 — 207 297 ( 135 ) ( 138 ) 895

Gain on disposition — — — — 2,882 — — 2,882 —

Income tax expense 357 64 99

Income from discontinued operations, net of tax $ 2,732 $ 233 $ 262

For the years ended December 31, 2023 and 2022, SG&A expenses include $ 17 million and $ 5 million, respectively, of separation-related costs incurred in connection with the sale of BPS.

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

Income tax expense (benefit) 177 ( 95 ) 139 — 357 64 177 262 203

Income (loss) from discontinued operations, net of tax ( 312 ) ( 250 ) 459 — 2,732 233 ( 312 ) 2,482 692

Net income attributable to noncontrolling interest included in discontinued operations 11 7 11 — — — 11 7 11

Net income (loss) attributable to Baxter stockholders included in discontinued operations $ ( 323 ) $ ( 257 ) $ 448 $ — $ 2,732 $ 233 $ ( 323 ) $ 2,475 $ 681

For the year ended December 31, 2024, SG&A expenses include $ 261 million of separation-related costs incurred in connection with the sale of our Kidney Care business.

For the year ended December 31, 2023, SG&A expenses include $ 196 million and $ 17 million, respectively, of separation-related costs incurred in connection with the 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 in the consolidated balance sheets as of December 31, 2024 and 2023:

as of December 31 (in millions) 2024 2023

Cash and cash equivalents $ 648 $ 116

Accounts receivable, net of allowances 942 971

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Prepaid expenses and other current assets 200 186

Current assets of discontinued operations 2,611 2,179

Property, plant and equipment, net 1,516 1,562

Goodwill 265 721

Other intangible assets, net 148 161

Operating lease right-of-use assets 204 188

Other non-current assets 367 317

Non-current assets of discontinued operations 2,500 2,949

Assets of discontinued operations $ 5,111 $ 5,128

Current maturities of finance lease obligations $ 1 $ 1

Accounts payable 344 360

Accrued expenses and other current liabilities 585 679

Current liabilities of discontinued operations 930 1,040

Long-term finance lease obligations, less current portion 37 41

Operating lease liabilities 173 173

Other non-current liabilities 344 337

Non-current liabilities of discontinued operations 554 551

Liabilities of discontinued operations $ 1,484 $ 1,591

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Contingent consideration related to business combinations is recognized at its estimated fair value on the acquisition date.

Subsequent changes to the fair value of those contingent consideration arrangements are

recognized in earnings.

Subsequent changes to the fair value of those contingent consideration arrangements are recognized in earnings.

Contingent consideration related to business acquisitions may consist of development, regulatory and commercial milestone payments, and sales or earnings-based payments, and are valued using discounted cash flow techniques.

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The fair value of sales-based payments is based upon probability-weighted future revenue estimates and increases or decreases as revenue estimates or expectation of timing or amount of payments changes.

On December 13, 2021, we completed our acquisition of all outstanding equity interests of Hillrom for a purchase price of $ 10.48 billion.

Including the assumption of Hillrom's outstanding debt obligations, the enterprise value of the transaction was approximately $ 12.84 billion.

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

In 2021, we completed our acquisition of all outstanding equity interests of Hillrom for a purchase price of $ 10.48 billion.

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

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

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

(in millions)

Cash consideration paid to Hillrom shareholders (a)

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

Total Consideration $ 10,476

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

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

The valuation of assets acquired and liabilities assumed was finalized during the fourth quarter of 2022.

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

(in millions)

Assets acquired and liabilities assumed

Cash and cash equivalents $ 399

Accounts receivable 561

Inventories 559

Prepaid expenses and other current assets 49

Property, plant and equipment 506

Goodwill 6,834

Other intangible assets 6,029

Operating lease right-of-use assets 74

Other non-current assets 133

Short-term debt ( 250 )

Accounts payable ( 140 )

Accrued expenses and other current liabilities ( 578 )

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

Operating lease liabilities ( 57 )

Other non-current liabilities ( 1,525 )

Total assets acquired and liabilities assumed $ 10,476

In the fourth quarter of 2022, we finalized our valuation of the acquisition date assets acquired and liabilities assumed.

The measurement period adjustments recorded in 2022 primarily impacted accounts receivable, property plant and equipment, other intangible assets, accrued expenses and other current liabilities and deferred income tax liabilities.

Individually, the measurement period adjustments were not material and in total increased goodwill by $ 49 million.

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

We allocated $ 804 million of the total consideration to developed technology with a weighted-average useful life of 5 years, $ 1.91 billion to trade names with an indefinite useful life, $ 62 million to trade names with a weighted-average useful life of 7 years, $ 3.19 billion to customer relationships with a weighted-average useful life of 15 years and $ 30 million to IPR&D that is considered an indefinite lived intangible asset.

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

We used a discount rate of 8.5 % to value the developed technology, trade names and customer relationships and 9.0 % to value the IPR&D.

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

We also recognized $ 1.33 billion of deferred income tax liabilities in connection with the acquisition.

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

See Note 5 for additional information about the impairments recognized in the second half of 2022 related to goodwill and certain intangible assets acquired in the Hillrom acquisition.

The results of operations of the acquired business have been included in our consolidated statement of income (loss) since the date the business was acquired.

The Hillrom acquisition contributed $ 212 million of net sales and a $ 96 million of pretax loss for the year ended December 31, 2021.

Significant drivers of the acquired business's pretax loss for 2021, which reflects the period from the December 13, 2021 acquisition date through year-end, included intangible asset amortization expense, incremental cost of sales from fair value step-ups on acquired inventory, acquisition-related expenses and interest expense on the borrowings used to finance the acquisition.

For the year ended December 31, 2023, we incurred $ 19 million of integration-related costs related to the Hillrom acquisition.

For the year ended December 31, 2022, we incurred $ 93 million of integration-related costs and $ 159 million of incremental cost of sales from the fair value step-ups on acquired Hillrom inventory that was sold in 2022.

We also incurred $ 85 million of restructuring charges in 2022 related to our integration of Hillrom.

See Note 12 for additional information about our restructuring activities.

For the year ended December 31, 2021, we incurred $ 139 million of acquisition and integration-related costs, $ 48 million of bridge facility fees and other pre-acquisition financing costs and $ 42 million of incremental cost of sales from the fair value step-ups on acquired Hillrom inventory that was sold in 2021.

See Note 6 for additional information about financing arrangements related to the Hillrom acquisition.

The following table presents the unaudited pro forma combined results of Baxter and Hillrom for the year ended December 31, 2021 as if the acquisition of Hillrom had occurred on January 1, 2020:

year ended December 31 (in millions) 2021

Net sales $ 15,574

Net income attributable to Baxter stockholders 962

The acquisition has been accounted for in the unaudited pro forma combined financial information using the acquisition method of accounting with Baxter as the acquirer.

In order to reflect the occurrence of the acquisition as if it occurred on January 1, 2020 as required, the unaudited pro forma combined financial information includes adjustments to reflect incremental depreciation and amortization expense based on the current preliminary fair values of the identifiable tangible and intangible assets acquired, additional interest expense associated with the issuance of debt to finance the acquisition, nonrecurring costs directly attributable to the acquisition and the income tax effects of the pro forma adjustments.

The unaudited pro forma combined financial information is not necessarily indicative of what the consolidated results of operations would have been had the acquisition been completed on January 1, 2020.

In addition, the unaudited pro forma combined financial information is not a projection of future results of operations of the combined company nor does it reflect the expected realization of any potential synergies or cost savings associated with the acquisition.

On July 29, 2021, we acquired certain assets related to PerClot Polysaccharide Hemostatic System (PerClot), including distribution rights for the U.S.

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

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

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

PerClot is approved for distribution in the European Union and other markets and was submitted for Pre-Market Approval for distribution in the U.S.

in the fourth quarter of 2021, for which approval was subsequently received in May 2023.

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

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

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

(in millions)

Contingent Consideration 28

Total Consideration $ 53

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

(in millions)

Assets acquired

Other intangible assets 49

Total assets acquired $ 53

The results of operations of the acquired business have been included in our consolidated statement of income (loss) since the date the business was acquired and were not material for the year ended December 31, 2021.

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

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

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

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

The goodwill, which is deductible for tax purposes, includes the value of overall strategic benefits provided to our surgical portfolio of hemostats and sealants and is included in the Medical Products and Therapies segment.

Transderm Scop

On March 31, 2021, we acquired the rights to Transderm Scop (TDS) for the U.S.

and specified territories outside of the U.S.

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

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

institutional market.

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

and motion sickness in European markets.

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

The fair value of the potential contingent consideration payment was estimated by applying a probability-weighted expected payment model and is a Level 3 fair value measurement due to the significant estimates and assumptions used by management in establishing the estimated fair value.

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

(in millions)

Contingent Consideration 24

Total Consideration $ 84

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

(in millions)

Assets acquired

Inventory $ 16

Other intangible assets 67

Total assets acquired $ 84

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

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

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

We consider the fair values

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

Total consideration transferred for other acquisitions totaled $ 32 million and $ 21 million in 2022 and 2021, respectively, and primarily resulted in the recognition of goodwill and other intangible assets.

Hillrom made those outcomes possible through digital and connected care solutions and collaboration tools, including smart bed systems, patient monitoring and diagnostic

technologies, respiratory health devices, advanced equipment for the surgical space and more, delivering actionable, real-time insights at the point of care.

Impairment of Goodwill from Our Hillrom Acquisition

During 2024, we recorded a $ 425 million goodwill impairment related to our Front Line Care reporting unit within our Healthcare Systems & Technologies segment.

Refer to Note 5 for additional information regarding this goodwill impairment.

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

acquired in connection with the Hillrom acquisition.

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

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

connection with our annual goodwill impairment assessment in the fourth quarter of 2022, we performed quantitative impairment tests for all of our reporting units and recorded an additional $ 27 million goodwill impairment related to our Hillrom segment.

No goodwill impairments were recorded for our remaining reporting units in connection with our annual goodwill impairment tests because the fair values of those reporting units exceeded their carrying amounts

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

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

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

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

Impairment of Indefinite-Lived Intangible Assets from Our Hillrom Acquisition

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

Those intangible asset impairment charges are classified within cost of sales in the accompanying consolidated statements of income (loss) for the year ended December 31, 2022.

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

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

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

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

In the fourth quarter of 2022, we recognized an impairment charge of $ 12 million related to developed-technology intangible assets due to declines in market expectations for the related products.

The fair values of the intangible assets were measured using a discounted cash flow approach and the charge is classified within cost of sales in the accompanying consolidated statements of income (loss) for the year ended December 31, 2022.

We consider the fair values of the assets to be Level 3 measurements due to the significant estimates and assumptions, including forecasted future cash flows, that we used in establishing the estimated fair values.

Total consideration transferred for other acquisitions totaled $ 32 million in 2022 and primarily resulted in the recognition of goodwill and other intangible assets.

These acquisitions did not materially affect our results of operations.

Except for Hillrom, we have not presented pro forma financial information for any of the 2023, 2022 or 2021 acquisitions because their results are not material to our consolidated financial statements.

Other Business Development Activities

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The related regulatory approvals were subsequently obtained for the generic version of liposomal doxorubicin and we recognized a loss of approximately $ 54 million in the third quarter of 2022, representing the difference between the amount we owed Celerity following those regulatory approvals and the proceeds that we were entitled to receive from our divestiture of those product rights.

That loss is reported within other operating expense (income), net in our consolidated statements of operations for the year ended December 31, 2022.

Caelyx and Doxil

On February 17, 2021, we acquired the rights to Caelyx and Doxil, the branded versions of liposomal doxorubicin, from a subsidiary of Johnson & Johnson for specified territories outside of the U.S.

We previously acquired the U.S.

rights to this product in 2019.

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

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

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

Net sales related to this acquisition were $ 108 million for the year ended December 31, 2021.

That loss is reported within other operating expense (income), net in our consolidated statements of income (loss) for the year ended December 31, 2022.

Other Asset Acquisitions

During 2021, we also entered into distribution license arrangements for multiple products that have not yet obtained regulatory approval for upfront cash payments of $ 3 million.

The cash paid was treated as R&D expenses on our consolidated statements of income (loss).

We could make additional payments of up to $ 32 million upon the achievement of certain development, regulatory or commercial milestones.

During 2021, we also entered into distribution license arrangements for multiple products that have not yet obtained regulatory approval.

In addition to the cash paid at acquisition, we could make additional payments of up to $ 17 million upon the achievement of certain development, regulatory or commercial milestones.

In addition to the arrangements described above, we have entered into several other collaborative arrangements.

6 unchanged sentences

Balance at beginning of period $ 62 $ 50 $ 52

Acquisition — — 13

Charged to costs and expenses 7 7 3

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Prepaid income taxes 199 204

Spare parts 123 141

Contract assets 51 53

Assets held for sale — 50

Derivative assets 8 45

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Prepaid expenses and other current assets $ 753 $ 706

In September 2022, we entered into a purchase agreement with a buyer to sell our corporate headquarters in Deerfield, Illinois for $ 52 million, which approximated its net book value.

The related assets were classified as held for sale at that time and were presented within prepaid expenses and other current assets in the accompanying

consolidated balance sheet as of December 31, 2022.

During 2023, the purchase agreement was terminated and the property was taken off the market.

We currently intend to continue using the property as our corporate headquarters for the foreseeable future and the related assets, which became classified as assets held for use upon termination of the purchase agreement, are presented within property, plant and equipment, net in the accompanying consolidated balance sheet as of December 31, 2023.

Property, Plant and Equipment, Net

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Depreciation expense was $ 372 million in 2024, $ 394 million in 2023 and $ 393 million in 2022.

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

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

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

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

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

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

Impairment of Opelika, Alabama 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 consolidated statements of income (loss), during the second quarter of 2023 to reduce the carrying amounts to their estimated fair values.

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

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

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

Other Impairments of Long-Lived Assets Related to HD Business

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

See further discussion in Note 18, Segment Information.

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

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

Based on the estimated fair value of our HD business, we allocated no goodwill to it, and we determined that a triggering event was present to review the carrying amounts of long-lived assets within the HD business, which include four manufacturing facilities that primarily manufacture HD products, HD equipment leased to customers under operating leases and developed technology intangible assets, for potential impairment.

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

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

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

The impairments are classified within cost of sales in the accompanying consolidated statement of income (loss) for the year ended December 31, 2023.

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

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

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

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

The fair values of the buildings within that asset group were determined based on a cost approach.

Significant assumptions used in the determination of those fair values included replacement costs of assets with a similar age and condition.

The fair values of manufacturing equipment and HD equipment leased to customers within that group were determined based on transaction prices of comparable assets.

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

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

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

Other Non-Current Assets

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Change in fair value of marketable equity securities ( 3 ) ( 7 ) ( 11 )

Loss on debt extinguishment — — 5

Pension settlement and curtailment (gains) losses — — ( 12 )

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The following is a reconciliation of goodwill by business segment.

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

Pharmaceuticals Kidney Care Total

December 31, 2021 $ 2,099 $ 309 $ 224 $ — $ 6,786 $ — $ — $ 9,418

Impairments — — — — ( 2,812 ) — — ( 2,812 )

Measurement period adjustments — — — — 49 — — 49

Currency translation ( 134 ) ( 20 ) ( 14 ) — ( 35 ) — — ( 203 )

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

Pharmaceuticals Total

December 31, 2022 $ 1,665 $ 78 $ 18 $ — $ 3,988 $ — $ 5,749

2 unchanged sentences

December 31, 2023 $ — $ — $ — $ 1,241 $ 3,989 $ 563 $ 5,793

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

Impairment — — — — ( 425 ) — ( 425 )

Currency translation and other — — — ( 56 ) ( 14 ) ( 23 ) ( 93 )

December 31, 2024 $ — $ — $ — $ 1,185 $ 3,550 $ 540 $ 5,275

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

Change in Reportable Segments

As discussed in Note 18, Segment Information, our reportable segments were previously comprised of the following geographic segments related to our legacy Baxter business:

Our reportable segments were previously comprised of the following geographic segments related to our legacy Baxter business:

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

In the third quarter of 2023, we completed the implementation of a new operating model intended to simplify and streamline our operations and better align our

manufacturing and supply chain to our commercial activities.

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

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

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

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

Under this operating model, our business is comprised of three reportable segments:

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

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

We performed goodwill impairment assessments both before and after the reporting unit change and we did not identify any goodwill impairments.

In connection with our November 1, 2023 annual goodwill impairment tests, we determined that no goodwill impairments had occurred.

The fair values of the Front Line Care reporting unit within our Healthcare Systems and Technologies segment and the Chronic Therapies reporting unit within our Kidney Care segment exceeded their

carrying values by approximately 5 % and 6 %, respectively.

We are continuing to closely monitor the performance of those reporting units, and if there is a significant adverse change in our outlook for those businesses in the future, a goodwill impairment could arise at that time.

As of December 31, 2023, the carrying amounts of goodwill for our Front Line Care and Chronic Therapies reporting units were $ 2.42 billion and $ 444 million, respectively.

Goodwill Impairments

As described in Note 3, we acquired Hillrom on December 13, 2021 and recognized $ 6.83 billion of goodwill and $ 6.03 billion of other intangible assets, including $ 1.91 billion of indefinite-lived intangible assets, in connection with that acquisition.

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

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

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

In connection with our annual goodwill impairment assessment in the fourth quarter of 2022, we performed quantitative impairment tests for all of our reporting units and recorded an additional $ 27 million goodwill impairment related to our Hillrom segment.

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

Goodwill Impairment

In connection with our annual goodwill impairment assessment in the fourth quarter of 2024, we recorded a $ 425 million goodwill impairment related to our Front Line Care reporting unit within our Healthcare Systems & Technologies segment.

The reduction in value was primarily due to lower forecasted operating results and a lower terminal growth rate utilized in valuing this reporting unit which contributed to reduced expected future cash flows, as well as lower earnings multiples.

The fair value of the Front Line Care 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 values of our reporting units generally include revenue growth rates, forecasted EBITDA margins, discount rates, terminal growth rates and earnings multiples.

The discounted cash flow model used to determine the fair value of our Front Line Care reporting unit reflected our most recent cash flow projections, a discount rate of 9.5 % and a terminal growth rate of 3.25 %.

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

See further discussion below for information regarding intangible asset impairment charges recognized during the third and fourth quarters of 2022.

As of December 31, 2024, the carrying amount of goodwill for our Front Line Care reporting unit was $ 1.99 billion.

Other Intangible Assets, Net

14 unchanged sentences

The anticipated annual amortization expense for definite-lived intangible assets recorded as of December 31, 2024 is $ 586 million in 2025, $ 562 million in 2026, $ 412 million in 2027, $ 400 million in 2028 and $ 378 million in 2029.

As a result of an update to our long-term branding strategy, we reclassified two trade name intangible assets with carrying amounts of $ 870 million and $ 21 million from indefinite-lived intangible assets to amortizing intangible assets during the fourth quarter of 2023.

The estimated useful lives assigned to those assets were 15 years and 5 years, respectively, and we recognized $ 10 million of amortization expense on those intangible assets from the date of reclassification through December 31, 2023.

During the fourth quarter of 2023, as a result of an update to our long-term branding strategy, we reclassified two trade name intangible assets with carrying amounts of $ 870 million and $ 21 million from indefinite-lived intangible assets to amortizing intangible assets.

The estimated useful lives assigned to those assets were 15 years and 5 years, respectively.

We performed impairment tests of those intangible assets at the time of the reclassification and determined that no impairment had occurred.

Intangible Asset Impairments

Impairment of Developed Technology Intangible Asset Related to HD Business

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

See Note 4, Supplemental Financial Information, for information about the impairment of this intangible asset, impairments of other long-lived assets related to our HD business and related fair value measurements.

Impairment of Indefinite-Lived Intangible Assets from Our Hillrom Acquisition

Those intangible asset impairment charges are classified within cost of sales in the accompanying consolidated statements of income (loss) for the year ended December 31, 2022.

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

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

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

In the fourth quarter of 2022, we recognized an impairment charge of $ 12 million related to developed-technology intangible assets due to declines in market expectations for the related products.

Impairment of Indefinite-Lived Intangible Assets from Our Claris Acquisition

In connection with our annual IPR&D impairment assessment in the fourth quarter of 2024, we recognized a pre-tax impairment charge of $ 50 million to reduce the carrying amount of an IPR&D asset to its fair value.

The reduction in value was primarily due to lower forecasted revenues and margins which contributed to reduced expected future cash flows.

The intangible asset impairment charge is classified within research and development expenses in the accompanying consolidated statements of income (loss) for the year ended December 31, 2024.

The fair value of the IPR&D asset was determined using the multi-period excess earnings method.

Significant assumptions used in the determination of the fair value of the IPR&D asset included forecasted cash flows and the discount rate.

The multi-period excess earnings model used in our determination of the fair value of the IPR&D asset reflected our most recent cash flow projections and a discount rate of 11 %.

Our IPR&D intangible asset fair value measurement is classified as Level 3 in the fair value hierarchy because it involves significant unobservable inputs.

DEBT AND CREDIT FACILITIES

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At December 31, 2024 and 2023, we had the following debt outstanding:

as of December 31 (in millions) Effective interest rate in 2023¹ 2023 1

as of December 31 (in millions) Effective interest rate as of December 31,2024¹ 2024 1

Commercial paper 4.8 % $ 300 $ —

0.4 % notes due 2024

Floating-rate notes due 2023 — % — 299

1.322 % notes due 2024

0.3 % 828 799

7.0 % notes due 2024

1.5 % 1,398 1,395

7.0 % notes due 2024

Floating-rate notes due 2024 — % — 300

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1.5 % 625 662

Delayed draw term loan due 2025 5.7 % 1,826 —

2.6 % notes due 2026

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Significant Debt Activity

In February 2025, we repaid $ 1.00 billion under our $ 1.64 billion five-year term loan facility maturing in 2026.

In 2024, we repaid our $ 13 million 7.0 % notes due 2024, $ 809 million 0.4 % notes due 2024, $ 1.40 billion 1.322 % notes due 2024, $ 300 million floating rate notes due 2024 and $ 130 million three-year term loan facility due 2024.

In 2023, we repaid our $ 800 million 0.868 % notes due 2023, our $ 300 million floating rate notes due 2023 and $ 1.54 billion under our $ 2.00 billion three-year term loan facility maturing in 2024.

In 2022, we repaid our $ 203 million 2.4 % notes due 2022, $ 335 million under our $ 2.00 billion three-year term loan facility maturing in 2024 and $ 355 million under our $ 2.00 billion five-year term loan facility maturing in 2026.

The losses from our early extinguishments of debt in 2023 and 2022 were not significant.

The loss from our early extinguishments of debt in 2023 was not significant.

Credit Facilities

On July 17, 2024, we entered into a credit agreement pursuant to which a group of banks provided us with senior unsecured term loans in an aggregate principal amount of up to $ 2.05 billion ("the bridge facility").

Borrowings under the bridge facility were 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 sale of our Kidney Care business.

Borrowings under the bridge facility bore 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 %.

We also incurred a ticking fee on undrawn commitments at a rate based on our long-term debt ratings in effect from time to time.

The banks' funding commitments under the bridge facility terminated on December 31, 2024.

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

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

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

In November 2024, we reduced the bridge facility capacity from $ 2.05 billion to $ 1.83 billion.

Additionally, during the fourth quarter of 2024 we drew on the bridge facility to repay our 1.322 % Senior Notes due November 29, 2024, our Floating Rate Notes due November 29, 2024 and the outstanding balance on our three-year term loan facility.

There was $ 1.83 billion outstanding under this bridge facility as of December 31, 2024.

In January 2025, we used a portion of the approximately $ 3.4 billion of net after-tax cash proceeds from the sale of our Kidney Care business to repay the $ 1.83 billion outstanding under the bridge facility, at which time it was terminated.

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.

In accordance with the terms of the amendment, the capacity under our U.S dollar-denominated revolving credit facility was reduced from $ 2.50 billion to $ 2.00 billion on September 30, 2024.

As of December 31, 2024, we were in compliance with the financial covenants in these agreements.

Costs incurred in connection with the amendment were not material.

In the first quarter of 2023, we previously amended the credit agreements governing our U.S.

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

As of December 31, 2024, we had a U.S.

Dollar-denominated term loan credit facility, which had two tranches of term loans outstanding, a U.S.

Dollar-denominated term loan credit facility, which had one tranche of term loans outstanding, a U.S.

Dollar-denominated revolving credit facility and a Euro-denominated revolving credit facility.

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We have the option to prepay outstanding amounts under the term loan credit facility in whole or in part at any time.

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

In addition to our U.S.

dollar-denominated revolving credit facility with a current capacity of $ 2.00 billion, our Euro-denominated revolving credit facility has a capacity of € 200 million.

Fees under the credit facilities are 0.125 % annually as of December 31, 2024 and 2023, and are based on our credit ratings and the total capacity of the facility.

There were no borrowings outstanding under the revolving credit facilities as of December 31, 2023 and 2022.

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

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

Each of the revolving credit facilities matures in 2026.

Each of the revolving credit facilities is scheduled to mature in 2026.

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

In the first quarter of 2023, we amended the credit agreements governing our U.S.

In the third quarter of 2022, we previously amended the credit agreements governing our term loan facility and our U.S.

Dollar-denominated revolving credit facility and the guaranty agreement with respect to our Euro-denominated revolving credit facility, in each case to delay the commencement of our net leverage ratio covenant step-down schedule until June 30, 2024.

We also amended the credit agreements governing our term loan facility and our U.S.

Dollar-denominated revolving credit facility to transition the benchmark rate from LIBOR to the Secured Overnight Financing Rate (SOFR).

Based on our covenant calculations as of December 31, 2023 we have capacity to draw on the full amounts under our revolving credit facilities.

Based on our covenant calculations as of December 31, 2024 we have capacity to draw on the full amounts under our revolving credit facilities, less commercial paper borrowings which were $ 300 million at year-end.

We also maintain other credit arrangements, which totaled approximately $ 412 million and $ 238 million as of December 31, 2024 and 2023, respectively.

The increase over the prior year is due to additional credit arrangements entered into in preparation for the sale of our Kidney Care business.

There were no amounts outstanding under these arrangements as of December 31, 2024 and 2023.

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Commercial Paper

As of December 31, 2024, we had $ 300 million of commercial paper outstanding with a weighted-average interest rate of 4.78 % and an original term of 45 days.

There was no commercial paper outstanding as of December 31, 2023.

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

In 2025, we repaid the $ 300 million balance outstanding as of December 31, 2024.

Future Debt and Finance Lease Maturities

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Lessor Activity

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, intravenous (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 intravenous (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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1 Unamortized imputed interest on minimum lease payments was less than $ 1 million as of December 31, 2024 .

In the third quarter of 2023, we recognized $ 267 million of long-lived asset impairments related to our HD business, which included impairments of $ 14 million of operating lease right-of-use assets and $ 58 million of equipment leased to customers.

See Note 4 for additional information.

COMMITMENTS AND CONTINGENCIES

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(iv) indemnities involving the representations and warranties in certain contracts;

and (v) contractual indemnities for our directors and certain of our executive officers for services provided to or at the request of us.

and (v) contractual indemnities for our directors and our executive and corporate officers for services provided to or at the request of us.

In addition, under our Amended and Restated Certificate of Incorporation, and consistent with Delaware General Corporation Law, we have agreed to indemnify our directors and officers for certain losses and expenses upon the occurrence of certain prescribed events.

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Legal 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.

If the reasonable estimate of a probable loss is a range, and no amount within the range is a better

estimate than any other amount, the minimum amount in the range is accrued.

If the reasonable estimate of a probable loss is a range, and no amount within the range is a better estimate than any other amount, the minimum amount in the range is accrued.

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

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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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General Litigation

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

National Prescription Opiate Litigation pending in the U.S.

District Court, Northern District of Ohio.

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

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

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

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

In November 2019, we and certain of our officers were named in a class action complaint alleging that we and certain officers violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by making allegedly false and misleading statements and failing to disclose material facts relating to certain intra-company transactions undertaken for the purpose of generating foreign exchange gains or avoiding foreign exchange losses, as well as our internal controls over financial reporting.

The parties reached an agreement to settle the case for $ 16 million, which became effective on September 13, 2021 and was paid in 2021.

We also cooperated with the staff of the SEC in connection with its investigation into those matters and, on February 18, 2022, we reached a settlement with the SEC.

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

In the order, the SEC acknowledged Baxter’s cooperation and we paid the penalty in the first quarter of 2022.

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

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

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

We have since resolved, without litigation, additional claims of injuries from exposure to

ethylene oxide at Mountain Home for amounts within accruals previously established as of December 31, 2021.

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

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

On October 20, 2022, a lawsuit was filed against us in the Western District of Arkansas alleging injury as a result of exposure to ethylene oxide at Mountain Home.

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

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

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

The case was dismissed on October 17, 2023.

In December 2023, five lawsuits were 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 us at our manufacturing facility in Round Lake, Illinois to sterilize certain of our products.

Since December 2023, 41 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.

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 Hillrom on December 13, 2021.

In July 2021, Hill-Rom, Inc., a wholly-owned subsidiary of Hillrom, received a subpoena from the United States Office of Inspector General for the Department of Health and Human Services (the DHHS) requesting documents and information related to compliance with the False Claims Act and the Anti-Kickback Statute.

The subpoena was related to a lawsuit brought under the qui tam provisions of False Claims Act.

The subpoena was related to a lawsuit brought under the qui tam provisions of the False Claims Act.

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

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

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

We paid the settlement amounts, which were not material to our financial results, in January 2024.

A stipulated request for dismissal has been filed and is pending before the court.

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

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

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

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 (the 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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Hill-Rom Services, Inc.

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

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

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

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

Kelley et al.

Baxter International Inc.

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

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

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

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

This matter was voluntarily dismissed on December 3, 2023.

On June 20, 2024, Reading Hospital filed a putative class action complaint against Hill-Rom Holdings, Inc., Hill-Rom Company, Inc., and Hill-Rom Services, Inc.

in the United States District Court for the Eastern District of Pennsylvania.

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

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.

On November 8, 2024, Hillrom filed a Motion to Dismiss Plaintiff's Amended Complaint.

Briefing was completed in January 2025 and the motion is pending before the court.

STOCKHOLDERS' EQUITY

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The related tax benefit recognized was $ 8 million in 2024, $ 10 million in 2023 and $ 31 million in 2022.

the benefit in 2023 was tax expense for stock-based compensation shortfalls of $ 11 million.

Included in the benefit in 2022 and 2021 were realized excess tax benefits for stock-based compensation of, $ 5 million and $ 13 million, respectively.

Included in the benefit in 2024 and 2023 was tax expense for stock-based compensation shortfalls of $ 9 million and $ 11 million, respectively.

Included in the benefit in 2022 were realized excess tax benefits for stock-based compensation $ 5 million.

Approximately 70 % of stock compensation expense is classified in SG&A expenses, with the remainder classified in cost of sales and R&D expenses.

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Our annual equity awards stock compensation program for senior management includes the issuance of PSUs.

PSUs awarded after 2019 were based on our compound annual sales growth rate (CAGR) performance, our adjusted return on invested capital (ROIC) performance and on our stock performance relative to our peer group.

PSUs awarded between 2018 and 2019 were based on adjusted operating margin as well as stock performance relative to our peer group.

The vesting condition for CAGR and ROIC PSUs is set at the beginning of the 3-year service period while the vesting condition for adjusted operating margin is set at the beginning of each year for each tranche of the award during the 3-year service period.

Compensation cost for the CAGR, adjusted ROIC and adjusted operating margin PSUs is measured based on the fair value of the awards on the date that the specific vesting terms for each award are established and the fair value of the awards is determined based on the quoted price of our stock on the grant date of the award.

The compensation cost for CAGR, adjusted ROIC and adjusted operating margin PSUs is adjusted at each reporting date to reflect the estimated vesting outcome.

PSUs awarded in 2024 (which grants were made solely to the CEO and Chief Financial Officer) were based on our stock performance relative to our peer group over the 3-year performance period.

PSUs awarded in 2020 through 2023 were based on our compound annual sales growth rate (CAGR) performance, our adjusted return on invested capital (ROIC) performance and on our stock performance relative to our peer group.

The vesting condition for these CAGR and ROIC PSUs was set at the beginning of the 3-year performance period.

Compensation cost for the CAGR and adjusted ROIC PSUs is measured based on the fair value of the awards on the date that the specific vesting terms for each award are established and the fair value of the awards is determined based on the quoted price of our stock on the grant date of the award.

The compensation cost for CAGR and adjusted ROIC PSUs is adjusted at each reporting date to reflect the estimated vesting outcome.

The fair value for PSUs based on our stock performance relative to our peer group is determined using a Monte Carlo model.

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As of December 31, 2024, approximately 8 million shares of common stock were available for issuance to eligible participants.

During 2023, 2022, and 2021, we issued approximately 1.4 million, 0.9 million and 0.7 million shares, respectively, under the employee stock purchase plan.

During each of the years ended December 31, 2024 and 2023 we issued approximately 1.4 million shares and during the year ended December 31, 2022, we issued approximately 0.9 million shares under the employee stock purchase plan.

Cash Dividends

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

We did not repurchase any shares under this authority in 2023.

We repurchased 0.5 million shares under this authority pursuant to a Rule 10b5-1 plan for $ 32 million in cash in 2022 and 7.3 million shares under this authority pursuant to Rule 10b5-1 plans for $ 600 million in cash in 2021.

We had $ 1.30 billion of purchase authority available as of December 31, 2023.

We did not repurchase any shares under this authority in 2024 or 2023.

We repurchased 0.5 million shares under this authority pursuant to Rule 10b5-1 plans for $ 32 million in cash in 2022.

We had $ 1.30 billion of repurchase authority available as of December 31, 2024.

In addition to common stock, our authorized capital structure includes 100 million shares of preferred stock, no par value.

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Balance as of December 31, 2023 $ ( 2,985 ) $ ( 452 ) $ ( 120 ) $ 3 $ ( 3,554 )

(in millions) CTA Pension and OPEB plans Hedging

activities Available-for-sale debt securities Total

Gains (losses)

Balance as of December 31, 2021 $ ( 2,907 ) $ ( 347 ) $ ( 126 ) $ — $ ( 3,380 )

Other comprehensive income (loss) before reclassifications ( 544 ) ( 9 ) 22 3 ( 528 )

Amounts reclassified from AOCI (a) 65 25 ( 15 ) — 75

Net other comprehensive income (loss) ( 479 ) 16 7 3 ( 453 )

Balance as of December 31, 2022 $ ( 3,386 ) $ ( 331 ) $ ( 119 ) $ 3 $ ( 3,833 )

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

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

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

( 185 ) ( 65 )

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

— ( 185 ) ( 65 ) Total before tax

Tax effect — — — Income tax expense (benefit)

$ ( 185 ) $ ( 65 )

$ — $ ( 185 ) $ ( 65 ) Net of tax

Pension and OPEB items

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Settlement charges — ( 2 ) ( 1 ) Other (income) expense, net

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

Pension settlement from BPS divestiture — 4 — Income (loss) from discontinued operations, net of tax

6 20 ( 31 ) Total before tax

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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 consolidated balance sheets.

Net trade accounts receivable was $ 2.43 billion and $ 2.34 billion as of December 31, 2023 and 2022.

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

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We currently expect to incur additional pre-tax cash costs, primarily related to the implementation of business optimization programs, of approximately $ 4 million through the completion of initiatives that are currently underway.

We continue to pursue cost savings initiatives, including those intended to mitigate a portion of the dis-synergies expected to arise as a result of the proposed spinoff of our Kidney Care business, and to the extent further cost savings opportunities are identified, we would incur additional restructuring charges and costs to implement business optimization programs in future periods.

We continue to pursue cost savings initiatives, including those intended to mitigate a portion of the dis-synergies expected to arise as a result of the sale of our Kidney Care business, and to the extent further cost savings opportunities are identified, we would incur additional restructuring charges and costs to implement business optimization programs in future periods.

For segment reporting, business optimization charges are unallocated expenses.

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Total restructuring charges $ 15 $ 126 $ 3 $ 144

For the year ended December 31, 2023, $ 111 million of the restructuring charges reflected 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 year ended December 31, 2023, $ 267 million of the restructuring charges reflected in the table above, consisting of $ 243 million of long-lived asset impairment charges, $ 14 million of other asset write-downs related to inventory and spare parts 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 4 for additional information.

For the year ended December 31, 2022, $ 85 million of the restructuring charges reflected in the table above were related to integration activities for the Hillrom acquisition, consisting of $ 55 million of employee termination costs, $ 22 million of contract terminations and other costs and $ 8 million of asset impairments.

For the year ended December 31, 2021, $ 37 million and $ 12 million, respectively, of restructuring charges reflected in the table above, consisting of employee termination costs, were related to global programs to simplify and streamline our supply chain and finance functions.

For the year ended December 31, 2024, $ 45 million of the restructuring charges reflected above, consisting of employee termination costs, were related to initiatives to reduce our cost structure following the sale of our Kidney Care segment.

For the year ended December 31, 2024, $ 46 million of the restructuring charges reflected in the table above were related to business optimization initiatives within our Healthcare Systems & Technologies segment.

These charges included $ 21 million of long-lived asset impairment charges, $ 9 million of other asset write-downs related to inventory and $ 2 million of employee termination costs related to our decision to discontinue a product line.

Additionally, these charges included $ 14 million of employee termination costs related to other business optimization initiatives within this segment.

For the year ended December 31, 2023, $ 81 million of the restructuring charges reflected above, consisting of employee termination costs, were related to the implementation of our new operating model intended to streamline our operations.

For the year ended December 31, 2022, $ 85 million restructuring charges reflected in the table above were related to integration activities for the Hillrom acquisition, consisting of $ 55 million of employee termination costs, $ 22 million of contract terminations and other costs and $ 8 million of asset impairments.

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

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Liability balance as of December 31, 2021 $ 75

Assumed in acquisition 6

Payments ( 118 )

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Settlements ( 8 ) ( 14 ) — —

Curtailment — ( 13 ) — —

Acquisitions — 2 — —

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Settlements ( 8 ) ( 14 ) — —

Acquisitions — — — —

Foreign exchange and other ( 26 ) 37 — —

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Actuarial gains and losses result from changes in actuarial assumptions (such as changes in the discount rate and revised mortality rates).

Actuarial losses in 2023 and gains in 2022 related to plan benefit obligations were primarily the result of changes in discount rates.

Actuarial gains in 2024 and losses in 2023 related to plan benefit obligations were primarily the result of changes in discount rates.

The pension obligation information in the table above represents the projected benefit obligation (PBO).

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For inactive employees, we utilize the average remaining life expectancy as the amortization period for prior service.

The following table is a summary of the pre-tax losses included in AOCI at December 31, 2023 and December 31, 2022.

The following table is a summary of the pre-tax losses (gains) included in AOCI at December 31, 2024 and 2023.

(in millions) Pension benefits OPEB

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$ ( 15 ) $ ( 103 ) $ ( 61 )

Amortization of loss to earnings, net of tax of $( 5 ) in 2023, $ 6 in 2022 and $ 16 in 2021

Settlement charges, net of tax of zero in 2023, 2022 and 2021

Amortization of gain (loss) to earnings, net of tax of zero in 2024, $( 5 ) in 2023 and $ 6 in 2022

Settlement charges, net of tax of zero in 2024, $( 1 ) in 2023 and zero 2022

Pension and other employee benefits $ ( 19 ) $ ( 92 ) $ ( 39 )

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Settlement charges — 1 —

Other 1 1 ( 4 )

Net periodic pension benefit cost $ ( 17 ) $ ( 12 ) $ 39

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Balance at December 31, 2022 $ 7

Transfers out ( 1 )

Balance at December 31, 2023 155

Unrealized gains (losses) ( 24 )

Balance at December 31, 2024 $ 127

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projected benefit obligation (PBO) with an offsetting curtailment gain included within other (income) expense, net on the consolidated statements of income (loss) for the year ended December 31, 2022.

As of December 31, 2022, we transferred the assets and liabilities of the Baxter International Inc.

and Subsidiaries Pension Plan II to the Baxter International Inc.

and Subsidiaries Pension Plan, resulting in one qualified U.S.

defined benefit plan.

Defined Contribution Plan

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Therefore, a valuation allowance of $ 42 million and $ 90 million was recognized on the Swiss deferred tax assets for the tax basis step-up as of December 31, 2024 and 2023, respectively.

For the year ended December 31, 2023, we recognized $ 9 million of deferred tax expense to increase our valuation allowance to reflect our current estimate of its recoverability.

For the year ended December 31, 2024, we recorded an adjustment to the tax rate originally applied to the Swiss net asset tax basis step-up, and as a result recorded a net tax expense of $ 25 million to decrease the deferred tax asset by $ 59 million and the related valuation allowance by $ 34 million as of December 31, 2024.

We evaluated the impact on prior periods and determined the impact was immaterial.

The following table is a summary of changes in our deferred tax valuation allowance for the years ended December 31, 2024, 2023 and 2022.

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Balance at beginning of period $ 584 $ 631 $ 326

Acquisition — — 38

Divestiture ( 5 ) — —

Charged to income tax expense 48 87 313

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Impact of foreign taxes 137 190 78

Tax-deductible foreign statutory loss on an investment in a foreign subsidiary — — ( 58 )

Unfavorable court decision in a foreign jurisdiction related to an uncertain tax position

Non-deductible goodwill impairments 86 — 591

Non-deductible separation-related costs 26 — —

Notional interest deduction expense (benefit) ( 37 ) 31 ( 306 )

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Foreign tax credits ( 5 ) ( 7 ) 4

Pillar Two taxes 11 — —

Revaluation of Swiss basis step-up deferred tax asset 58 — —

Tax law changes on Section 987 17 — —

Other, net 9 ( 8 ) 27

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federal statutory rate due to a number of factors, including tax incentives, foreign rate differences, state income taxes, non-deductible expenses, non-taxable income, increases or decreases in valuation allowances and liabilities for uncertain tax positions, excess tax benefits or shortfalls on stock compensation awards, audit developments and legislative changes.

In 2023, our effective income tax rate was impacted favorably by geographic earnings mix, which was impacted by the long-lived asset impairments we recognized during 2023, a $ 50 million net tax benefit after related valuation allowances from notional interest deductions that are received by certain wholly-owned foreign subsidiaries that have financed their operations with equity capital and a $ 21 million tax benefit related to research and development tax credits, partially offset by non-deductible separation-related costs and tax shortfalls on stock compensation awards.

In 2022, our effective income tax rate was adversely impacted by non-deductible impairments of goodwill acquired in the Hillrom acquisition and valuation allowance increases, including the increase described above related to deferred tax assets from a tax basis step-up that arose from Swiss tax reform legislation in 2019.

In 2024, the difference between our effective income tax rate and the U.S.

federal statutory rate was adversely impacted by a non-deductible impairment of goodwill and legislative changes under IRC Section 987 (which is the exchange gain or loss on foreign branch remittances in the U.S., effective in 2024), and a net revaluation of the Swiss basis step-up deferred tax asset and related valuation allowance that arose from Swiss tax reform legislation in 2019, partially offset by a favorable geographic earnings mix, a decrease in valuation allowance mainly related to U.S.

foreign tax credit carryforward, and a tax benefit related to research and development tax credits.

In 2023, our effective income tax rate was impacted favorably by geographic earnings mix, a $ 50 million net tax benefit after related valuation allowances from notional interest deductions that are received by certain wholly-owned foreign subsidiaries that have financed their operations with equity capital and a $ 17 million tax benefit related to research and development tax credits, partially offset by tax shortfalls on stock compensation awards.

deferred tax assets from a tax basis step-up that arose from Swiss tax reform legislation in 2019.

Those items were partially offset by a $ 47 million net tax benefit after related valuation allowances from notional interest deductions.

In 2021, our effective income tax rate was impacted favorably by geographic earnings mix, including a $ 50 million net tax benefit after related valuation allowances from notional interest deductions, a $ 58 million tax benefit related to a tax-deductible foreign statutory loss on an investment in a foreign subsidiary, a tax benefit related to a change in U.S.

foreign tax credit regulations, which is reflected in the valuation allowances item in the table above, and excess tax benefits on stock compensation awards, partially offset by an unfavorable court decision in a foreign jurisdiction related to an uncertain tax position.

We plan to repatriate our foreign earnings with the exception of approximately $ 505 million of accumulated earnings that are indefinitely reinvested as of December 31, 2023 related to two of our foreign operations.

We plan to repatriate our foreign earnings with the exception of approximately $ 607 million of accumulated earnings that are indefinitely reinvested as of December 31, 2024 related to three of our foreign operations.

Additional withholding and capital gain taxes of $ 70 million would be incurred if such earnings were remitted currently.

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Balance at beginning of the year $ 89 $ 87 $ 106

Increase due to acquisition — — 11

Increase associated with tax positions taken during the current year 10 9 11

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Tax Incentives

We have received tax incentives in Puerto Rico, Switzerland, Dominican Republic, Costa Rica and Thailand.

We have received tax incentives in Puerto Rico, Switzerland, Dominican Republic, and Costa Rica.

The financial impact of the reductions as compared to the statutory tax rates is indicated in the income tax expense (benefit) reconciliation table above.

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tax years 2017-2018 with the IRS with no material adjustments to our financial statements.

Tax years 2019 and 2020 remain under examination by the IRS and tax years 2012 and forward remain

under examination by various foreign taxing authorities.

Tax years 2019 and 2020 remain under examination by the IRS, including with respect to transfer pricing matters, and tax years 2012 and forward remain under examination by various foreign taxing authorities.

While the final outcome of these matters is inherently uncertain, we believe we have made adequate tax provisions for all years subject to examination.

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Income (loss) from continuing operations $ ( 326 ) $ 181 $ ( 3,113 )

Net income attributable to noncontrolling interests 7 12 11

Net income attributable to noncontrolling interests included in continuing operations — — 1

Income (loss) from continuing operations attributable to Baxter stockholders ( 326 ) 181 ( 3,114 )

Income from discontinued operations 2,732 233 262

Income (loss) from discontinued operations ( 312 ) 2,482 692

Net income attributable to noncontrolling interests included in discontinued operations 11 7 11

Income (loss) from discontinued operations attributable to Baxter stockholders ( 323 ) 2,475 681

Net income (loss) attributable to Baxter stockholders $ ( 649 ) $ 2,656 $ ( 2,433 )

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Diluted shares 510 508 504

Basic and diluted shares are the same for the years ended December 31, 2023 and 2022 due to our net losses from continuing operations for those periods.

The effect of dilutive securities for the year ended December 31, 2021 includes unexercised stock options, unvested RSUs and contingently issuable shares related to granted PSUs.

The computation of diluted EPS excluded 25 million, 22 million, and 7 million equity awards in 2023, 2022, and 2021, respectively, because their inclusion would have had an anti-dilutive effect on diluted EPS.

Basic and diluted shares are the same for the years ended December 31, 2024 and 2022 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, 19 million, and 22 million equity awards in 2024, 2023 and 2022, respectively, because their inclusion would have had an anti-dilutive effect on diluted EPS.

Refer to Note 9 for additional information regarding items impacting basic shares.

FINANCIAL INSTRUMENTS, DERIVATIVES AND HEDGING ACTIVITIES

Accounts Receivable Sales

For accounts receivable originated in Japan, we have entered into agreements with a financial institution in which the entire interest in and ownership of the receivable is sold.

We continue to service the receivables in this arrangement.

The following is a summary of the activity relating to the arrangement.

as of and for the years ended December 31 (in millions) 2023 2022 2021

Sold receivables at beginning of year $ 71 $ 81 $ 96

Proceeds from sales of receivables 274 291 339

Cash collections (remitted to the owners of the receivables) ( 275 ) ( 293 ) ( 346 )

Effect of foreign exchange rate changes ( 4 ) ( 8 ) ( 8 )

Sold receivables at end of year $ 66 $ 71 $ 81

The net gains or losses relating to the sales of accounts receivable were immaterial for each year.

DERIVATIVES AND HEDGING ACTIVITIES

Concentrations of Credit Risk

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

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

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

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

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

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

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.

This forward contract matured in May 2024.

Net Investment Hedges

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

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

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

In May 2019, we issued € 750 million of 0.40 % senior notes due May 2024, which we repaid in full on their maturity date.

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

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

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Accumulated other comprehensive income (loss) balance at end of year $ ( 108 ) $ ( 120 ) $ ( 119 )

As of December 31, 2023, $ 6 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.

As of December 31, 2024, $ 1 million of deferred, net after-tax gains on derivative instruments included in AOCI are expected to be recognized in earnings during the next 11 months, coinciding with when the hedged items are expected to impact earnings.

Derivative Assets and Liabilities

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Total $ 19 $ — $ 5 $ 14

As of December 31, 2023 and 2022, cash and cash equivalents of $ 3.19 billion and $ 1.72 billion, respectively, included money market and other short-term funds of approximately $ 1.63 billion and $ 341 million, respectively, that are considered Level 2 in the fair value hierarchy.

As of December 31, 2024 and 2023, cash and cash equivalents of $ 1.76 billion and $ 3.08 billion, respectively, included money market and other short-term funds of approximately $ 583 million and $ 1.63 billion, respectively, that 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.

A majority of the derivatives entered into by us are valued using internal valuation techniques as no quoted market prices exist for such instruments.

The principal techniques used to value these instruments are discounted cash flow and Black-Scholes

The principal techniques used to value these instruments are discounted cash flow and Black-Scholes models.

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

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

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

The fair value of sales-based payments is based upon probability-weighted future

revenue estimates, and increases as revenue estimates increase, probability weighting of higher revenue scenarios increases or the expected timing of payment is accelerated.

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

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Fair value at beginning of period $ 14 $ 1 $ 84 $ 27

Additions — 2 — 23

Change in fair value recognized in earnings — — ( 19 ) ( 21 )

Change in fair value recognized in AOCI — — — 4

Payments ( 2 ) — ( 51 ) —

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Fair value at end of period $ 12 $ 1 $ 14 $ 1

During the years ended December 31, 2023 and 2022, 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 year ended December 31, 2023, available-for-sale debt securities were reclassified from Level 3, upon conversion to marketable equity securities, which are classified as Level 1 in the fair value hierarchy, upon initial public offerings of the investees.

Financial Instruments Not Measured at Fair Value

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

SEGMENT INFORMATION

Our reportable segments were previously comprised of the following geographic segments related to our legacy Baxter business:

Americas, EMEA and APAC, and a global segment for our Hillrom business.

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

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

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.

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.

The Healthcare Systems and Technologies segment includes sales of our connected care solutions and collaboration tools, including smart bed systems, patient monitoring systems and diagnostic technologies, respiratory health devices and advanced equipment for the surgical space, including surgical video technologies, precision positioning devices and other accessories.

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 PD, HD, CRRT and other organ support therapies.

SEGMENT AND GEOGRAPHIC INFORMATION

Our business is comprised of three reportable segments:

Medical Products & Therapies, Healthcare Systems & Technologies, and Pharmaceuticals.

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

The Healthcare Systems & Technologies segment includes sales of our connected care solutions and collaboration tools, including smart bed systems, patient monitoring systems and diagnostic technologies, respiratory health devices and advanced equipment for the surgical space, including operating room integration technologies, precision positioning devices, and other accessories.

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

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.

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and International disaggregated net sales.

Intersegment sales are eliminated in consolidation.

for the years ended December 31 2024 2023 2022

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International Total

Infusion Therapies and Technologies

Infusion Therapies & Technologies

$ 2,279 $ 1,824 $ 4,103 $ 2,227 $ 1,733 $ 3,960 $ 2,241 $ 1,576 $ 3,817

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603 501 1,104 582 469 1,051 574 424 998

Medical Products and Therapies 2,809 2,202 5,011 2,815 2,000 4,815 2,747 2,074 4,821

Medical Products & Therapies 2,882 2,325 5,207 2,809 2,202 5,011 2,815 2,000 4,815

Care and Connectivity Solutions

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843 294 1,137 905 308 1,213 840 308 1,148

Healthcare Systems and Technologies

Healthcare Systems & Technologies

2,154 797 2,951 2,168 845 3,013 2,135 804 2,939

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Pharmaceuticals 780 1,631 2,411 759 1,490 2,249 682 1,444 2,126

Chronic Therapies 1

34 33 67 66 21 87 137 40 177

Acute Therapies 1

271 499 770 263 472 735 308 512 820

Kidney Care 1,198 3,255 4,453 1,186 3,263 4,449 1,177 3,505 4,682

66 21 87 137 40 177 112 28 140

Total Baxter $ 5,850 $ 4,786 $ 10,636 $ 5,802 $ 4,558 $ 10,360 $ 5,769 $ 4,288 $ 10,057

1 In connection with our segment change in the third quarter of 2023, we reclassified $ 16 million of sales from the first half of 2023, $ 34 million of sales for the year ended December 31, 2022 and $ 38 million of sales for the year ended December 31, 2021 from Chronic Therapies to Acute Therapies to conform to the current period presentation.

Additionally, in connection with the reclassification of our BPS business to discontinued operations during the second quarter of 2023, we reclassified $ 2 million of contract manufacturing revenues from the first quarter of 2023, $ 37 million of sales for the year ended December 31, 2022 and $ 31 million of sales for the year ended December 31, 2021 from BPS to Other (within continuing operations), as the related manufacturing facility was not part of that divestiture transaction.

1 In connection with the reclassification of our BPS business to discontinued operations during the second quarter of 2023, we reclassified $ 2 million of contract manufacturing revenues from the first quarter of 2023 and $ 37 million of sales for the year ended December 31, 2022 from BPS to Other (within continuing operations), as the related manufacturing facility was not part of that divestiture transaction.

Geographic Information

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Total property, plant and equipment and operating lease right-of-use assets, net $ 3,176 $ 3,207

Segment Operating Income

We use segment operating income to evaluate the performance of our segments and to make resource allocation decisions.

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

Segment Information

Our chief operating decision maker who has been identified as our Chair, President and Chief Executive Officer, reviews the financial information presented for purposes of evaluating the performance of our segments and to make resource allocation decisions.

Segment operating income is the measure of segment profitability and represents income before income taxes, interest and other non-operating income or expense, unallocated corporate costs, intangible asset amortization and other special items.

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

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

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

as unallocated corporate costs.

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

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

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

With the results of our former Kidney Care segment reported in discontinued operations, corporate costs that had previously been allocated to the Kidney Care segment which did not convey with the Kidney Care segment in the completed sale are now presented as unallocated corporate costs.

Segment results include net sales, cost of sales, selling general and administrative expenses, research and development expenses, and other segment items which are directly allocated to each segment.

Beginning in 2024

annual reporting, we adopted ASU 2023-07 retrospectively.

The following tables present our segment information of net sales, significant expenses and operating income during the periods presented.

For the year ended December 31, 2024

(in millions) Medical Products & Therapies Healthcare Systems & Technologies Pharmaceuticals

Net sales $ 5,207 $ 2,951 $ 2,411

Cost of sales 2,867 1,464 1,612

Selling, general and administrative expenses 1,176 836 396

Research and development expenses 216 184 91

Other segment items ( 2 ) ( 1 ) ( 1 )

Segment operating income $ 950 $ 468 $ 313

For the year ended December 31, 2023

(in millions) Medical Products & Therapies Healthcare Systems & Technologies Pharmaceuticals

Net sales $ 5,011 $ 3,013 $ 2,249

Cost of sales 2,720 1,532 1,400

Selling, general and administrative expenses 1,097 822 363

Research and development expenses 222 176 86

Other segment items — — ( 1 )

Segment operating income $ 972 $ 483 $ 401

For the year ended December 31, 2022

(in millions) Medical Products & Therapies Healthcare Systems & Technologies Pharmaceuticals

Net sales $ 4,815 $ 2,939 $ 2,126

Cost of sales 2,584 1,463 1,293

Selling, general and administrative expenses 1,069 827 361

Research and development expenses 202 155 81

Other segment items ( 2 ) — —

Segment operating income $ 962 $ 494 $ 391

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

for the years ended December 31 (in millions) 2024 2023 2022

Medical Products and Therapies $ 972 $ 962 $ 955

Healthcare Systems and Technologies 483 494 60

Medical Products & Therapies $ 950 $ 972 $ 962

Healthcare Systems & Technologies 468 483 494

Pharmaceuticals 313 401 391

Kidney Care 300 408 488

Total reportable segment operating income 1,731 1,856 1,847

Other 18 18 77

Total 2,174 2,332 2,085

Unallocated corporate costs ( 275 ) ( 355 ) ( 367 )

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Long-lived asset impairments ( 50 ) — ( 344 )

Separation-related costs ( 225 ) ( 7 ) —

Legal matters ( 17 ) ( 7 ) —

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Product-related items ( 15 ) — ( 44 )

Hurricane Helene Costs ( 110 ) — —

Loss on product divestiture arrangement — — ( 54 )

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Loss on subsidiary liquidation — — ( 21 )

Investigation and related costs — — ( 31 )

Total operating income (loss) 14 707 ( 2,845 )

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Other (income) expense, net ( 38 ) 26 9

Loss from continuing operations before income taxes $ ( 103 ) $ ( 2,650 ) $ 1,116

Income (loss) from continuing operations before income taxes $ ( 289 ) $ 242 $ ( 3,248 )

Additional financial information for our segments is as follows:

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Depreciation Expense 1 :

Medical Products and Therapies $ 202 $ 204 $ 213

Healthcare Systems and Technologies 91 95 3

Medical Products & Therapies $ 201 $ 232 $ 217

Healthcare Systems & Technologies 109 108 117

Pharmaceuticals 62 54 59

Kidney Care 277 271 282

Total depreciation expense $ 372 $ 394 $ 393

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QUARTERLY FINANCIAL DATA (UNAUDITED)

The following table represents data from our unaudited consolidated statements of operations for the most recent eight quarters.

The following table represents data from our unaudited consolidated statements of income (loss) for the most recent eight quarters.

This quarterly information has been prepared on the same basis as the consolidated financial statements and includes all normal recurring adjustments necessary to fairly state the information for the periods

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Quarter Second Quarter 2

Fourth Quarter Full Year 1

Quarter Fourth Quarter 3

Net sales $ 2,490 $ 2,694 $ 2,699 $ 2,753 $ 10,636

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(in millions, except per share data) First

Quarter Second Quarter Third

Quarter Second Quarter 4

Fourth Quarter Full Year 1

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1 The sum of per share amounts for quarterly periods may not equal full year amounts due to rounding.

2 Our results from continuing operations for the quarter ended June 30, 2023 included $ 243 million of long-lived asset impairment charges resulting from our decision to cease production at one of our dialyzer manufacturing facilities.

3 Our results from continuing operations for the quarter ended September 30, 2023 included $ 267 million of long-lived asset impairment charges related to our HD business and our results from discontinued operations for that quarterly period included a gain of $ 2.88 billion from the sale of our BPS business.

4 Our results from continuing operations for the quarter ended September 30, 2022 included $ 2.79 billion of goodwill impairments and $ 332 million of long-lived asset impairments related to assets acquired in connection with our December 2021 acquisition of Hillrom.

2 Our results from discontinued operations for the quarter ended June 30, 2024 included a $ 430 million charge related to a goodwill impairment of our Chronic Therapies reporting unit within our Kidney Care segment.

3 Our results from continuing operations for the fourth quarter ended December 31, 2024 included a $ 425 million charge related to a goodwill impairment of our Front Line Care reporting unit within our Healthcare Systems & Technologies segment.

4 Our results from discontinued operations for the quarter ended June 30, 2023 included $ 243 million of long-lived asset impairment charges resulting from our decision to cease production at one of our dialyzer manufacturing facilities.

5 Our results from discontinued operations for the quarter ended September 30, 2023 included a gain of $ 2.88 billion from the sale of our BPS business, partially offset by $ 267 million of long-lived asset impairment charges related to our the hemodialysis business of our former Kidney Care segment.

Report of Independent Registered Public Accounting Firm

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In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in I nternal Control - Integrated Framework (2013) issued by the COSO.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

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The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Goodwill Impairment Assessments – Front Line Care and Chronic Therapies Reporting Units

As described in Notes 1 and 5 to the consolidated financial statements, the Company’s consolidated goodwill balance as of December 31, 2023 was $6,514 million.

Goodwill is not amortized but is subject to an impairment review annually and whenever indicators of impairment exist.

In the third quarter of 2023, the Company completed the implementation of a new operating model and the Company’s segments were changed to align with the new operating model.

As disclosed by management, the Company identified new reporting units as a result of the segment change and performed goodwill impairment assessments both before and after the reporting unit change and did not identify any goodwill impairments.

As disclosed by management, in connection with the Company’s November 1, 2023 annual goodwill impairment tests, the fair values of the Front Line Care reporting unit within the Company’s Healthcare Systems and Technologies segment and the Chronic Therapies reporting unit within the Company’s Kidney Care segment exceeded their carrying values.

As of December 31, 2023, the carrying amounts of goodwill for the Front Line Care and Chronic Therapies reporting units were $2.42 billion and $444 million, respectively.

The fair values of the Company’s reporting units are generally determined based on a discounted cash flow model (an income approach) and earnings multiples (a market approach).

Significant assumptions in reporting unit fair value measurements generally include forecasted cash flows, discount rates, terminal growth rates and earnings multiples.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessments of the Front Line Care and Chronic Therapies reporting units is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of these reporting units;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to the forecasted cash flows, discount rates, terminal growth rates, and earnings multiples;

Goodwill Impairment Assessment – Front Line Care Reporting Unit

As described in Notes 1 and 5 to the consolidated financial statements, the Company’s consolidated goodwill balance as of December 31, 2024 was $5.3 billion, and the goodwill associated with the Front Line Care reporting unit was $1.99 billion.

If management determines that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, or they do not elect the option to perform an initial qualitative assessment, they perform a quantitative goodwill impairment test.

In the quantitative impairment test, management calculates the estimated fair value of the reporting unit, and if the carrying amount of the reporting unit exceeds the estimated fair value, an impairment charge is recorded.

The fair values of the Company’s reporting units are generally 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 in reporting unit fair value measurements generally include revenue growth rates, forecasted earnings before interest, taxes, depreciation, and amortization (EBITDA) margins, discount rates, terminal growth rates and earnings multiples.

In connection with the annual goodwill impairment assessment, management recorded a $425 million goodwill impairment related to the Front Line Care reporting unit.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of the Front Line Care reporting unit is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the reporting unit;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to the revenue growth rate, forecasted EBITDA margin, discount rate, and terminal growth rate used in the discounted cash flow model and earnings multiples used in the earnings multiples approach;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessments, including controls over the valuation of the Company’s reporting units.

These procedures also included, among others (i) testing management’s process for developing the fair value estimate of the Front Line Care and Chronic Therapies reporting units;

(ii) evaluating the appropriateness of the income approach and market approach;

(iii) testing the completeness and accuracy of underlying data used in the income approach and market approach;

(iv) and evaluating the reasonableness of the significant assumptions used by management related to the forecasted cash flows, discount rates, terminal growth rates, and earnings multiples.

Evaluating management’s significant assumption related to the forecasted cash flows involved evaluating whether the assumption used was reasonable considering (i) the current and past performance of the Front Line Care and Chronic Therapies reporting units;

These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessments, including controls over the valuation of the Front Line Care reporting unit.

These procedures also included, among others, (i) testing management’s process for developing the fair value estimate of the Front Line Care reporting unit;

(ii) evaluating the appropriateness of the discounted cash flow model and the earnings multiples approach used by management;

(iii) testing the completeness and accuracy of underlying data used in the discounted cash flow model and the earnings multiples approach;

(iv) and evaluating the reasonableness of the significant assumptions used by management related to the revenue growth rate, forecasted EBITDA margin, discount rate, terminal growth rate and earnings multiples.

Evaluating management’s significant assumptions related to the revenue growth rate and forecasted EBITDA margin involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the Front Line Care reporting unit;

(ii) the consistency with external market and industry data;

and (iii) whether the assumption was consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in evaluating the appropriateness of the income approach and market approach and the reasonableness of the discount rate, terminal growth rate and earnings multiple assumptions.

Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the

discounted cash flow model and the earnings multiples approach and (ii) the reasonableness of the discount rate, terminal growth rate and earnings multiples assumptions.

/s/ PricewaterhouseCoopers LLP

4 unchanged sentences

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What changed 10-K

Item 8. Financial Statements and Supplementary Data