Baxter International (BAX) 10-K risk factor changes: FY2020 vs FY2019

Issues with product supply or quality could have an adverse effect on our [removed: business, subject us to regulatory actions,] [added: business] or cause a loss of customer confidence in us or our products, among other negative consequences.

These levels vary in response to macro-economic conditions, regulatory requirements (including the availability of private or public reimbursement), seasonality, natural disasters, [added: pandemics,] epidemics and other matters.

[removed: Additionally, quality] [added: Quality] management plays an essential role in [removed: determining and] meeting customer requirements, preventing defects, improving our products and services and assuring the safety and efficacy of our products.

Our [removed: future] success [added: also] depends on our ability to maintain and [removed: continuously] [added: routinely] improve [added: product quality and] our quality management program.

[added: See “—Risks Related to Legal and Regulatory Matters.”] An inability to address a quality or safety issue in an effective and timely manner may also cause negative publicity, a loss of customer confidence in us or our current or future products, which may result in the loss of sales and difficulty in successfully launching new products.

Additionally, [removed: Baxter has] [added: we have] made and [removed: continues] [added: continue] to make significant investments in assets, including inventory and property, plant and equipment, which relate to potential new products or modifications to existing products.

Unaffiliated [removed: third party] [added: third-party] suppliers provide a number of goods and services to our R&D, clinical and manufacturing organizations.

Failure of a [removed: third party] [added: third-party] supplier to provide compliant raw materials or supplies could result in delays, service interruptions or other quality related issues that may negatively impact our business results.

If we are unable to obtain sufficient components or raw materials on a timely basis or for a cost-effective price or if we experience other manufacturing, [removed: sterilization or] [added: sterilization,] supply [added: or distribution] difficulties, our business and results of operations may be adversely affected.

Although we do carry strategic inventory and maintain insurance to help mitigate the potential risk related to any [removed: related] supply disruption, there can be no assurance that such measures will be sufficient or effective.

A reduction or interruption in [added: supply, an issue in the] supply [added: chain, including issues due to the revocation of distribution facilities’ licenses,] and [removed: an] [added: our] inability to quickly develop acceptable alternative sources for such [removed: supply,] [added: supply] could adversely affect our ability to [removed: manufacture and] [added: manufacture,] distribute [added: and sell] our products in a timely or cost-effective [removed: manner, and our ability to make product sales.][added: manner.]

[added: See “—Risks Related to Legal and Regulatory Matters.”] Additionally, volatility in our costs of energy, transportation/freight, components, raw materials and other supply, manufacturing and distribution costs could adversely affect our results of operations.

Climate change (including laws or regulations passed in response thereto) could increase our costs, in particular our [added: costs of supply, energy and transportation/freight.]

Loss or damage [removed: to] [added: to, or closure of,] a manufacturing facility or storage site due to a natural disaster, such as we experienced as a result of Hurricane Maria, [added: a pandemic, such as COVID-19,] or otherwise could adversely affect our ability to manufacture sufficient quantities of key products or deliver products to meet customer demand or contractual [removed: requirements] [added: requirements,] which may result in a loss of revenue and other adverse business consequences (including those identified in the paragraphs above).

Because of the time required to approve and license a manufacturing facility, a [removed: third party] [added: third-party] manufacturer may not be available on a timely basis (if at all) to replace production capacity in the event we lose manufacturing capacity or products are otherwise unavailable.

We [removed: increasingly] rely upon [added: information] technology systems and infrastructure, including support provided by our partners and third parties, to support our business, our products and our customers.

We are required to comply with increasingly complex and changing legal and regulatory requirements that govern the collection, use, storage, security, transfer, disclosure and other processing of personal data in the United States and in other countries, including, but not limited to, The Health Insurance Portability and Accountability Act, as [removed: amended,] [added: amended (HIPAA),] The Health Information Technology for Economic and Clinical Health [removed: Act (HIPAA),] [added: Act,] the California Consumer Privacy Act (CCPA), and the European Union’s General Data Protection Regulation (GDPR).

[added: HIPAA also imposes] stringent data privacy and security requirements and the regulatory authority has imposed significant fines and penalties on organizations found to be out of compliance.

The [removed: increasing use and] [added: continuing] evolution of [removed: technology,] [added: technology we use,] including cloud-based computing, and reliance on third parties creates additional opportunities for the unintentional, intentional and/or unauthorized exposure, dissemination and/or destruction of Confidential Information stored in our devices, systems, servers, infrastructure and products (collectively, Technology).

Our Technology [removed: (and that of third parties that we use)] is vulnerable to breakdown, interruption, cyber and other security attacks, system malfunction, unauthorized access, inadvertent exposure or disclosure of information, theft and other events.

We have, like other large multi-national companies, experienced cyber incidents in the past and may experience them in the [removed: future.][added: future, which have exposed and may continue to expose vulnerabilities in our information technology systems.]

Although the prior incidents have not had a material effect on our business and we have invested and continue to invest in the protection of data and Technology, there can be no assurance that our efforts will prevent breakdowns, attacks, breaches in our Technology, cyber incidents or other incidents or ensure compliance with all applicable security and privacy laws, regulations and standards, including with respect to [removed: third party] [added: third-party] service providers that host or process Confidential Information on our behalf.

We could also suffer strained relationships with [removed: customers and] [added: customers,] business partners, [added: physicians and other healthcare professionals,] increased costs (for security measures, remediation or otherwise), litigation (including class actions and stockholder derivative actions) or other negative consequences (including a decline in stock price) from breaches, cyber and other security attacks, industrial espionage, ransomware, email or phishing scams, malware or other cyber incidents, which may compromise our system infrastructure or lead to data leakage, either internally or at our third-party providers or other business partners.

We identified certain misstatements to our previously issued financial statements and have restated the financial statements described [removed: below,] [added: below (the “restatement”),] which has exposed us to a number of additional risks and uncertainties.

[removed: We concluded that these previous periods should be] [added: As discussed in the Explanatory Note, in Note 2, Restatement of Previously Issued Consolidated Financial Statements, and in Note 19, Quarterly Financial Data (Unaudited) in our 2019 Annual Report on Form 10-K, we] restated [added: certain of our previously issued audited and unaudited consolidated financial statements and selected financial information] to correct misstatements of certain foreign exchange gains and losses from foreign currency denominated intra-company loan receivables and payables, cash balances and gains and losses from foreign currency derivative contracts, which we determined were material to these periods.

As a result of the misstatements and the restatement, we have become subject to [removed: a number of] additional risks and uncertainties and [removed: unanticipated costs for accounting, legal and other fees and expenses,] [added: costs,] including as a result of a [added: pending class-action lawsuit and a stockholder request for inspection of our books and records.]

We are subject to a number of [removed: existing] laws and regulations, non-compliance with which could adversely affect our business, financial condition and results of operations, and we are susceptible to a changing regulatory environment.

[removed: The impact of this on us is direct to] the extent we are subject to these laws and regulations, and indirect in that in a number of situations, even though we may not be directly regulated by specific healthcare laws and regulations, our products must be capable of being used by our customers in a manner that complies with those laws and regulations.

The same testing and procedures sometimes apply to current products that are up for authorization or renewal or are subject to changes in laws or regulations (for example certain of our medical devices will have to comply with the new European Union Medical Device [removed: Regulation).][added: Regulation when it enters into force in May 2021).]

The DOJ and the [removed: Securities and Exchange Commission] [added: SEC] have also increased their focus on the enforcement of the U.S. Foreign Corrupt Practices Act (FCPA), particularly as it relates to the conduct of pharmaceutical and medical product companies.

The laws and standards governing the promotion, pricing, sale and reimbursement of our products and those governing our relationships with healthcare providers and governments, including the Sunshine Act enacted under the Patient [added: Protection and Affordable Care Act (as amended, the PPACA), can be complicated, are subject to frequent change and may be violated unknowingly.]

[removed: From time to time,] certain of our subsidiaries have limited business dealings with countries subject to these sanctions, including Iran, Sudan, Syria, Russia and Cuba.

Violations or allegations of violations of these laws may result in large civil and criminal penalties, debarment [added: or exclusion] from participating in government programs, diversion of management time, attention and resources and may otherwise have an adverse effect on our business, financial condition and results of operations.

For more information related to our ongoing government investigations, please refer to Note [removed: 9] [added: 7] in Item 8 of this Annual Report on Form 10-K.

The laws and regulations discussed above are broad in scope and subject to evolving interpretations, which could require us to incur substantial [removed: cost] [added: costs] associated with compliance or to alter one or more of our sales and marketing practices and may subject us to enforcement actions or litigation which could adversely affect our business, financial condition and results of operations.

Following [removed: an] [added: a 2019] executive order from [added: former] President Donald Trump, the U.S. Department of Health and Human Services announced the launch of a new kidney health initiative.

[removed: Proposed] [added: These proposed] regulatory changes in kidney health policy and reimbursement may substantially change the U.S. end stage renal disease market and could [removed: impact] [added: increase] demand for our peritoneal dialysis products, necessitating significant multi-year capital [removed: expenditures.][added: expenditures in order to meet that demand.]

[removed: Any such changes and] [added: However,] the [removed: corresponding] impact [added: of such changes] and related expenses are difficult to estimate in advance.

If our competitors develop more effective or affordable [removed: products,] [added: products] or achieve earlier patent protection or product commercialization than we do, our business, financial condition and operations will likely be negatively affected.

Certain of these activities are subject to antitrust and competition laws, which laws could impact our ability to pursue strategic transactions and could result in mandated divestitures [added: in the context of proposed acquisitions.]

Risks Related to the COVID-19 Pandemic

The effects of the COVID-19 pandemic have had, and we expect will continue to have, a material adverse effect on our business.

The nature and extent of future impacts are uncertain and unpredictable.

These measures have led to unprecedented restrictions on, disruptions in, and other related impacts on businesses and personal activities.

In addition to travel restrictions put in place in early 2020, governments have closed borders, imposed prolonged quarantines and may continue those measures or implement other restrictions and requirements in light of the continuing spread of the pandemic.

We expect that these evolving restrictions and requirements, as well as the corresponding need to adapt to new methods of conducting business remotely, will continue to have an adverse effect on our business.

Risks associated with COVID-19 include, but are not limited to, the following:

patients.

Some of our products are particularly sensitive to reductions in elective medical procedures, and, as hospital systems prioritize treatment of COVID-19 patients and otherwise comply with government guidelines, many of those procedures have been suspended or postponed in our principal markets.

In the second, third and fourth quarters of 2020, this resulted in lower levels of general hospital admissions and elective surgery volumes in those markets, which negatively impacted the demand for certain of our products.

It is not possible to predict the timing of a broad resumption of elective medical procedures.

If patients and hospital systems continue to de-prioritize, delay or cancel these procedures, our business, financial condition and results of operations would continue to be negatively affected.

- A significant number of our suppliers, manufacturers, distributors and vendors have been adversely affected by the COVID-19 pandemic, including with respect to the ability of their employees to get to their places of work and maintain the continuity of their on-site operations.

These impacts could impair our ability to move our products through distribution channels to end customers.

Any delay or shortage in the supply of components or materials or other operational or logistical challenges may result in our inability to satisfy consumer demand for our products in a timely manner or at all, which could harm our reputation, future sales and profitability.

For example, we have experienced and expect to continue to experience supply constraints for amino acid raw materials used in our parenteral nutrition products, as such materials are also being used to produce COVID-19 vaccines.

- We could experience a loss of sales and profitability due to delayed payments, reduced demand or insolvency of healthcare professionals, hospitals and other customers, and suppliers and vendors facing liquidity or other financial issues.

These liquidity or other financial issues could be exacerbated if prolonged high levels of unemployment or loss of insurance coverage impact patients’ ability to access treatments that use our products and services.

- COVID-19 could adversely impact our ability to retain key employees and the continued service and availability of skilled personnel necessary to run our operations, including members of our management, as well as the ability of our suppliers, manufacturers, distributors and vendors to retain their key employees.

To the extent our management or other personnel are impacted in significant numbers by COVID-19 and are not available to perform their professional duties, we could experience delays in, or the suspension of, our manufacturing operations, research and development activities and other functions.

- We face increased operational challenges as we continue to take measures to support and protect employee health and safety, including through office closures and work from home policies.

For example, remote working arrangements heighten our risks associated with information technology systems and networks, including cyber-attacks, computer viruses, malicious software, security breaches, and telecommunication failures, both for systems and networks we control directly and for those that employees and third-party developers rely on to work remotely.

Any failure to prevent or mitigate security breaches or cyber risks or detect, or respond adequately to, a security breach or cyber risk, or any other disruptions to our information technology systems and networks (as a result of remote working arrangements or otherwise), can have adverse effects on our business and cause reputational and financial harm.

These risks are particularly heightened due to COVID‑19 as cybercriminals attempt to profit from the disruptions caused by the uncertain environment.

- COVID-19 and related impacts have affected and may further affect the global economy and capital markets worldwide, which, among other consequences, may restrict our access to capital, increase financing costs, adversely affect our liquidity, the perceptions of our creditworthiness, and our ability to complete acquisitions, and increase volatility in foreign currency exchange rates.

The extent of the impact from the pandemic depends on future developments that cannot be predicted at this time, such as the severity and duration of the pandemic (including of related resurgences and future mutations or outbreaks of related strains of the virus); the extent and effectiveness of containment efforts, including the effectiveness and acceptance of any vaccines for COVID-19; and the direct and indirect impact of the pandemic on our employees, customers, counterparties, service providers and regulators, as well as other market participants.

Finally, to the extent COVID-19 adversely affects our operations and global economic conditions more generally, many of the other risks described in this “Risk Factors” section may be heightened.

Risks Related to Our Ability to Grow Our Business

For example, as hospital systems prioritized treatment of COVID-19 patients, elective medical procedures were suspended or postponed in our principal markets, which negatively impacted demand for certain products.

New or unintended uses of our product (for example, in response to COVID-19 or changing clinical practice) may also raise quality or safety issues.

healthcare industry can be intense.

Risks Related to Our Business Operations

Moreover, changes in regulation, world trade policies, international taxes and government-to-government relations and issues with export and import activities could negatively impact our ability to distribute products within a country and across countries.

Breaches and breakdowns affecting our information technology systems or protected data, including from cyber security breaches and data leakage, could have a material adverse effect on our business, results of operations, financial condition, cash flows, reputation and competitive position.

Some of our products, even though not internet enabled nor connected to our systems, connect to hospital networks, electronic medical records or electronic health records.

Third-party systems that we rely upon could also become vulnerable to the same risks and may contain defects in design or manufacture or other problems that could result in system disruption or compromise the information security of our own systems.

See “—Risks Related to Legal and Regulatory Matters.” As the FDA, other regulators and our customers become more sensitive to risks related to cybersecurity, our ability to meet certain information technology safety standards could affect our products’ marketability and competitiveness.

Further, a greater number of our employees are working remotely in response to the COVID-19 pandemic and related government actions, which (among other things) could

expose us to greater risks related to cybersecurity and our information technology systems.

On January 31, 2020, the United Kingdom (UK) formally left the European Union (EU) (commonly known as Brexit) when the UK-EU Withdrawal Agreement became effective.

costs of supply, energy and transportation/freight.

Our manufacturing capacity may also be adversely affected by public health crises and epidemics/pandemics, such as the novel strain of coronavirus (COVID-19), as a result of which we may be unable to obtain sufficient components or raw materials on a timely basis or at a cost-effective price.

Although we have not experienced significant manufacturing or supply difficulties as a result of COVID-19, the degree and duration of disruptions to business activity are unknown at this time.

We are increasingly dependent on information technology systems and subject to privacy and security laws, and our systems and infrastructure face certain risks, including from cyber security breaches and data leakage.

Additionally, the legal and regulatory environment surrounding information security and privacy is increasingly demanding, with the imposition of new and changing requirements across businesses.

HIPAA also imposes

As discussed in the Explanatory Note, in Note 2, Restatement of Previously Issued Consolidated Financial Statements, and in Note 19, Quarterly Financial Data (Unaudited) in this Annual Report on Form 10-K, we restated our previously issued audited consolidated financial statements as of December 31, 2018 and for the years ended December 31, 2018 and 2017, unaudited interim financial information as of and for the quarterly periods ended June 30, 2019, March 31, 2019, December 31, 2018, June 30, 2018 and March 31, 2018, for the six months ended June 30, 2019 and 2018, and as of September 30, 2018 within the notes to the financial statements, and unaudited selected financial data as of December 31, 2017 and as of and for the years ended December 31, 2016 and 2015 within Item 6, Selected Financial Data.

In our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2019, we also restated our unaudited financial statements for the quarterly and year-to-date periods ended September 30, 2018.

The restatement also included corrections for certain items, including items that affect operating income and operating cash flows, that were immaterial, individually and in the aggregate, to our previously issued financial statements.

pending class-action lawsuit and a stockholder request for inspection of our books and records.

We identified a material weakness in our internal control over financial reporting.

If we are unable to remediate the material weakness, or if we experience additional material weaknesses in the future, our business may be harmed.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting and for evaluating and reporting on the effectiveness of our system of internal control.

Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. GAAP.

As a public company, we are required to comply with the Sarbanes-Oxley Act and other rules that govern public companies.

In particular, we are required to certify our compliance with Section 404 of the Sarbanes-Oxley Act, which requires us to furnish annually a report by management on the effectiveness of our internal control over financial reporting.

In addition, our independent registered public accounting firm is required to report on the effectiveness of our internal control over financial reporting.

Management performed an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2019 and concluded that our internal control over financial reporting was not effective as of December 31, 2019 due to the material weakness related to the accounting for certain foreign exchange gains and losses.

Specifically, we did not have controls in place to monitor and quantify the difference between the foreign exchange gains and losses that we reported and the foreign exchange gains and losses that we would have reported using exchange rates determined in accordance with U.S. GAAP.

Additionally, our policies and controls related to approvals and monitoring of intra-company transactions were insufficient to prevent or detect intra-company transactions undertaken solely for the purpose of generating foreign exchange gains or avoiding losses under our historical exchange rate convention.

We have taken and continue to take remedial steps to improve our internal control over financial reporting.

For further discussion of the material weakness identified and our remedial efforts, see Item 9A, Controls and Procedures.

Remediation efforts place a significant burden on management and add increased pressure to our financial resources and processes.

If we are unable to successfully remediate our existing material weakness or any additional material weaknesses in our internal control over financial reporting that may be identified in the future in a timely manner, the accuracy and timing of our financial reporting may be adversely affected; our liquidity, our access to capital markets, the perceptions of our creditworthiness and our ability to complete acquisitions may be adversely affected; we may be unable to maintain or regain compliance with applicable securities laws, the listing requirements of the New York Stock Exchange and the covenants under our debt instruments or derivative arrangements regarding the timely filing of periodic reports; we may be subject to regulatory investigations and penalties; investors may lose confidence in our financial reporting; our reputation may be harmed; we may suffer defaults, accelerations or cross-accelerations under our debt instruments or derivative arrangements to the extent we are unable to obtain additional waivers from the required creditors or counterparties or are unable to cure any breaches; and our stock price may decline.

Our failure to prepare and timely file our periodic reports with the SEC limits our access to the public markets to raise debt or equity capital.

We did not file our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2019 within the timeframe required by the SEC; thus, we have not remained current in our reporting requirements with the SEC.

Although we regained status as a current filer on March 17, 2020 by filing this Annual Report on Form 10-K (within

the extended time period provided for by Rule 12b-25) and our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2019, we are not currently eligible to use a registration statement on Form S-3 that would allow us to continuously incorporate by reference our SEC reports into the registration statement, or to use “shelf” registration statements to conduct offerings, until approximately one year from the date we regained and maintain status as a current filer.

If we wish to pursue an offering now, we would be required to conduct the offering on an exempt basis, such as in accordance with Rule 144A, or file a registration statement on Form S-1.

Using a Form S-1 registration statement for a public offering would likely take significantly longer than using a registration statement on Form S-3 and increase our transaction costs, and could, to the extent we are not able to conduct offerings using alternative methods, adversely impact our ability to raise capital or complete acquisitions of other companies in a timely manner.

Protection and Affordable Care Act (as amended, the PPACA), can be complicated, are subject to frequent change and may be violated unknowingly.

The eventual impact of the current U.S. presidential administration on coverage, reimbursement and other matters related to the PPACA and/or healthcare reform in general, remains uncertain.

in the context of proposed acquisitions.

The United Kingdom’s (UK) withdrawal from the European Union (EU) (commonly known as Brexit) effective January 31, 2020 and subsequent transition period through December 31, 2020 continues to create uncertainties affecting business operations in the EU.

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

For example, elective surgeries are being de-prioritized which will negatively impact the usage of certain of our products, while other of our products are experiencing an increase in demand which we may not be able to meet in accordance with the customer’s desired timing.

In addition to existing travel restrictions, countries may close borders, impose prolonged quarantines, and further restrict travel, which may significantly impact the ability of our employees to get to their places of work to produce products, or may significantly hamper our products from moving through the supply chain.

As a result, while the financial impact on us has not been significant to date, given the rapid and evolving nature of the virus, COVID-19 could negatively affect our sales, and it is uncertain how COVID-19 will affect our global operations generally if these impacts persist or exacerbate over an extended period of time.

For further discussion, see the risk factor entitled “—If we are unable to obtain sufficient components or raw materials on a timely basis or for a cost-effective price or if we experience other manufacturing, sterilization or supply difficulties, our business and results of operations may be adversely affected.”

Since the spin-off of Baxalta, we have been executing on plans to enhance profitability and returns for our stockholders.

For financial information about our segments, see Note [removed: 18] [added: 16] in Item 8 of this Annual Report on Form 10-K.

In October 2019, we acquired 100 percent of Cheetah Medical, Inc. (Cheetah) for total [removed: upfront] cash consideration of [removed: $195] [added: $188] million, net of cash acquired, with the potential for additional cash consideration, up to $40 million, based on clinical and commercial milestones for which the acquisition date fair value was $18 million.

Refer to Note [removed: 4] [added: 2] in Item 8 of this Annual Report on Form 10-K for additional information regarding the acquisition of Cheetah.

Refer to Note [removed: 4] [added: 2] in Item 8 of this Annual Report on Form 10-K for additional information regarding the acquisition of the [removed: RECOTHROM] [added: Recothrom] and [removed: PREVELEAK] [added: Preveleak] products.

Refer to Note [removed: 4] [added: 2] in Item 8 of this Annual Report on Form 10-K for additional information regarding the acquisition of [removed: Claris.][added: Seprafilm.]

Our global net sales totaled [removed: $11.4] [added: $11.7] billion in [removed: 2019,] [added: 2020,] an increase of [removed: 2%] [added: 3%] over [removed: 2018] [added: 2019] on [added: both] a reported [removed: basis] and [removed: 5% on a] constant currency basis.

International sales totaled [removed: $6.5] [added: $6.8] billion in [removed: 2019,] [added: 2020,] an increase of [removed: 3%] [added: 4%] compared to [removed: 2018] [added: 2019] on a reported basis and [removed: 7%] [added: 5%] on a constant currency basis.

Sales in the United States totaled [removed: $4.8] [added: $4.9] billion in [removed: 2019,] [added: 2020,] an increase of [removed: 2%] [added: 1%] compared to [removed: 2018.][added: 2019.]

Our income from continuing operations totaled [removed: $1.0] [added: $1.1] billion, or [removed: $1.93] [added: $2.13] per diluted share, in [removed: 2019.][added: 2020.]

Income from continuing operations in [removed: 2019] [added: 2020] included special items which resulted in a net decrease to income from continuing operations of [removed: $716] [added: $495] million, or [removed: $1.38] [added: $0.96] per diluted share.

Our financial results included R&D expenses totaling [removed: $595] [added: $521] million in [removed: 2019,] [added: 2020,] which reflects our focus on balancing [removed: increased] investments to support our new product pipeline with efforts to optimize overall R&D spending.

Our financial position remains strong, with operating cash flows from continuing operations totaling [removed: $2.1] [added: $1.9] billion in [removed: 2019.][added: 2020.]

Capital expenditures totaled [removed: $696] [added: $709] million in [removed: 2019] [added: 2020] as we continue to invest across our businesses to support future growth, including additional investments in support of new and existing product capacity expansions.

Our investments in capital expenditures in [removed: 2019] [added: 2020] were focused on projects that improve production efficiency and enhance manufacturing capabilities to support our strategy of geographic expansion with select investments in growing markets.

During [removed: 2019,] [added: 2020,] we paid cash dividends to our stockholders totaling [removed: $423] [added: $473] million.

Additionally, in [removed: 2019] [added: 2020] we repurchased [removed: 16.5] [added: 6.3] million shares through cash repurchases pursuant to [added: a] Rule 10b5-1 repurchase [removed: plans, an accelerated share repurchase plan and otherwise.][added: plan.]

For information on our share repurchase plans, see Note [removed: 10] [added: 8] in Item 8 of this Annual Report on Form 10-K.

As part of our portfolio management strategy, we seek to optimize our position in product areas where we have a stable, profitable business model, identify and alter investments in products that have reached the end of their life [removed: cycles or for which market positions have evolved unfavorably.]

As part of this strategy, we are shifting our investments to drive innovation in product areas where we have compelling opportunities to serve patients and healthcare professionals while advancing [removed: the] [added: our] business and we are accelerating the pace in which we bring these advances to market.

Throughout [removed: 2019,] [added: 2020,] we continued to implement a range of water conservation strategies and facility-based energy saving initiatives.

Additionally, we [removed: developed new] [added: monitor our progress against] long-term goals to drive continued environmental stewardship while creating healthier, more sustainable communities where our employees work and live.

The following table provides a summary of our special items and the related impact by line item on our results of continuing operations for [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017.][added: 2018.]

| years ended December 31 (in millions) | | | [removed: 2019] [added: 2020] | | | [removed: 2018] [added: 2019] | | | [removed: 2017] [added: 2018] | | |

| Intangible asset amortization expense | | | $ | [removed: (183)] [added: (222)] | | $ | [removed: (169)] [added: (183)] | | $ | [removed: (154)] [added: (169)] | |

| Intangible asset impairment1 | | | [removed: (31)] [added: (17)] | | | [removed: —] [added: (31)] | | | — | | |

| Business optimization items2 | | | [removed: (69)] [added: (53)] | | | [removed: (49)] [added: (69)] | | | [removed: (53)] [added: (49)] | | |

| Product-related [removed: items4] [added: items3] | | | [removed: —] [added: (29)] | | | [removed: 6] [added: —] | | | [removed: (17)] [added: 6] | | |

| Acquisition and integration [removed: expenses5] [added: expenses4] | | | [removed: (30)] [added: (11)] | | | [removed: (27)] [added: (30)] | | | [removed: (8)] [added: (27)] | | |

| Hurricane Maria insurance [removed: recoveries (costs)7] [added: recoveries6] | | | — | | | [removed: 32] [added: —] | | | [removed: (32)] [added: 32] | | |

| European medical devices [removed: regulation8] [added: regulation7] | | | [removed: (25)] [added: (33)] | | | [removed: (6)] [added: (25)] | | | [removed: —] [added: (6)] | | |

| Total Special Items | | | $ | [removed: (338)] [added: (368)] | | $ | [removed: (221)] [added: (338)] | | $ | [removed: (265)] [added: (221)] | |

| Impact on Gross Margin Ratio | | | [removed: (3.0] [added: (3.1] pts) | | | [removed: (2.0] [added: (3.0] pts) | | | [removed: (2.5] [added: (2.0] pts) | | |

| Business optimization items2 | | | $ | [removed: 70] [added: 78] | | $ | [removed: 145] [added: 70] | | $ | [removed: 116] [added: 145] | |

| Acquisition and integration [removed: expenses5] [added: expenses4] | | | [removed: 20] [added: 9] | | | [removed: 23] [added: 20] | | | [removed: 20] [added: 23] | | |

| [removed: Investigation-related costs13] [added: Investigation and related costs8] | | | [removed: 8] [added: (3)] | | | — | | | — | | |

| Total Special Items | | | $ | [removed: 98] [added: 106] | | $ | [removed: 170] [added: 98] | | $ | [removed: 163] [added: 170] | |

| Impact on SG&A Expense Ratio | | | [removed: 0.9] [added: 1.0] pts | | | [removed: 1.5] [added: 0.9] pts | | | 1.5 pts | | |

| Business optimization items2 | | | $ | [removed: 45] [added: 3] | | $ | [removed: 26] [added: 45] | | $ | [removed: —] [added: 26] | |

| Acquisition and integration [removed: expenses5] [added: expenses4] | | | [removed: 8] [added: 22] | | | [removed: 7] [added: 8] | | | [removed: —] [added: 7] | | |

| European medical devices [removed: regulation8] [added: regulation7] | | | — | | | [removed: 3] [added: —] | | | [removed: —] [added: 3] | | |

In February 2020, we completed the acquisition of the product rights to Seprafilm Adhesion Barrier (Seprafilm) from Sanofi for approximately $342 million in cash.

Transderm Scop

In February 2021, we agreed to acquire the rights to Transderm Scop from subsidiaries of GlaxoSmithKline for an upfront purchase price of $55 million plus the cost of acquired inventory and the potential for additional cash consideration of $30 million based upon a successful technology transfer by a specified date.

We currently sell this product under a distribution license to the U.S. institutional market.

Transderm Scop is indicated for post-operative nausea and vomiting in the U.S. and motion sickness in European markets.

We expect the transaction to close late in the first quarter or early in the second quarter of 2021, subject to the satisfaction of closing conditions.

Caelyx and Doxil

In December 2020, we agreed to acquire 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 for $325 million.

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.

We expect the transaction to close late in the first quarter or early in the second quarter of 2021, subject to the satisfaction of regulatory approvals and other closing conditions.

cycles or for which market positions have evolved unfavorably.

| Litigation5 | | | — | | | — | | | (8) | | |

| Litigation5 | | | — | | | — | | | 2 | | |

| Investigation and related costs8 | | | 19 | | | 8 | | | — | | |

| Investigation and related costs8 | | | 1 | | | — | | | — | | |

| Business optimization items2 | | | $ | (17) | | $ | — | | $ | — | |

| Claris Settlement⁹ | | | — | | | — | | | (80) | | |

| Loss on debt extinguishment12 | | | 110 | | | — | | | — | | |

Additionally, we recognized a gain of $17 million in 2020 for property we sold in conjunction with our business optimization initiatives.

4Our results in 2020 included $40 million of acquisition and integration expenses related to the acquisitions of Cheetah and Seprafilm and in-process R&D assets, partially offset by a benefit related to the change in the estimated fair value of contingent consideration liabilities.

8Our results in 2020 and 2019 included charges of $23 million and $8 million, respectively, for investigation and related costs.

Additionally, we recorded incremental stock compensation expense of $8 million in 2020 as we extended the term of certain stock options that were scheduled to expire in the first quarter of 2020.

11Our results in 2020 included a charge of $43 million related to lump-sum settlement distributions made to certain former U.S. employees with vested pension benefits.

12Our results in 2020 included a loss of $110 million on the November 2020 early extinguishment of $750 million of 3.75% senior notes that were issued in March 2020.

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Foreign currency exchange rates had no net impact on 2020 net sales growth.

In 2020, the acquisition of Seprafilm contributed $94 million in revenue.

These measures have led to unprecedented restrictions on, disruptions in, and other related impacts on businesses and personal activities.

In addition to travel restrictions put in place in early

2020, governments have closed borders, imposed prolonged quarantines and may continue those measures or implement other restrictions and requirements in light of the continuing spread of the pandemic.

We expect that these evolving restrictions and requirements, as well as the corresponding need to adapt to new methods of conducting business remotely, will continue to have an adverse effect on our business.

For further discussion, refer to the Global Business Unit Net Sales Reporting section below and Item 1A of this Annual Report on Form 10-K.

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| | | | | | | | | | | | | | | | Percent change | | | | | | | | | | | | | | |

Renal Care net sales increased 3% in 2020 and were flat in 2019.

The increase in 2020 was driven by global patient growth in PD, partially offset by a 1% negative impact from foreign exchange rate changes, as compared to the prior-year period.

Restatement of Previously Issued Consolidated Financial Statements

We have restated our previously issued consolidated financial statements contained in this Annual Report on Form 10-K.

Refer to the “Explanatory Note” preceding Item 1, Business, for background on the restatement, the periods impacted, control considerations, and other information.

In addition, we have restated certain previously reported financial information as of December 31, 2018 and for the fiscal years ended December 31, 2018 and December 31, 2017 in this Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, including but not limited to information within the Results of Operations section.

See Note 2, Restatement of Previously Issued Consolidated Financial Statements, in Item 8, Financial Statements and Supplementary Data, for additional information related to the restatement, including descriptions of the misstatements and the impacts on our consolidated financial statements.

Claris Injectables Limited

In July 2017, we acquired 100 percent of Claris Injectables Limited (Claris), a wholly owned subsidiary of Claris Lifesciences Limited, for total cash consideration of approximately $629 million, net of cash acquired.

Through the acquisition, we added capabilities in production of essential generic injectable medicines, such as anesthesia and analgesics, renal, anti-infectives and critical care in a variety of presentations including bags, vials and ampoules.

In December 2019, we entered into a definitive agreement to acquire Seprafilm Adhesion Barrier (Seprafilm) from Sanofi.

The transaction closed in February 2020 and we paid approximately $345 million for the acquired assets, subject to a post-close adjustment.

As the acquisition was completed after December 31, 2019, our consolidated financial statements do not include the financial condition or results of operations of Seprafilm in any of the periods presented herein.

| Separation-related costs3 | | | — | | | — | | | (1) | | |

| Litigation and contractual disputes6 | | | — | | | (8) | | | — | | |

| Separation-related costs3 | | | — | | | — | | | 18 | | |

| Litigation and contractual disputes6 | | | — | | | 2 | | | 21 | | |

| Historical reserve adjustments9 | | | — | | | — | | | (12) | | |

| Claris Settlement10 | | | — | | | (80) | | | — | | |

| Venezuela deconsolidation12 | | | — | | | — | | | 33 | | |

3Our results in 2017 included costs related to the Baxalta separation of $19 million.

Our results in 2017 included acquisition and integration expenses of $28 million related to our acquisition of Claris.

Our results in 2017 included charges of $21 million related to litigation and contractual disputes for businesses or arrangements in which we are no longer engaged or a party thereto.

Our results in 2017 included a charge of $32 million related to the impact of Hurricane Maria on our operations in Puerto Rico.

The costs primarily included inventory and fixed asset impairments as well as idle facility costs.

9Our results in 2017 included a benefit of $12 million related to an adjustment to our historical rebates and discounts reserve.

12Our results in 2017 included a charge of $33 million related to the deconsolidation of our Venezuelan operations.

Our results in 2017 included a net tax charge of $322 million related to the estimated impact of U.S. federal tax reform on our tax related assets and liabilities.

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Changes in foreign currency exchange rates favorably impacted 2018 net sales growth by one percentage point, principally due to the weakening of the U.S dollar relative to the Euro, British Pound and Chinese Yuan, partially offset by the strengthening of the U.S. Dollar relative to the Brazilian Real, Turkish Lira and Australian Dollar.

The acquisition of Claris contributed $140 million and $57 million of revenues in 2018 and 2017, respectively.

Due to these impacts and measures, we may experience significant and unpredictable reductions or increases in demand for certain of our products as health care customers re-prioritize the treatment of patients.

For example, elective surgeries are being de-prioritized which will negatively impact the usage of certain of our products, while other of our products are experiencing an increase in demand which we may not be able to meet in accordance with the customer’s desired timing.

In addition to existing travel restrictions, countries may close borders, impose prolonged quarantines, and further restrict travel, which may significantly impact the ability of our employees to get to their places of work to produce products, or may significantly hamper our products from moving through the supply chain.

As a result, while the financial impact on us has not been significant to date, given the rapid and evolving nature of the virus, COVID-19 could negatively affect our sales, and it is uncertain how COVID-19 will affect our global operations generally if these impacts persist or exacerbate over an extended period of time.

Foreign exchange rates unfavorably impacted Renal Care net sales 3% in 2019 and favorably impacted net sales 1% in 2018, respectively.

Excluding the impact of foreign exchange rates, Renal Care net sales increased in 2019 and 2018.

The increase in 2019 was driven by global patient growth in PD, partially offset by lower U.S. in-center HD sales.

The increase in 2018 was primarily driven by global growth in the PD business as well as increased international sales in the HD business.

Foreign exchange rates unfavorably impacted Medication Delivery net sales 2% in 2019 and favorably impacted net sales 1% in 2018, respectively.

increased in 2019 and decreased in 2018.

As of December 31, [removed: 2019,] [added: 2020,] we manufactured products in over 20 countries and sold them in over 100 countries.

As used in this report, “Baxter International” means Baxter International Inc. and “we", "our” or "us" means Baxter International and its consolidated subsidiaries (after giving effect to the separation and distribution of Baxalta Incorporated [removed: (Baxalta),] [added: (Baxalta) in 2015,] as further described below), unless the context otherwise requires.

For financial information about our segments, see Note [removed: 18] [added: 16] in Item 8 of this Annual Report on Form 10-K.

Sales are made and products are distributed on a direct basis or through independent distributors or sales agents in more than 100 countries as of December 31, [removed: 2019.][added: 2020.]

For more information on these risks, see the information under the captions “Risks Related to Baxter’s Business —We are subject to risks associated with doing business globally” and [removed: “— Changes] [added: “—Changes] in foreign currency exchange rates and interest rates could have a material adverse effect on our operating results and liquidity” in Item 1A of this Annual Report on Form 10-K.

For financial information about [added: our] foreign and domestic [removed: operations] [added: revenues] and geographic [added: segment] information, see Note [removed: 18] [added: 16] in Item 8 of this Annual Report on Form 10-K.

In connection with the separation and distribution of [removed: Baxalta,] [added: Baxalta in 2015, as further described below,] we entered into a long-term manufacturing and supply agreement with Baxalta.

Our businesses benefit from a number of competitive advantages, including the breadth and depth of our product [removed: offerings,] [added: offerings and] our strong relationships with customers, including hospitals and clinics, GPOs, physicians, and patients, many of whom self-administer home-based therapies that we supply.

For more information on patent and other litigation, see Note [removed: 9] [added: 7] in Item 8 of this Annual Report on Form 10-K.

Expenditures for our R&D activities were [removed: $595] [added: $521] million in [removed: 2019, $654] [added: 2020, $595] million in [removed: 2018,] [added: 2019,] and [removed: $615] [added: $654] million in [removed: 2017.][added: 2018.]

Quality management plays an essential role in determining and meeting customer requirements, [removed: preventing] [added: helping to prevent] defects, facilitating continuous improvement of our processes, products and services, and assuring the safety and efficacy of our products.

In order to [removed: continually] [added: consistently] improve the effectiveness and efficiency of our quality system, various measurement, monitoring and analysis methods, such as management reviews and internal, external and vendor audits, are employed at local and central levels.

In 2016, we disposed of our remaining 19.5% interest in Baxalta [added: (Retained Shares)] through a series of transactions, including debt-for-equity exchanges, an equity-for-equity exchange and a contribution to our U.S. pension [removed: plan.][added: plan (Retained Shares Transactions).]

[removed: Refer] [added: For further discussion, refer] to [removed: Note 3 in] Item [removed: 8] [added: 1A] of this Annual Report on Form [removed: 10-K for additional information regarding the separation of Baxalta.][added: 10-K.]

COVID-19

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

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

These measures have led to unprecedented restrictions on, disruptions in, and other related impacts on businesses and personal activities.

In addition to travel restrictions put in place in early 2020, governments have closed borders, imposed prolonged quarantines and may continue those measures or implement other restrictions and requirements in light of the continuing spread of the pandemic.

We expect that these evolving restrictions and requirements, as well as the corresponding need to adapt to new methods of conducting business remotely, will continue to have an adverse effect on our business.

For example, we made $10 million of capital expenditures in 2020 related to a new ethylene oxide emissions control system at our Mountain Home, Arkansas facility.

The new system is expected to be completed in 2022 and we currently expect to incur an additional $40 million of capital expenditures related to this project.

Human Capital Management

As of December 31, 2020, we employed approximately 50,000 people globally, with approximately 13,000 employees in the United States and approximately 37,000 employees outside of the Unites States.

Our employees are our most important assets and set the foundation for our ability to achieve our strategic objectives.

All of our employees contribute to our success and, in particular, the employees in our manufacturing, sales, R&D and quality assurance departments are instrumental in driving operational execution and strong financial performance, advancing innovation and maintaining a strong quality and compliance program.

The success and growth of our business depends in large part on our ability to attract, retain and develop a diverse population of talented and high-performing employees at all levels of our organization, including the individuals who comprise our global workforce as well as executive officers and other key personnel.

To succeed in a competitive labor market, we have developed recruitment and retention strategies, objectives and measures that we focus on as part of the overall management of our business.

These strategies, objectives and measures form our human capital management framework and are advanced through the following programs, policies and initiatives:

- Competitive Pay and Benefits.

Our compensation programs are designed to align the compensation of our employees with our performance and to provide the proper incentives to attract, retain and motivate employees to achieve superior results.

The structure of our compensation programs balances incentive earnings for both short-term and long-term performance.

- Activating Change Today (ACT).

Building on our strong diversity and inclusion platform, our senior leadership is working in close collaboration with the Baxter Black Alliance business resource group and colleagues from across the company on a multidimensional program to advance inclusion and racial justice.

The ACT initiative is focused on driving results across four key areas – Workforce, Workplace, Community and Marketplace – encompassing employees, external stakeholders, and the markets and communities we serve.

- Health and Safety.

Health and safety are firmly rooted across our global footprint.

In response to the COVID-19 pandemic and related mitigation measures, we implemented changes in our business in 2020 in an effort to better protect our employees and customers, and to support appropriate health and safety protocols.

For example, we installed physical barriers between employees in production facilities, implemented extensive cleaning and sanitation processes for both production and office administration spaces and implemented broad work-from-home initiatives for employees in our administrative functions.

While our essential workers (production and field service employees) have continued to work at our facilities and provide vital service to our customers, most employees in our administrative functions have effectively

worked remotely since mid-March.

During 2020, we paid incremental non-recurring special compensation bonuses to our essential workers.

- Recruitment, Training and Development.

We use recruitment vehicles to attract diverse talent to our organization and we invest in learning opportunities that foster a growth mindset.

Our formal offerings include a tuition reimbursement program, an e-learning platform known as BaxU and virtual workshops that support our culture, strategy and the development of crucial skills.

To measure the impact of the investments we make in our people, and to help us consistently improve our human resources programs, we regularly conduct anonymous surveys of our global workforce to seek feedback on a variety of topics including confidence in our leadership, competitiveness of our compensation and benefits packages, career growth opportunities and improvements on how we can make our company an employer of choice.

Administered and analyzed by an independent third-party, the survey results are reviewed by our senior leaders, which include our executive officers.

The results of this engagement survey are also shared with individual managers, who are then tasked with taking action based on their employees’ anonymous feedback (both quantitative and qualitative).

By paying close attention to the results both at an aggregate enterprise level as well as at a department/business/work group level, we have been able to enhance our culture of respect, help educate employees more effectively about our benefits offerings as well as our learning and development opportunities and further improve our communications content, mechanisms and frequency.

Employees

As of December 31, 2019, Baxter employed approximately 50,000 people.

Incorporated by reference to Note [removed: 9] [added: 7] in Item 8 of this Annual Report on Form 10-K.

For the fiscal year ended December 31, [removed: 2019][added: 2020]

[removed: ][added: ]

| Delaware | | | | | | | | | | | | [removed: | | | | | |] 36-0781620 | | |

| (State or Other Jurisdiction of Incorporation or Organization) | | | | | | | | | | | | [removed: | | | | | |] (I.R.S. Employer Identification No.) | | |

| One Baxter Parkway, | | | Deerfield, | | | Illinois | | | [removed: | | |] 60015 | | | | | | [removed: | | |]

| (Address of Principal Executive Offices) | | | | | | | | | [removed: | | | | | |] [added: (Zip Code)] | | | [removed: (Zip Code)] | | |

The aggregate market value of the voting common equity held by non-affiliates of the registrant as of June [removed: 28, 2019] [added: 30, 2020] (the last business day of the registrant’s most recently completed second fiscal quarter), based on the per share closing sale price of [removed: $81.90] [added: $86.10] on that date and the assumption for the purpose of this computation only that all of the registrant’s directors and executive officers are affiliates, was approximately [removed: $42] [added: $44] billion.

The number of shares of the registrant’s common stock, $1.00 par value, outstanding as of [removed: February] [added: January] 29, [removed: 2020] [added: 2021] was [removed: 507,263,731.][added: 505,103,894.]

Portions of the registrant’s definitive [removed: 2020] [added: 2021] proxy statement for use in connection with its Annual Meeting of Stockholders expected to be held on May [removed: 5, 2020] [added: 4, 2021] are incorporated by reference into Part III of this report.

| [Item [removed: 1.](#i9886386820ea4ce3bad9bbc3bc752006_10)] [added: 1.](#id032277b8ada47a996ec6f4e6a1e7e29_10)] | | | [removed: [Business](#i9886386820ea4ce3bad9bbc3bc752006_10)] [added: [Business](#id032277b8ada47a996ec6f4e6a1e7e29_10)] | | | [removed: [1](#i9886386820ea4ce3bad9bbc3bc752006_10)] [added: [1](#id032277b8ada47a996ec6f4e6a1e7e29_10)] | | |

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| [Item [removed: 1B.](#i9886386820ea4ce3bad9bbc3bc752006_16)] [added: 1B.](#id032277b8ada47a996ec6f4e6a1e7e29_16)] | | | [Unresolved Staff [removed: Comments](#i9886386820ea4ce3bad9bbc3bc752006_16)] [added: Comments](#id032277b8ada47a996ec6f4e6a1e7e29_16)] | | | [removed: [18](#i9886386820ea4ce3bad9bbc3bc752006_16)] [added: [20](#id032277b8ada47a996ec6f4e6a1e7e29_16)] | | |

| [removed: [Item](#i9886386820ea4ce3bad9bbc3bc752006_19) [2](#i9886386820ea4ce3bad9bbc3bc752006_19)[.](#i9886386820ea4ce3bad9bbc3bc752006_19)] [added: [Item 2.](#id032277b8ada47a996ec6f4e6a1e7e29_19)] | | | [removed: [Properties](#i9886386820ea4ce3bad9bbc3bc752006_19)] [added: [Properties](#id032277b8ada47a996ec6f4e6a1e7e29_19)] | | | [removed: [18](#i9886386820ea4ce3bad9bbc3bc752006_19)] [added: [20](#id032277b8ada47a996ec6f4e6a1e7e29_19)] | | |

| [Item [removed: 3.](#i9886386820ea4ce3bad9bbc3bc752006_22)] [added: 3.](#id032277b8ada47a996ec6f4e6a1e7e29_22)] | | | [Legal [removed: Proceedings](#i9886386820ea4ce3bad9bbc3bc752006_22)] [added: Proceedings](#id032277b8ada47a996ec6f4e6a1e7e29_22)] | | | [removed: [20](#i9886386820ea4ce3bad9bbc3bc752006_22)] [added: [22](#id032277b8ada47a996ec6f4e6a1e7e29_22)] | | |

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| [Item [removed: 9B.](#i9886386820ea4ce3bad9bbc3bc752006_184)] [added: 9B.](#id032277b8ada47a996ec6f4e6a1e7e29_193)] | | | [Other [removed: Information](#i9886386820ea4ce3bad9bbc3bc752006_184)] [added: Information](#id032277b8ada47a996ec6f4e6a1e7e29_193)] | | | [removed: [178](#i9886386820ea4ce3bad9bbc3bc752006_184)] [added: [108](#id032277b8ada47a996ec6f4e6a1e7e29_193)] | | |

| [Item [removed: 10.](#i9886386820ea4ce3bad9bbc3bc752006_187)] [added: 10.](#id032277b8ada47a996ec6f4e6a1e7e29_196)] | | | [Directors, Executive Officers and Corporate [removed: Governance](#i9886386820ea4ce3bad9bbc3bc752006_187)] [added: Governance](#id032277b8ada47a996ec6f4e6a1e7e29_196)] | | | [removed: [179](#i9886386820ea4ce3bad9bbc3bc752006_187)] [added: [108](#id032277b8ada47a996ec6f4e6a1e7e29_196)] | | |

| [Item [removed: 11.](#i9886386820ea4ce3bad9bbc3bc752006_190)] [added: 11.](#id032277b8ada47a996ec6f4e6a1e7e29_199)] | | | [Executive [removed: Compensation](#i9886386820ea4ce3bad9bbc3bc752006_190)] [added: Compensation](#id032277b8ada47a996ec6f4e6a1e7e29_199)] | | | [removed: [179](#i9886386820ea4ce3bad9bbc3bc752006_190)] [added: [108](#id032277b8ada47a996ec6f4e6a1e7e29_199)] | | |

| [Item [removed: 12.](#i9886386820ea4ce3bad9bbc3bc752006_193)] [added: 12.](#id032277b8ada47a996ec6f4e6a1e7e29_202)] | | | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#i9886386820ea4ce3bad9bbc3bc752006_193)] [added: Matters](#id032277b8ada47a996ec6f4e6a1e7e29_202)] | | | [removed: [179](#i9886386820ea4ce3bad9bbc3bc752006_193)] [added: [109](#id032277b8ada47a996ec6f4e6a1e7e29_202)] | | |

| [Item [removed: 13.](#i9886386820ea4ce3bad9bbc3bc752006_196)] [added: 13.](#id032277b8ada47a996ec6f4e6a1e7e29_205)] | | | [Certain Relationships and Related Transactions, and Director [removed: Independence](#i9886386820ea4ce3bad9bbc3bc752006_196)] [added: Independence](#id032277b8ada47a996ec6f4e6a1e7e29_205)] | | | [removed: [180](#i9886386820ea4ce3bad9bbc3bc752006_196)] [added: [109](#id032277b8ada47a996ec6f4e6a1e7e29_205)] | | |

| [Item [removed: 14.](#i9886386820ea4ce3bad9bbc3bc752006_199)] [added: 14.](#id032277b8ada47a996ec6f4e6a1e7e29_208)] | | | [Principal Accountant Fees and [removed: Services](#i9886386820ea4ce3bad9bbc3bc752006_199)] [added: Services](#id032277b8ada47a996ec6f4e6a1e7e29_208)] | | | [removed: [180](#i9886386820ea4ce3bad9bbc3bc752006_199)] [added: [109](#id032277b8ada47a996ec6f4e6a1e7e29_208)] | | |

| [Item [removed: 15.](#i9886386820ea4ce3bad9bbc3bc752006_202)] [added: 15.](#id032277b8ada47a996ec6f4e6a1e7e29_211)] | | | [Exhibits and Financial Statement [removed: Schedules](#i9886386820ea4ce3bad9bbc3bc752006_202)] [added: Schedules](#id032277b8ada47a996ec6f4e6a1e7e29_211)] | | | [removed: [180](#i9886386820ea4ce3bad9bbc3bc752006_202)] [added: [110](#id032277b8ada47a996ec6f4e6a1e7e29_211)] | | |

| [Item [removed: 16.](#i9886386820ea4ce3bad9bbc3bc752006_205)] [added: 16.](#id032277b8ada47a996ec6f4e6a1e7e29_214)] | | | [Form 10-K [removed: Summary](#i9886386820ea4ce3bad9bbc3bc752006_205)] [added: Summary](#id032277b8ada47a996ec6f4e6a1e7e29_214)] | | | [removed: [181](#i9886386820ea4ce3bad9bbc3bc752006_205)] [added: [110](#id032277b8ada47a996ec6f4e6a1e7e29_214)] | | |

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Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

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Explanatory Note

General

On February 13, 2020, we concluded, in consultation with the Audit Committee of our Board of Directors, that our consolidated financial statements as of December 31, 2018 and 2017, for the years ended December 31, 2018, 2017 and 2016, as of and for the interim periods within the years ended December 31, 2018 and 2017 and the interim periods ended June 30 and March 31, 2019 should no longer be relied upon because of misstatements to our previously reported foreign exchange gains and losses as described below.

Restatement

This Annual Report on Form 10-K for the year ended December 31, 2019 includes the following restated financial information:

- audited consolidated financial statements as of December 31, 2018 and for the years ended December 31, 2018 and 2017;

- unaudited interim financial information as of and for the quarterly periods ended June 30, 2019, March 31, 2019, June 30, 2018, and March 31, 2018, for the quarterly period ended December 31, 2018, for the six months ended June 30, 2019 and 2018, and as of September 30, 2018; and

- unaudited selected financial data as of December 31, 2017 and as of and for the years ended December 31, 2016 and 2015.

Selected financial data as of December 31, 2018 and for the years ended December 31, 2018 and 2017 is derived from our audited consolidated financial statements included in this Annual Report on Form 10-K.

Refer to our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2019, filed on March 17, 2020, for our unaudited restated interim financial statements for the three and nine months ended September 30, 2018 and related information.

Restatement Background

On October 24, 2019, we reported that we had commenced an internal investigation into certain intra-company transactions that impacted our previously reported non-operating foreign exchange gains and losses.

Our internal investigation, as it pertains to the evaluation of related financial statement impacts, is complete.

We previously had applied a longstanding convention for the initial measurement of foreign exchange transactions and the subsequent remeasurement of foreign currency denominated monetary assets and liabilities that was not consistent with U.S. Generally Accepted Accounting Principles (U.S. GAAP).

Beginning years after the adoption of that convention, certain intra-company transactions were undertaken, after the related exchange rates were already known, solely for the purpose of generating non-operating foreign exchange gains or avoiding foreign exchange losses.

We believe that the use of our previous exchange rate convention to generate non-operating foreign exchange gains and avoid losses had occurred for at least ten years.

The cumulative impact of correcting misstatements of non-operating foreign exchange gains and losses in periods prior to 2017 has been recorded as a reduction to our opening retained earnings in the consolidated financial statements included herein.

As previously disclosed, we voluntarily advised the staff of the Securities and Exchange Commission (SEC) of our internal investigation and are continuing to cooperate with the staff of the SEC.

Restatement of Previously Issued Consolidated Financial Statements

As described above, this Annual Report on Form 10-K includes audited restated financial statements as of December 31, 2018 and for the years ended December 31, 2018 and 2017.

In addition to the correction of misstatements related to non-operating foreign exchange gains and losses, we corrected additional misstatements that were immaterial, individually and in the aggregate, to our previously issued financial statements.

Those other immaterial misstatements relate to (i) equipment leased to customers under operating leases, (ii) classification of foreign exchange gains and losses on cash balances and intra-company receivables and payables in our consolidated statements of cash flows, (iii) translation of the financial position and results of operations of our foreign operations into U.S. dollars, (iv) statement of income classification of transition services income related to the separation of Baxalta Incorporated in 2015 and (v) other miscellaneous adjustments.

See Note 2, Restatement of Previously Issued Consolidated Financial Statements, in Item 8, Financial Statements and Supplementary Data, for additional information.

Unaudited interim financial information as of and for the quarterly periods ended June 30, 2019, March 31, 2019, June 30, 2018, and March 31, 2018, for the quarterly period ended December 31, 2018, for the six months ended June 30, 2019 and 2018, and as of September 30, 2018 has also been restated.

See Note 19, Quarterly Financial Data (Unaudited), in Item 8, Financial Statements and Supplementary Data, for additional information.

The restatement resulted in the following decreases to our previously reported income from continuing operations and diluted earnings per share from continuing operations (in millions, except per share data):

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| | | | | | | Six months ended June 30, 2019 | | | Year ended December 31, 2018 | | | Year ended December 31, 2017 | | | | | |

| Income from continuing operations | | | | | | | | | $ | (35) | | $ | (78) | | $ | (115) | |

| Diluted earnings per share from continuing operations | | | | | | | | | $ | (0.07) | | $ | (0.15) | | $ | (0.20) | |

Control Considerations

In connection with the restatement, management has reassessed its conclusions regarding the effectiveness of our internal control over financial reporting as of December 31, 2018 and has determined that a material weakness in our internal control over financial reporting existed as of that date.

As a result of the material weakness, our disclosure controls and procedures were not effective as of December 31, 2018 and throughout 2019.

Management has been implementing changes to strengthen our internal controls and remediate the material weakness, which continued to exist as of December 31, 2019.

See Item 9A, Controls and Procedures, for additional information related to the material weakness in internal control over financial reporting and our related remediation activities.

| | | | Tel Aviv, Israel | | | Leased | | |

As of [removed: March 17, 2020,] [added: February 11, 2021,] the following serve as Baxter’s executive officers:

Almeida*, age [removed: 57,] [added: 58,] is Chairman, President and Chief Executive Officer, having served in that capacity since January 2016.

*Giuseppe Accogli*, age [removed: 49,] [added: 50,] is Senior Vice President and President, Americas.

*Cristiano Franzi*, age [removed: 57,] [added: 58,] is Senior Vice President and President, EMEA.

*Andrew Frye*, age [removed: 54,] [added: 55,] is Senior Vice President and President, APAC.

*Jacqueline Kunzler*, [added: Ph.D.,] age [removed: 54,] [added: 55,] is Senior Vice President and Chief Quality Officer.

*Sean Martin*, age [removed: 57,] [added: 58,] is Senior Vice President and General Counsel.

Mason*, Ph.D., age [removed: 64,] [added: 65,] is Senior Vice President, Human Resources.

Saccaro*, age [removed: 47,] [added: 48,] is Executive Vice President and Chief Financial Officer.

*James Borzi*, age 58, is Senior Vice President, Chief Supply Chain Officer.

He joined Baxter in August 2020 from GE Healthcare, where he served as Vice President, Chief Supply Chain Officer from 2019 to 2020.

Prior to joining GE Healthcare, he spent five years with Becton Dickinson (BD) in various manufacturing operations leadership roles; his last role with BD was Executive Vice President of Global Operations and Chief Supply Chain Officer.

Earlier in his career, he was Senior Vice President of Operations & Technology at Hydro Aluminum and Executive Vice President of Worldwide Operations at Lennox International.

Prior to that, he was the Chief Operating Officer at AEES and Senior Vice President of Americas Operations at Alcoa.

The following table includes information about our common stock repurchases during the three-month period ended December 31, [removed: 2019.][added: 2020.]

| November 1, [removed: 2019] [added: 2020] through November 30, [removed: 2019] [added: 2020] | | | — | | | | | | $ | — | | | | | — | | | | | | | | |

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

During the fourth quarter of [removed: 2019,] [added: 2020,] we repurchased approximately [removed: 2.4] [added: 6.3] million shares for [removed: $204] [added: $500] million in cash pursuant to this authority through [added: a] Rule 10b5-1 purchase [removed: plans.][added: plan.]

The remaining authorization under this program totaled approximately [removed: $897 million] [added: $1.9 billion] at December 31, [removed: 2019.][added: 2020.]

[removed: At February] [added: As of January] 29, [removed: 2020,] [added: 2021,] there were [removed: 22,818] [added: 22,017] holders of record of our common stock.

[removed: ][added: ]

Issuer Purchases of Equity Securities

| October 1, 2020 through October 31, 2020 | | | — | | | | | | $ | — | | | | | — | | | | | | | | |

| December 1, 2020 through December 31, 2020 | | | 6,343,100 | | | | | | $ | 78.85 | | | | | 6,343,100 | | | | | | | | |

| Total | | | 6,343,100 | | | | | | $ | 78.85 | | | | | 6,343,100 | | | | | | $ | 1,897,272,535 | |

Market Information and Holders of our Common Stock

| October 1, 2019 through October 31, 2019 | | | 2,369,658 | | | | | | $ | 86.02 | | | | | 2,369,658 | | | | | | | | |

| December 1, 2019 through December 31, 2019 | | | — | | | | | | $ | — | | | | | — | | | | | | | | |

| Total | | | 2,369,658 | | | | | | $ | 86.02 | | | | | 2,369,658 | | | | | | $ | 897,396,644 | |

Performance through June 30, 2015 has been adjusted for the Baxalta separation which occurred on July 1, 2015.

| | | | | | | | | | | | | | | | [removed: Unaudited] | | | [removed: | | | | | | | | |] [added: Unaudited] | | |

| as of or for the years ended December 31 | | | | | | [added: 2020] | | | [removed: 2019 2] [added: 2019¹] | | | 2018 | | | 2017 [removed: 3] | | | [removed: 2016 3,4,5 | | | 2015 6 | | | | | |] [added: 2016²] | | |

| Operating Results | | | Net sales | | | $ | [removed: 11,362 | | 11,099 | | | 10,584 | | | 10,133 |] [added: 11,673] | | [removed: 9,918] [added: 11,362] | | | [added: 11,099] | | | [added: 10,584] | | | [added: 10,133] | | |

| *(in millions)* | | | Income from continuing operations | | | $ | [removed: 1,011 | | 1,552 | | | 609 | | | 4,936 |] [added: 1,110] | | [removed: 254] [added: 1,011] | | | [added: 1,552] | | | [added: 609] | | | [added: 4,936] | | |

| | | | [removed: (Loss) income] [added: Loss] from discontinued operations, net of tax | | | $ | — | | [removed: (6) | | | (7) | | | (1) | | | 571] [added: —] | | | [added: (6)] | | | [added: (7)] | | | [added: (1)] | | |

| | | | Net income attributable to Baxter stockholders | | | $ | [removed: 1,001 | | 1,546 | | | 602 | | | 4,935 |] [added: 1,102] | | [removed: 825] [added: 1,001] | | | [added: 1,546] | | | [added: 602] | | | [added: 4,935] | | |

| | | | Earnings per share from continuing operations | | | | | | | | | | | | | | | | | | [removed: | | | | | | | | |]

| | | | Basic | | | $ | [removed: 1.97 | | 2.91 | | | 1.12 | | | 9.04 |] [added: 2.17] | | [removed: 0.47] [added: 1.97] | | | [added: 2.91] | | | [added: 1.12] | | | [added: 9.04] | | |

| | | | Diluted | | | $ | [removed: 1.93 | | 2.84 | | | 1.10 | | | 8.96 |] [added: 2.13] | | [removed: 0.46] [added: 1.93] | | | [added: 2.84] | | | [added: 1.10] | | | [added: 8.96] | | |

| | | | [removed: (Loss) earnings] [added: Loss] per share from discontinued operations | | | | | | | | | | | | | | | | | | [removed: | | | | | | | | |]

| | | | Basic | | | $ | — | | [removed: (0.01) | | | (0.01) | | |] — | | | [removed: 1.04 | | |] [added: (0.01)] | | | [added: (0.01)] | | | [added: —] | | |

| | | | Diluted | | | $ | — | | [removed: (0.01) | | | (0.02) | | |] — | | | [removed: 1.04 | | |] [added: (0.01)] | | | [added: (0.02)] | | | [added: —] | | |

| | | | Earnings per share | | | | | | | | | | | | | | | | | | [removed: | | | | | | | | |]

| | | | Basic | | | $ | [removed: 1.97 | | 2.90 | | | 1.11 | | | 9.04 |] [added: 2.17] | | [removed: 1.51] [added: 1.97] | | | [added: 2.90] | | | [added: 1.11] | | | [added: 9.04] | | |

| | | | Diluted | | | $ | [removed: 1.93 | | 2.83 | | | 1.08 | | | 8.96 |] [added: 2.13] | | [removed: 1.50] [added: 1.93] | | | [added: 2.83] | | | [added: 1.08] | | | [added: 8.96] | | |

| | | | Weighted-average number of shares outstanding | | | | | | | | | | | | | | | | | | [removed: | | | | | | | | |]

| | | | Basic | | | 509 | | | [removed: 534 | | | 543 | | | 546 | | | 545] [added: 509] | | | [added: 534] | | | [added: 543] | | | [added: 546] | | |

| | | | Diluted | | | [removed: 519 | | | 546 | | | 555 | | | 551] [added: 517] | | | [removed: 549] [added: 519] | | | [added: 546] | | | [added: 555] | | | [added: 551] | | |

| Balance Sheet Information | | | Total assets | | | $ | [removed: 18,193 | | 15,720 | | | 17,102 | | | 15,459 |] [added: 20,019] | | [removed: 20,941] [added: 18,193] | | | [added: 15,720] | | | [added: 17,102] | | | [added: 15,459] | | |

| *(in millions)* | | | Total liabilities | | | $ | [removed: 10,281 | | 7,854 | | | 7,993 | | | 7,238 |] [added: 11,293] | | [removed: 12,089] [added: 10,281] | | | [added: 7,854] | | | [added: 7,993] | | | [added: 7,238] | | |

| | | | Total equity | | | $ | [removed: 7,912 | | 7,866 | | | 9,109 | | | 8,221 |] [added: 8,726] | | [removed: 8,852] [added: 7,912] | | | [added: 7,866] | | | [added: 9,109] | | | [added: 8,221] | | |

| | | | Long-term debt and finance lease obligations | | | $ | [removed: 4,809 | | 3,481 | | | 3,512 | | | 2,774 |] [added: 5,786] | | [removed: 3,923] [added: 4,809] | | | [added: 3,481] | | | [added: 3,512] | | | [added: 2,774] | | |

| Cash Flow Information | | | Cash flows from operations - continuing operations | | | $ | [removed: 2,110 | | 2,017 | | | 1,730 | | | 1,588 |] [added: 1,870] | | [removed: 1,211] [added: 2,110] | | | [added: 2,017] | | | [added: 1,730] | | | [added: 1,588] | | |

| *(in millions)* | | | Cash flows from investing activities - continuing operations | | | $ | [removed: (1,100) | | (916) | | | (1,292) | | | (716) |] [added: (1,179)] | | [removed: (855)] [added: (1,100)] | | | [added: (916)] | | | [added: (1,292)] | | | [added: (716)] | | |

| | | | Cash flows from financing activities | | | $ | [removed: 498 | | (2,603) | | | 93 | | | (324) |] [added: (345)] | | [removed: (481)] [added: 498] | | | [added: (2,603)] | | | [added: 93] | | | [added: (324)] | | |

| | | | Capital expenditures - continuing operations | | | $ | [removed: (696) | | (659) | | | (616) | | | (705) |] [added: (709)] | | [removed: (905)] [added: (696)] | | | [added: (659)] | | | [added: (616)] | | | [added: (705)] | | |

| Common Stock Information | | | Cash dividends declared per share | | | $ | [removed: 0.850] [added: 0.955] | | $ | [removed: 0.730] [added: 0.850] | | $ | [removed: 0.610] [added: 0.730] | | $ | [removed: 0.505] [added: 0.610] | | $ | [removed: 1.270 | | | | | | | | |] [added: 0.505] | |

[removed: 2.Income] [added: 1.Income] from continuing operations for the year ended December 31, 2019 included a [added: pre-tax] charge of $755 million [added: ($568 million, or $1.09 per diluted share, on an after-tax basis)] related to the annuitization of a portion of our U.S. pension plan.

[removed: 5.For] [added: 2.Income from continuing operations for] the year ended December 31, [removed: 2016, income from continuing operations] [added: 2016] included [added: pre-tax] net realized gains of $4.4 billion [added: ($4.4 billion, or $8.07 per diluted share, on an after-tax basis)] related to the disposition of our formerly retained shares in Baxalta (Baxalta Retained Shares).

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| | | | | | | | | | As Restated 1 | | | | | | | | | | | | | | | | | | | | |

1.We have restated in this Annual Report on Form 10-K our previously issued audited financial statements as of December 31, 2018 and for the years ended December 31, 2018 and 2017 and selected previously reported financial information as of December 31, 2017, 2016 and 2015 and for the years ended December 31, 2016 and 2015.

In addition to the correction of misstatements related to non-operating foreign exchange gains and losses, we also corrected other misstatements that were immaterial, individually and in the aggregate, to our previously issued financial statements.

See Note 2, Restatement of Previously Issued Consolidated Financial Statements, in Item 8, Financial Statements and Supplementary Data, for additional information.

3.As of December 31, 2017, total assets have changed from $17,111 million as originally reported to $17,102 million as restated, total liabilities have changed from $7,995 million as originally reported to $7,993 million as restated, total equity has changed from $9,116 million as originally reported to $9,109 million as restated, and long-term debt and finance lease obligations have changed from $3,509 million as originally reported to $3,512 million as restated.

See Note 2, Restatement of Previously Issued Consolidated Financial Statements, in Item 8, Financial Statements and Supplementary Data, for information related to the restatement impacts on operating results and cash flow information for the year ended December 31, 2017.

Balance sheet information as of December 31, 2017 is unaudited.

4.As of and for the year ended December 31, 2016, net sales have changed from $10,163 million as originally reported to $10,133 million as restated, income from continuing operations has changed from $4,966 million as originally reported to $4,936 million as restated, net income attributable to Baxter stockholders has changed from $4,965 million as originally reported to $4,935 million as restated, basic earnings per share from continuing operations has changed from $9.10 as originally reported to $9.04 as restated, diluted earnings per share from continuing operations has changed from $9.01 as originally reported to $8.96 as restated, basic loss per share from discontinued operations has changed from $(0.01) as originally reported to $0.00 as restated, basic earnings per share has changed from $9.09 as originally reported to $9.04 as restated, diluted earnings per share has changed from $9.01 as originally reported to $8.96 as restated, total assets have changed from $15,546 million as originally reported to $15,459 million as restated, total liabilities have changed from $7,266 million as originally reported to $7,238 million as restated, total equity has changed from $8,280 million as originally reported to $8,221 million as restated, long-term debt and finance lease obligations have changed from $2,779 million as originally reported to $2,774 million as restated, cash inflows from operations - continuing operations has changed from $1,624 million as originally reported to $1,588 million as restated, cash outflows from investing activities - continuing operations has changed from $730 million as originally reported to $716 million as restated, and capital expenditures - continuing operations has changed from $719 million as originally reported to $705 million as restated.

6.As of and for the year ended December 31, 2015, net sales have changed from $9,968 million as originally reported to $9,918 million as restated, income from continuing operations has changed from $393 million as originally reported to $254 million as restated, net income attributable to Baxter stockholders has changed from $968 million as originally reported to $825 million as restated, basic earnings per share from continuing operations has changed from $0.72 as originally reported to $0.47 as restated, diluted earnings per share from continuing operations has changed from $0.72 as originally reported to $0.46 as restated, basic earnings per share from discontinued operations has changed from $1.06 as originally reported to $1.04 as restated, basic earnings per share has changed from $1.78 as originally reported to $1.51 as restated, diluted earnings per share has changed from $1.76 as originally reported to $1.50 as restated, total assets have changed from $20,962 million as originally reported to $20,941 million as restated, total liabilities have changed from $12,097 million as originally reported to $12,089 million as restated, total equity has changed from $8,865 million as originally reported to $8,852 million as restated, long-term debt and finance lease obligations have changed from $3,922 million as originally reported to $3,923 million as restated, cash inflows from operations - continuing operations has changed from $1,253 million as originally reported to $1,211 million as restated, cash outflows from investing activities - continuing operations has changed from $861 million as originally reported to $855 million as restated, and capital expenditures - continuing operations has changed from $911 million as originally reported to $905 million as restated.

| as of December 31 (in millions, except share information) | | | [removed: 2019] [added: 2020] | | | | | | [removed: 2018] [added: 2019] | | |

| Cash and cash equivalents | | | $ | [removed: 3,335] [added: 3,730] | | | | | $ | [removed: 1,838] [added: 3,335] | |

| Accounts receivable, net | | | [removed: 1,896 | | |] [added: $] | [added: 70] | | [removed: 1,840] [added: $] | [added: 63] | |

| Inventories | | | [removed: 1,653] [added: 1,916] | | | | | | [removed: 1,667] [added: 1,653] | | |

| Prepaid expenses and other current assets | | | [removed: 619] [added: 688] | | | | | | [removed: 614] [added: 619] | | |

| Total current assets | | | [removed: 7,503] [added: 8,411] | | | | | | [removed: 5,959] [added: 7,503] | | |

| Property, plant and equipment, net | | | [removed: 4,512] [added: 4,722] | | | | | | [removed: 4,530] [added: 4,512] | | |

| Goodwill | | | [removed: 3,030] [added: 3,217] | | | | | | [removed: 3,002] [added: 3,030] | | |

| Other intangible assets, net | | | [removed: 1,471] [added: 1,671] | | | | | | [removed: 1,410] [added: 1,471] | | |

| Operating lease right-of-use assets | | | [removed: 608] [added: 603] | | | | | | [removed: —] [added: 608] | | |

| Other non-current assets | | | [removed: 1,069] [added: 1,395] | | | | | | [removed: 819] [added: 1,069] | | |

| Total assets | | | $ | [removed: 18,193] [added: 20,019] | | | | | $ | [removed: 15,720] [added: 18,193] | |

| Short-term debt | | | $ | [removed: 226] [added: —] | | | | | $ | [removed: 2] [added: 226] | |

| Current maturities of long-term debt and finance lease obligations | | | [removed: 315] [added: 406] | | | | | | [removed: 2] [added: 315] | | |

| Accounts payable and accrued liabilities | | | [removed: 2,689] [added: 2,927] | | | | | | [removed: 2,810] [added: 2,689] | | |

| Total current liabilities | | | [removed: 3,230] [added: 3,333] | | | | | | [removed: 2,814] [added: 3,230] | | |

| Long-term debt and finance lease obligations | | | [removed: 4,809] [added: 5,786] | | | | | | [removed: 3,481] [added: 4,809] | | |

| Operating lease liabilities | | | [removed: 510] [added: 501] | | | | | | [removed: —] [added: 510] | | |

| Other non-current liabilities | | | [removed: 1,732] [added: 1,673] | | | | | | [removed: 1,559] [added: 1,732] | | |

| Total liabilities | | | [removed: 10,281] [added: 11,293] | | | | | | [removed: 7,854] [added: 10,281] | | |

| Common stock, $1 par value, authorized 2,000,000,000 shares, issued 683,494,944 shares in [removed: 2019] [added: 2020] and [removed: 2018] [added: 2019] | | | 683 | | | | | | 683 | | |

| Common stock in treasury, at cost, [removed: 177,340,358] [added: 178,580,208] shares in [removed: 2019] [added: 2020] and [removed: 170,495,859] [added: 177,340,358] shares in [removed: 2018] [added: 2019] | | | [removed: (10,764)] [added: (11,051)] | | | | | | [removed: (9,989)] [added: (10,764)] | | |

| Additional contributed capital | | | [removed: 5,955] [added: 6,043] | | | | | | [removed: 5,898] [added: 5,955] | | |

| Retained earnings | | | [removed: 15,718] [added: 16,328] | | | | | | [removed: 15,075] [added: 15,718] | | |

| Accumulated other comprehensive (loss) income | | | [removed: (3,710)] [added: (3,314)] | | | | | | [removed: (3,823)] [added: (3,710)] | | |

| Total Baxter stockholders’ equity | | | [removed: 7,882] [added: 8,689] | | | | | | [removed: 7,844] [added: 7,882] | | |

| Noncontrolling interests | | | [removed: 30] [added: 37] | | | | | | [removed: 22] [added: 30] | | |

| Total equity | | | [removed: 7,912] [added: 8,726] | | | | | | [removed: 7,866] [added: 7,912] | | |

| Total liabilities and equity | | | $ | [removed: 18,193] [added: 20,019] | | | | | $ | [removed: 15,720] [added: 18,193] | |

| years ended December 31 (in millions, except per share data) | | | [removed: 2019 | | | 2018 | | | 2017] [added: 2020] | | | [added: 2019] | | | [added: 2018] | | |

| Net sales | | | $ | [removed: 11,362] [added: 11,673] | | $ | [removed: 11,099] [added: 11,362] | | $ | [removed: 10,584 | | | | | |] [added: 11,099] | |

| Cost of sales | | | [removed: 6,601 | | | 6,340 | | | 6,110] [added: 7,086] | | | [added: 6,601] | | | [added: 6,340] | | |

| Gross margin | | | [removed: 4,761 | | | 4,759 | | | 4,474] [added: 4,587] | | | [added: 4,761] | | | [added: 4,759] | | |

| Selling, general and administrative expenses | | | [removed: 2,535 | | | 2,620 | | | 2,627] [added: 2,469] | | | [added: 2,535] | | | [added: 2,620] | | |

| Research and development expenses | | | [removed: 595 | | | 654 | | | 615] [added: 521] | | | [added: 595] | | | [added: 654] | | |

| Other operating income, net | | | [removed: (141) | | | (99) | | | (56)] [added: (19)] | | | [added: (141)] | | | [added: (99)] | | |

| Operating income | | | [removed: 1,772 | | | 1,584 | | | 1,288] [added: 1,616] | | | [added: 1,772] | | | [added: 1,584] | | |

| Interest expense, net | | | [removed: 71 | | | 45 | | | 55] [added: 134] | | | [added: 71] | | | [added: 45] | | |

| Other (income) expense, net | | | [removed: 731 | | | (78) | | | 133] [added: 190] | | | [added: 731] | | | [added: (78)] | | |

| Income from continuing operations before income taxes | | | [removed: 970 | | | 1,617 | | | 1,100] [added: 1,292] | | | [added: 970] | | | [added: 1,617] | | |

| Accounts receivable, net of allowance of $125 in 2020 and $112 in 2019 | | | 2,077 | | | | | | 1,896 | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Balance as of December 31, 2020 | | | 683 | | | $ | 683 | | 179 | | | $ | (11,051) | | $ | 6,043 | | $ | 16,328 | | $ | (3,314) | | $ | 8,689 | | $ | 37 | | $ | 8,726 | |

| Loss on debt extinguishment | | | 110 | | | — | | | — | | |

| Payments of long-term debt | | | (1,181) | | | — | | | — | | |

(1) We did not have restricted cash balances as of December 31, 2019 or 2018.

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, 2020:

| As of December 31 (in millions) | | | 2020 | | |

Risks and Uncertainties Related to COVID-19

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

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

These measures have led to unprecedented restrictions on, disruptions in, and other related impacts on businesses and personal activities.

In addition to travel restrictions put in place in early 2020, governments have closed borders, imposed prolonged quarantines and may continue those measures or implement other restrictions and requirements in light of the continuing spread of the pandemic.

We expect that these evolving restrictions and requirements, as well as the corresponding need to adapt to new methods of conducting business remotely, will continue to have an adverse effect on our business.

On February 14, 2020, we completed the acquisition of the product rights to Seprafilm Adhesion Barrier (Seprafilm) from Sanofi for approximately $342 million in cash.

Refer to Note 2 for additional information.

Beginning March 16,

Refer to Note 2 for additional information.

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

Determining whether products and services are considered distinct performance obligations that should be accounted for separately and determining the allocation of the transaction price may require significant judgment.

Additionally, for arrangements containing a performance obligation to deliver software

| Contract manufacturing services | | | $ | 47 | | $ | 36 | |

| Software sales | | | 40 | | | 43 | | |

| Bundled equipment and consumable medical products contracts | | | 47 | | | 52 | | |

| Contract assets | | | $ | 134 | | $ | 131 | |

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

| Contract assets | | | $ | 134 | | $ | 131 | |

In 2020, 2019 and 2018, the amount of revenue recognized that was included in contract liabilities as of December 31, 2019, 2018 and 2017 was not significant.

The following table summarizes the allowance for doubtful accounts.

| years ended December 31 (in millions) | | | 2020 | | | 2019 | | |

| Balance at beginning of period | | | $ | 112 | | $ | 110 | |

| Charged to costs and expenses | | | 11 | | | 12 | | |

| Write-offs | | | (4) | | | (8) | | |

| Balance at end of period | | | $ | 125 | | $ | 112 | |

Restricted cash represents cash balances restricted as to withdrawal or use and are included in prepaid expenses and other current assets on the consolidated balance sheets.

In the quantitative impairment test, we calculate the estimated fair value of the reporting unit.

Our investments in marketable equity securities are classified as other non-current assets and are measured at fair value with gains and losses recognized in other (income) expense, net.

We have elected to apply the measurement alternative to equity securities without readily determinable fair values.

As such, our non-marketable equity securities are measured at cost, less any impairment, and are adjusted for changes in fair value resulting from observable transactions for identical or similar investments of the same issuer.

| | | | | | | | | | As Restated | | |

| | | | | | | As Restated | | | | | | | | | | | |

| | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | As Restated | | | | | | | | |

| Available-for-sale securities, net of tax expense of zero in 2019, 2018 and 2017, respectively | | | — | | | — | | | 2 | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Balance as of January 1, 2017 (As Restated) | | | 683 | | | $ | 683 | | 144 | | | $ | (7,995) | | $ | 5,958 | | $ | 13,846 | | $ | (4,261) | | $ | 8,231 | | $ | (10) | | $ | 8,221 | | | | | | | | | | | | | | | | | | | | | | |

| Distribution of Baxalta | | | — | | | — | | | — | | | — | | | — | | | 34 | | | — | | | 34 | | | — | | | 34 | | | | | | | | | | | | | | | | | | | | | | | |

| Net income | | | $ | 1,011 | | $ | 1,546 | | $ | 602 | | | | |

| | | |

| --- | --- | --- |

Currency restrictions enacted in Venezuela require approval from the Venezuelan government to exchange Venezuelan bolivars for U.S. dollars.

Due to a decline in transactions to exchange Venezuelan bolivars for U.S. dollars, and limitations on our ability to repatriate funds generated by our Venezuela operations, we concluded in the second quarter of 2017 that we no longer met the accounting criteria for control over our business in Venezuela and we deconsolidated our Venezuelan operations on June 30, 2017.

As a result of deconsolidating the Venezuelan operations, we recorded a pre-tax charge of $33 million in other (income) expense, net in 2017.

This charge included the write-off of our investment in our Venezuelan operations, related cumulative translation adjustments and elimination of intra-company amounts.

Beginning in the third quarter of 2017, we no longer included the results of our Venezuelan business in our consolidated financial statements.

In 2018, we liquidated our subsidiary in

Venezuela and currently sell direct to distributors in that country through legal entities outside of Venezuela.

The distributors purchase our products in U.S. dollars and are responsible for importing those products into Venezuela.

We adopted Accounting Standards Update (ASU) No. 2014-9, Revenue from Contracts with Customers (Topic 606) as of January 1, 2018.

Results for the years ended December 31, 2019 and 2018 are presented under Topic 606, while the 2017 period is presented under previous guidance.

See further discussion of the impact of Topic 606 below under the header “New Accounting Standards.”

Our contract asset balances totaled $131 million as of December 31, 2019, of which $36 million related to contract manufacturing services, $43 million related to software sales and $52 million related to bundled equipment and consumable medical products contracts.

Our contract asset balances totaled $80 million as of December 31, 2018, of which $33 million related to contract manufacturing services and $47 million related to software sales.

Contract assets are presented within accounts receivable, net ($63 million and $50 million as of December 31, 2019 and 2018, respectively) and other non-current assets ($68 million and $30 million as of December 31, 2019 and 2018, respectively) on the consolidated balance sheets.

Contract liabilities were $12 million as of December 31, 2019 and were included in other non-current liabilities on the consolidated balance sheet.

Contract liabilities as of December 31, 2018 were not significant.

| | | | | | | | | | | | | | | | As Restated | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

The allowance for doubtful accounts was $112 million and $110 million as of December 31, 2019 and 2018, respectively.

estimated economic life of the related technology or product, subject to annual impairment reviews as discussed below.

In the first step, the fair value of the reporting unit is compared with its book value including goodwill.

If the fair value of the reporting unit is in excess of its book value, the related goodwill is not impaired and no further analysis is necessary.

If the fair value of the reporting unit is less than its book value, there is an indication of potential impairment and a second step is performed.

When required, the second step of testing involves calculating the implied fair value of goodwill for the reporting unit.

The implied fair value of goodwill is determined in the same manner as goodwill recognized in a business combination, which is the excess of the fair value of the reporting unit determined in step one over the fair value of its net assets, including identifiable intangible assets, as if the reporting unit had been acquired.

As of January 1, 2019, we adopted ASU No. 2017-12, Targeted Improvements to Accounting for Hedging Activities.

The purpose of this ASU is to better align a company’s risk management activities and financial reporting for hedging relationships, simplify the hedge accounting requirements, and improve the disclosures of hedging arrangements.

As of January 1, 2018, we adopted ASU No. 2016-01, Financial Instruments: Recognition and Measurement of Financial Assets and Liabilities.

Our management, with the participation of our Chief Executive Officer and [removed: our] Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the [removed: Securities] Exchange [removed: Act of 1934, as amended (the Exchange Act))] [added: Act)] as of December 31, [removed: 2019.][added: 2020.]

[removed: Based on that evaluation, Chief Executive Officer and our Chief Financial Officer concluded that, as of December 31, 2019, due to the material weakness in our internal control over financial reporting described below, our] [added: We have established] disclosure controls and procedures [removed: were not effective] [added: that are designed] to [removed: provide reasonable assurance] [added: ensure] that [removed: the] information [removed: we are] required to [removed: disclose] [added: be disclosed by us] in the reports that we file or submit under the [added: Securities] Exchange Act [added: of 1934 (the Exchange Act)] is recorded, processed, [removed: summarized,] [added: summarized] and reported within the time periods specified in the [removed: SEC’s] rules and [removed: forms,] [added: forms of the SEC,] and that such information is [removed: accumulated and] communicated to our management, including our Chief Executive Officer and Chief Financial Officer, [removed: as appropriate,] to allow timely decisions regarding required disclosure.

Management performed an assessment of the effectiveness of our internal control over financial reporting as of December 31, [removed: 2019.][added: 2020.]

Based on that assessment under the framework in *Internal Control-Integrated Framework (2013)*, management concluded that our internal control over financial reporting was [removed: not] effective as of December 31, [removed: 2019.][added: 2020.]

The effectiveness of our internal control over financial reporting as of December 31, [removed: 2019] [added: 2020] has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.

Remediation of [removed: the] Material Weakness

- Exchange Rate Policy – We [removed: have] discontinued the use of our historical exchange rate convention and are using the exchange rates determined in accordance with U.S. GAAP for purposes of measuring foreign currency transactions and remeasuring monetary assets and liabilities denominated in a foreign currency.

- Automated Feed – We [removed: have] implemented an automated feed that extracts foreign exchange rates on a daily basis from a recognized third-party exchange rate source.

- Daily Rate Comparison – We [removed: have] implemented a daily rate comparison control that extracts foreign exchange rates from (a) a third-party exchange rate source, (b) our treasury application, and (c) our enterprise resource planning (ERP) system and compares those rates in order to identify any potential differences and provide assurance that the correct rates were captured and are being used in our financial systems.

- Intra-company Transaction Approvals – We [removed: have] updated our policies to require additional approvals of intra-company transactions and implemented a requirement that such transactions be supported by a documented business purpose.

- Personnel - We [removed: have] made personnel changes including hiring a new treasurer from outside Baxter with more than thirty years of treasury experience and responsibility, including at four publicly traded companies.

Additionally, we [removed: have] created a treasury controller role within our accounting function and are continuing to add resources as appropriate to improve our financial reporting controls related to treasury activities.

As previously disclosed, since 2017, we have been implementing a long-term business transformation project within [removed: the] [added: our] finance, human resources, purchasing and information technology functions which will further centralize and standardize business processes and systems across the company.

We [removed: are transitioning] [added: have transitioned and continue to transition] some processes to our shared services centers while others have been moved to outsourced providers.

This multi-year initiative [removed: will be] [added: is being] conducted in phases and [removed: include] [added: includes] modifications to the design and operation of controls over financial reporting.

Other than as described in the [removed: two] preceding [removed: paragraphs] [added: paragraph] and in the *Remediation of Material Weakness* section above, there have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended December 31, [removed: 2019] [added: 2020] that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2020.

As previously reported in our Annual Report on Form 10-K for the year ended December 31, 2019, we identified a material weakness over the accounting for certain foreign exchange gains and losses.

This material weakness resulted in misstatements that were corrected in the restatement included in our Annual Report on Form 10-K for the year ended December 31, 2019.

Due to the actions taken by us to implement new controls and procedures, management has concluded that this material weakness has been remediated as of December 31, 2020.

The actions we took to remediate the material weakness were as follows:

We and our Board of Directors are committed to maintaining a strong control environment and we believe that these remediation efforts represent significant improvements in our controls.

We monitored the related processes and controls throughout the remediation period and have concluded that they are operating effectively.

None.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements would not be prevented or detected on a timely basis.

We did not maintain effective controls over the accounting for certain foreign exchange gains and losses.

This material weakness resulted in the restatement of our consolidated financial statements as of December 31, 2018 and for the years ended December 31, 2018 and 2017 and each of the quarterly and year-to-date periods in the year ended December 31, 2018 and the first two quarters and related year-to-date interim period in the year ended December 31, 2019.

Additionally, this material weakness could result in a misstatement of the aforementioned account balances or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.

Because of this material weakness, management concluded that we did not maintain effective internal control over financial reporting as of December 31, 2019.

Management has been implementing changes to strengthen our internal controls over the accounting for foreign exchange gains and losses.

These changes are intended to address the identified material weakness and enhance our overall control environment and include the ongoing activities described below.

While we believe that the above actions will ultimately remediate the material weakness, we intend to continue to refine those controls and monitor their effectiveness for a sufficient period of time prior to reaching any determination as to whether the material weakness has been remediated.

Notwithstanding the identified material weakness, management believes that the consolidated financial statements included in this Annual Report on Form 10-K present fairly, in all material respects, our financial position, results of operations, and cash flows as of and for the periods presented in accordance with U.S. GAAP.

As previously disclosed, we are currently implementing an upgrade to our ERP software.

In connection with the ERP upgrade, we are updating the processes that constitute our internal control over financial reporting, as necessary.

This normal course of business ERP upgrade is being implemented to remain current with the latest release of the software.

New Almeida Offer Letter

On March 12, 2020, Baxter entered into a new offer letter with Mr. Almeida that replaced his prior offer letter.

The terms of the new offer letter will be effective until December 31, 2023.

Under the new letter, Mr. Almeida will continue to serve as Chairman of the Board and President and Chief Executive Officer of the Company.

Mr. Almeida’s base salary will remain $1,300,000 per annum.

His target bonus and target long-term incentive opportunity were increased starting in 2020 commensurate with such compensation elements for Chief Executive Officers in Baxter’s peer group.

Specifically, Mr. Almeida’s target bonus opportunity was increased from 145% of base salary to 165% of base salary, and his long-term incentive opportunity was increased from $10,000,000 to $11,000,000.

Mr. Almeida remains eligible to receive benefits to the same extent and on the same terms as those benefits provided to other senior executives.

The offer letter also continues to provide Mr. Almeida with the right to receive cash severance equal to two years’ base salary and target bonus in the event of an involuntary termination without cause or termination with good reason prior to December 31, 2023.

In addition, beginning with Mr. Almeida’s 2020 equity award grants and for all future annual equity awards granted through the end of 2023, Mr. Almeida will be eligible to receive Baxter’s equity award retirement treatment when he attains 60 years of age (as opposed to 65 years of age), which will provide for continued vesting of his stock option and PSU awards and a longer period of time to exercise his outstanding stock options upon his retirement.

In addition to these benefits, in accordance with the terms of his change of control agreement, Mr. Almeida remains eligible for certain payments in the event of his termination for good reason or termination without cause following a change in control.

Mr. Almeida is also subject to certain restrictive covenants, including non-competition, non-solicitation of customers, suppliers and employees and non-disparagement.

The foregoing summary does not purport to be complete and is qualified in its entirety by reference to the full text of the offer letter, which is filed as Exhibit 10.23 to this Annual Report on Form 10-K and is incorporated into this filing by reference.

Refer to information under the captions entitled “Corporate Governance at Baxter International Inc. — Proposal 1 — Election of Directors,” “— [removed: Directors Continuing in Office,” “—] Board of Directors — Nomination of Directors,” “— Committees of the Board — Audit Committee,” “— Board Responsibilities — Code of Conduct,” and “Ownership of Our Stock — [added: Delinquent] Section 16(a) [removed: Beneficial Ownership Reporting Compliance”] [added: Reports”] in Baxter’s definitive proxy statement to be filed with the Securities and Exchange Commission and delivered to stockholders in connection with the Annual Meeting of Stockholders expected to be held on May [removed: 5, 2020] [added: 4, 2021] (the Proxy Statement), all of which information is incorporated herein by reference.

The following table provides information relating to shares of common stock that may be issued under our existing equity compensation plans as of December 31, [removed: 2019.][added: 2020.]

| Equity Compensation Plans Not Approved by Stockholders | | | [removed: 86,227] [added: 53,160] | | | | | | (4) | | | | | | $ | 28.97 | | | | | | | | | | | — | | | | | | | | |

(3)Includes (i) [removed: 2,702,381] [added: 2,002,996] shares of common stock available for purchase under the Employee Stock Purchase Plan; (ii) [removed: 427,682] [added: 447,261] shares of common stock available under the 2007 Incentive Plan; (iii) [removed: 8,597,492] [added: 2,689,357] shares of common stock available under the 2011 Incentive Plan; and (iv) [removed: 11,937,281] [added: 11,771,363] shares of common stock available under the 2015 Incentive Plan.

(5)Includes outstanding awards of [removed: 20,343,699] [added: 20,195,617] stock options, which have a weighted-average exercise price of [removed: $50.99] [added: $56.88] and a weighted-average remaining term of 6.1 years, [removed: 1,274,436] [added: 1,137,920] shares of common stock issuable upon vesting of restricted stock units, and [removed: 929,665] [added: 759,681] shares of common stock reserved for issuance in connection with performance share unit grants.

| Equity Compensation Plans Approved by Stockholders | | | 22,075,966 | | | | | | (1) | | | | | | $ | 56.95 | | | | | (2) | | | | | | 16,910,977 | | | | | | (3) | | |

| Total | | | 22,129,126 | | | | | | (5) | | | | | | $ | 56.88 | | | | | (2) | | | | | | 16,910,977 | | | | | | | | |

| Equity Compensation Plans Approved by Stockholders | | | 22,507,640 | | | | | | (1) | | | | | | $ | 51.08 | | | | | (2) | | | | | | 23,664,836 | | | | | | (3) | | |

| Total | | | 22,593,867 | | | | | | (5) | | | | | | $ | 50.99 | | | | | (2) | | | | | | 23,664,836 | | | | | | | | |

| | | | [Consolidated Balance [removed: Sheets](#i9886386820ea4ce3bad9bbc3bc752006_67)] [added: Sheets](#id032277b8ada47a996ec6f4e6a1e7e29_70)] | | | [removed: 49] [added: 48] | | |

| | | | [Consolidated Statements of [removed: Income](#i9886386820ea4ce3bad9bbc3bc752006_73)] [added: Income](#id032277b8ada47a996ec6f4e6a1e7e29_73)] | | | [removed: 50] [added: 49] | | |

| | | | [Consolidated Statements of Comprehensive [removed: Income](#i9886386820ea4ce3bad9bbc3bc752006_76)] [added: Income](#id032277b8ada47a996ec6f4e6a1e7e29_76)] | | | [removed: 51] [added: 50] | | |

| | | | [Consolidated Statements of Changes in [removed: Equity](#i9886386820ea4ce3bad9bbc3bc752006_85)] [added: Equity](#id032277b8ada47a996ec6f4e6a1e7e29_82)] | | | [removed: 52] [added: 51] | | |

| | | | [Consolidated Statements of Cash [removed: Flows](#i9886386820ea4ce3bad9bbc3bc752006_82)] [added: Flows](#id032277b8ada47a996ec6f4e6a1e7e29_85)] | | | [removed: 53] [added: 52] | | |

| | | | [Notes to Consolidated Financial [removed: Statements](#i9886386820ea4ce3bad9bbc3bc752006_88)] [added: Statements](#id032277b8ada47a996ec6f4e6a1e7e29_88)] | | | 54 | | |

| | | | [Report of Independent Registered Public Accounting [removed: Firm](#i9886386820ea4ce3bad9bbc3bc752006_175)] [added: Firm](#id032277b8ada47a996ec6f4e6a1e7e29_184)] | | | [removed: 173] [added: 105] | | |

| | | | [Schedule II — Qualifying and Valuation accounts for each of the three years in the period ended December 31, [removed: 2019](#i9886386820ea4ce3bad9bbc3bc752006_214)] [added: 20](#id032277b8ada47a996ec6f4e6a1e7e29_223)[20](#id032277b8ada47a996ec6f4e6a1e7e29_223)] | | | [removed: 188] [added: 117] | | |

| 4.8 | | | [Twelfth Supplemental Indenture, dated as of [removed: May](http://www.sec.gov/Archives/edgar/data/10456/000119312519147345/d751331dex42.htm) [15,] [added: May 15,] 2019, by and between the Company and The Bank of New York Mellon Trust Company, N.A., as Trustee (including form of 0.400% Senior Notes due 2024 and form of 1.300% Senior Notes due 2029) (incorporated by reference to Exhibit 4.2 of the Company’s Current Report on Form 8-K, filed on May 15, 2019).](http://www.sec.gov/Archives/edgar/data/10456/000119312519147345/d751331dex42.htm) | | |

| [removed: 4.9*] [added: 4.14] | | | [Description of Securities Registered Under Section 12 of the Exchange [removed: Act](https://www.sec.gov/Archives/edgar/data/10456/000162828020003693/bax-20191231xexx49.htm)] [added: Act (incorporated by reference to Exhibit 4.9 to the](https://www.sec.gov/Archives/edgar/data/10456/000162828020003693/bax-20191231xexx49.htm) [Company’s Annual Report on Form 10-K, filed on March 17, 2020).](https://www.sec.gov/Archives/edgar/data/10456/000162828020003693/bax-20191231xexx49.htm)[](https://www.sec.gov/Archives/edgar/data/10456/000162828020003693/bax-20191231xexx49.htm)] | | |

| 10.1 | | | [Five-Year Credit Agreement, dated as of [removed: July 1, 2015,] [added: December 20, 2019,] among Baxter International Inc. as Borrower, JPMorgan Chase Bank, National Association, as Administrative Agent and certain other financial institutions named therein (incorporated by reference to Exhibit [removed: 10.4] [added: 10.1] to the Company’s Current Report on Form 8-K, filed on [removed: July 7, 2015).](http://www.sec.gov/Archives/edgar/data/10456/000119312515246136/d57625dex104.htm)] [added: December 20, 2019).](http://www.sec.gov/Archives/edgar/data/10456/000119312519321056/d843903dex101.htm)] | | |

| 10.2 | | | [removed: [Amendment No. 1 to the Five-Year Credit] [added: [Credit] Agreement, dated as of [removed: October 26, 2015,] [added: December 20, 2019,] among Baxter [removed: International Inc.] [added: Healthcare SA and Baxter World Trade SPRL,] as [removed: Borrower, JPMorgan Chase Bank, National Association,] [added: Borrowers, J.P. Morgan Europe Limited,] as Administrative Agent and certain other financial institutions named therein (incorporated by reference to Exhibit [removed: 10.1] [added: 10.2] to the Company’s Current Report on Form 8-K, filed on [removed: October 27, 2015).](http://www.sec.gov/Archives/edgar/data/10456/000119312515353939/d96844dex101.htm)] [added: December 20, 2019).](http://www.sec.gov/Archives/edgar/data/10456/000119312519321056/d843903dex102.htm)] | | |

| 10.4 | | | [removed: [Five-Year Credit] [added: [Letter] Agreement, dated as of [removed: December 20, 2019,] [added: January 11, 2016, by and] among Baxter International [removed: Inc. as Borrower, JPMorgan Chase Bank, National Association, as Administrative Agent] [added: Inc., Baxalta Incorporated] and [removed: certain other financial institutions named therein (incorporated] [added: Shire plc. (Incorporated] by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on [removed: December 20, 2019).](http://www.sec.gov/Archives/edgar/data/10456/000119312519321056/d843903dex101.htm)] [added: January 11, 2016).](http://www.sec.gov/Archives/edgar/data/10456/000119312516426696/d51194dex101.htm)] | | |

| [removed: 10.5] [added: 10.30] | | | [removed: [Credit] [added: [Tax Matters] Agreement, dated as of [removed: July 1,] [added: June 30,] 2015, [removed: among Baxter Healthcare SA] [added: by] and [added: between] Baxter [removed: World Trade SPRL, as Borrowers, J.P. Morgan Europe Limited, as Administrative Agent] [added: International Inc.] and [removed: certain other financial institutions named therein] [added: Baxalta Incorporated] (incorporated by reference to Exhibit [removed: 10.5] [added: 10.2] to the Company’s Current Report on Form 8-K, filed on July 7, [removed: 2015).](http://www.sec.gov/Archives/edgar/data/10456/000119312515246136/d57625dex105.htm)] [added: 2015).](http://www.sec.gov/Archives/edgar/data/10456/000119312515246136/d57625dex102.htm)] | | |

| [removed: 10.10] [added: C 10.12] | | | [removed: [Tax Matters Agreement, dated as of June 30, 2015, by and between Baxter] [added: [Baxter] International Inc. [removed: and Baxalta Incorporated] [added: Equity Plan for the 2015 Incentive Plan] (incorporated by reference to Exhibit [removed: 10.2] [added: 10.6] to the Company’s Current Report on Form 8-K, filed on July 7, [removed: 2015).](http://www.sec.gov/Archives/edgar/data/10456/000119312515246136/d57625dex102.htm)] [added: 2015).](http://www.sec.gov/Archives/edgar/data/10456/000119312515246136/d57625dex106.htm)] | | |

| [removed: 10.11] [added: C 10.17] | | | [removed: [Letter Agreement, dated as of January 11, 2016, by and among] [added: [Offer Letter between] Baxter International [removed: Inc., Baxalta Incorporated] [added: Inc.] and [removed: Shire plc. (Incorporated] [added: José E. Almeida, dated as of October 28, 2015 (incorporated] by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on [removed: January 11, 2016).](http://www.sec.gov/Archives/edgar/data/10456/000119312516426696/d51194dex101.htm)] [added: October 29, 2015).](http://www.sec.gov/Archives/edgar/data/10456/000119312515357002/d39629dex101.htm)] | | |

| [removed: 10.12] [added: 10.50] | | | [Support Agreement, dated as of September 29, 2015, by and among Baxter International Inc., Third Point LLC, Third Point Partners L.P., Third Point Partners Qualified L.P., Third Point Offshore Master Fund L.P., Third Point Ultra Master Fund L.P., Third Point Reinsurance Co. Ltd., Third Point Advisors LLC, Third Point Advisors II LLC, Daniel S. Loeb and Munib Islam (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on September 30, 2015).](http://www.sec.gov/Archives/edgar/data/10456/000119312515333393/d93131dex101.htm) | | |

| C [removed: 10.13] [added: 10.6] | | | [Form of Indemnification Agreement entered into with directors and officers (incorporated by reference to Exhibit 10.8 to the Company's Annual Report on Form 10-K, filed on February 21, 2019).](http://www.sec.gov/Archives/edgar/data/10456/000156459019003727/bax-ex108_609.htm) | | |

| C [removed: 10.14] [added: 10.7] | | | [Baxter International Inc. 2007 Incentive Plan (incorporated by reference to Appendix A to the Company’s Definitive Proxy Statement on Schedule 14A, filed on March 20, 2007).](http://www.sec.gov/Archives/edgar/data/10456/000095013707004087/c13022ddef14a.htm) | | |

| C [removed: 10.15] [added: 10.8] | | | [Baxter International Inc. Equity Plan for the 2007 Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on March 16, 2007).](http://www.sec.gov/Archives/edgar/data/10456/000095013707003994/c13397exv10w1.htm) | | |

| C [removed: 10.16] [added: 10.9] | | | [Baxter International Inc. 2011 Incentive Plan (incorporated by reference to Appendix B to the Company’s Definitive Proxy Statement on Schedule 14A, filed on March 18, 2011).](http://www.sec.gov/Archives/edgar/data/10456/000095012311026923/c62262ddef14a.htm) | | |

| C [removed: 10.17] [added: 10.10] | | | [Baxter International Inc. Equity Plan for the 2011 Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, filed on May 3, 2011).](http://www.sec.gov/Archives/edgar/data/10456/000095012311043980/c63383exv10w1.htm) | | |

| C [removed: 10.18] [added: 10.11] | | | [removed: Baxter] [added: [Baxter] International Inc. 2015 Incentive Plan (incorporated by reference to Appendix A to the Company’s Definitive Proxy Statement on Schedule 14A, filed on March 25, [removed: 2015).] [added: 2015).](http://www.sec.gov/Archives/edgar/data/10456/000119312515104161/d864138ddef14a.htm#toc864138_20)] | | |

| C [removed: 10.19] [added: 10.13] | | | [Baxter International Inc. Equity Plan for [added: José E. Almeida under] the 2015 Incentive Plan (incorporated by reference to Exhibit [removed: 10.6] [added: 10.2] to the Company’s Current Report on Form 8-K, filed on [removed: July 7, 2015).](http://www.sec.gov/Archives/edgar/data/10456/000119312515246136/d57625dex106.htm)] [added: October 29, 2015).](http://www.sec.gov/Archives/edgar/data/10456/000119312515357002/d39629dex102.htm)] | | |

| C [removed: 10.20] [added: 10.14] | | | [Baxter International Inc. [added: 2017] Equity [removed: Plan for José E. Almeida under the 2015 Incentive Plan] [added: Plan, effective as of March 2, 2017] (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed on [removed: October 29, 2015).](http://www.sec.gov/Archives/edgar/data/10456/000119312515357002/d39629dex102.htm)] [added: March 3, 2017).](http://www.sec.gov/Archives/edgar/data/10456/000119312517068798/d344320dex102.htm)] | | |

| C [removed: 10.21] [added: 10.15] | | | [Baxter International Inc. [removed: 2017] [added: 2020] Equity Plan, effective as of March [removed: 2, 2017] [added: 16, 2020] (incorporated by reference to Exhibit [removed: 10.2] [added: 10.22] to the Company’s [removed: Current] [added: Annual] Report on Form [removed: 8-K,] [added: 10-K,] filed on March [removed: 3, 2017).](http://www.sec.gov/Archives/edgar/data/10456/000119312517068798/d344320dex102.htm)] [added: 17, 2020).](https://www.sec.gov/Archives/edgar/data/10456/000162828020003693/bax-20191231xexx1022.htm)] | | |

| [removed: C 10.22*] [added: 21*] | | | [removed: [Baxter International Inc. 2020 Equity Plan, effective as] [added: [Subsidiaries] of [removed: March 16, 2020.](https://www.sec.gov/Archives/edgar/data/10456/000162828020003693/bax-20191231xexx1022.htm)] [added: Baxter International Inc.](https://www.sec.gov/Archives/edgar/data/10456/000162828021001867/bax-20201231xexx21.htm)] | | |

| C [removed: 10.23] [added: 10.16] | | | [Baxter International Inc. Directors’ Deferred Compensation Plan (amended and restated effective May 6, 2019) (incorporated by reference to Exhibit 10.16 to the Company's Quarterly Report on Form 10-Q, filed on May 8, 2019).](http://www.sec.gov/Archives/edgar/data/10456/000156459019016660/bax-ex1016_737.htm) | | |

| C [removed: 10.24] [added: 10.18] | | | [Offer Letter between [removed: Baxter International Inc.] [added: the Company] and José E. Almeida, dated as of [removed: October 28, 2015] [added: March 12, 2020] (incorporated by reference to Exhibit [removed: 10.1] [added: 10.25] to the Company’s [removed: Current] [added: Annual] Report on Form [removed: 8-K,] [added: 10-K,] filed on [removed: October 29, 2015).](http://www.sec.gov/Archives/edgar/data/10456/000119312515357002/d39629dex101.htm)] [added: March 17, 2020).](https://www.sec.gov/Archives/edgar/data/10456/000162828020003693/bax-2019x1231xexx1025.htm)] | | |

| C [removed: 10.26*] [added: 10.19] | | | [Offer letter between Baxter Healthcare SA and Cristiano Franzi, dated June 8, [removed: 2017.](https://www.sec.gov/Archives/edgar/data/10456/000162828020003693/bax-20191231xexx1026.htm)] [added: 2017 (incorporated by reference to Exhibit 10.26 to the Company’s Annual Report on Form 10-K, filed on March 17, 2020).](https://www.sec.gov/Archives/edgar/data/10456/000162828020003693/bax-20191231xexx1026.htm)] | | |

| C [removed: 10.27] [added: 10.20] | | | [Form of Severance Agreement entered into with executive officers (incorporated by reference to Exhibit 10.11 to the Company’s Annual Report on Form 10-K, filed on February 21, 2014).](http://www.sec.gov/Archives/edgar/data/10456/000119312514061654/d596470dex1011.htm) | | |

| C [removed: 10.28] [added: 10.21] | | | [Baxter International Inc. Employee Stock Purchase Plan (as amended and restated effective July 1, 2011) (incorporated by reference to Appendix A to the Company’s Definitive Proxy Statement on Schedule 14A, filed on March 18, 2011).](http://www.sec.gov/Archives/edgar/data/10456/000095012311026923/c62262ddef14a.htm) | | |

| C [removed: 10.29] [added: 10.22] | | | [First Amendment to Baxter International Inc. Employee Stock Purchase Plan (dated as of July 15, 2016) (incorporated by reference to Exhibit 10.27 to the Company’s Annual Report on Form 10-K, filed on February 23, 2017).](http://www.sec.gov/Archives/edgar/data/10456/000156459017002240/bax-ex1027_383.htm) | | |

| C [removed: 10.30] [added: 10.23] | | | [Baxter International Inc. Non-Employee Director Compensation Plan (as amended and restated effective January 1, 2018) (incorporated by reference to Exhibit 10.21 to the Company's Annual Report on Form 10-K, filed on February 21, 2019).](http://www.sec.gov/Archives/edgar/data/10456/000156459019003727/bax-ex1021_608.htm) | | |

| C [removed: 10.31] [added: 10.24] | | | [Form of Non-Competition, Non-Solicitation and Confidentiality Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on April 14, 2017).](http://www.sec.gov/Archives/edgar/data/10456/000119312517124024/d365699dex101.htm) | | |

| C [removed: 10.32*R] [added: 10.25R] | | | [Commitment Agreement, dated as of October 4, 2019, by and among [removed: Baxter International Inc.,] [added: the Company,] The Prudential Insurance Company of America and State Street Global Advisors Trust Company, acting solely in its capacity as the independent fiduciary of the Baxter International Inc. and Subsidiaries Pension [removed: Plan.](https://www.sec.gov/Archives/edgar/data/10456/000162828020003693/bax-20191231xexx1032.htm)] [added: Plan (incorporated by reference to Exhibit 10.32 to the Company’s Annual Report on Form 10-K, filed on March 17, 2020).](https://www.sec.gov/Archives/edgar/data/10456/000162828020003693/bax-20191231xexx1032.htm)] | | |

| C [removed: 10.33] [added: 10.26] | | | [Baxter International Inc. and Subsidiaries Pension Plan (Amended and Restated effective January 5, 2018) (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on January 8, 2018).](http://www.sec.gov/Archives/edgar/data/10456/000119312518005221/d520610dex101.htm) | | |

| C [removed: 10.34*] [added: 10.27] | | | [First Amendment to the Baxter International Inc. and Subsidiaries Pension [removed: Plan.](https://www.sec.gov/Archives/edgar/data/10456/000162828020003693/bax-20191231xexx1034.htm)] [added: Plan (incorporated by reference to Exhibit 10.34 to the Company’s Annual Report on Form 10-K, filed on March 17, 2020).](https://www.sec.gov/Archives/edgar/data/10456/000162828020003693/bax-20191231xexx1034.htm)] | | |

| C [removed: 10.35*] [added: 10.28] | | | [Second Amendment to the Baxter International Inc. and Subsidiaries Pension [removed: Plan.](https://www.sec.gov/Archives/edgar/data/10456/000162828020003693/bax-20191231xexx1035.htm)] [added: Plan (incorporated by reference to Exhibit 10.35 to the Company’s Annual Report on Form 10-K, filed on March 17, 2020).](https://www.sec.gov/Archives/edgar/data/10456/000162828020003693/bax-20191231xexx1035.htm)] | | |

| C [removed: 10.36*] [added: 10.29] | | | [Baxter International Inc. and Subsidiaries Pension Plan II (Amended and Restated effective January 1, [removed: 2019).](https://www.sec.gov/Archives/edgar/data/10456/000162828020003693/bax-20191231xexx1036.htm)] [added: 2019) (incorporated by reference to Exhibit 10.36 to the Company’s Annual Report on Form 10-K, filed on March 17, 2020).](https://www.sec.gov/Archives/edgar/data/10456/000162828020003693/bax-20191231xexx1036.htm)] | | |

| C [removed: 10.37] [added: 10.30] | | | [Baxter International Inc. and Subsidiaries Supplemental Pension Plan (Amended and Restated effective January 5, 2018) (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed on January 8, 2018).](http://www.sec.gov/Archives/edgar/data/10456/000119312518005221/d520610dex103.htm) | | |

| C [removed: 10.38] [added: 10.37] | | | [Baxter International Inc. [removed: and Subsidiaries Deferred Compensation Plan (Amended and Restated] [added: Executive Severance Plan,] effective [removed: January 5, 2018)] [added: November 16, 2020] (incorporated by reference to Exhibit [removed: 10.4] [added: 10.1] to the Company’s Current Report on Form 8-K, filed on [removed: January 8, 2018).](http://www.sec.gov/Archives/edgar/data/10456/000119312518005221/d520610dex104.htm)] [added: November 20, 2020).](https://www.sec.gov/Archives/edgar/data/10456/000162828020016670/exhibit101-baxterexecu.htm)] | | |

| [removed: 21*] [added: C 10.31*] | | | [removed: [Subsidiaries of Baxter] [added: [Baxter] International [removed: Inc.](https://www.sec.gov/Archives/edgar/data/10456/000162828020003693/bax-20191231xexx21.htm)] [added: Inc. and Subsidiaries Deferred Compensation Plan (As Amended and Restated effective January 1, 2021).](https://www.sec.gov/Archives/edgar/data/10456/000162828021001867/bax-20201231xexx1031.htm)] | | |